Mr. Chair, members of the committee, thank you for inviting me to speak at this hearing.
I am a chartered professional accountant and a forensic accounting specialist. Over the course of my career, I have investigated various cases related to allegations of corruption, fraud, financial misconduct and conflicts of interest. I also teach at the University of Ottawa's Faculty of Law and in the executive MBA program at the Telfer School of Management in the areas of corporate ethics and corruption.
In these times of crisis, the worst and best human behaviours are noticeable. As a result of the declaration of a state of health emergency, the abolition of certain internal control procedures for awarding contracts makes the federal government vulnerable to corruption, embezzlement, undue influence and fraud.
With the introduction of tens of billions of dollars in new federal aid programs, oversight and accountability are becoming unavoidable paradigms. Thus, alternative measures must be put in place to compensate for the revocation of certain internal compliance controls.
While rapid action is needed in times of crisis, maintaining an adequate level of due diligence at the supply chain level is essential to prevent corruption, fraud and other unethical practices. The reputation of the government and the credibility of programs depend on it.
It is important that the flow of money and the contracts associated with it be very transparent. This means making the information accessible to the general public. It is also important to always document the considerations that led to a single-source contract with a company or an organization.
To mitigate the impact of the risks of non-integrity and corruption, it is important to take a holistic approach in six stages.
First, integrity. Senior officials must ensure that the various players in the procurement process demonstrate integrity and adhere to standards of ethics, honesty, professionalism and righteousness. The issue is fairness, non-discrimination and compliance in the public procurement process.
Second, transparency. There must be full transparency in public procurement to promote accountability, ensure access to information and, above all, level the playing field so that small and medium-sized enterprises can compete on an equal footing.
Third, access. Access to public procurement by potential companies of all sizes is important to ensure the best value for money through fair competition. It is essential that companies that violate integrity and engage in corruption be punished and excluded. The deterrent effect is paramount.
Fourth, monitoring. With respect to the public procurement cycle, it is essential that it be monitored and overseen to support accountability and promote integrity. It is important that the effectiveness of the supply cycle can be measured by a system for analyzing the risks of the process and its environment. This will allow the government to gain insight into new and emerging risks or alarm indicators that will allow it to improve its monitoring and oversight system.
Fifth are controls. Internal controls are firewalls and they avoid dangerous shortcuts. Whether we are talking about financial controls, internal audits or management controls, they must be carried out to ensure that legal, administrative and financial procedures are followed. More than ever, in times of pandemic and anti-corruption, we need harmonized internal control practices to ensure consistency in the application of procurement rules and standards across the public sector.
The sixth and final stage is due diligence. With respect to the pre-examination of the financial situation and governance structure of contracting entities, senior officials must conduct appropriate diligence that includes identification and verification of four key factors: the true shareholders, the governance structure, the legal structure of related organizations and, lastly, a detailed review of financial statements and other financial reports.
Moreover, in public contracts, the most basic caution requires that there be comprehensive justification and documentation of the decision-making process recommending the award of a non-tender contract.
When it comes to awarding a sole-source contract to an entity, it is crucial that some questions are specifically answered. Does the entity have impeccable probity? Does the entity have the technical skills? Does the entity have the human resources to carry out the mandate properly? Does the entity have a transparent legal structure? Does the entity have a stable governance structure? Does the entity have the financial stability to complete the contract?
Were audits of the entity's officers carried out prior to the award of the contract? Was the contract awarded in an emergency context? Were apparent, potential and actual conflict of interest issues assessed prior to the award of the contract? Is the contract guided by due diligence with respect to the department's interests? Is the contract typical of the relationship between a department and an entity? Does the contract include a clause relating to the ongoing monitoring of the ethics and compliance program of the entity under consideration to be retained? Does the contract include anti-corruption clauses? Lastly, was there a legal validation of the contract prior to its award?
These questions must be answered.
In closing, in this time of a global pandemic where wrongdoing can lead to reputationally damaging administrative or judicial action, the government must set an example and strengthen its reputation for integrity. The government and senior officials need to be more vigilant and strengthen structures to reduce the risk of favouritism and clientelism in awarding contracts.
Although emergency exemptions may be permitted to award sole-source contracts, they must be necessary and non-selective as they provide possible bypass routes for deviant actors.
Canada has an efficient, rules-based procurement system. We must simply use it properly and follow the rules.