Bill C-2 (39th Parliament, 1st Session) Committee on May 9th, 2006

[Pat Martin, NDP, Winnipeg Centre, MB]

I'm sorry, I don't quite understand what you mean by that. Can you say the last part again?

[Sheila Fraser]

We talk about protecting audit working papers, and not letting them become public for a variety of reasons. One is that in the process of an audit you validate facts, and you could have drafts of reports that are in fact incorrect. Also there is information that is given that is confidential. If people were to know that in interviews what they said would become public, I don't think we would get the same kind of information we're getting.

[Pat Martin, NDP, Winnipeg Centre, MB]

Wasn't it the draft report or the draft interim audit of the sponsorship scandal that was first ATIPed and blew open the whole--

[Sheila Fraser]

No, actually it was a report that had been produced under a contract that the department couldn't find, and then they found out that there were other ones that were very similar. So it wasn't the internal audit. It's not the fact that working papers in the internal audit become public but more what is actually done with the internal audit report once it's produced that is the issue.

So, yes, I think access to information has an effect on documentation. Now, is the solution to make it a requirement and to have sanctions? I don't know. I hesitate to comment on that.

[Pat Martin, NDP, Winnipeg Centre, MB]

I understand. Actually that's very helpful.

Your office pops up quite a bit throughout the action plan and even of course in the bill itself. Did the government consult with you about all of the aspects that included you?

[Sheila Fraser]

We did have discussions with government on the proposed changes.

[Pat Martin, NDP, Winnipeg Centre, MB]

Are there any changes in here that you advised against in those discussions?

[Sheila Fraser]

Let's just say we had good, vigorous discussions on certain items, and we believe it is really up to Parliament to decide the kind of mandate it wishes to give its auditor. We wanted to be sure that the words “at the discretion of the Auditor General” were very clear in any expansion of our mandate. We did bring forward--

[Pat Martin, NDP, Winnipeg Centre, MB]

Do you see that, where you need to know?

[The Chair, Conservative, David Tilson]

I think we're going to have to conclude and move on to Mr. James Moore.

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

I was wondering if Ms. Fraser could indulge me and the committee just a bit. I wasn't going to have an intervention, but the issues raised by Mr. Martin and Mr. Poilievre piqued my curiosity.

In my district I have one aboriginal reserve. We've had a real hell of a time getting some accountability out with regard to that reserve...and some specific environmental issues. I know this has been a long-standing issue in this country and previous Parliaments, the whole issue of accountability of first nations.

I remember back in the 37th Parliament--Mr. Owen remembers, because he was in Mr. Chrétien's cabinet--the First Nations Governance Act that was put forward by then Minister Bob Nault. What was then proposed was seen as a real push to get accountability with some real controversies that I know Mr. Martin and others had on that.

I know this goes a little beyond the Accountability Act, but basically there are three proposals. There is the First Nations Governance Act, which I know you are aware of, put forward by Minister Nault when he was Minister of Indian Affairs. Now we have the federal Accountability Act. Then there is the proposal for an auditor general specifically for first nations. Perhaps you could just take a couple minutes and speculate on which of those three avenues is the respected voice for accountability in governance.

The reason I ask the question, of course, is that first nations benefit from accountability. I agree with everything Mr. Martin said, and what you said, about the reality of accountability for first nations communities, but a lot of Canadians don't see that. A lot of Canadians are frustrated, not necessarily about first nations communities but about the bureaucracy associated with the department here and not seeming to get full access to information that's of concern to a lot of Canadians in a lot of communities.

I guess I would just ask you to talk a little about those three options--auditor general for first nations, the federal Accountability Act and what we've proposed, and the First Nations Governance Act of a couple of years ago--and the pros and cons of each, what might be the best mix.

[Sheila Fraser]

Mr. Chair, obviously I'm not prepared to get into an analysis of this. We haven't studied each one of these bills in any great detail, especially the governance one of a few years ago.

It might be interesting for the committee to know that quite a few years ago we did a study on accountability of first nations to the federal government. I guess if I could leave you with one thought, it would be that accountability is more than just reporting, and accountability is more than audit.

Accountability is about a relationship between two people. There has to be good trust. There has to be cooperation. There has to be consultation. People have to have a desire to make these things work. If we fall back into believing it's just the Auditor General or somebody auditing the money, that to me is not really about accountability. Yes, the government transfers a lot of money into these first nations, but it's about what is being accomplished at the end of all of this.

I can say quite frankly that in many of the reports we have issued--and we have a status report coming next Tuesday that will look at 37 of the recommendations we've made in first nations communities--there are serious issues there. I think most people would agree that there are unacceptable conditions. Often the department does not know what the conditions are, and they're not making the progress that one would expect. It's about how the department as well is measuring its outcomes, and what the performance indicators are. In order to do that well, it requires the cooperation of first nations communities.

To me, saying that we're going to send the Auditor General in to audit isn't accountability, quite frankly. We may have fundamental differences of opinion on that. It's a lot more than producing 200 reports a year. It's really about establishing relationships. It's also putting the practices and the institutions in place in those communities that will support their own development and will support their accountability to their people. That's why we have been supportive of the idea of a first nations auditor general, because that goes to the whole idea of building institutions.

[The Chair, Conservative, David Tilson]

That concludes the second round. Although we're now 22 minutes over the 40 minutes, we did agree to go another round.

Mr. Tonks and then Mr. Murphy.

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

Thank you very much, Mr. Chairman.

Madam Auditor General, the act is the Accountability Act, and in both the Gomery Commission report and your reports there were indications of systemic breakdowns that occurred as a result of the lack of checks and balances and the completion of the accountability loop. I'm sure the committee would agree with you that the audit is not the sole methodology with respect to closing the accountability loop, but to paraphrase something--and it's probably totally wrong in context--the audit is still our best protection against the worst that could happen in administrations that are huge and complex.

This legislation suggests that the deputy minister will be the accountable finance officer in each ministry. Would it be possible for you to give an overview with respect to your relationship with the internal audit committees, how this interfaces with your perception of ministerial oversight, and what your role is with respect to audits, both internal and external, that may point to systemic weaknesses and what the role of the Comptroller General is with respect to closing that accountability loop?

Thank you, Mr. Chairman.

[Sheila Fraser]

Thank you.

I guess I should start by saying that the Auditor General of Canada is the external auditor of government. The Comptroller General is, if you will, the person who sets the policies and the procedures and who has the oversight role for the internal audit. He has actually been working very actively to try to strengthen that function within government. Internal audit is really a function for the management. It's a way for management to ensure that systems and practices are working as they should within the department and to provide that information to senior management.

One of the difficulties we have noted, and that I think you will note regarding many of the high-profile audits that we have done in the past few years, is that there were internal audits that identified those problems repeatedly in some cases. But the internal audits weren't taken seriously enough and corrective action wasn't taken. So the introduction of an audit committee with external people, hopefully, will bring a little more rigour into the system and will help the deputy minister, or the heads of the agencies, in addressing some of the management problems. It is our hope that if those are addressed then the external auditor won't be reporting on them.

So there can be very good collaboration between internal audit and external audit. We want to make sure that our work is coordinated, that we're not looking at the same things, if possible. The external auditor will rely on the work of the internal auditor. We work very closely with the Comptroller General obviously on a lot these issues because we have the same objective, which is to improve management within government. We have different roles, but we are all trying to get to the same place.

[The Chair, Conservative, David Tilson]

You have a little bit of time, Mr. Murphy.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

That's great.

I have just one quick question--which may be the meat of some giddy accounting parties because I can't imagine your having the answer to this--and one serious question. The unserious question is whether the $1,000 whistler-blower amount is a taxable amount, in that it doesn't arise from employment and could be considered a general damage in the law because it arises from a damage of the employment situation. You can think that one over and discuss it with your accountants at the cocktail party.

The serious question is--and it's the meat of your report or your précis--that systems and procedures should be in place, and they should be working, and you would report on the adequacy of the systems and provide recommendations for improvement with the new foundations that you oversee or have prevalence over. What I'm asking you is whether you are not underestimating the work that might be required for the million-dollar foundations. There would be more of them. I'm presuming--which is dangerous--that the million-dollar foundations might not have the sophisticated systems and procedures in place, just because of a function of budget, that the one hundred million-dollar foundations that you already look at have. Might you therefore--as you say, you're not going to need additional funding--expect that there will be more work involved with the foundations that frankly have fewer resources to put systems and procedures in place? It's an assumption and you can respond to it as the expert.

[Sheila Fraser]

Thank you, Chair.

When we referred to systems and practices, we were referring to the systems of the departments that manage the programs. For example, we would expect the Department of Industry, which gives loans to the private sector under various programs, to have a system in place that would allow it to know whether the terms and conditions of those funding agreements are being met and if the program is meeting its objectives.

We're not necessarily referring to the systems and practices of the individual recipients. Obviously, the departments should take some sort of risk consideration for that. For example, the Department of Heritage will deal with many small non-profit organizations, and when they are giving them money, either grants or contributions, one would expect them to take that into account. How good is the management within that? We're saying that is really the responsibility of the department. It is our responsibility to look at how well that department system or framework of control has been established and if necessary to make recommendations to it about how to improve.

I would just mention, if I may, Chair, that next week in our status report we have an audit on grants and contributions programs in five departments where we are reviewing if progress has been made on addressing past recommendations.

[The Chair, Conservative, David Tilson]

Thank you.

Mr. Petit.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Ms. Fraser, I would like to ask a question that is both quite simple and somewhat complicated.

The people of Canada see that their country is sending millions of dollars abroad. Very often, people think that this money is not being spent as was agreed upon. For example, if I were to send $44 million to Haiti, the intent would be to help the country, but I would not be there to check that that is in fact what happened. The people of Canada are not present either. However, you have a responsibility to see whether the program is meeting the objectives that were set, such as helping the people, and whether the conditions are being met, such as not using the money to purchase weapons.

Could you explain to me how your audit power could apply even outside the country? This is another sovereign nation and I do not know how this would work. It seems there is a grey area that I am unable to grasp at the moment.

[Sheila Fraser]

Mr. Chairman, let me give you the example of CIDA, which does a great deal of development work and contributes to a number of programs in various countries.

We have done audits in the past. We have studied how CIDA manages its programs and how, in the case of contributions, it ensures that all the terms and conditions are met and checks whether the money was spent for the purposes for which it was intended.

CIDA has been doing project audits for two or three years. Sometimes, the auditors can even detect expenditures that do not qualify for funding. In such cases, CIDA recovers the money.

In our recommendations, we said that CIDA was not recovering the money fast enough. However, the agency itself has set up an audit system to ensure that the terms and conditions are met. It tracks the situation and analyzes the results obtained.

Finally, we audit the framework and the systems, and we make recommendations, for example that CIDA must be more rigorous in recovering and tracking the money. However, the basic system is already in place.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Mr. Chair, is there time for another question?

[The Chair, Conservative, David Tilson]

Yes, there is.

Mr. Poilievre.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Ms. Fraser, you mentioned some areas where you think we may have gone too far in expanding your powers. Is that a fair characterization?