Public Accounts Committee on April 21st, 2009

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

We will definitely persevere, that's for sure.

[Sheila Fraser]

When we receive requests from committees, we give them serious consideration.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

I now have a question for Treasury Board.

In your document, you talked about outsourcing. When you do outsourcing, are there standards and rules to ensure that it is not more expensive to entrust this work to people from the outside than to have it done by federal employees?

[Wayne Wouters]

Thank you for your question.

On what we normally require at the border through the secretariat if you're looking at outsourcing the management of a specific project or private-public partnership, we've adopted best practices that other governments have put in place in the private sector. Departments have to bring forward a very detailed business case on the overall costs and benefits to the government in moving forward with an outsourcing proposal. Often the advantage is sharing the risks and rewards. Where the private sector firm can provide upfront investment in some of these, particularly if it's IT related, they tend to be very lumpy investments, and the costs are pretty significant up front.

There are normally efficiencies gained in the delivery, and we can work out arrangements for sharing the profits from the efficiencies over time. So it's a matter of looking at that from a cost-benefit perspective to determine if it is better than doing it ourselves. Every case we look at is quite different, and that's the approach we take.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

I'll tell you why I want to ensure that outsourcing rules and standards exist. For example, a contractor is currently doing repairs on the West Bloc. This contractor gave the work to a sub-contractor, who in turn entrusted it to another sub-contractor. In the end, the first contractor went bankrupt. The department or the Treasury Board never checked to ensure that the first contractor was solvent. In fact, this story recently made newspaper headlines. I'm wondering how the government goes about doing outsourcing. That's just one example. I haven't looked for others.

[Wayne Wouters]

I'm sorry, I can't comment on that specific case.

I think what we do as part of our overall risk assessment when departments come forward with these proposals to the board...and not all of them come to the board for approval. Some of them are within the department's own authorities. It's only when projects are of a certain size or complexity that they may require Treasury Board approval. In that case, as part of the due diligence that we will require, again the overall financial viability of the proponent, of the contractor, will have to be determined. We'd want to see that as part of the due diligence or cost-benefit work that we will require as part of any proposal coming to the board.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Desnoyers.

Mr. Christopherson, seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

I thank you all for your presentations today.

Let me just take the opportunity to say this. I got here almost five years ago, and since that time I've been on this committee continuously. In the last two Parliaments, I've actually made it a priority when I've met with my leader; I wanted to be on this committee. I enjoy the work.

I just want to say to the Canadian people, while we have the public cameras on us, how well served I believe Canadians are by the high calibre, integrity, and professionalism that each one of you brings to your tasks. You could all make a lot more money and have a lot higher status if you wanted to go elsewhere, yet you're here serving the Canadian people. Thank you for that. You do a great job, and we appreciate it.

[Some hon. members]

Hear, hear!

[David Christopherson, NDP, Hamilton Centre, ON]

Having said that....

[Some hon. members]

Oh, oh!

[David Christopherson, NDP, Hamilton Centre, ON]

These are just a couple of little things--really small--that I've just noticed. You don't even have to comment on them.

We have three presentations in front of us, and only one of them is double-sided. Given that the environment is part of...and it's the Auditor General's presentation that is double-sided. They're in good shape.

But this begs another question. As I was thinking about the first part, I was looking around and thinking about all the bleach we still use in government to make paper white. At some point, there are some really fundamental things that we could do that would make a big difference.

At any rate, I want to turn first to the clip from today's Globe and Mail, with the headline of “Inquiry into Revenue Canada auditors sprung from Mafia probe”. It's a bit of an ongoing story. It speaks to the fact that two employees, I believe, of Revenue Canada who are team leaders, who supervise other investigators, were alleged to have been conducting themselves in an inappropriate way, shall we say, and that the only reason it was found out was that the RCMP were doing a Montreal Mafia investigation, Project Coliseum. They sort of tripped over this as a secondary matter.

Given the fact that we have the Auditor General, we have Treasury Board, we have the Comptroller General, and we have assistants and auditors all over the place, why did it take the RCMP--it's almost like it took the auditors to get Al Capone--to get auditors?

[Sheila Fraser]

I've only read about this thing in the newspapers, but I can tell you that in audit it is very difficult, if not impossible, to find collusion. When an employee within is colluding with someone outside--I think there were even questions that they were manipulating the way audits were being done and were giving information to help commit an alleged fraud outside--it is very difficult. In our audit procedures, we have certain standards we have to follow to see if we can detect fraud. We will go through that, but it is very difficult. And this sounds actually quite sophisticated.

Unfortunately, I think many of these kinds of things are found through other investigations. I believe they came across certain documents from the Revenue Agency that should not have been outside the Revenue Agency--

[David Christopherson, NDP, Hamilton Centre, ON]

Pictures, actually; somebody saw a picture and said, “Hey, that's....”

[Sheila Fraser]

And so that's what started it. To find that within an audit would be difficult.

[David Christopherson, NDP, Hamilton Centre, ON]

I've got to tell you I hear what you're saying, but--just to push back a little--we are supposed to have systems in place that allow us to catch that. Catching it incidentally would be done by design. You're looking at it from different directions.

It's Revenue Canada, no less. It's a financial department. It's not like the transportation department was doing something financial. It's the whole heart of the matter. By the looks of it, there are allegations that they were able to corrupt it. It just seems to me that we've been piling on internal auditors, and....

I noted some of Mr. Monette's comments about the work that's being done internally. I hear you that it's difficult to get, but you know, for us, that can't always be good enough.

[Rod Monette]

Thank you, Mr. Chair and Mr. Christopherson.

One of the things I think we're getting a little bit better at is the whole area of fraud detection. We have learned a bit in the last couple of years. There was a recent fraud at PWGSC, and when we looked at it, we found that when people do these things, there are patterns. The people who do this kind of work can now go into a computer system and have ways of pulling out the information to see whether those same kinds of patterns are there. It's a growing area that we're developing expertise in. I agree with the Auditor General that it's not something you can be perfect at, but there are some new techniques that will be very helpful to us. We're trying to make sure that our auditors have those tools.

[David Christopherson, NDP, Hamilton Centre, ON]

Good. Thanks.

I want to move on to the Auditor General's report, page 10. Under “Our Impact”, I appreciate the bullet point that says, “Since we launched our Status Report in 2002, we have reported that departments have made satisfactory progress in more than half of our follow-up audits.” That can also be put the other way: holy smokes, almost half are not complying, which is a more troublesome way to look at it.

Over the last couple of years, we've been dealing with and now have in place, I'm pleased to see—and I was amazed that nothing existed when I got here, not that I led this change, but I was a part of it—the ability to monitor our recommendations, so that we can go back a year and a half later to determine whether there was action on our recommendations, after they have come forward and said they will do everything—“Don't worry; everything will be okay”—and then go off, and nothing happens. We get the attention of departments in a serious way when the Auditor General tables her report; we get response in a serious way when we bring them in and hold a hearing. Outside of these occasions, the culture seems to be that those recommendations aren't that important. I'm just saying that this is the impression that's left: it's not that important; it's something you have to get through rather than address.

Here we are now, having to put systems in place, and we're doing it, and that's good, but still, this concerns our recommendations. Almost half of the Auditor General's recommendations aren't being complied with.

My question is this. What more do we need to do, at the parliamentary level, to change the culture so that these things matter and so that it's no longer acceptable to stickhandle your way through a day or two of tough media attention, and then after that you're into clear sailing?

[Rod Monette]

Thank you, Mr. Christopherson.

I've personally visited about two dozen of these, and the people in the departments are taking seriously the new audit committees we have, with external members; they really are. One of the jobs these committees have is to go through not just the Auditor General's recommendations but internal audit recommendations and then to report on them every year. With the system we're putting in place, those reports will come to us at the Comptroller General's office, and we will have some sense of how this is going. People are taking the new committees seriously, and they are having a big impact in holding people accountable and asking, where's your progress against this recommendation or that recommendation?

[Wayne Wouters]

I had to do this personally in my own department with our new internal audit committee, with three external members. We put a very comprehensive report together, looking at both the recommendations from the Auditor General and the recommendations for the internal audit. I must say I found it very educational for me. These were, in some cases, areas in which we had not followed up. We did a fairly good job, I have to say, overall; we weren't in bad shape. But I think these new committees really have raised the bar on a whole number of fronts, including ensuring that we are following through not only with the Auditor General's audits but with our own internal audits. It stands to reason that we simply should be doing this as a matter of course. I think we're seeing that happen much more.

[Sheila Fraser]

Mr. Chair, I would just add, for when we have a discussion on Thursday on our departmental performance report, that we receive information from the departments on the implementation of recommendations—referring to the status report. I wish I had the statistics with me, but I think if we combine them, recommendations that are fully implemented and those that are substantially implemented are over 80% of the total. Granted, I think there are some departments whose rates are much lower than that, and those are the ones we'll have to keep looking at, but I believe that the audit committees are making a difference as well, in that they are keeping this on the agenda in front of senior management.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson.

Mr. Saxton, you have seven minutes.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair.

Thanks to all of you for being here today.

I know, Mr. Smith, you've already spent a few hours in front of another committee, so we recognize that this has been a long day for you. Thank you again for coming.

I know that this meeting is not supposed to be about the economic stimulus package, but since my colleague opposite brought it up, I think it would be helpful to hear what accountability measures are in place with regard to these expenditures.

[Wayne Wouters]

Since Alister has been answering a lot of questions on the economic stimulus package at various committees over the last number of weeks, I'm sure he has probably responded to this, so I'll turn to him.

That has been part and parcel of the work we've done through the secretariat and the board. Yes, we have moved up the processes to ensure we get the appropriate authorities, but as part of doing that, we also wanted to ensure we undertook the proper due diligence in our assessments and providing advice to the Treasury Board about a given program, the terms and conditions. Were we comfortable with them; do we feel they have the appropriate oversight in place as they go forward with those? So while we've moved up the process, we've tried to maintain our level of due diligence.

You heard the Comptroller General talk about how we've been working with departments to ensure that their due diligence is also being undertaken at the front end by having the internal audit committees review the terms and conditions to see if there are any problems from a control point of view. The chief financial officer has being very involved in looking at these programs as they go forward. And I think that has been our concern: that while there is a need to spend--we all believe we need to spend as quickly as we can--there's also a need to ensure there's the appropriate prudence and due diligence. So it's finding that balance, and I think we have done that overall, program by program, through what departments are being asked to do and what we've done at the Treasury Board Secretariat through my analysts, all my support, who provide the advice on each program as they're coming through to the board.

So that's where we are. It is clearly a higher level of risk, but I think we feel quite comfortable overall that we have found that balance.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay. I assume these expenditures are subject to Treasury Board approval?