Public Accounts Committee on May 2nd, 2013

[Malcolm Allen, NDP, Welland, ON]

That was my next question, about satisfactory/unsatisfactory, but you've already articulated that, Mr. Auditor General. I appreciate it.

But let me just quickly read into the record the very bottom of paragraph 2.29:

Unlike the previous version of the Policy, the 2009 Policy does not state whether contracted firms with access to protected and classified information are required to hold a security clearance. In our opinion,

—this is the Auditor General's opinion—

this is an important gap that could result in inconsistent application of the Policy and thus introduce additional security risk.

So not only did they not follow through in 2007, but we get to this point in this audit, and lo and behold, we still have the Auditor General saying there's security risk, in paragraph 2.29.

Sir, I'm looking at page 68. There's a chart, exhibit 2.8, and I'll go specifically to National Defence. It shows the “Number of contracts with security requirements” and the “Number of contracts without security requirements”. The total is 48 for the two of them: 25 with and 23 without.

According to your final column, “Number of contracts with incomplete or absent security documentation or improper application of controls”, it's 32 out of 48 for the defence department. This is not the transport department, VIA Rail, or the postal service—no offence to either one of those two crown corporations; they're both brilliant crown corporations, I think—but the defence department. That translates into 66% of these contracts that didn't meet the requirements when it comes to security.

Are my numbers off there, or am I correct?

[Michael Ferguson]

Mr. Chair, we did find, as was stated, that the number of contracts with incomplete or absent security documentation or improper application of controls was 32 out of the total contracts we reviewed in National Defence.

I think, as we state in paragraph 2.69 in terms of that whole exhibit, that the majority of the files in which there were weaknesses “did not present significant security risks”, but certainly some of them could have presented significant security risks. Many of the weaknesses were “a lack of proper application of controls”.

But again, we deemed that progress was not satisfactory; this information constitutes another reason that we felt progress was not satisfactory. Fundamentally, these things need to be improved so that these numbers are better.

[The Chair, NDP, David Christopherson]

Very good. Thank you. The time has expired.

I would just note that Mr. Clarke has joined us.

Welcome, sir.

Now we'll begin the rotation anew.

Oh, I'm sorry; we have one more to go on the former rotation and then will begin the new one.

Mr. Saxton, you have the floor, sir.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much, Mr. Chair.

Mr. Ferguson, in chapter 4, entitled “Official Development Assistance through Multilateral Organizations”, the report does not have a formal recommendation regarding your concern about the reporting on the use of trust funds at multilateral organizations.

Was there a reason for this?

[Michael Ferguson]

Mr. Chair, the issue we had here was with the reporting of these trust funds. I'm trying to recall exactly.... I think in paragraph 4.61 we talk about the need for the government to improve the statistical report on international assistance. One of the improvements would be around the trust funds—how much is sitting in trust funds, when it actually is spent, and that sort of thing. I don't think it is specifically itemized there—I'm just trying to look at it again quickly—but that is where we would like to see the improvement: in the reporting in the statistical report.

[Andrew Saxton, Conservative, North Vancouver, BC]

Then your recommendation would be what, therefore?

[Michael Ferguson]

Right now, the way this type of reporting shows up is that when the amount, say, goes out of the government's bank account, it shows up in the statistical report as spent, which from an accounting point of view it is. But there are often situations in which the money is still sitting in trust in the multilateral. It hasn't actually been spent on the ground in the countries in which it is supposed to have impact on poverty levels and that sort of thing.

What we would like to see is something in the statistical report that indicates how much money is in trust, and then a continuity schedule showing how much was there last year, how much has come out because it actually did go to programs, how much more money was put into the trust accounts, and then the balance. It's a continuity schedule that lets people understand that some of this money isn't going to be spent for two or three years, but some money was spent this year that had gone into trust accounts in the previous year—just to give the full picture.

[Andrew Saxton, Conservative, North Vancouver, BC]

Right. Thank you for that.

CIDA's business, as you know, is a multi-year business and at times is quite volatile in nature. I'm sure you saw this year the situation in Mali, which has changed plans midway. Also, CIDA deals with the complex nature of humanitarian crises caused by natural disasters and political crises.

Given these considerations, would you have general thoughts on considering multi-year budgeting and on what some of the downsides are, specifically to accounting and audit?

[Michael Ferguson]

Do you mean, for multi-year budgeting in general?

[Andrew Saxton, Conservative, North Vancouver, BC]

Yes.

[Michael Ferguson]

Mr. Chair, that's not something we have done an audit on.

I think the concept of multi-year budgets is something that in certain cases is worth consideration. Of course, it always runs into the normal issue that appropriations are usually done on an annual basis.

So it's not something I can give a definitive answer on, but it's something that is worth discussion.

[Andrew Saxton, Conservative, North Vancouver, BC]

Can you discuss the challenges that multi-year budgeting might present with regard to accounting and audit?

[Michael Ferguson]

Mr. Chair, I don't think there are any particular challenges that multi-year budgeting would present in accounting or audit terms. I think it's more an issue of making sure that it can fit within the appropriation process.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

In chapter 5, “Promoting Diabetes Prevention and Control”, the report notes that activities related to diabetes have not been fully coordinated at the federal health portfolio level.

I want to mention that, as I'm sure you would appreciate, all chronic diseases share many common risk factors, such as, in the case of diabetes, for example, tobacco and harmful alcohol use, raised blood pressure, hypertension, physical inactivity, raised cholesterol, obesity, unhealthy diet, and raised blood glucose. These could all contribute to various diseases, including diabetes. The Public Health Agency and our government have taken an approach to address all of these risk factors as a way to reduce chronic disease, including diabetes.

Given that obesity, for example, is a known risk factor for diabetes, I'm interested to know why you didn't evaluate or take into consideration the government's efforts to promote weight loss and healthy diet. I bring this up because our government has made significant investments—for example, in nutrition education and awareness-raising, Nutrition North, the child fitness tax credit, Participaction, healthy living partnerships with the private sector—all of which support diabetes prevention and should be taken into account when assessing the government's efforts.

I just want to ask whether you would agree with that.

[Michael Ferguson]

Certainly, Mr. Chair, when we discussed this issue with the Public Health Agency, we were told that their focus has been on dealing with those common risk factors, such as childhood obesity and that sort of thing. We were looking, though, at trying to find out what the overall strategy was around diabetes.

In the chapter, we indicate that there are a number of activities going on, and some of them are good activities, but what we were looking for is the overall strategy that would help bring all of those activities together in a way that helps them leverage off each other, so that they're not just a series of activities, but a series of things that are contributing to the meeting of an overall strategy.

[The Chair, NDP, David Christopherson]

Thank you. Time has expired.

Now we will begin anew, and we will start with Mr. Kramp.

You have the floor, sir.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

From a little bit different perspective, I will be directing my question to CRA, should they come before committee on this. But perhaps you can give me some clarification, because I'm also going to wear the hat of a person who has 30-some-years' experience in business and actually was, and fairly so, subject to audit, which would be solidly understandable.

When taking a look at the amount of money that's owing, we certainly recognize the need for penalty and interest accumulation and everything that goes along with trying to encourage people to pay the arrears. The challenge, of course, is how, why, when, and where we do this.

I'm not going to get into a collection process with you right now, but what I am concerned about...and I'll give you one quick, little hardship case and then I'll ask my question. A particular constituent owed $1.5 million. They ended up paying $1.6 million. They ended up owing, still, another $800,000. That's pretty onerous.

But of course, that's not the question to you. The question for you is this. When you calculate the receivable that is outstanding—the significant accumulation of interest and penalty versus principal—have you actually separated how much is an actual debt and how much is an accumulation of penalty and interest?

[Michael Ferguson]

Mr. Chair, that information is not in the report, so it's not something I have at my fingertips. I think the one thing I can say is that now Canada Revenue Agency does have a better idea of how much of the outstanding tax debt relates to interest. It would be a question best posed to the agency.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine. Thank you. I just didn't know if you had taken that into account in your evaluation of outstanding receivables, but I'm quite comfortable with your explanation on that, and certainly I think CRA, given the opportunity, should come forward with that in testimony. So I will certainly ask that, and I do appreciate it.

As Mr. Van Kesteren has stated, I also have a significant number of agricultural producers in my riding. There's a little bit of a contradiction in section 1.33 of your report, and I wonder if you could just give me some clarification. Under evaluating the effectiveness of programs regarding Agriculture and Agri-Food Canada, you state that “evaluations should only be counted for coverage once they are completed, because planned evaluations can be delayed or cancelled.”

However, paragraph 1.52 of your report subsequently outlines two important benefits of ongoing evaluations. So we have completed versus ongoing evaluations. This contradiction appears to be consistent throughout the report. So perhaps you could explain and articulate your position on why they continually contradict themselves in the report. To someone like me at least, that appears to be the case. Could you give me some justification for that?

[Michael Ferguson]

I'll ask Mr. Maxwell to answer the question.

[Neil Maxwell, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

We're really talking about two quite separate things. Completed evaluations are important, because the Financial Administration Act requires that all grants and contribution programs be evaluated within a five-year period, so we're largely talking about a legal compliance issue that's set out in the law. Ongoing evaluations are also important, because evaluation has to be very timely and has to support decision-making.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine. Thank you very much. I do appreciate that.

I was formerly involved in security at one particular point in my past history, so I'm a little surprised in one way. CSIS plays a pretty important role in the security and safety of our nation, and yet in your status report on security and all the contracting and so on, there is no recommendation for CSIS at all. I'm just curious as to why.

[Michael Ferguson]

Mr. Chair, we found in general that the practices at CSIS related to security and contracting were good practices. I think there was one place where we noted—I think it's in paragraph 2.73—that we would encourage CSIS to strengthen its control for clearances of firms. Essentially we found good practices in CSIS. We found one place where they could maybe just improve, but overall we found that they were doing the things we expected them to do.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Great. I can recall of course the 2007 performance report for the RCMP. I certainly remember it well. In this report, in paragraph 2.91, you have stated that the RCMP has obviously made some dramatic improvements and uses good practices. I'm wondering if you could maybe illustrate a few of those or perhaps demonstrate how sharing these as best practices would be beneficial.

[Michael Ferguson]

Mr. Chair, I'll ask Ms. Cheng to deal with that.