Public Accounts Committee on Nov. 28th, 2006

[The Chair, Liberal, Shawn Murphy]

Colleagues, at this time I would like to call the meeting to order. I want to welcome everyone here. We have two items on the agenda and I wouldn't expect them to take the two hours.

The first hour we have with us Mr. Arthur Kroeger in connection with our study on the roles and responsibilities of the Treasury Board Secretariat. I want to point out that the first two chapters of the annual report of the Auditor General, which was tabled in Parliament earlier today, are very relevant and pertinent to this issue that we're studying.

Mr. Kroeger's curriculum vitae is in the briefing notes. He's had a long and, I would suggest, very distinguished career here in Ottawa. He's been a deputy minister for approximately twenty years with about six or seven different departments. This was followed by an academic career at the University of Toronto and Queen's University, and he was also for a nine-year period the Chancellor of Carleton University here in Ottawa. Of course, as we all know, Carleton named the Arthur Kroeger College of Public Affairs in his honour.

I'm going to turn the meeting over to Mr. Kroeger for any opening remarks that he has.

At the end of the hour, colleagues, we'll then go in camera to finalize draft reports 11 and 12. I propose to table those next week.

Before we invite Mr. Kroeger to speak, Mr. Fitzpatrick, do you have your dissenting opinion to provide to us today?

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Yes, I think the clerk has it already.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Mr. Kroeger, welcome to the committee, and on behalf of the committee, I want to thank you very much for your interest and for appearing here today.

Mr. Kroeger.

[Arthur Kroeger, As an Individual]

Thank you, Mr. Chairman.

The Treasury Board has a lot of responsibilities, and there are many different things one could say in talking about them. I thought perhaps I would spend a little time talking to the committee about an aspect that you may not have focused on. Obviously, I'll answer questions on anything that comes to mind. My opening, off-the-cuff remarks are not going to be very long.

I hope that in looking at the functions of the Treasury Board, the committee does not end up suggesting that the Treasury Board should get further into the micromanagement of departments. And I use the expression “further” because there's been a trend, really since about the year 2000 or so, in which after many years of loosening up controls, letting the managers manage, as the Glassco report said, you've had a reversal, in response to the human resources controversy and about some other things, that really has amounted to a re-bureaucratization of government. A lot of this is hard to see from outside. I thought I'd spend a little time talking to the committee about it because what you got in response to the human resources development controversy was a stream of directives, rules, and so forth from the Treasury Board. These really amounted to a strong reassertion of central control and a limitation of departmental discretion. Then the previous President of the Treasury Board announced that he was putting in place another 153 management improvement measures, as he called them, and then on top of that he announced he was going to put in place another 80, just as Justice Gomery came in with his report.

The cumulative effect of this--and perhaps members of Parliament have heard some adverse comment--has made the federal government increasingly cumbersome, awkward, sclerotic, and difficult to deal with. It's certainly affected the public service. I can tell you about studies that have found that senior officials spend less than 50% of their time now doing what their departments were set up to do. The business community has complained about the cumbersomeness, and so have the non-governmental organizations.

I'd like to give you a few examples. There was a group of 16 organizations that filed a brief with Justice Gomery that said, “Please don't load any more rules on us; we have too many already.” Incidentally, the good judge took them to heart and he did not. They pointed out in their brief that the amount of time they had to spend filling out forms, detailing minor expenditures, right down to the number of pencils and photocopies they use, was very cumbersome.

I have, for seven years, been chairman of the board of Canadian Policy Research Networks. In the past few years we had to double our staff dealing with government paperwork because of all the extra requirements that were put upon us. I asked the clerk to circulate a brief that we put in on a study that's being done about lightening this load. It's called “Please reconcile the 64¢ difference”. This actually happened. We were asked by a department, in writing, to explain the 64¢ difference between what we said we were going to spend and what we reported we had spent.

There's any amount of minutiae that we could get into, which I don't propose to. I chair a committee that's dealing with a fairly complicated subject. We met in Toronto. At the meeting, the official from the sponsoring department explained, I think with some embarrassment, that there couldn't be any coffee provided when we arrived for the meeting because his department had a rule that coffee could not be served at meetings before 10 o'clock in the morning. Now these are people who had travelled from every corner of the country. They were experts in their field. And they found this sort of minutiae imposed on them. It's pervasive. You don't see it. You don't read about it. But anybody who works in a department or deals with it will see it.

I know of a case of someone who probably donated, in private sector terms, $15,000 or $20,000 worth of personal time to participate in a study of biotechnology. When he submitted an expense account to the department in question for a trip to Toronto, his expenses were cut by $6.81 because he had exceeded a Treasury Board limit for what he could charge for dinner.

Now, why does this happen? Officials aren't stupid. They don't enjoy doing this sort of thing. They are responding to the climate in which government has to operate at present.

There is another study that I've just had some exposure to that found that risk averseness is now pervasive in the federal government. Nobody dares depart from what's in the book. They're afraid that if they break any rule, bend any regulation, it's going to turn up in an audit report, and the next thing they know, their deputy will be hauled in front of the public accounts committee to explain what happened.

This is really not in anyone's interest, and it's certainly not in the interests of people who deal with the federal government. The same study I just referred to found that the federal government is now far more cumbersome to deal with than the provinces or the municipalities.

I hope that in studying the Treasury Board, the committee will not lose sight of the importance of allowing experienced officials to exercise their common sense as compared with just doing it by the book, which is much too prevalent, according to almost every observer I've talked to.

I think I would conclude by simply affirming what the previous Auditor General said to you a couple of weeks ago. He said, “treat departments and agencies like big boys and girls”. Have an oversight of them, be well informed of what they're doing, but let them use their common sense in what they do. I hope that more micromanagement will not end up as an outcome of the study you're doing, which in other respects is very important, but it's an avenue that I would encourage you to think about carefully before you go down it.

Thank you, Mr. Chairman.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Kroeger.

We're going to start the first round. I don't see too many of my Liberal colleagues here today. They must be preoccupied with the leadership convention.

We're going to move--

[John Williams, Conservative, Edmonton—St. Albert, AB]

I'm sure, Mr. Chairman, this being the... [Technical difficulty--Editor]...sidetracked into other issues that could be dealt with on the weekend.

[The Chair, Liberal, Shawn Murphy]

I think you're right, Mr. Williams. They're all back at their offices reading the estimates, as we speak.

[John Williams, Conservative, Edmonton—St. Albert, AB]

And the Auditor General's report.

[The Chair, Liberal, Shawn Murphy]

And the Auditor General's report.

You have eight minutes, Mr. Nadeau.

[Richard Nadeau, Bloc, Gatineau, QC]

Thank you, Mr. Chairman.

Mr. Kroeger, if I understand correctly, the federal government operates on an annual budget of approximately $224 billion. That's the latest figure I heard. When the last government was in power, the sponsorship scandal erupted, which led to an election call exactly one year ago today. The amount of money involved in the sponsorship scandal was a mere drop in the bucket compared to the government's overall operating budget. However, the scandal caused some damage, from an ethical standpoint, and gave rise to subsequent political tricks of various kinds.

I'm relying on your experience and wisdom in such matters, since you have analysed the situation extensively. As elected officials accountable to the voters and in light of the sound work we must do here, how should we be looking at a document? Should we be looking at how the money is spent? Obviously, the Auditor General sounds the alarm and raises some red flags. That's clear to us. Should we be examining a document with an eye to cost and performance, or simply with an eye to political fallout and how the public will react? There is no question that public opinion matters. To the public, one million dollars is a lot of money. However, in this case, it's actually a small amount. We stand up and take notice when figures hit the one billion mark. Therefore, to be effective, what approach should we be taking to ensure that we do our work in the best possible way? I realize that this is a broad question, but I'm putting it to you anyway.

[Arthur Kroeger]

In my opinion, the most important thing that MPs and Parliament can do is to focus on results. The government spends a vast amount of money, over $200 billion in fact. What does all of this spending mean for Canadians? As I see it, this should be the fundamental concern of MPs.

Experts can do studies to see if the money is spent effectively, if a particular department is overstaffed or if too much money was spent to purchase a vehicle. All of these are areas that can be examined, but MPs do not have an unlimited amount of time. They must make choices. For example, how do you want to spend your time as members of this committee? The most important thing is to examine results and to be prepared to identify expenditures that have failed to produce significant results. Money can then be put to better use elsewhere.

[Richard Nadeau, Bloc, Gatineau, QC]

I see. The Auditor General, the committee, Treasury Board and the Treasury Board Secretariat, all of whom are major players in the audit and accountability field, suggest that we make all kinds of decisions. What can we do to ensure that we are not overstepping one another's authority and doing a proper job in terms of ensuring accountability?

I emphasize that the process is political. Even though we want to set aside any partisanship, it comes back with a vengeance. On the other hand, the Auditor General is appointed to a multi-year term of office. Her job is to scrutinize spending. Treasury Board is part of the machinery of government, regardless of whom is in power, while the TBS helps to do analyses and provides the necessary grids to ensure that the money available is well spent. How do we avoid stepping on each other's toes, so that we can do our job as effectively as possible?

[Arthur Kroeger]

That could be one of the most important findings to come out of your study of the Treasury Board. The best approach that your committee could take would be to initiate a dialogue with the Auditor General's Office and with Treasury Board to find out what role they play and what they can do for you, the members of Parliament, who ultimately are held accountable. I think your committee has communicated extensively with the Auditor General, but perhaps less so with Treasury Board. I suggest that you look at the work that you are doing and take care not to waste time doing studies that others are doing.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Earlier, you concluded your remarks by asking that we not focus on micromanagement. How do you define “micromanagement”, since you want us to avoid that approach?

[Arthur Kroeger]

Focusing on 64¢ would be one example of micromanagement. It's not merely the fact of having too many regulations. The Auditor General said there was too much, as did Justice Gomery. The problem is not only the large number of regulations, but the climate in which all public servants work. If they are afraid of doing something, even something small, that is not authorized in a document of some sort, this can be very bad for relations between the government, members of Parliament, regardless of political affiliation, and Canadians.

As I said, micromanagement may not be the direct result, but rather the indirect result, of your studies. If you find that there are not enough regulations, that more laws, more audits and so forth are needed, then this will impact the way in which public servants perform their duties.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

That's very interesting. Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Laforest, Mr. Kroeger.

You have eight minutes, Mr. Williams.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you very much, Mr. Chairman.

Welcome, Mr. Kroeger. It's nice to see you back here.

Of course the big question is, did you find the 64¢?

[Arthur Kroeger]

I don't think we did.

[John Williams, Conservative, Edmonton—St. Albert, AB]

You didn't? We'll have to write a report on that.

[Some hon. members]

Oh, oh!

[John Williams, Conservative, Edmonton—St. Albert, AB]

I appreciate your comments, and I very much agree with you that the Treasury Board's job is not to micromanage government departments. My goodness, there should be enough professionalism in the departments so that they can manage themselves, subject to supervision and accountability by Treasury Board.

This is where things have gone right off the rails. If we govern by principles only, it's hard sometimes when things go off the rails to realize that they are going off the rails and to get them back. This is where it's a bit of a conundrum.

There are a couple of points I wanted to discuss with you. First, a year or so ago, the government decided that chief financial officers should be professional accountants. What a surprise. These people are handling billions of dollars—$200 billion in total—and there are about 20 or 25 CFOs. Now we say that perhaps they should be professional accountants. Wow! Why haven't they been professional accountants for 40 or 50 years? I don't know.

On the same line, we just dealt with an issue regarding the estimates and the gun registry, where there was a big debate here at the public accounts committee—I think there was about $21 million or $23 million—about whether it had to be reported in the supplementary estimates or whether it could be allowed to slide to another time. It just happened to be a politically hot and difficult time for the government of the day. They had a simple little legal opinion that said, you can't avoid it; you have to seek permission, seek authorization, and seek the estimates. They didn't like that, so they got a long, convoluted, contorted, difficult, impossible to read, and impossible to agree with legal opinion that finally said, oh yes, you can do this.

The Comptroller General of Canada was trumped. Now this is a senior accountant for the Government of Canada, a professional accountant, who was trumped by a legal opinion by a contract lawyer, as to what the accounting procedure should be.

Here we have this conundrum. We're trying to say we're governed by rules, but when the rules don't apply, people.... We found out it was Ms. Bloodworth, I believe, who took the responsibility for that decision, and she is a deputy minister. She said, hey, I decided we needed a different legal opinion.

So principles are fine, but you shouldn't use micromanagement by the Treasury Board. When deputies comes up against something they don't like, they find a way around it. Let's square the circle, or whatever the phrase actually is.

[Arthur Kroeger]

There's no simple answer to the question. The government is very complicated, and one of the jobs of officials is to help ministers find ways of getting the business of government done.

That said, you obviously should be doing it within what is permitted by law, what is good governance, and so forth. I would not fault officials for casting about to see whether there's some way of getting around a roadblock. Then it's a matter of judgment whether the way this is used is proper or not.

I'm afraid I'm not familiar with the case Mr. Williams refers to.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Another question, and this is something I've had in my mind for quite some time, Mr. Chairman, is that when the CFOs are not professional accountants and they rise up through the bureaucracy, starting way down at wherever, and become senior people, we need to have what I call cross-fertilization between the public sector and the private sector, so that we can understand each other better.

There's nothing absolutely magical about the management of the public sector that a private sector CFO from a bank couldn't handle. This could be a CFO of Human Resources and Social Development, for example. We need to have what I call cross-fertilization.

I know there are some restrictions. I'll put it on the record, Mr. Chairman, because it might find its way into the report. I think we need to take a look at pension plans and other things that are inhibitors preventing cross-fertilization. We could get that into the report.

What's your comment on this concept of cross-fertilization?

[Arthur Kroeger]

It's good idea; it's important. It can be hard to do, which is why, although people have been trying for many years, there isn't as much of it as there ought to be.

It's hard to do in several different ways. First of all, there's the money problem. If you get somebody who's the chief financial officer of the Bank of Nova Scotia and invite them to come to work in Ottawa for $170,000 a year, you probably won't get many takers. On the other hand, are you going to bring someone in for $700,000, when the chief financial officer in the department next door is making $170,000?

Those are the kinds of problems. But it's too bad those exist, because I think the public service benefits all the time, if you can compare notes with somebody from another big organization and ask, how did you do it, how did you cope with a situation like this? You should be able to learn from them, and they might learn some things that they can take back to the private sector as well.

There is another feature. I was once asked to do a study about the problems of bringing people into the public service from outside, because the people involved were concerned that the failure rate was so high. And it is very high, particularly at the most senior levels, not with lawyers and not with financial officers. If you bring someone in as a deputy minister who's been the executive vice-president of a private sector corporation, to some extent it's like landing on the moon. Those of us who live in this city don't realize how complicated government is in many ways. Members of Parliament certainly know.