Public Accounts Committee on May 2nd, 2013

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Thank you all for being here with us this afternoon.

I want to go to chapter 11 and Farm Credit Canada. Farm Credit is quite important in my neck of the woods. I oftentimes have farmers coming in to my office telling me how thankful they are to have an organization.

In the report, first of all you praise “identifying, measuring, monitoring, and reporting on risks”. Then you go on to suggest that they should possibly be appointing a chief risk officer.

I'm wondering how the survey opinion of one individual might lead to greater success, when we have a proven system in place already. Are we maybe introducing another spoon into the soup and causing more confusion, when we have a good thing going?

[Michael Ferguson]

Mr. Chair, this was a special exam that we did on the Farm Credit Corporation. When we do a special examination, our objective and the scope of the work that we do are established, and we look to see whether there are any significant deficiencies. We have to opine on whether there are any significant deficiencies in specific systems.

In this case we did not find any. We simply made the observation that they should consider whether they need a chief risk officer to help understand how all of the different risks fit together. We're not identifying this as a significant deficiency in any way; we're just saying that it's something they should consider. It's up to the corporation to determine whether this is something that would add value to them.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I just want to make sure I understand this. The organization is functioning quite well in that capacity; it's just that this could be an improvement to the organization. Is that correct?

[Michael Ferguson]

Again, Mr. Chair, the overall conclusion here was that there were no significant deficiencies in their control operations; these things are being managed at a level that is adequate. This is simply something that we were suggesting.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, sir.

The report also recognizes that the loan portfolio has increased by nearly $20 billion over five years. This is an enormous success story. The report goes on to criticize FCC for not reflecting upon how successful it has been in achieving critical outcomes.

Don't you agree that Farm Credit has expanded with economic success and continues to serve and represent hard-working Canadian farmers while remaining task-oriented? Again, there seems to be a little bit of a discrepancy here: on the one hand you attribute to it success; then on the other hand you criticize it for not being able to achieve critical outcomes.

[Michael Ferguson]

Mr. Chair, we would have this type of observation for many organizations. What is critical in performance measure is trying to determine what outcomes the organization is trying to achieve, what performance information you can gather around these, and then how you assess whether it is achieving its intended objectives.

We find many cases in which organizations are only able to measure the activities they do; they're not able to measure the results and the outcomes. We encourage all organizations to continue to work towards bettering their ability to have performance measures based on outcomes.

We found with the Farm Credit Corporation that there was room for them to try to improve in this area. But this is not something that would be an unusual finding for us in many organizations.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Again, you write that Farm Credit “has put in place processes for identifying, measuring, monitoring, and reporting on risks”. Despite this, though, you make the recommendation for a chief risk officer.

Is the answer the same as the one you gave to my first question: that yes, they're doing a good job, but this just may be an improvement in the way it could be run?

[Michael Ferguson]

The way we have it worded is:

The Corporation would benefit from the position of a Chief Risk Officer as it would help senior management and the Board understand the interrelationships in various types of risks.

What we're saying is that to have this type of position would perhaps be the next layer of sophistication or maturity in their approach to risk management. It's for them to consider. We did not find any serious deficiencies in the control environment of this organization.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So everything is going well; let's just take it up to the next level?

[Michael Ferguson]

Again, this would be—

[The Chair, NDP, David Christopherson]

Make it very quick, please.

[Michael Ferguson]

I can only say it the way I've said it, Mr. Chair, that there were no significant deficiencies; there may be some room for improvement.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thanks, Mr. Ferguson.

[The Chair, NDP, David Christopherson]

Very good.

Thank you, Mr. Van Kesteren.

Now we go to Mr. Allen.

You now have the floor, sir.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

Mr. Ferguson, I'm going to look at chapter 2, specifically around page 55, paragraph 2.18. There was a task force created that was supposed to talk about security, to ensure that security of government contracting, whether through Public Works or through Defence contracting—the Department of National Defence's contracting outfit, because there is a separate piece again....

These are actually security measures. I notice that it was determined that there was a group of folks brought together, primarily under the direction of deputy ministers or the equivalent thereof, and a report was written. This was a task force. At the end, the report was actually put together, but not funded.

Am I seeing that correctly, that we could have had a task force giving us a new policy and framework, but then the Treasury Board Secretariat, in this case, didn't fund it? Is that what I'm seeing in this piece?

[Michael Ferguson]

I'll ask Ms. Cheng to answer the question.

[Nancy Cheng, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

Indeed, the Deputy Minister Committee on National Security commissioned a task force. The task force studied the issues surrounding security in contracting and filed a report, which was supported by the deputy minister committee.

The proposal then went forward to Treasury Board Secretariat, which was putting together a funding proposal, and at that time, given the fiscal climate, it was felt that there wasn't going to be the funding for it. That's where the set of recommendations died.

[Malcolm Allen, NDP, Welland, ON]

Just so that I'm clear in my head, let me say it out loud. We strike a deputy ministers task force—the highest level of the public service—to talk about security; we get recommendations on the way we should do security; and we don't fund it.

I'm not asking you.... If you have a yes or no answer to that, I'll take it, Ms. Cheng, but that was a statement.

[Nancy Cheng]

Mr. Chair, there is a standing Deputy Minister Committee on National Security. What they did was commission a task force to work on behalf of the committee to look at the questions. I just want to clarify that.

[Malcolm Allen, NDP, Welland, ON]

Thank you.

On page 57, the last part of paragraph 2.29 talks about a policy that was put together by this government in 2009—they did an update. It notes that “the Security and Contracting Management Standard was not revised and has not been updated since 1996.”

In your sense, when you did this audit, should there have been an update to that piece? Would it have been effective to have that update?

[Michael Ferguson]

Mr. Chair, this was something we expected, based on the recommendation we had made in the previous audit: that the standard would have been revised.

[Malcolm Allen, NDP, Welland, ON]

I'm assuming, Mr. Ferguson, that when you say this, you're talking about the 2007 audit, which the department said it would follow through on. Is that correct?

[Michael Ferguson]

Yes, that's correct.

[Malcolm Allen, NDP, Welland, ON]

In 2007, you suggested that they needed to update this, and they said yes. And yet, when you did this one, lo and behold, we still have a 1996 standard.

[Michael Ferguson]

Mr. Chair, this was a follow-up audit to an audit we had done in 2007. Overall, we deemed that the progress on this file has not been satisfactory. This area would have been one of the reasons we deemed that the overall progress had not been satisfactory.