Public Accounts Committee on Oct. 5th, 2011

[The Chair, NDP, David Christopherson]

I call this meeting to order. This is meeting number 6 of the Standing Committee on Public Accounts. The matter before us is the spring 2011 report of the Auditor General of Canada, which has been forwarded to us from the House after it was tabled in June.

I would advise colleagues to be aware that this meeting is being televised. I will also welcome our interim Auditor General, Mr. John Wiersema. I'll ask him in just a moment to introduce his delegation.

But before that, I'd like to bring to the attention of colleagues that we have a distinguished guest with us today, and that is Dr. Mohammad Sharif Sharifi. He is in his tenth year of serving as Afghan Auditor General.

Welcome, sir. We're pleased to have you here. We wish you safe travels during your time here in our country, sir.

[Some hon. members]

Hear, hear!

[The Chair, NDP, David Christopherson]

With that, hearing no points of order or other matters, I will then go to Mr. Wiersema for an introduction of his delegation and his opening remarks.

Sir, you have the floor.

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

Good afternoon, Mr. Chair, and thank you very much.

Thank you for inviting us to appear before the committee today to discuss the two reports that we tabled in the House of Commons on June 9, 2011.

Mr. Chairman, you indicated that this is the sixth meeting of the committee in this Parliament. This is the first opportunity that we've had to meet with this committee, so I would like to congratulate all the members of the committee on their election or re-election to the House of Commons and indicate that we're very much looking forward to working with this committee in this Parliament.

I'm accompanied by Wendy Loschiuk and Ronnie Campbell, assistant auditors general, who were responsible for a number of the chapters that were included in the two reports that were tabled today.

With your permission, Mr. Chair, I'd like to now give you a brief description of the chapters in each of the reports that we've tabled.

I am going to start with our Spring Report. The first chapter deals with the expenditures for the G8 and G20 summits. We found that Parliament was not clearly informed of the total amount of funding requested by departments.

Fourteen departments asked for funding over two fiscal years in seven separate requests. This made it almost impossible for Parliament to know the total amount of money that was being requested. Government should ensure that parliamentarians have a clear picture of the total funding being requested for initiatives involving many departments such as this.

At the time of our audit, departments were projecting expenditures of about $664 million for the two summits, just over half of the $1.1 billion that was approved by Parliament. Because of the short timeframe to prepare for the summits, departments had to prepare budgets quickly, often with limited information. As a result, the funding requests significantly overestimated the amounts needed.

I turn now, Mr. Chairman, to the G-8 legacy infrastructure fund. Parliament received a request for $83 million for the border infrastructure fund. It was not informed that $50 million of that amount was intended to fund infrastructure projects in the region hosting the summit. When government presents a request for funds to Parliament, it should be transparent about the intended use of the money.

Thirty-two projects were approved for funding by the former Minister of Infrastructure on the advice of the former Minister of Industry. Public servants were not involved in the selection of the projects.

I am very concerned that documentation was not available within the federal government to explain how or why these 32 projects were selected. Supporting documentation is important for transparency and for accountability.

I will move now to the reserve force pension plan. This plan had been under discussion and development for more than 10 years, yet the Department of National Defence dropped the ball. As a result, many reservists could face delays of seven years or longer to find out what their pension benefits will be. The department did not have enough staff or adequate systems in place when the plan came into force in 2007; this led to significant backlogs.

About 9,000 reservists in the plan have sought to buy back past service. At the time of our audit, fewer than 400 of these requests had been processed.

Reservists play a critical role within the Canadian Forces. They should not have to wait this long to receive the pension services they are entitled to.

I will now move to the chapters in our 2011 status report. Our status reports answer the question: has the government made satisfactory progress in acting on problems identified in past audit reports. We are reporting satisfactory progress in two of the six areas we examined, those two being financial management and control, and internal audit.

The opening to the status report, “Matters of Special Importance”, was Mrs. Fraser's final message to Parliament as Auditor General. In it, she noted areas where the government has made progress and two areas where she reported action is needed.

The first chapter of this report deals with financial management. With annual spending of about $275 billion, the government clearly needs good financial management.

We are pleased that the government has enhanced its financial management capacity with a significant increase in people with financial expertise.

Internal audit is another area where we found satisfactory progress.

Strong internal audits can help an organization achieve its objectives, improve its management practices, and make it more effective. I'm particularly pleased to see the significant improvements made in internal audits. I'm also impressed by the role departmental audit committees are playing in strengthening internal audits and in improving management practices.

Let me turn now to large information technology projects, one of the areas in which the government's progress has been unsatisfactory.

Continued investment in information technology is needed to deliver services to Canadians. Developing these systems is complex and expensive. It needs to be managed well.

We note improvement in certain areas. However, action is needed in planning and monitoring projects, and measuring results—areas that are still weak.

The government's progress has also been unsatisfactory in the area of programs for first nations on reserves. I am very disappointed that conditions on reserves have worsened and are well below the national average.

The education gap between first nations living on reserves and the general Canadian population has widened. Houses are in poor condition, and the housing shortage on reserves has increased. More than half the drinking water systems on reserves still pose a significant risk to the communities.

A preface to this chapter provides an overview of the structural impediments that have hindered progress on reserves.

Improving conditions on reserves will be a difficult challenge. It will take first nations and government working together in new ways to resolve these issues.

Turning now to the national police services, the RCMP provides specialized services used by police forces across Canada. These include fingerprint identification, DNA analysis, and other services important to public safety in the criminal justice system. The RCMP has made unsatisfactory progress in addressing longstanding issues that affect its ability to provide these services. We are concerned by the lack of progress in this area. The federal government, working with provincial, territorial, and municipal partners, needs to decide which police services should be provided and how they should be delivered and funded.

I'll turn now to the chapter on regulating medical devices.

Canadians rely on Health Canada to ensure that they have timely access to safe and effective medical devices. These devices range from bandages to pacemakers. They play an important role in the quality of health care. The department's progress in regulating the safety and effectiveness of these medical devices has been unsatisfactory. Health Canada needs to improve its on-time performance, use foreign reviews to reduce delays, and ensure that it adequately monitors the safety and effectiveness of medical devices available in Canada.

The last chapter in the status report includes the main points of special examination reports on four crown corporations. They were issued in 2010. We report on whether or not there were significant deficiencies that could prevent these corporations from achieving their objectives.

We are pleased to note that there were no significant deficiencies in two of the corporations we examined: the Canada Deposit Insurance Corporation and Telefilm Canada. We did, however, find significant deficiencies in the National Arts Centre Corporation and the Freshwater Fish Marketing Corporation.

Mr. Chair, that concludes my opening statement. We will be happy to answer any questions you may have.

[The Chair, NDP, David Christopherson]

Thank you very much. We appreciate that.

Following the prior agreed to rotation for speaking, the first spot goes to the government.

I have Mr. Saxton on my list. Mr. Saxton, you have the floor, sir.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much, Mr. Chair. Thanks to our witnesses as well for being here today.

The government has accepted the recommendations made by the Auditor General in the spring 2011 report and updates. The Office of the Auditor General provides an important challenge function to ensure the best possible outcome for taxpayers.

My questions are for the interim Auditor General. There have been some questions raised by the opposition as to why the border infrastructure fund was used for the G-8 legacy projects. I would like to address that by quoting my colleague, the Hon. John Baird, who said, “Public Servants in my department made a recommendation we could use the Border Infrastructure Fund as an existing authority so we could move expeditiously.” He goes on to say that he accepts responsibility for that decision.

Mr. Wiersema, you too were quoted as saying that the evidence you saw suggested that this was done for matters of expediency. Is that correct?

[John Wiersema]

That is correct, Mr. Chairman. The evidence we saw indicates that this was done for reasons of expediency, but I would indicate that in a situation like this I'm not sure it's appropriate for expediency to trump the proper reporting of information to Parliament and transparency in that disclosure.

I believe the government was aware that the funds were intended for the legacy fund, and to present it to Parliament for reasons of expediency as part of the border infrastructure fund, in my view, doesn't make it right. That's a serious concern to me, notwithstanding the reasons that were behind it. How government requests funding from Parliament should be transparent.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

Through the course of your examination, did you find any G-8 legacy projects where money was not accounted for?

[John Wiersema]

Mr. Chairman, as I indicated in my opening statement, and as the report indicates, no documentation exists in the federal government to indicate how the 32 projects were selected from the 200-and-some that were submitted. Once those projects were selected and approved by the ministers, they were transferred to Infrastructure Canada and passed over to the public servants to administer. The public servants did a good job in administering the agreements once the projects had been selected and ensured that Canada got what we paid for in those projects.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

That is consistent with what my colleague the Honourable Tony Clement said when he said that the Auditor General also concludes that not a penny was misallocated or misappropriated and every penny went to the stated, intended purpose.

Some have said that a successful program has three distinct yet very important links. The first is the program intake, the second is project management, and the third is the project completion. The government has agreed with your recommendations surrounding the first link of that important chain, that improvements should be made. In your report you said the following statement, and I quote:

Infrastructure Canada maintained project records and established project management frameworks.

What does that mean, and why is that important to the members of this committee and to Canadians?

[John Wiersema]

As I indicated, Mr. Chairman, once the projects were selected and handed over to Infrastructure Canada, Infrastructure Canada officials did a good job in administering those projects and ensuring that the government received what it paid for under those agreements. The issue of concern with respect to the 32 projects that we indicated in the report was how they got selected. Why those 32?

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

The NDP suggests that your office was kept in the dark about the fact that officials attended the local area leadership group meetings. Were you aware that officials had attended those meetings?

[John Wiersema]

As a result of documentation that subsequently was made public, Mr. Chairman, I have become aware of documentation that had its origins in municipal governments. We've reviewed that documentation and continue to stand behind the conclusion of our report, which is that public servants were not involved in the selection of the projects, although they attended some meetings that did not involve discussions as to which projects would be selected for funding. I've reconfirmed that with senior officials in government, that government officials were not involved in the selection.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

While we understand now that the G-8 legacy fund was not clearly listed in the estimates, is this the first time your office has made a recommendation that the listing of a program or service could have been clearer in the estimates?

[The Chair, NDP, David Christopherson]

A very brief answer, please.

[John Wiersema]

Mr. Chairman, I'd have to go back and check every single recommendation we ever issued. In recent history—and I would define that as my 30-some years in the office—I cannot think of an analogous example where information was presented in the estimates in one fashion when the intent was to use it for quite a different fashion. So I'm not aware of any specific examples at present.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

[The Chair, NDP, David Christopherson]

Thank you both very much.

We're over to the NDP now. I have Monsieur Caron on my list.

Monsieur Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chairman.

I would also like to welcome the Interim Auditor General and his team to the committee.

Like my colleague, I am particularly interested in Chapter 2 of the Spring 2011 Report on the G8 Legacy Infrastructure Fund.

As regards the answers you received from the different departments when you conducted your review, are you able to confirm that they were all signed by ministers and deputy ministers?

[John Wiersema]

As a normal part of our practice, Mr. Chairman, with every report we issue we ask for the deputy minister's confirmation that the facts presented in the report are accurate. We received those confirmations from the deputy ministers working in the departments that were involved with the G-8 legacy fund.

Those departments, I believe—and Wendy Loschiuk will help me here—are Industry Canada, Infrastructure Canada, Foreign Affairs, and Treasury Board Secretariat probably.

Yes, they've confirmed the facts.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

In your report, you mentioned that you had spoken to officials from several different departments in order to ascertain how funding levels had been set. You talked about officials. You mentioned several departments, such as Infrastructure Canada, Industry Canada, the Office of the Coordinator for the 2010 Olympics and G8 Security, which reports to the Privy Council Office, the Royal Canadian Mounted Police, and the Summits Management Office, which comes under Foreign Affairs and International Trade Canada.

This is what you say in your report: “Senior officials were not able to provide us with any information and said their input had not been sought as part of that process.”

In the document we obtained from the Local Area Leadership Group, which became a major topic of discussion following the NDP's research, it says that Minister Clement informed local mayors that the level of funding would be set by the Prime Minister's Office.

In your opinion, would that explain the fact that none of the departments you questioned was able to explain how the funding level had been set?

[John Wiersema]

Mr. Chairman, in terms of explaining how the funding levels are determined, that's probably a question best posed to government. When we inquired how the amount of this fund was established at $50 million, relative to similar examples, we were not able to get a clear explanation from the departments.

I would ask Ms. Loschiuk if she can shed any further light on this for the committee.

[Wendy Loschiuk, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Chair.

We made simple investigations into why it was $50 million, but there was really very little information available. We had asked, through the normal course of doing our interviews, the departments that were involved in this, but they had explained to us that it was really not a decision that was made at their level. That was more of a government decision and they were not involved.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

My next question is connected to your opening presentation, where you state that public servants were not involved in the selection of projects. Through our own research, we have determined thus far that at least 12 officials did take part. They were from four different departments, including Infrastructure Canada, Foreign Affairs and International Trade Canada, FedNor and Industry Canada.

Do you mean that these 12 public servants did not answer your questions when you submitted them to the department, or that their involvement was not mentioned?

[John Wiersema]

Mr. Chairman, public servants were involved in supporting the minister in a number of meetings. Public servants indicated to us, and that was confirmed by the documentation, that they were not involved in the selection of the projects. I continue to believe that was the case. I stand behind that conclusion, that public servants were not involved in the actual project selection.

We have had a look at the documentation from the municipalities. It's subsequently been made public. Notwithstanding that documentation, we maintain the position that, in our view, public servants were not involved in the selection of projects.

There was one particular meeting where it was not clear whether or not the meeting involved discussions and selection of projects or the program overall. In that particular case, I have reconfirmed with the deputy minister that it was not a meeting that involved decisions as to the selection of projects, and he has reconfirmed to me, in writing, that public servants were not involved in project selection.