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37th PARLIAMENT, 3rd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Tuesday, March 2, 2004

1000

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

1010

Mr. Peter Harder (Deputy Minister, Department of Foreign Affairs and International Trade)

1015

The Chair

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

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

1020

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

The Chair

Mr. Paul Forseth

The Chair

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

1025

Mr. Peter Harder

The Chair

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

1030

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

The Chair

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

1035

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

1040

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

The Chair

Mr. Joe Comartin (Windsor—St. Clair)

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

1045

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

The Chair

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

1050

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

Mr. Joe Comartin

The Chair

Mr. Peter Harder

The Chair

Mr. Vic Toews (Provencher, CPC)

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

1055

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

Mr. Peter Harder

Mr. Vic Toews

The Chair

Mr. Peter Harder

The Chair

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

1100

Mr. Odina Desrochers

Mr. Peter Harder

Mr. Odina Desrochers

Mr. Peter Harder

The Chair

Hon. Walt Lastewka (St. Catharines, Lib.)

Mr. Peter Harder

Hon. Walt Lastewka

Mr. Peter Harder

Hon. Walt Lastewka

The Chair

Hon. Walt Lastewka

Mr. Peter Harder

Hon. Walt Lastewka

The Chair

Hon. Walt Lastewka

The Chair

Hon. Walt Lastewka

Mr. Peter Harder

1105

Hon. Walt Lastewka

Mr. Peter Harder

Hon. Walt Lastewka

Mr. Peter Harder

The Chair

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

Mr. Peter Harder

1110

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

The Chair

Mr. Gary Lunn (Saanich—Gulf Islands, CPC)

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

1115

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

The Chair

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

Mr. Peter Harder

The Chair

Hon. Joe Jordan

The Chair

Hon. Joe Jordan

The Chair

Hon. Joe Jordan

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

1120

Hon. Joe Jordan

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

The Chair

Mr. Jason Kenney (Calgary Southeast, CPC)

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

1125

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

The Chair

Mrs. Marlene Jennings

1130

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

The Chair

Mrs. Marlene Jennings

1135

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

The Chair

1140

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Peter Harder

The Chair

Mr. Peter Harder

1145

The Chair

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

The Vice-Chair (Mrs. Marlene Jennings)

Hon. Walt Lastewka

Mr. Alan Tonks

1150

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

Mr. Peter Harder

Mr. Alan Tonks

The Chair

Hon. Walt Lastewka

Mr. Peter Harder

Hon. Walt Lastewka

Mr. Peter Harder

The Chair

Hon. Walt Lastewka

1155

The Chair

Mr. Peter Harder

The Chair

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

The Chair

Hon. Joe Jordan

1200

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

Hon. Joe Jordan

The Chair

Mr. Peter Harder

Hon. Joe Jordan

The Chair

Hon. Joe Jordan

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Hon. Joe Jordan

Mr. Peter Harder

1205

The Chair

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

The Chair

Mrs. Marlene Jennings

1210

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

Mr. Peter Harder

The Chair

Mr. Joe Comartin

1215

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

Mr. Peter Harder

Mr. Joe Comartin

The Chair

Mr. Gary Lunn

1220

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

Mr. Gary Lunn

Mr. Peter Harder

The Chair

Mrs. Marlene Jennings

Mr. Peter Harder

Mrs. Marlene Jennings

1225

Mr. Peter Harder

Mrs. Marlene Jennings

The Chair

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

Mr. Jason Kenney

Mr. Peter Harder

1230

The Chair

Hon. Walt Lastewka

The Chair

Hon. Walt Lastewka

The Chair

Mr. Alan Tonks

1235

Mr. Peter Harder

The Chair

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

The Chair

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

Mr. Peter Harder

Mr. Paul Forseth

1240

Mr. Peter Harder

The Chair

Mr. Peter Harder

Mr. Paul Forseth

The Chair

Mr. Rob Walsh (Law Clerk and Parliamentary Counsel, House of Commons)

1245

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 008

3rd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, March 2, 2004

[Recorded by Electronic Apparatus]

À (1000)

[English]

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

Our order of the day is 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.

Our witness today is from the Department of Foreign Affairs and International Trade, Mr. Peter Harder, the deputy minister. Of course, Mr. Harder is here because of Mr. Mills' motion that all current and former deputy ministers of Treasury Board and Public Works, including the ministers of Treasury Board and Public Works, be called. I understand that Mr. Harder was the Secretary of the Treasury Board and Comptroller General of Canada from November 1995 to March 2000.

We welcome you, Mr. Harder. But before we get to you, we have some business to do.

The first thing I have is a letter addressed to the clerk from the Business Development Bank, which we now have in both official languages. It says:

Dear Mr. Fournier:

In my capacity as Acting President and Chief Executive Officer of the Business Development Bank of Canada (BDC), I acknowledge receipt of your letter mentioned in reference above and attached Minutes of proceedings of the Standing Committee on Public Accounts (Committee) dated February 18, 2004. I want to give assurance to the Committee as to the full cooperation of the BDC with any request the Committee may have.

In accordance with the order of the Committee and Sections 3 and 8(2) of the Privacy Act(Canada), I have set out below each of the financial transactions described in Chapters 3, 4 and 5 of the Auditor General of Canada's November 2003 report relating to BDC, together with the identity of the BDC officer or employee, his/her position, function and responsibility in respect of authorization of each such transaction.

We have the financial transaction, the report page reference, 12 and 13, and the names Jean Carle, senior vice-president of corporate affairs, and Christiane Beaulieu, vice-president of public affairs. That was regarding Le Canada du Millénaire series, 1998 to 2000.

Next is the Innovation Series, 1999 to 2004; report page reference, 14 and 15; Michel Vennat, president and chief executive officer; Mr. Guy Beaudry, senior vice-president, corporate affairs; and Christiane Beaulieu, vice-president of public affairs.

We are not aware whether Mr. Carle was authorized by anyone at a higher level of authority for Le Canada du Millénaire Series. Please note that Mr. Carle and Ms. Beaulieu are no longer in the employ of the Bank.

I reiterate BDC's readiness to appear before the Committee to discuss the issues raised by the Auditor General. I look forward to receiving word about an appearance before the Committee. I would be grateful if you would direct any future communication in this matter directly to Guy G. Beaudry, BDC's Senior Vice President, Corporate Affairs at 514-496-3980.

I trust that this will be satisfactory to the Committee.

Sincerely yours,

André Bourdeau, Acting President and Chief Executive Officer

It indicates copies to other people.

I also have a letter that's dated February 25. Before I released this, we needed some legal counsel, and the Law Clerk of the House of Commons advised that it was quite in order for me to read this into the record. Again, it's to the clerk:

Dear Mr. Fournier:

I am writing further to our conversation of February 25, 2004, concerning the production of documents in response to the motion of the Standing Committee on Public Accounts ordering the Government to provide a copy of all cabinet documents pertaining to the Sponsorship Program, including those surrounding its creation.

As indicated in the letter of February 24 from the Clerk of the Privy Council, some documents were severed in order to protect confidences of the Cabinet which relate to subjects other than the sponsorship program.

As I mentioned during our conversation, there are two severances made for reasons other than the one mentioned above. These severances were made to ensure that the Committee has an opportunity to consider whether to release this information into the public domain. Attached you will find unsevered pages to assist the Committee in this regard.

The first severance occurs at Tab 8 in a Memorandum to Cabinet concerning the Government Response to the 10th Report of the Committee, (pages 17 to 19 in the English version and page 20 of the French version). The paragraph severed deals with in-camera proceedings of the Committee in relation to contracts between the Government and Groupaction as referenced in the Special Report of the Auditor General. In order to respect the Committee's decision to conduct the related proceedings in-camera, it is our view that any determination concerning the release of references to its confidential deliberations properly rests with the Committee.

As I mentioned, the law clerk said he didn't have a problem because it refers to hearsay regarding the leaks and the hearsay around the meeting; it doesn't refer to the meeting itself.

The second severance occurs at Tab 10 in a deck entitled “Auditor General's Report--February 10, 2004” (page 4 of both the English and French versions of the deck). The portion severed constitutes information which would allow for the identification of an individual and could be considered personal information. It is our view that the Committee itself must have an opportunity to decide whether this information should be released.

These two severances are the sole instances in which information has been withheld other than for the reasons set out in the letter from the Clerk of the Privy Council.

I remain available to discuss the matter with you at your convenience.

I trust this will be of assistance to you.

Again, the law clerk has indicated that it's acceptable to put that on the public record.

Is there anything else, Mr. Clerk? Oh, yes. This will be standard procedure. This is no reflection on you, Mr. Harder, but I had indicated--and had omitted to do so in previous meetings--that I would read this at every meeting from now on. It says to the witnesses:

...the refusal to answer questions or failure to reply truthfully may give rise to a charge of contempt of the House, whether the witness has been sworn in or not. In addition, witnesses who lie under oath may be charged with perjury.

That comes from Marleau and Montpetit, page 862.

That's the business conducted.

Do you have an opening statement, Mr. Harder? I turn the floor over to you.

À (1010)

Mr. Peter Harder (Deputy Minister, Department of Foreign Affairs and International Trade): Thank you, Mr. Chair.

I have a brief opening statement. I'd like to make an opening statement with respect to the time of my stewardship as the Secretary of the Treasury Board and the Comptroller General of Canada. For the record, as the chair indicated, I was appointed to these positions in December of 1995 and left the role in March of 2000.

The present Secretary of the Treasury Board, Jim Judd, has reviewed for the committee the role the board has played and has spoken to the submissions that have been provided to the committee.

Eight documents are relevant to my time as secretary. Specifically, on September 19, 1996, Treasury Board approved the cancellation of appendix Q's reporting requirements to the Treasury Board. As the documents indicate, the secretariat concluded that “because of the high level of competition of public opinion research and advertising contracts, the reporting requirement should be removed...”. This is the quarterly reporting requirement. “PWGSC, however, would continue to monitor its contracts for these services and ensure that high levels of competition continue, and that no one company dominates the market.”

Later that same year, on November 21, 1996, Treasury Board approved $17 million for each of the fiscal years 1996-97 and 1997-98 to support communications priorities of the Government of Canada. Approximately a year later, on November 29, 1997, Treasury Board approved $18.8 million for fiscal year 1997-98 for communications priorities of the Government of Canada. Later that same year, on December 11, Treasury Board approved $35 million, which is to say, the preceding $17 million and the $18 million for fiscal year 1998-99, again, to support communications priorities of the Government of Canada.

Less than a year later, on September 24, Treasury Board approved the reclassification of a senior communications coordination position in Public Works and Government Services Canada. Also, in December 1998 Treasury Board approved $40 million for one year for communications and sponsorships for fiscal year 1999-2000. A year later, in December 1999, Treasury Board approved $40 million for the next fiscal year, 2000-01. Later that same month Treasury Board approved an additional $9 million in supplementary estimates for 1999-2000 for communications activities for PWGSC. These submissions reflect the approval of the board of increased funding for communications activities for enhanced programming for a specified period of time.

I would also like to say a few words about the initiatives that were put in place, in the period I was secretary of the board, to enhance the comptrollership function in government. First, we created a comptrollership branch and recruited a senior private sector auditor. Second, in 1996 we established an independent review panel on the modernization of the comptrollership function in the Government of Canada. This report and its endorsement by Treasury Board ministers led to a significantly enhanced focus on comptrollership. Third, in 1997 I wrote to all deputy ministers and senior financial officers detailing their duties and obligations, including:

If the deputy head does not accept the advice offered by the SFO, then the SFO must request that the deputy head seek the advice of the Comptroller General before taking a final decision. The deputy head must then discuss the matter with the Comptroller General.

Fourth, in March 2000 Treasury Board tabled a document entitled “Results for Canadians: A Management Framework for the Government of Canada”, which reinforced the government's commitment to continuous management improvement and accountability for results. In this context it identified the need for a better-positioned and strengthened internal audit function. This management framework grew out of the work we had been doing, such as the “Assessment Framework for Modernizing Comptrollership”, “Managing for Results 1999”, “Modern Comptrollership - Moving Forward”, and “Modernizing Accountability Practices in the Public Sector”.

I would be pleased to respond to your questions.

À (1015)

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

We will now start our first round with Mr. Forseth; eight minutes, please.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, CPC): Thank you very much, Mr. Harder.

In your opening statement, basically, what you have outlined gives us a feeling of how good things were, and if there was a little bit of concern, you responded appropriately. Yet on the other hand the Auditor General simply says:

These arrangements--involving multiple transactions with multiple companies, artificial invoices and contracts, or no written contracts at all--appear to have been designed to pay commissions to communications agencies while hiding the source of funding and the true substance of the transactions.

This happened on your watch. Were you not aware of the way this was structured? How could this get by Treasury Board?

Mr. Peter Harder: The role of the board was to respond to a submission for increased funding of an existing program activity. It was not the role of the board to go into the department and manage it for them. Were the department to engage the board in concerns, of course the board would respond. But that was not done.

Mr. Paul Forseth: The Treasury Board writes all the rules and regulations. We hear in the House all the time, “Oh, Treasury Board guidelines have been violated.” What capacity or will does Treasury Board have to enforce its guidelines so that they're worth the paper they're written on?

Mr. Peter Harder: First of all, the board's role is to ensure that there is an understanding of the rules and the guidelines and that there are appropriate frameworks in place. It is the responsibility of departments to administer accordance to the Treasury Board. There is an important role for internal audit in this regard. The internal audit is an instrument that the deputy ministers have in order to determine whether there is an issue of management concern.

Mr. Paul Forseth: But the problem is that when the guidelines are broken, and the rules that you write are broken, there are no consequences. Nothing happens. Is that not true?

Mr. Peter Harder: I think the fact that there were consequences after the internal audit at Public Works demonstrates that the internal audit system works. Now, should the internal audit system be more robust in government--that certainly is a direction that I would be, and was, supportive of.

Mr. Paul Forseth: The evidence we've heard so far is that this was a very special case that seemed to be able to get funds and disburse funds without the normal accountability chain, without the normal decision-making chain of verification of value for dollar. So that money could have just disappeared into someone's pocket. There was a possibility of that, and I suppose the RCMP is investigating some of that.

The Treasury Board is supposed to be kind of the watchdog. This unit appeared to be a very special case, and I'm kind of wondering, how often does the Prime Minister sign off on a submission? I take it that he had his fingers on this particular unit's submissions.

Mr. Peter Harder: Let me assure members that the Treasury Board submissions that were dealt with that I know, because of the time I was there, were dealt with in the normal fashion. It was rare but not unprecedented for the Prime Minister to sign Treasury Board submissions. He signs them with respect to the estimates of the Privy Council Office, for example. As Mr. Judd indicated, the Prime Minister's signature on this submission reflected the fact that it was to access funds that were under his control in the fiscal framework.

Mr. Paul Forseth: The Auditor General said:

We found widespread non-compliance with contracting rules in the management of the federal government's Sponsorship Program, at every stage of the process.

That's quite an indictment of the oversight of Treasury Board, and this was on your watch. Can you explain how this could happen? If you're saying, well, it just kind of was there, then maybe it's happening in many other departments also.

Mr. Peter Harder: Well, sir, the internal audit that was launched within Public Works and Government Services Canada was launched at the same time as I departed from the position--not that they were coincidental--and the action taken through the internal audit process did show that the internal audit function at Public Works did work. The Auditor General herself has acknowledged that. But that's speaking beyond the period in which I was secretary.

À (1020)

Mr. Paul Forseth: The internal audits obviously said that they didn't feel that there was any misappropriation of funds or whatever, and yet when we finally begin to dig into it, yes indeed there was. It kind of looked like the audit was done by the people who were doing the program, and everyone had a self-interest in whitewashing things rather than correcting the inherent problems of this program.

Mr. Peter Harder: I can't comment on the internal audit. It was conducted after I left.

Mr. Paul Forseth: I'm trying to get at almost the utility of the Treasury Board writing rules and specifying rules of the game to ensure that taxpayers' money is spent wisely and appropriately. When those rules are violated, what's the Treasury Board going to do to ensure that there are consequences?

Mr. Peter Harder: As I indicated, there was a strengthening of the internal audit function and the comptrollership role in the Government of Canada.

Perhaps I could just put this period into a bit of context. We were managing program review, which took direct program expenditures from 17% of GDP to 12%, an $8 billion reduction. We were managing about 40,000 people departing the public service. We were engaged in collective bargaining for the first time since the freezes of about seven years. There was the IT agenda, the service agenda, the Y2K preparations, and modernizing comptrollership. It was a rather charged agenda for some 700 people.

Mr. Paul Forseth: From a Treasury Board oversight perspective, then, perhaps you can comment on what the Auditor General said, that some sponsorship funds were transferred to crown corporations using unusual methods that appeared designed to provide significant commissions to communications agencies “while hiding the source of the funds and the true nature of the transactions”.

Mr. Peter Harder: Well, sir, that observation is with respect to the timeframe after I had left the board.

In terms of the frameworks that the board established, I would point to the modernizing of the comptrollership, which, as the chair will remember, we had sessions on in public accounts. The framework was an attempt to articulate a modern approach to the role of a central agency like Treasury Board and the role of departments.

I should add that it was endorsed by the Auditor General of the day and pursued actively in departments.

Mr. Paul Forseth: I'll bring it back to something that certainly was in your purview. As you said in your opening statement, later the same year Treasury Board approved $17 million for each of the fiscal years. Obviously these submissions were reflected in documents to Parliament. Government proposes, but it is still Parliament that must vote the appropriations.

However, as the Auditor General said, Parliament was not informed of the sponsorship program's true objectives:

...it is not clear to us how the decision to create the program was made, and by whom. Nor is it clear why the decision was not communicated in writing.

So it appears that even though you write the budgets of the departments--you mentioned here “supplementary estimates for 1999-2000 for communications activities”--was it spelled out really clearly for Parliament to understand what were these communications activities, their true nature?

Mr. Peter Harder: As I understand it, I believe vote 5 of the Department of Public Works and Government Services was the vote that captured government services, within which the activities of sponsorship and other communications activities were described.

The fact of the matter is that this was envisaged to be a term-limited and not terribly largely funded activity. It was designed to enhance the communications activities of the Government of Canada, as described in the public accounts of the day.

The Chair: Thank you, Mr. Forseth. I'm sorry--

Mr. Paul Forseth: I'll just finish with a comment, Mr. Chair.

It is my contention--and I disagree with you--that Parliament was misled and that the submissions written by Treasury Board talked about communications in general, and never did specify what it was all about.

The Chair: Thank you, Mr. Forseth.

[Translation]

You have eight minutes, Mr. Desrochers.

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Thank you, Mr. Chairman. In the next 60 or 90 seconds, I'd like to sum up Mr. Harder's resume, with your permission.

You served as Secretary of the Treasury Board from 1995 to 2000. While acting in that capacity, you launched the Federal Identity Program in February 1998. We also learned that you put pressure on the CBC to display small Canadian flags just about everywhere. Subsequently, you served as Deputy Minister at Industry Canada from 2000 to 2003. According to the documents I received, during that period, you sat on the board of directors of the Business Development Bank of Canada, which, according to the Auditor General, lent its name to two projects undertaken by Robert-Guy Scully, namely the Le Canada du millénaire and the Innovation series. You also served on the Bank's board of directors alongside Jean Carle and Michel Vennat. The later was suspended without pay on February 24, 2004.

Given your career moves, Mr. Harder, and everything you've done to sell Canada at every opportunity, it's hard to believe that you were unaware of what was happening at Public Works.

À (1025)

[English]

Mr. Peter Harder: My role in respect of the federal identity program is the role of the Treasury Board to provide policy direction to departments, and there was a strong sense within the secretariat and among the Treasury Board ministers that the federal identity program had lost sufficient focus, that there were too many identities out there, and we should enhance the identification of government programs, activities, buildings, etc. That policy directive was refreshed, and the responsibility for implementing it was given to departments.

With respect to my time at the BDC, I don't know, Mr. Chair, whether that's the subject of the reason for my being here. I was on the board of the Business Development Bank for the period in which I was Deputy Minister of Industry. I do not recall those programs being discussed at the board, but I did not, in preparation for today, refresh my memory.

The Chair: In response to that question, I think we're trying to ask you to answer the questions from the body of knowledge that you contain, so if the information came to you, and you have it in your mind, from any particular source, be it your work at the Treasury Board or BDC, I think you should bring that forward. We respect the point that you did not refresh your memory from the BDC, but as you know, it is part of the issue before us. I just read a letter from the BDC offering their full cooperation and support.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: In so far as the Federal Identity Program and the pressures brought to bear on the CBC are concerned , did you focus your efforts on Quebec or on Canada as a whole?

[English]

Mr. Peter Harder: The policy that the Treasury Board enunciated on the identities program was a government-wide and Canada-wide policy. The implementation of that was directed to all government institutions and departments, but the management of the program itself rested with Public Works and the departments.

[Translation]

Mr. Odina Desrochers: So then, you gave Public Works the mandate to set up this program. Were arrangements made to provide additional funding for program administration, or did this fall under the sponsorship and advertising envelope?

[English]

Mr. Peter Harder: I don't recall, frankly. You could undoubtedly get that information from Mr. Judd.

[Translation]

Mr. Odina Desrochers: But you were there, Mr. Harder, from 1995 to 2000. You must have some recollection of certain events. You seem to have some difficulty admitting that while you were Secretary of the Treasury Board...You maintain that Public Works received funding for the Federal Identity Program. I'm also referring to some of the duties you later had. I can't understand your inability to recall certain facts. You can't remember how much funding this program received. You can't remember the instructions you gave to Public Works. You don't know which Public Works official was responsible for administering this program. You can't answer any of these questions. Is that in fact what you're telling me?

[English]

Mr. Peter Harder: Sir, I do not have a memory that allows me to provide to you, in detail, the level of expenditures that the federal identity program had eight years ago.

[Translation]

Mr. Odina Desrochers: Well then, Mr. Harder, I have another question for you.

You saw a request signed by the Prime Minister and by Mr. Gagliano for additional funds for priority federal government communications initiatives. While serving in this capacity, did you often have occasion to see the Prime Minister and Mr. Gagliano request a grant or additional funds? Was this standard procedure in other departments, or were such requests unique to Public Works?

À (1030)

[English]

Mr. Peter Harder: As I indicated earlier, it was not frequent that the Prime Minister would sign, or co-sign, a Treasury Board submission, but this is not the only case. The Prime Minister's signature reflected access to funds within the fiscal framework over which he had discretion.

[Translation]

Mr. Odina Desrochers: Did you raise any questions when you received this request? You were Secretary of the Treasury Board at the time the request was submitted. I would imagine that you had a budget. When you laid eyes on this document signed by the Prime Minister and by Mr. Gagliano, a document that clearly stated that the details of the file should not be widely discussed and that the contact person was either Chuck Guité or Pierre Tremblay, didn't you find it all rather unusual?

[English]

Mr. Peter Harder: Sir, the funding that was provided in the period in which I was secretary was to supplement an existing program of government activity in the communications area. It was not in that sense unusual for government to say we want to do more of some of the things we are doing. No, it did not raise my attention.

[Translation]

Mr. Odina Desrochers: I understand what you're saying, Mr. Harder, because MPs will be called upon in the coming weeks to approve a number of budget items. You also said that it was rare to see the name of either the Prime Minister Jean Chrétien or Alfonso Gagliano on a request for additional funds. That wasn't the way things were done. Was this the only time you witnessed such a thing between 1995 and 2000, or did this happen on other occasions, aside from the two mentioned?

[English]

Mr. Peter Harder: Of the documentation covering my period, it is the only one I'm aware of. But again, I would suggest that you might want to ask Mr. Judd, because he has access to the documents over a wider frame of time.

[Translation]

Mr. Odina Desrochers: Mr. Harder, as Secretary of the Treasury Board, after seeing this department request additional funding, for example the 1997 request at year's end, did it occur to you to ask the department why it wanted the money and what it planned to do with the funds? The description provided was rather vague. GIven the size of the request and the fact that the Prime Minister was the one asking for the money, did you take any special follow-up action or subsequently ask Public Works to account for how the money was spent?

[English]

Mr. Peter Harder: Well, sir, with respect to the amount of funding we were looking at, we interpreted it and believed this to be a supplementary expenditure for Government of Canada communications activities. It's not unusual to augment activities. In that context this was a very regular and usual submission and was treated as such.

[Translation]

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

You have the floor for eight minutes, Ms. Jennings.

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman.

Thank you for coming here today, Mr. Harder. You say that it wasn't unusual for the Prime Minister to co-sign a request for additional funding for an existing program. Therefore, when this request came across your desk, it wasn't deemed out of the ordinary for the Prime Minister to have signed it.

When you were Secretary of the Treasury Board in 1996, an audit of Public Works' APORS was conducted by Ernst & Young. This firm audited all of the contracts managed or issued by this Public Works sector between 1994 and 1996. The audit findings were fairly disturbing. Similar conclusions were reached in the internal audit ordered in 1999-2000, in the Auditor General's report on the three contracts awarded to Groupaction and in the AG's report on all communications coordination operations.

Did you know about the Ernst & Young report when you were Secretary of the Treasury Board?

À (1035)

[English]

Mr. Peter Harder: No, I was not. The 1996 audit was conducted before the board instructed departments to put their internal audits on the website and provide them to the Treasury Board. That was done as part of the modernizing comptrollership initiative because we had the view that internal audits ought to have the light of day, and that was initiated in the latter part of my time there. I believe Mr. Judd indicated the specific letter went out some months after I left, but it was done as a response to implementing the modern comptrollership initiative.

[Translation]

Mrs. Marlene Jennings: Therefore, at the time the Ernst & Young audit was conducted, it wasn't unusual for the Secretary of the Treasury Board not to be aware of this report.

[English]

Mr. Peter Harder: That's correct.

[Translation]

Mrs. Marlene Jennings: I see. Generally speaking, is there anything unusual about the fact that a program or service created by a government department is headed up by an official who reports directly to the Deputy Minister?

[English]

Mr. Peter Harder: No, but the Treasury Board does not have a role in determining how a deputy organizes matters to deliver their programs other than the fact that, as you know from the material you have in front of you, the board, together with the Public Service Commission, determines whether the classification of that work warrants an ADM level, and that was done in this case for the position. As to the organization of the department, that was left to Mr. Quail, who answered these questions yesterday for the committee.

Mrs. Marlene Jennings: I understand that, but I want it on the record that the decision to expand the mandate of the ads, polls, and opinion research sector, which was the subject of the Ernst & Young audit in 1996, for it to become the coordinating and communications branch--I forget what it's called, CCSB--remained within Public Works--

Mr. Peter Harder: That's correct.

Mrs. Marlene Jennings: --and that Treasury Board, under the normal policies, rules, procedures, and regulations, would have had no input and no knowledge other than knowledge of a decision by the Public Service Commission that this particular position should be at the ADM level, assistant deputy minister.

Mr. Peter Harder: Yes, and the board at the time had to approve ADM-level positions, but it was the position we were examining.

Mrs. Marlene Jennings: Now, we have heard testimony about the position, which was executive director of APORS. This was the ads, polls, and opinion research sector, which was the subject of the 1996 Ernst & Young audit within Public Works, which concluded many disturbing things. The testimony was that according to Treasury Board rules and guidelines, the decision to promote a position--not an individual but a position--from EX-1 to EX-2 remains within the department. Is that correct?

Mr. Peter Harder: Yes, it is. The classification of a position is delegated by the Public Service Commission, not the board, to departments.

À (1040)

Mrs. Marlene Jennings: Would the decision to promote or reclassify a position, then, from EX-2 to EX-3 also remain within the department itself?

Mr. Peter Harder: They would have to seek the concurrence of the Public Service Commission.

Mrs. Marlene Jennings: Thank you.

Once a position is reclassified, from--

Mr. Peter Harder: The Treasury Board's interest is only with respect to ADM-level positions.

Mrs. Marlene Jennings: That's EX-4.

Mr. Peter Harder: Or EX-5.

Mrs. Marlene Jennings: Or EX-5. And it's only at the point where there is a submission that a position will be reclassified from EX-3 to EX-4 or from EX-4 to EX-5 and that Treasury Board has to become directly involved and be aware of everything surrounding and justifying, entre guillemets, the reclassification. That's correct?

Mr. Peter Harder: That's correct.

Mrs. Marlene Jennings: Once the Public Service Commission gives its approval for a reclassification from EX-1 to EX-2 or from EX-2 to EX-3, for instance, will the Public Service Commission then be responsible for determining whether the individual, the physical person who's occupying the position that has now been reclassified, has the capacity and the experience, professional and otherwise, to continue to occupy that position and therefore warrant a reclassification so as to maintain the position? And in so doing, will the Public Service Commission determine that, according to rules and procedures, a competition has to be conducted?

Mr. Peter Harder: There is some jurisprudence on this where incumbents who have been performing at the level, and the reclassification now says the work has changed to a higher level, have incumbent rights. There is some jurisprudence in that regard, but if the work description is different and unique, the PSC can determine that it should go to competition.

Mrs. Marlene Jennings: I have another question. In its determination as to whether the person occupying the position that has now been reclassified upwards is competent to continue occupying that position, would PSC, under normal circumstances, be informed of an audit, the conclusion of which clearly stated that the expertise for a certain function did not exist within that sector, including the person running that sector? I am talking about the Ernst & Young 1996 audit.

Mr. Peter Harder: I can't answer that. It's probably a question for the PSC. I think it's a good question.

The Chair: It's a good question, but we don't have the answer, Ms. Jennings.

Mr. Comartin, please, eight minutes.

Mr. Joe Comartin (Windsor—St. Clair): Thank you, Mr. Chair, and thank you, Mr. Harder, for being here.

Mr. Harder, I want to go back to the very beginning of the...I was going to say “scam”, but let me just say this program, which isn't really a program.

There was a meeting held by the Treasury Board in September of 1996. The minutes show that you were in attendance at that meeting. At that meeting there was, and I will read this, “an Analysis of contracts awards for public opinion research and advertising services for the 1995-96 Fiscal Year.”

Do you recall being at that meeting?

Mr. Peter Harder: These documents refreshed my memory. Yes, I was at Treasury Board meetings regularly.

Mr. Joe Comartin: Okay. Did the report I just mentioned come forward at that time?

Mr. Peter Harder: Yes.

Mr. Joe Comartin: I want to back up to before it came forward. Can you tell me who actually prepared this report, this analysis?

Mr. Peter Harder: Every submission that the board receives is produced in the department. What the board then does is--

À (1045)

Mr. Joe Comartin: I'm sorry, so that we can be clear, are we talking about Public Works or Treasury Board?

Mr. Peter Harder: In this case, Public Works.

The respective department proposes a Treasury Board submission. It submits a document to the board. Each of those documents is then reviewed by Treasury Board staff, and a précis examination of the request is provided, in which the secretariat can recommend to ministers of the board approval of the request as made, or approval subject to certain changes to the request being sought. That normally is done in consultation with the department, so that they are not blindsided by what advice the secretariat might provide. And there are times when Treasury Board submissions are withdrawn because there is a difference of view.

Yes, the board has an obligation to recommend to ministers, in each case, with respect to a submission the board has received.

Mr. Joe Comartin: If I can summarize that, the essence of this report or analysis was prepared at Public Works, and was perhaps modified by the secretariat.

Mr. Peter Harder: The secretariat provides the summary, which you have, which is called a précis. That's all that the board provides. The submission itself is done in the department.

Mr. Joe Comartin: Right. And can you tell me who in the secretariat, the actual people, would have done the précis?

Mr. Peter Harder: It's usually done in the sector responsible.

Mr. Joe Comartin: I'm guessing you're not going to be able to tell me the exact names. That's what I am looking for. You do not know the exact names.

Mr. Peter Harder: Not off the top of my head.

Mr. Joe Comartin: Mr. Chair, could we note that I would like to know who actually prepared that précis in Treasury Board?

The Chair: We will have our clerk write to Treasury Board and request that information.

Mr. Joe Comartin: Then I'm assuming, Mr. Harder, that you have no idea who prepared the overall report that came out of Public Works.

Mr. Peter Harder: Not from my memory.

Mr. Joe Comartin: Could I also have the same request as to who prepared the larger report, the main report, from Public Works, Mr. Chair?

The Chair: Okay, the clerk will also do that.

Mr. Joe Comartin: Mr. Harder, in terms of this report that was accepted, the result was that the quarterly reporting function was removed as a responsibility to Public Works. Is that correct?

Mr. Peter Harder: Yes.

Mr. Joe Comartin: If I read the report accurately, the two major concerns the Treasury Board had at that time was that there be competitive bidding and that there be no domination of the market by one particular agency. Is that a fair...?

Mr. Peter Harder: Correct.

Mr. Joe Comartin: It also shows up repeatedly--in the précis, in the report, in the minutes of the meeting--that one of the concerns was that both Public Works and Government Services Canada and the Treasury Board Secretariat would be able to reduce costs and resources by dropping this reporting function.

Mr. Peter Harder: The quarterly reporting function.

Mr. Joe Comartin: Yes, the quarterly reporting function. Do you have any idea how much that saved either Treasury Board or Public Works?

Mr. Peter Harder: I don't recall. There was a broader initiative to reduce the number of submissions the board had to receive. There were cases that required submissions that didn't merit, I would argue, ministerial attention, including such things as deeming spouses and pension cases.

Mr. Joe Comartin: All right.

In terms of the long-term effect, we see subsequently, on the front page of the National Post today, and we saw it in the reports we got yesterday, people like Mr. Guité awarding a $1.5 million contract over the telephone.

You go through all of those reports and you see no sign whatsoever of competitive bidding. Had this reporting continued on, would that in fact not have caught that type of abuse?

Mr. Peter Harder: What was eliminated in this document was quarterly reporting. There was still annual reporting provided for during the period in which I was there.

Mr. Joe Comartin: In those annual reports, did you in fact observe any of this type of conduct?

Mr. Peter Harder: No.

Mr. Joe Comartin: So the reports you got were, in some fashion or other, falsified.

Mr. Peter Harder: Well, I can't determine that.

The Chair: Are you making an accusation here, Mr. Comartin, or...?

Mr. Joe Comartin: Touché, Mr. Chair.

Mr. Harder, at any time while you were there—you were there from 1995 to 2000—did you ever see a review done of the actual contracts and how they were allocated?

Mr. Peter Harder: I personally was not involved in the submissions that would.... The comptrollership branch would have been involved in working on doing that kind of work. Nothing was brought to my attention.

Remember, we were dealing with probably 1,200 submissions a year, and perhaps more.

Mr. Joe Comartin: At Treasury Board Secretariat, who would get those annual reports?

À (1050)

Mr. Peter Harder: It would be in the comptrollership area.

Mr. Joe Comartin: Going back to the saving of costs and resources, at that period of time there was a fair amount of cutting going on in the public service. Can you tell me how important that saving was in the final determination to drop the quarterly reports?

Mr. Peter Harder: I don't think the dropping of this specific reporting requirement.... I can't determine what that savings would be, but there was an attempt to rationalize the reporting requirements of the department--

Mr. Joe Comartin: I'm sorry, Mr. Harder, let me interrupt you. That's not the question. I'm not asking how much, I'm asking how significant a factor it was, in the determination at the Treasury Board level, to drop the quarterly reports.

Mr. Peter Harder: There was a determination to reduce reporting requirements to those that were meaningful and that would assist departments and the board in managing public finances.

Mr. Joe Comartin: Mr. Chair, I don't know if we've actually had these annual reports. I haven't seen them. I don't know if we've asked for those yet. These are the annual reports that would have gone to the comptroller's office within Treasury Board.

The Chair: Are you are talking about the departmental performance reports that are tabled annually in the House of Commons in the fall? Are you talking about the internal annual reports within each department and the Treasury Board?

Mr. Joe Comartin: These are coming from Public Works, over to Treasury Board, showing how the contracts have been allocated.

The Chair: That's not a document that is made public by normal course, if I am correct.

Are they made public, Mr. Harder?

Mr. Peter Harder: It's not part of material that has become public. I would suggest asking Mr. Judd.

The Chair: So you're saying there is an annual report from Public Works to the Treasury Board on contracts.

Mr. Peter Harder: What was eliminated in this submission was quarterly reporting.

The Chair: Yes, but there would still have been the annual reporting.

Mr. Peter Harder: That's correct.

Mr. Joe Comartin: Which deals directly, Mr. Chair--so I can be clear on this--with the question of open bidding and the question of no domination by any particular agency.

The Chair: Then perhaps I'll just have the clerk ask for that annual report or the quarterlies, if they existed, around that time.

Do you remember when the quarterlies were eliminated, Mr. Harder?

Mr. Peter Harder: Well, that was in September of 1996, as a result of the....

The Chair: Well, we will get these quarterly reports, starting in 1995 and moving forward, and then we'll get the annual reports from that point forward, Mr. Comartin.

Unfortunately, your time has now expired.

Mr. Toews, please, for four minutes.

Mr. Vic Toews (Provencher, CPC): Thank you.

In an interview on Friday, February 27, with The Winnipeg Sun, the Treasury Board president, Mr. Alcock, stated that “Prime Minister Paul Martin knew for years that the federal government's financial management system was rife with problems and susceptible to abuse”. He said that even though Mr. Martin was the finance minister and vice-chair of the Treasury Board, he was “powerless to do anything about it”. Mr. Alcock said Martin did not have the responsibility of the machinery of government.

Basically, Mr. Alcock said the controls didn't exist in the 1990s when Mr. Martin was the finance minister. So it would have been right during your watch when, as Mr. Alcock said, none of these controls were in place and the former finance minister, now Prime Minister, knew there were weak internal controls and serious deficiencies in the system but couldn't do anything to change them. Did he bring those issues to your attention, Mr. Harder?

Mr. Peter Harder: Well, sir, the whole attempt and initiative--

Mr. Vic Toews: No, no. My question is did Mr. Martin bring those deficiencies to your attention? These deficiencies that have been identified by the President of the Treasury Board, did he bring those to your attention?

Mr. Peter Harder: I think all ministers of the day were concerned that we improve the quality of our management practices in the context of program review, which was a significant management--

Mr. Vic Toews: No, I'm not asking you about that. I'm asking about the vice-president or the vice-chair of the Treasury Board, the finance minister. Did he bring these problems to your attention when you were Secretary of the Treasury Board?

Mr. Peter Harder: He was, among other ministers, concerned that we improve--

Mr. Vic Toews: What did he say to you about the problem with the management system being rife with problems and susceptible to abuse during the 1990s?

À (1055)

Mr. Peter Harder: I don't recall a specific quote, but he, with other ministers, was very concerned that we improve the quality of our management, and that's the initiative we were implementing.

Mr. Vic Toews: So all he said to you was, you know, I just want you to improve the quality of the management. We have here a statement from the present Treasury Board chairperson saying the controls weren't in place, the financial management system was rife with problems and susceptible to abuse, and he just came to you and said, uh, you know, I'd like you to improve things. That's all he said?

Mr. Peter Harder: No, sir. The independent--

Mr. Vic Toews: Well, what did he say?

Mr. Peter Harder: After making its report, the Independent Review Panel on Modernization of Comptrollership worked with the secretariat to establish an action plan of enhanced comptrollership.

Mr. Vic Toews: All right, we know about the action plan.

Mr. Peter Harder: The ministers of the board endorsed that action plan.

Mr. Vic Toews: Well, Mr. Alcock said Mr. Martin knew there were weak internal controls and serious deficiencies but couldn't do anything to change things during the 1990s. He said he even had discussions with Mr. Martin about it at the time. I'm wondering what specific discussions you had with Mr. Martin and when you first knew about the serious deficiencies, when they were first brought to your attention.

Mr. Peter Harder: Again, in establishing--

Mr. Vic Toews: No, no. When did he bring those to your attention?

Mr. Peter Harder: I don't have a specific date or a specific--

Mr. Vic Toews: Give us a year.

Mr. Peter Harder: Well, when we launched the independent panel, that was 1996.

Mr. Vic Toews: That was 1996. So Mr. Martin brought these to your attention in 1996 and nothing was done about it until, as Mr. Alcock says, three months ago?

Mr. Peter Harder: Well, sir, I'm not here to answer for Mr. Alcock, but the fact of the matter is that an initiative was begun in 1996 to enhance the comptrollership function. It did determine that there were weaknesses in the system. There was an enhancement of the internal audit function, and $60 million was provided to increase the internal audit function. We all took improving the quality of our management extraordinarily seriously. Public servants across the Treasury Board and--

Mr. Vic Toews: And somehow $40 million or $100 million or $250 million just slipped between the cracks.

The Chair: Thank you, Mr. Toews.

Do you have a response?

Mr. Peter Harder: No.

[Translation]

The Chair: You have the floor for four minutes, Mr. Desrochers.

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

I'd like to focus on the role of the Vice President of the Treasury Board, who was Minister of Finance. Submissions were approved by the Prime Minister and signed by the Minister. Did you point out to the then Finance Minister that the Prime Minister and Mr. Gagliano were intervening directly in an effort to secure additional funding for Public Works?

[English]

Mr. Peter Harder: Sir, there was nothing unusual in the submission, and no.

[Translation]

Mr. Odina Desrochers: But Mr. Harder, earlier you said that...

[English]

Mr. Peter Harder: It would have been provided to all ministers.

[Translation]

Mr. Odina Desrochers: Mr. Harder, you said that the signatures of the Prime Minister and of Mr. Gagliano weren't often seen on submissions. When you saw Mr. Chrétien's signature, did you say anything to the former President of the Treasury Board? You said you were surprised to see this approach taken. Did you inform Mr. Martin, who was Finance Minister at the time?

[English]

Mr. Peter Harder: Sir, I did not say I was surprised; I said it was not frequent. All this documentation you have would have gone to all members of the Treasury Board, and they would have dealt with it as they did.

[Translation]

Mr. Odina Desrochers: You say that members of the Treasury Board may have been apprised of the situation. Did Mr. Martin, who was Finance Minister at the time, attend these meetings?

[English]

Mr. Peter Harder: You have the attendance records in the material, and you can draw your own conclusions.

[Translation]

Mr. Odina Desrochers: I want to know if Mr. Martin was present when you shared your concerns or conveyed your surprise over the fact that Prime Minister Jean Chrétien and Mr. Gagliano were making a direct submission to Treasury Board for additional funds for a communications program. Was Mr. Martin told about the request?

[English]

Mr. Peter Harder: Again, sir, I was not surprised by the submission being co-signed. It was appropriate, given that the Prime Minister's signature provided access to funds that were within the fiscal framework for his access, and the connection with Mr. Gagliano reflected the program those funds were designed to support. It was in that sense routine.

Á (1100)

[Translation]

Mr. Odina Desrochers: So then, the Prime Minister routinely intervened to request funds? Is that what you're telling me? In the same breath, you're saying that only rarely did the Prime Minister get involved in Mr. Gagliano's affairs. I really want to be clear about your testimony here this morning.

[English]

Mr. Peter Harder: Let me repeat. It was not common but not inappropriate or unusual in a situation where the Prime Minister either sought Treasury Board support for, let's say, Privy Council Office funding or, as in this case, provided access to funds that were within the fiscal framework for his access. The co-signature reflects the fact that those funds were to support Public Works and Government Services Canada's communications program.

[Translation]

Mr. Odina Desrochers: As Secretary of the Treasury Board, did you take any steps to find out where the money was going? Did you ask Mr. Gagliano to file a report at year's end to account for these additional funds allocated for communications coordination activities?

[English]

Mr. Peter Harder: The role of the Treasury Board is not one to seek from ministers a specific accounting for how individual decisions on the allocation of program activities, in this case communications, were made. This is a large organization.

The Chair: Merci, Monsieur Desrochers.

Mr. Lastewka, please, for four minutes.

Hon. Walt Lastewka (St. Catharines, Lib.): Thank you, Mr. Chair.

I want to go over a number of things just to confirm what's been said this morning.

In September 1996 there was the cancellation of appendix Q, and you confirmed to the committee that the only thing that was cancelled was the quarterly reporting.

Mr. Peter Harder: At that time.

Hon. Walt Lastewka: At that time. Do you know if appendix Q has changed otherwise since that time?

Mr. Peter Harder: I believe Mr. Judd was asked that, but frankly, I don't remember his response.

Hon. Walt Lastewka: Mr. Chair, I understand you're going to get some of the quarterly reports before the change, and annual reports after the change. Is that correct?

The Chair: I asked for the reports, I believe, from 1995--when the quarterly reports were still in existence--and then the annual reports after the quarterlies ceased.

Hon. Walt Lastewka: In 1996, on the establishment of the Independent Review Panel on Modernization of Comptrollership in the Government of Canada, you mentioned that a number of people were concerned and wanted to get to it. When you issued your detail of duties and obligations, it said that “if the deputy head does not accept the advice by the SFO, then the SFO must request that the deputy head seek the advice of the Comptroller General...”.

Are you aware of any instances during your watch when the SFO or the deputy ministers went to the Comptroller General to seek advice?

Mr. Peter Harder: No.

Hon. Walt Lastewka: Mr. Chair--

The Chair: By the way, he was the Comptroller General.

Hon. Walt Lastewka: I understand that, Mr. Chair, but I think it would be good for us to check if there were any requests to go to the Comptroller General during the time span of November 1997 to 2001, to see if there were any requests.

The Chair: Okay, the clerk will send a letter.

Hon. Walt Lastewka: Okay, because I think it's important for us to know if there was anything that came from Public Works senior financial officers to have any disputes resolved between the two.

When you talked about.... I forget who it was; I think it was Mr. Forseth who talked about the role of the Treasury Board. It's my understanding that the role of the Treasury Board is to set policy that would be adhered to by internal audits and Auditors General to go back and double-check--or is the Treasury Board a watchdog over departments?

Mr. Peter Harder: Sir, under the Financial Administration Act and government policy, deputy heads are fully responsible and accountable for financial management in their departments and agencies. That's the system that we have. The board establishes the frameworks, the accountability regimes. The reporting is forthcoming from departments, and the board does have, in that sense, a monitoring role of quality of the reporting.

There was the improved reporting to Parliament initiative, which the board led, together with parliamentarians, to enhance the quality of reporting, but that reporting is ultimately done in departments, and that's what the initiative was designed to do.

Á (1105)

Hon. Walt Lastewka: Many times I get--

Mr. Peter Harder: The internal auditors of departments are an instrument of the deputy minister. There is, within the board, a centre of excellence for internal audit. We did then, and I'm sure they do now, provide some training and some guidance on how internal audits ought to be conducted. You will know that we now require those internal audits to be posted publicly so that they become part of the discussion of management's challenges and corrective action in departments.

Hon. Walt Lastewka: This takes me to where my concern is. Treasury Board sets a policy that deputy ministers and internal audits need to adhere to. You have a centre of excellence for auditors; therefore auditors are trained. And the Auditor General has mentioned that the Public Works internal audit is an excellent audit team.

The question I have now is if there are no internal audits taken, as there were not on the sponsorship program from 1997 until August 2000.... How did that happen? Was that outside the Treasury Board policy, that there be no audits of a program from 1997 to 2000?

Mr. Peter Harder: That would not be unusual, in the sense that, as Mr. Quail indicated yesterday, Public Works would normally have around 25 internal audits a year. They would allocate those across their suite of programs, over a cycle of time. The fact that you were adding to an existing activity--the funding we're referring to--would not in itself sort of say “Gee, let's do this earlier”. In fact, as I understand it from Mr. Quail, when he launched the audit in March of 2001, he brought forward the normal audit cycle for that program.

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

Mr. Tonks, please, for four minutes.

Mr. Alan Tonks (York South—Weston, Lib.): Thank you, Mr. Chairman.

Good morning, Mr. Harder. Thank you for being here.

I want to continue with the line of questioning that Mr. Comartin was undertaking with respect to appendix Q. You've had an opportunity to see what Mr. Marshall presented in terms of what the normal Public Works process was with respect to contract procurement and how that was completely circumvented. Now, when appendix Q was approved in 1996, there was a document presented. Is that the document Mr. Comartin referred to, that was prepared in Public Works and that made the recommendation for Treasury Board to not require competitive contracts--an open kind of process, the kind of thing that Mr. Marshall was referring to?

Mr. Peter Harder: I want to be careful in responding, because this was some years ago, but to my recollection, the document you have in front of you, which led to terminating the quarterly reporting requirements, was done on the recommendation of officials. The findings that they identified were being met--that is to say, no dominance and competition--and as a result, the need for quarterly reports was viewed as not necessary. That review would not be done within Treasury Board itself but through working with departments.

Á (1110)

Mr. Alan Tonks: But would you agree that a very large consideration with respect to being able to get under the radar of internal Public Works was the fact that there weren't quarterly reports and there wasn't a competitive process? I mean, there had to be some reason why the executive director could go from putting out a contract, and completely circumventing all of the checks and balances, to the point where he himself was the one who signed off and paid the cheques out and nobody knew.

Mr. Peter Harder: Again, I can't comment, in the sense that I had no awareness of that.

Mr. Alan Tonks: Okay.

Mr. Marshall said:

Mr. Chairman, in summary, I'd like to say that no system is foolproof. As the Auditor General has pointed out, controls and procedures did exist...to ensure good administration, had they been followed. Yet in the case of sponsorship they were not followed and a few individuals who were put in positions of power took advantage of that.

I think you appreciate that what we're trying to do is find out where those positions of power were, who those people were, and where they got that power from.

When you were the Secretary of Treasury Board, I assume you chaired the Treasury Board Secretariat as well.

Mr. Peter Harder: If I could answer that portion, the Secretary of the Treasury Board is the deputy head of the secretariat. As secretary to the board--that is, the council of ministers of the board--you have the responsibility, as provided in statute, to bring the views of the secretariat forward to ministers, for ministers of the board to make a decision. That's why the President of the Treasury Board is not called the “minister” of the Treasury Board; they preside, and it's the collective will of...it's a cabinet committee that's in statute. It's the only cabinet committee provided for in statute.

Mr. Alan Tonks: Okay. As you were sitting as Secretary to the Treasury Board, do you think--in retrospect, using the advantage of hindsight--this was an exceptional request that had been put forward to eliminate the terms and conditions of quarterly reporting, competitive bids, and the whole process that Public Works was supposed to have been taken through? In retrospect, if you had known then what you know now, would you in your capacity have said this was inordinately excessive in terms of the checks and balances that Treasury Board or PWGSC should have been providing?

That's it. That's my question.

Mr. Peter Harder: It's a good question, because I guess you have to ask whether a quarterly report would have picked that up. This was a very routine change in the sense of eliminating this quarterly reporting requirement. As to whether, in hindsight, a weekly requirement would have brought this forward, I am not sure.

The Chair: Thank you, Mr. Tonks.

Mr. Lunn, please, for four minutes.

Mr. Gary Lunn (Saanich—Gulf Islands, CPC): Thank you, Mr. Chair.

Mr. Harder, I want to come back to the line of questioning taken by my colleague Mr. Toews. I would like to know what year you first discussed the lack of controls specifically with the sponsorship program.

Mr. Peter Harder: Well, sir, I was never involved in the discussion on the sponsorship program.

Mr. Gary Lunn: You're on the record as saying that you discussed with Mr. Martin the problem with controls. Are you telling us that wasn't with the sponsorship program?

Mr. Peter Harder: That's correct. It was the--

Mr. Gary Lunn: If it wasn't the sponsorship program, was there another one that we don't know about? What other problems were there with lack of control?

Mr. Peter Harder: Our concern at the time was to ensure that we had a robust accountability framework, robust management framework, and that we had appropriately trained and resourced--

Mr. Gary Lunn: No, I'm not going there, though. You're on the record already as saying that you discussed with Mr. Martin in 1996 that there was a problem with controls, that they had broken down and they weren't.... That was your testimony earlier.

So I want to know--and specifically, not generally--what are we referring to? Where was the problem with controls? What program are we talking about? What were you referring to?

Mr. Peter Harder: Sir, the Auditor General in successive reports had commented on the state of public service management. I came to the board--

Mr. Gary Lunn: We've read all those reports, though. I'm coming back to your comments. We've read all of the Auditor General's reports, and I want to know....

You're on the record as saying that in 1996 there was a problem with the controls. You had discussions with Mr. Martin. I want to know exactly what you were talking about. What did you discuss with Mr. Martin about the lack of controls?

Á (1115)

Mr. Peter Harder: We discussed with ministers of the Treasury Board--

Mr. Gary Lunn: And Mr. Martin...I want to know specifically.

Mr. Peter Harder: Well, sir, I don't have a specific--

Mr. Gary Lunn: But he was there.

Mr. Peter Harder: On the need to have a more robust comptrollership framework--

Mr. Gary Lunn: But you identified that there were problems, obviously, and it wasn't working.

Mr. Peter Harder: It wasn't related to a specific program. From reading the Auditor General's reports and reading the internal audits of departments, we recognized that we had to improve--

Mr. Gary Lunn: I want to ask you a question. I will get very specific.

Are you telling me, then, from your time in 1995 to 2000, that the lack of controls specifically with the sponsorship program was never discussed? Yes or no.

Mr. Peter Harder: No.

Mr. Gary Lunn: They were never, ever discussed when you were present, never referenced.

Mr. Peter Harder: In March of 2001, when Mr. Quail indicated that he was going to undertake an internal audit, he did alert me to the fact that he was going to undertake an internal audit. That was, in my view, the normal tool available to a deputy minister who was managing the program.

But Treasury Board ministers, to the best of my recollection--

Mr. Gary Lunn: I come back to this report by Mr. Alcock. He says that Paul Martin knew for years that the federal government's management system was rife with problems, susceptible to abuse. I mean, it's almost incomprehensible that....

Of course, this program was going on for those five years. We're seeing the Prime Minister's intervention, that he's signing off. It's not that common, let's leave it at that. So I can't imagine that this was never, ever discussed.

Was it discussed with Madam Robillard?

Mr. Peter Harder: Remember, the internal audit, which brought forward some of these concerns, was both begun and reported after I left. So I cannot tell you how that was dealt with, either internally in the secretariat or with ministers. What I have been trying to say is that there was no specific discussion about the sponsorship program or problems in the sponsorship program at the Treasury Board or within the Treasury Board while I was secretary.

There was no specific discussion with Mr. Martin with respect to the sponsorship program while I was secretary. Mr. Martin and other ministers of the board, and ministers outside the board, did have a significant interest in improving the quality of our management. They welcomed the independent panel. It was endorsed by the Auditor General. It was the subject of public accounts meetings. It was aligned with the improved reporting to Parliament project, and it did lead to significant action in departments to do a GAP analysis of the quality of the internal audit, which led to enhanced internal audit resources and training. It's part of the ongoing mandate we all have to improve the quality of public service.

The Chair: Thank you, Mr. Lunn.

Mr. Jordan, please, for four minutes.

Hon. Joe Jordan (Leeds—Grenville, Lib.): Thank you, Mr. Chair.

Mr. Harder, I'd just like a quick point off the top. Madam Jennings asked some specific questions about employees. Does the public service use the Hay system when it evaluates, so I can prepare for when they come?

Mr. Peter Harder: Yes.

The Chair: The Hay system is a personnel management formula that is used fairly extensively by large businesses in the private sector.

Hon. Joe Jordan: I know. I've worked in organizations--

The Chair: I just want to get that on the record, what the Hay system is.

Hon. Joe Jordan: It's not a farm product.

The Chair: That's right. It's not what farmers produce in the summer.

Hon. Joe Jordan: Some would argue it's as valuable.

You mentioned that it was unusual for the Prime Minister to sign Treasury Board submissions. If it hadn't been the Prime Minister who signed it, what other signature would have made that a valid document?

Mr. Peter Harder: Well, Treasury Board submissions are signed by ministers.

Hon. Joe Jordan: Does a submission need two signatures?

Mr. Peter Harder: No, not necessarily. It would depend on what funds you were accessing. In this case the signature of the Prime Minister was there. As Mr. Judd indicated in his testimony and as I did earlier, it was because the Prime Minister had access to funding that had been made available in the fiscal framework.

Á (1120)

Hon. Joe Jordan: This is just so we're clear when you're talking about a Treasury Board submission with the Prime Minister's signature. I have here Treasury Board number--this probably means nothing to you at the moment--825713, for the record. It's a Treasury Board submission signed by the Minister of Public Works at the time, Alfonso Gagliano, and the Prime Minister.

Mr. Peter Harder: That's correct.

Hon. Joe Jordan: I just want a reference for the committee. Here's a document from the same deck dated November 21, 1996. It's a Treasury Board submission for supplementary estimates for this program, and it's signed by the Minister of Public Works, Diane Marleau, and the Prime Minister. In the course of that period of time, we have two Treasury Board submissions that were signed by the Prime Minister.

This is not meant to feed the conspiracy theorists, but one thing is becoming clear. I thought Mr. Quail's testimony yesterday was quite striking, and I want to put this question to you; hopefully, you can bring some comfort to me about it. It seems to me that this particular agency, if left to the devices or the machinery of government, would not have been set up the way it was set up. There were reasons, and I don't want to cast aspersions; I've heard the testimony about the environment and the need for flexibility, and that's all well and good. But what is your view about this particular agency of Public Works that had oversight for sponsorship as to the way it was set up and structured and as to the reporting mechanisms that were in place, which you said were decisions of Public Works? Does that strike you as out of the ordinary or out of the norm in terms of how an agency would normally have been set up?

Mr. Peter Harder: My answer to that would be to remind you that subsequent decisions were made to create Communication Canada and to establish it as a program. So I'm sure there was at the time, and subsequent to my departure, discussion as to the mechanism that was best suited for communications programming.

Hon. Joe Jordan: Have you seen other agencies set up like that?

Mr. Peter Harder: Public Works and Government Services Canada, remember, is a central agency doing work on behalf of the Government of Canada across departments. It's a very important department for procurement and for common activities, and Mr. Quail was an experienced deputy minister, one who had the respect of his colleagues.

Hon. Joe Jordan: He was also an experienced deputy minister who expressed a little bit of surprise--not surprise, but concern--about the reporting structure. There seem to have been communication channels, back channels or side channels, whereby this particular entity was treated differently from other agencies of similar scope and scale. I'm not saying that's illegal; I'm not saying that's necessarily wrong. I think the direction the committee seems to be going is to ask, why was that done?

And when you combine that with what is becoming very clear in terms of the Auditor General's comments or observations, we see that we had structural problems in the department in the sense that there was no division of powers in terms of approving contracts and then subsequently approving invoices. The normal internal processes that would have caught this sort of thing weren't present. So I'm just wondering whether that surprised you. When you look at that, is that the way we should be setting up and managing agencies in the public service?

Mr. Peter Harder: Well, you'll know that after the internal audit revealed this, that separation did take place.

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

Mr. Kenney, please, for four minutes.

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

Mr. Harder, I presume that as Secretary to the Treasury Board, you attended all or virtually all of the Treasury Board meetings during your tenure.

Mr. Peter Harder: That's correct.

Mr. Jason Kenney: I'd like to know about attendance at Treasury Board meetings on the part of ministers. Generally speaking, would all or most members of the board attend most meetings?

Mr. Peter Harder: Certainly you had to have a quorum for a meeting to be valid, and we obviously had a quorum and more. Ministerial time is very precious, and there wasn't always a full complement of ministers, but certainly the minimum quorum was always there and usually enhanced beyond--

Á (1125)

Mr. Jason Kenney: During your roughly five years at Treasury Board, during that whole period, the then Minister of Finance was vice-chair of Treasury Board. Do you have any recollection as to the frequency of his attendance at Treasury Board meetings?

Mr. Peter Harder: Well, he was not a frequent attendee as vice-chair. The chair was assumed by the president in the period in which I was there. It was not that he never came, but I didn't, frankly, do a tally in my mind as to how many times. It was not frequent.

Mr. Jason Kenney: We've been furnished with the Treasury Board minutes from 1996 through 2004 regarding this issue. There were 13 meetings that occurred dealing with sponsorship issues where moneys were approved for Public Works. During Mr. Martin's tenure as vice-chair and member of that committee, he only attended one of those 13; that would be an 8% attendance record. Would that be the norm for the vice-chair of the committee to attend only 8% of the meetings?

Mr. Peter Harder: Well, for the period in which I was there, that would probably work out. It was not usual, but it was done. His presence was available on some occasions.

Mr. Jason Kenney: Now, you left Treasury Board in March of 2000. It wasn't until several months later that the internal audit was completed, in November of that year. But let me ask you--you'd be familiar with the normal procedures on this--once an internal audit of this nature is completed, how will that be transmitted to Treasury Board and its members, the ministers who are members of it?

Mr. Peter Harder: Well, as the internal audit was being developed by the comptrollership branch in the board, it would be normal that there would be discussions between the department and the board with respect to the findings. The internal audit itself would be available under the policy of providing it on the website and what not.

Not all internal audits are discussed at Treasury Board meetings. It would not have been unusual for an internal audit to go to the board where it brought to light a particular problem that had significant salients either by itself or by its cross-cutting nature, but the board did not review internal audits.

Mr. Jason Kenney: But would it not be incumbent on you in the secretariat to advise ministers if serious problems had been flagged in a particular department?

Mr. Peter Harder: Absolutely.

Mr. Jason Kenney: And do you assume that's what would have happened in this instance?

Mr. Peter Harder: I would assume so.

Mr. Jason Kenney: What action would Treasury Board ministers normally take upon being advised of that, if asked to approve additional funds for that department or program? Would they not make inquiries about whether corrective steps had been taken?

Mr. Peter Harder: In a theoretical environment, the Treasury Board ministers could impose conditions on expenditures that could lead to either reporting requirements or other ways to signal their concern and to enhance their level of oversight. The secretariat would work with the department to ensure that the decisions of the ministers were supportive of action and took into account the need for proper oversight.

The Chair: Thank you, Mr. Kenney.

[Translation]

You have four minutes, Ms. Jennings.

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

Mr. Harder, from January 1995 to November 1997, Charles Guité, the then Director of APORS, reported to the ADM, Departmental Services and to the Senior Financial Officer. His position was subsequently reclassified from the EX-1 to the EX-2 level, and then later to the EX-3. When the new Communications Coordination Services Branch was created in November 1997, his position was again reclassified to the EX-4 level.

Á (1130)

However, in your statement this morning, you note the following in the first paragraph on page 2:

Third, in 1997 I wrote to all deputy ministers and the Senior Financial Officers detailing their duties and obligations including “if the deputy head does not accept the advice offered by the SFO, then the SFO must request that the deputy head seek the advice of the Comptroller General before taking a final decision. The deputy head must then discuss the matter with the Comptroller General.

Based on your experience as Secretary of the Treasury Board, when a Deputy Minister decides to reclassify a position to account for a broader mandate, as we saw in the case of APORS which became the Communications Coordination Services Branch that handled sponsorships, does the senior financial officer have a say in the drafting of the job description? We've heard, and the Auditor General has confirmed this in her report, that different duties were rolled into the same position, something that wasn't usually done in order to ensure good accountability practices and external oversight.

Would you have expected the senior financial officer with Public Works' Departmental Services to have had a say in the drafting of the job description for the position of Director of the CCSB?

[English]

Mr. Peter Harder: That's not the case. It may be something the committee would want to reflect on in terms of recommendations. I should also point out, though, that the Public Service Commission approves reclassifications, and indeed promotions, so they're the instrument of broader interests.

Mrs. Marlene Jennings: Oversight.

Mr. Peter Harder: Not the Treasury Board. Again, the Treasury Board is exclusively focused on assistant-deputy-minister-level job descriptions; that is, does it merit an assistant deputy minister level.

Mrs. Marlene Jennings: I understand that.

Let's take away the reclassification from EX-1 to EX-2 to EX-3. When a decision was made to reclassify to EX-4, a description of the responsibilities and duties of the executive director was provided. I assume that description would have said that position would be responsible for contracting authority and project authority. What both the Auditor General has told us and Treasury Board rules and guidelines tell us is that normally those two functions should not be carried out by the same individual--ergo, should not be part of a job description for one position.

Mr. Peter Harder: The job description that was put forward to the board was reviewed within the human resources branch of the board. The chief human resources officer signed off on it and it went to the board as an appendix case in a routine fashion.

The Chair: Thank you, Madam Jennings.

Mrs. Marlene Jennings: I have just one more question.

Can I ask for a copy of the job descriptions that were used in order to reclassify the position from EX-1 to EX-2, then from EX-2 to EX-3, then EX-3 to EX-4, at which point it went to Treasury Board?

And if I think of anything else, I'll let you know.

Voices: Oh, oh!

Á (1135)

The Chair: The clerk will look after that matter for you.

Mrs. Marlene Jennings: Thank you.

The Chair: Mr. Comartin, please, for four minutes.

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

Mr. Harder, just a quick point. You indicated that in 2001 you got some indication from Mr. Quail that he was asking for, I think, an internal audit.

Mr. Peter Harder: An internal audit, yes.

Mr. Joe Comartin: You were at Industry Canada at that--

Mr. Peter Harder: No, I was at the board. I was just leaving the board in March of...in March of 2000, I'm sorry.

Mr. Joe Comartin: You did say 2001.

Mr. Peter Harder: Yes, I was mistaken. It was March of 2000.

Mr. Joe Comartin: And what was the communication from Mr. Quail at that time?

Mr. Peter Harder: He indicated to me that he was initiating an internal audit.

Mr. Joe Comartin: And you never saw the internal audit?

Mr. Peter Harder: No, I left at a time that was almost coincidental to that. I left in mid-March.

Mr. Joe Comartin: Did you draw this fact, that an internal audit had been requested, to the attention of members of Treasury Board? I'm speaking specifically of the elected members.

Mr. Peter Harder: No, I did not.

Mr. Joe Comartin: You did not.

Mr. Peter Harder: No.

Mr. Joe Comartin: Is there any reason why you wouldn't have at that point?

Mr. Peter Harder: Internal audits are taking place all the time. It would be the findings of the internal audit that would be of interest to me and to ministers, not what internal audits are under way.

Mr. Joe Comartin: Mr. Harder, this committee has a responsibility basically to look at ministerial responsibility for the types of incidents that took place around the sponsorship program. I'm assuming that, given the experiences you have gone through during the period of time you were there and post that period of time, you've done some significant thinking about how this might have been caught. Am I safe in making that assumption?

Mr. Peter Harder: I think a lot of people have done some significant thinking on this.

Mr. Joe Comartin: I think a lot of Canadians have, Mr. Harder, or at least the opinion polls would certainly indicate that.

What I'm asking for, and what I'm looking for, is any in-depth analysis that you've done on that. Do you have any recommendations you can give to the committee--and I'm looking at it from the Treasury Board's perspective--on how this could have been avoided?

Mr. Peter Harder: I think that's a really good question, and one that would be difficult to answer in a couple of minutes, but--

Mr. Joe Comartin: Then let me ask you to address these two things. It seems to me that one of the concerns I have...and it became more pronounced yesterday, when we got some press releases about the whistle-blower and how he was treated. With that, and the fact that it seemed you could set up this kind of internal administration that basically, as the Auditor General said, “breaks all the rules”, would it be of...or is the safest protection the whistle-blower?

If the answer to that is even a tentative yes, is there some way the Treasury Board can open up communications more directly with whistle-blowers in terms of the situation we appear to have in Public Works, where you have somebody who has the courage to come forward and then is in effect shut down within the department, meaning the information doesn't get outside the department?

Mr. Peter Harder: I think it's a series of initiatives involving training, internal audit, and robust management attention. I don't know a public servant who doesn't share your concerns about the events you're reviewing, because we are all collectively painted with this brush. Happily, the Auditor General has reported to you and to Canadians that this is an exception, but that doesn't give us comfort in the sense of needing to continuously improve the quality of management in the public service.

I do have to acknowledge, though, that if there are bad people, they can circumvent the best processes, rules, training programs, and the like. The balance we have is to ensure that the reforms we undertake--and we should undertake some--are ones that are really leveraging, with the investment of time and money, the best improvement in the quality of management. That's going to be the challenge of parliamentarians and public servants.

The Chair: Thank you, Mr. Comartin. I apologize, but four minutes go very quickly.

I am going to ask a few questions myself, Mr. Harder. You are familiar with the issue of when the Government of Canada sold off Canada Communication to a company called Canada Communications Group Inc. Are you familiar with them?

Á (1140)

Mr. Peter Harder: Yes.

The Chair: Are you also familiar with the fact that the executive chairman and chief executive officer was one Mr. Tony Gagliano?

Mr. Peter Harder: I read about that, yes, but....

The Chair: He wrote to you on January 7, 1998:

Dear Mr. Harder:

I am writing to advise you personally of our business plans and our intentions with respect to the work force at Canada Communications Group Inc.

So you had direct and personal involvement with this particular issue, with the sale of Canada Communication.

Mr. Peter Harder: Yes. It wasn't my initiative, but obviously, as I was Secretary of the Treasury Board, he had an interest in ensuring that I was aware of the proposal and how they were dealing with employment issues.

The Chair: You're not aware of whether Mr. Tony Gagliano had any relationship to a former minister of the crown by the same name?

Mr. Peter Harder: I recall asking that question.

The Chair: And the answer was...?

Mr. Peter Harder: No.

The Chair: Not related? That's the answer you were given?

Mr. Peter Harder: Yes.

The Chair: Okay.

I wonder if you can tell me why a privatized organization, Canada Communications Group Inc., was given a privileged administrative agreement that says “A directive must be given to all Departments for mandatory use of the PAA”--that's privileged administrative agreement--“for all printing jobs greater than”--the amount is blacked out--“and less than $100,000.”

So all printing of under $100,000 was not going to go to competitive bid, but was going, under this particular agreement, to the privatized Canada Communications Group Inc. How did that happen?

Mr. Peter Harder: Mr. Chairman, I haven't reviewed, for today, that file, so let me give you my unvarnished recollection.

The Chair: Okay.

Mr. Peter Harder: There was a concern on the balance necessary to in a sense make sure that the privatization was viable. There were concerns with respect to levels of work and availability of response, etc. The discussions--which, again, the Treasury Board was not the direct negotiator of--did express “How can we make this work?“ There was some sense that there had to be some level of guarantee at that time for the company to make a go of it.

The Chair: So everybody else in the private sector has to make a go of it without these privileged agreements, but this one got a special dispensation.

Mr. Peter Harder: Well, it was moving a very significant piece of work out of the public sector to the private sector. This was a privatization.

The Chair: How long did that privileged administrative agreement remain in force? Have you any idea?

Mr. Peter Harder: I couldn't tell you.

The Chair: Okay.

I have an e-mail—and this is all through access to information, by the way—from an R.J. Kelly. You may not know her. The e-mail was sent to Mr. Alan Windberg. I believe he was a Treasury Board employee.

Mrs. Marlene Jennings: Mr. Chair, may I just interject for a moment? Are these documents tabled with the committee? Because if they're not, I would suggest that they be tabled, given that you're using them for questioning.

The Chair: I am quite prepared to table them all, Madam Jennings. Unfortunately, they're not in both official languages.

Mrs. Marlene Jennings: Well, if you table them, they'll be translated.

The Chair: I will table all these documents I have that were received from access to information, including, believe it or not, a report from the Standing Committee on Public Accounts.

Mrs. Marlene Jennings: Perfect. I appreciate that.

The Chair: At any rate, this e-mail from R.J. Kelly to Mr. Alan Windberg states, and I quote, regarding Canada Communication:

I was not privy to the sales negotiations and I have never even seen the agreement of sale nor the final version of the PAA.

That's the privileged agreement.

There does not seem to be copies of the documents in the Treasury Board Secretariat files. I am advised that the government copies are with PWGSC.

By copy of this message, I would suggest that Mr. Guité make available these documents so that the government side will have a starting point to resolve this situation.

Was Mr. Guité involved in the sale of Canada Communication?

Mr. Peter Harder: I couldn't tell you.

The Chair: Did you have any dealings with Mr. Alfonso Gagliano, the minister of the crown, regarding the sale of Canada Communication Group?

Mr. Peter Harder: No. Mr. Gagliano was a member of the Treasury Board, as you know.

Á (1145)

The Chair: Yes, but you didn't discuss the sale of Canada Communication Group with him.

Mr. Tonks, please, for four minutes.

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

Mr. Harder, I want to follow up on the role of the finance minister that has been alluded to. You stated that internal audits, such as the one in 1996, didn't normally come before the Treasury Board. You've also stated that the records show that funds were approved for the sponsorship program but they were as a matter of course. You've also stated that promotions with regard to EX-1 for the executive director were handled through the Public Service Commission and that they didn't trigger a Treasury Board decision with regard to accountability, cheque signing, and so on. Those instruments went through the Public Service Commission.

We also know, with regard to appendix Q, that quarterly reports would not be coming before the Treasury Board.

Would it have been important, given that is the role of Treasury Board, for the finance minister, in his capacity as the vice-chair, to have been involved in a level of detail that was not carried out by the Treasury Board? Would it have required his presence, given what was actually coming before the board?

Mr. Peter Harder: Any cabinet discussion is enhanced by the participation of the Minister of Finance. The Minister of Finance is an ex-officio member of cabinet committees and the vice-chair. The level of transactions the board dealt with was not always of huge significance.

Mr. Alan Tonks: In terms of the checks and balances you put in, Mr. Marshall said in his testimony:

...as information became available, in the severity of issues...controls and scrutiny were increased. Audits were done, funds withheld, files referred to the RCMP, management of the sponsorship and advertising changed and restructured, employees actions reviewed and, following due process, certain employees sanctioned. “The Treasury Board has set out additional guidelines...”.

In other words, in terms of the overall administration, of which the sponsorship program was part, between 1996 and 2001 the board was taking actions. And you talked about the establishment of the comptroller. These were actions that weren't necessarily coming from a minister saying we have to do these things. In terms of the sponsorship program, they weren't coming before the Treasury Board.

Mr. Peter Harder: That's correct, sir. A series of initiatives, including requiring that internal audits be posted on websites and submitted to the Treasury Board Secretariat, was undertaken in that period so that there would be greater public reporting of the internal audit function to provide light on management issues.

Mr. Alan Tonks: So within that context, with regard to the actions of the finance minister, it would be an extreme situation to say that as vice-chair, he would be coming in and directing that level of activity on a day-to-day basis.

I keep going back to this appendix Q. What would have been the difference if appendix Q had been rejected, if Treasury Board had said something tells us this is inordinately below the radar screen of normal checks and balances--therefore we don't approve this?

Mr. Peter Harder: My observation would be that it would not have been picked up in quarterly reporting. It's an internal audit that has the capacity to do that, as it did in the year 2000.

Mr. Alan Tonks: I'm not quite sure of that answer. What I'm trying to understand--

The Vice-Chair (Mrs. Marlene Jennings): Mr. Tonks, your time is up. Thank you.

I'll now go to Mr. Lastewka for four minutes and then to Mr. Forseth for four minutes.

Hon. Walt Lastewka: I will share my time with Mr. Tonks so he can finish.

Mr. Alan Tonks: Thank you very much, Mr. Lastewka.

I want to go back to what I said originally, which was with respect to what Mr. Comartin was asking in terms of the quarterly reporting and the other mechanisms with respect to the transparency in this process of procurement. It appears that appendix Q is fundamental to that, so I'll use the expression Mr. Marshall said, that we must understand not only who was abusing power but where the power came from.

My question concerns appendix Q. The Prime Minister and Mr. Gagliano signed off on that report, I believe. It was reported in The Globe and Mail, I think, that this was the report that encompassed the normal Treasury Board reporting processes. Am I mistaken on that? Maybe you can clarify that--or wouldn't you know?

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Mr. Peter Harder: What I do know is what was released to the committee, and that's the Treasury Board submission of September 19, in which the quarterly reporting requirement was eliminated.

Mr. Alan Tonks: And who signed off on that?

Mr. Peter Harder: My recollection is that it came as a result of consultative work with Public Works and Government Services Canada.

Mr. Alan Tonks: So the minister of the day and the Prime Minister had nothing to do with that. That was an internal document that....

Mr. Peter Harder: Not that I'm aware of. Again, that was some time ago.

Mr. Alan Tonks: So any suggestion that the architecture that allowed the circumvention of the normal checks and balances came from that level couldn't, to your knowledge, be corroborated or established.

Mr. Peter Harder: No, sir.

Mr. Alan Tonks: Thank you.

Thank you, Mr. Chairman.

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

You have a minute and a half, Mr. Lastewka.

Hon. Walt Lastewka: Mr. Harder, you have just given some testimony saying that only the internal audit would have found out whether there were misdealings, and this has been my opinion all the way through this. It would seem to me that there were a number of people, starting with the minister and the deputy minister, who played a bypass role and that the executive directors, both Guité and Tremblay, were involved in a situation where the internal audit did not appear. In fact, things were done in such a way as to make sure the internal audit was not done to review this new program, which started in November 1997 and went, as far as I'm concerned, until about 2000, when it was requested that the internal audit be done.

I'm just asking for your opinion. When we start new programs, is there anything in Treasury Board guidelines that says if it's a new program we should therefore have some oversight and have an internal audit done, the way it is done in business when we start a new department or go into a new area? Does anything say an internal audit should be done many times within a year in order to make sure this new department or new group is doing things appropriately? Is there anything in Treasury Board that has that?

Mr. Peter Harder: Treasury Board has that capacity.

Hon. Walt Lastewka: It has the capacity, but is there a policy on that?

Mr. Peter Harder: Not that I'm aware of, but under the recommendations of the secretariat in a submission, you could say you wanted to ensure that there was an internal audit in x period of time. Internal audit is a good management tool.

The Chair: Most of the time it's a good management tool.

Did you have a quick, brief summary question?

Hon. Walt Lastewka: I just want to summarize by saying that I've been on this all the way through, and I see that this group was in a way pushed out or made to operate in such a way that there wouldn't be an internal audit. I guess that's my question for Treasury Board: is there something in the system that says that when you start a new department, because it's a new department, it should have an internal audit, which would then be put on the web as soon as possible?

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The Chair: Any comment, Mr. Harder?

Mr. Peter Harder: I think those suggestions are ones that should be taken into consideration.

The Chair: Mr. Forseth, please, for four minutes.

Mr. Paul Forseth: Thank you, Mr. Chair.

I want to come back to the Auditor General's report, chapter 3, page 7, paragraph 3.26, where it says “The former Minister stated that his office had not decided which events to sponsor.” It's talking about Minister Gagliano, yet of course we've heard evidence otherwise. It goes on to say “He confirmed that there had been no written objectives or guidelines but also stated that the program had been part of the national unity strategy.”

Can you cite such a document or tell us where we can find a document that spells out this so-called “national unity strategy”? A lot of money at Treasury Board was approved in its name over and over, so I'm asking, where are those justifications? Where is the document that would have justified and permitted spending some $40 million a year?

Mr. Peter Harder: There is no Treasury Board document that I'm aware of.

Mr. Paul Forseth: So you can't help us find a document where this national unity strategy was spelled out.

Mr. Peter Harder: As Secretary to the Treasury Board, I wasn't aware then of any document.

Mr. Paul Forseth: Well, we do know that everyone seemed to know what was going on, yet when it comes to the paper trail, like you said, everyone denies that they knew about the big picture or the problems, where favoured advertising agencies overbilled or false-billed and some of them may have contributed significantly to the Liberal Party. But that kind of activity doesn't account for the $100 million. It looks like there was additional graft or malfeasance and money was actually stolen. The Prime Minister himself, Mr. Chrétien, admitted that in the House of Commons when he said millions may have been stolen. It was the talk of Parliament Hill through the informal knowledge network.

I want to turn to the Auditor General's report, chapter 4, page 21, paragraph 4.84, where it says “Departments did not require agencies to seek bids for subcontracted work, nor did they challenge commissions charged and invoices that were not adequately supported.” It goes on in paragraph 485:

The Government of Canada issued contracts over $435 million on media placement purchases during the five years covered by its agreement with Media/I.D.A. Vision, its agency of record. The government did not properly monitor the performance of its agency of record or audit it as required.

That's how the money was stolen, and it happened under your watch at Treasury Board. Why didn't Treasury Board act in these four years? What was the problem holding you back from doing your job to protect the public interest, doing your role to make sure that this agency of public record properly billed?

Mr. Peter Harder: Well, sir, in the time in which I was Secretary to the Treasury Board, I did not feel constrained from doing my job. Billings are made by department in departments; they don't come to the Treasury Board Secretariat for approval. The Treasury Board role, as I indicated, is one of ensuring that there is a proper framework, that there is an understanding of the Financial Administration Act, that there are the right resources allocated to internal audit and management functions, and that there is greater transparency to improve the reporting to Parliament and to enhance the oversight capacity. I believe that agenda is an important one for continuing to improve public management.

Mr. Paul Forseth: You have just basically outlined what was not done, because there was no proper framework. The Auditor General also spells out the fact that basically Parliament was misled. It looks like the fundamental basis of why we have Treasury Board and the whole challenge process didn't work in this special case, so I'm wondering, what else was going on that constrained you from doing your job?

Mr. Peter Harder: I would point out that the Auditor General herself has gone out of her way to say that her observations concern an anomaly in the system.

The Chair: Thank you, Mr. Forseth.

Mr. Jordan, please, for four minutes.

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

Mr. Harder, you did say that internal audits are valuable tools. One of the things that strikes me is that one of the initial litmus tests that an internal audit team would do, or somebody doing an internal audit, would be compliance-related: do they follow the rules. It strikes me that this department didn't seem to have any rules.

The Auditor General said that as soon as she started to ask questions, it became very clear that rules weren't followed. The minute they started asking for documents to support decisions and value-for-money type of analysis, there was nothing.

I guess there is a real paradox here. There seem to be certain aspects of the actions of this department--and this is the fourteenth or fifteenth department, whatever the Auditor General quoted--under Mr. Guité's watch.... Certain things they did looked fairly sophisticated, in terms of splitting contracts, using crown corporations to achieve ends that, if they had done it in lump sum, would have triggered some kind of oversight. That seems fairly sophisticated.

At the same time, these people are undertaking activities with what would seem no regard for basic rules, not necessarily rules that even need to be written down. Somebody who is making a salary at a certain level in the public service should understand basic, good management. That particular issue is something this committee is going to have to pursue. Clearly, we're at a point where we're heading in that direction, I hope.

I want to revisit a statement that you made in answer to an opposition line of questioning. I want to read my recollection of it and ask you if that is your version of events here. You were asked specifically if at any time in your tenure, from 1995-2000, as Secretary to the Treasury Board--which is equivalent to deputy minister of that function in the ministry that oversees the management of government--did you ever discuss problems specific to the sponsorship program with the then finance minister, the current Prime Minister, and your answer was no. Is that your answer?

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Mr. Peter Harder: That's correct.

Hon. Joe Jordan: Did you ever discuss problems specific to the sponsorship program with your minister, which would have been the President of the Treasury Board?

Mr. Peter Harder: No.

Hon. Joe Jordan: Okay. One final question--

The Chair: Did you want to add to that?

Mr. Peter Harder: Just to remind members that between the cabinet documents that you have and the Treasury Board documents that you have, you do know that I was aware that the funding was being provided consistent with the cabinet decision. To that extent, I don't want to have my no as being registered that I was unaware of that. I was aware of that--absolutely.

Hon. Joe Jordan: Okay.

Just a couple of housekeeping items. Mr. Tonks touched on this: the Minister of Finance is ex officio to cabinet committees. Is that true?

The Chair: Which cabinet committees?

Hon. Joe Jordan: I think he is ex officio to all of them, isn't he?

Mr. Peter Harder: That's my.... Yes. I certainly know it for that period of time. Frankly, I haven't looked at it lately.

Hon. Joe Jordan: So his attendance pattern on these committees, the fact that he doesn't attend every meeting, wouldn't necessarily be an unusual circumstance?

Mr. Peter Harder: I didn't serve in this function with the previous Minister of Finance, but it was not unusual practice for the Minister of Finance to be an irregular attender. They do have a preoccupation with other issues.

Mr. Paul Forseth: Is that irregular, or regular?

Mr. Peter Harder: Irregular.

It was sort of the tradition of the Minister of Finance. The vice-chair role probably comes out of the fact that Treasury Board itself emerged from the Department of Finance. There was a time when the Minister of Finance was also the President of the Treasury Board. In the post-Glassco era, it was separated out, and had a distinct and separate minister.

Hon. Joe Jordan: I'm jumping around a little bit, but I'm trying to cross some t's here. It is my recollection of the testimony that at an EX-4 level, Mr. Guité would have had under his signature authority to expend up to $5 million. Is that usual?

Mr. Peter Harder: The distribution of signing authorities is the responsibility of the deputy. I couldn't tell you, frankly, whether your case is as you described it. The Treasury Board interest in the position was to assure itself that the position merited an EX-4 classification.

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The Chair: Thank you, Mr. Jordan.

Mr. Kenney, please, for four minutes.

Mr. Jason Kenney: Thank you, Mr. Chairman.

Mr. Harder, when I last had an opportunity to ask you some questions, although I acknowledged that you were not at Treasury Board in the fall of 2000 when the internal audit was completed by Public Works, I asked you some generic questions about how this sort of thing might be handled. You said that Treasury Board could or likely would impose conditions on a program going forward to receive funding, conditions that would reflect some of the deficiencies that appeared in the audit. Is that fair to say?

Mr. Peter Harder: Yes. I have not refreshed my memory in this regard in terms of what the board did after I left, but it would not be unusual in the light of an audit finding such as the one that came out for there to be an action plan that the secretariat of the board would have worked on with the department to develop.

Mr. Jason Kenney: Well, the audit was completed in the fall of 2000, and the next time the Treasury Board dealt with the sponsorship matter, according to the documents we received, was at its meeting of February 8, 2001, about six or seven months after the internal audit was completed. Now, Mr. Judd has testified that Treasury Board and its members would definitely have been aware of it, because this was publicly released, as we know. Even though it was, shall we say, an expurgated version that was posted on the Public Works website, this was public information.

You've testified that the internal audit would have been transmitted from Public Works to Treasury Board as a matter of form, and Mr. Judd has testified that it would have been more or less a matter of public knowledge. Given that, why would it be that at this meeting of February 8, 2001, seven months after the release of the audit, Treasury Board authorized, according to these minutes, an additional $40 million annually for sponsorship-related activities without any indication of any kinds of conditions?

Mr. Peter Harder: I can't speculate on that, sir. I wasn't there.

Mr. Jason Kenney: But would it be normal, in your experience of five years as a deputy at Treasury Board, to see serious problems identified in a program, to see them reported to Treasury Board, but to see no conditions applied going forward to additional funding? Is that the normal practice?

Mr. Peter Harder: I can't answer because I don't know what the nature of the discussion was, and I don't know the details of the action plan that was initiated after the internal audit and to what extent that action plan intersected with this Treasury Board submission. I just don't know.

Mr. Jason Kenney: I appreciate that, and hopefully we'll have a chance at some point to question the person who replaced you, the person who was in the chair at the time.

For the record, the documents we have show no conditions being attached to this additional $40 million that was approved by the ministers at Treasury Board.

You were, however, at Treasury Board in 1996, when the Ernst & Young audit was completed on the polling and advertising program. That report concluded, among other things, that there were recurring instances of non-compliance with specific contracting policies. This was released in November of 1996. Now, I've looked at the Treasury Board minutes for the next two or three meetings--November 21, 1996; November 20, 1997; December 11, 1997--and there were additional funds being granted to advertising and sponsorship-related activities with no conditions attached. Why is it that the 1996 audit, which pointed out contracting compliance problems, did not appear to trigger any conditions on future funding?

Mr. Peter Harder: Sir, that internal audit was not brought to the attention of the secretariat. And I would also point out that as a result of our deliberations in the secretariat, we did take steps to ensure that internal audits would be both shared with Treasury Board and placed on websites. But the audit to which you refer was not brought to my attention, or to the secretariat's, as far as I'm aware.

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

Madam Jennings, please, for four minutes.

Mrs. Marlene Jennings: Mr. Harder, given your experience as Secretary of Treasury Board, given the mandate of Treasury Board, and given the work of the government through Treasury Board to improve, strengthen, and enhance our oversight of financial management within all government departments, please tell us this. Do you think that it is normal procedure for a decision to be made either by the deputy minister of a department or by the minister of that same department to expand the functions of a role, to expand an office's sector of activities, and to reclassify the position of the individual who will run those activities, including different functions that come down to both contracting authority and project authority, when an internal audit conducted by an outside agency has already deemed that the individuals working in the section that is now going to be expanded and have further responsibilities have no expertise in the functions we're giving them? I'm talking about your experience.

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Mr. Peter Harder: I can't get in the minds of those who made decisions to do that.

Mrs. Marlene Jennings: But you, given your experience--

Mr. Peter Harder: Look, the most important decision the deputy has is to put people of high integrity and ability in senior positions and ensure that they understand the accountability frameworks and the expectations. That is a task all of my colleagues take very seriously.

Mrs. Marlene Jennings: In your experience and with your knowledge of how government departments operate and specifically of how Public Works would have operated, would you have expected the senior financial officer of Public Works to be aware of the Ernst & Young audit of 1996, given that the sector that was audited came under his or her purview?

Mr. Peter Harder: It's difficult for me to answer that but to say I would have expected that the SFO would have been part of an internal audit committee that would itself have reviewed the internal audit report. I do not know how Public Works organized its internal audit.

Mrs. Marlene Jennings: Under normal circumstances and according to the normal principles that have been established by Treasury Board for accountability and oversight of the financial management of moneys and programs within any department, you would have expected that the senior financial officer would be part of a committee that did that oversight internally?

Mr. Peter Harder: The SFO is a very serious position.

Mrs. Marlene Jennings: So would you then find unusual and difficult to explain, based on your experience, a decision to increase the mandate of a section that comes directly under senior financial management and to move that section out of the ambit of the authority of the senior financial manager in order for it to report directly to a deputy minister?

Mr. Peter Harder: I don't want to get in the mind of or second-guess the deputy--

Mrs. Marlene Jennings: I'm not asking you to get into the mind; I'm asking you to get into your own mind, given your own professional experience you have had as deputy minister of a number of departments, including Secretary of the Treasury Board, which is responsible for the stewardship of our government and its operations. Given that experience, would you find it unusual or would you have bells go off, learning that--

Mr. Peter Harder: The SFO is a key actor in enabling a deputy minister to ensure the integrity of financial administration and probity.

The Chair: Thank you very much, Madam Jennings.

Mr. Comartin, for four minutes.

Mr. Joe Comartin: Mr. Harder, I want to pursue the methodologies we might put into place. I want to go back to how we facilitate an individual, mid-level or low-level, who identifies this type of abuse going on. How do we facilitate them being able to go to somebody else rather than somebody within the department?

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Mr. Peter Harder: As you know, sir, first of all, it's not just at the low level that these things--

Mr. Joe Comartin: I'm going to come to the upper level in a minute.

Mr. Peter Harder: There are proposals out there with respect to whistle-blowing procedures. You have Keyserlingk with his report. I think we all would be interested in making sure that there is the right balance in ensuring that those who see wrongdoing, or who perceive wrongdoing, have the ability to act.

I wouldn't want to pronounce on a specific proposal other than to say that this is a high priority, as I understand it, and Parliament is well seized of the issue.

Mr. Joe Comartin: In the situation that we appear to have in Public Works, where you have the minister having direct contact and direct control over a small part of the department to the exclusion of the deputy minister, should we be requiring the deputy minister to be signalling that, in writing, to somebody else in the service, whether that be Treasury Board or somebody else?

Mr. Peter Harder: That's a good question. In a well-functioning department, senior officials at the assistant deputy minister level or below that often and appropriately interact with the minister. The deputy minister cannot be present at every form of interaction. As you know, there have been some academic discussions as to how the accountability relationship ought to be working or be enhanced. I'm familiar with some of those. I think the work done by you and by others is looking at how that could best be accomplished. There is the accounting officer option, which some have written about, that the British have.

I think it's important for us to have that discussion and to determine what, in light of what your deliberations and others' are, would be the best response.

Mr. Joe Comartin: Thank you.

That's all, Mr. Chair.

The Chair: Mr. Lunn.

Mr. Gary Lunn: Thank you, Mr. Chair.

I am troubled, Mr. Harder, listening to all of this. Just looking back, there was the 1996 internal audit. Then we go to April 7, 1997, when this committee...they reported, again, the same types of problems, HRDC activities.

This was all during your tenure. I think you even stated back then that you didn't really want to dictate to the departments what they must do. But if there's no leadership coming from the Treasury Board....

You know, all these great things--all these controls, all these measures--have been addressed a number of times, and all I can see is that absolutely nothing has been done. You talk about the great things you're doing, the good job, but they all failed miserably, without question. The record speaks for itself. I mean, looking at the advertising, everybody was....

I guess I have to get really blunt and get right down to it by saying that the only plausible explanation I can find for any of this is that there had to have been some unwritten rule, or somebody who said “This is the Prime Minister's baby. This is what he wants done. Hands off, everybody. Don't touch it.” It was so blatant, and so bad. I appreciate that you can't comment on that, but that is the only explanation. I mean, you have internal audits, you have reports by this committee, and they're all identifying the problems. They're going to claim that they're putting in the controls, that they're doing something, and yet obviously they failed miserably.

What do you have to say on why all of this failed so badly, so miserably? What in fact did you do for those five years to show any type of leadership? If you couldn't show leadership at that level, how could you have expected any department in the government to have shown any leadership at all?

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Mr. Peter Harder: This sounds like our earlier public accounts some years ago, when we were debating the process.

Look, I am unaware...and no unwritten rule was ever pronounced to me. The internal audit of 1996 that you hang a lot on was not--

Mr. Gary Lunn: [Inaudible—Editor]...another one that you're aware of.

Mr. Peter Harder: The 1996 internal audit was not available. The role of the board at the time was very much preoccupied with enhancing the control function in government.

Mr. Gary Lunn: Okay, I want to stop you right there, at “enhancing the control function in government”. What exactly did you do to enhance the control function in government?

Mr. Peter Harder: Clear direction to the SFOs and to deputies with respect to their obligations under--

Mr. Gary Lunn: So did they just absolutely, completely ignore you?

I mean, I'm just looking at the record and where we are today. It's abysmal. It's absolutely horrendous. You didn't succeed. You failed miserably.

Mr. Peter Harder: Well, I'm not going to engage in that kind of accusation.

Mr. Gary Lunn: I'm talking about the record. I'm not making this a personal thing. I'm speaking to the board, so don't take this personally.

When you look at the controls, they failed. Look at what we're facing today. Look at the outrage of the Canadian people. I can't state it any other way than this: it's an abysmal failure.

Mr. Peter Harder: Sir, in that period, the Government of Canada, through program review, reduced direct program expenditures by $8 billion. We severed some 40,000 people from the public service of Canada. We managed within our fiscal framework. At the same time, we returned to collective bargaining in a relatively harmonious fashion. We settled a pay equity complaint. I think the record speaks for itself.

Is this an egregious anomaly? Yes. Are public servants everywhere disturbed by it? Yes. But don't think that public servants at all levels can be characterized in the way you have.

The Chair: Thank you, Mr. Lunn.

I would, I think, speak on behalf of the committee, and would like to endorse what Mr. Harder has said, that we do want to ensure, as a committee, that we're dealing with one specific program. The public service of Canada is not on trial here. We have a great deal of respect and admiration for the hard work done by the many thousands of people on behalf of all Canadians.

So we thank you for bringing that point forward, Mr. Harder.

Madam Jennings, please.

Mrs. Marlene Jennings: I just want to, in the words of my colleague Mr. Jordan, tie up a few ends.

A great deal has been made in our hearings of the fact that, given the problems identified by the Ernst & Young audit of APORS in 1996--the report came out, I believe, towards the end of 1996 or beginning of 1997--an internal audit of the successor of APORS, which was the Communications Coordination Services Branch, was too late. So you weren't aware of the 1996 audit, but we have copies of the report, and the report came out in late 1996 or early 1997, something like that. The CCSB was begun in November 1997. The internal audit of that branch was either ordered or actually begun in March 2000, which would give us a little over two years after the creation of that branch.

Would I be correct with that timeline?

Mr. Peter Harder: That's my understanding.

Mrs. Marlene Jennings: Therefore, given that the Deputy Minister of Public Works at the time was aware of problems, serious problems, of APORS, regardless of why a decision was made to expand it and create it into a branch, once that decision was made, a decision to conduct an internal audit within two years of the beginning or the establishment of that branch, would that follow within what one would call “high-risk” management? We've already identified that this may be high-risk, and therefore we are going to audit it outside of the normal audit cycle, and bring that cycle much shorter than it normally would be.

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Mr. Peter Harder: My understanding is that this is what Mr. Quail did.

Mrs. Marlene Jennings: Thank you.

I'm finished, Mr. Speaker...or Mr. Chair. I've elevated you. But you haven't been elected--yet.

The Chair: No, not yet, only as chair.

Mr. Kenney, please, four minutes.

Mr. Jason Kenney: Thank you, Mr. Chairman.

One of the hazards of this kind of investigation is that we sometimes lose sight of the forest for the trees, Mr. Harder, and it's evident that quite above and beyond the internal audit, Ernst & Young in 1996, and the internal audit in 2000, there was informal knowledge, if you will, about serious problems in the operation of the sponsorship program. Questions were being raised in the House of Commons as early as 1996 about Groupaction and its relationship...and the contracts it was receiving. The current Prime Minister has stated that he heard rumours, without specifying the date; there is correspondence suggesting that he had been advised early in 2000 about problems with respect to the program.

Now, as a senior member of the public service, as a senior deputy minister who meets with other deputies and shares information about what's going on in Ottawa, did you ever hear what Prime Minister Martin has described as “rumours” about problems, quite apart from the formal lines of information reporting? Did you ever hear or get a sense around town, as it were, that there was a serious problem here?

Mr. Peter Harder: The decision by the Deputy Minister of Public Works to engage in an internal audit in the spring of 2000 was, I would take it, reflecting his concern that an internal audit needed to be done to give him the satisfaction that the management of the program was appropriate.

I don't recall the precise day, frankly, but it was before I left in March that he indicated to me that he would do this, and he did it in March. So I presume it was somewhere around mid-March.

Mr. Jason Kenney: When questions in the House of Commons were being raised about untendered contracts, Groupaction, big donors of the governing party, and so on, as Deputy Minister of Treasury Board, that never sort of turned on a light and suggested that you'd better look into this?

Mr. Peter Harder: No. It was the responsibility of the department to respond to the questions that were raised in the House of Commons.

Mr. Jason Kenney: During your period at Treasury Board, did you ever meet with Chuck Guité or Pierre Tremblay?

Mr. Peter Harder: No; couldn't identify them.

Mr. Jason Kenney: So you've never met either of those men. Did you ever sit on or attend meetings of the ad hoc government communications committee established by former minister Gagliano?

Mr. Peter Harder: No, I did not.

Mr. Jason Kenney: Mr. Harder, who do you think is responsible for this?

Mr. Peter Harder: I don't know. That's presumably why there is an RCMP investigation, an inquiry, and the actions of this committee. I along with you and other Canadians look forward to answering that question.

Mr. Jason Kenney: Well, that is partly our task. You know as much as or more than anyone on this committee about what transpired during this period. Certainly you've followed, in retrospect, what's happened, and surely you must have an opinion about how what's been described as one of the largest public finance scandals in recent Canadian history happened when you had at least indirect oversight over it. Surely you have an opinion. Would you care to share that opinion with us as we begin to try to focus on who was responsible?

Mr. Peter Harder: I'm not in a position to speculate.

Mr. Jason Kenney: I'm asking you to offer your opinion as to who was responsible.

Mr. Peter Harder: And I'm saying that I wouldn't....

Mr. Jason Kenney: We have to make a determination about that. It's not speculation. It's called looking at the evidence and drawing a reasoned conclusion from the evidence available to us about who was ultimately responsible for this. Surely you have a view on that.

Mr. Peter Harder: Sir, I'm here to appropriately respond to the facts of the sponsorship program--

Mr. Jason Kenney: That's what I'm asking you to do.

Mr. Peter Harder: --and the documentation before you from the period of December 1995 to March 2000. I've tried to do that. It would be wrong for me to speculate on what transpired since, or, given what's out there in the public, what I would conclude. That would be inappropriate for a deputy minister to do.

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

Mr. Lastewka.

Hon. Walt Lastewka: Thank you, Mr. Chair.

I don't have any further questions for Mr. Harder. I think he has been very clear in his testimony.

My question is to you, Mr. Chair, on the procedures going forward. I think it's incumbent upon our researchers to do some work. I know that to date the members on both sides have asked some very good, pointed questions to witnesses. I think it's time for the researchers to do a summary, not of the innuendoes or accusations, but of what we heard from the witnesses, such that we can take advantage of the fact that some of the witnesses are starting to repeat certain things that have happened over time. I would like the researchers to look at that and summarize it so that we could have it for our use, including some of the areas the researchers think we have not probed. I think it's time for the researchers to do that, perhaps over the next week or two, at your choice of timing, Mr. Chairman, and maybe have it ready for our deliberations once we come back after the next break.

The Chair: As you are aware, we do not plan to hold any more meetings this week. Next Tuesday the Secretary General of the United Nations will be in town and will be speaking to the House. That will take place at our normal meeting time, so there'll be no meeting next Tuesday. It will be a week from Thursday before we will have our next meeting.

I agree with you that we need to start assembling what we've already heard. As you are aware, the committee asked the Library of Parliament to engage the services of a forensic auditor. That bid is currently being worked on. In fact, I have the statement of work and so on in front of me, which I've just been going over. That will take a week or so to go through the competitive process to ensure that we follow the rules. If other people haven't followed the rules, we want to follow the rules. In the meantime, our researchers, in consultation with legal counsel and all the resources available to them, will try to put together some summaries for us.

The forensic auditor is being brought on board specifically to provide information to the Standing Committee on Public Accounts as set out in the statement of work and so on. The whole idea is that we need more resources than we currently have available. It's not that they haven't been excellent in the past, but this is a bigger issue than we've dealt with in the past.

Hon. Walt Lastewka: I take it, Mr. Chair, that in the last two weeks of March there will be fewer interruptions, and we'll be able to concentrate on having even more meetings if so desired by the committee.

The Chair: That's correct. There will be no meetings until a week from Thursday. There will be a meeting right after this one of the subcommittee on witnesses. We want to start having a continuous flow of people who are going to move this agenda forward and hopefully shed some light on how it all happened. That will be discussed in camera immediately following this meeting.

Mr. Tonks.

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

I have one last question. With regard to the submission of the Secretary of the Treasury Board to this committee on February 26, I would like you to address this issue, just as a matter of interest. It follows from what Mr. Comartin has been probing in terms of the systems that broke down. I think we're starting to get a fairly good handle on that, and your testimony has been very helpful.

In the initiatives that have been talked about--modern comptrollership, revision of Treasury Board transfer payment policies, new audit policies, policies on internal disclosure, management accountability framework, values and ethics code for the public service, and so on--nowhere is there any elaboration of the oversight provision of the standing committee as it relates to estimates. Could you take this opportunity--perhaps as your last shot to this committee--to tell us why there is no mention of that? Where does the parliamentary system go in order to ensure that the committee oversight provisions do come to grips with this kind of situation, including program review and performance review, that ongoing oversight? Could you elaborate on that?

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Mr. Peter Harder: Mr. Tonks, I think your question is extremely important. I can't comment on what the existing secretary presented here, but in my remarks I referred to the improved reporting to Parliament project and “Results for Canadians”. Both had as an objective to provide members of Parliament and their committees with more transparent and readily understood information that could lead to quality oversight and to Parliament undertaking its role more effectively. That work was initiated with the public accounts committee and the secretariat. We had a number of hearings and specific recommendations that were endorsed, and I think it's hugely important. I did use the line at the time that the existing mechanisms of providing Parliament with information reminded me of Brezhnev's Moscow, where workers pretended to work and managers pretended to pay them.

The kind of information that was stacked, and in large volume, particularly the part threes before the reforms, was not particularly edifying for Parliament in its role in oversight and accountability. I think there is work to be done, but there has been work done, and we need to both encourage the reforms that are underway and acknowledge that there is need for continuous improvement.

Senior officials and ministers would of course wish to work with committees, the public accounts committee in particular, to sort of revisit some of these systems issues. Improved reporting to Parliament is at its core giving Canadians and parliamentarians greater capacity to hold officials to account, to explain, to provide reasons why certain investments have achieved certain results, and to make government more understandable to the population that pays for it.

The Chair: We will now have some final questions. Mr. Forseth.

Mr. Paul Forseth: Thank you.

Yesterday we had Mr. Quail here, and I was wondering if you could comment on why a deputy minister like Mr. Quail would be bypassed the way we heard about in the testimony yesterday. You did say today that deputy ministers are fully accountable; that was part of your testimony. We heard yesterday how Mr. Quail was regularly bypassed, at least for the business related to the CCSB. This went on during your watch. Why did the CCSB have such special treatment?

Mr. Peter Harder: I can't answer that. I don't know.

Mr. Paul Forseth: Would you be prepared to speculate?

The Chair: You don't have to unless you want to.

Mr. Peter Harder: The chair has invited me to decline.

Some hon. members: Oh, oh!

Mr. Paul Forseth: Mr. Chair, you shouldn't undermine my questions.

Mr. Harder, were you aware of the special status of the CCSB during your watch, of its freedom to operate without controls?

Mr. Peter Harder: No.

Mr. Paul Forseth: December 1995 to March 2000 was your watch, and during that time CCSB was out of control; the Treasury Board accountability function did not work for the advertising and sponsorship program. You've talked about the solution, that perhaps there should be more systems--or maybe we should all recite the Ten Commandments. We talk about “quality oversight”, which were some of the words you used, so I will ask you, do we have sufficient oversight now to ensure that money can't be stolen and that Parliament will not be misled again?

Mr. Peter Harder: It's a very good question. I think it's one where this inquiry and others will contribute to our understanding, because continuous improvement of the public administration is what we are all about. It would be remiss of me to sort of say I think we've reached nirvana.

Mr. Paul Forseth: You've run out the clock, but it was a non-answer and I'll go at it again. Have we got there? Do we have sufficient oversight? With respect to the Treasury Board functions you so eloquently outlined, do we have quality oversight? This committee is going to have to grapple with that issue, perhaps making recommendations to further build in systems or get people to again recite the Ten Commandments or whatever so this kind of thing doesn't happen again.

It's not our money. It's the taxpayers' money, and they're expecting somebody to make sure this kind of thing doesn't happen.

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Mr. Peter Harder: I guess I would repeat that the Auditor General herself acknowledged that this was an anomaly in the system, and she herself has spoken to the quality of oversight in public sector management. I believe that it reflects well on, generally speaking, the management of public administration in Canada.

Do we need to improve? Yes.

The Chair: Can we improve?

Mr. Peter Harder: Yes.

Mr. Paul Forseth: Thank you.

The Chair: We come to the end now.

This morning, at the very beginning of the meeting, I read a letter that I have received from the Privy Council. I invoked the name of the law clerk, Mr. Rob Walsh, as to having given me advice, and I wasn't aware that Mr. Walsh was actually sitting at the table. Therefore, I think it's more appropriate that he give his own advice rather than the chair paraphrase what he said.

Mr. Rob Walsh (Law Clerk and Parliamentary Counsel, House of Commons): Mr. Chairman, you invariably paraphrase with great acuity, so it is hardly a loss to the committee if they don't hear from me directly.

This relates to a letter of February 25 from the Privy Council Office, from Hélène Laurendeau, Special Advisor, Cabinet Confidences, Legislation and House Planning/Counsel. It relates to two documents that were not included in the earlier documents provided to this committee on the general issue of cabinet confidence. I'll read the paragraph that is relevant from the letter.

According to the letter, we're talking about what they call severances, that is, documents taken out of the larger group.

The first severance occurs at Tab 8 in a Memorandum to Cabinet concerning the Government Response to the 10th Report of the Committee.... The paragraph severed deals with in-camera proceedings of the Committee in relation to contracts between the Government and Groupaction as referenced in the Special Report of the Auditor General. In order to respect the Committee's decision to conduct from related proceedings in-camera, it is our view that any determination concerning the release of references to its confidential deliberations, properly rests with the Committee.

I take it that an earlier decision was taken because of this in camera nature of the testimony to not include it in the first group, and then, on reflection, they decided perhaps that is a decision for the committee. However, when you read the relevant paragraph of the document--it is paragraph 12, one of the attachments to the letter, the bottom of what is page 17--you will see that the testimony at that in camera meeting of the committee, which is set out in that paragraph, is based on testimony leaked to the press. I have not taken that paragraph and checked it against the press of the day to see that all those elements were in fact reported in the press. I'm assuming that they all were. So it's not a case of confidential testimony being set out in this paragraph; in my view, it's a case of confidential testimony as they have it from the media.

On the second element, the paragraph in the letter reads:

The second severance occurs at Tab 10 in a deck entitled “Auditor General's Report - February 10, 2004”.... The portion severed constitutes information which would allow for the identification of an individual and could be considered personal information. It is our view that the Committee itself must have an opportunity to decide whether this information should be released.

You have that document attached. It is this document here, mesures prises, the French version, and I'll give you the English version as well. The concern relates to reference to disciplinary action. No individuals are named, but in one case a position is mentioned, which arguably enables the person to be identified. With some sleuth activity or scrutiny, you might be able to do that.

In my view, notwithstanding the potential for identification of a person, it doesn't itself identify the person. It seems to me, given the way this inquiry has advanced and the number of individuals who have been mentioned, it is in the larger interests of this committee and its inquiry that this document not be withheld from the general collection of documents put into the public arena by the committee.

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

We would also like to thank Mr. Harder for coming forward this morning to give us his testimony.

The meeting is adjourned to the call of the chair.