EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 1, 1996

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[Translation]

The Chairman: Good afternoon.

The Standing Committee on Public Accounts is meeting Standing Order 108(3)(d) to begin its study of Chapter 18 of the Auditor General of Canada's Report of November 1995, dealing with the Atlantic Canada Opportunities Agency.

Before beginning, I will ask our witnesses to kindly introduce themselves, beginning with you, Mr. Desautels.

Mr. Denis Desautels (Auditor General of Canada): Good afternoon, Mr. Chairman. My name is Denis Desautels and with me today is John O'Brien, Principal in our Halifax office.

Mr. Norman Spector (President, Atlantic Canada Opportunities Agency): Good afternoon, Mr. Chairman. I am Norman Spector and with me today is Paul LeBlanc, who is our Vice-President, Corporate Affairs.

The Chairman: Thank you, gentlemen. Do you have an opening statement, Mr. Desautels?

Mr. Desautels: Yes, Mr. Chairman.

I appreciate the opportunity to meet with the committee to discuss the contents of Chapter 18 of my 1995 annual report.

The audit of the Atlantic Canada Opportunities Agency, or ACOA, is one of four conducted on regional economic development programs in 1995. The other three dealt with the Western, Ontario and Quebec Agencies. Chapter 17 of my 1995 report provides a summary of overall regional development issues.

By most measures such as level of unemployment or economic activity, Atlantic Canada is at an economic disadvantage when compared to Canada as a whole. The Agency operates in a difficult environment where many of the proposals that it receives are high risk.

While there are many similarities between the economic development agencies, there are important differences. For example, our Chapter 20 dealing with Western Economic Diversification Canada raises some issues which are quite different from those related to ACOA.

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[English]

Our audit of ACOA focused on two areas: one, the measurement and reporting of results achieved, and two, the assessment and monitoring of its projects.

I recognize that any discussion of regional economic development programs is likely to raise a debate on the actual results achieved. Opinions are many and they tend to be polarized. These programs face a number of problems concerning public confidence, particularly the question of whether they're achieving their stated objectives.

The history of federal regional economic development in Canada is one of frequent changes in direction and organization. Changes in approach make evaluating results more challenging. The process of change in these programs is indeed ongoing.

As we report in chapter 17, we found that information on results achieved by regional economic development programs generally did not demonstrate their impact in reducing regional disparities or in meeting their other stated objectives. Some people have suggested it is impossible to measure the results of economic development programs. However, we think results can and should be measured. I believe the agency's own progress in measuring results supports this viewpoint.

[Translation]

I would like first to comment on areas where the Agency has done well in measuring and reporting results. We found that the Agency selected results for measurement and reporting that were relevant to its objectives. The Agency's reporting of its macro-economic impacts went beyond most current practice.

The Agency met the unique requirement in its legislation to report on its programs' impacts on regional disparity. We found the results information provided to Parliament to be considerable and relevant to the Agency's legislative objectives, although occasionally reported in a confusing manner.

So what needs to be improved? The Agency should improve the clarity and measure ability of objectives for its key programs. Further, the Agency should gather and maintain program information necessary to evaluate the impact of its programs. For example, information on the activities and national results of Cooperation Program Projects was not readily available. In addition, we have concerns about the reliability of the basic data used to evaluate the Action Program. Finally, the Agency should measure and report any negative impacts of its programs, as well as positive results.

Although there are significant limitations in the results information reported to Parliament, we are encouraged by the Agency's initial efforts. We believe that it is on the right track with its methodology, although it should employ more rigour in the collection of the data used to report the results achieved. In the end, the Agency should produce comprehensive, balanced evaluations to incorporate both the positive and negative effects of programs.

The committee may wish to examine changes implemented or planned by the Agency that will affect its future ability to measure and report results achieved.

[English]

I would like now to turn attention to another important area of our audit, the agency's assessment and monitoring of individual projects. During our assessment we asked if the following were addressed: the need for government funding, the viability of the project, the net economic impact on the region, and the extent of capital provided by the applicant.

We found the agency's assessment dealt appropriately with some of the risks to achieving its economic development objectives. However, in a significant number of cases we found that one or more of these basic questions were not adequately addressed by the agency prior to approval. For example, we identified projects where applicants appeared to have had sufficient resources to proceed and the agency's analysis did not identify reasons why government support was necessary. In other instances, the agency's analysis did not fully address serious impediments to the viability of projects.

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When assessing projects, the agency needs to improve the linkage from expected project results to program objectives. For example, it's not sufficient to indicate that the result to be achieved is the hiring of a marketing manager. Rather, we believe the expected results should be stated in terms of what is expected to be achieved by the hiring of that marketing manager.

We found that the agency did a good job of monitoring compliance with the conditions of contracts. However, there is a need for account managers to improve their understanding of client operations and the progress and results of projects. Improved knowledge of the results of individual projects should help management make decisions about future projects.

An important part of the agency's programming involves federal-provincial economic development agreements. We found a number of significant problems with the existing agreements. We found that the objectives are not clear, measurable, and results-oriented; that eligibility criteria do not include key economic development concepts; and that there is an absence of a clear assignment of responsibility for monitoring and reporting on the performance of projects. As it is difficult to make changes to the existing agreements, we think the agency should seek to negotiate improvements in these areas in future federal-provincial agreements.

[Translation]

Previously, I raised concerns before this committee about accountability for program delivery involving third parties. The Agency enters into arrangements with non-commercial organisations to assist it in carrying out its economic development objectives. We found that the Agency needed to improve the reporting of results for such arrangements. With a growing emphasis on the economic development at the community level, it is important that the Agency establish clear project objectives and require the reporting of project results by these third parties.

I would also like to point out our favourable comments about the important role that the Agency played in coordinating development activities in two industry sectors. These efforts to coordinate the Agency's development activities with other levels of government and the private sector are a positive development.

The committee may wish to examine the steps planned or taken by the Agency to improve assessment and monitoring of projects and improve control over program delivery by other parties.

Mr. Chairman, in summary, we have raised concerns that the program results reported by the Agency have significant limitations and that the Agency's assessment and monitoring of projects needs to be improved.

Thank you, Mr. Chairman. We would be pleased to answer questions.

The Chairman: Thank you, Mr. Desautels.

Mr. Spector, before giving you the floor, I would like to ask if you have any written notes you could give us that would help us to follow your presentation?

Mr. Spector: No, I decided not to make an opening statement. I would just like to say a few words, if I could.

The Chairman: Were you not asked to send us your notes?

Mr. Spector: The Clerk said that this was optional. It was up to me to decide whether or not I wanted to make an opening statement. I decided not to make one so as to allow you more time for questioning.

The Chairman: All right, go ahead.

[English]

Mr. Spector: To make it clear, the message we had in our office was that it was optional, that one could choose to make a written statement or not. To provide more time to the committee we chose not to.

We at ACOA are obviously very grateful to the Auditor General for recognizing the substantial progress that was made in program evaluation. As he notes, we are the only of the regional agencies that is required to do such evaluation. Given that these activities took place in our start-up years, I think we can give substantial credit to the people who were there at the time - I don't count myself as one - for the efforts they have made.

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Having said that, the Auditor General has clearly pointed to a number of areas in which we could be doing better. As president of ACOA, quite frankly I welcome these suggestions. In my view, the Auditor General is one of the best allies that a deputy minister has in ensuring that the programs he or she is administering meet the objectives set out for those programs - with the objectives in this case being economic development, jobs, growth and regional development. So it is in our interest, in order to pursue the goals set by Parliament and to function as an economic instrument of Parliament, that we have a continuing and ongoing dialogue with the Auditor General. We therefore welcome this report.

We have made substantial changes to the agency since the period this report covers, namely the start-up years, 1988 to 1993. Some of the programs the Auditor General comments on have been changed substantially, namely the action program, which no longer exists. It has been replaced by the business development program.

Under the business development program, all contributions to commercial organizations are repayable. That is a substantial difference from the situation that prevailed in the start-up years. Because the contributions are repayable there is a much closer monitoring by our account managers of these projects. For that reason I believe there will be much better data used as input for the evaluation of our programs in the next go-around. Similarly, the other major program audited by the Auditor General, the cooperation program, has changed substantially in that we are now negotiating single agreements with each of the four provinces.

We have made significant progress in bringing the provinces along into this new world of value-for-money auditing. We're hopeful that at the next go-around we will be evaluating these programs clearly in terms of results achieved. With the results achieved, we take in a very positive fashion the example cited by the Auditor General. Clearly the distinction he draws between effort and results is a good distinction and one that we wish to pursue in our future evaluations.

If there's one lacuna in the report, an area in which I think we would be asking for even greater involvement from the Auditor General and greater advice from the Auditor General in the future, it is the following. By it's very nature the Auditor General's office is most interested in programs that expend a large quantity of resources, particularly financial resources. In the new world, the one to which the federal government seems to me to be heading, there will be firstly fewer resources, and secondly more partnerships. It seems to me that to acquire a complete and balanced picture of an agency like ACOA, we should be paying considerable attention to programs that don't consume a lot of resources, as well as programs that consume resources.

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What do I mean by that? Let me give one example. In Atlantic Canada - and I think this is unprecedented in the country - we now have 50,000 students enrolled in entrepreneurship courses, courses that are designed to promote the option of self-employment, starting a business, etc. The intent here is to change the culture of Atlantic Canada as one of the answers to economic development. By the year 2000 we will have entrepreneurship courses from K to 12. We are working directly with the schools on this, not directly through the provinces, from K to 12. All students will be able to follow a course in entrepreneurship.

It seems to us it is extremely important to be able to measure the economic impact and the job creation of programs such as these, of cultural changes, that by their nature do not amount to hundreds of millions of dollars or even scores of millions of dollars. In our continuing dialogue with the Auditor General over the next few years we will be looking to develop measures not only for resource-intensive projects but for projects that are less resource-intensive and more diffuse in their orientation. How does one capture the economic impact and the job creation impact of programs such as this?

[Translation]

That concludes my comments, Mr. Chairman. I am now ready to answer your questions.

The Chairman: Thank you, Mr. Spector.

I will start by giving the floor to the Bloc Québécois representative, Mr. Rocheleau.

Mr. Rocheleau (Trois-Rivières): My questions are to Mr. Desautels, and there are three of them. The first deals with your paragraph 22, in which you say that the Agency coordinated development activities with other levels of government and the private sector. There's a reference here to activities, responsibilities and coordination. Could it be said that there may have been some duplication between some of the Agency's programs and some provincial government programs in the Atlantic region?

My second questions relates to paragraph 8 of your opening statement. I find it quite important. I would just like you to give us more details about what you mean when you say:

...we found information on results achieved by regional economic development programs generally did not demonstrate their impact in reducing regional disparities or in meeting their other stated objectives.

I would like you to talk more about that for the benefit of Committee members.

Finally, I would like to know whether the Maritimes have a program similar to the one in Quebec called the Community Futures Development Corporation or CFDC. If such a body exists, does ACOA have the same responsibility as FORD-Q in Quebec regarding these CFDC programs?

Those are my three questions, Mr. Chairman.

Mr. Desautels: Mr. Chairman, I will try to answer the three questions quite quickly. First, the member referred to paragraph 22 and asked whether there is any duplication with provincial programs. In the course of our work, we did not find any duplication as such. Rather, we found that there was fairly good coordination between the Agency and provincial officials. Thus, as far as I'm concerned, I saw no evidence of such a problem. On the contrary, there seems to be quite good cooperation between the two levels of government.

I believe you were referring to paragraph 8 of chapter 18 when you spoke about statistics on regional disparities.

Mr. Rocheleau: No, I was referring to paragraph 8 of your statement.

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Mr. Desautels: In chapter 18 we give a series of indicators that compare the unemployment rates and averaging income for Canada as a whole with that of the Atlantic provinces, for example.

We see that between 1960 and 1994, the differences may have been somewhat reduced in some respects. Overall, however, there is a fairly large gap in the case of most of the economic indicators I just mentioned. I think all of that is set out quite clearly in chapter 18.

You are also asking whether ACOA has any programs similar to those offered by the Quebec government, I believe?

Mr. Rocheleau: No.

In Quebec, FORD-Q is responsible for coordinating programs such as the CFDC. Is that true of ACOA as well? Is there a CFDC in the Maritimes? If so, has ACOA recently been given the responsibility of coordinating it, as is the case with FORD-Q?

Mr. Desautels: Yes. However, I would prefer to have the President of ACOA answer this question, given that his agency is the one involved with these programs.

The Chairman: That's what I was going to suggest. I didn't want to be too directive regarding your choice of questions. I think Mr. Spector would like to answer the question.

Mr. Spector: What does CFDC stand for?

Mr. Rocheleau: The Community Futures Development Corporation.

Mr. Spector: Yes, we are responsible for similar programs that were transferred to us by the Department of Human Resources Development a few years ago. We call them Community Futures Corporation.

We too are responsible for promoting the economic development of communities, and so on. We expect that these bodies will help create 4,000 jobs over the next five years of our planning.

Mr. Rocheleau: I would like to come back to paragraph 8 of your statement.

If we believe your conclusions, should the government not seriously consider rethinking or perhaps abolishing these programs, because they seem rather ineffective, particularly since they are costly? Would you go that far in your recommendation?

Mr. Desautels: In the light of the gaps that continue to exist between various regions, we did not go so far as to suggest that there was no reason to maintain these programs.

There are many ways of interpreting these results. A case could even be made that the gap would have been even greater if programs of this type had not existed over all these years.

However, given that people are raising questions about the programs, not only in the Atlantic regions, but elsewhere as well, we think it is important to measure regularly their real impact and the results they achieve.

In some ways, we must try to answer people's questions, which are similar to those you've raised, as to whether the existing programs are still valid or whether they should be changed.

I think a rigorous evaluation of these programs could help parliamentarians draw some conclusions about them.

Mr. Rocheleau: Thank you.

[English]

The Chairman: Mr. Harper, you have ten minutes.

Mr. Harper (Simcoe Centre): Thank you, Mr. Chairman.

Actually, I'd like to deal with procedure here, because if I understood you correctly, when we opened the meeting you indicated that you asked for written opening remarks. The clerks here indicated that this was Mr. Spector's choice, and that goes against the request from the chair. Can I have a clarification of whether you did request it and whether in fact that is a choice?

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[Translation]

The Chairman: We did not intend to get into a long debate on this matter. However, the Clerk, who is a veteran of committees on Parliament Hill, did mention this possibility and said that it was customary...

Perhaps there was just a misunderstanding about the request made by the Clerk to Mr. Spector and Mr. Spector's understanding of it. I don't think we should spend a great deal of time on this, with all due respect, Mr. Harper. I don't think we should press the point further.

However, when a witness appears before us without any notes, it does show... Let's say that we could take the appearance seriously if... I would like to reserve my comments on the recommendations contained in the Auditor General's report until Mr. Spector has completed his testimony.

[English]

Mr. Harper: Thank you, Mr. Chairman.

I have a question for Mr. Spector, and it's regarding the overview, specifically the comments that are made in 17.53. That's headed ``Program Results are More Than the Sum of Project Results''. There's the suggestion there that we should be evaluating the impact there would be on income levels and on employment levels if in fact ACOA did not exist.

So my question to you, Mr. Spector, is this. What consideration are you giving to evaluating the suggestion that's there in 17.53?

Mr. Spector: I don't want to prolong the debate either, but just to make it clear that the option was presented, I believe we replied in writing that in light of the option, we would not be presenting a written opening statement. The reason given was to allow greater time for questions. Had the response to us been that a written statement was mandatory, of course we would have come forward with a written statement.

So I hope there will be no presumption. Perhaps there's been a misunderstanding, but there was a written exchange of correspondence in this regard several weeks ago.

On your point of program evaluation, I think you're absolutely correct. It seems to me that what is of interest to parliamentarians is not the success of one project versus another or whether three succeed and one fails, etc. That's all very interesting, but what parliamentarians are primarily interested in is the results that are being achieved by a program.

In fact, that's how we've been coming at it. We've tried to assess the results of our major programs, the business development program, under which we provide repayable contributions, and the cooperation program, which is the program of federal-provincial joint agreements that have existed for 30-odd years. The report we provided to Parliament, our five-year report for the years 1988 to 1993, was in fact an evaluation of our major programs and the results achieved, primarily in the nature of the jobs that have been achieved.

Does that answer your question, or did I miss something?

Mr. Harper: I don't believe it does. The question was whether you are going to give consideration to evaluating the prospect of you not being there, of you not interfering with somebody in the private sector. That's the question that's posed in 17.53. That's the other side of the issue that you have to look at. Sure, this created this many jobs, but if we hadn't been here, what would have happened? That's what's in 17.53, and I don't believe you replied to that.

Mr. Spector: Okay. I think there are two aspects to your question of what if we hadn't been here. One is the whole question of incrementality. Let's say we've created 100 jobs. One of the things we look at is whether we have destroyed 20 jobs in the process, by unfair competition, etc. The figures we have presented to Parliament, namely the 42,000 jobs in our first 5 years, are net figures of that factor.

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There may be some measurement problems; I wouldn't swear that it's not 41,950, etc. But as an intellectual proposition, as an empirical question, your point is one we have incorporated in our analyses.

On the question of what happens once that net figure is arrived at, I think you could say the flip side is at a minimum the 40,000 jobs would not exist. That's the effect of us not being there, at a minimum.

On the question of competing with the private sector, I don't think it could be said at present that we are competing with the private sector. We are providing repayable contributions, but they're repayable contributions unlike any you could get at a bank. They're interest-free, they're unsecured and they are repayable over very long time horizons. So I think the 40,000, either plus or minus - i.e., if we didn't exist - is a pretty fair figure, independent of competing with the private sector.

Mr. Harper: Thank you.

Under your new action program all loans are going to be repayable. I think you said in future 100% are going to be repayable. Have you done an analysis of what the collection success might be? In going to 100%, have you forecast what your collection success would be?

Mr. Spector: At this point we're hoping for 100% collection success.

Mr. Harper: What you're hoping for is one thing, but has anybody sat down -

Mr. Spector: We're discussing with Treasury Board now what revenue stream they will book for us. In other words, they will assume revenues are going to be coming in and will deduct that from our base. We are presently negotiating that with Treasury Board.

Mr. Harper: You use the assumption for your model that the jobs created will last ten years. The Auditor General mentioned in his report that he could find no reliable evidence to validate that ten-year program. As a matter of fact Statistics Canada indicates that the average job tenure for the four Atlantic provinces is: in Newfoundland, 98.2 months; in P.E.I., 98.3 months; in Nova Scotia, 100.4 months; and in New Brunswick, 100.1 months. So what is the justification for choosing a ten-year, or 120-month, period?

Mr. Spector: Are those Stats Can figures...? I have not seen that report, so I would want to examine those figures and see what the basis of that analysis is before replying.

Mr. Harper: So you haven't seen these figures.

Mr. Spector: That's correct.

Mr. Harper: And you're not sure why you're using the ten-year period.

Mr. Spector: I'm not sure. I remain to be persuaded by better figures, but I'd want to take a close look at those figures.

Mr. Harper: Okay. Thank you.

The Chairman: Mr. Byrne.

Mr. Byrne (Humber - St. Barbe - Baie Verte): Thank you, Mr. Chair. I appreciate the opportunity to speak and I appreciate the attendance of our two selections of witnesses before the committee today. My first question, or range of questions, goes to the Auditor General.

Sir, in the process of doing the audit, I assume that in addition to a review of the fiscal year in question there is also a review of previous audits and previous performance, and that's what helps set the tone of the current recommendations or criticisms of the current year's audit. Would that be true?

Mr. Desautels: In carrying out this particular audit we looked at more than one particular year's transactions or the picture at one point in time. As you know, we have quite a bit of knowledge about ACOA and we have reported on ACOA in past years, so the audit here makes use of our accumulated knowledge of the operations of ACOA.

Mr. Byrne: Following from that question, in your due consideration, what would be the performance of ACOA in more recent years versus the performance of ACOA in the years in its early inception, say from 1987 to the early 1990s? In your professional opinion, do you think the act of ACOA is cleaner than it was before?

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Mr. Desautels: Mr. Chairman, without going to a whole lot of detail on that, I think some of the problems we and other people have raised about ACOA in the past would not likely be found today. In some of the day-to-day operations of the agency the situation at the date of our audit in 1995 was in fact better than what we would have found, let's say, four or five years back, and better than what was found by others.

Mr. Byrne: Is it fair to assume some of the reasons why your criticisms or your evaluations of the current years, or more recent years, are because structural changes within the program have eliminated the original causes of concern? More specifically, when you raised concerns in the past... I take it you're not repeating those same concerns, because they've been addressed. Would that be fair to say?

Mr. Desautels: I'll ask Mr. O'Brien to complete my answer in a moment.

Some of the problems we raised this time around, for instance, were raised in the past. Not all of them, but some of the past problems have been fixed to a certain extent. As an example, we found certain problems this time about how some of the applications for projects were actually processed and how certain factors were taken into account in evaluating the applications. In the past we have found quite a few problems like that in specific cases, which we reported in previous reports. So in our view the ACOA we see today is quite different from what it was a few years back.

But that's not to say everything's perfect. As we know, there are still problems with certain cases. We give examples of those in this report.

Mr. Chairman, I'd like Mr. Brien, who actually did the audit at ACOA, to elaborate a bit on that question.

Mr. John O'Brien (Principal, Audit Operations Branch, Office of the Auditor General of Canada): All I can answer is that our previous audits of ACOA were audits of individual projects. This is the first comprehensive value-for-money audit we've performed on the agency since it was formed in 1987. The observations we've had in the past have tended to be one of observations. As the Auditor General has said, we do see some of those same concerns now. To give an overall comparative opinion based on what was there five or six years ago versus what is there now... We didn't do a comprehensive audit five or six years ago, so it's hard to give that progress. If the agency is there five or six years from now, we'll be able to have that score card now.

Mr. Byrne: Why didn't you do a comprehensive audit? It would seem to me for a relatively new, important program for a particular region a comprehensive review would be done on an annual basis, especially in the early years.

Mr. O'Brien: Our general policy in doing audits is a cycle of anywhere from five to eight years. In the structuring of this audit the time was ripe. We wanted to do all the regional development agencies at one time. I guess part of it would be to give the agency a chance to develop over those first few years.

Mr. Byrne: One further round of questions. It was mentioned that this is a timely time for an audit. I think it is timely. One of the things outlined in the Auditor General's report is that they were encouraged by the agency's efforts - and successes, I would imagine - to coordinate its economic development activities with those of other levels of government.

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The Senate banking committee recently released its report, and the committee's views were that it would be most appropriate for ACOA to close its doors and to amalgamate with other currently existing, national-scope agencies or departments. It seems as if the Auditor General is contradicting that, because it feels as though there is less duplication than the Senate believes there to be.

For the record, sir, I'd like to know your thoughts and opinions about the Senate banking committee's recommendations and its report overall.

Mr. Spector: For obvious reasons, I won't either agree or disagree with the recommendation of the Senate committee. That's a recommendation that the government will consider and act on in one way or another.

Let me just say that, on a factual level, I think it's fair to say that the Senate committee was not set up to look at the regional agencies. It was set up to look at the lending agencies of the Government of Canada and to see if there are overlap and duplication at the federal level amongst those lending agencies.

Right at the end of the process, the committee asked the regional agencies to appear, as they also, as part of their business, were in the business of lending, as we in a part of our business are in lending. The committee did not inquire into our activities or the activities of the other regional agencies.

So it's a matter of comparing apples and oranges to suggest that they did what the Auditor General... The Auditor General looked at the range of programs of the agencies. The Senate committee looked at the lending aspect only.

The second observation I'd make is that the Senate committee I think is incorrect factually when it says that we're duplicating what the Federal Business Development Bank does, because, as I pointed out to Mr. Harper, the Federal Business Development Bank offers credit on a basis very different from that on which we offer repayable contributions.

So I give a two-part answer: firstly, I think the observations are not correct when it comes to the credit or the lending business that we're in and, secondly, they did not examine most of our business, which includes coordinating economic activity with the provinces, etc.

Mr. Byrne: I can appreciate your reluctance to take an official stand or position on the Senate banking committee's report. However, you mention very clearly that as an agency you're proud and you've had considerable success with ACOA's direct relationship in providing entrepreneurial programs, and you've done so without the direct involvement of the provinces.

As an agency, you saw the need to go into schools, to cooperate, to work in partnership with school boards and teachers and students, and to promote entrepreneurs, yet one of the recommendations of the Senate banking committee's report is that if there are regional economic development programs funded at the federal level that do not involve direct business-related services, then provincial agencies are best able to deliver such programs. Yet you are saying that your agency has had considerable success in working with entrepreneurs and I guess the non-profit agencies directly. Would you care to comment on that?

Mr. Spector: I think that's true, and that's just an example of the observation I made, that the committee did not look at our programs. They did not ask us about our entrepreneurship programs.

I'll give you another example where we are working with the provinces. It is tourism marketing. We brought the four Atlantic provinces, for the first time in history, around one table to market Atlantic Canada as a region, instead of each each province marketing itself individually abroad. We created a concept of Atlantic Canada in tourism marketing. The provinces would not have done that by themselves.

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There is a lot of competition among the provinces, but we brought them together. We pursued the synergies that are available for common marketing to the point that New Brunswick no longer markets on its own at all in the United States, for example. They are part of the Atlantic Canada tourism partnership for marketing in the U.S.; they have now diverted their marketing dollars to Quebec, which is a very important market for New Brunswick.

So there are many examples where we bring a value added, both when we are not working with the provinces - as is the case with entrepreneurship - or when we are working with the provinces by taking a regional approach. We know this is a small area with a small population. That's one of the problems of Atlantic Canada. A regional approach is therefore brought in to exploit the economies of scale that are available to a regional approach.

But again, the Senate committee did not ask us to appear because it was not in their mandate to discuss our Atlantic Canada tourism partnership.

The Chairman: Thank you, Mr. Byrne.

Mr. Byrne: I appreciate it.

[Translation]

The Chairman: Before we get into questions, I would just like to say, Mr. Spector, that so far I have found your approach somewhat disappointing. Perhaps this is because you have a great deal of experience with committee hearings. We did not want to overwhelm you. However, you seem quite detached from the proceedings and are speaking in vague generalities.

In your opening remarks, you said that you would appreciate it if the Auditor General made some suggestions or gave you some advice. For our part, we were expecting... Your 1996-97 budget totals $354 million in Canadian taxpayers' money. And I should mention in passing that they are getting fed up with paying for all sorts of things. That's what we're talking about here.

I'm disappointed, because I would have liked to hear you speak about and read your remarks on what you have done in concrete terms since November 1995. I would like to quote some brief paragraphs from the Auditor General's report and from his statement today. In paragraph 11, he comments that information was "occasionally reported in a confusing manner". In paragraph 12, the Auditor General states:

What needs to be improved? The Agency should improve the clarity and measurability of objectives for its key programs.

Further on in the same paragraph we read:

Finally, the Agency should measure and report any negative impacts of its programs, as well as positive results.

Paragraph 15 states:

...in a significant number of cases, we found that one or more of these basic questions were not adequately addressed by the agency prior to approval.

In paragraph 14 there's a list of certain criteria that were to have been taken into account before projects were approved.

Let me give you another example, from paragraph 19. The Auditor General says "Objectives are not clear, measurable and results oriented.". Paragraph 24, he concludes by saying:

...we have raised concerns that program results reported by the agency has significant limitations and that the agency's assessment in monitoring of projects needs to be improved.

Mr. Spector, I would respectfully request that you not stay above the fray, but rather tell us what concrete steps you have taken since the tabling of the Auditor General's report in November 1995, given that we are talking about $354 million here.

[English]

Mr. Spector: Mr. Chairman, I thank you for your question. I'm perfectly willing to provide precise answers to precise questions.

As I noted, the Auditor General points out that we are breaking new ground with our evaluations, that no one else has ever done this. We are the pioneers. That's what the report says. Yes, we could have done better in our first five years. Of course we could have done better with our results, and we could have done better in measuring our results, but we are the pioneers. None of the other agencies did what we did - evaluated our programs.

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Now, specifically, we have a new business development program, and the evaluation program that we are developing for our next report to Parliament will reflect the criticisms the Auditor General has put forward. We will be developing intermediate measures such as productivity, sales, exports - such as he suggested. We will be specifying our results not only as measurable, but as results, not as effort.

I said I am not taking issue with the Auditor General's criticisms. I think they are very valid criticisms. We will be reflecting them as we go about measuring our programs, and I will evaluate my own success. And when the Auditor General does his next comprehensive audit, I hope he will say this is an agency that took seriously the critiques in the first report. I hope we will not only get credit the next time for developing the state of the art, for going beyond normal practice and for going beyond the state of the art - which we got credit for this time - but for doing an excellent job. That is my commitment, that is my pledge, and I take it very seriously.

We have been going about the work, and it's arduous work. It's difficult work because no one has ever done this before. No one has done it in a province, be it an Atlantic province, be it the western provinces where I worked before, or be it in Quebec. No one has ever done this kind of evaluation of programs. We are pioneering this work.

The work has been done in Europe to a much greater extent, and we're on a par with the work that's being done there. So we take this very seriously, and we're prepared to answer any precise questions that you have.

[Translation]

The Chairman: Thank you, Mr. Spector.

Mr. Rocheleau.

Mr. Rocheleau: My question deals with paragraph 16 of the Auditor General's remarks in which Mr. Desautels says, to summarize, that ACOA should not have got involved in certain projects that did not require its services, because the applicant had adequate resources, or in other projects that were too risky.

I would like to know how many projects of this type there were, or at least have a rough idea of the number. I would also like to know how this happened. I would like some further explanation, if possible.

I would also like to hear Mr. Spector's reaction to the comment by Mr. Desautels in paragraph 16.

Mr. Desautels: Mr. Chairman, I will ask Mr. O'Brien to answer Mr. Rocheleau's question.

[English]

Mr. O'Brien: Mr. Chairman, if you turn to paragraphs 18.75 and 18.76 of our report, we have some statistics in there that are based on our sample of action program projects. What we found was that in terms of concerns about possible effects on competitors, it appeared that with about 23% of the projects that we looked at - sorry, this is under the heading ``Incrementality'' - in terms of whether or not there was a need for government funding, in about 19% of the cases there were indications that the recipients had the resources available to carry out the project. These indications came from both the files and discussions with the project officers. We couldn't find another reason. There are other reasons, such as the need to get an appropriate return on investment, but we couldn't get another explanation as to why those funds were provided. Similarly, in terms of viability, with about 17% of the projects there were questions raised in our auditors' minds as to whether or not the future viability of an organization was adequately considered. So those are the statistics based upon the sample of projects that we looked at.

In terms of the reasons why those things occurred, it was partly because the procedures of the agency didn't require an in-depth investigation or in-depth review of smaller projects, and many of these were smaller projects. One of our concerns is that most of their projects are now going to be smaller projects. There is a need for those procedures to reflect that changing reality.

.1715

Mr. Spector: Just as a follow-up on the second part of your question, I should note that the agency has a success rate of over 90%. More than 90% of the projects it has supported are successful.

Secondly, it is true that for the smaller projects, given the resources we have available, we did not in the past do as rigorous an analysis as we did for the larger projects. Some of that will change now, because we're going to repayable contributions and the account manager will be monitoring the project throughout its life cycle. I think we'll have a much better idea on these criteria than we did in the past.

Mr. Harper: Mr. Spector, in 18.38 reference is made to several important reasons for differences between the information included in the survey and the information contained in the agency's files. It says in some cases the survey estimate included all jobs created by all agency-supported projects of a client and not just the direct jobs created by the project that was indeed the subject of the survey. How specifically are you going to address that confusion in the numbers there?

Mr. Spector: The simple answer is that under our new program we will be monitoring the projects throughout their life cycle, so we will not lose track of them from the inception to the completion. We will be with them through their life cycle. I think we'll have a much better count on the job performance.

I should mention as well that we discounted the figures based on this survey by 33% before we reported them to Parliament. We wanted to err on the side of conservatism.

But the short answer to your question is that we'll have a much better headcount of jobs as a result of monitoring the project throughout its life cycle.

Mr. Harper: Also in that same 18.38 is an example of one company in the survey that reported the creation of 42 jobs by a project that had received approval for $155,000 in agency assistance. It was designed to create one job. The same company had two other major projects included in the establishment of the company, with approved agency assistance of $1.3 million. Why is one company allowed to get money under three different umbrellas, if you like, so the figures tend to be skewed?

Mr. Spector: Companies can get more than one contribution. They apply on a project basis, not on a company basis.

Mr. Harper: But here in the survey we had a company reporting 42 jobs on a project that received $155,000. There's something terribly wrong there. If they can't get more than one approval, then we have a problem here in the reporting.

Mr. Spector: Yes, that's fair. I think that's why the Auditor General pointed that out. There's a problem in the reporting of that company. As I say, I think we will avoid many of those problems under our new repayable contributions program.

Mr. Harper: There was a newspaper article in The Telegraph-Journal on April 27. It had to do with the attempt to reveal the accuracy of the jobs that were created. I think at that time we were reporting 42,000 jobs. It was an attempt to ask ACOA to justify that number, to ask whether that was true or not. There was some reluctance to do that, even though we were dealing with taxpayers' dollars that went into these jobs. In the future, are you going to be more inclined to work with the people who are trying to get this information, to justify these numbers, or are you going to attempt to fudge the numbers, as may have been the case here with the number of firms versus the number of jobs?

.1720

Mr. Spector: If you refer to the judgment of the Federal Court, Madam Justice McGillis noted in her decision, after examining the survey data the newspaper was looking to have released under the access legislation, that the agency had satisfied the requirements of Parliament for accountability. In other words, she looked at the actual survey data and saw no substantial difference between the report we presented in the aggregate and the survey data.

Our interest in keeping the data confidential was we had promised confidentiality to our clients who would only participate in a survey if they were promised that kind of confidentiality. There are all kinds of data in there about the nature of the firm. Just like Statistics Canada has to promise confidentiality to Canadians for the census, we have to promise confidentiality, or they won't participate.

Madam Justice McGillis, who examined this data, concluded in her judgment that there was no public interest in its release. She ruled against the newspaper and against the information commissioner because we had already reported on our results and she found this adequate.

Mr. Harper: So you don't see a problem there and you don't see the need for ACOA to change its position, then?

Mr. Spector: Well, I suppose we could try to do these surveys without promising confidentiality and see what kind of take-up rate we get.

Mr. Harper: When these people come to us to borrow money, they aren't concerned about confidentiality, but when we are dealing with taxpayers' money, would you not think accountability would override that?

Mr. Spector: I agree with you. I think next time around we should not promise them confidentiality. I agree with you. That point is very well taken; it is taxpayers' money.

Mr. Harper: Thank you, Mr. Spector.

Thank you, Mr. Chairman.

[Translation]

The Chairman: Members of the Committee, there will be a vote in seven or eight minutes. I suggest that we suspend the meeting until after the vote. Would you kindly remain until we return, because we still have many questions we would like to ask you?

Can you stay, Mr. Spector?

Mr. Spector: Yes.

[English]

The Chairman: Agreed. We will continue after the vote.

[Translation]

Just before we suspend the meeting, following upon Mr. Harper's question about the 42,000 jobs and the Access to Information Act, I would like to ask Mr. Desautels whether he is familiar with these figures? Would you dispute these figures? Are they credible?

Mr. Desautels: Mr. Chairman, we have access to all this information under our own Act. So we have examined not only the studies that came up with the figure of 42,000, but also the files on which the calculation was based.

The Chairman: And you are satisfied? The figure is correct?

Mr. Desautels: We have noted deficiencies in the calculation of these figures. If you read our chapter carefully, you will see that we question some of the figures that were used to calculate the 42,000 jobs. These reservations must be taken into account when the figure of 42,000 is used.

The Chairman: Thank you. The Committee is adjourned until we return from the vote.

.1724

.1803

The Chairman: The meeting will resume.

[English]

Mr. Hubbard, five minutes.

Mr. Hubbard (Miramichi): Thank you.

I noticed in some of the briefing papers that ACOA's budget is in the vicinity of $350 million for the year 1995-96. It's my understanding you operate about seven different offices, with six in Atlantic Canada, including one in Moncton, which is the head office.

Another indication here is the cost of administration is about 6%. About $20 million is spent on personnel, without administrative costs. About 350 people are working for you, at a cost of about $60,000 per person working in those offices. Does that compare favourably, Mr. Spector, with other government agencies and government departments in terms of personnel and average cost per person employed in that agency?

Mr. Spector: I don't have any specific figures, but if I had to guess, I would think ACOA is a more expensive operation to operate.

Mr. Hubbard: As the president of ACOA, are you concerned with what I believe is a bit of an excessive cost per person working with ACOA?

Mr. Spector: I think the source of this expenditure is the decision that was taken by Parliament to run a very decentralized operation.

Mr. Hubbard: May I go a little bit further with this?

Mr. Spector: Could I just complete the answer?

Mr. Hubbard: Yes.

Mr. Spector: One could think of a number of options. Clearly if everything were located in Ottawa the organization would be cheaper to administer. If, instead of offices in each of the four provincial capitals, there were, say, one office for Nova Scotia and Prince Edward Island and another office for... One could think of a number of permutations and combinations that would be cheaper.

.1805

As you know, there was an attempt made, I think in the last Parliament, to close the Sydney office of Enterprise Cape Breton Corporation. I believe the legislation was defeated in the Senate. There are a number of possible configurations, but within the mandate and within the framework we have been given in our legislation, I'm not sure where one would close offices.

Mr. Hubbard: I'm not advocating the closing of offices.

I'll move on then to senior management. You have a new board of directors, appointed recently. How many times have they met since you became president?

Mr. Spector: You mean the advisory board?

Mr. Hubbard: Yes.

Mr. Spector: The advisory board has probably met four times since I've been president. It did not meet for the first five months or so of my presidency, but it has since been meeting on a monthly basis and is required by statute to meet four times a year.

Mr. Hubbard: One of the situations that I see in terms of Atlantic Canada, as a member here now, is that we need advocacy groups to look towards contracts in terms of the Government of Canada, in terms of business, in terms of CIDA, and so forth. What percentage of your overall effort is placed towards looking for contracts for companies from Atlantic Canada?

Mr. Spector: We have a significant effort here at our Ottawa office, and we also have those people in constant touch with the account managers in each of the regions, because it's a two-way process. What we are essentially doing is bringing to the attention of Atlantic business people the opportunities for contracts that exist in Ottawa, and the flow comes from the regions of suppliers in Atlantic Canada that are potential providers or bidders on those contracts. So it is a substantial effort, and it's one we're very proud of.

Mr. Hubbard: I have one final question, and it deals with something similar to what Mr. Byrne was asking before.

We have Industry Canada, we have the Federal Business Development Bank, we have so many different agencies. Many companies that are looking to get financing for their efforts are running from one place to another trying to uncover all these different possibilities. In fact, you see companies that are getting funding from private banks, from the Federal Business Development Bank, from ACOA, and probably some from their own company. It's a very difficult business.

In terms of the other agencies, how do you relate to them? Do you feel that you have a good relationship in terms of clients you deal with? Is there a good communication to find out how they're dealing with other banks and loaning agencies, or is there a problem in that area in Atlantic Canada?

Mr. Spector: We think there's been a vast improvement in the last couple of years as we move towards the business service centres, which provide one-stop shopping. A client can go into one of our business service centres and there will be someone there from Industry Canada, from the province, from the Business Development Bank. So there's one place that client goes, and we're very excited about this form of alternative service delivery.

Mr. Hubbard: We're working towards that in our own constituency and it is a good effort.

Thank you, Mr. Chairman.

The Chairman: You have five minutes, Mr. Grose.

Mr. Grose (Oshawa): Mr. Spector, let me start by saying that I'm appalled by the fact that you're here without any written presentation. I think you've been around here long enough to know the rules, written or unwritten, and I think rather than saving us time you've wasted our time. You could have replied to some of these points of the Auditor General. Then we would not have had to ask those questions. That having been said, we don't have a written presentation. I think that may have led to my first question.

Mr. Harper asked a question about the assumption that jobs would last for ten years. I wasn't satisfied with the answer he got at all. Also, in your oral presentation you mentioned five years.

Mr. Spector: I don't recall mentioning five years.

Mr. Grose: That's the problem with having no written presentation. I'm quite sure you did, but we'll let that go. It causes some confusion, though.

.1810

Let's revisit paragraph 16. Nineteen per cent of the projects seemed to have sufficient resources and still got government money. Seventeen percent had serious impediments to the viability of the projects.

I've been in the business on my own for 35 years. I have applied for funds, in some cases from federal agencies - incidentally, I've paid them all back - and I find this is worrisome. Why would one-fifth of your actions be taken with companies or groups that really didn't need the money? It raises a suspicion in my mind that I don't like.

We then go to paragraph 19, and here we're into objectives that are not clear, eligibility criteria that do not include key economic development concepts, and the absence of a clear assignment of responsibility for monitoring and reporting on the performance of projects. Again, it brings up that point: why are these people being considered and then why are they successful?

Mr. Spector: Mr. Chairman, first of all, let me just respond to the point about the written statement again. I just want to say that this is the first time I have appeared before a parliamentary committee where I have been told it is obligatory to have a written statement.

Mr. Grose: No, that is not what I said. Please don't put a fine legal point on it. Let's get on with business.

Mr. Spector: With respect, I think you said that I know the rules. So I'm saying that I took the message I received from the clerk at face value. There is no hidden agenda here. I think at the most it was an honest lack of communication. I applied in writing and said that I would not be presenting a statement. Had I received a response to that saying that a statement is obligatory, I would certainly have complied with the rules of this committee. Believe me, I'm not about not complying with the rules of a committee of Parliament.

The Chairman: Mrs. Barnes wants to add something.

Mrs. Barnes (London West): On a point of information, last week in preparation for this meeting - because there are new members on this committee - I requested the clerk to re-contact to see if it would be agreeable to get a presentation here. Was that done?

[Translation]

The Chairman: I will ask the Clerk, Mr. Fournier, to answer.

[English]

The Clerk of the Committee: Yes, Mrs. Barnes, first thing next day I called the Moncton office. The person I've been dealing with was absent but her replacement was told that the committee would very much appreciate a written statement, and that if there wasn't a written statement some members would probably not be very pleased. That was the comment.

Mrs. Barnes: Thank you.

The Chairman: We had a letter sent by our clerk on March 26.

[Translation]

This letter mentions, and I quote the third paragraph:

[English]

The Committee has requested that copies of all opening statements and other documents for the meeting be received by the Members of the Committee the week preceding the meeting.

Mr. Grose: Thank you, Mr. Chairman.

Mr. Spector, I don't believe you finished your answer.

Mr. Spector: No, I have not. This is just to say that both the request of last week and that letter were in the context of a very clear indication given to us at the outset that this was optional, and the response that I think you received was tabled in that context.

Mr. Grose: Let's not count the angels on the head of a pin. Let's get on with it.

Mr. Spector: Let me address your question. I think one of the most difficult judgments our people have to make is the test of incrementality. Obviously, 100% of applicants will come to our officers and say that they need the money and that the project will not go ahead if they don't receive the contribution from the government.

In the period of the audit, we were giving grants, so if there's anything greater than 100% it would have been greater than 100% of the applicants who would have been saying ``I need this money and it will not go ahead without this money.''

Many applications are rejected. There are many applicants who are sent away on the basis that the project would proceed even without the contribution. I'm sure that members of Parliament from time to time get complaints from their constituents that an application has been rejected on that basis. All I can say is that in 80% of the cases, according to this audit, our officers have made the right judgment.

.1815

We will try to do better. That's all I can say.

Mr. Grose: Well, I'm sorry, but you've left out the 17% that were not fully addressed for their eligibility. In any case, let's get on from there.

I'm not terribly satisfied with that answer. I'm also not at all satisfied with the answer you gave for return on money loaned. You said 100%. I consider that a frivolous answer. There isn't anyone in this world who loans money and gets all the loans back. I would like some idea of just what your success rate on recouping the money is.

Mr. Spector: The program of repayable contributions is too new to give you a success rate. They only went to this new approach in February 1995.

Mr. Grose: Fair answer.

I'm also a little disturbed by... Might I ask you a direct question? How long have you been chairing this agency?

Mr. Spector: Ten months now.

Mr. Grose: You're in a rather poor position, then, to be responsible for what happened beyond that time, so some of my questions are not entirely fair, I'll give you that. But I think you would have helped your cause if you had come with some submission even with that in it, that you'd been there only ten months and therefore you were deficient in knowledge of some parts of what had been done before you came here.

I think it's clear to you. I hope next time we meet - and I hope we do - you will keep that in mind and you will have a written presentation so we have something to start with. Actually, we're floundering around here, and it's mainly because of having no written presentation.

I'm satisfied, Mr. Chairman. Thank you.

The Chairman: Thank you, Mr. Grose.

[Translation]

Before leaving the floor to Mr. Paradis, and to continue into the same vein, I will just recall that you were appointed on the 4th of July, 1995, after having been Canadian ambassador to Israel. I can understand that after such a short amount of time, you are perhaps not in a position to know about everything that goes on.

Mr. LeBlanc can perhaps answer our specific questions. I thought about you during the vote earlier. You said that if we had specific questions, we could get specific answers.

In paragraph 12 of the report presented by the Auditor General, and I quote:

The Agency should improve the clarity and measurability of objectives for its key programs.

Concretely, how do you intend to proceed? Whom will you consult? What timeframe do you foresee? Six months? One year? Two years? This is a specific question.

[English]

Mr. Spector: We will be evaluating our programs in terms of jobs created, in terms of incomes, those kinds of results. I think those are clear, measurable results.

We will also be adopting the recommendation of the Auditor General to go to intermediate measures - sales, productivity, exports - of those applicants to whom we have provided assistance. We will measure those. We will measure the effect of the contributions we have given.

My sense is we will have completed this work, this evaluation framework, within the next two, three, four months. We have been hard at work at it. It is very difficult work, it is unprecedented work, but we will do it.

[Translation]

The Chairman: Mr. Paradis.

Mr. Paradis (Brome - Missisquoi): My question is also for Mr. Spector.

My questions refer to the period before Mr. Spector took the position, because he has only been there for 10 months. My questions refer to the fiscal year that ended on March 31, 1995.

.1820

In the Agency's expenditures there are sums or contributions that are granted to people who work in the tourist accommodation area.

I will list a few examples: Anchor Inn Motel, $166,000; Brier Island Logdge Limited, $101,000; Garden of the Gulf Court and Motel Inc., $103,000; Kaddy Motor Inns Limited in Fredericton, $178,000; and White Hills Resort Limited, $428,000. There might be others, but I will only mention those five large tourist establishments.

Does the Agency foresee, in its policies, continuing to contribute in the area of tourist facilities, that is, motels and hotels?

Mr. Spector: It depends on the province. I can talk about our present policy and about some parts of our previous policy.

For example,

[English]

in Prince Edward Island the fixed link is about to be completed. There is a consensus amongst ourselves and the province that the accommodations are not adequate to meet the expected increase in tourism as a result of the fixed link. So we have agreed with the province to provide assistance to tourist accommodations above the level of three stars. That's Prince Edward Island.

Mr. Paradis: That continues.

Mr. Spector: That continues. That has started.

In Nova Scotia we have never provided assistance in the metro Halifax area, as the sense was that it was adequately served, except during the G-7. There was a sense that some of those operations should refurbish themselves given the international media attention that the Prime Minister's initiative of the G-7 had attracted to Halifax.

New Brunswick stopped this several years ago and now provides what is called cluster accommodation, a niche market.

In Newfoundland we do not provide assistance in St. John's, but we do outside the metro area.

[Translation]

Mr. Paradis: I would like to make sure I understand you properly. You say that this could continue depending on the circumstances.

Mr. Spector: Depending on the circumstances in each province.

Mr. Paradis: That was my first question. I have two other questions that I will ask one after the other. You can perhaps answer them together afterwards.

In the Public Accounts there are expenditures, contributions made by the Agency during the fiscal year that I am referring to, and that were made to groups or companies whose address is not in the Maritime provinces.

I will quote some examples: the Rasakti Group Inc. of Drummondville; Seprachem Canada Limited of Windsor, Ontario, which received a half million dollars; and Wink Industries Ltd. in Montreal, which received 8.2 million dollars.

I'm not asking you for these details because you were not there at the time. However, I would like you to clarify these amounts, because important amounts were granted to companies whose addresses were not in the Maritime provinces, but rather in Montreal and in Ontario.

For my last question, I would like you to clarify certain points in the Public Accounts.

It says Folk of the Sea received $195.000, during the same period.

.1825

A sizeable sum, in the amount of roughly $2,678,000 was granted to John Cabot 1997, the corporation for the 500th anniversary, on the 31st of March 1995. I'd like to know if other amounts were disbursed and what happened to the funds if this corporation was actually wound up, as I was told.

These are specific questions. Still in the same vein, what about the Women's Enterprise Bureau, which received $913,000?

And finally, I would like to know who was your predecessor and where he is at present.

Mr. Spector: In response to your first question about companies with headquarters outside of Atlantic Canada, I would like to say that all of our contributions are made to companies that work in Atlantic Canada. This does not exclude outside companies that invest in the region. This is how the expenses that you have mentioned can be explained.

I will have to give you an answer in writing about Folk of the Sea because I know nothing of the matter.

With regards to the John Cabot corporation, this was a provincial corporation that the provincial government dropped, and we have recovered our funds. The agreement was cancelled by the province. We are nonetheless going to promote the celebrations and set aside other funds within the framework of the marketing programs I mentioned previously, such as the Atlantic Canada Tourism Partnership. The money was recovered from the province.

Mr. Paradis: Mr. Spector, can you confirm in writing to the Committee that the amount of $2.6 million dollars allocated to John Cabot was recovered in its entirety, and can you tell us if other amounts that might have been granted during the fiscal year were also recovered?

Mr. Spector: I don't know if the Women's Enterprise Bureau is the bureau located in Nova Scotia, at the Mount St. Vincent University. I don't know exactly...

Mr. Paradis: In Newfoundland.

Mr. Spector: In Newfoudland. Many of our programs focus on promoting entrepreneurship among women. For example our subsidies and programs at the Mount St. Vincent University Campus in Halifax encourage the mentorship of women who are interested in setting up their own companies. This is one of our programs. We must have programs like that in Newfoundland.

Mr. Paradis: Who was your predecessor and where is he now?

Mr. Spector: My predecessor was Ms Mary Gusella. She is currently one of the commissioners with the Public Service Commission.

Mr. Paradis: In conclusion, when will we receive your written answers?

Mr. Spector: In a week at the latest.

Mr. Paradis: Fine. Thank you.

[English]

The Chairman: Mr. Telegdi.

Mr. Telegdi (Waterloo): Mr. Spector, welcome to the committee.

.1830

You mentioned that you netted a 42,000-job net benefit to the region. Would I be correct in saying that this is to the Atlantic region?

Mr. Spector: Yes, that is correct.

Mr. Telegdi: Do we have any idea how many jobs might have been lost in the province of Ontario or Quebec or what have you? Is that included in the net?

Mr. Spector: Mr. Chairman, we are very careful not to engage in poaching, if that's what your question is directed at. We will not provide any contribution to a firm relocating existing activities from a province outside the region to the Atlantic region.

Mr. Telegdi: Let me put it another way. If somebody comes to you and says, hey, I can make gloves and I'm going to start up the business in the Atlantic, that business might compete with one in the province of Ontario. The person in Ontario doesn't have the benefit of a regional development grant, so that person can become uncompetitive because of the grants provided. I want to know if you measure that kind of job loss.

Mr. Spector: No, we don't. To be very frank, we interpret our mandate from Parliament as being to promote economic development in Atlantic Canada. It is a fact and it can't be contested, as you say, that we are providing a benefit to people who are willing to undertake activities in Atlantic Canada that don't exist, say, in southern Ontario. There's a similar but different program in northern Ontario, but not in southern Ontario. So I would not disagree with you.

Mr. Telegdi: I would like then to put it over to the Auditor General. Do you believe that these kinds of figures should be available for analysis? If we create a dozen jobs in the Atlantic and it means we lose a dozen jobs in Kitchener or any other place, the net job creation to Canada is zero. We have a situation where we have taken government moneys, put them in the Atlantic, and in all probability the business outgrows our business where people were paying taxes that partially went to deal with that situation. Do you feel it's important for Canada to have a handle on it?

Mr. Desautels: Mr. Chairman, in our report we did express concern about the measurement of some of the possible negative effects of some of the projects. We would welcome better estimation and better disclosure of these effects. Whether they are simply within the Atlantic region or whether they involve other provinces, I think the issue is the same. This is part of the concerns we have raised in our chapter.

Mr. Telegdi: I say this not to be mean to the Atlantic, but it seems to me that the strategy we as a federal government would want is to enhance the ability of Canadian firms to compete for new business from abroad, which would benefit the whole country through economic activity in all regions.

I look at my area. We have a lot of high-tech jobs and all sorts of job growth there. We also have a lot of folks who have found their jobs, such as in the tire industry at Uniroyal... They have lost thousands of jobs there. But these folks aren't ready to go into the high-tech economy. So it's important that we have jobs in our area that can be handled by various sectors of the population, because the last thing we want to do is to start seeing those people move around. I know there's a terrible problem in the Atlantic provinces, but I think it would be good for government policy just from the perspective of how can we make sure our programs enrich Canada as a whole and be on the plus mark.

.1835

Mrs. Barnes: I'm going to follow up a little. You used the term ``poaching'', and I think the Auditor General's report talks about the concept of displacement. I'm going to talk about your measurement of displacing similar industries within the same environment in Atlantic Canada. In other words, if you give x dollars to support a motel, is there ever a measurement of how the impact of those dollars to help one industry, with competitors not financed by ACOA money in the same region...? When you value your job creation, your net job creation may have very much displaced somebody who is using a different type of dollar, with a different risk factor involved and a different application. I want to know how you're going to improve and address that situation.

Mr. Spector: I think we would agree completely with your point. The first observation is that we do not provide any assistance to the retail sector, which is where this problem is most likely to occur within the Atlantic region. Secondly, we will evaluate the displacement effect of any application we receive, again within the region. We have turned down numerous applications that would have the effect of displacing, as opposed to, as the previous member of Parliament indicated, focusing on creating new wealth and exports, etc.

Mrs. Barnes: Obviously this has to be done through some very fair and equitable process within the region. Do you have guidelines, or could you provide us with the guidelines?

Mr. Spector: Yes, we can provide you with those. We'll provide those in writing in a week.

Mrs. Barnes: Thank you.

I've talked to some of my colleagues who live in Atlantic Canada, and there seems to be a concern that in the past the agency may have given applicants money - I think we've touched on this today - where alternate sources of funding could have been found. I want to know what you are going to do in your capacity to prevent this from happening or what procedures or guidelines you would put in place even to ask the simple question of whether you have alternate sources of funding and what steps you have taken to exhaust those, or whether you consider that even a worthwhile objective.

Mr. Spector: Yes, we do ask that question. Moreover, we ask the applicant to sign a written declaration to that effect. But I think the most important change is the change announced by the government in February 1995, which is outside the scope of this audit, moving to repayable contributions as opposed to grants. I think that puts a much greater discipline on the applicant than might have existed in the past.

Mrs. Barnes: My understanding - and I would like to be corrected if I'm wrong here - is that applicants are asked to fill out a form, as you've stated, saying they require financial assistance, but there's no secondary question that says ``and have you exhausted'' or ``what other sources have you gone to?''

Mr. Spector: The form they're required to sign says the project would not go ahead without this assistance.

Mrs. Barnes: And is there follow-up, checking on that?

Mr. Spector: Yes, that's the kind of thing... And there'll be more of that as we're into the repayability, because we'll be monitoring the projects throughout the life cycle.

Mrs. Barnes: Some of these projects, after they've received their funding and the funding runs out, either at the expiration of term or for other reasons, do not survive. What type of evaluation process are you going to put in at the front end to make sure there's a good sustainability prospectus at the rear end of the project?

Mr. Spector: One of our criteria is viability of the enterprise. Our people do a lot of due diligence, which I think is shown by the fact that 90% of our projects are successful.

Mrs. Barnes: I understand tourism obviously is of great economic benefit to Atlantic Canada. Could you pinpoint any activities ACOA might be involved in to extend the tourism season into the shoulders, considering the dollars you've put into things that support tourism?

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Mr. Spector: Yes. One of the two top priorities is shoulder season; the other one is the question of attractions in the area of tourism. I mentioned earlier, but I guess you were in the House on other business -

Mrs. Barnes: No, I was at a briefing. Sorry.

Mr. Spector: Oh, okay.

I mentioned that one of the things we're proudest of is we have brought the four Atlantic provinces and the industry to a common table under the aegis of the Atlantic Canada Tourism Partnership, and we now have joint marketing. We've stopped the competition between and among provinces and we're now marketing ourselves as a region.

On the specific example of a shoulder season, one of the most exciting initiatives is in New Brunswick, actually, where they're developing a ski-doo market to foster winter tourism. We're working heavily on skiing and golf. This is very controversial. A lot of people think we shouldn't be in golf, but as has been shown on Prince Edward Island, golf has a tremendous impact on attracting Japanese tourists.

So our strategy is very much in tune with the concept of extending the shoulder season.

The Chairman: Mr. Hubbard.

Mr. Hubbard: Mr. Spector, you have a very important job to do, and we're certainly looking for good work with your efforts as the leader of ACOA.

We in Atlantic Canada think in terms of moneys being spent all across this country by Industry Canada, which is not very well represented in Atlantic Canada. We see it as a very important factor. I've sat on boards of directors that have had assistance from ACOA. It's not always bottom-line assistance that companies get. More importantly, it's money that encourages a company to be able to invest and to proceed with the project.

Overall, in terms of entrepreneurship, you're on the right road of trying to get more people into Atlantic Canada. We've sat back for generations and let others, whether it be the factories in Ontario or whatever, produce the goods we need in Atlantic Canada. We have to develop an industry there that is generated and supported by its own people and also encouraged by organizations like ACOA.

I don't want you leaving this committee feeling you've been put down by it. I certainly would say, as an Atlantic Canadian, we see ACOA as very important. We've seen it being cleaned up in the last few years, after what happened back in the 1980s, and hopefully we'll see good results from your work in the years ahead.

Thank you.

[Translation]

The Chairman: Before allowing the Auditor General to conclude, I would like to ask you, on behalf of all Canadians who have given you 350 million dollars of their taxes to manage every year, if you are ready to commit yourself to providing in writing, as soon as possible - we could agree immediately on a deadline - concrete answers, plans, procedures, as well as the names and responsibilities of the people who will respond to the 25 points raised in the 25 paragraphs and to the points arising from today's presentation.

Are you ready to commit to providing this information as soon as possible?

I would like to propose a deadline that would be useful for us, that is to say before the recess in June. We could study the information over the summer. Is this possible?

Even though we have not discussed this and I do not want to be seen as an autocratic leader imposing things, will my colleagues allow me to make a second request? Members of the Committee, if you have any objections please let me know.

If necessary, would you be willing to come back before our committee after we have studied your answers over the course of this summer?

Mr. Spector: My answer to both your questions is yes, certainly.

The Chairman: Perfect.

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Mr. Spector: It will be a pleasure. I will include comments in response to the Auditor General's praise of us in his report. To a certain extent, we are the representatives of other agencies that he was referring to in this chapter and in Chapter 17. As the Auditor General noticed, the Agency follows through on evaluation of its programs in much greater detail than other agencies. We are therefore quite ready to provide written answers as soon as possible and it is with pleasure that I welcome your invitation to reappear in front of this Committee.

The Chairman: Mr. Spector, I ask that you don't put words in the Auditor General's mouth. I did not hear those comments. You are speaking on behalf of the Federal Office of Regional Development and the Department of Western Economic Diversification.

If the Standing Committee on Public Accounts asked you to appear before it - this should perhaps be part of your training as new President - , it was because it had decided to study Chapter 18 of the Auditor General's Report. You are not here as a model agency. These hearings do not replace those that we may decide to hold. We have decision-making power. We can decide to go further than we did in the West. Don't kid yourself. This is not really what I wanted to say to you, but don't presume anything. If this is the case, the Auditor General will tell us so.

In life, we always want to improve things. We do not want to shower praise on you. Our goal is to improve things, to improve the management of the $354 million that you have in your hands.

Mr. Spector: I completely agree, even though I did note, and I may be repeating myself, that the Auditor General, who is here at my side, praised us. This does not mean that we don't have improvements to make; we take his recommendations very seriously. Nonetheless, he did say that the Agency's reporting had gone much further than is the practice with other agencies.

The Chairman: This is found in your constituant legislation. You are obliged to do so.

Mr. Spector: It is a fact.

The Chairman: I hope that you are not boasting of doing what you have to do under the Act.

Mr. Spector: But it is a fact.

The Chairman: Mr. Spector, we expect to receive specific points regarding the clarity of the goals of these key programs in order to make them more measurable. We would like to see the praise that the Auditor General is showering on you.

Mr. Spector: You will, but you will also receive a response to the Auditor General's findings on the efforts we have made in this area.

The Chairman: With that, the Auditor General of Canada has the floor.

[English]

Mr. Desautels: Mr. Chairman, I'll try to be quite brief. Following that last exchange I would just like to say that we have tried to be quite fair in our report. If something has been done well, we tend to say so. If there are things that should be done better, we have said that as well.

I'd just like to make sure that when it comes to the problems we've raised, particularly those that have been noted by a number of members on the overall estimation of the number of jobs created over a period of time, the measuring problems we have raised are not trivial. I think they are important and I think they have to be addressed quite seriously.

Having said that, I would like to remind the committee that we normally go back and follow up on what we've reported within two years, so we certainly do intend to go back and visit ACOA. At that point we would expect to see first of all that the project management issues we've raised have been addressed, particularly through the new business development program. We would also expect, more specifically, to see the results measurement issues we have raised to have been addressed in the new plan Mr. Spector has been talking about. You can count on us to go back and report back to the committee at some point in the future.

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[Translation]

The Chairman: But our request is not incompatible with... We know you will be going back to it.

Mr. Desautels: This will make our job easier, because it will effectively speed things up all the more.

The Chairman: Fine. I'd like to thank the witnesses for their presentation.

The Committee stands adjourned.

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