Bill C-2 (39th Parliament, 1st Session) Committee on May 30th, 2006

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you, Mr. Chairman.

And thank you, Mr. Isaacs and your colleagues, for being here.

I want to follow up a little bit on what my colleague, Mr. Murphy, has pursued in terms of the role of the financial officer through the deputy minister. You used the term “embedded”, that financial officers should be embedded in the process of program development and program evaluation—I'm actually putting it in those terms, although you didn't quite say it that way. I think this term “embedding” comes from the media recently being embedded on military fronts to provide balanced commentary from those fronts. In that sense, we're in the same kind of an action, trying to get a balanced commentary on program evaluation.

The problem I have is, how do you embed financial officers in a system that, under the terms of the legislation, has the accounting officer through, I would think, an internal audit function with an internal audit committee...? I would think that a financial officer should be part of that internal audit committee. But internal audit reports to the Comptroller General. It seems to then take another course in terms of the evaluation, as opposed to taking course changes within a ministry, within a particular role.

Could you expand on that a bit in terms of how a financial officer could be better utilized in program evaluation and how that could provide a course direction that would be more immediate and more within the committee structure and the oversight structures of Parliament?

[Milt Isaacs]

First, probably the way I can answer this is to enlighten you a little bit as to what we meant by “embedded in the program” and see if I hit your question.

You spoke of the Comptroller General and the internal audit. The internal audit is more reactive. It is discovery after the fact. What we're talking about in terms of preventive measures is that financial officers are in the process at the beginning.

Through access to information--using the sponsorship program as an example--the first question we had when it became public was, “Well, where was the financial officer?” We had asked for organizational charts, and there wasn't a financial officer. With the expectation of financial officers in the program...one of the things that should have happened in that process, when you're spending someone else's funds, is you would have had commercial paper, some sort of authorization, that said you have authorization to spend these funds. That then begins the accountability trail. I understand that's what's missing, how did that authority happen.

So what we're talking about here is that financial officers should be in those types of programs so that they can give advice and direction to the program managers and say, “This is the authority you have that's given to you by Parliament through appropriation, and here are the rules of engagement in terms of how you spend those funds. You had the authority for this, but you don't have authority for that, and if you want this type of authority, you must go and seek it.”

That's what a financial officer does, and if that role had been played, I think we probably wouldn't be here today.

[The Chair, Conservative, David Tilson]

Thank you, Mr. Isaacs.

Madame Guay.

[Monique Guay, Bloc, Rivière-du-Nord, QC]

Thank you, Mr. Chairman.

Thank you for coming quickly despite a short notice. You have managed nevertheless to provide us with quite an interesting document. You are not the only ones to bring out the issue of longer consultations. The majority, if not all of the witnesses who come here, call our riding offices to tell us that they do not have sufficient time to prepare a brief that would allow us to table the amendments ensuring that the bill will operate properly. We are attempting, rather, to pass legislation that in the end or in ten years' time, will probably have to be revised. In this way, we will have administered legislation over a decade that quite simply did not work.

I would like your opinion on the following: we had proposed that Bill C-11 from the previous Parliament be enacted. I know that Bill C-11 was not a perfect bill, but it could have provided a temporary safety net while the study of Bill C-2 was completed and while we could take the necessary time to draft a well-crafted piece of legislation, with necessary amendments that you, the witnesses, could have proposed during an in-depth study.

I would like your opinion on this.

[Milt Isaacs]

Merci, Madame.

Whistle-blowing is an important aspect, obviously, of how we do business as public servants. What you're describing is sort of a bridging from Bill C-11 to Bill C-2, and from our point of view, we felt that Bill C-11 didn't have a whole lot of teeth. It didn't give us what we felt was necessary.

If it's a bridging platform, we wouldn't have any opposition to that. I really don't know if I have much of a comment to make on that.

As far as the whistle-blowing aspect in terms of Bill C-2 is concerned, that's another thing we still have under review. We're trying to look at that and ask, what are the merits; what does this do in terms of our members?

I think it's a noble effort to protect public servants and to have them come forward, no question about it, but I think my members, just from the professional code of conduct, would, if they see significant abuses per se, come forward anyhow. But there is some hesitation, no question, in the culture right now, because I don't think there's a sense that public servants feel they would be protected.

In my own personal opinion, I'm not even sure you could even legislate that into the culture, to be honest. I think you can put as much protection out there, but there's still the typical approach that once you become a whistle-blower, you're labelled. I think that's a significant cultural change, not just in the public service but in industry as well.

It's a difficult one, and I'm not sure if you're going to resolve that through legislation.

[Monique Guay, Bloc, Rivière-du-Nord, QC]

You said earlier that you were still in consultation, that you were still in the process of studying the bill as such. You are here as a witness today, you are making a few recommendations to us, but if you are still in the process of studying the bill, that means that you would probably have further recommendations to make to us once your study is complete.

And so I find it unfortunate that we do not already have all of the results of your study. You could always ask to appear before the committee again in order to table the final version of your proposals. Otherwise, we will not be doing serious, in-depth work. For us, it is extremely important when we are studying a bill.

I recall working on the legislative review of the Environmental Protection Act. We took two years to do so. In this case, we are trying to have a bill passed in the space of two months. This is not a criticism, because I believe that everyone wants a bill on accountability. However, it must be done responsibly. It seems, however, that you did not have the time to complete your study of the bill.

I therefore invite you, when all your recommendations are ready, to request the opportunity to come and present them before the committee.

I have one final question for you, gentlemen, if you wish to answer it. What do you think of the $1,000 reward?

[Milt Isaacs]

First I'd like to say that yes, we would appreciate the opportunity. I agree with your comments. We haven't had the opportunity to really digest this, so yes, we'd appreciate the invitation, if it's there.

The $1,000 is, in our opinion, unnecessary. Our members are bound by a professional code of conduct. I don't think this would entice anybody to come forward. I don't think any amount of money, to be honest, is necessary.

[Monique Guay, Bloc, Rivière-du-Nord, QC]

I find that fully satisfying. We are also completely against the $1,000 reward. We believe that it is a person's responsibility to inform about wrongdoing that they have witnessed, without there having to be compensated for . This could even bring about a situation in which people will seek to disclose just about anything in order to cash in on the $1,000 reward. And so we agree with you.

I hope you will complete your study of the bill and that you will ask to come back and see us. We would be pleased to welcome you back.

[The Chair, Conservative, David Tilson]

Thank you.

Mr. Martin, I don't know whether you have any comments or questions.

[Pat Martin, NDP, Winnipeg Centre, MB]

I would if I have time.

[The Chair, Conservative, David Tilson]

You do have time, sir.

[Pat Martin, NDP, Winnipeg Centre, MB]

I'm sorry I had to be out of the room for part of your presentation, but I have been looking at your brief, sir, and I appreciate both the tone and the content. I accept your view that you should have had input and consultation in the development of the process.

I would point out that some of the items I see within your brief are things that should be viewed as ongoing, continuous improvement, and that we shouldn't have to wait for a bill to come along to engage in this continuous improvement of our management practices. I think it would be catastrophic to the viability of this bill if we stopped now to undertake some of the recommendations here, such as commissioning an empirical study of all current performance reporting systems. This is work that should be done, but I argue it should be done on an ongoing basis.

This is because we've been studying many of these things for 10 years. Some people would say we're studying this issue for 40 days. In actual fact we're studying it for a very generous period of time compressed into a few short weeks. But on many of the issues, we know what needs to be done. By stopping in our tracks now and even backing up to undertake some of what you're recommending here, such as engaging public servants in a wide-ranging debate on the issue of ministerial and deputy ministerial accountability.... That would be interesting, but it's like the question of how many angels can dance on the head of a pin when it comes to the hard, fast, concrete measures we're trying to get through here.

In this limited window of opportunity in this minority Parliament, we want to show some real results, because there are people who don't want this bill to succeed. There are enemies of this bill who are lurking in the wings, as it were, trying to sabotage and undermine the progress of this bill. One of the most effective ways to kill it would be to engage in a study, to continue hearing witnesses into next spring, and then, come election time.... Believe me, in a majority government, you would not have the opportunity to make these concrete steps.

Wouldn't you agree that it would be important to get the three pillars in place: whistle-blower protection, access to information reform, and a cleaning up of the patronage appointments practices? If we achieved those three things in this minority Parliament, wouldn't that be something to celebrate?

[Milt Isaacs]

I'm not sure I'm in a position to comment, because you rather framed it around an environment that is political. I would suggest to you that if the mechanism is there to bring in amendments to the legislation, then absolutely, I would have to agree with the comments you've made. It's difficult not to.

The concern we have is that once you build this legislation and pass it, you now have a framework, and policies have to now fit within that framework. That's our concern: what would it take then? I understand that when you're going to go.... The review is there after five years, but I think you need to probably look at the thing on an annual basis.

I wouldn't want to see you get into a fairly bureaucratic process to make adjustments to the bill, where you find flaws over time because you're looking in the mirror and realize we have to make these types of fundamental changes. Our concern really is that once you pass this legislation, the box has already been formed at that point. You've laid down the foundation, and what policies can be fit in there have to fit within that framework.

That's why we're saying you need to bring in the stakeholders and give them time to digest this. We're not talking about years here.

[Pat Martin, NDP, Winnipeg Centre, MB]

Well, we are talking years for some of us on some of these issues. The pace has been glacial. I've seen successive presidents of the Treasury Board come along and do all of these things that you're recommending we do again--undertake a thorough review of the professional climate of financial officers. Alcock did that. He added on a whole bunch more. We've been standing by watching a lot of these developments take place to no appreciable benefit to anybody. It's just been studies for the sake of studies and round tables for the sake of analyzing the study that we just took. Most Canadians want some concrete evidence at least that there is a commitment to transparency, accountability, and good governance.

We have this window now, and as much as I believe all of these points you raise are valid, I think it would be a mistake to delay and stall this bill to accommodate these ongoing measures that we should embrace just as part of the working culture. We should have a continuous improvement culture--kaizen, as the Japanese call it--in which the financial officers are always looking for ways to do their job in a better way. I would be concerned if the enemies of this bill would use your presentation today as further justification to kill this bill or have it die a natural death prior to the next federal election.

[The Chair, Conservative, David Tilson]

Mr. Moore.

[Rob Moore, Conservative, Fundy Royal, NB]

Thank you, and thank you to the witnesses.

As someone who has been sitting on this committee, we have had a pretty intense schedule, and we're meeting long hours and so on to hear from a broad range of witnesses. Obviously you were invited as a witness so that we could get the benefit of your input and testimony. I guess I find it a bit alarming when people say they're not being consulted when this is a part of that consultation. We have had the benefit of years of study on these types of issues. This is a well thought out bill, and we're working in a way to hear from witnesses. This committee is working very hard to take the inputs we're getting from witnesses.

Is there any general clear-cut recommendation that you have for this committee? I noticed, as Mr. Martin has already stated, the recommendations that are in your executive summary would involve a great deal of time. I think Canadians are saying we'll never achieve perfection. I know that, and I don't think any of us are under any illusion that you can ever be perfect, but we want to take a good product.

I noted with interest your comment that Bill C-11 did not have teeth, and that's one thing about Bill C-2--it does have teeth. It has teeth that empower officers of Parliament to do their job better and it has teeth to protect whistle-blowers from reprisal, and those are some of the necessary steps that we have to take as responsible members of Parliament to further accountability in our country. I would rather move forward with something that is positive. These types of studies have been going on for years, and will continue to go on, and we can benefit from them.

I'll take your comments on that, but also in your executive summary it says:

Just because accountability is a fundamental democratic value does not mean that there can never be too much accountability. However, excessive and burdensome accountability requirements can detract from responsiveness, innovation and efficiency.

I'm wondering if you can also comment a bit on that. Can you give some specific examples? Can you shed a bit of light on what that means?

[Milt Isaacs]

Unfortunately, I don't have anything specific on that. I didn't come prepared with a specific case.

I've spent 25 years as a financial officer for the federal government. I can tell you that what is meant by that is that it's difficult for program managers to deliver on their programs when there are a significant number of rules they have to comply with. I understand this legislation attempts to resolve some of those issues—and that's a positive thing. So in that context, we are hoping to ensure that this legislation does not add other layers of rules and regulations that can in fact end up being counter-intuitive.

In the world of government, like the world of business, there is a balance. There has to be a reasonable level of risk imposed in the process, so that you don't build impediments to services to Canadians. Some people find that strange, coming from financial officers. There's a perception that we are bean counters, but nothing could be further from the truth; I think that particular description has gone by the way of the dodo bird. It really comes down to the fact that these are professionally qualified individuals, and they're really looking at the purpose of why they exist. The financial officers are there to ensure probity in terms of how funds are spent, but at the same time to ensure that the programs are delivered. We are concerned that there is a tendency to try to legislate risk away, and I don't think that's going to be the case; I don't think you're going to get there.

As the Auditor General mentioned, these are isolated cases; there's not a widespread scandal going on in the federal government, not that I'm aware of. I would suggest that the tendency sometimes to overreact causes the issues. And then when you do so, there is this element of building gates and loops that individuals have to go through, and that's the bureaucracy that we've been talking about in this particular report and that we're trying to avoid. So it's not really a case of saying, don't introduce legislation—because we do learn from our mistakes—but to be aware that when you're looking at legislation, government has to allow for reasonable risk in day-to-day processes in order to be efficient, and that legislation is not necessarily the answer.

[The Chair, Conservative, David Tilson]

Thank you, Mr. Isaacs. Your time has expired.

I thank you, gentlemen, for coming this morning and telling us what you think about the bill. Thank you very much.

We will have a brief break before the final presenter.

[The Chair, Conservative, David Tilson]

I'd like to reconvene the meeting. Our final witnesses this morning are from the Certified General Accountants Association of Canada. We have with us the vice-president of government and regulatory affairs, Carole Presseault, and the vice-president of research and standards, Roch Lefebvre.

Good morning to both of you. I think you know that if you wish you may make some preliminary comments, and then members of the committee will have some questions for you. Thank you for coming.

[Carole Presseault, Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada]

Thank you, Mr. Chairman, and ladies and gentlemen.

I understand you've had a long morning, but I do have a statement I want to make.

On behalf of CGA Canada and our 64,000 members, we're very pleased to be here and to engage in discussions with you on this very important piece of legislation.

It's actually fitting to a certain extent that about 100 years ago, 12 accountants working in Montreal sat in a room and decided to form themselves as the Certified General Accountants Association, in the quest for professional development and building of experience and skills to meet the ever-changing business environment. Some of our members working in government—about 8,000 work in the federal government right now—are struggling and coping with some of the same things as are public sector managers.

We look forward to your questions and discussions on elements of this very important legislation, but I have a few brief comments to make.

The genesis of Bill C-2 stems from a crisis of confidence that goes well beyond the purview of this government, this parliament, and indeed Canada's borders. In this world of post-Enron, Worldcom, and Parmalat, we needn't be reminded of the scourge of scandal within the private sector. Nor do we need to dwell on problems closer to home in the cases of Nortel or Canada's judicial inquiry into the sponsorship program and advertising activities. Suffice it to say that we face a crisis of confidence as a direct result of the perceived absence of ethics among our corporate, political and bureaucratic elites.

The important question is why? How has it come to this? What, if anything, has changed? What can we learn from this? And what measures can or should we adopt to prevent a recurrence?

While we all hope the legislation before us will help prevent many of the wrongs of the past from being repeated, rules and regulations are no substitute for ethical behaviour. The Auditor General and many other witnesses have said as much in their testimony before you and before other forums.

It might strike you as ironic that we should appear before you today in defence of a cautionary approach to rule-making. After all, accountants are predisposed to rules and structure. We're number crunchers, financial analysts, chief financial officers, auditors, business leaders. In sum, we are the people others turn to for guidance on how to follow the rules governing capital, assets, profits, and losses.

In that connection, though, the accountancy profession bears an enormous burden of public trust and responsibility, but a burden we shoulder willingly. It is after all our stock-in-trade. But we need to remind ourselves that rules for their own sake won't likely achieve the outcomes for which we all strive. The challenge before this Parliament and this committee is to ensure that we are able to achieve the right balance between rules, ethics, and sound governance.

In the financial world, accountability for fiscal performance is more straightforward today than ever before. Rules introduced post-Enron hold CEOs and CFOs accountable for certifying their corporate financial statements; auditors are now subject to independent oversight. No one argues with the idea that top executives are ultimately responsible for the accuracy and veracity of the financial information presented to shareholders: it merely signals that leadership and accountability come straight from the top.

Undeniably, ethics commissioners and judicial investigators have a role to play, but so have our political leaders. U.S. President Harry Truman was reputed for displaying a sign on his oval office desk that read: “The buck stops here.” What it signalled was the simply stated but powerful embrace of personal responsibility, and he was widely admired for it. Canadians are no different. We expect the same thing from our government leaders.

Canada wants and needs a federal accountability act that works, but not just at any cost. In your consideration of this legislation, you've been tasked with the challenge of striking a balance between competing interests, in order to serve all Canadians. That delicate balance includes a myriad of advocacy interests, like the organization we represent, and must take stock of their right to be heard with respect, and, at times, in strict confidence. This lies in sharp contrast with Canadians' right to know as reflected by the access to information commissioner, the media, and parliament itself. Bridging these two poles is critical — though we appreciate it is no easy task.

In bringing forward Bill C-2, we believe the government has gotten several critical elements right. We welcome the clarification of roles of deputy ministers and their ADM as accounting officers. We strongly support the creation of independent audit committees. We also believe the access to information protection afforded to internal audit working papers is appropriate and will improve the internal audit process in departments and agencies. We are pleased to see that appropriate safeguards have been put in place to ensure that draft audit reports are protected and provision has been made for their release. In sum, these measures will safeguard the integrity and effectiveness of the audit process.

We applaud the broadening of the Auditor General's authority to follow the money, and we agree with the new requirement for a five-year review of relevance and effectiveness of grants and contributions--a provision that echoes one of our many recommendations. We also think you as parliamentarians will be well served by the creation of a new position of parliamentary budget officer. And while we agree with protective and supportive measures aimed at whistle-blowers, we reject, as others have, the idea of providing public servants with monetary reward. These are all initiatives that align themselves very well with similar undertakings throughout the corporate sector.

This legislation is ambitious in its attempt to strengthen accountability and improve the management of the government's fiscal and human resources. We support these initiatives, and we've been asked to assist in efforts to strengthen financial management and improve internal audit within the federal public service. We are in the throes of launching a series of initiatives to support this goal.

As registered lobbyists, we would be remiss if we neglected to comment on proposed changes to the Lobbyists Registration Act. Clarity lies at the root of all good legislation and regulation. It ensures that each player in the system is made aware of what is expected of him or her. We believe more enforceable legislation governing the conduct of lobbyists is a laudable objective. To this end, we lend our support to the Government Relations Institute of Canada and its call for stronger investigative and enforcement provisions. While the vast majority of lobbyists are fully compliant with the law, more and better enforcement provisions will serve to protect the majority from the tarnish caused by a misguided few, and we think that's in everybody's interest.

We all want what is right for Canada's future, though we may at times disagree on how best to get there. During the course of the last federal election campaign, CGA Canada called on all parties to commit to several measures aimed at restoring Canadians' shaken confidence in their public and private sector leaders and institutions. We are delighted to see our message, along with others, was heeded.

We look forward to assisting this committee in its deliberations in whatever way we can.

We thank you and we will be pleased to answer your questions.

[The Chair, Conservative, David Tilson]

I'm sure there will be some questions, Ms. Presseault. Thank you very much for coming. Your presentation was outstanding.

We have questions from Mr. Owen.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Thank you both for being here and assisting us with these deliberations.

It is a large bill and has great complexity, and the succinctness with which you're putting forward the benefits that you see in the bill is very helpful.

I wonder, Ms. Presseault, if you or your colleague might comment on the change you see coming as a result of this bill from the adjustments that were made by the previous government in respect of restoring the role of the Comptroller General that was removed in the early 1990s and setting up chief financial officers in each department.

This goes to your comments I think about financial management rather than just auditing, but builds into the whole process a very cautious review of implementation against purposes and designated funds, rather than simply waiting for post-implementation audits. Do you have any view of how that has worked to date and to what extent it might be dealing with some of the problems that occurred in the sponsorship program?

[Carole Presseault]

Thank you, Mr. Owen, for your question. It's an important one, in the sense that we really saw the restoration of the role of the Comptroller General as a very good move, because essentially, again, when you're talking about mirroring initiatives taken in the corporate sector, tone is set at the top, and I think that is an underlying theme that we wanted to leave with the committee today.

The Comptroller General has very, very clear responsibility in terms of not only strengthening the internal audit process but also building capacity. We've talked a lot about internal audit, and the Auditor General and others have talked a lot about it. We haven't really talked a lot about strengthening financial capacity in the public sector, and in that respect, when I mention launching a number of programs, we are launching a number of programs, but we hope that setting the tone at the top, reinforcing the role of the chief financial officer, will trickle down.

The group you heard before us are financial officers. We met with them last week, and they're all in the throes of seeing how they can contribute to this capacity building. A new emphasis on the professionalization of the public service, obtaining appropriate professional designations such as the Certified General Accountants Association designation and other accounting designations, is really a key role.

As I said, the role of the office of the Comptroller General sets the tone for this across the public sector.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Thank you.

[The Chair, Conservative, David Tilson]

Madame Lavallée.