Government Operations Committee on Feb. 20th, 2007

[Sheila Fraser]

It's almost two separate activities. And that's why we're saying there needs much more of a priority setting. Then there has to be a regime to ensure that the conservation of the sites that it has been decided need to be preserved are in fact preserved.

[Raymond Simard, Liberal, Saint Boniface, MB]

I'm just going to jump over to the coast guard. I'm trying to get a lot of stuff covered because I may only get one round here.

I'm not sure, but it seems to me that when I was looking at this, the audit that we were comparing to was 1983. Does that make sense, that it would have been the last audit?

[Sheila Fraser]

There were audits in 2000 and 2002. What we're saying, though, is that some of the issues we are raising are similar to ones in 1983.

[Raymond Simard, Liberal, Saint Boniface, MB]

They were existing in 1983. Fair enough.

Thank you very much.

[The Chair, Liberal, Diane Marleau]

Ms. Thibault.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Madam Chair.

Thank you for being here, Ms. Fraser and your officials.

I will do like my colleague and try to cover three or four points during my seven minutes.

I disagree with my colleague on the issue of passports. At my riding office, my role is to help people. I have no complaints to make about the work done regularly by staff at my riding office.

With regard to what you indicated, emergency planning is totally inadequate for crisis situations. Like many of my colleagues, I can attest to the fact that there is no planning for western hemisphere travel initiative—I do love those titles—and that is surprising.

Given your past audits, I am astounded to see that there was no planning. We knew that this was coming and it is not because we are now working 24 hours a day, 7 days a week that the problem will be resolved. People need to travel. The thing that is very serious is that we do not have access to members' offices, Forget that! Unfortunately, people employed there are quasi-incompetent, and I am being polite. You then contact Passport Canada.

At point 5.40, you refer to security by stating that some employees have access rights that allow them to produce passports, without being properly authorized or having the security clearance to do so.

Given the crisis we are facing, does that not add to your concern?

[Sheila Fraser]

They have made a lot of progress with regard to security. Employees have received all the required levels of security clearance. A problem remains, because some unauthorized people have access to the system. The agency has provided the examiners and the necessary tools. We expected that those things would be done within one year. It would be up to Passport Canada to explain, but in my view, if line-ups are so long, it is because they are continuing to enforce security guidelines.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I would like to talk about built heritage. If I have understood correctly, the Canada Parks Agency has addressed your 2003 recommendations in a satisfactory manner. There are, however, problems in other departments. I have just heard you say that there was no funds for the classification of buildings.

Why classify buildings if there is no plan or accountability?

[Sheila Fraser]

That is indeed a problem. We classify buildings and sites as having historic or heritage value, but there is a competition for funds allocated to the operations of such departments as Public Works and Government Services, National Defence or Fisheries and Oceans.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have heard you say that because you do not get involved in operations, you could not say whether centralization would be a potential solution. In some departments, the Treasury Board policy is not implemented, either entirely or in part, or not considered useful or applicable.

[Sheila Fraser]

The policy applies to all departments, but it lacks teeth. It only covers buildings, but not other sites. Furthermore, Parks Canada has to comply with an act, whereas other departments only deal with a policy.

I will ask Aline Vienneau to explain a bit further.

[Aline Vienneau, Principal Director, Office of the Auditor General of Canada]

Parks Canada is mandated to protect the historic buildings and sites that we have talked about, including canals, etc. As for departments, they are governed by a Treasury Board policy that only applies to buildings.

For example, Public Works and Government Services might have a park that lies in between two buildings, but even though the park is part of the historic site, nothing governs its management. So the policy has shortcomings.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have a question for either you or Ms. Fraser.

On page 14 of your report, at point 2.30, you cite three entities that use the factor of "the need to act quickly in order to use funds that have become available".

Concerning accrual accounting, which we have spoken a lot about, even though it could not solve everything, do you think it could help? That way, people could not argue that they have to use the funds immediately to carry out such and such activities. We could tell them that the funds can be applied over a number of years.

[Sheila Fraser]

I believe so, as long as you choose capital funding that is spread over a long period of time. Repair and renovation work would also have to be planned and provided with the necessary funds, and that those funds do not lapse at the end of a fiscal year, so that they can be carried forward from one year to another.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You are about to tell me that my time is up, Madam Chair. Might I have another 30 seconds?

[The Chair, Liberal, Diane Marleau]

Thirty second, but no more.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

My last question is concerning the Canada Revenue Agency. With regard to international taxation, have you reviewed the system's shortcomings that might increase the risks of money laundering?

[Sheila Fraser]

No, that was not really considered. What we did do, however, was examine the agency's audit activities.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

[The Chair, Liberal, Diane Marleau]

Thank you.

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Madam Chair.

Good day to all.

It's a little unusual that we can sit here in a situation like this and actually be facing really good news. I've taken a look at your comments regarding the different areas of evaluation, in particular.

As a matter of fact, when the member across the table, Mr. Wrzesnewskyj, and I sat on public accounts and went through the public opinion research, we saw the sad tale of woe that took place at that particular time. Of course, the committee made a number of recommendations based on your comments back then. I would like to comment briefly on that.

But before I get to that topic to discuss some of the areas and ask for you comments on some of the successes we have had in dealing with it, hopefully patterning other actions in other departments to parallel those kinds of successes, I have one area of concern I wish to touch on. It's on international taxation and the loopholes, and/or potential loopholes, or who knows what loopholes regarding a potential loss of revenue for the Canada Revenue Agency.

On these tax loopholes, be it Barbados, the Caymans, or whatever tax haven that is used, you've stated in your report, at page 5 of the status report, the agency has yet to deal with the low level of expertise in international tax audits, particularly ones that handle high-risk files. This lack of expertise could result in inconsistencies, and it could go on to problems also remaining in the matching of non-resident tax data.

Given the size and scope of this file, you mentioned as well that we're talking about over $1.5 trillion in transactions and up to $5 billion in revenue in taxation to the Canadian government at this particular time. If we have a discrepancy that's unknown, it's disturbing.

What I'd like to know is this. Do you think this is an issue that should require more scrutiny on our part? And if some additional action should be taken, what do suggest that should be?

[Sheila Fraser]

Thank you, Madam Chair.

The problem we're raising here is related to the greater Toronto area, where the agency has a great deal of trouble recruiting and maintaining expertise in its offices. People with international tax expertise are very highly sought after. We certainly didn't recommend to the agency that they try to go out and hire more people, because I don't think it would be realistic, quite frankly.

We note in the report that slightly more than 40% of the international tax auditors in the greater Toronto area have less than two years of experience. As one could imagine, the greater Toronto area is where you're going to find many of the large corporate taxpayers who have significant international transactions and what one may consider higher-risk files.

We have suggested to the agency that they need to develop an approach across the country. There are offices that have significant amounts of expertise, people with a lot of experience. They should think more nationally rather than regionally in dealing with these files and use the expertise that is available elsewhere to deal with the more complex transactions.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

I'll now go back to my initial comment on what I honestly consider to be a good news status report. We all have access to the report on advertising and opinion research back in 2003. And I'm not knocking the previous government; that was just the reality at that particular time.

We see that Public Works did not provide equitable access to all the suppliers. In some cases, there was no evidence that a selection process had even been carried out at all. Departments did not even follow or meet the requirements of the Financial Administration Act. In many departments, they didn't even indicate the need for undertaking particular research. They just went and did it. In other words, there was no justification or verification whatsoever.

In particular, it was noted the government paid for research that monitored, among other things, voting behaviour and political party image. They were items absolutely contrary to the guidelines that had been in place at that particular time.

This was really disturbing, but I'm encouraged that a lesson was taken and a lesson was heard. What I'm looking for from you at this particular time is this. When you fix a problem, do you reinvent the wheel or do you fix the wheel? In one statement in particular, you said than rather than simply creating new rules, the government in question, the government now, and of course the public service, focused on the rules and took action on those rules.

Can you give us some examples of that?

[Sheila Fraser]

Yes. And I too would like to say that we were very pleased to see the progress that had been made and to see the results of the audit.

I'd say one of the major issues was around the contracting, the open tendering, the process to select suppliers, which was not done in an equitable manner. Often we couldn't find the rationale for choosing certain suppliers. This time we found that the suppliers had been chosen following the government's contracting policy, that there was a good process that had been put in place, that proper evaluations had been done, and that people had been awarded contracts through a process that appeared fair and transparent.

So I guess that was one of the most significant improvements.

I don't know if Mr. Campbell wants to—

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Kudos to the public service and to the government for basically saying let's solve the issue, let's not just talk about the issue. By all appearances, your report has recognized that this department in particular took your comments seriously.