Public Accounts Committee on Nov. 27th, 2014

[The Chair, NDP, David Christopherson]

I call this 40th meeting of the Standing Committee on Public Accounts to order.

Colleagues, you'll know that we're here today to formally receive the fall report of the Auditor General. Prior to commencing that, I remind members that our next meeting will be on Tuesday, December 2, when we will be doing committee business. Also, I'd like to advise you that it's my intent, schedule permitting, to table the draft report, which we just concluded at our last meeting, on Monday afternoon.

Unless anybody else has matters that must come before this committee, I will turn our attention to the matter at hand.

Seeing none, we will do just that.

Welcome, Mr. Ferguson. It's nice to have you here again, sir. I will give you the floor in a moment to give you an opportunity to make your opening remarks. I will also leave it to you to introduce your august delegation.

With that, sir, I will turn the floor formally over to you for your opening remarks.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you.

Mr. Chair, I am pleased to present our Fall 2014 Report which was tabled in the House of Commons last Tuesday. I am accompanied by Assistant Auditors General Ronnie Campbell, Jerome Berthelette and Wendy Loschiuk.

We are reporting on seven audits which examined a number of different government activities and programs. As is typically the case with our audits, we found good practices in some areas, and we found some practices that need improvement. One concern that I have in looking at these audits is that departments need to have a clearer understanding of whether the services they are providing are truly meeting the needs of Canadians.

In the first of the audits we're reporting on, we looked at how the Government of Canada provides assistance in response to the onset of humanitarian crises in developing countries. We found that Foreign Affairs, Trade and Development Canada considers the needs of affected populations and works through appropriate partners in providing humanitarian assistance in crisis-affected areas.

While we found that Foreign Affairs, Trade and Development Canada can respond quickly to humanitarian appeals and proposals, we also noted that for one third of the projects we examined, responses took three months or longer. There is an opportunity for the department to analyze the timeliness of its responses and find ways to improve response times.

Our second audit looked at the Royal Canadian Mounted Police, or RCMP, Liaison Officer Program. Overall, we found that this program works well to support Canadian law enforcement in combatting transnational crime. Liaison officers are well-qualified and develop good productive working relationships with foreign law enforcement agencies.

There are, however, some opportunities for improvement. For example, we also noted that in general, the RCMP could not access information on Canadians arrested, charged, convicted, and released from prison abroad. Foreign Affairs, Trade and Development Canada and the RCMP need to work together to identify any additional information that can be shared legally.

Turning now to our audit of mental health services for veterans, we found that Veterans Affairs Canada has put in place important mental health supports. However, in many cases, these supports do not facilitate veterans' timely access to mental health services and benefits.

Veterans Affairs Canada needs to do more to overcome the barriers that slow veterans' access to services and benefits. These barriers are a complex application process, delays in obtaining medical and service records from National Defence and the Canadian Armed Forces, and long wait times for getting access to qualified health care professionals and government-funded operational stress injury clinics. This means that from the time they first contact Veterans Affairs Canada, about 20% of veterans have to wait more than eight months before the department gives them a green light to access specialized mental health services.

In this audit, we also looked at what Veterans Affairs Canada is doing to increase awareness among various stakeholder groups of the supports it makes available to veterans.

We found that the department delivers a variety of outreach activities that target its existing clients and soldiers being released from military service. However, it could do more to reach other groups who can encourage veterans to seek help, in particular family doctors and families of veterans.

This report also presents our findings about how the Royal Canadian Mounted Police and the Canadian armed forces have managed selected requirements of the government's 2009 contract for integrated relocation services. Overall, we found that the RCMP has improved its financial and administrative controls for relocation files. For example, it has recently introduced national standard procedures that are intended to ensure that RCMP members receive the appropriate benefits, that the requirements of the Financial Administration Act are met, and that relocation files are handled consistently across the country.

While the Canadian Armed Forces has taken steps to improve the management of the 2009 relocation services contract, we noted weaknesses in the way it verifies relocation transactions. The Canadian Armed Forces should improve its processes to ensure that members consistently receive relocation benefits that meet the requirements of the Financial Administration Act.

For our audit of the support to the automotive sector, we looked at how Industry Canada, the Department of Finance Canada and Export Development Canada managed the $9 billion of financial assistance provided by the federal government to support the 2009 restructuring of the Canadian operations of Chrysler and General Motors. This financial assistance involved complex transactions, high uncertainty, and tight time frames. These circumstances had an impact on what Industry Canada could do to manage the assistance.

We found that Industry Canada, Finance Canada, and Export Development Canada managed the financial support to the automotive sector in a way that contributed to the viability of the companies and the competitiveness of the sector in Canada over the short and medium terms. Industry Canada adequately assessed the recovery prospects of Chrysler and GM and monitored the companies' production commitments in Canada.

However, we also identified weaknesses in the way the assistance was managed and reported. For example, Industry Canada had limited information on concessions and on GM Canada's pension liabilities, making it difficult for the department to understand the impacts on the long-term viability of the companies. Also, there was no comprehensive reporting to Parliament of information about the restructuring assistance. This makes it difficult for government to draw lessons for the future from this experience.

This report also includes an audit of the Nutrition North Canada Program. We found that Aboriginal Affairs and Northern Development Canada has not taken enough measures to meet the objectives of making healthy foods more accessible and affordable to residents of isolated northern communities.

Food costs are significantly higher in the north. lt costs on average twice as much to feed a household in Nunavut as it does elsewhere in Canada. One of the problems we found is that the nutrition north program does not identify eligible communities on the basis of need. For example, there are two communities in northern Ontario that are about 20 kilometres apart and are similarly isolated. One is eligible for a full subsidy of $1.60 per kilogram of food, while the other is eligible for only a partial subsidy of 5¢ per kilogram.

We also found that Aboriginal Affairs and Northern Development Canada has not done the work necessary to verify that northern retailers are passing on to consumers the full government subsidy on eligible foods. If the department was able to verify that this was the case, some of the public skepticism surrounding the nutrition north program could be lessened. This would benefit the department, northern retailers, and the residents of Canada's remote northern communities.

Moving on to our last audit, we looked at the preservation of government records of historical value.

We looked at how Library and Archives Canada acquires and preserves those records, and what it does to facilitate access to them for current and future generations.

We found that Library and Archives Canada is not acquiring all the government records of archival value that it should from federal institutions. Of what it has acquired, 98,000 boxes are waiting to be processed, and some have been around for decades. The backlog includes approximately 24,000 boxes of military records.

We also noted that Library and Archives Canada spent over $15 million on a digital repository that was tested, approved, and ready to use but that ultimately was never used. Library and Archives Canada still does not have an integrated system to manage the electronic transfer, preservation, and storage of digital information. Library and Archives Canada has stated that by 2017, digital will be its format of choice for receiving records. However, we found that the institution is not prepared to manage the volume of digital records it will have to acquire, preserve, and make accessible.

The findings we have presented in particular in our audits of Veterans Affairs Canada, the nutrition north Canada program, and Library and Archives Canada underscore the disconnect that happens when departments don't have a clear understanding of whether the services they are providing are meeting the needs of their clientele. When departments do not fully consider the on-the-ground impact of their activities, they are missing opportunities to verify that they are hitting the mark for Canadians.

Mr. Chair, that concludes my opening statement.

We will be happy to answer your questions.

Thank you.

[The Chair, NDP, David Christopherson]

De rien. Thank you.

Now we'll begin the rotation in the usual fashion, starting with vice-chair John Carmichael.

You now have the floor, sir.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Mr. Chair.

Good afternoon to you, Mr. Ferguson, and to your colleagues. Welcome. It is always good to have you here.

I want to state for the record that I'm always impressed with the volumes of information you are able to provide us on oversight, allowing us to do our jobs more effectively. I thank you for that. It is helpful. It generates great discussion, and obviously these reports generate great reaction that makes our government better at doing its job.

With that, I'd like to begin, if you don't mind, by turning to section 5 on the automotive sector. I've been reading quite a bit about the report in the media and hearing lots of input regarding different sections and content of this report. I'd like to address an area of concern that I have and to seek your assistance. That is with regard to the moneys that were earmarked or designated for the pension issue, paragraph 5.46 specifically. In your report you note that, “$1 billion of the $4 billion that had been earmarked for GM Canada’s pension plans and placed in a separate account was paid instead to the US parent company.”

What I'd like to know is whether there were any conditions put in place upon the release of that $1 billion to the parent company.

[Michael Ferguson]

I don't have with me the specific requirements that were related to that. It was put into a trust account, a separate account, but I don't have the specifics of the account with me.

[John Carmichael, Conservative, Don Valley West, ON]

Okay. Let me read to you from paragraph 5.46, because I think to the extent that we're here today, this helps us to at least understand what the ground rules basically were:

Industry Canada officials told us—

—that means you—

—that the funds had been set aside in case GM Canada could not meet its commitment to contribute $1 billion to its pension plans.

I came to understand this was a condition that General Motors had to provide, out of their own funding, $1 billion of the $4 billion to the fund. It goes on:

Once Export Development Canada received confirmation from Ontario that GM Canada had contributed to its pension plans, the Corporation authorized the release of the funds to the parent company.

In other words, $4 billion was provided; $3 billion went directly to the pension obligations; $1 billion was provided by General Motors on top of that, with the balance going into a trust fund awaiting clearance from various officials that it could be released for whatever other purpose, and I guess we don't know at this point what that purpose was. To that extent, it's my understanding that the amount of $4 billion was ultimately put into GM Canada's pension plan.

Am I correct in that assessment?

[Michael Ferguson]

I think the point here is that originally it was designed to be very direct, putting the money into the separate account and then paying into the trust fund, $4 billion. It ended up going through a more circuitous route, but at the end of the day, we were satisfied that the $4 billion that was intended to go into GM Canada's pension plan did end up in GM Canada's pension plan.

[John Carmichael, Conservative, Don Valley West, ON]

Good, thank you.

I remember living through those days, having come from part of that industry. I came from the retail side of that industry, and clearly it was a tenuous time. In my case, my own manufacturer had gone out of business or was on the verge of serious trouble.

You refer in your report to the complexity of trying to keep these businesses together and the impact that they would have had on our economy.

It's been stated that as many as 500,000 jobs were kept intact, if you look at the union workers and manufacturing, the parts companies and suppliers, the dealers and all of the other ancillary industries that were dependent on that industry. They were kept whole because of what this government, the Ontario government, and the U.S. government were able to produce.

I wonder if you would comment, sir, on the outcome of these negotiations and the placements of these moneys and what would have happened to our economy and to this country if the government had not contributed to this fund.

[Michael Ferguson]

In terms of what you've described, I think certainly in the audit we noted that it was a time of great uncertainty. It was the economic crisis, so the decisions had to be made within a very short timeframe. There was a lot of complexity. In fact, it was the U.S. government that was leading the negotiations with the parent companies. The Canadian decision was really whether Canada should participate. There was a lot of complexity.

In terms of what we identified as the outcome of the audit, we did say that the funding that was provided by Canada and by the Government of Ontario contributed to the viability and the competitiveness of the industry certainly in the short and medium terms.

In terms of what might have happened had the assistance not been provided, that's not something that is auditable or that we could audit. Certainly when Industry Canada was making the decisions about whether to participate or not, it was very concerned about the economic impact of this sector and the trouble in terms of the economic crisis. I can't speak specifically to what the outcome might have been, but certainly Industry Canada was very concerned about what that outcome might have been.

[The Chair, NDP, David Christopherson]

Thank you. The time has expired.

Colleagues, if I might, just before we go on, I want to bring to your attention the fact that we have some guests here today. They are four auditors. Two of the auditors are from Cameroon and two are from Tanzania.

We're honoured to have you here. There really is a worldwide movement of people who care about auditing and transparency and accountability and the oversight work of public accounts. It's through best practices that we achieve the best standards for the people we represent. So thank you for your contribution to auditing, transparency, and accountability, and welcome to our country. We hope that you enjoy your time with us.

Colleagues, moving along, we'll pick up again with Mr. Allen.

You now have the floor, sir.

[Malcolm Allen, NDP, Welland, ON]

Chair, before I begin my questioning I'd like to raise something, and I'd appreciate it if you wouldn't dock the time.

There is a document in front of us, I'm not sure from whom. It's a chart. I'm not sure from where the document is actually taken. There's no name on it. I'm wondering if this is meant to be an aid. Is this meant to be tabled? I'm not really sure.

[The Chair, NDP, David Christopherson]

That's a fair question.

Madam Clerk, would you help, please?

[The Clerk of the Committee, Ms. Angela Crandall]

Certainly. Mr. Woodworth had asked me. He provided the copies in French and English. He asked me to distribute it to the members of the committee today here in the meeting room, because it will assist in questions he plans to ask in the committee.

[The Chair, NDP, David Christopherson]

It's a document that comes from Mr. Woodworth. He's planning to reference it in his questioning. He asked the clerk if she'd be good enough to circulate it to members before we began.

[Malcolm Allen, NDP, Welland, ON]

That begs the obvious question, is he tabling it as a document that he wishes to bring into evidence, or is it something to simply help us as he goes through his questions?

[The Chair, NDP, David Christopherson]

I'll leave that to him when he gets the floor. For now, you asked where it came from and that's the explanation, unless you have a problem with that. It's just there as information and it will become, or not, active as the committee determines as we move forward.

[Malcolm Allen, NDP, Welland, ON]

Fair enough. I think the only thing I would say in response, Mr. Chair, would be that depending on what Mr. Woodworth tells us he wishes to do with the document, I may reserve the right to reply to that at that time.

[The Chair, NDP, David Christopherson]

And I will give you the floor at that opportunity and give you the opportunity to make your case.

[Malcolm Allen, NDP, Welland, ON]

I appreciate that.

Mr. Ferguson and guests, thanks for being with us again.

Let me pick up on Mr. Carmichael's comments, because both of us came from the same place albeit at different ends of the scheme. I used to try to make stuff for him to sell. I hope I made pretty good stuff that he could sell.

Getting back to 5.46, in this chapter the last line of 5.46 says “the Corporation”—meaning the Canadian corporation—“authorized the release of the funds to the parent company”, which is indeed the U.S. corporation.

Is it correct for me to say that of the $4 billion—albeit I agree with you there was a bit of a question of how exactly it flowed back and forth for the pension fund—$1 billion of the $4 billion that the Canadian government put in that escrow account ended up in the hands of the U.S. corporation? Is that correct?

[Michael Ferguson]

One billion dollars was paid to the parent company in the U.S. Again, ultimately, all $4 billion ended up in the pension plan, but $1 billion of it went through the U.S. parent company.

[Malcolm Allen, NDP, Welland, ON]

Paragraph 5.47 in the report says:

This finding is important because in the absence of detailed information on the use of the funds, Industry Canada does not know to what extent the federal government’s financial assistance contributed to the viability of Chrysler Canada and GM Canada.

The fact that they didn't seem to be able to track it as well as they wanted to, albeit it was convoluted.... I agree with Mr. Carmichael because I was actually in the last Parliament and I remember it well. It was a hectic period and things needed to go very quickly, and I can say the government and the opposition were in agreement and we needed to find a way to do this quickly. There were a lot of jobs at stake and a big chunk of the economy.

This is an after piece rather than a before piece, if I can put it that way. One ought to know at the end of the things what happened and how to track it. At the front end there may have been some weaknesses but that was probably because of expediency and the rush to get it done.

In your sense, is Industry Canada satisfied that it really knows what happens and is it able to ascertain.... Because if it ever got in this place again, would it do it in a similar fashion or not? I realize that's an opinion piece from me. You may not actually want to answer that.

[Michael Ferguson]

As I said in response to the earlier question, our conclusion was that the financing that was provided helped assure the viability of the companies in the short and medium terms. I think really the issue that we are raising, what our concern is about, is the longer term, and when you're looking at money being put into a pension plan, understanding the benefits of that pension plan.... Because GM Canada still has the liability for that pension plan, so obviously putting money into a pension plan will help it in the short and medium terms, but we felt Industry Canada needed to have more information to understand the longer term impact of that pension obligation. They needed to really understand the funding position, the benefits and that sort of thing, so that they could predict the long-term impact.

[Malcolm Allen, NDP, Welland, ON]

Let me take you to chapter 3, which is one where we see a lot of issues. If memory serves me correctly, in your opening statement you spoke about two distinct things here in this veterans disability program, the rehabilitation program and the longer disability benefits program, if you will, if I can use those terms.

One seems to work relatively well. That's the rehabilitation program. Is that correct?

[Michael Ferguson]

Remembering that what we were looking at was access to the two programs, not the services that are being offered, yes, access in the rehabilitation program was adequate, but in the disability one we felt it took too long.

[Malcolm Allen, NDP, Welland, ON]

It's understood that we're not measuring the outcomes of patient care, and I appreciate the clarification.

Clearly, on the disability side, the sense that you had in this audit was that the timeframe it took to clear people through was longer than it needed be and ought to be shorter. Is that fair to say?