Canadian Heritage Committee on June 15th, 2006

[The Chair, Conservative, Gary Schellenberger]

I'm going to call this meeting to order.

Please excuse my voice. Usually I'm not as raspy as I am, but it seems to be going around these days.

I must say thank you very much to the Auditor General and staff, all that are here today, for this very important meeting.

Pursuant to Standing Order 108(2), we are studying the Auditor General's reports on support to cultural industries, which is chapter 5 from November 2005, and protection of cultural heritage in the federal government, which is chapter 6 from November 2003.

I know we have some handouts here.

Ms. Fraser, if you would proceed to start this meeting off, I would appreciate it. Thank you.

[Sheila Fraser, Auditor General of Canada]

Thank you, Mr. Chair. We thank you for giving us this opportunity to meet the members of the committee and to discuss certain issues that we raised in our 2003 report on the protection of cultural heritage, and in our 2005 report on support to cultural industries.

Accompanying me today are Richard Flageole, the assistant auditor general, responsible for these audits; and Richard Gaudreau, director.

In our chapter on the protection of cultural heritage, we concluded that the built, archival, and published heritage under the auspices of the federal government is exposed to serious risk of loss. This is because of deficiencies in various protection regimes, weaknesses in management procedures, and the combined effect of growth in heritage to be protected, as well as to a decrease in protection expenditures.

Organizations we examined have taken some protective measures since the publication of our report. In 2006 and 2007, Library and Archives Canada plans to move its collections most at risk to more suitable storage space that it has acquired. However, issues such as the development of a legal framework for the protection of built heritage and the efficient acquisition of government archives of historic interest and archival importance have not yet been resolved.

We are following up on the measures Parks Canada and other departments have taken to protect national historic sites and federal heritage buildings. We plan to report our observations in 2007. We also plan to follow up on measures taken to preserve the federal government's documentary heritage.

In support of cultural industries, Canadian Heritage and other organizations such as Telefilm Canada, the Canadian Television Fund Corporation, and the Canada Revenue Agency, provide about $800 million a year to film, television, publishing, sound recording, and new media to encourage the creation, production, and distribution of Canadian cultural works.

In our November 2005 chapter, we made observations on strategic management, governance, and control. In strategic management, we concluded that Canadian Heritage has not yet clearly defined the results it wants to attain by investing in cultural industries. Furthermore, it has not set targets to measure the performance of its investments. We believe that this weakness does not promote the cohesiveness the Department needs to achieve specific objectives and is less able to report on its performance to Parliament.

We noted that the governance of the Canadian Television Fund was particularly complex, and that the administration of its program was cumbersome. At the time of our audit, Telefilm Canada and the Canadian Television Fund administered the fund's program. The boards of directors of these two corporations had to approve the budget, the business plan, and the guidelines for the program. The mandate of Telefilm Canada, which Parliament amended in 2005, is to promote and encourage the development of the Canadian audio-visual industry.

We noted that the department had considerable influence over the governance of Telefilm Canada through its contribution agreements with the crown corporation. As a result of the administrative requirements of these agreements, and the relative importance of the amounts involved, Telefilm Canada has little leeway to interpret its mandate and determine the best way of carrying it out. This degree of oversight is unique among crown corporations.

Finally, we concluded that despite the implementation of an appropriate control framework, Canadian Heritage, Telefilm Canada, and the Canada Revenue Agency do not apply their controls rigorously enough to ensure that Canadian requirements for content, project selection, and eligible expenses are met. We know that the department has taken some measures to improve the management of its programs and activities. However, we have not yet audited the implementation. Your committee may wish to ask Canadian Heritage and concerned entities about the measures they have taken or plan to take, to remedy the shortcomings that we found in our audit.

I would like to take this opportunity to let you know that we intend to initiate a risk-based planning exercise to help us identify future audit work in the heritage, arts, and culture sector. As part of this process, we would like to meet with some members of this committee to discuss any issues that may be of particular interest to the Committee and that we should consider in our audit work over the next three to five years.

Mr. Chairman, we would be pleased to answer the Committee's questions about these audits or our role, mandate, and work. Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much for that.

Does the department also have an opening statement?

[Jean-Pierre Blais, Assistant Deputy Minister, Cultural Affairs, Department of Canadian Heritage]

Yes, Mr. Chair. We are thinking of dividing it because there are two reports. So Lyn Elliot Sherwood will deal with one of the reports briefly, and Jean-François Bernier and I will deal with the second report.

[The Chair, Conservative, Gary Schellenberger]

Okay.

[Lyn Elliot Sherwood, Executive Director, Heritage Group, Department of Canadian Heritage]

Thank you, Mr. Chairman.

I'd like to introduce Mr. Daniel Caron, who is from Library and Archives Canada.

I'll be talking about the 2003 report, which concerns the protection of cultural heritage. We identified four themes in the report, and I'd like to outline what's been done since that time.

The first theme is protection of built heritage. I'm sure the committee is aware of that fact that Parks Canada is now the responsibility of the Minister of Environment. We nevertheless continue to work with Parks Canada analyzing options for the legislative protection of the built heritage.

The second general theme within the Auditor General's 2003 report was the protection of archival and published heritage. As the Auditor General noted, an element of that falls within the management of government information policy, for which the President of the Treasury Board has the lead.

Since 2003, Library and Archives Canada has completed a comprehensive risk assessment of its collection, and is currently working to develop an information technology system that will enable it to be more effective in reporting on the state of its collection. It's also working on an integrated risk management framework to aid decision-making.

Funding has been allocated, as the Auditor General mentioned, for temporary storage facilities in the so-called Zeller's building, and a longer term strategy is in development. I understand that meetings are taking place between Library and Archives Canada and the Office of the Auditor General to continue the review of progress to date.

The third theme is protection of heritage collections owned by other departments. Treasury Board has responsibility in this area. We're told that Treasury Board has completed its work on developing new material management policies. This new policy requires the identification and protection of heritage collections. This policy will enter into effect on November 1 of this year, and we believe that the Treasury Board Secretariat is currently working to develop guidelines associated with this policy to ensure proper implementation.

The fourth theme dealt with the definition of objectives, desired results, and appropriate resources in heritage protection. I've already identified some of the measures, such as the integrated risk management framework and strategic plan for Library and Archives Canada.

Within the department evaluations by third party consultants have been conducted on programs directed towards heritage. As I mentioned last week, indemnification was one of them, and we've developed new results-based management accountability and risk-based audit frameworks for the programs, which will clearly set out both desired results and our data collection strategies for performance indicators.

The government has invested in a number of new facilities to better protect and present national collections, including the temporary facilities for the library and archives, the new hangar for the Canada Aviation Museum, the new building for the Canadian War Museum, and upgrades to the Victoria Memorial Building for the Canadian Museum of Nature.

The Auditor General's 2003 report also called on us to complete the heritage policy framework as soon as possible. At that time we were working on a horizontal framework. We fairly quickly realized that to be effective we needed to address the issues that were specific to each area. As a result, we moved independently at the time on the historic places initiative, which is now with Parks Canada, and on a separate piece that falls into the intangible heritage category with the initiative on aboriginal languages and culture where the government announced in 2002 the allocation of $160 million over ten years. As you aware from what the minister said two weeks ago, we are continuing our analysis with respect to a museum policy.

Thank you.

[Jean-Pierre Blais]

With respect to the other study of the Auditor General, you should have in front of you a short deck. I'll just walk through it. It basically summarizes what we have done so far since the November report was tabled.

May I say, just from the outset, that I'd like to thank the committee for inviting us, but as well to say that anyone in the government who manages programs always welcomes the opportunity to have the dialogue we have with the Auditor General as well as our internal evaluators and auditors so that we can improve the program delivery.

The report is only about 30 weeks ago, but I still think we've made tremendous progress in improving it. In fact, it confirms

a number of the conclusions to which I myself came when I accepted the position of Assistant Deputy Minister for Cultural Affairs in September 2004. Moreover, I believe that the Auditor General clearly stated in paragraph 5.18 that she had noted a change in direction in November 2004, shortly after I arrived at the department. That's a good sign. However, we're still making progress in that area.

In the presentation, we'll try to divide the Auditor General's recommendations and to update progress being made on implementing them.

You'll note that it's obviously not a completed job. It's only been some 30 weeks, but it's always a work in progress. We're always trying to redefine the environment changes, and the needs of the cultural industries change as well.

I can tell you, for instance, that on page 2 of the presentation, the suggestion was that we needed to do stronger horizontal management in my sector, which has about 300 employees and numerous programs. I have a group that reports directly through me, which is responsible for strategic policy and planning. As a result, I'm able to have a direct influence on making sure that we have that horizontal approach. I've created research tables that are horizontal, as well as results tables, HR tables, and a task force on the impact of new technologies on the cultural sector more generally.

Since the Auditor General's report was issued, I also effected a reorganization, and my colleague here was appointed director general of cultural industries in a single place. Beforehand, cultural industries were divided up into several places with different accountabilities. This will bring stronger horizontality.

On page 3 there were comments about governance and governance framework. I can report that since the Auditor General's report, there have been developments concerning the Canadian Television Fund. As of March 1, we implemented the new structure, which had been announced by former Minister Frulla about a year ago. Everyone at Telefilm, in the department, and at the CTF worked diligently to implement a simpler, more aligned structure to deliver the CTF program.

I'm happy to report that the transition costs for the new structure came in at some $300,000 below budget, and on a going-forward basis we will be saving about $3 million annually, which can be redirected towards production financing, as a result of the realignment.

I can also tell you that the administration costs have gone down from an average of 5.8% to 5.1% over that period of time. Although we had seen this issue, the Auditor General noted that we could do better. We've implemented a plan to get better results for Canadians.

Maybe I'll ask Jean-François to speak to pages 4 and 5.

[Jean-François Bernier, Director General, Film, Video and Sound Recording, Department of Canadian Heritage]

Thank you, Jean-Pierre.

As regards the implementation of controls, this mainly concerns the management of the Canadian Audio-Visual Certification Office and the co-management relationship between the Tax Credit Program and the Canada Revenue Agency. As regards the certification of files, we've already implemented the strictest analysis procedures. We now send the Canada Revenue Agency monthly reports on project certification and revocation, as the Auditor General suggested. We're updating our procedures manual for analysts of the Tax Credit Program.

All the recommendations were very serious, but one of them emphasized that we were running the risk of granting tax credit certificates for productions involving non-Canadian creators because we were not requiring Canadian citizenship. Within two weeks, we will have amended the procedures. In support of their certificate applications, producers will now have to submit proof of Canadian citizenship rather than merely an affidavit.

Now I'm going to talk about the efficiency of the controls in general. On three occasions, in the context of what's commonly called the Lincoln report, and in that of the feature film report prepared by this committee, recommendations were made in this area. The Auditor General, for her part, recommended a more strategic approach to the certification of Canadian content. As we had stated in the government's responses on the subject, we are working on ensuring that Canadian content of Canadian audio-visual productions is certified in one and the same location.

[Jean-Pierre Blais]

Just to conclude, Mr. Chairman, on page 6, this is about results. I can tell you one of my first things when I arrived in this new job was realizing that we weren't telling our results story as well as we could, and I put a great deal of emphasis on this in the group.

Since I've been there, we have more clearly defined what our strategic objectives are. We have five, which go from creation of various categories of works to actually getting Canadians to have access to those works. Based on defining these, we then started defining a logic model that moves us from all the various outputs the department is involved in, when funding this project or that creative activity, to immediate, intermediate, and ultimate outcomes for the department.

We now have a fully developed logic model for results and are now populating that grid so that we are able to report on an annual basis where we're heading.

You've dealt with the feature film report. That represents the sort of clear targets we want. There may be some doubts as to whether it was the right target or the right way to calculate it, but it's a perfect example of saying that if five years ago we wanted to go to 5% of the feature film market, that's what we're moving towards, and that's what our programs should be prepared and shaped to deliver.

I would be more than happy to answer some questions.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Bélanger.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you, Mr. Chairman.

First, I'd like to get an idea of the situation as a whole.

Madam, I listened to your remarks on the essential aspects of your two reports. I congratulate you because, as usual, you've done your work in a disciplined manner and you encourage the departments to correct the deficiencies that have been outlined.

I also listened carefully to the presentation of the departmental people. If I understood correctly, it appears that a whole set of measures has been taken since your 2003 and 2005 reports appeared. For example, the processes of Telefilm Canada and the Canadian Television Fund have been merged, and criteria revised, and things appear to be more rigorously audited with regard to the Canadian Revenue Agency. It was mentioned that significant investments had been made to protect our collections, whether it be those of the Aviation Museum, the War Museum, the Museum of Nature or others. I don't know whether specific reference was made to them, but in talks I've had with certain persons, I've been told that the merger between the National Library and the National Archives—a field where Canada appears to be innovating—was supposed to result in better management, savings, and so on, and that it appears that is the case. I don't know whether it's actually the case, but that's what I was told.

Are you satisfied with all these initiatives that the department has taken, and do you believe it reacted well to your report and the recommendations?

[Sheila Fraser]

As the member mentioned, we see that the departments and agencies concerned have taken the findings and recommendations of the two audits very seriously. A series of actions are currently being taken. Rather than state a finding, we prefer to go back and re-audit, which we'll do with regard to the built heritage question. We're getting ready to start the audit at Parks Canada.

As to the cultural industries question, it's too early. These obviously aren't matters that can be resolved in six months or even a year. You have to give them time. So we'll conduct another audit later.

I would add that, as regards built heritage and archival heritage, the important issue that we raised was that protection systems are no longer sufficient. We can improve administration and perhaps change ways of doing things, but, for us, the issue was not simply a management issue. A strategy had to be developed and priorities established, because there was a gap between what they were trying to preserve and their ability to do so. We observed that, by scattering money around, they wound up not preserving the heritage as they should have. At the time we conducted the audit, two-thirds of the buildings were in a condition that left much to be desired, and 90 per cent of the archives were in unprotected premises. There was already a quite significant deficiency, and they had to review the policy and decide what they wanted to preserve based on the resources they were going to allocate to that. I would say that it is virtually up to parliamentarians and the committee to decide that.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

If I understand your message correctly, the administration of existing resources appears to be adequate, but there may be reasons to increase available resources.

[Sheila Fraser]

When there's a discrepancy, there are two ways of proceeding. You can increase resources or limit actions.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

The conclusion I draw from your comments is that the department took your recommendations seriously and seems to be heading in the right direction, even though there may be other audits at the appropriate time.

My other question is a general one. I know from experience that there will probably always be more demand than there are resources. That's the nature of every government, I believe.

Having said that, I would like to know whether Ms. Fraser or the departmental people can tell me whether any comparisons were drawn between Canada and other countries. How does Canada compare to other countries with regard to the protection of its built heritage and documentary heritage? I know that initiatives have been taken in a number of fields in the country, and I believe similar initiatives have been taken in other countries.

Have any comparisons been drawn, and, if so, how does Canada compare to other countries?

[Sheila Fraser]

We didn't do that kind of work. That would be a kind of comparative analysis, and we didn't do that. The departments and agencies may have some information on the subject.

[Lyn Elliot Sherwood]

This isn't the result of a systematic study, but I must say there are some major differences among the countries. In the United Kingdom, for example, lottery funds are available for institutions engaged in heritage protection. And the challenges of archives and libraries are virtually the same everywhere, including in Canada.

[The Chair, Conservative, Gary Schellenberger]

Make it a short answer, please.

[Jean-François Bernier]

That's called international comparative studies in the cultural industries field. It isn't done systematically, but we have it for the film industry. Moreover, there's an appendix in the last report containing a comparative study. There's one for sound recording and another's underway for the periodicals sector.

These are the things that are available. We can forward them to the committee if that's of interest to you.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Kotto.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Thank you, Mr. Chairman. Thank you for being here again, Ms. Fraser.

Since people are probably listening to us, in order to prevent citizens from tuning out, I'd like you to explain to us briefly, in terms as ordinary as possible, your mandate as Auditor General in the context of our portfolio. I'd like you to put your work into perspective within Telefilm and the NFB. Can you do that?

[Sheila Fraser]

Yes, I'll be pleased to explain our mandate briefly.

First, we are the auditors of the financial statements of the Government of Canada, but also a number of Crown corporations, including Telefilm. We do Telefilm's financial auditing every year. We also do what's called management audits. These are the two audits that we are discussing today. We select programs or horizontal issues in government, and we examine the management practices and systems to determine whether improvements can be made or whether programs are operating as they should.

We publish reports for parliamentarians, to provide them with objective information that they can use to make the government accountable for the use of public funds.

So our role is really to support parliamentarians in their accountability work.

[Maka Kotto, Bloc, Saint-Lambert, QC]

That leads me to Telefilm. We noted that the November 2005 report on cultural industries detected some weaknesses in strategic management and governance and control mechanisms. In this last case, it was noted that Canadian Heritage, Telefilm Canada and the Canada Revenue Agency are not applying controls rigorously enough to guarantee compliance with requirements regarding Canadian content, project selection and expense eligibility. However, I'll limit my question to Telefilm.

Are you familiar with the Montreal festival saga, as it's called?

[Sheila Fraser]

No, unfortunately we haven't examined that issue.

[Maka Kotto, Bloc, Saint-Lambert, QC]

In an interview she gave to Le Devoir on March 11 of this year, Louise Pelletier, who at the time sat on the board of directors at Telefilm Canada, said that she had sent you a file on irregularities that had resulted in the creation of a new film festival that failed and, it was said, lost a lot of money. Were you informed of that?