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I now call this eighth meeting of the Standing Committee on Public Accounts to order.
Colleagues, as per our previous decision, today we are formally receiving from the House the 2013 Fall Report of the Auditor General of Canada.
May I just mention that we have officials here from Ghana and Tanzania who are on a 10-month attachment to the Office of the Auditor General under its international fellowship program. We also have an official from the Australian national audit office, who is on a one-month secondment to the OAG.
On behalf of all colleagues, I extend a welcome to all our guests. I hope you enjoy your time with us today, and in Canada.
Welcome.
I think it's worth noting, colleagues, that Canada, public accounts, and the Office of the Auditor General continue to receive a fair bit of attention, particularly from many emerging democracies as they're looking to set up their auditor general system and the public accounts piece that goes with it.
Internationally, we have been to Burma and Jamaica, working with those countries, but we've also been receiving a lot of international delegates, and I think that will continue as long as we continue to provide as close to the gold standard as possible.
In terms of the work of the Office of the Auditor General and its partnership with the public accounts committee, we will continue to be seen as a model of public accounts, accountability and transparency. We're not perfect by any means. We're still pursuing and struggling and trying to get better and better, but make no mistake that there are an awful lot of countries that are looking at the office and at this committee and saying that's where they want to get to. They want to get to this level of transparency and accountability. The work here goes beyond just the borders of our own country, colleagues.
I would also remind everyone that on Monday we will be doing committee business.
Unless there are any interventions, and I don't see any, we'll proceed with the orders of the day. For the newer members of the committee, the process is very similar to the informal meeting we held yesterday morning.
I will turn the floor over to the Auditor General. He will read his opening statement, and then we will begin the rotation in the usual fashion. We'll continue until we've exhausted the speakers list.
With that, I will now formally turn the floor over to the Auditor General of Canada, Mr. Michael Ferguson.
You, sir, now have the floor.
[Translation]
Mr. Chair, I am pleased to present my Fall 2013 Report, which was tabled in the House of Commons yesterday. I am accompanied by assistant auditors general Wendy Loschiuk and Maurice Laplante, and principals Gordon Stock and John Affleck.
This report touches on a range of long-standing issues the government has been struggling to address, with potentially significant impacts for Canadians.
Rail safety is one such issue. Fourteen years ago, Transport Canada recognized the need to shift from an inspection-based oversight approach to one that integrates the oversight of safety management systems. This shift is ongoing. Much work remains to be done, and the transition is taking too long.
[English]
Transport Canada completed only 26% of its planned audits of federal railways over a three-year period. Most of these audits were narrowly focused and provided assurance on only a few aspects of railway safety management systems. The department has yet to establish an audit approach that provides a minimum level of assurance that federal railways have implemented adequate and effective safety management systems for complying on a day-to-day basis with Canada's framework for rail safety.
Our audit of Canada's food recall system showed that the Canadian Food Inspection Agency does a good job of managing most aspects of recalls. However, the weaknesses we saw in both follow-ups with industry and in large emergency recalls leave significant gaps in the system. While illnesses were contained in the recalls we examined, I'm not confident the system will always yield similar results. The weaknesses we found in decision-making and follow-up stand in the way of the continuous improvement of a system intended to deal with food safety incidents in Canada.
[Translation]
In this report, we also looked at how the Canada Revenue Agency followed up on a list of possible Canadian residents with accounts in a European bank. The Canada Revenue Agency's initial work on offshore banking information shows promise. However, with more lists to look at and changes in legislation that will give the agency access to more information, I believe that it needs to formalize its approach to deal with the increase in its workload.
[English]
In another audit, we looked at border controls to prevent illegal entry into Canada. It is very important for the safety of Canadians that controls at the border work as they are supposed to. I am very concerned that our audit found too many examples of controls not working.
Though the Canada Border Services Agency has made significant progress in some of its efforts to detect high risk travellers, it often does not get the information it needs to identify these travellers before they arrive in Canada. Furthermore, even when the agency has the information, we found that controls do not always work. We also found that the RCMP does not know the extent to which it is successful in intercepting people who enter the country illegally between ports of entry.
Though it is not the first time we have raised these issues, border controls are still not working as they should. With better analysis of existing information and better monitoring, many of these issues can be fixed.
Our audit of disaster assistance to agricultural producers is an example of a program with a disconnect between the program's objectives and its outcomes.
Providing quick assistance to agricultural producers is a key goal of the AgriRecovery program. While Agriculture and Agri-Food Canada has delivered assistance to producers for large disasters within their targeted timeline, those producers impacted by disasters with a smaller total payout often wait more than a year for financial help.
Agriculture and Agri-Food Canada needs to streamline its processes for smaller initiatives, and it must track whether it is meeting its timelines.
[Translation]
Let's now move on to our audit of online government services. We found that, since 2005, the government has not significantly expanded the services it offers online to its citizens. As Canadians rely more on the Internet in their day-to-day lives, they expect the government to provide them with online information and services that address their needs.
The government has estimated that savings can be realized by providing better online services for Canadians, but there needs to be a concerted client-focussed strategy. Departments need to work together to make this happen.
Our audit of Aboriginal Affairs and Northern Development Canada's role in supporting emergency management on first nations reserves showed that the department is in a cycle of reacting to emergencies. It has not been able to focus on what can be done to prevent and mitigate these events.
Some reserves continue to be adversely affected in significant ways by repeated emergencies, such as floods. These difficulties are compounded by the fact that the respective roles and responsibilities of the federal government and other stakeholders are unclear. Aboriginal Affairs and Northern Development Canada must work with other stakeholders, including first nations, to reduce the human and financial costs of emergencies over the long term.
We also followed up on our audit of internal controls over financial reporting. Eight years after the government made it a priority to have in place effective internal controls over financial reporting, I am concerned that several large departments are still years away from knowing whether these controls are in place and working effectively. With annual spending of nearly $300 billion across government, effective internal controls are a necessary part of safeguarding public assets. It is imperative that departments get this work done without further delay.
[English]
This report also looked at the national shipbuilding procurement strategy, specifically whether it has been designed and managed to help sustain Canadian shipbuilding capacity and capability over the coming decades. It's still early, but so far the strategy has resulted in the transparent and efficient selection of two yards to build ships for the navy and the coast guard.
Although only a few contracts have signed to date, and it will be a few years before any ships are delivered, the national shipbuilding procurement strategy shows promise. As with anything new, there are risks involved, and these will need to be closely monitored on an ongoing basis.
[Translation]
A look over the audits that we are reporting on today shows that, in many cases, the results need to be improved. Even when the government recognizes a problem, it takes too long to develop and implement solutions. The resulting delays can have significant impacts on Canadians, both directly and indirectly.
[English]
Departments need to focus on critical success factors that are proven to work. These include setting clear priorities, applying lessons learned, and monitoring deliverables against timelines and objectives.
Mr. Chair, that concludes my opening statement.
[Translation]
We are happy to answer any questions the members may have. Thank you.
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Thank you very much, Mr. Chair.
I want to thank the Auditor General for being here today along with his staff. Obviously, it is a very important function to make sure that Canadians are getting value for money. I certainly look forward to working with you during my time on this committee.
I'd like to start with chapter 1 of your report. Specifically, I want to understand not just the recommendations, but also the problems that are at hand.
First of all, it's my understanding that the Treasury Board policy on internal control was implemented back in 2009. To me, it sounds as if the purpose was to shift the department's focus from audited financial statements to mandatory annual public disclosure of their risk-based assessment of controls over financial reporting and their planned improvements. It's moving from that. It sounds to me as if they're moving from just keeping the numbers, tracking the numbers, to keeping an eye on other priorities such as inventories, liabilities, etc.
Could you explain a little bit more what that shift is?
I will switch now to chapter 4, which is on food safety. In chapter 4 of your report, at paragraph 4.57, you reference the Weatherill report, which obviously folks in your department looked at during this audit process, because it talked about what things they were supposed to do with respect to the Weatherill report. By the way, this individual, a lady by the name of Sheila Weatherill, was hired by the Conservative government. In 2009 she did a study of the listeriosis crisis of 2008. I happened to be part of the subcommittee on listeriosis, not part of the Weatherill report, so there were two reports at once.
Ms. Weatherill made a comprehensive number of recommendations, of which you are kind of talking about one. It's the ICS, which is basically on emergency management. My understanding of this—and I don't know whether this became part of your documents—is the government actually said it had completed all of the Weatherill report's recommendations. They were all complete. If that was true, then how could the ICS still be in draft form, untested from 2004?
I'm going to focus on the national shipbuilding procurement strategy. To my knowledge it is the largest procurement in the history of the government, and it's extremely complex. Having read your report, I'm very satisfied the audit shows that thus far it's working. I realize it's in the early stages.
You mentioned in your report that the selection of the shipyards was “successful and efficient”; that the government is working to “acquire federal ships in a timely and affordable manner consistent with the NSPS”, the national shipbuilding procurement strategy; that the selection process was carried out in an “open and transparent manner”; that Public Works and Governments Services Canada should consider using the NSPS approach in future procurement; that the NSPS design was “supported by analyses”; “in a way that should help sustain shipbuilding capacity”, and on and on.
Those comments are really good and I could focus on those. If I were partisan, all I would talk about would be the good things. However, there's a question around the budget that I actually want to understand a little bit better, specifically the budget caps.
With the Arctic offshore patrol ships there was a quote, “Budget caps were set early and could result in a reduced number of ships or capabilities”. This brings up the whole philosophy around budgets. You also comment that initial budgets were based on parametric modelling.
My question is, was the process for setting the initial budgets reasonable, the parametric modelling process? Is it reasonable to assume, considering the magnitude and duration of this project, that in all likelihood it's very possible and very realistic and one would think that the budgets should change?
Let's talk about caps first and then go the other way. Should we be changing our process in terms of caps? Caps were set actually before the national shipbuilding procurement strategy. The NSPS office said they “recommended that budgets not be capped until definition activities are sufficiently advanced to develop substantive cost estimates.”
I join my colleagues in welcoming you, Mr. Ferguson, and your officials today.
I'm also going to focus on railway safety and the oversight factors there.
In your report you mention that Transport Canada has implemented a regulatory framework for rail transportation that functionally centres on a safety management system, an elevated level of safety management, SMS, as you referred to it in the audit, that's designed to identify, analyze, and respond to railway safety risks, and that it has made progress in working with federal railways to implement safety management systems.
You note that the railway sector in particular has experienced unique difficulties with respect to the implementation of SMS. I wonder if you could speculate on or speak to the reason for these difficulties and what the government and/or the rail industry could do to facilitate the efficient and effective implementation of SMS.
In a similar vein, are these difficulties applicable to both class I and class II railways, or are they unique to short-line operators specifically?
I wonder if you could answer those specifically.
This audit was completed on results through the end of 2012, as I understand. We've had a lot of very visible tragedies in the rail industry this past year. I'd like to focus, though, on the time within your mandate, or this particular mandate. My personal feeling is that one accident, one derailment, is one accident or derailment too many. I think we'd all agree on that.
Within the audit, you examined whether Transport Canada had adequately overseen the management of rail safety risks by federal railways in that period. The Transportation Safety Board reports that train accidents in Canada had declined by 10% and derailments by some 41% from the five-year average.
I wonder if you could comment on that. It seems that we're making progress, but I wonder from your perspective if you would have a comment on those numbers.
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Thank you. I want to thank the officials for coming in today. Auditor General, thanks to you as well. It's nice to finally meet you.
I want to talk about some comments that were made earlier about ship procurement, not that specifically, but we talked about options. In other words, this is a process that is noble, but nonetheless, because of the budget caps, options have to be made, and therefore, these numbers have to be adjusted, and so on and so forth.
These are major decisions with major amounts of money, as we all know. What bothers me and alarms me the most is—and I'll read directly from chapter 1. It says:
Eight years after government made it a priority to have in place effective internal controls over financial reporting, I am concerned that several large departments are still years away from knowing whether these controls are in place and working effectively.
What I'm saying is, I'm very alarmed at the monitoring that is not taking place. Specifically, since I'm the citizen service critic for the Liberal Party, I want to focus on chapter 2, “Access to Online Services”. I'll give you some time to check that out. It says that since 2005 “the government has not significantly expanded” the services it offers online to its citizens.
For the last five or six years, we've constantly been hearing about how the government is going to steer traffic, the clients from in-person visits and telephone calls, over towards the online service. Now I get that, because the numbers you show say that it costs the government close to $30 for a person-to-person visit to an office, but if it's done online, some of the studies show it can be as cheap as 13 cents.
The problem is that it's just not keeping up with what the expectations are. The government says that they want more people online, but it seems to me they're just not ready for it. There's no coordination.
I'll leave you with this example from paragraph 2.42 in chapter 2 about online access. This is what's alarming. It says:
Service Canada does not have an overall service delivery strategy, although it has been working on developing one since 2009.
Millions of dollars have been spent advising people to go online when it's not there.
What is most egregious to you since 2005 that deserves attention?
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I come from an IT and computers and customer service background. It's never as easy as it looks. We just have to look south of the border at the problems they're having with online services right now as proof of that.
Moving over to chapter 6, “Emergency Management on Reserves”, I wanted to start off with a line about why it was important to do the audit.
In Canada, natural disasters and catastrophic events, such as flooding, are increasing in both frequency and intensity. When it comes to such disasters, First Nations communities are considered to be at risk of emergencies due to their isolation and geographic location.
Of course, it's not up to you to figure out why we're having more catastrophes and disasters, but I would say, for myself, I believe climate change is a part of it.
From 2009-10 to 2012-13, there have been 447 emergencies that have occurred on reserves. Moving to your findings, Aboriginal Affairs and Northern Development Canada's annual budget of about $19 million for the emergency management program is not sufficient. Later you mentioned that the government had to put close to $400 million in additional money into those programs over and above the $19 million. Later in the same paragraph, it's mentioned that oftentimes the money was borrowed from other funds, including the capital funds which are there to actually build infrastructure in these communities, which would make them safer and less prone to emergencies and disasters.
Do you think this is a prudent approach? You've mentioned it in the report, and it's something that is there. Is there enough money going into disaster management? Does the government have the right focus? Are they putting enough into prevention and mitigation of disasters to prevent them from happening in the first place?
I was going to say to Mr. Harris that since I've become involved in politics, I find that five minutes takes a lot longer when other people are speaking than when I'm speaking.
Voices: Oh, oh!
Mr. Stephen Woodworth: Mr. Chair, I welcome our guests today and thank them for their attendance.
I want to say at the outset that I'm always very impressed, Mr. Ferguson, by the degree of detail and thoroughness you bring to your reports in terms of tracking things down and crossing every t and dotting every i.
I want to begin with an issue which I think was incorrectly stated earlier. All of my questions, by the way, will be on chapter 4, “Canada's Food Recall System”. I'm referring to paragraph 4.57. As I understand it, the Weatherill report recommended, among other things, the use of the ICS. Is that correct?
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The same opportunity. Thank you, Mr. Chair.
I'm going to focus on chapter 8. You say in your opening statement:
Our audit of disaster assistance to agricultural producers is an example of a program with a disconnect between the program's objective and its outcomes.
I may be reading it wrong, but I would read that this is not a program that anyone would want to template. By the way, I don't agree with that in principle or in reality, quite honestly.
I want to go to page 4, paragraph 8.7:
When federal and provincial governments agree that an AgriRecovery response is appropriate, they work together—
That means the governments, the federal, provincial, and in this case the territories, which are not too involved.
—to create an initiative. In most cases, the affected province delivers both the federal and provincial shares of funding to producers who qualify for disaster relief. The province processes applications, makes payments, and conducts post-payment audits of producers. After participating in the assessment of the event and the creation of the initiative, the federal government reimburses the province for the federal share....
In paragraph 8.1, the audit findings relate only to the department. That would be Agriculture and Agri-Food Canada, as you did not audit the provincial role.
I just need to understand. If we go back to page 6, paragraph 8.15, a 45-day target, that's the assessment period. Am I hearing that this is the area of concern?
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You did have a conversation with a number of agriculture commodity groups, I guess. I'm a little familiar with it, and in all my time here I've never heard this come up as an issue.
To go back, you say:
For example, a $44,000 excess moisture initiative was delivered in a total of 228 days, while the largest, at $150 million, took less than half that time.
We're talking about the wet, which mostly is about really bad weather, that takes it beyond what insurance would cover and into a disaster program.
I'm wondering what was said in terms of disease and drought, in terms of your assessment of the time. If you're in the agriculture field, actually, and if you have disease and drought, it's understandable that the assessment time will be quite a bit longer. There has to be an evaluation, I believe, with the crop insurance to see what impact that disease or that drought may have had on the yield of the crop.
I'm trying to understand the justification that both the province and the federal government are telling you, through the commodity organizations, that this is excessive. I'm wondering if there is a reason for that, just based on the comments I've made.
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Thank you very much, Chair.
Mr. Ferguson, going back to food recall, I listened with great interest to my colleague, Mr. Woodworth. In your statement with regard to chapter 4, one of the things you said is that “While illnesses were contained in the recalls we examined, I am not confident that the system will always yield similar results.” Then you went on to talk about weaknesses in the inherent system.
While my colleague might say that you looked at some samples and you didn't actually find a lot of illnesses—albeit at XL there were some, there were not a lot, obviously—the other piece to look at under ICS is the additional piece that talked about how, yes, at the senior level, and I think Mr. Affleck said that, they understood ICS, but the folks who would have what we call “boots on the ground” did not.
There was this whole piece, it seems to me in reading this, and hopefully you can help me with this, that with regard to the folks who thought they had made decisions before who now weren't necessarily going to make the decisions, no one had actually told them that they weren't making the decisions anymore.
There was a whole ream of confusion, especially at the XL piece, because this was a major recall.... Well, it wasn't a major one; it was the largest meat recall in this country's history.
With that confusion, sir, is that a program that's actually working effectively when the identification is that we have confusion?
I'll jump right into it so we can get in a little bit more questioning.
Mr. Ferguson, in recent times you've expressed a concern.... We know how important the work of your office is. The public accounts committee is an important part of reviewing the work so that we can write reports that go back to Parliament and get responses from government to see some action moving forward.
Recently you've expressed some concerns that the committee is not studying as much of your reports as it used to. Your fall report has just come out. The spring report came out in late April and to date, this committee has studied only one chapter of it. To date there is no plan to go back and study more chapters of it, and some important chapters like those on search and rescue.
Because we have five or six months before your next report comes out, do you believe this committee should, over the next few months, go back and study more chapters from the spring report?
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Absolutely, and certainly that's a very good point about how the committee having hearings actually helps to get the information out and to get messages to departments about improvements that should be made. It's part of the very important oversight that we provide in support of the exceptional and world-renowned work that your office does.
I certainly would look across to my colleagues in the hope that we can find a way to study some more chapters in the previous report.
An hon. member: Focus on this one.
Mr. Dan Harris: Focus on this one? We haven't even focused on the last one yet, and moving forward we certainly need to have a look at more chapters so that we can actually get some improvements in, for instance, on search and rescue before the next report comes out in the spring.
We have six months. We have lots of time to get that work done on this report and the last one.
Now following up on Mr. Albas' comments about the changes at the border, previously, Mr. Ferguson, you stated, “I am very concerned that our audit found too many examples of controls not working.” You further stated:
Though it is not the first time we have raised these issues, border controls are still not working as they should. With better analysis of existing information and better monitoring, many of these issues can be fixed.
When was it that you first raised these issues?
In point 3.47, which pertains to naval policy, you mention the importance of monitoring productivity and competitiveness. I did my homework and looked at the prices paid by foreign governments, and it was mind-boggling. Paying $700 million for a ship, as the French and the Italians do, is already a lot. Yet we pay $1.8 billion for the same kind of ship. That is a major cost discrepancy. We pay astronomical prices for our ships, and the only way to control those prices is to reduce the vessels' quality or quantity. Foreign governments have been working on standardizing interoperability policies and consolidating subcontracting purchases.
In our naval policy, have you noted whether a specific service ensures interoperability, standardization and order consolidation for ships from different services of our government?
I want to use the example of anti-aircraft guns. Our transport ships will be equipped with Mauser 27-mm cannons; our surface combatants will have Phalanx 20-mm weapon systems on board; and our arctic vessels will carry the Litton 25 mm. Couldn't someone consolidate everything? In this policy, have you noted a service that is in charge of reducing the price of vessels instead of simply reducing their quantity and quality?
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You more than did that. I appreciate it. Thank you, sir.
With that, we conclude our rounds of questions and comments for today.
First off, let me thank Mr. Ferguson, our Auditor General, and all of his staff and colleagues for coming here today. We never tire of saying how much we respect the Office of the Auditor General of Canada and how much Canadians look to you and your office to be their eyes and ears in terms of the transparency and accountability here on the Hill.
We thank you very much for that, sir. We certainly thank you for your attendance here today.
Colleagues, before we break, I remind you that on Monday we'll be having a committee meeting. We have already agreed that we are going to hear four of the chapters in this report. There will be two selected by the government and two selected by the opposition. If they can't come to an agreement, then it will break down to one for the NDP and one for the Liberals. That's in addition to the three chapters the committee had previously agreed to hold hearings on, one of which was a government choice. The other two are opposition choices.
There is ample time for those hearings. I hope we're able to squeeze those in. Please bring your selections on Monday. Be ready to get to work, and we'll start scheduling these hearings.
With that, colleagues, this committee now stands adjourned.