PACP Committee Report

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GOVERNMENT RESPONSE TO THE FIFTH REPORT OF THE STANDING COMMITTEE ON PUBLIC ACCOUNTS, ENTITLED “CHAPTER 4, CANADIAN AGRICULTURAL INCOME STABILIZATION – AGRICULTURE AND AGRI-FOOD CANADA OF THE MAY 2007 REPORT OF THE AUDITOR GENERAL OF CANADA”

Introduction

The Government of Canada is pleased to respond to the Fifth Report of the House of Commons Standing Committee on Public Accounts, entitled Chapter 4, Canadian Agricultural Income Stabilization – Agriculture and Agri-Food Canada of the May 2007 Report of the Auditor General of Canada. The Government agrees with the recommendations of the report and is committed to addressing the observations and recommendations made by the Office of the Auditor General (OAG). The content of AAFC’s status report to the OAG is attached for information.

The Canadian Agricultural Income Stabilization (CAIS) program was introduced in

December 2003. The goal of the program was to help agricultural producers protect their operations from small and large drops in income due to circumstances beyond their control. Producers were eligible for CAIS support if they had farmed for more than six months and had reported farming income for income tax purposes. CAIS was a federal-provincial-territorial program that was administered by Agriculture and Agri-Food Canada (AAFC) for all of Canada except Alberta, Ontario, Quebec and Prince Edward Island, where the provincial governments administered the program.

A more responsive, bankable and predictable suite of Business Risk Management (BRM) programs was implemented on April 1, 2008 under Growing Forward, Canada’s new agricultural policy framework. AgriInvest, a savings account program for producers, and AgriStability, an improved margin-based program, have replaced the CAIS program. These programs have been designed to improve on previously identified weaknesses in agricultural income support programs. They are complemented by AgriInsurance, which includes production insurance, and AgriRecovery, a new disaster relief framework.

The Government has carefully reviewed the recommendations in the Standing Committee’s report, a number of which have been addressed by actions taken by the Government, and welcomes the opportunity to respond to each recommendation individually.

Recommendation 1

Agriculture and Agri-Food Canada provide the Public Accounts Committee (PAC) with a status report by 31 December 2008 detailing its implementation of the recommendations made in Chapter 4: Canadian Agricultural Income Stabilization – Agriculture and Agri-Food Canada of the Auditor General’s May 2007 Report.

AAFC is firmly committed to implementing the recommendations made in the OAG report and reporting on progress made towards their implementation. AAFC completed the status report requested by the PAC by December 31, 2008 but as a result of the Fall 2008 federal election and the proroguing of Parliament, the original timelines for reporting back to the PAC were not applicable. In February 2009, the OAG requested AAFC to perform a “self-assessment” of AAFC’s progress in implementing the report’s recommendations. The OAG report contains ten recommendations on the national farm income support programs and AAFC has assessed its progress as “Full Implementation” for five of the recommendations and “Substantial Implementation” for the remaining five recommendations (for more details, see the attached report entitled “Agriculture and Agri-Food Canada’s Status Report on the 2007 Office of the Auditor General’s (OAG) Canadian Agricultural Income Stabilization (CAIS) Audit”). The assessment was provided to the OAG in April 2009, and the content of AAFC’s status report to the OAG is attached for information.

Recommendation 2

Agriculture and Agri-Food Canada include in its annual Departmental Performance Report (DPR) a performance indicator that measures agricultural producers’ satisfaction with the Canadian Agricultural Income Stabilization program and its successor programs.

The Government concurs with this recommendation and AAFC has already achieved significant progress in developing and putting in place performance indicators for the suite of Business Risk Management programs under Growing Forward. In conjunction with the provinces, the Department has developed a performance measurement framework that includes a logic model that demonstrates the relationship between all of the programs in achieving the overall objectives as well as performance measures and targets for the suite and each of the programs within it.

These performance indicators provide information on how well the programs are meeting their objectives and outcomes as well as producers’ satisfaction. These indicators include producer views on progress made on some of the key issues with the former CAIS program, specifically the timeliness, predictability and bankability of the programming. The key results obtained through the framework will be shared in the Departmental Performance Report (DPR).

As part of this performance framework, AAFC has also sought provincial and territorial collaboration for developing a client satisfaction survey with regard to the service delivery of BRM programs. This client satisfaction survey is currently in progress and will measure producers’ experiences, expectations, and priorities for service improvement regarding BRM programs. Results of this survey should be available for inclusion in AAFC’s DPR for 2009-10.

Recommendation 3

Agriculture and Agri-Food Canada conduct summative evaluations at the end of each farm income support program’s life and report on these evaluations in its DPR.

AAFC conducted an evaluation of the BRM chapter under the Agricultural Policy Framework (APF) in advance of the implementation of the new BRM suite under Growing Forward. This evaluation highlighted concerns with the program design and industry perception, which were considered in the development of the new suite of programs. As part of its performance framework, AAFC also has developed a performance measurement strategy for CAIS successor programs, AgriStability and AgriInvest and is collecting appropriate information to demonstrate the performance of the programs. As required by the Federal Accountability Act and the Treasury Board Transfer Payment Policy, AAFC will evaluate its grants and contribution programs in time to inform program renewal decisions. Growing Forward programs, including CAIS successor programs AgriInvest and AgriStability, will be evaluated in time to inform the development of AAFC’s new BRM programming under the next policy framework to be implemented in 2012-13. The evaluation will be led by AAFC’s Office of Audit and Evaluation. Once completed, the evaluation will be made public and its findings reported through the 2012-13 DPR.

Recommendation 4

Agriculture and Agri-Food Canada establish a realistic service standard for processing Canadian Agricultural Income Stabilization program and AgriStability and AgriInvest program applications and report on how this service standard is being met in its annual DPR.

The Government concurs with this recommendation. AAFC has already achieved much progress in establishing realistic service standards for processing farm income support program applications and seeks to improve delivery of programs on a continuous basis. AAFC agreed to a service standard of 75% of files within 75 days for the processing of final 2007 AgriStability payments for provinces and territories for which AAFC delivers the program. AAFC in collaboration with all provincial and territorial governments will continue to develop a national service standard for the processing of final AgriStability and AgriInvest applications.

AAFC has posted its service standard target and performance results on the AAFC AgriStability website and will ensure the information is referenced in its annual DPR beginning in the Fall of 2009.

Recommendation 5

Agriculture and Agri-Food Canada provide confirmation to the PAC that all of the files handled in any way by the five employees found to have been in violation of the Values and Ethics Code for the Public Service have been audited and that any appropriate and corrective actions have been taken to address any inconsistencies found in the audits.

In the course of AAFC’s fact finding during the OAG audit (2006) indications were that 18 employees, at some time, may have been completing CAIS applications for a fee. The employees were reminded of the Values and Ethics Code for the Public Service and, as applicable, directed to clarify their activities by submitting a Confidential Report pursuant to the Code. Five employees indicated that they had in fact been completing applications for a fee and were provided with specific instructions to stop doing so. Each of the five employees cooperated and each signed a declaration that they had complied and would continue to comply with the directions provided. All declarations were received by May 2, 2007.

Additionally, to ensure that clear direction was provided to AAFC staff, AAFC consulted extensively with Justice Canada and the Canada Public Service Agency. Following that consultation, in December 2006, the Deputy Minister provided AAFC staff with specific procedures to be followed when applying for AAFC programs and when assisting others with their program applications. As well, all CAIS employees were reminded of their Conflict of Interest (COI) responsibilities through a number of separate training sessions, newsletters and other direct communications. AAFC also modified its administrative procedures so that CAIS, AgriStability and AgriInvest applications completed by current and former program employees would be processed by a special team of select, experienced employees.

In April 2008, the Public Accounts Committee (PAC) requested AAFC review the files handled by the five employees. AAFC directed the five employees to provide a listing of files that they had completed. AAFC also cross checked its database to ensure that all files had been identified by the employees. The files of over 700 clients were segregated and assigned to a team of objective and experienced processing staff and financial officers. Over 2,600 CAIS client files (CAIS was an active program for the 2003 to 2006 program years) were then subjected to a detailed validation, which included a review of how the files were processed, to ensure they had been processed in compliance with procedures. The review identified some errors which are being addressed, but did not indicate any inappropriate activity by any of the five employees.

AAFC takes a rigorous approach to protecting the integrity of the BRM programs and ensuring proper stewardship of public funds. During the same period that AAFC was responding to the PAC recommendations, it conducted a thorough investigation into allegations of conflict of interest and the improper use of insider knowledge made in relation to the CAIS and AgriStability Programs. These allegations were separate from the concerns raised by the PAC. As a result of this investigation, disciplinary measures were imposed on a small number of employees, ranging from written reprimands, suspensions, and up to termination of employment, depending upon the circumstances of the individual case.

AAFC has acted to address COI concerns related to the CAIS program and to strengthen its values and ethics program, raising awareness and understanding of COI measures and guidelines within AAFC. Some of the actions taken include:

Specifically for employees delivering CAIS/AgriStability:

COI education and awareness sessions were provided to staff in fiscal year 2007-08;
in fiscal year 2008-09, the COI sessions became mandatory for all AAFC employees and 715 employees delivering farm financial programs received the mandatory training in Winnipeg and Regina;
letters were sent to 78 employees on leave outlining their responsibilities under the Code;
an advisory was sent to 484 form preparers and 170 former employees informing them that former AAFC employees are required to self-identify when filing applications for farm financial programs for themselves or for others;

For AAFC:

implementation of a policy of mandatory COI training sessions for all AAFC employees, delivered by each employee’s senior management;
parallel delivery of specialized COI sessions by Senior Values and Ethics Officers in areas of higher risk;
the launch of a comprehensive Values and Ethics website that addresses a number of issues including COI, providing extensive reference material, and questions and answers for employees and managers;
the establishment of a Values and Ethics Advisory Board led by an Assistant Deputy Minister champion to shape and facilitate AAFC’s ethics strategy; and
inclusion of Values and Ethics and COI educational material as an introductory module in AAFC’s Core Learning Program courses, executive and employee orientation sessions.

AAFC will continue to maintain and enhance its AAFC Ethics Strategy.

Agriculture and Agri-Food Canada’s Status Report on the 2007 Office of the Auditor General’s (OAG) Canadian Agricultural Income Stabilization (CAIS) Audit

Every year the OAG contacts audited entities, as necessary, to request an update on progress made to implement current and outstanding audit recommendations. The entities are expected to formally respond, within the specified time frame (usually up to four months), to this request with status reports. The status reports are to include:

a concise description of the actions undertaken up to the fiscal year end toward the implementation of each outstanding recommendation; and
an assessment of the level of implementation achieved as of that fiscal year end—based on a scale of 1 to 5 as follows: Level 1: No progress or insignificant progress, Level 2: Planning stage, Level 3: Preparations for implementation, Level 4: Substantial implementation, and Level 5: Full implementation.

In 2009, the OAG required Agriculture and Agri-Food Canada (AAFC) to provide a status report on the action plan implementation for the 2007 OAG Canadian Agricultural Income Stabilization (CAIS) audit. This status report was provided to the OAG on April 28, 2009. (The OAG audit of the CAIS program was also the subject of a hearing by the parliamentary Standing Committee of Public Accounts in early 2008.)

OAG’s numbering of recommendations is not consecutive because the recommendation number identifies the section or paragraph where they are found in the OAG report.

AAFC STATUS REPORTS ON:

Recommendation 4.31:

Agriculture and Agri-Food Canada should improve the transparency of the final statement that it sends to producers about their farm income support program benefits. AAFC should clearly and fully explain how it calculates benefits, including what information it changes and why it makes the changes. AAFC assessment demonstrated Level 4: Substantial implementation.

AAFC 2009 Response: AAFC has taken steps to improve the transparency of the information it provides to producers. Revised final benefit statements highlighting AAFC’s corrections/adjustments were introduced for the 2007 program year, and additional improvements are being implemented for the 2008 program year as well. Changes in the 2009 program year will conclude the response to the OAG’s requested improvements to the statements with the introduction of AAFC's new BRM AgriStability processing system. Producers will be provided with change summaries and payment calculation summaries. Any additional explanation will be available on request through the toll-free service and/or by provision of a full detail print. Focus testing confirmed producer appeal of this approach.

Recommendation 4.44:

Agriculture and Agri-Food Canada should use a statistically valid methodology to estimate errors in farm income support program payments. AAFC assessment demonstrated Level 5: Full implementation.

AAFC 2009 Response: AAFC contracted experts from the University of Manitoba Mathematics Department to review the statistical basis for AAFC error estimates and provide insight on the need for and feasibility of further statistical accuracy measures.

The report from the Statistical Advisory Service at the University of Manitoba affirmed that the statistical data produced by AAFC was sound and provided a sufficient basis to determine accuracy measures.

AAFC implemented the recommended methodology to provide the additional accuracymeasures for the 2007 AgriStability program year.

Recommendation 4.46:

Agriculture and Agri-Food Canada should establish and publicize a target for the accuracy of payments for its farm income support programs, and should report to Parliament, and other interested parties, how well it meets this target. AAFC assessment demonstrated Level 5: Full implementation.

AAFC 2009 Response: As stated in the OAG’s audit report, AAFC’s goal with respect to maximum payment error rate is 3%. Since the audit, AAFC has significantly reduced its error rate.

AAFC’s error rates (accuracy rates) for the 2003 to 2006 CAIS program years of 10.2%, 6.5%, 3.44% and 2.5% respectively, were reported to Parliament through the tabling of AAFC’s 2007-08 Departmental Performance Report.

AAFC continues to reduce its error rate. The final error rate for the 2006 CAIS program year was 2.5% and the AgriStability 2007 year-to-date error rate is 3.15%.

AAFC’s accuracy rates for the 2003 and 2004 program years were also published in the initial CAIS report, covering fiscal years April 1, 2003 - March 31, 2006, a practice which will be continued in subsequent reports.

AAFC is also, in conjunction with provincial delivery partners, exploring options to report on accuracy rates across administrations.

Recommendation 4.58:

When estimating errors in payments from farm income support programs, Agriculture and Agri-Food Canada should include zero payment applications in its post-payment samples. AAFC assessment demonstrated Level 5: Full implementation.

AAFC 2009 Response: AAFC has included testing of zero payment files since the summer of 2007. AAFC continues to test zero payment files for the 2007 program year as part of its 2007 AgriStability post payment sampling strategy.

AAFC's recipient audit plan for this program includes desk audits of zero payment files.

Recommendation 4.60:

When processing applications for benefits, under farm income support programs, the emphasis that Agriculture and Agri-Food Canada places on efforts to prevent, detect, and correct both under-payments and over-payments to producers should be proportional to the relative risks of underpayments compared with over-payments as determined through AAFC's revised post-payment sampling results as recommended elsewhere in this chapter. AAFC assessment demonstrated Level 4: Substantial implementation.

AAFC 2009 Response: AAFC has updated its processes for prevention, detection, and correction of under-payments and over-payments.

In designing new programs such as AgriInvest, which replaced the top tier of the previous CAIS program, the verification strategy was designed up-front as a balanced approach which considers both over and under-payment risks.

Additionally for the AgriStability program, quality assurance (QA) processes have been refined to ensure a balanced approach to verification is attained. The quality assurance measures ensure a focus on accuracy without bias towards under-payments or over-payments.

AAFC is also specifically targeting under-payment files by performing reviews and audits of zero payment files to identify weaknesses in its verification approach. While results have not indicated a significant concern with zero payment files to date, AAFC continues to investigate and will consider the results in the development of subsequent verification strategies.

AAFC has also implemented a more balanced approach to adjustments. Where the administration detects a producer reporting error in a previous program year through verification, both over-payments and under-payments will be corrected. Previously, if the adjustment was identified outside the producer’s notice period, only over-payments would be established.

Recommendation 4.74:

Agriculture and Agri-Food Canada should strengthen its focus on continuous improvement in the administration of its farm income support programs by systematically:

collecting relevant information about the nature, extent, and timing of errors;
analyzing the information; and
continually applying the results of the analyses to improve all phases of application processing. AAFC assessment demonstrated Level 4: Substantial implementation.

AAFC 2009 Response: With a view to improving its processes, AAFC has established a continuous improvement team from various business areas to collect and analyze data. Results of the initiative include:

improvements to processing procedures and to forms and guides for producers;
revisions to program publications, internal processes, and promotional material to ensure they take account of feedback from program information sessions with accountants and producers; and
implementation of the simplified application form used in the 2006 and subsequent program years.

AAFC has undertaken many other continuous improvement initiatives to improve the administration of farm support programs including:

development of a central Quality Assurance (QA) database to gather and organize data on identified errors so that corrective actions can be taken in a more timely manner.
an external assessment of training and evaluation methods to improve the integrity of internal training results.
the implementation of more structured quality assurance processes and feedback loops to processors to focus on accuracy, including the inclusion of accuracy as a component of the processor’s performance assessment.

Other important reviews have included the following:

a review of the 2006 program year Automated Risk Assessment (ARA) process was used to implement improvements to the ARA for the 2007 program year.
a review of the procedures for calculating program margins and prices and for monitoring the reasonableness of Benchmark Per Unit (BPU) methodologies and the accuracy of BPU calculations was performed. The review resulted in standardizing tools used to calculate BPUs, formalizing procedures for entering values into AAFC’s processing system, and the allocation of additional resources to monitor quality.
the review of the simplified application form gathered input from each of the stakeholder groups involved in the application process including agricultural producers and accountants, administrative staff and provincial representatives. Information from the study is being used to adjust current program year processing and future form and guide development.

Recommendation 4.82:

Agriculture and Agri-Food Canada should set realistic service time standards for processing farm income support program applications and should accurately measure its performance against those standards. AAFC assessment demonstrated Level 5: Full implementation.

AAFC 2009 Response: A service standard of 75% of files processed within 75 days for processing 2007 final AgriStability applications was in place in June 2008, where AAFC delivers the program. Alberta has also adopted a 75/75 day service standard for processing applications. All administrations have also agreed to an interim service standard of 30 days.

The federal administration is reporting publicly against service standards by posting targets and performance on the AgriStability website.

Recommendation 4.90:

Agriculture and Agri-Food Canada should ensure that it meets the audit and reporting requirements of the federal-provincial-territorial (FPT) agreements. AAFC assessment demonstrated Level 4: Substantial implementation.

AAFC 2009 Response: AAFC has taken steps to ensure monitoring provisions of the federal-provincial-territorial (FPT) agreements are administered in accordance with terms and conditions.

A national CAIS compliance audit covering all administrations delivering the CAIS 2005 Program year reviewed program consistency with FPT agreements and guidelines. Audit reports were received and are being discussed with the administrations. The audit results will be used to improve delivery and accountability in 2009-10.

AAFC continues to monitor and follow-up on audit and reporting requirements.

Recommendation 4.96:

Agriculture and Agri-Food Canada should:

establish specific and measurable targets for all of the performance indicators in its Results-Based Management and Accountability Framework; and
produce timely reports to Parliament on the performance of farm income support programs, measured against those targets. AAFC assessment demonstrated Level 4: Substantial implementation.

AAFC 2009 Response: The CAIS performance measurement activities have been strengthened. In collaboration with the FPT governments, measurable performance targets for the CAIS program were used in the most recent Departmental Performance Report for 2007-08. As the department puts in place its new policy framework – Growing Forward – performance information is a key priority. A new suite of Business Risk Management (BRM) programs to provide producers with effective tools to manage business risks has already been announced as part of Growing Forward. Work is in progress with provincial and territorial partners to identify performance measures and targets.

AAFC will perform a client satisfaction survey with regard to the service delivery of BRM programs in 2009. This client satisfaction survey will measure producers’ experiences, expectations, and priorities for service improvement regarding BRM programs, and is included in AAFC’s Public Opinion Research (POR) plan for 2008-09. The research will use the Common Management Tool (CMT) as per the Management Accountability Framework (MAF) requirements. Results of this survey, and other important performance indicators and targets, will be included by AAFC in its Departmental Performance Reports and communicated to clients, where appropriate.

Recommendation 4.110:

Agriculture and Agri-Food Canada should strengthen measures to reduce the risks of potential conflicts of interest. At a minimum, the Department should strengthen its values and ethics program - making it clear to employees that they cannot prepare applications for others for a fee, and establish processes to:

identify processors who also prepare applications for farm income support programs;
address risks associated with employees preparing applications for their own farms or their families' farms, including performing on-farm audits if necessary; and
ensure that all applications prepared by farm income support program employees are approved manually rather than electronically. AAFC assessment demonstrated Level 5: Full implementation.

AAFC 2009 Response: The Department took immediate steps to address the OAG recommendation and continues to develop measures to reduce potential for conflict of interest and to increase awareness of Values and Ethics across the Department.

Specifically for employees delivering CAIS:

conflict of Interest education and awareness sessions were delivered to employees in fiscal year 2007-2008;
in fiscal year 2008-2009, the Conflict of Interest awareness session became mandatory for all AAFC employees, including employees delivering CAIS;
in fiscal year 2008-2009, 715 employees delivering farm financial programs received the mandatory Conflict of Interest session in Winnipeg and Regina;
new measures were implemented for employees to self-identify when completing applications for AAFC financial programs for themselves or others;
internal newsletters in January 2007 and May 2008 included articles on Conflict of Interest (COI) guidelines and reminders of their obligation to self-identify when completing applications;
employees were clearly directed not to complete AAFC financial program application forms for a fee;
a special team was designated to process applications that originate from AAFC employees;
a comprehensive set of Conflict of Interest Questions and Answers was communicated to all employees delivering CAIS in January 2009; the questions are available to all AAFC employees on AAFC’s intranet site.
letters were sent to employees on leave reminding them of their responsibilities under the Values and Ethics Code for the Public Service.
an advisory was sent to form preparers and former employees informing them that former AAFC employees are required to self-identify when filing applications for farm financial programs for themselves or others. The applications are directed to a specially trained team within the Administration. The procedure ensures that all producers’ forms are processed on an impartial basis.

The Department continues to maintain and enhance its Values and Ethics Program, including Conflict of Interest.

letters of offer to new AAFC employees include mention of their obligations under the Values and Ethics Code for the Public Service as a condition of employment; employees are required to sign their letters acknowledging their responsibility; employees are provided with a copy of the Values and Ethics Code for the Public Service.
the Deputy Minister issues an annual reminder to employees with respect to both Values and Ethics and conflict of interest.
the Department established a Values and Ethics Advisory Board, led by AAFC’s Values and Ethics Champion, Assistant Deputy Minister of Market and Industry Services Branch, the Board consists of Executive (EX) level and EX minus one or two level equivalent employees from each Branch to help shape and facilitate the Department’s ethics strategy and to promote ethical awareness and decision-making, action, and leadership in their respective Branches.

The Department has implemented further ways of raising awareness of COI Measures and guidelines. Initiatives include:

on November 4, 2008, AAFC’s Executive Council approved the roll-out plan of the mandatory COI education and awareness sessions and has begun the delivery process across the Department.
COI information sessions are mandatory for all AAFC employees, and are being delivered by the employee’s respective Senior Management.
parallel delivery of the COI sessions, by the Senior Values and Ethics Officers, is ongoing in higher risk areas of the Department.
development of a comprehensive Values and Ethics website that includes Conflict of Interest, Duty of Loyalty, and Political Activities, that employees and managers can use as a reference tool and that Human Resources can use to provide new information and links to relevant websites to employees and their managers. The website was announced to all AAFC employees in June 2008 and is continuously being updated and improved.
Values and Ethics and COI educational information is added as introductory modules to AAFC Core Learning Program courses, executive and employee orientation sessions.

The Department has strengthened and continues to enhance procedures and develop service standards in preparation of the planned 2009-10 audit that the Office of Audit and Evaluation will conduct on the Department’s values and ethics framework, including the adequacy of conflict of interest controls.

The Department has improved its processes in the management of conflict of interest queries and cases. The Human Resources Branch has clarified and defined the roles and responsibilities of AAFC’s Management with respect to conflict of interest monitoring and compliance. AAFC and its Managers have since been better equipped to respond quickly and appropriately to instances of breach of the Values and Ethics Code for the Public Service and of possible non-compliance with directives.