Government Operations Committee on June 16th, 2009

[Martha Hall Findlay, Liberal, Willowdale, ON]

No, that was a fairly blunt question. Your concern was appearances at the meeting. Would you support the motion if we took number three out?

[Chris Warkentin, Conservative, Peace River, AB]

It still doesn't address the fact that we're still calling for other people to appear before the committee and taking a portion of that time.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Mr. Warkentin, would you support it if we took out numbers two and three? We very much want this information. All humour aside, we very much want this information. We were told by one department that it was another department, so we'd really like the information. If we were to remove numbers two and three to address your concerns--

[Chris Warkentin, Conservative, Peace River, AB]

Let's maybe have other negotiations involved with the senior witnesses.

[The Chair, Liberal, Derek Lee]

I'm going to propose a mini coffee break here. There seems to be some discussion occurring on the substance of the motion that has been defeated. I feel as though we should go to our witness now. While the witness is here, members are free to discuss amongst themselves if there is to be any further discussion. I'm in the hands of members. If members want to reconsider any part of this in some way, we can.

Mr. Anders.

[Rob Anders, Conservative, Calgary West, AB]

Mr. Chair, I just didn't like the motion. I don't want my feelings insulted.

[The Chair, Liberal, Derek Lee]

No, we're getting along quite well here.

I'm going to look for motions now to report the supplementary estimates (A). In my view, colleagues, we did not go to all of the data, all of the estimates, but we did have a look at Treasury Board, and we did have a look at Public Works on the supplementary side and in the main estimates. I'm of the view we should report those back to the House, if colleagues are of a view to do so.

The other supplementary estimates (A), which we did not have meeting time devoted to, were Canadian Heritage and Privy Council. I'm not proposing that we report those back, having not had the time to look at them, but for the others I am.

I would be delighted to have a motion that we report back votes 1a, 5a, and 6a under Public Works, and then we could do that before the expiry, the end of the rules. Is there any member prepared to move that? Mr. Warkentin will move that. Thank you.

PUBLIC WORKS AND GOVERNMENT SERVICES

Vote 1a--Operating expenditures..........$279,043,899

Vote 5a--Capital expenditures..........$70,920,000

Vote 6a--Real Property Services Revolving Fund..........$1

(Votes 1a to 6a inclusive agreed to)

Then under Treasury Board...I should note that this stuff may be carried on division as well.

TREASURY BOARD SECRETARIAT

Secretariat

Vote 1a--Program expenditures..........$8,141,104

Vote 20a--Public Service Insurance..........$74,905,000

Canada School of Public Service

Vote 40a--Program expenditures..........$796,860

Vote 55a--Program expenditures..........$0

(Votes 1a to 55a inclusive agreed to)

As I read it, it carries by a thin margin.

Shall I report the supplementary estimates (A) 2009-2010 to the House?

[Some hon. members]

Agreed.

[The Chair, Liberal, Derek Lee]

All right. Thank you for that.

Now we'll go to our witnesses. Could I ask, if my voice is within range, the witnesses from the Auditor General's office to take positions at the table? Thank you very much.

Colleagues, the Auditor General recently presented her report to the House of Commons, which she normally does. We have issues that have come up with chapter 7 of the 2009 spring report.

We have as witnesses here today John Wiersema, Deputy Auditor General, and Richard Flageole, Assistant Auditor General.

Welcome, witnesses. I would ask you to make a presentation outlining the, I believe, three crown corporations with which, or in relation to which, you found deficiencies that were notable. I think you could use this time to outline those to us, along with any other concerns that the Office of the Auditor General would want to put to our committee. The floor is yours.

[John Wiersema, Deputy Auditor General, Office of the Auditor General of Canada]

Good morning, Mr. Chairman, and thank you for this opportunity to discuss our chapter on special examinations of crown corporations. As you indicated, I'm joined at the table this morning by Richard Flageole, an Assistant Auditor General in the office.

Crown corporations represent an important part of federal government activity. They employ over 92,000 people and manage over $185 billion in assets. Crown corporations are accountable to Parliament through the responsible minister, and as required by part X of the Financial Administration Act, we periodically conduct special examinations of crown corporations. A special examination is a form of performance audit. It provides an independent opinion on whether or not there is reasonable assurance that a crown corporation has systems and practices in place to ensure that assets are safeguarded and controlled; that financial, human, and physical resources are managed economically and efficiently; and that operations are carried out effectively.

Any major weakness in the key corporate systems and practices that would prevent it from achieving those objectives is reported as a significant deficiency. As such, our special examination reports provide important information that parliamentarians can use to hold crown corporations accountable.

In the March 2004 budget, as part of measures designed to strengthen management and accountability, the government announced that it intended to require crown corporations to make public their special examination reports from the Auditor General, and since then all crown corporations receiving our reports have made them available on their websites.

Last year for the first time, we tabled a chapter that provided, among other information, summaries of eight special examination reports as well as the status on our special examinations of 46 crown corporations. This year, we continued the practice and presented the main findings of our reports for an additional eight crown corporations.

We are pleased that the committee is taking an interest in these special examinations and we will continue to present this information annually in our report. Chapter 7 includes summaries of reports that we issued and that have subsequently been made public by the following eight crown corporations: the Canada Council for the Arts, Defence Construction (1951) Limited, the Federal Bridge Corporation Limited, the Great Lakes Pilotage Authority, the International Development Research Centre, the Pacific Pilotage Authority, Parc Downsview Park Incorporated and VIA Rail.

Of these eight special examinations, we identified no significant deficiencies for five of them and one or more significant deficiencies for three. We found significant deficiencies in the Federal Bridge Corporation, the Great Lakes Pilotage Authority and VIA Rail. For each of these three corporations, we chose to bring the reports to the attention of the appropriate minister. In this chapter, we are presenting only the main findings. The full text of the report can be found on the corporations' websites. Please note, however, that these reports were issued in 2008, some very early in 2008, and that circumstances may have changed since then.

I would also like to bring to your attention some recent significant changes to the legislation related to special examinations. Up until this year, crown corporations were required to undergo special examinations at least once every five years. In early 2009, changes to the Financial Administration Act extended this cycle to at least once every 10 years. It's a change that we fully support. As well, the act now requires that the reports be made available to the public within 60 days.

That, Mr. Chairman, concludes my opening remarks, and we'd be pleased to answer any of the committee's questions.

[The Chair, Liberal, Derek Lee]

Thank you very much.

I'll look to the official opposition, Ms. Hall Findlay.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chair, and thank you very much, both of you, for being here with us this morning.

Can you describe a little bit for us the deficiencies that you found, just a summary, for the meeting today?

[John Wiersema]

As I noted in my opening statement, Mr. Chairman, there were three corporations in which we identified significant deficiencies or concerns with those corporations' systems and practices. Those relate first to Via Rail.

Via Rail has been facing a number of ongoing strategic challenges for many years. These relate to the access it has to the tracks. The tracks are owned by CN, so Via has concerns and issues and challenges that it has yet to fully resolve in terms of access to those tracks.

Via Rail has also had difficulty in recent years in meeting the financial targets that are set out in its corporate plan. It has consistently underperformed. It has not met those targets. We were concerned that it didn't have contingency plans in place for what would happen if it was not able to meet those targets. We were also concerned about their planning processes, in that the planning processes consistently provided targets that the corporation hasn't been able to meet.

Those are some of the key challenges in Via Rail.

We also reported a significant deficiency in the Great Lakes Pilotage Authority. In this case the major concern has to do with an exemption from compulsory pilotage in the Great Lakes. This system of exemption was put in place in 1972. It was originally intended to be temporary; 35 years later, it has still not been resolved.

In our view, the authority does not have an effective mechanism to provide it with reasonable assurance that Canadian masters and deck watch officers have the competencies and qualifications needed to ensure the safe passage of their ships in the compulsory pilotage areas.

In its response to our report, the corporation indicated that it intended to make regulatory changes in 2008. We inquired earlier this week as to the status of those regulatory changes, and they have not yet been made. We think that too is an important issue, an important deficiency, in the Great Lakes Pilotage Authority.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Just to clarify, those regulatory changes would be made by...?

[John Wiersema]

They would be made by government.

[Martha Hall Findlay, Liberal, Willowdale, ON]

What department specifically would be responsible for that?

[John Wiersema]

Well, it would have to be initiated by the Great Lakes Pilotage Authority, working with the Department of Transport.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay, that's what I thought. Thank you. That was just for clarification. Sorry.

[John Wiersema]

The third crown corporation that we identified as having significant deficiencies was the Federal Bridge Corporation Limited, the corporation that looks after the bridges in Cornwall and Montreal. In that corporation we identified two significant deficiencies.

First, these bridges are facing significant refits and modernization updates. The corporation had not, at the time of our audit, resolved all those funding issues, and in our view they presented a threat to the financial sustainability of the corporation.

Second, the Federal Bridge Corporation Limited has a number of subsidiaries that look after the individual bridges. The parent corporation has a very small board of directors, and we were concerned that the board of the parent corporation was exercising insufficient oversight of the operations of the Federal Bridge Corporation and its subsidiaries.

Since we issued this report in 2008, I understand there have been some significant subsequent developments. We've not yet audited those developments, but I understand that the government has provided significant additional funding for upkeep and repairs to some of those bridges.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much.

I'm going back to the concerns that have been raised with regard to VIA. It certainly sounds as though there are some problems with the planning process. You highlighted that as a third one, I think, but it certainly jumps out, given the first two you mentioned, or at least the second one, which was trouble meeting financial targets and having no contingency plans.

From your perspective in doing these audits, can you highlight for us a little bit of what has happened? It sounds as though not meeting financial targets and not having contingency plans has been a recurring issue. Has that issue been addressed? What has been the solution for VIA on an annual basis to fix the problem?

[John Wiersema]

Perhaps, Mr. Chairman, that's a question that's best addressed to the corporation. We issued the report to the corporation and its board of directors. It has accepted and agreed to all our findings, and it's agreed to our recommendations. It has indicated that it intends to undertake actions to address those findings and recommendations.

In this case, Mr. Chairman, the report was issued in February of 2008. We have not done significant audit work to follow up on the corporation's actions since then. As I mentioned in my opening statement, Mr. Chairman, we're pleased that this committee has expressed an interest in these crown corporations and in the special examination reports. Our purpose in bringing these matters to Parliament's attention was to encourage committees to use these reports to assist in holding these crown corporations accountable.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you.

[John Wiersema]

This is a big corporation and it's facing significant issues. You may wish to talk to VIA Rail.

[Martha Hall Findlay, Liberal, Willowdale, ON]

No, there's no doubt about that. But just from an audit perspective, your task, as I understand it, is reviewing the efficiency and the operation of the corporations. If there is repeated missing of financial targets, then that money has to come from somewhere in order for it to keep operating. I'm assuming, then, that the government has in past years provided additional money to VIA Rail.

In your report, did you determine that the trouble meeting financial targets was because of problems simply in planning or problems that you identified in the actual operation of the company?

[John Wiersema]

I think the short answer to that, Mr. Chairman, is that it would probably be a combination of both. Our report indicates that we think the targets the corporation is setting are unrealistic, and the corporation has had difficulty meeting its other performance measures, like its on-time performance for the trains. That obviously has an impact on revenue.

In our report, we indicated that in 1998 the government funding for the corporation's operations was about $169 million a year, and in 2006 it approved an additional budget of $233 million over three years for an overhaul program. So yes, one of the consequences has been that significant need for increased government funding.