PACP Committee Report
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On 10 February 2004, the Speaker of the House of Commons tabled the November 2003 Report of the Auditor General of Canada in the House of Commons.1 Pursuant to Standing Order 108(3)(g), this report was referred to the Standing Committee on Public Accounts.
Chapters 3, 4, and 5 of the report informed Parliament of the results of a series of government-wide audits focused on sponsorship, advertising, and public opinion research, respectively. In her overview of this series of audits, the Auditor General of Canada summarized her findings in the following manner:
We found that the federal government ran the Sponsorship Program in a way that showed little regard for Parliament, the Financial Administration Act, contracting rules and regulations, transparency, and value for money. 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.
We found widespread non-compliance with contracting rules in the management of the federal government’s Sponsorship Program, at every stage of the process. Rules for selecting communications agencies, managing contracts, and measuring and reporting results were broken or ignored. These violations were neither detected, prevented, nor reported for over four years because of the almost total collapse of oversight mechanisms and essential controls. During that period, the program consumed $250 million of taxpayers’ money, over $100 million of it going to communications agencies as fees and commissions.
Public servants also broke the rules in selecting communications agencies for the government’s advertising activities. Most agencies were selected in a manner that did not meet the requirements of the government’s contracting policy. In some cases, we could find no evidence that a selection process was conducted at all.2
While the Auditor General determined that “[o]verall, public opinion research was managed transparently,” she had discovered instances in which guidelines had not been followed and departments had not established a clear need to conduct public opinion research.3
The activities covered by the audits represented significant expenditures. Between fiscal year 1996-1997 and 31 March 2003 the federal government spent approximately $250 million to sponsor 1,987 events. Of this amount, over $100 million went to communications agencies for production fees and commissions.
Between 1998-1999 and 2002-2003, the government conducted more than 2,200 advertising activities with contracts valued at about $793 million. (Report, paragraph 4.9) In 2001-2002, the government coordinated 686 public opinion research projects at a cost of $26.2 million. In 2002-2003, 576 projects were involved, at a total cost to the government of $23.7 million.
As a consequence of the large expenditures for these collective activities and the serious nature of the Auditor General’s findings, the Committee decided to conduct an extensive review of the audit results.
The Committee considers that one of its most important functions is to help uphold, maintain, and strengthen the lines of accountability between government, Parliament, and Canadians.
Throughout its review of the audit results, the Committee has had two principal objectives in mind. The first has been to establish and clarify the facts. The second, longer-term objective has been to explore the nature of the relationship between the political and administrative aspects of government as embodied by the interaction between the executive (cabinet and more particularly, the ministers of which it is composed) and senior levels of the bureaucracy. Put more simply, the Committee is particularly interested in the relationship between ministers and deputy ministers. This longer-term objective has required an in-depth examination of the broader accountability relationship that exists within the public service of Canada and the theory and practice of ministerial and deputy ministerial accountability. The Committee has therefore continued its study in this area in the 1st Session of the 38th Parliament with the intention of tabling a second report concentrating exclusively on ministerial and deputy ministerial accountability.
As the Committee worked to establish and clarify the facts surrounding the Sponsorship Program, it has laboured under several obligations. The first is to the people of Canada who deserve an explanation of what went wrong and need to know how the potential of it ever happening again can be diminished and, if possible, entirely eliminated. The second, and closely related obligation is to the continued health of the institutions of representative government and the public sector organizations that support them; the Committee intends to fulfil this obligation when it reports its conclusions and recommendations regarding ministerial and deputy ministerial accountability.
The Auditor General has told Parliament and Canadians what happened. The Committee’s role is of a different order. As a committee composed of elected representatives of the people of Canada, the Public Accounts Committee has been guided by a profound sense of its responsibility towards Canadians to establish first of all and to the best of its ability, how the abuses reported by the Auditor General occurred, why they occurred, to identify who is responsible, and to ensure that proper checks and balances are put in place to prevent a recurrence of a similar event.
The process of discovering and clarifying the facts is eclipsed by a higher obligation. Steps — urgent steps — must be taken to ensure that the institutions of government remain worthy of the respect, support, and above all trust of Canadians. The abuses uncovered by the Auditor General, although confined to one department and a small number of individuals within it, cast a pall over government in its entirety and threaten to undermine the support of Canadians without which democratic government cannot function.
The third obligation under which the Committee laboured was therefore to the women and men who work in the institutions of government, without whose skill and dedication government cannot be what it must be: the servant of the Canadian people.
Without doubt, those who feel the anger over the sponsorship file most acutely are the overwhelming majority of public office holders — elected and non-elected alike — whose highest ambition is to serve Canada and its people and who have done so honourably, faithfully, and in adherence to the rules governing their conduct. These men and women feel deeply betrayed by the handful among them who, in the words of the Auditor General “broke just about every rule in the book.”4 The Committee feels a special obligation towards these public servants who must have some guarantee that their reputations be protected against further injury. The Committee is also mindful that unless this happens, the ability of the public sector to attract the best-qualified and most talented men and women in the future may suffer irreparable damage.
To truly meet these obligations, the Committee must seek out constructive means that will ensure that problems revealed by the audits do not re-occur and to place them before the House of Commons and the Government of Canada in the form of practical recommendations.
The Auditor General has already made recommendations of an administrative nature which the Committee supports without exception; the Government of Canada has accepted these recommendations and taken additional steps of its own (see the section on corrective measures listed in Appendices C and H).
To pursue its objectives, the Committee held 47 meetings during which it has heard from 44 witnesses, some of them more than once.
A complete list of these witnesses is contained in Appendix A of this report. However, the Committee owes a special debt of gratitude to those public servants who have stepped forward to assist it in its inquiry. Knowledge of the internal operations of the departments involved and, in particular, of the procurement process and how it should work — and did not work, in this instance — would not have been available without their help.
The Hon. Reg Alcock, President of Treasury Board, did facilitate the appearance of public service witnesses before the Committee with a pledge that no administrative actions would be launched against them for having done so. This was backed up by the Committee in its first and second reports (37th Parliament, 3rd Session) to the House of Commons in which it called for protections offered by pending “whistle blowing” legislation to be extended retroactively to these men and women.5 Nevertheless, the Committee recognizes the fortitude of its public service witnesses whose devotion to duty overcame any reluctance they may have felt and who came forward to help ensure that the truth of these matters would emerge.
Finally, the Committee wishes to thank Mr. Allan Cutler, a career public servant with Public Works and Government Services Canada, who became concerned about problems with the management of advertising contracts in 1995 and began reporting them in 1996. Mr. Cutler’s concerns resulted in the first of a series of internal reviews and audits that would eventually lead to the Auditor General’s 2001 and 2003 audits. In response to his insistence that contracting rules be followed and having raised his concerns with the Department’s Audit and Review Branch, Mr. Cutler was initially told by his Director General, Mr. Guité, that he would be declared surplus — in other words, laid off.
Following an intervention by his professional association, Mr. Cutler was instead transferred outside the Advertising and Public Opinion Research Directorate (APORD, the precursor to the Communications Co-ordination Services Branch). Until this happened, Mr. Cutler had to continue working under Mr. Guité. Throughout this period, until a formal grievance that Mr. Cutler had initiated was launched, Mr. Cutler felt that his “employment security was uncertain and all prospects for [his] career advancement [had] vanished.”6
The Committee sincerely regrets the treatment that Mr. Cutler had to endure as a consequence of having done the right thing. It also regrets that the concerns he raised did not end the abuses he had observed and result in a change of management in APORD. Had that been done, the Sponsorship Program might have been managed and administered in accordance with the rules and public funds spent transparently and for the sole purposes for which they were intended.
On 8 May 2002, the Office of the Auditor General released the results of an audit requested by the Minister of Public Works and Government Services of Canada, the Hon. Donald Boudria, of three contracts awarded to Groupaction Marketing.7 The Auditor General found that:
… Senior public servants responsible for managing the contracts demonstrated an appalling disregard for the Financial Administration Act, the Government Contracts Regulations, Treasury Board policy, and rules designed to ensure prudence and probity in government procurement.
The government files on the three contracts [were] so poorly documented that many key questions remain[ed] unanswered surrounding the selection of the contractor and the basis for establishing the price and scope of work for the contracts. In our opinion, the government did not receive much of what it contracted for and paid for.
In particular the Auditor General found the following:
| • | The government did not receive everything it contracted for and paid for. Key elements of what was specified in the contracts were never delivered, and no one has been able to find a report for the second contract, for which the government paid $549,990. |
| • | Officials approved payments for work that varied considerably from what the contracts specified. In a few cases, payments were approved with the knowledge that the requirements of the contracts had not been fully met. |
| • | Payments were made that the Auditor General was told were for verbal advice, but no such advice was either stipulated in any of the contracts or documented as having been received. |
| • | The first contract had been amended to double its value without any documentation to support the need for the amendment. |
| • | None of the documents … examined contained any explanation of how the government had determined the need for the services or why it had decided that contracting was the best way to fill the need. |
| • | No evidence was found that a proper selection process was followed in awarding the first contract. |
| • | There was little documented support for the decision to award the second and third contracts to Groupaction. |
| • | Officials did not comply with the requirements of the Financial Administration Act and contracting regulations and did not verify that the amount of time billed for by the contractor was an acceptable reflection of the work that was done. |
B. The Tenth Report of the Public Accounts Committee
Following a series of hearings on the Special Audit Report, the Committee tabled its Tenth Report (37th Parliament, 2nd Session) on 20 March 2003. The Committee made 12 recommendations calling for improved scrutiny and enforcement of the Government of Canada’s contracting regulations building on previous recommendations,8 better arrangements and protection for public servants wishing to report workplace wrongdoing, and a restructured and better funded internal audit function in government.
In its report the Committee noted that the Auditor General was conducting a government-wide audit of advertising and sponsorship programs and planned to report the results at the end of 2003. The Committee indicated its:
[f]irm belief that the situation warrants a full review of what went wrong and how to fix it. Accordingly, the Committee applauds the Auditor General’s decision to conduct a full-scale audit of advertising and sponsorship programs, and looks forward to the results.9
| 1 | Tabling was delayed because the House of Commons was not sitting. |
| 2 | Office of the Auditor General of Canada, Report of the Auditor General of Canada to the House of Commons, November 2003, chapters 3, 4, 5, Overall Main Points, p. 1. (http://www.oag-bvg.gc.ca). |
| 3 | Ibid., p. 1. |
| 4 | Office of the Auditor General of Canada, News Release, 8 May 2002. |
| 5 | Tabled 2 February and 12 March 2004, respectively. |
| 6 | Mr. Allan Cutler, Synopsis of Evidence, p. 4, document presented to the House of Commons Standing Committee on Public Accounts. |
| 7 | Office of the Auditor General of Canada, Report to the Minister of Public Works and Government Services of Canada on Three Contracts Awarded to Groupaction, 8 May 2002 (http://www.oag-bvg.gc.ca/domino/reports.nsf/html/02sprepe.html). |
| 8 | House of Commons Standing Committee on Public Accounts, 28th Report, 36th Parliament, 1st Session, tabled 5 May 1999; House of Commons Standing Committee on Public Accounts, 12th Report, 36th Parliament, 2nd Session, tabled 8 June 2000. |
| 9 | House of Commons Standing Committee on Public Accounts, 10th Report, 37th Parliament, 2nd Session, tabled 20 March 2003. |