Fisheries Committee on Feb. 20th, 2007

[The Chair, Conservative, Gerald Keddy]

Pursuant to Standing Order 108(2), we are undertaking a study on chapter 4, “Managing the Coast Guard Fleet and Marine Navigational Services—Fisheries and Oceans Canada”, of the February 2007 report of the Auditor General of Canada.

I'd like to welcome our guests. We have a few more members to arrive, but it is eight minutes past the hour of eleven and we only have two hours. I'm sure the membership will have all kinds of questions for our guests.

I would like to welcome Sheila Fraser, Auditor General of Canada; John O'Brien, principal; and Kevin Potter, director.

From the Department of Fisheries and Oceans, we welcome George Da Pont, Commissioner of the Canadian Coast Guard; Larry Murray, deputy minister; and Charles Gadula, Acting Deputy Commissioner of the Canadian Coast Guard.

I would also like to welcome two guests here today, Jake Vanderhide and Georges Cormier from the Pacific Halibut Association, who are here just to take in the proceedings of committee today.

I will ask the Auditor General, if she would, to start.

[Sheila Fraser, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

We thank you for this opportunity to discuss chapter 4 of our February 2007 report.

As you mentioned, I am joined today by John O'Brien and Kevin Potter, principal and director respectively from our Halifax office, who are responsible for this audit.

In this chapter we concluded that Fisheries and Oceans Canada, more particularly the Canadian Coast Guard, has not made satisfactory progress over the last four to six years in implementing recommendations made in chapter 31, “Fleet Management”, of our December 2000 report, and in chapter 2, “Contributing to Safe and Efficient Marine Navigation”, of our December 2002 report.

The coast guard plays a number of important roles. It provides marine navigation services, such as aids to navigation and marine communications, to mariners in Canadian waters.

The coast guard uses its fleet of large vessels to deliver its own programs, such as icebreaking and offshore search and rescue. These vessels also support other departmental programs, such as science and fisheries management. In addition, the fleet assists other government departments when requested to do so.

In the 2005-06 fiscal year, the cost of fleet services totalled about $344 million. The cost of marine navigational services was about $245 million, including costs allocated from the fleet.

In our earlier reports, we concluded that Fisheries and Oceans Canada had not managed its fleet and marine navigational services cost-effectively. In response to the problems we noted in 2000 and 2002, we made 13 recommendations for improvement, 12 of which remain the department's responsibility.

The department accepted all of these recommendations and made a commitment to take action.

After concluding that progress was unsatisfactory, we focused our attention on identifying the underlying causes.

We found that the coast guard started a number of initiatives, many of which were designed to address issues that we previously raised. However, the coast guard has not been able to complete these initiatives. We believe that there are three fundamental reasons for this lack of progress.

First, the coast guard accepted assigned duties even when there was no realistic way that it could successfully deliver. For example, it proceeded with implementing the coast guard as a special operating agency. With an already stretched management team, the coast guard developed an implementation plan without having the resources needed to support its completion. Not surprisingly, we found that many elements of this plan were unfinished well after the expected completion date.

Second, the coast guard did not prioritize its actions. For example, the coast guard attempted to address all of our recommendations to improve management of its fleet at once. These initiatives stalled at various stages of completion.

Finally, while the coast guard made commitments to resolve management problems and complete initiatives, both organizational and individual accountability for achieving results were lacking.

On April 1, 2005, the coast guard became a special operating agency within Fisheries and Oceans Canada. The decision to establish the agency was done with a view to affirming the coast guard as a strong national institution ensuring that its fleet provide services to the government and to providing the coast guard more operating flexibility.

In the chapter, we raised several issues that will be important for successfully implementing the special operating agency.

The coast guard has had limited success in developing a national approach to managing its operations. It has yet to strike the right balance between appropriate national direction and guidance, and responsive, accountable delivery.

In addition, the modernization of the coast guard's marine navigational services has been slow. New technologies are expected to improve the effectiveness of marine navigation while reducing the coast guard's costs. However, until it can shed the old technology and associated infrastructure, these cost reductions will be difficult to attain.

Furthermore, the fleet is aging. Reliability and rising operating costs are significant issues. While the government has approved funding for new vessels, we are concerned that the most recent plan for replacing vessels is already out of date.

You will note that we have made only one recommendation in this chapter. If little has changed, why then would we not repeat our past recommendations?

Like any other organization, the coast guard has limited resources and must focus on the key issues it faces. Therefore, we have recommended that it establish its priorities for improvement, setting clear achievable goals for each priority. Sufficient and appropriate resources should be allocated to each priority. The coast guard should plan and implement the changes required by holding managers and organizational units accountable for the identified results.

I am satisfied that the department's response to our recommendation recognizes the need for realistic planning and implementation.

I believe that your committee can play a valuable role by asking the coast guard to identify its priorities for improvement and to provide regular updates on the results that are achieved.

Mr. Chairman, this concludes my opening statement. We would be pleased to answer your committee's questions. Thank you.

[The Chair, Conservative, Gerald Keddy]

Thank you, Madam Fraser. I think that's a pretty straightforward and accurate report of the situation we're in. I appreciate your forthrightness.

Are we going to have another opening statement or are we going to—? Yes?

If Mr. Simms can wait a bit—That was only six minutes. I know you're hot to ask questions and I'm going to make sure you get to do that, but we have another statement to SCOFO from the deputy minister.

Mr. Larry Murray.

[Larry Murray, Deputy Minister, Department of Fisheries and Oceans]

Thanks very much, Mr. Chairman.

Like Madam Fraser, we welcome the opportunity to be here, particularly with the Auditor General. I'm joined, as you mentioned, by George Da Pont, the commissioner of the coast guard, and Charles Gadula, the deputy commissioner.

As you probably know, Minister Hearn issued a statement following the tabling of the report in which he fully accepted the findings of the Auditor General. He has instructed that the commissioner and I develop a realistic plan that addresses to his satisfaction the matters raised by the Auditor General, and that we provide him with regular reports on progress. We intend to share this plan with the Auditor General and the Treasury Board prior to implementation.

Naturally, both the commissioner and I are disappointed with the audit results. The concerns raised by the Auditor General are largely, but not exclusively, management issues and must be addressed. As deputy minister of Fisheries and Oceans, I fully accept responsibility for the slow progress to date in responding to the recommendations of the 2000 and 2002 Auditor General reports.

However, notwithstanding our failure to complete all outstanding actions with respect to these recommendations, considerable progress has been made on many initiatives, and I believe that with careful identification of priorities, as recommended by the Auditor General, this important work will be completed.

We have produced a document for your information and consideration that indicates, fairly objectively, I believe, what has been achieved to date in response to the Auditor General's earlier recommendations and what remains to be done.

I also want to offer a few comments on the context within which this work was taking place. When I became deputy minister in April 2003, I knew that both the coast guard and the department faced significant fiscal and operational challenges. I felt that we needed to strengthen and clarify the organizational model, that we had to develop a strategic plan on our overall direction and that we needed additional resources to deal with serious operational shortfalls.

A major internal review encompassing the entire department, including the coast guard, is known as the departmental assessment and alignment project, or DAAP, together with a parallel Treasury Board expenditure management review where the principal vehicle is used to complete this work.

With respect to the coast guard, one of my first actions was to implement clear lines of accountability. In June 2003, I established the coast guard as a line organization and had the assistant commissioners in the regions report directly to the commissioner. Prior to that time they reported to the department's regional directors general. I was also concerned with the “five coast guard” reality, which has been raised again in this report. I felt this change in reporting relationships was an essential first step to addressing the issue, and still believe that to be the case.

In December 2003, the government announced the intention to further strengthen the coast guard's autonomy by making the organization a special operating agency within DFO. Various policy and regulatory functions that had previously resided with the coast guard were consolidated in Transport Canada, so that the coast guard could focus exclusively on program and service delivery. It did take several months of highly focused management effort to develop and secure approval of the authorities required to establish the coast guard as a special operating agency, and this change came into effect on schedule on April 1, 2005.

Meanwhile, the DAAP and related Treasury Board processes were concluded in April 2004 and resulted in a renewed departmental strategic plan, a significant reallocation of internal resources to operational purposes, and the foundation for a transformational plan that ultimately produced $55 million in short-term operational relief in 2005 and 2006 and, with Canada's new government budget of 2006, a $99 million permanent increase to our A-base, $45 million of which went to the Canadian Coast Guard.

The 25-year fleet renewal plan was also completed concurrently with these various initiatives, including the approval of phase I implementation. I would say the reports of this committee on the coast guard in 2003 and 2004 also very much informed and supported these processes and the results achieved, including augmented funding.

However, what I have described also entails a great deal of change for already busy managers across the coast guard, and culture change, which is what this is really all about, does and will take time. I firmly believe that solid progress has been made and is being made within the Canadian Coast Guard and that under Commissioner Du Pont's capable leadership, the CCG management team is deeply committed to transforming the agency into a strong national institution.

With regard to coast guard participation in maritime security priorities, I would like to correct erroneous media reports that the $27 million received by the agency has not been used for these purposes. Coast guard began receiving funding from Treasury Board in 2002 especially to enhance our on-water presence. Consequently, the vast majority of the fleet's increased number of sea days were carried out by multi-tasked vessels engaged in various programs, since existing on-water activities provided the collateral benefits of federal presence in Canadian waters including readiness to respond to on-water emergency incidents.

As the Auditor General has noted, there was a problem in reporting the information. Activity codes were put in place in May 2002 to track vessel activities related to maritime security. However, these codes were being interpreted differently, leading to an inconsistent application at the regional level. A strategy has since been developed to deal with activity coding deficiencies and inconsistencies.

I also want to emphasize the very effective work the coast guard has done throughout the period in maintaining its day-to-day operations. Here again, I would like to correct some news reports last week suggesting that no fisheries resource surveys had been conducted since 2001. The coast guard provided the necessary platforms to ensure that the vast majority of them were indeed carried out. As the Auditor General noted, a number were delayed or changed as a result of technical problems. However, out of close to 90 surveys in the Atlantic zone between 2001 and 2006, only two were not done, both of which were referenced by the Auditor General in her report.

My primary point is that the crews who operate the over 100 ships of the Canadian Coast Guard year round in some of the harshest conditions on the planet do so with selfless dedication, professionalism, and courage.

[The Chair, Conservative, Gerald Keddy]

Excuse me, Mr. Murray, you may have to slow down just a little bit for interpretation.

[Larry Murray]

Okay. Sorry.

The well-founded criticism of some management practices and a lack of satisfactory progress on previous audits, which the Auditor General has delivered in a measured and very effective way, is deserved. However, it is also important to recognize that the men and women of the Canadian Coast Guard deliver excellent operational results, whether in marine search and rescue, consistently maintaining NAFO patrol vessels on the nose and tail of the Grand Banks 365 days a year in all weather conditions, responding to unique emergencies such as the highly successful Hurricane Katrina relief operation in the Gulf of Mexico with the ship, the Sir William Alexander, whose control systems were designed for operation in cold northern waters, or routinely maintaining six to eight ice breakers in the Arctic for six months a year, despite always-present technical and logistical challenges. As this committee well knows, there are countless other examples I could use.

Finally, as our minister has emphasized publicly, notwithstanding the management issues correctly raised by the Auditor General, the Canadian Coast Guard has one of the best records in the world for marine search and rescue, with a 98% success rate in cases with lives at risk during the same period.

I offer these observations not as excuses for the slow progress in some management areas, for which I take responsibility, but rather as examples of ongoing significant achievement in challenging and very important operational areas by the members of the Canadian Coast Guard.

I now will ask Mr. Da Pont to say a few words to conclude the statement.

Thank you.

[Commr George Da Pont, Commissioner, Canadian Coast Guard]

Thank you. I wanted to spend a few minutes to give the committee a sense of how we intend to respond to the findings of the Auditor General.

First, let me say that the management team of coast guard agrees fully with her report. Early last year, just after I had begun to act in the position of commissioner, I launched an A-base review to examine both how we were spending our money and our internal business practices.

We set up a dedicated team of people from all parts of coast guard and all regions to do this work over a six-month period. While I obviously knew that the Auditor General's staff would cover some of the same ground, I felt that a review of our A-base would look beyond the scope of the auditors, and take a broader look at our internal practices. This group reported out in September of last year. Their findings were very consistent with those of the Auditor General. Indeed they helped to inform her analysis.

Last September I appeared before this committee. I identified five multi-year priorities for coast guard that were reflected in our first business plan as an agency and indicated that, within each of these areas, we would identify specific actions and activities to be taken.

As you may recall the priorities were: full implementation of agency status; renewal of the fleet; steady progress on our various modernization initiatives; our on-going contribution to the security agenda; focus on our people, especially succession planning.

I believe these priorities provide a good framework for responding to the Auditor General's findings. I also agree completely with her observation that we tried to do everything at the same time with unrealistic timeframes and without ensuring that we had adequate human or financial resources assigned to complete the work.

That is why I would like to use our business plan as the vehicle to respond, so that we can put our response to the Auditor General's findings in the context of all our other business activities to ensure that we do not repeat the mistake of spreading ourselves too thin.

I will also provide regular progress reports to the minister and, through our business plan, to the Treasury Board. The plan is a public document, so it will be available for widespread scrutiny, including by this committee. I expect our next business plan to be ready by the end of April.

I've also taken a number of concrete actions that begin to address some of the issues identified by the Auditor General. For example, marine advisory boards, which are our principal consultative mechanism with the shipping industry, have been revitalized at both the national and regional levels. Already we've engaged in meaningful discussions on the issue of marine service fees, which have been a contentious issue for many years. This has helped us to re-engage with one of the primary users of our services.

We are in the process of establishing a parallel link with recreational boaters and commercial fishers through existing structures.

I have created a new group to focus exclusively on vessel procurement, a capacity that has not been in place in the coast guard for 20 years. We have also updated our fleet renewal plan. I've created a workforce development unit to establish a capacity for analysis and strategic thinking on how we manage and train our people.

I have taken a different approach to budgeting, which will bring more transparency to what we spend our moneys on, particularly for maintaining the fleet and for the results of the funding we received for federal on-water presence. Finally, I have increased the moneys we allocate for vessel refit and put in place a more structured planning process for how we do that work.

These measures are only a start, and I know that much more needs to be done. But I am confident that we are on the right track to building the strong national institution that we all want.

Let me conclude by emphasizing, as did the deputy minister, how proud I am of the professional and dedicated work of our employees.

Thank you, Mr. Chairman. That concludes our opening remarks.

[The Chair, Conservative, Gerald Keddy]

Thank you to our witnesses.

We'll go to our first questioner.

Mr. Simms, you have your opportunity.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Mr. Chair. I would like to thank our guests for coming, and I'll just launch right into this as quick as I can. I believe I have 10 minutes. Is that right?

[The Chair, Conservative, Gerald Keddy]

You have 10 minutes exactly.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Ms. Fraser, would it be safe to assume that a lot of these—I won't say mistakes—misgivings took place at around the time that the special operating agency was set up?

[Sheila Fraser]

I don't think, Mr. Chair, that we can conclude that, because the special operating agency has only been in existence now for about two years. These are long-standing problems. We've referenced audits from 2000 and 2006, but we could even go back further than that. So there are many problems, I think, that are long-standing.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I guess what I'm getting at is it seems to me there's been a flux in the transition for the Canadian Coast Guard. I'd like Mr. Da Pont to weigh in on this as well.

The transition from, say, transportation over to fisheries: did you gauge that there was a lot of uncertainty in the management practices when that was taking place?

[Sheila Fraser]

We didn't specifically look at that, Mr. Chair, but I think we can all recognize that any kind of a reorganization will take management attention and time and resources. But we didn't specifically look at that issue.

The deputy minister or the commissioner might be able to comment on that.

[Commr George Da Pont]

Yes, I could offer a few comments.

As the Auditor General has noted, certainly, when the coast guard transferred from Transport Canada to Fisheries and Oceans, there was a significant amount of work that had to be done. We had to merge what was then the existing coast guard fleet with the DFO fleet. At the same time, both were downsized in the context of program review activities. We had changes to our mandate.

So those are things that take a fair bit of time to implement and do. In addition, the “five coast guard” reality was a reality of the time of the transfer. It's not something that was created in the last few years, because, as the Auditor General has noted, some of those activities and differences go back many years.

I think it did take time to put together the special operating agency. It did take some focused time to put in place the authorities that were required to make it effective. They only became effective at the beginning of April 2005, and I'm very confident it gives us a good framework for moving forward. Obviously, it hasn't been a reality for that long, and I don't think we've yet realized the full benefits of that.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

It just seems to me that, as the Auditor General pointed out, you're taking on a lot without any clear objectives, or at least in the short term and perhaps even the long term. The long-term goal obviously is to increase the effectiveness of the fleet, and whether that happens in this department or in another, in my opinion, remains to be seen.

But, Ms. Fraser, you said the recent plan to replace the fleet is out of date. Is that correct? I want to explore that issue for just a moment. Which recent plan are you referring to?

[Sheila Fraser]

I'll let Mr. O'Brien respond to that.

[John O'Brien, Principal, Office of the Auditor General of Canada]

I think, Mr. Chairman, if you look at paragraph 4.78, we talk about the vessel replacement plan at the time we did the audit. And there were two or three issues that we note there. One is that the coast guard had asked for ten new vessels and had approval to get six. Of the six it did get, the timeframes were stretched out in terms of delivery. The long-term plan talked about replacing vessels several years after their expected useful life, so they were going to be very old when they had to be replaced.

Another issue that's tied in with this goes back to the issue of marine aids modernization. In terms of things like the large buoy tenders, the nature of the infrastructure that you have to maintain will drive the type of vessel you need. So as marine aids modernization has not progressed as rapidly as expected, you need to have the new, modern aids system in place before you can make clear decisions as to the type of vessel you're going to need to service those aids. Those are the types of things we talked about.

I do note in the document, which I think has been tabled, that the coast guard indicates that it updated that plan earlier this year, since July.

Those were the kinds of concerns we had when we did our audit work.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

How much time do I have?

[The Chair, Conservative, Gerald Keddy]

You have nearly five minutes.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Okay. I just have to prioritize my questions.

Mr. Da Pont, would I be right in saying that last year alone, senior managers of the Canadian Coast Guard received roughly $300,000 in bonuses?

[Commr George Da Pont]

Yes, that would be close to the right figure.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Who decides what bonus you get?

[Commr George Da Pont]

It's decided by a departmental committee within the coast guard. Each assistant commissioner and myself at the national level would give ratings for the people who report to them.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Why were the bonuses given out?