Public Accounts Committee on May 11th, 2006

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Are confidentiality agreements signed for a report like this with anybody who is involved in the publication of it?

[Sheila Fraser]

I'm not sure. I would--

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

I would have to verify, but I suspect, Mr. Chairman, the contract with the printers would provide for confidentiality, and it's part of our normal procedures with the departments with whom we operate. In the covering letters we attach to the reports when we send them over, we remind the departments that those reports are confidential until they're tabled in Parliament.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

And I'm new as well, so this is an educational process for me. I noticed on page 8 you mention you are fully funded by the federal government, but I noticed in your report on page 43 you have accounts receivable.

Now you've got items coming from the consolidated revenue fund, but then there are accounts receivable. Is this the cost recovery on UN agencies, etc., that you mention?

[Sheila Fraser]

Yes. We bill the UN agencies for the services we provide. I suspect that's probably, in part.... I'll ask my comptroller to provide the response.

[Robert D'Aoust, Comptroller, Office of the Auditor General of Canada]

If I may, the accounts receivable are mainly composed of amounts to be reserved from Treasury Board Secretariat for overpayment of the employee benefit plan. There are also prepaid expenses incorporated in those receivables.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Okay, so they don't include cost recovery--

[Robert D'Aoust]

They would, but it's minor. It's mostly related to amounts recoverable from TBS for the employee benefit plan.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

I have one last thing, if I still have a moment. A colleague brought up the airport, and another concern I have would be the CATSA organization security. Has a performance audit already been done on that organization?

[Sheila Fraser]

That is an interesting question. We are the auditors of CATSA, so we audit the annual financial statements, and there is a special exam currently under way that we will be completing by the end of the summer. So the special examination is under way as we speak.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Does that have a performance component to it, given that it's our security organization?

[Sheila Fraser]

Yes. Essentially special examinations are like a broad-scope performance audit of the whole crown corporation, and we actually have to give an opinion on whether there are any significant deficiencies in its management. So we will be looking at all the significant management areas of CATSA in that special exam.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Sweet.

Mr. Lévesque, for five minutes.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Ms. Fraser, it's an honour for me to speak to you and your associates, those who are here and those who are back in their offices. I must tell you that my wife does not generally hold Members of Parliament in high regard. The only time she envies me is when I get an opportunity to speak to prominent people like yourself or Justice Gomery.

In your Performance Report for 2004-2005, you noted that departments had implemented only 44 per cent of the recommendations made by your Office in the year 2000.

How do you determine if a recommendation has been implemented? Are you talking about all of the recommendations put forward or merely those that were accepted by departments and agencies?

[Sheila Fraser]

Thank you, Mr. Chairman. And thank you, Mr. Lévesque, for your kind words. It's very encouraging when parliamentarians appreciate the work we do.

WIth respect to recommendations, each year we do a follow up with departments and agencies. We do a status report on the implementation of the recommendations put forward four years earlier. We ask the department to provide us with a follow-up report or to explain what steps it has taken, and the team responsible for this department assesses the credibility of the response and determines if these are satisfactory or not.

In addition, each year, the Office releases a Status Report in which we review our audits of certain areas and judge whether or not satisfactory progress has been achieved on the recommendations made previously. The 2006 Status Report will be released next week.

We use both the responses provided by the departments and the Status Report to compile our statistics.

I also have to say that the 44 per cent compliance rate is not acceptable to us. We've launched an initiative with the Office of the Comptroller General to find out why departments are not following through with the recommendations. Yet, all of the departments said they agreed with the recommendations when they were first made.

On the other hand, the Office has come to realize that it needs to improve the quality of the recommendations to make them somewhat clearer. This would make it easier to judge whether any progress has been made. Occasionally, we felt that our recommendations were too general. Efforts are therefore being made on both sides, in the hope that some improvement will be noted.

Lastly, the committee has been most helpful to us. In recent years, it has called on departments to produce an action plan identifying the parties responsible for making improvements as well as target implementation dates. We rely on the action plan to ascertain when we can re-audit the department. I even think these plans make the system more rigorous. The committee has therefore done us a great service in recent years by requiring these action plans.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Since you're trying to ascertain why the implementation rate is so low, do you have the authority to take steps to ensure that more of your recommendations are in fact implemented?

[Sheila Fraser]

I only have the authority to make recommendations and to report on the progress made on the implementation front. Sometimes, the mere fact of reporting little progress can spur departments into action.

Often, when we arrive to start our audit, we get the feeling that departments want to receive a good report card when the process is over. They are beginning to take a look at problem areas.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

I want to remind you at this time that you are five years into your ten-year mandate.

When you were first appointed, you identified five areas in which you wanted to effect positive changes. Can you speak to us briefly about these areas and give us a status report on the progress achieved? Can you also tell us how you plan to divide your budget among each of these sectors?

[Sheila Fraser]

The first of the five priorities was accountability to Parliament, a fundamental consideration for an Auditor General. Our Office has conducted a number of audits and studies and intends to continue doing so.

Another priority of ours was ensuring an efficient Public Service. We look into such issues as human resources management and technologies management. Our efforts in this area are ongoing.

Another area of concern is public health and safety. We've conducted a number of audits on national security, particularly in the wake of 9/11. A considerable amount of money has been invested in this activity.

We're continuing to carry out a series of health audits involving Health Canada and the food protection service. Additional audits will be carried out over the course of the next few years.

Another priority was Heritage. We've conduced an audit on the management of historical and other sites. This was a first for a legislative auditor. We foresee conducting more in the future.

The last priority identified was aboriginal issues. We've conducted an average of two audits per year in this sector.

At the Office, they're already starting to talk about the end of my mandate, yet it seems I just took up the position. We plan to provide a report of sorts on these matters as the end of my mandate nears. We're also planning audits to address questions such as the ones raised by Mr. Lévesque.

[The Chair, Liberal, Shawn Murphy]

Merci beaucoup, Monsieur Lévesque.

Mr. Casey is next for five minutes.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you very much.

It's a pleasure to have you here today. I am a substitute, so this is a treat for me. I didn't expect to have you here.

I want to raise one particular case with you that you and I have had a little bit of correspondence on. It's the Digby wharf in Digby, Nova Scotia, close to where I live.

In 1999, the Department of Transport was going through a divestiture process. They turned over a wharf in Digby, which is used by 40 fishermen, to a not-for-profit organization set up by a former Department of Fisheries and Oceans employee. The minister wrote him a cheque for $3,064,272.26. They just sent him the cheque--no accountability.

On the day he got the cheque, he signed it over to a private engineering firm. On the same day, or thereabouts, the private engineering firm hired all the directors of the not-for-profit society, including the president, his wife, and his three friends. The money is now all gone, the wharf is falling down and is in really sad shape--half the wharf is closed.

I wrote to you on July 27, 2001, and you wrote me back right away on August 1 and said the internal audit did show issues of concern, but it was part of a legal process. I wrote again on February 21, 2002, and you wrote back on March 5, 2002, and again said there were concerns there, but it was part of the legal process, and you must respect the legal process.

Well, the legal process has just been completed, so now I'd like you to unleash the auditors. I'd like you to audit this transaction, follow the money, and see if you can find out where the money went, because nobody knows where the money went.

The minister wrote me a letter and said the money was to go to capital expenditures on the wharf and maintenance. It didn't. The wharf is literally closed. Half of it is closed now because it has fallen in and is unsafe. There's been a health and safety report on it that has condemned part of it.

This contract that the Department of Transport had with this not-for-profit society absolutely guaranteed no accountability. Once the money left the not-for-profit society, it went to the private sector. There are allegations that they used it to do a feasibility study on a tour boat in another harbour on the other side of the province, and all kinds of things.

It's a very intriguing story, but anyway, it's time somebody got to the bottom of the Digby wharf. I hope you will unleash the auditors.

In both of your replies to me, you said you'd continue to monitor the file as soon as the legal process was over. I would just like to make the request now that you take this on, to see if you can find out where the money went, and see if there's any way to get the money back for the people of Digby who need the wharf. Also, analyze the transaction to make sure that never ever happens again. Deal or no deal?

[Sheila Fraser]

Thank you, Chair.

Obviously I'll have to go back and talk to my people, because we'll have to look at what the contracts were. I'm not sure we would have access, quite frankly, to go beyond that. Let me look at it, and I will once again send you a letter saying what we can or cannot do.

[Some hon. members]

Oh, oh!

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

And then you'll monitor the situation.

For sure—and it's not hard, really—you can find out where the government's weakness was. The government of the day was so weak; even before they transferred the money, some of us asked the minister not to go ahead with the deal, but he did anyway. Then the money just evaporated, and then there is no accountability.

For sure, any time the federal government writes a cheque to a person or a not-for-profit society, or anything else, there should be guaranteed accountability. This contract guaranteed that there was none; it just erased the accountability trail. It was a defect in the way the government operated. But if you can go further and find out where the money went, we'd all be very grateful. If you can get some of the money back, that would be even better.

That's the extent of my questioning. I appreciate your monitoring of this problem over the last six years. I look forward to further monitoring.

Thank you.