[Recorded by Electronic Apparatus]
Thursday, February 20, 1997
.1117 
[Translation]
The Chairman: Order!
Pursuant to Standing Order 108(3)(d), the Standing Committee on Public Accounts is meeting for consideration of chapter 26 of the November 1996 report of the Auditor General on the Canada Infrastructure Works Program - Lessons Learned.
Before asking the witnesses to introduce themselves, I would like to apologize, on behalf of the members of the committee who were supposed to be busy with something else this morning, for the problems we had getting a quorum but I think everything's back to normal now.
Without further ado, I would ask the witnesses to introduce themselves before making their presentations. Mr. Desautels, we'll ask you to introduce the people with you before starting your presentation.
Mr. L. Denis Desautels (Auditor General of Canada): Mr. Chairman, I have with me today Ms Maria Barrados and Mr. Henno Moenting who were both in charge of the chapter we're discussing this morning.
[English]
The Chairman: Mr. Winberg -
[Translation]
Mr. Paul Thibault (Executive Director, Infrastructure Works, Secretariat of the Treasury Board of Canada): Allow me to introduce my group, Mr. Chairman. I'm Paul Thibault and I'm the Assistant Secretary for Government Operations and the Executive Director for the Infrastructure Works Program at Treasury Board.
With me is Mr. Alan Winberg the Assistant Secretary in charge of Audit, Mr. Guy MacKenzie, the Assistant Deputy Minister from the Federal Office of Regional Development (Quebec) andMr. Christian Fortin also from FORD(Q).
The Chairman: Thank you.
Mr. Desautels, you have the floor for your presentation.
Mr. Desautels: Mr. Chairman, thank you for this opportunity to present the results of our audit of the Canada Infrastructure Works Program, as reported in chapter 26 of the November 1996 report.
As indicated by the title of the chapter, we took a lessons learned approach to report our findings. Your review of these lessons learned is timely in view of the government's decision to extend the program as well as increasingly to deliver programs through partnership arrangements.
Although our recommendations are reported as lessons learned, our work followed standard audit procedures. We agreed on the audit criteria with program managers, reviewed our findings with them, reached agreement on the facts as presented in the audit report, identified any outstanding differences of view, and published the government's response to the findings. At the conclusion of the audit, Mr. Harder, Secretary of the Treasury Board, wrote to Ms Barrados indicating his satisfaction with the outcome of the process.
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The Canada Infrastructure Works Program was introduced in 1994 as a temporary initiative, with a planned duration of five years. A series of federal-provincial agreements provides the framework for its implementation and assigns much of the authority for the day-to-day delivery to the provinces.
This cost of the program is shared. The federal government contributed approximately$2 billion in program funds, with roughly a further $4 billion provided by provincial governments and municipalities along with other local sponsors.
[English]
Our audit examined the extent to which the design and implementation of the program are consistent with the achievement of its objectives and provide for appropriate control and accountability with respect to federal expenditures involved. We also examined the government's subsequent review of the program to determine whether valid and reliable information on program results has been produced.
We found a number of strengths in the program approach. The audit showed that the approach of using federal-provincial agreements as a framework for program delivery is sound and produces many benefits. There was striking evidence of benefits resulting from the principle of allocating responsibilities for program implementation between governments, based on their relative expertise.
At the working level, federal-provincial relations were consistently good and smooth-running. The partnership approach resulted in more efficient program administration and simplified program data systems.
In addition, the federal-provincial agreements were put in place, program frameworks developed, guidelines established, and the program made operational within a period of only eight weeks following its announcement. This was an important achievement, particularly in view of the need for the program to operate in a counter-cyclical manner and respond quickly to prevailing unemployment conditions.
There was a strong and clear commitment to evaluating the program. The government completed the assessment of results achieved in the late summer of 1996. This provided timely feedback for policy consideration. The experience demonstrates what can be achieved when results measurement is accorded a high priority.
In addition to the program's strengths, the audit identified a number of areas where we believe improvements are possible for future initiatives of this type. I would like to go over these briefly.
While the approach to program design was generally effective, we found the nature and the extent of the federal responsibility for assessing program proposals were not sufficiently clear.
The funding arrangements were contributions. This means payments are conditional on performance or achievement and are subject to audit. Under these arrangements, federal managers need information to support decisions and are accountable for them.
We found the projects proposed were often approved without sufficient supporting information or analysis. Further, there was little or no performance reporting and low priority was given to compliance audit in most cases.
[Translation]
Your committee might wish to explore whether contribution arrangements are the most appropriate approach to these types of partnership agreements.
The intended coverage of the program was not clearly identified and project selection criteria were vague. This raises questions about the program's targeting; for example, the intended coverage of what constituted ``infrastructure'' was not fully clear and in some situations was interpreted to include private sector activities as well as those in the public sector.
Further, under most federal-provincial agreements, project selection criteria designed to ensure that the program would encourage additional investment in local infrastructure proved not to be sufficiently rigorous. The government's own evaluation of the program raises concerns about how this program requirement was implemented. It is our assessment that the program supported some investments that would have occurred anyway.
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Of the total program expenditures during the first year of the program's operation, we estimate that around 35% failed to add to the overall levels of municipal investment, as intended. Instead, such expenditures simply replaced investment activity. When this occurs, the program's employment creation effect is also reduced. For this reason, we believe that the figure of 101,000 short-term jobs reported by the government overestimates the program's short-term employment creation effects. The government's official response to our findings, published as part of our chapter, indicates that it came to roughly the same conclusion regarding the extent of the shortfall in additional investment.
[English]
We also found that environmental assessments of projects were often based on inadequate information. In a number of cases, projects have been approved and work begun before the necessary environmental assessments were completed.
I've emphasized areas where we identified problems because they are useful lessons that can be applied to improve the cost-effectiveness of this and similar programs, as well as to improve accountability to Parliament. I would encourage the committee to explore how these and other lessons that are identified in our report will be dealt with in the extension of the program that has been announced by the government.
The key lessons, which we summarize at the end of the chapter, deal with, first, ensuring clear delineation of roles and responsibilities, a clear statement of intended program coverage, and well-defined program criteria consistent with the achievement of program objectives; second, ensuring required operational information is available on a timely basis; and finally, strengthening the measurement and evaluation of key impacts.
[Translation]
Thank you, Mr. Chairman. We'll be happy to answer your questions.
The Chairman:
Mr. Thibault, you have the floor.
Mr. Thibault: Mr. Chairman, I have been very recently appointed the new Executive Director of the Canada Infrastructure Works Program. I am pleased to respond to your invitation as witness to your committee on the review of the Auditor General's report tabled last November.
As a relative newcomer to the Infrastructure Program, I read with interest both the Infrastructure Works Program evaluation report and the Office of the Auditor General's work. I have also been directly involved with the negotiation of the program top-up for 1997-98 since my appointment. The provinces and municipalities are very positive about continuing the success of the current program.
However, I must say that I noticed some discrepancy between the text of chapter 26 which, in total, is not unlike the positive perspective on the program that I am hearing from community and provincial leaders, and the highlights and Auditor General's press release, which both concentrate almost entirely on the negative.
The government has already noted, in the responses printed with chapter 26, that we accept the overall conclusions in the Auditor General's chapter about the appropriateness and effectiveness of the federal-provincial agreements as the cornerstone of this type of partnership.
It is essential that such agreements and the rest of the program delivery arrangement recognize and make use of the relative expertise of each level of government. The government notes that the approach led to a relatively trouble-free and successful program, in large part because of the high level of co-operation with provincial and municipal governments.
[English]
I believe the chapter of the Auditor General reporting to Parliament could have placed more emphasis on three significant points.
First, the Canada Infrastructure Works Program is a success. Program design and implementation arrangements among the three partners play key roles in achieving that success. The program evaluation provided substantial review of crucial aspects of the program, including how well the program is meeting its primary objectives, and is being used in active policy decisions about a renewal of the program.
The audit and reporting regime, in a shared-cost program with primary delivery responsibility in the hands of the municipalities, could not be as intense as the Auditor General might have desired in other programs that are entirely federally funded. The audit regime was entirely appropriate for this program, which was low-risk by dint of its very public nature.
Audits were put in place in a timely manner, even though these were not necessarily defined in agreements. Municipalities and provinces undertook proper due diligence relative to the shared partnership program design and implementation responsibilities of CIWP.
.1130
While parts of the Auditor General's chapter generally acknowledge the value of the CIWP approach, it appears to me that the ``Main Points'' section and his November press release certainly downplay the positive aspects and real success of the model.
Mr. Bryon Wilfert, president of the Federation of Canadian Municipalities, commented in November that it should be remembered ``that 12,000 projects have created jobs and assets of lasting value in communities across Canada''.
[Translation]
If you don't mind my doing so, I shall now address the matter of partnership. Program design and the review of the program took account of the existing expertise and competencies. Program implementation focused on local identification of needs, community priority setting and local municipal decision-making about project selection.
It would have been duplicative and not cost effective, as well as highly contentious, for the federal government to insist on a controlled regime which provinces and municipalities would have seen as unnecessary second-guessing or a lack of confidence in the capabilities of those partners.
The management committees of the Canada Infrastructure Works Program in each province approved projects that led to the construction of public goods or provided facilities for services openly available to the public. All project selection decisions were subject to local public scrutiny and those choices were subject to oversight by both the provinces and the federal government. These facts of program delivery led to an appropriate controlled regime relative to the risk assessment. There is no evidence at all of any misuse of funds and no evidence of a general pattern of poor project selection to indicate that sufficient safeguards of public funds were not in place. The results and impacts of program spending are clearly visible.
Quebec was able to establish a more highly structured controlled regime because of existing reporting arrangements between the provincial ministry and its client municipalities. It was not appropriate for the federal government to insist on imposing a similar regime on other provincial partners if they did not already have such arrangements in place.
[English]
Mr. Chairman, the successful review and evaluation of the CIWP is a key result of the government's new review policy. The government committed to undertake a comprehensive program evaluation of the CIWP. The government announced this review in the 1994 budget and quickly followed up with your committee. We tabled a review framework with you and with the Office of the Auditor General. The review framework your committee received last year gave members a clear understanding of how we would undertake audit, evaluation, and program monitoring.
[Translation]
We developed an evaluation plan based on this review framework in close consultation with the Office of the Auditor General. We shared with them preliminary results of case studies and economic analyses and asked for their opinion and critique to improve the review. We shared with the Office of the Auditor General our case studies, as the municipalities and provinces completed them, to demonstrate how the evaluation was being implemented. We provided them with results from the other elements of the evaluation, notably the econometric study, as they became available. We believe that the OAG supported our approach and the design of the evaluation given our ongoing dialogue and all of the advance material they had been receiving since January and February of 1996.
The program evaluation takes into account qualitative and quantitative information through multiple lines of investigation and provides a balanced view of the strengths and weaknesses of the program. The fact that the evaluation report was delivered in a timely manner to both the federal government and to all our partner provincial governments has made it particularly useful in the consideration of future policy development.
It demonstrates the government's resolve to undertake important evaluations of its programming, to share the results with all the partners and interested stakeholders and to apply the results of the review in policy decision-making.
[English]
In early September of last year, Dr. Richard Soberman, a professor of engineering at the University of Toronto, submitted his evaluation report, ``Taking Stock'', to the Minister responsible for Infrastructure. Dr. Soberman reported frankly on strengths and weaknesses in program design and delivery and made recommendations for improvements. Minister Massé then presented this program evaluation to you in advance of any other release or distribution. The Office of the Auditor General reviewed and commented on that report in its November tabling.
About program impacts, Dr. Soberman's ``Taking Stock'' report says that CIWP funds were in the main wisely spent, and the condition of municipal infrastructure was appreciably improved. He notes that jobs were created for persons who were largely unemployed and that there were positive, albeit modest, improvements in the economy. The program made a contribution to the quality of urban life.
While the evaluation report is largely positive, it also provided the federal government and its partners some advice about potentially negative policy implications in the event a similar program was considered in the future. It was a balanced and frank evaluation that reported on the achievement of the main objectives and did so in time to be useful.
.1135
To aid in their own review of program impacts and results, we quickly shared Dr. Soberman's report with our provincial partners and with the Federation of Canadian Municipalities. They all had positive responses to the results of the evaluation. The findings and recommendations in the evaluation report are clearly influencing discussion concerning program renewal.
[Translation]
Further, Mr. Chairman, I note in the already printed response that the government agrees with the conclusion that the requirement for a compliance audit plan should have been included in each of the agreements at the outset. Audit plans should be designed to allow for early identification of any issues for timely management action. It is agreed that audit activities should begin quickly, especially in programs with a short timeframe.
However, the professionalism and goodwill of our partners has nevertheless resulted in excellent audit coverage for the current Canada Infrastructure Works Program. We will be negotiating agreements on such audit planning for the extended program.
The government is pleased with the program management model developed for CIWP. We intend to promote it as a model for future federal-provincial arrangements, especially where other third parties such as municipalities, colleges and universities or private sector interests are involved in sharing costs and delivering services to the public.
We also believe that we have produced an exemplary review in the form a program evaluation which takes into account quantitative and qualitative information through multiple lines of investigation. We believe that elements of our evaluation, notably economic analysis and employment estimates, demonstrate substantial improvements in the field of program evaluation. We also believe that the report was delivered in a timely manner to both the federal and provincial governments to support future policy decisions.
Mr. Chairman, I will be pleased to answer questions from the members on any questions about the program.
The Chairman: Thank you, Mr. Thibault. I will now give the floor to Mr. MacKenzie.
Mr. Guy MacKenzie (Assistant Deputy Minister, Operations, Federal Office of Regional Development (Quebec)): Thank you, Mr. Chairman.
The Quebec part was destined for all 1,433 Quebec municipalities. The federal contribution was $526.7 million, the municipalities and Province of Quebec sharing the remaining two-thirds for a total generated investment of $1.6 billion.
Respect for the government's key themes was at the centre of concern. These themes were: jobs and growth; innovation and technology; partnership; and investment in the future. Ninety-eight point three percent of all municipalities participated, or 1,408 of 1,433; 4,000 projects were proposed and 2,655 projects were approved by the Agreement Management Committee, which was a joint committee. Eighty percent of projects dealt with the rehabilitation of roads, aqueducts, sewers and bridges.
[English]
In the province of Quebec, in agreement with our provincial colleagues, we were working with four components. Component one was restoration, expansion, and construction of infrastructure in municipalities of 5,000 or more inhabitants. Component two was restoration, expansion, and construction of infrastructure in municipalities of fewer than 5,000 inhabitants. Eligible infrastructure included the water supply system, sewers, transportation infrastructure, and municipal and community facilities.
[Translation]
Part III dealt with the matter of experimenting with new technologies. The eligible work was experimental work in the area of new techniques, methods or materials for rehabilitation or diagnostic of infrastructure; 210 projects were submitted, 38 municipalities were involved,97 projects were approved and total financial help was $23 million.
As for Part IV, major projects with urban impact, eligible works included major structural projects that were a priority for municipalities and governments; 37 projects were approved.
From Parts I to IV, municipal equipment accounted for 613 projects; bridges, viaducts and tunnels, 48 projects; roads, streets and sidewalks, 1,185 projects; purification of drinking water,521 projects; and disposal of waste water, 288 projects.
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Part III was unique to Quebec. The objective was to allow municipalities to undertake infrastructure rehabilitation or diagnostic works while experimenting with new technologies, methods or materials with a view to improving practices, decreasing rehabilitation costs, favouring technological transfer and marketing new products or techniques. This part very fully met the total objectives of the program which were: creation of technological jobs; innovative project; implementation in partnership with universities or research centres and investment in the future.
In Part III, we had a total of 97 projects: treatment processes, 26 projects; testing and diagnostics, 26 projects; rehabilitation techniques, 45 projects.
The Canada-Quebec management approach, as there is the matter of lessons learned, was close co-operation between the management teams at both levels of government, daily contact between federal and provincial officials, efficacious exchange of information, respect of roles and responsibilities based on jurisdictions and knowledge of each level, and a management committee made up of two representatives of each government. There was a very small number of people participating. On the federal side, there were only five and 24 on the provincial side.
[English]
Innovative aspects of the approach in the Quebec-Canada agreement - minimum capital expenditure level. The department of municipal affairs has calculated the minimum capital expenditure level for every municipality in Quebec. This figure was determined by taking the lowest result from the following three calculations: average capital expenditures for engineering in 1991 and 1992; and average for municipalities of comparable size. If you take the two years and divide by two, the result is a fixed limit of $125 per inhabitant for municipalities of over 10,000 inhabitants. This limit corresponds to the average capital expenditure for engineering.
Municipalities can use a program for work that constitutes an additional investment beyond the limit - the notion of incrementality. Financial assistance should allow for work that could not otherwise have been carried out and speed up its completion in order to ensure job creation.
[Translation]
The objective of the audit program prior to payment of contributions was to attain a satisfactory degree of certainty to the effect that the financial aid accomplished its intended goal. The Department of Municipal Affairs conducted field audits. In some cases, for municipalities that presented a risk, based on the history of the Department of Municipal Affairs programs, for projects where the contribution was more than $1 million, for all projects under Parts III and IV or for certain projects chosen by sampling, there was a field audit.
The tool used was a uniform worksheet which included all elements subject to audit according to the regulations and standards stemming from the Canada-Quebec agreement and the municipal legislation, for example the level of investment, day work and conformity of costs claimed.
Projects under Parts I and II that posed no risk or where there was no withholding sampling were summarily examined by the Department of Municipal Affairs for each partial claim. This program was mentioned by the Auditor General on pages 23 to 26.
[English]
In order to be successful with the said evaluation or audit, we prepared a fact sheet for every project, which contained the following information: project description; rating in terms of program criteria; eligible work; ineligible work; project costs; project funding; schedule; short- and long-term job creation; special conditions; compliance of projects with the agreement; and finally, the signature of the two co-chairs.
[Translation]
At FORD(Q), we implemented a management information system 100% compatible with Quebec's. We basically used the same software as the province and adapted it to our internal needs.
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FORD(Q) thus had available all of the information useful to Quebec to conduct its analysis. Thus, without any duplication whatsoever, we harmonized both systems, which allowed us to work with five employees on the federal side and 24 on the provincial side.
The efficacy of the procedure implemented rapidly allowed us to make an announcement on December 21, 1993 and to have a signed agreement on February 7, 1994. Management costs only represented 0.25% of the total amount of work, which is definitely lower than what is found in some other cases.
In conclusion, I'd simply like to quote the Auditor General's report concerning the audit system set up for the Canada-Quebec agreement:
- The program is implemented with a clearly set-out framework of responsibilities and program
controls. This framework served as a basis for the federal-provincial agreement partners to
discharge their obligations.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. MacKenzie.
I believe Ms Barrados wanted to add a few comments.
[English]
Ms Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chairman, I'd like to add a few comments about the findings from our audit relating to control regimes relative to audit risk.
We agree with the government's final position as laid out in the opening statement, but our assessment of risk across the country and the need for timely audit is really different. Our audit does not support the judgment of low risk with respect to financial management and control of these program expenditures.
As we stated in the audit report, we found questions related to things like eligibility of salaries of local proponents and employees as part of project costs. In about 10% of our sample in two provinces costs of salaries were claimed when they were not clearly eligible. Some of the audits that had been done raised questions of poor cash management involving payments in advance of approximately $2.4 million, as reported in the audit report.
We also note that there were problems in control over project selection. These findings we draw from the sample of projects we examined during the audit. Of the 200 cases we examined, more than half referred to bringing infrastructure up to community standards, but there's no definition or explanation of what this really is. Similarly, a third cited enhancing economic competitiveness when it is not clear what that means.
In addition, some identified a number of issues related to concerns that are a consequence of poor project selection. Some of these have been discussed. Just to highlight them, there are questions of environmental issues where projects were approved and begun before an environmental assessment was completed. There are questions related to provision of public service. We identified, in our sample of 200 projects, $30 million in federal funds committed to four projects that subsidize private sector and quasi-private sector activities. This is in addition to the issue of incrementality.
Finally, we found that audits were not put in place in a timely manner in most cases, with the exception of Quebec. When we finished our audit in the summer of 1996, audits of contribution recipients in several provinces had not even started.
Thank you, Mr. Chairman.
[Translation]
The Chairman: Thank you, Ms Barrados.
We'll now go to Mr. Rocheleau.
Mr. Rocheleau (Trois-Rivières): I thank the witnesses for their presentations.
In my opinion, two things clearly flow from what was written and said in this report on infrastructure. First, of the $415 million in expenditures, $135 million would have been spent in any case according to the Auditor General's estimate. Secondly, we know that on the Quebec government side, there were special operations vis-à-vis the municipalities and the federal government and the Quebec government required that Quebec municipalities spend a minimum amount before putting any request for co-operation within the context of the federal infrastructure program.
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I'd like to know who took the initiative of forcing Quebec municipalities to make a minimum investment before putting in a request.
Mr. MacKenzie: Quite honestly, Mr. Rocheleau, I wasn't there at the time but my predecessor negotiated that with the provincial side. I don't think it was imposed. I think it was agreed upon by both parties.
Mr. Rocheleau: Did the idea come from Ottawa or Quebec City?
Mr. MacKenzie: Quebec City, sir.
Mr. Rocheleau: As this was imposed upon Quebec municipalities but not upon other municipalities in the rest of Canada, are we to understand that Quebec public funds, through the federal infrastructure program, served to fund municipal work that would have been done anyway by the City of Moncton, the City of Banff or even Toronto, while the reverse was not true because of what Quebec imposed on its own municipalities?
M. Thibault: I'd like to give a general answer to that question and ask one of my colleagues, Mr. Chairman, if you don't mind, to give a more detailed answer.
I wasn't there either, but the negotiations on how the program would apply, how the sharing out would be done, how the municipalities would participate in the sharing of the different projects were undertaken with the province. It is the province that ultimately decided how it would act vis-à-vis its municipalities and what kind of projects would be suggested and then go to the management committee. The project was submitted to the management committee at the final stage.
So, there are different regimes depending on the negotiations with each province.
I could ask one of my colleagues to give you more details, if you don't mind.
Mr. Mokhtar, please.
Mr. Hani Mokhtar (Senior Advisor, Policy, Infrastructure Works, Secretariat of the Treasury Board): The conditions of all agreements were exactly the same concerning supplementary expenditures or additional investments required.
Quebec had set up a system to calculate the minimum level to ensure that the expenditure would be supplementary, and this does not mean that this was not the case in all the other provinces. It's simply that a calculation system was established at the outset for this program. All the other municipalities had the same requirements in the sense that they had to certify that the expenditure would be supplementary and that the projects submitted would not have been undertaken had the infrastructure program not existed.
If you look at the real expenditures during the two or three years of the program, you'll see there were supplementary expenditures all across Canada. Except that in the case of Quebec, there was a calculation system. In other provinces, there were other ways of establishing that the investments were supplementary.
Mr. Rocheleau: My next question will be for the Auditor General.
Mr. Desautels, if the gentleman is right, how did you come to the conclusion that 35% of expenditures under this infrastructure program would have happened anyway? The gentleman states that these were expenditures supplementary to what the municipalities had already provided for in general. How did you arrive at this conclusion?
Mr. Desautels: Mr. Chairman, the definition of ``supplementary expenditure'' that we just heard was applied project by project. So it's a far narrower definition than we or other observers used.
The definition says that a given project would perhaps not have been undertaken without the infrastructure program but that does not mean that this project isn't bumping aside another project that had perhaps been provided for already. So there's a bumping effect that's not necessarily captured by this kind of definition.
We used a more macroeconomic approach which is a lot like the one established in Quebec: what was the level of expenditure before the program and what were the expenditures after the implementation of the program?
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It's perhaps more complicated or technical than that, but to make things simple, I would say that we use a macroeconomic approach rather than a definition on a project-by-project basis.
Mr. Rocheleau: When I say that because of the procedure used by both parties, Quebeckers were made to fund work that would have been undertaken in any case by other Canadian municipalities, is there any basis for this or is it totally unfounded?
Mr. Desautels: Personally, I wouldn't go so far as you do. We examined the program province by province and, in some respects, things were done better in some provinces and not as well in others. I don't think that, at the end of the day, it could be said that one province was subsidizing another.
Mr. Rocheleau: Even if Quebec imposed minimum expenditures on its municipalities while the other provinces didn't?
Mr. Desautels: Yes, but at the outset, the funds were allocated province by province based on a definite formula. In each province, the structure set up was to ensure the best use of those funds. The criterion that these should be supplementary expenditures is one factor amongst many. I don't think it could be said that if one province managed its program better on some given point that this served to subsidize any other.
Mr. Rocheleau: Fine.
[English]
The Chairman: Mr. Hubbard, you have ten minutes.
Mr. Hubbard (Miramichi): Thanks, Mr. Chairman.
In terms of the cooperation and the spirit of the infrastructure program, I don't think any program we've had in a long time has had a better sense of trying to get things achieved at all three levels of government than what we've had here.
To begin with, I'd like to ask the Auditor General about the press release that was issued on the infrastructure program. The press release came out as a very negative report of what happened, or at least it was perceived by certain people as very negative.
I'd like to know the procedures you have within your office for looking at a report or a chapter of a report and trying to offer to the press an indication of what that report reflects. Is it done by a particular person? Is it done by a group? Does it eventually come to your desk for approval before it's released to the press?
Mr. Desautels: The press releases that we prepare - and we've done this now for the last three or four years, I believe - are essentially the responsibility of the authors of the actual chapters. And yes, before these are eventually used, I personally see them and agree with them.
As I've said on other occasions, the general intent is to try to communicate our messages as well as possible, and if possible at the same time to avoid any distortions of our messages. This is one aspect that had me concerned at one point, earlier in my mandate, that some of our messages could be distorted. So the intent of press communiqués was to help the press better understand our messages and therefore better interpret them for the general population.
We've found generally it's been working quite well. There's been minimum distortion of our messages and better communication of our messages by the media over the last two or three years. I recognize that on occasion we may disagree with various departments on how it's put together, but I would say on the whole it's been working quite well.
Even in this case, the press generally has the right kind of analysis of this particular program. In my experience, I've seen other situations where certain of our reports might have been interpreted in a tone much different from what we had intended, but I don't think that was so much the case in this one.
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Mr. Hubbard: Are you aware that there has been criticism of your agency in terms of the municipal, provincial and federal departments thinking that their position is not treated fairly in terms of that press release?
Mr. Desautels: I'm not sure if I'm aware of all of the same things you are perhaps referring to, but we do receive a certain amount of correspondence. We in fact received correspondence from different municipalities and municipal associations following this report.
I think the municipalities have been quite supportive of this program, and have defended it. In other words, generally municipalities have enjoyed this program. I guess they don't take very kindly to any indication that somebody might be suggesting that it could have been run even a little better. I think you have to recognize that perspective. But, yes, I have received a number of letters on this from different parties.
Mr. Hubbard: The infrastructure program was a kick-start to the economy. When we talk about 35%, it's really about the one third the Auditor General has reported here. One would assume that municipalities and other groups did about three times as much in that given period than they ordinarily would have done. If we don't take that approach to it, we're taking the other approach that this was simply part of their everyday plan in terms of year-by-year budgeting for particular capital projects.
Is there evidence that the money was simply used to accommodate a two- or three-year plan by which they really only each spent one third and it's had no effect, or is it really this spending three times the normal that, when you look at the projects and the reports, a municipality would have?
Ms Barrados: We report in the audit report that clearly it did have an effect. There were many projects, a lot of activity.
One of the conditions of the program is that it is in addition to the investments already planned. That's a difficult thing to estimate. We were having a discussion about the example of Quebec. There they had a concerted effort to try to ensure that the spending was in addition to - a new, incremental type of expenditure.
In the audit we tried to estimate for the first year. In the management of the program, whether the expenditures were all additional - and you probably can't get to 100% - it was our effort to estimate how much of this expenditure was additional or how much it was substitution of things that were switching around. In other words, it was the level of things they were going to do anyway, and there was a shifting around in the plans. Our estimation is 35%.
This is difficult to estimate, but to us it meant that when you manage these kinds of programs, do it carefully. It's in everyone's interest to make sure the expenditure is in addition to, not a substitution.
Mr. Hubbard: The private sector was mentioned here. I wasn't aware that there was that much in terms of the private sector. Were there questions in terms of the validity of private sectors being involved in terms of getting two-thirds funding towards projects?
Ms Barrados: Again, our question is, how do you manage this, and what are you really intending to do? We read the definitions and the purposes. As auditors we go in and see if the definitions and purposes were applied.
The definition and purpose said that this was supposed to be for public services. Then we saw these other activities in our sample that raised this question of whether or not this was really the case. When we looked at whether they could comply by the rules, yes, things could comply by the rules, but there was this overall definition that left us with a big question as to whether this really was the intention.
So our recommendation is that when you do these things, make sure you make it clear so that everyone understands what's intended. Then you spend the money the way you intend.
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Mr. Hubbard: There were a couple of things I didn't glean from the report. I would assume a certain amount of money was set aside for native communities in terms of the infrastructure program. It was my understanding that they simply divided by the number, about 600, and spent that money across the country. It seemed like a very small amount that eventually got to the first nations level. Do you have any observations on that in terms of the fairness of the program to first nations people?
Ms Barrados: We didn't include the first nations expenditures in the scope of our audit, and I'm not sure whether it was examined in the evaluation. Maybe the people from Treasury Board could speak to that.
Mr. Thibault: I would just say that, as I understand it, for first nations the same formula applied - population and unemployment rate - and the money was allocated accordingly on that same basis.
Mr. Hubbard: So for Treasury Board the unemployment rate was a major factor in determining the allocation of moneys to different provinces and to different areas.
Mr. Thibault: Yes. There were two factors used. One is general population and the other is the seasonally weighted unemployment rate.
Mr. Hubbard: And that has been generally well received, and will be well received, in terms of the new $1.8 billion?
Mr. Thibault: In the first round, certainly everybody was aware of how the money was allocated, and in the top-up discussions I've had so far there has never been any question about the amount or the allocation formula that's being applied.
Mr. Hubbard: Thank you, Mr. Chairman.
[Translation]
The Chairman: Mr. Rocheleau, five minutes.
Mr. Rocheleau: I'd like to get back to the 35% of the expenditures that would have been undertaken in any case. This 35% figure is valid for 1994. Could you give us a breakdown by province? Is it possible that this is a Canadian average? Do you also have data for 1995 for this kind of expenditure?
Here's a final question. Taking into account the ``lessons learned'' as the Auditor General describes it, might one think that the Quebec approach, in co-operation with the federal level and not with the municipalities, might serve as a model or is this going to remain within Quebec exclusively?
Mr. Desautels: We don't have a breakdown by province. We did it on a national basis. Moreover, we're not in a position to do this calculation for 1995 because these figures were not yet available at the time of our audit.
Finally, to your question as to whether certain lessons can be learned from the model set up in Quebec and if they could be used in future, I would answer yes. This is actually why we did emphasize them and I was happy to hear Mr. MacKenzie describe them in more detail than we did in our own report this morning. We should all learn from that.
Mr. Rocheleau: Do you know whether the government will draw from this in the next program?
Mr. Desautels: I think that the Treasury Board representatives would be able to answer this question better than I could.
M. Thibault: As you know, Mr. Rocheleau, we do not have a new infrastructure program. All that we have now is $425 million that is to be added to the existing program for 1997-1998. The approach we are taking with all of the provinces is simply to allocate these funds just as we did in the past since this is an existing program to which we are adding money. Consequently, unless the provinces wish to modify the existing program, we are not suggesting any change to the current structure.
The Chairman: Excuse me, it seems to the me that the memorandum of understanding has not yet been signed by all the provinces.
Mr. Thibault: No, we are in the negotiating process.
The Chairman: You are negotiating.
Mr. Thibault: That's right.
Mr. Rocheleau: Would it be possible to obtain a province-by-province breakdown?
Mr. Desautels: I could find out, but I do not think that this is possible because the statistical base that we would need is not yet available or is not detailed enough.
Mr. Rocheleau: And for 1995?
Mr. Desautels: Of course, we could eventually do the same calculations for 1995.
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Mr. Rocheleau: We would appreciate this because these are sizeable sums of money. We know that, politically speaking, this money could perhaps be used more effectively than has been the case in the past. That will be all, Mr. Chairman.
The Chairman: Mr. Paradis, you have five minutes.
Mr. Paradis (Brome - Missisquoi): First of all, I would like to congratulate the Auditor General on the excellent work that he does in all of these reports.
Secondly, I would like to say that this Infrastructure Program has been wonderful and, as the Auditor General mentioned earlier, very well received by all the stakeholders.
One thing in particular strikes me. This is a new program, a new approach which calls for political agreements between three government levels: namely, the federal, provincial and municipal governments.
This is the first time that I have seen an audit that is somewhat political in nature and this bothers me a bit. For instance, in defining ``infrastructure'', Mr. Desautels, you said in your statement that the members of your office felt that this definition should be more restrictive.
There are three political levels. There is the municipal, the federal and the provincial, which, it would appear, are willing to agree to a definition which, in my humble opinion as a politician, creates some flexibility in the system. We must also take note of the fact that our municipalities are the ones that identify the primary needs, the basic essential needs of the people.
The municipalities come to an agreement with the provinces and with the federal government, and we have an exceptional program. This is why I am somewhat bothered to see an approach which I would say defines an agreement in political terms.
We must remember, and I mentioned this earlier, that the federal government is contributing one third of the money; not two thirds, one third. The province kicks in the other third and the final third comes from the municipality.
I already talked about infrastructure. I will ask my question following the preamble,Mr. Chairman. There is a board of auditors from across Canada, from all of the provinces and Ottawa. As soon as a federal-provincial-municipal agreement on infrastructure has been made, it would perhaps be wise to call upon this Canadian board of audit to find out how we should be dealing with these audits and this new approach to federal-provincial agreements. This is simply a suggestion that I would like to make.
People are primarily concerned about duplication, and rightly so. We must avoid situations where city auditors examine the entire program because the municipality is paying a third, and then the Quebec auditors come in and review the entire program because the province is paying a third and then our Ottawa auditors also scrutinize the whole program because the federal government is paying a third.
We can certainly come to an agreement at your audit level, just as the various government levels reach an agreement on the application of a program that is as exceptional as this one.
The Chairman: Your question, Mr. Paradis.
Mr. Paradis: I am getting to my question. I would simply like to mention that I regularly visit my 42 municipalities in Brome - Missisquoi, and to tell you that this is an extraordinary program for all of the communities in my riding, as it must be for others.
The mayors, counsellors and citizens, everyone says: ``Keep up the good work''. This is an important program, an important initiative.
When renewing this program, would it not be wise to come to an understanding with other auditors from other government levels about some type of integrated procedure?
I think that it is important to establish an integrated procedure rather than leave it up to everyone to do their own thing in their district. Thank you, Mr. Chairman.
Mr. Desautels: In answer to Mr. Paradis' specific question, I would to reassure him by saying that this has already been done. We already operate this way. Whenever possible, we based ourselves on work already done by other legislative auditors.
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Quebec's case was cited as an example. We based ourselves on some work that had been done by our colleague, the Auditor General of Quebec. Consequently, we are trying to avoid any duplication at our level and we contact our provincial colleagues whenever we audit a joint federal-provincial and, in this case, municipal program.
I have, therefore, noted your question, but I can assure you that we already do this. I think we should do this in other sectors, whenever possible.
Mr. Chairman, if I may, I would like to take this opportunity to respond to the first comment made by Mr. Paradis, who was wondering whether we were getting a bit too political by conducting this type of audit involving the various government levels.
I can tell you that the federal government is currently looking at several new ways of delivering services. The joint federal-provincial programs formula will be one among others. We should, in my opinion, expect to see other programs of the same type as well as other forms of service delivery in the future. I feel that this type of expenditure program must, however, be subject to some type of audit so that the federal Parliament will know whether or not the objectives and the terms of the program have been met.
This type of thing will occur more and more frequently and therefore, in the future, we have to find ways to audit this new type of service delivery in order to fulfil our obligations to you, the federal members of Parliament.
Mr. Paradis: Mr. Desautels, I would just like to make a brief comment on the last issue you raised with respect to this new component, namely, agreements between various government levels. You are quite right in saying that we have to find ways of ensuring that this is done as well as possible.
However, I might add that there must be some limit to this and that your decisions must never be in lieu of political decisions. It is up to Mr. Charest, Mr. Manning or other leaders to determine whether or not this infrastructure program should be different.
This is more of a political matter than an audit issue, given that we are dealing with three government levels. There must, therefore, be some limitations, and you are right in saying that we must determine where this begins and ends. I hope that this marks the beginning of a series of new federal-provincial agreements.
Mr. Desautels: Mr. Chairman, as is the case in other similar programs, we started off, in this program, with the act as approved by the Canadian Parliament. The legislation sets our work in motion.
This particular program is one that was initiated by the federal government, which set out certain terms when it implemented the program. We base ourselves on this when we do our work and then report to you. Of course, we have absolutely no intention of making political decisions and I agree with you that this should be left up to the politicians, however, when Parliament has passed legislation or set forth certain criteria, certain standards, we can work on the basis of these standards.
The Chairman: Mr. Paradis, had I known that your comments were going to be of that nature, I would not have allowed you to prolong the discussion. I am not at all in agreement with your vision of the Auditor General's role. I noticed that you did not demonstrate this same caution nor did you have the same opinion when it came to family trusts. At any rate, we will talk about this later.
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Mr. Paradis: Mr. Chairman, you are interpreting my opinion with respect to another matter. If I may, I would like to talk about something else.
The Chairman: I was drawing an analogy. We have a very good saying in Quebec: I remember.
[English]
Mrs. Barnes (London West): Thank you. It's unfortunate that I will only have five minutes, but I'll try to make my questions very short.
First, a statement. I think Canadians win when all levels of government work together, and that's a good message to all of our constituents when we do that.
Second, the Auditor General's concern about 35% incrementality.... I read parts of the Soberman report on that. I have problems figuring out how you can be so definitive on such a number. I look at my own municipal council and they have wish lists on their capital projects. The wish lists have been there for a long time, and to say that they're ten years out and we'll get to them sometime.... How do you measure incrementality?
I come from the province of Ontario, and the provincial cutbacks have been severe. I think we have to go back into history prior to this program. I don't really want to quibble about numbers, but I want to say that it's like predicting what happens in the future, and I don't think that's the exact science, where you pick a number and say this is 35% and 110,000 jobs.
I think there are some other aspects that we have to look at historically. There are 100,000 or 100,000-plus people who were perhaps unemployed, who were perhaps receiving benefits from this level of government, the federal government, by way of UI, or maybe at another level of government, maybe a municipal level and it was welfare. Hopefully, when they were employed under this program they were then feeding taxes back into our treasury.
On the subject of those areas, maybe I'll go to Treasury Board, because I've heard comments from the Auditor General about how they did that. If there is enough time I'd like to hear from the Auditor General.
To Treasury Board, I can only speak from what happened in my community and my province, but I'm sure the experience could have been different across the country.
Mr. Thibault: Mrs. Barnes, I'm not an economist, but I think you've clearly demonstrated that it's not an exact science; these are estimates. It's on the basis of what projects did not happen, but it's also on the basis of what would not have happened if the program hadn't taken place. Would there have been further projects discarded? One doesn't know. This incrementality business is not a very exact science.
Maybe I'll ask my colleague Mr. Winberg, who is an economist, to give us a few words from our perspective on that.
Mr. Alan Winberg (Assistant Secretary, Government Review and Quality Services Sector, Treasury Board Secretariat): Thank you very much. I'm really very interested in having people understand what we're talking about when we talk about incrementality, because it's very easily misunderstood. When a number is put up, it's very quickly jumped on and seen to be something exact, something that some smart people measure, and it's not that at all.
Dr. Soberman, who we hired from the University of Toronto to assemble this evaluation, looked at work that was done by the best economists in the country. We hired a firm in Ottawa that is known for its econometric modelling. We used models developed by Stats Canada over many years. The conclusion is that it is not possible to prove a specific level of incrementality. It just can't be done.
So rather than try to look at some theoretical number, because it really is an academic type of exercise to try to say it was 10%, 30%, 101% - there's no way to prove that number. Incrementality is a very important issue, and we know it can be a variety of levels; there's a range within which it can exist. We wanted to ensure that Canadians are getting value from this program.
So in looking at that issue with respect to a decision about whether the program is worth it or not, whether it is delivering value for Canadians or not, we took two limits. We said, okay, let's just say it's only 60% incremental, so worse than what the Auditor General says. Is it still a good deal or not? The answer is yes.
Let's look at full incrementality. How much better is it? It's a great deal. Basically we looked at it and asked whether, at the two limits that we think are at the very end of what this could be, it makes sense. The answer is yes.
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So the short answer on incrementality is that there are lots of ways to estimate it. There are lots of valid ways to estimate it.
The Auditor General used a Statistics Canada model, a survey basically, in which people were asked about how much they invested. I talked with people at Statistics Canada about this yesterday. There's another survey in which they go around to ask people what their intention is: how much do you intend to spend?
So there's a hypothetical level against which you're talking to people about intentions. There's no way to prove intentions.
You can go back and track: if your intention was X, then what was your actual Y? We can measure that, but basically the short answer is that you can't prove a specific level of incrementality. What matters is whether we are delivering value for Canadians with the program the way it's designed and set up.
Mrs. Barnes: Thank you. That clarifies it for me.
If anybody else wants to add to that, I'd be more than happy to give my time to it.
Ms Barrados: Mr. Chairman, could I just add a few points?
I'm basically in agreement with Mr. Winberg's explanation. I just have a couple of things here.
We didn't use surveys in our estimation; we used an estimation based on leading indicators. Our effort was to demonstrate what this meant. We recognize that it's difficult to come up with a fast number. We took a very conservative estimate.
The evaluation, as it was described, does recognize that this is difficult to do. Their estimate of incrementality is lower than ours. They came up with a 40% non-incremental expenditure.
They did that on a best judgment. They took more of a poll in terms of getting a best judgment. But I think it's correct to say that it is difficult to do. We feel we have a reasonable estimate to indicate that there is a problem with this area. Then we went to the administration of the program and cited the case of Quebec, where they tried to deal with it administratively. That is our point. This is something to deal with administratively.
Mr. Thibault: This is from a non-practitioner's point of view, but it certainly shows the danger, as you mentioned earlier, of numbers. That 35% is a number that sticks. In fact, we are really talking about the best estimates based on economic models that have yet to be perfected in any way. So a number becomes quite a sensitive thing in that context.
Mrs. Barnes: I agree. I think it sticks in people's minds. I just see municipal budgets go slash, slash, slash. What is possible today isn't possible tomorrow. This whole concept of incrementality has been negatively viewed as opposed to positively viewed.
I know the things we managed to accomplish in my community. If they were done three years from now, my community would not be serviced so well. So those are the practical, on-the-ground results.
You wanted to add something?
Mr. Winberg: I just wanted to clarify something. As for the 60% number, which is inDr. Soberman's report, economists call it a scenario. It doesn't mean it's an estimate; it just means we're going to work with that number to see what it produces.
It produced positive results for the program. At the upper limit, there was a scenario created in which the number was higher than 100%, taking into account the private sector contributions to the program. Taking into account this survey run by Statistics Canada of intentions, it's possible to show a scenario of greater than 100% for analysing this program.
Mrs. Barnes: Thank you, Mr. Chairman.
[Translation]
The Chairman: Mr. Desautels, to begin with, I would like to tell you that I completely agree with the way that you interpreted your role in answer to Mr. Paradis' question.
The legislator passes an act containing definitions that are applied and interpreted by civil servants or employees of the Public Service. I'm not using the word ``civil servant'' in a pejorative way. As a watchdog, it is your role to determine whether or not the applications and interpretations correspond with the definitions, to determine whether or not the money was spent in accordance with the definition.
It is true that this is a program where the federal, provincial and municipal governments each contribute a third. However, we must not forget that these contributors all have a common denominator that is apart from all of this, which is, in my mind, the taxpayer, and this taxpayer is tired of paying taxes to the federal, provincial and municipal governments.
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Consequently, the taxpayer wants to ensure that he is getting a bang for his buck. We must not forget the taxpayer.
In defining the word ``infrastructure'', you say, in paragraph 26.40 of your report:
- The term is defined in federal-provincial agreements as being ``any physical capital assets in
Canada instrumental in the provision of public services''.
Mr. Desautels: Mr. Chairman, when you ask the question in this fashion, you have almost answered it? I think that there are some administrators, on the government side, that agree with us that some projects perhaps slipped into the program although they, at least at first glance, did not meet the criteria of the definition given in 26.6.
We wanted, among other things, to bring this type of situation to the attention not only of parliamentarians, but also of administrators in case the program is renewed, so that we can at least make the needed changes should it be decided that this is not the type of project that we want to fund.
The Chairman: Do you wish to add anything, Mr. Thibault?
Mr. Thibault: I will add just a general comment and, if you wish, we could provide you with more details on the matter.
We must all be clear about this. According to the definition that we give to ``recreational projects'', certain projects are acceptable, are they not? They create jobs, bring in tourists, serve the municipality in various ways. Consequently, we feel that certain recreational projects are quite acceptable, and the provinces and the municipalities agree with this as well.
My big problem is always the example selected, the program that may have a negative impact on some part of the program. As I was saying, a recreational project is quite acceptable and desirable. We can provide you with further information on this particular problem should you so desire.
The Chairman: I think that my colleagues would appreciate receiving this information. Could you provide the Clerk with the background on the golf course file, since this issue was raised by the Auditor General, as well as information on the ski resort? I think that all of my colleagues would appreciate receiving such information.
Mr. Thibault: Mr. Chairman, I will do so with pleasure. However, would you allow me two brief interventions so that I can give some explanation about the golf course or ski resort issue?
The Chairman: But you will send information through the Clerk.
Mr. Thibault: Yes, certainly.
[English]
Mr. Tom Scott (Senior Adviser, Programs, Policy and Coordination, Infrastructure Works Branch, Treasury Board Secretariat): Mr. Chairman, I think it's important to understand that this project was not something the federal government selected. This was a project that the local council members, in public, decided was their highest priority as a project to put forward to be funded by the province and by the federal government.
The property in question was owned by the municipality. It was industrial park land that couldn't be developed because of environmental sensitivities. It had to be maintained as a green space. The town made a choice of converting that green space into a golf course and created a not-for-profit corporation - if you want to call that private sector - to take over the development and management of that course. An existing golf course was then invited to come in to help manage that function. They took out a 20-year mortgage, so the mortgage is being repaid to the city. At the same time the golf course is going to be paying municipal taxes, and they have an agreement with the operators of the course that as long as the mortgage is being paid, 30% of the green times will be open to the public.
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It's a tourism attraction to the municipality. It's an active use of property that could not otherwise have been used. It's returning revenue to the municipality. So they see this as a very high economic generator for their community.
It's a good choice, and if you ask the councillors to come and defend their choice, in terms of meeting the criteria and in terms of serving the purposes of creating jobs while it's being constructed and then serving longer-term jobs while the course is being operated, they'll certainly come and give you very positive evidence of this particular course.
Did we subsidize the private sector? We have to look at what the definition of the private sector is in this case, and the private sector in this case is a not-for-profit, community-organized affair that was set up for the purpose of running this golf course and making money for the municipality.
[Translation]
The Chairman: I have other questions, but there are colleagues who would like to have the floor. I will have an opportunity to go back to this later.
Mr. Rocheleau.
Mr. Rocheleau: Mr. Thibault, the methodology, the terms or the details may vary, but when it comes to the meaning, when it is said that 35% of the expenditures would have been made at any rate, does this bother you at all in terms of organizational culture? Do you find this normal? Do you intend to monitor this more closely?
Mr. Thibault: Obviously, Mr. Rocheleau, we are going to continue monitoring this issue of what is referred to as ``additionality'' or ``incrementality''. As my colleague explained, this is not an exact science. Greater clarification means that we will be in a better position to ensure that the program is being implemented properly.
I would remind you that there is also another objective, a main objective. There was the additionality component, but there was also job creation. Job creation remains one of the key objectives of the program. In our opinion, 100,000 jobs were created as a result of this tripartite injection of money.
Mr. Rocheleau, we will of course continue to monitor this issue and we now have an evaluation plan which we will implement for the first part of the program in an effort to deal with these questions in a better fashion and to provide you with more details the next time. We will continue working with our partners, especially the provincial partners we deal with through management committees, to ensure that we are delivering the best program possible.
Mr. Rocheleau: The Auditor General's report deals with 1994. Do you have a breakdown of the expenditures per province?
Mr. Thibault: No. To my knowledge, we have not broken down the data on a provincial basis.
Mr. Rocheleau: Have you got any data for 1995, data that is not yet available to the Auditor General, or have you got even further?
Mr. Thibault: I do not believe so.
Mr. Rocheleau: Do you have any?
[English]
Mr. Scott: No, Mr. Chairman. We did our study in 1994 and 1995 and into 1996 on the basis of municipal intentions. We did have spending figures available for 1994 and 1995, which we made available to the Auditor General, but I think they may have arrived too late for them to have done their analysis and included it in their report. But certainly, yes, we did have figures available for 1995, and they show an even higher level of swing from what the municipalities had intended. That is, we could more than fully have accommodated the whole of the spending of our program and the difference between what municipalities had intended in 1995 and what they actually spent.
In terms of what Statistics Canada shows, 1995 was the highest year ever in Canada of municipal capital investment. So quite clearly our program did have a significant impact when it took full effect in the main year, which was 1995.
[Translation]
Mr. Rocheleau: Thank you.
The Chairman: Mr. Paradis.
Mr. Paradis: First of all, I would like to point out that, when I made my comments, I certainly did not want to defend one project as opposed to another, whether it be a ski resort or a golf course. However, I represent a riding where there is tourism and I must say that, if a municipality in my riding chooses to build a golf course or a ski resort - I have all of the Eastern Townships ski resorts in my riding, and this is what attracts people to our area and which builds the economy - , such infrastructures may be just as important for these municipalities as other types of infrastructures are for others.
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Secondly, I would also remind you that the government has decided to emphasize tourism in the budget it just tabled.
I would also like to go back to a point you raised earlier, mainly, the role of the Auditor General. I am in full agreement with your interpretation. The role of the Auditor General with respect to the law, is to ensure that the government machinery spends money in accordance with the bills that we pass in the House. I am in full agreement with you.
What is different in this case, and we pointed this out earlier, is that we are dealing with a new system. We are embarking in a system of federal-provincial-municipal agreements and this is what is different. These agreements have flexibility that our legislative system does not have. The ministers and governments can reach an agreement. Changes can be made and this is what is so good about the system. This is what both the municipalities and provincial governments approve of and like.
Consequently, this is a fundamental difference. As I was saying earlier, Mr. Auditor General, we must ensure that the auditing system is able to adapt to these political agreements existing at various governmental levels. This is what I was talking about. I did not say that the purpose of the system was not to review government spending in accordance with the legislation that we adopt. This is a fundamental difference. As I also mentioned, it is important that we take steps to prevent duplication.
Mr. Chairman, you said that taxpayers must get a bang for their buck; I can only agree with this statement and I am certainly one of the first around this table to say that I agree with this.
However, we must understand how this system works. First of all, the municipal level specifies its priorities in this tripartite system. Secondly, the provincial level, and we will use Quebec in this example, says yes. Quebec also determines its priorities within the envelope. At the end of the line, Ottawa says yes or no. This is how the system works. It is at the grassroots level and it is flexible; it is not coming from top to bottom nor does it give the directives to be followed.
I'm repeating what I said earlier: it is important that this system continue to convey the same criteria and values that it did at the start. I would ask the Auditor General to comment on this matter.
Mr. Desautels: In this new world that Mr. Paradis is describing, we may be evolving towards programs that will be delivered by different government levels. Obviously, we will have to adjust to this new reality, just as everyone else will. The administrators of these programs and parliamentarians will, along with others, also have to adjust.
In terms of adjustments, we will have to establish a certain framework of accountability within this new world. We cannot have a situation where there is no accountability. We therefore have to come to an agreement about this. Your opinion on this matter could be of big help to us. We must establish a framework of accountability that will guide the administrators, and help us as well to fulfil our mandate better and enable you, as parliamentarians, to receive the required assurances that your intentions are indeed being carried out.
This is a changing world, and I will be the first one to say that everyone will have to adjust to this new world, as we have already done. We intend to continue to do so if things keep going in this same direction.
Mr. Paradis: I fully agree with the comments made by the Auditor General.
The Chairman: Such symbiosis is extraordinary. It is staggering!
I still have some brief questions for you, Mr. Thibault. Usually our witnesses send us a copy of their statement ahead of time. In this case, we appear to have two versions of your notes; we have an Old Testament and a New Testament, for those who follow this religion. In the Old Testament, namely, the notes that you sent us on February 13, there are some comments under the heading ``Detailed Discussion''.
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I was anxious for you to get into this. You have taken away all hope I had in being able to ask you some good questions. You had made some quite juicy comments about the Auditor General. Why have they been deleted from today's version, namely the February 19 version? Poof! They've been blown away! Gone with the wind. What happened?
Mr. Thibault: You know, Mr. Chairman, that it is only a draft until it is actually delivered. Like you and the other parliamentarians, we have many duties. There are a lot of projects on the go and, naturally, we wanted to meet your deadline. I had not read the first text. The text that I read today is my text.
The Chairman: But you had send it to the committee, all the same.
Mr. Thibault: It was sent, but I do not believe that this was my text.
The Chairman: Yes, I have it here, this text is dated February 13.
Mr. Thibault: It is only a draft.
The Chairman: That's right. The version read today is the one deemed to be authentic.
Mr. Thibault: Indeed, and I apologize to you, Mr. Chairman, if this led to any confusion.
The Chairman: At any rate, the second version deprived me of my opportunity to ask some good questions. As we say, on Orléans Island, you ride somewhat roughshod on the Auditor General.
I have a second brief question for you, Mr. Thibault. Do you have with you any program performance indicators or program performance standards starting from 1993-1994? I'm asking this question because I am preparing for a conference that I will be giving. At a meeting of the Canadian Council of Public Accounts Committees, in Victoria, we said that program evaluations must be done. We had to establish success criteria and performance standards and we had to determine whether or not they met its objectives, and whether or not the objectives were measurable, verifiable and quantifiable. Have you got this data?
Mr. Thibault: Clearly, this is an important objective, Mr. Chairman. As you know, I have been in my current position for scarcely two months and my role is primarily to negotiate, with the provinces, the spending of this additional $425 million. We obviously intend to meet with our provincial counterparts in the near future to discuss this whole issue and to try to assess the numbers together, as well as possible and in the spirit described by Mr. Paradis. My colleague, Mr. Winberg, who is our auditor, may have some comments to make.
The Chairman: You are referring, of course, to the professor of the University of Toronto.
Mr. Winberg: I would like to discuss this with you a little bit, particularly since you will be addressing other people on behalf of Canada. I can tell you that this is one of the best studies of its type that I am aware of and I have been working in this field for 20 years. This study examines the main objectives of the program in a very impartial, systematic and rigorous fashion, including the results that we hoped to achieve, the measurements taken of each of these results, public and balanced reporting as well as an indication of what works and what doesn't, so that decisions can be made. I would like to state, in public, how much this document is appreciated by the Auditor General and his staff, and I would like to point out the excellent work done in this report. It is very much appreciated.
I will now talk about the specific points that are important for the program. Certain points are listed on the first page of this report. The three most important points are as follows: on the whole, was the money spent wisely, was municipal infrastructure enhanced significantly and were jobs created for individuals who were, for the most part, unemployed? Three other points are also listed and are also important for the program. This report contains comprehensive documentation on each of these points. The Canadian Government and all those who participated in this study are right to be proud of this document.
The Chairman: That is a very nice answer. Far be it for me to challenge Professor Soberman; he is head and shoulders above me.
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One of the criteria indicating the quality of a good objective is that it must be measurable and it must not represent pious hopes. When I tell you that the program funds were spent wisely, is that measurable? What is spent wisely for me might not be so for you. When you say ``wisely'', it is a pious hope.
He states that the condition of infrastructure has appreciably improved. I will give you an example of a measurable objective. Revenue Canada could set an objective to reduce the average processing time for income tax returns form 31 to 15 days. If at the end of the year the department has managed to reduce that average to 14 days, it will have reached its objective. That is a measurable criterion of success. With all due respect for the professor, I must tell you that using expressions like ``wisely'' and `` appreciably improved'', it's all wind, it's hot air. Those are subjective criteria; those are not measurable objective criteria.
What I think is done wisely may not necessarily be so for you.
Mr. Winberg: That is why I quoted from the first page. That was in the first page, with the positive findings as well as the negative findings, in a balanced fashion.
If you turn the page, you will find an executive summary containing more details on the way we measured each of these points. Starting after that page, you will find about 100 pages containing explanations about how each one of these objectives was measured using the best methodology in the world.
That study was very special and I will take a few minutes to tell you about it. Mr. Soberman did not determine all these measurements. In order to measure each one of these elements, we contracted out to teams of independent experts, evaluators, economists and engineers who looked into each of these objectives. They talked with scholars, groups of municipalities and engineers working in the infrastructure field. They all wrote their own reports. We also gave you a summary in the other package with the four labels. So there are four evaluation models. Then, rather than taking those models and giving them our own subjective interpretation, we made an independent contract with a consultant from the University of Toronto who studied each one of these models and wrote a summary report.
In my view, the work that was done can help us make decisions, and it also probably made the Auditor General's work easier so that we can work together, with no duplication and that the best information possible on this program is available to us. Finally, I state that this work is good because we will be able to use the lessons we have learned in order to improve the program renewal. For instance, explicit auditing plans to make sure the rules of the game are followed, will be included in each of the contracts made with our partners in this important program.
The Chairman: Before giving the floor to Mr. Desautels, I would like to say that I asked this question in response to what has been said. I believe Mr. MacKenzie or Mr. Thibault had mentioned that discussions were going on with a view to extending the program, based on the same criteria and on the same model.
In other words, for another year, it...
Mr. Thibault: We added, if you recall, an evaluation plan. That was new and it was done following the Auditor General's recommendation.
The Chairman: Is that the only new element that would be added to the old program?
Mr. Thibault: As far as auditing is concerned, yes.
Mr. Desautels: I only wish to say that in my view, the study done by Professor Soberman is a good one. Secondly, I must emphasize the fact that it was done within a very reasonable time frame. What I wish is that the experience be repeated, with other programs. There was a will to do it, in this case. It was done within a reasonable time frame and I hope the lesson that will be drawn from it will be that it is feasible and that it should be repeated elsewhere.
The Chairman: I have one last question on the issue of job creation.
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Mr. Thibault, would you be in a position to make a commitment to send us, through the Clerk, the estimates concerning the jobs created through the program, but broken down as suggested in the Auditor General's report, in paragraph 26.105 which reads as follows:
- 26.105 Finally, the approach does not distinguish between full-time and part-time work. The
Canada Infrastructure Works Program office has indicated that further work is planned in this
area.
Mr. Thibault: I undertake to do that, Mr. Chairman.
The Chairman: Within what time frame?
Mr. Thibault: As quickly as possible.
The Chairman: What is as quickly as possible for you may not be as quickly as possible for me.
Mr. Thibault: When would you wish to get that?
The Chairman: Can you supply it to us next week, in two weeks or before May 3rd?
Mr. Thibault: We will send it to you before May 3rd.
The Chairman: Before Monday June 9th, without fail. I realize that you did not understand why I said before May 3rd, but when I said before June 9th, people understood. That would be helpful. That is because we would like to promote the job creation brought on by that program, that is to say the numerous jobs created by it. I appreciate the commitment you have made before us all,Mr. Thibault.
I have one last question, because everybody is hungry and we want to have time to digest our meal. In paragraph 26.104 on page 26-25 of his report, the Auditor General says:
- For example, we found that in one province, the employment estimates from the Statistics
Canada model were about 20% higher than employment indicated by operational data from a
sample of completed projects.
Mr. Thibault: Mr. Chairman, with all due respect, since it's a comment made by the Auditor General, he would certainly be ready to give you some explanation.
The Chairman: Yes, that is true. Mr. Desautels, could you please tell us which province you're alluding to?
Ms Barrados: Mr. Chairman, it is the province of Manitoba.
The Chairman: Manitoba. Who can give me an explanation? What does it mean? Was the number of jobs inflated by 20%? What was the problem with that model? It showed 20% more jobs than the number that was actually created?
[English]
Ms Barrados: Mr. Chairman, it's the problem with the estimations. We were asking the Treasury Board officials to use more than one number when they come up with an indication. If you use the model they used and then apply it to individual project data, it doesn't work.
So we're saying yes, we know this is difficult, but use more than one number when you come up with these numbers, because it is a sensitive thing. When you're dealing with a construction type of project, this is pretty easy kind of employment to measure - the numbers of people who are out there digging things or building things.
Mr. Winberg: I can add something. When you're using the Statistics Canada model and the manner in which it translates into full-time job equivalence, it's done through a statistical modelling method. Statistics Canada has done a great deal of work, and it seems to be a reasonable estimate of jobs created from that expenditure. In fact, I talked about this with them yesterday. In my opinion, as an economist, it's a very conservative number.
In measurement, though, to do the work in Manitoba, they would have had to select a sample. When you select a sample you choose a small number of projects from a much larger number. It's highly unlikely - it's almost impossible - that your sample will reflect with 100% precision the full population of projects in Manitoba. It's impossible.
In order to do the work in an efficient manner you choose such a sample. It's not impossible. In fact, one time out of some certain number - and if they do it for every province and territory that's twelve times they've done it - you will not have representability between one selection and the overall measurement.
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So if this was the worst case of a divergence between the average measure and the select group of samples in the province of Manitoba, it would not be unusual, and it does not indicate that there's anything wrong with the overall Statistics Canada measure.
[Translation]
The Chairman: Mr. Desautels, a brief comment in conclusion?
Mr. Desautels: No, thank you, Mr. Chairman. We had a good discussion. I believe we have reached the goals that we had set for ourselves and that we drew for the future the right lessons from this first program. Thank you.
The Chairman: Very well. Now the committee still has to work hard in order to write a good unanimous report. I'm convinced that we will have a unanimous report on this subject. This thing doesn't go back to the time of the Conservatives. Thank you and have a good day.
The meeting is adjourned.