Government Operations Committee on Nov. 7th, 2006

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Do you recommend that we go to one system change, that we make this overhaul? I put that question to the Comptroller General as well, because obviously I asked the teams from B.C. and Ontario, and they obviously didn't have insight into it and didn't want to comment on it. But based on the preliminary analysis that you're doing on the legacy systems, is it your viewpoint that we need to make a major system overhaul and make that part of our recommendations?

[Sheila Fraser]

I would be hesitant to recommend that there be a major overhaul in those systems right now, because there was a significant investment made in 1999-2000 to move to the seven systems. A lot of departments put in these ERP, enterprise-wide systems, like SAP and Oracle, so there were hundreds of millions of dollars spent not that long ago. If government wants to take the position that we should go to a common system, I think they have think this through and that it has to be brought in over time. I wouldn't recommend that this be done right away. In many of our audits we've also noted that the departments aren't making full use of the systems and the capacities they already have, and there has been a lot of money spent in this. I would be hesitant to recommend just going to one system.

The other consideration in this is that there are many organizations in the federal government. Some are very large and very complex, while others are very small. I'm not sure that one system could meet the needs of everyone. The very large departments obviously need these enterprise-wide systems. I'm not sure that some of the smaller organizations that have 25 or 30 people need a system of that complexity, so there may have to be some variety in the systems.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Yes, so very quickly--

[The Chair, Liberal, Diane Marleau]

We're going to go to Madame Thibault.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

Ms. Fraser, as I glanced through the PricewaterhouseCoopers report, I wondered about something I had never thought about before. This report talks about government expenditures. Some of these concern the provinces, while others pertain to transfers or stem from grants and contributions paid to organizations.

The current procedure must have an impact. People have to account for the way in which they spend funds. Not-for-profit organizations often talk about the burden of having to fill out forms in order to demonstrate that the funds allocated to them have been spent properly. They must also write submissions for the next year when they have recurring funding. So I can imagine what reporting may be like for a provincial government or for Quebec.

Will the new procedure, whether option 3 or 4 is selected, have a different impact on government bodies and agencies?

[Sheila Fraser]

In my opinion, a new appropriation system will not affect reporting for transfer recipients.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Right, that is something important to know. Thank you.

The report talks about the readiness of departments and agencies. When such a study is carried out, it is impossible to take everything into account. The study’s sample targets the following departments: Indian Affairs, National Defence, Parks Canada, Transport, the Privy Council Office, etc. I think that nine departments in all were targetted.

My purpose is not to criticize the firm that conducted this study, but is this sample representative of the machinery of government?

As far as the readiness assessment is concerned, the consultants issue some caveats, saying that these are self-assessments, that the data were not verified and the results have no statistical validity. Are these caveats cause for worry, or to be expected?

Every time a study is done, caveats are issued, along with comments to the effect that, in view of the sample used, the data obtained are only internal and that therefore the study cannot go any further. Is this a worry or not?

[Sheila Fraser]

As far as the second question is concerned, I think this is normal.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

For the interpreters, this is found on page 202 of the French version of the PricewaterhouseCoopers report.

[Sheila Fraser]

It is pretty normal for consultants to issue such caveats. They report what the departments have told them and they are not going so far as to verify all the statements made by them. Such caveats are to be expected.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

It is not just the caveat. This study must not have been commissioned with a view to getting conclusions, because it does not contain any.

[Sheila Fraser]

You would have to put this question to the representatives of...

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have not read the study completely; some sections caught my attention, however. In the note they gave us this morning, the researchers confirm what I had already noticed: the study does not contain conclusions.

My question is for Mr. Moloney and Mr. St-Jean. Did you not ask for the study to contain conclusions?

Mr. Moloney, page 210 of the French version talks about the central agencies. The central agencies indicated to the consultants, and I quote: “... that they could accept accrual budgeting easily ...” If I have understood correctly, you can go ahead without any problems.

But do you have any concerns about the departments? Are you confident or somewhat concerned? Is your concern implied by the suggestion that implementation be phased in over five years? It is one way of seeing things.

I have other questions, but I am going to limit myself to these.

[Charles-Antoine St-Jean]

I will answer your first question. You seem to be a bit disappointed that the PricewaterhouseCoopers report does not contain any definitive conclusions.

Under the mandate given to the firm, the purpose of the study was to survey the situation. A great deal of confusion surrounds this file. What are the various models? Should this be implemented by department or by the government all at once? Should it be done on a cash basis? There are six matrix models.

It is important to be familiar with the situation in Canada and the situation elsewhere in the world. The study was designed to gather this information and present it, and I thank the PricewaterhouseCoopers team for doing just that. The various models of page 5 of the report provide an idea of the context in which we find ourselves.

As my colleague and I mentioned earlier, we are tending towards Model 3 or 4. If we look at the package, 4E is the model we are tending towards.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Are you confident, Mr. St-Jean? The representatives from Ontario and British Columbia, whom we had the pleasure of receiving recently, told us about the “cultural revolution.” I will summarize their comments. They think that a champion of the cause is essential, that everyone needs to understand that the decision has been made and that there is no going back.

I note a certain dichotomy on page 210 of the report. We read that significant cultural change is required within the central agencies and also that the central agencies say they are ready.

I am not trying to be funny. Are you ready, or are you saying that, even within your department, you will have to work hard to change the culture? The departments are not the only places where there will be resistance.

Do you share the same opinion as the study’s authors?

[Charles-Antoine St-Jean]

Totally, but I am not traumatized by that. My colleagues in New Zealand, who carried out the same exercise 15 years ago, told me that they had to wait about ten years for people to understand what accrual accounting was, for purposes of both appropriation of funds and reporting.

The same thing occurred when we switched from Fahrenheit to Celsius. It was not because people did not want a new system; we just have to give them the time to understand it and put it into practice.

Gradually people will adopt new work tools and habits. Little by little we will all learn to live with the new budget estimates to be presented. We are ready to go on to the next phase, but we have to make a concerted effort towards achieving our goal.

I am not particularly worried.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You have confidence.

[Charles-Antoine St-Jean]

Yes.

[The Chair, Liberal, Diane Marleau]

Thank you, madam.

We will continue with Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Madam Chair. I can't believe we're at this point. My heavens, we're actually making some progress on this.

Madam Fraser, I can recall when this was first brought up before public accounts and, of course, a recommendation went from committee. Unfortunately, it wasn't acted upon, regretfully, and it went back to public accounts again and back to government operations here. I think I can definitely--at least I feel very confident--speak with a level of appreciation for the rest of my colleagues around this table who have, I think, come to a reasonable consensus on this, that we have to move forward, and I'm hopeful that we will come up with the suggestions that are necessary to implement this.

But building on Madame Thibault's one comment--and this takes us back to when our guests were here from Ontario and B.C.--somebody has to lead the way. Someone has to champion this, in Madame Thibault's words, to effect this positive change. Have any of our guests here given any consideration to the implementation process, whether it's an implementation office, officer, composition of that office, who should be involved with this effective transition, and what type of leader we need to be able to go forward with this? Should it have a political involvement? Should this have bureaucratic involvement? What would your thoughts be in terms of the implementation of this, and the composition of a committee and/or a leader to go forward with this?

I'd actually like to hear from both Madam Fraser as well as from the Treasury Board, through Mr. St-Jean.

[Sheila Fraser]

I can perhaps start, Madam Chair.

I think the first thing that would be really important is to have a clear indication and a clear statement that government is going this way. We're talking about studies still. I have yet to hear that government has actually agreed that they are going to move to accrual appropriations, and the form has to be worked out. I would think this has to come from a very senior political level.

When the government moved to accrual-based financial statements, there was actually a statement in the budget on that. So I would think that given the importance of this, there should be some statement from a very senior political level that government is working that way, or planning to go that way, and that it's an intention to put it in over a certain number of years.

And perhaps the committee can obviously recommend the higher-level direction that the votes could take. I think the suggestion that was made today about setting up a working group of parliamentarians who perhaps have a particular interest to work through the details of this is a good suggestion. And then I think once that's mapped out, obviously it will require resources within the Treasury Board Secretariat or the Comptroller General, and they would have to obviously define how they would want to move that project.

But there should be a specific project. This is going to be an important project that will take many years. I think there should be a specific responsibility given and clearly resources given as well.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

So you feel it's just mandatory that we have a defining statement from senior government officials and/or government itself and hopefully a unanimous move in the House, etc. This would send a very clear sign, and it's going to take that kind of initiative in order to be able to really instigate some serious response to this? Is that what you anticipate?

[Sheila Fraser]

It would certainly give a very clear indication to all that this is serious and that the government intends to move that way.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Mr. Moloney.

[David Moloney]

Thank you. I'm happy to speak to that as well.

I think there's no doubt that we're talking about fundamental changes in what departments do, how they do it, and what systems they do it with. That certainly will take leadership. Whether there's one champion or a team of champions, we can work through that. However, it will not just require a senior statement to trigger such effort. There are significant needs for cabinet level decisions. Introducing legislation is a cabinet decision.

Putting money in a budget, as was the case before, will.... I hope there is no doubt at all that this will require investments of some serious amount. We still need to work that out. As the Comptroller General mentioned, there is the issue of what other investments and changes to departmental financial systems or policies would be undertaken. The cost of this on its own, versus the cost of those together, obviously needs to be worked out. This will take cabinet level decisions, for both the legislative and the money aspect.

We are both here of course because there is a critical departmental financial management aspect to this. There is also our relationship--both TBS and the Comptroller General--in terms of bringing the estimates to Parliament, I dare say with lots of constructive advice from the OAG and from departments as well.

We will need interlocutors for those details from among parliamentarians as we go forward.