Government Operations Committee on May 30th, 2006

[Mike Wallace, Conservative, Burlington, ON]

You can do this over the phone, though, can't you?

[William Baker]

Some of it is done over the phone, but for the last while we've been attempting to do as many physical verifications as possible. We rely on a volunteer system. It isn't perfect, but it is affordable.

[Mike Wallace, Conservative, Burlington, ON]

If I had a handgun or a restricted gun of some sort, I'm assuming I cannot verify that over the phone.

[William Baker]

No. Bear in mind too that the vast majority of verifications are done by gun dealers and gunsmiths in this country. There isn't one who isn't a verifier, because it's their business. When that person calls the Firearms Centre to say they wish to register this particular handgun to Mr. Wallace, first of all they want to ensure that you've got the proper licence to be able to possess a handgun, and that is verified, and we do an address check and so on. Then they would describe the firearm, and we would ensure that it matches the firearm on the table.

I agree with the Auditor General. It's not perfect. Ideally, you would want to have absolutely perfect information on every firearm registered in the system. It is by no means perfect, but the system isn't as faulty as one might think.

[The Chair, Liberal, Diane Marleau]

Thank you very much.

Madam Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Madam Chair, and thank you to everyone who has come here this morning on this important issue.

Ms. Fraser, you have very publicly and very well documented the exploding costs of the Canadian firearms program. Now you've taken another thorough look at this. My question is, is your sense that appropriate measures now are being put in place to really get this system running properly? I know you say there are some ongoing problems. But do you feel that generally the systems are getting put in place to get this program operating well, or would you say that it's still a very troubled program with the possibility of the costs getting out of control again?

[Sheila Fraser]

Thank you, Madam Chair.

When we did the audit in 2002, the main issue we brought forward then was that Parliament hadn't been adequately informed about the increasing costs of the program. Our audit was really limited to that. Because of the difficulties we had with the financial records, we didn't look beyond that. In this audit we did a more comprehensive audit of the management practices. We noted in the early years of the program that there were many difficulties with the costs, of course, but also with contracting. We note in the report that with the arrival of the new management team, led by Mr. Baker in 2003, that we see significant progress in dealing with many of those issues. The financial reporting has improved and the contracting as well. We identified what we call red flags that could be indications of problems in contracting. Those have gone down significantly, as some of the tables in the report will note.

There are still ongoing challenges, but quite frankly, there are ongoing challenges in every department in government. We note the ones that are still problematic, but we do see considerable progress and considerable improvement.

[Peggy Nash, NDP, Parkdale—High Park, ON]

It's a huge undertaking to get something like this up and running, because as was said earlier, it's a case of moving from a system of registering some guns to registering all guns and to licensing all gun owners, which is a huge undertaking. A lot of money has been spent, some of it well spent and some of it not so well spent, but there is a system that is up and running and that is generally improving and doing much better.

There has been discussion about the long gun registry and stopping that system of registering long guns. My question to you, Mr. Baker, is what would be the cost saving from that? I'm told it's relatively minor, two or three million dollars—but that could be way off. Do you have a sense of what it would save Canadians if we no longer registered long guns?

[William Baker]

I can't be precise on that, except that I can frame it for you. If you look at the budget for the year just completed, which was for a little over $82 million for the entire Canada Firearms Centre, including all of the licensing, safety training, registration, and so on, something less than $15 million of the $82 million was for registration. That would be to register all firearms, including online police access to the database.

I don't think you could do it on a per-unit basis, because there's a fixed cost associated with having a registration system. There would certainly be savings associated with eliminating such a large volume of registrations, but I can't be precise as to what the exact savings would be vis-à-vis the total cost of $15 million. I should point out that the Auditor General was able to confirm that the means by which we allocate costs between licensing and registration are reasonable.

[Peggy Nash, NDP, Parkdale—High Park, ON]

All right. When you hear about a billion dollars in costs, the cost of registering long guns, for example, is actually quite small in comparison with the overall expenditures to date for this program.

[William Baker]

I think, in fairness, the firearms program and the registry have been used somewhat interchangeably to describe the program. We, the officials who work in the Firearms Centre, have a narrow definition of the registry as the component dealing with the registration of firearms. It is not the whole program. The vast majority of expenditure, over 75%, is for licensing of firearms owners, and then, of course, we're also involved in safety training, safe storage, and publicity around that. But as I said, when it comes to registration, we're looking at a total amount of less than $15 million a year.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Do I have more time?

[The Chair, Liberal, Diane Marleau]

Yes, you do.

[Peggy Nash, NDP, Parkdale—High Park, ON]

The other issue that you raised, Ms. Fraser, was the quality of the data that's in the system. As I understand it from reading the documents, there was a rush to get things up and running and some of the data were compromised in an effort to get things moving.

I'm just trying to understand the system. Given that there is ongoing renewal of licenses and ongoing registration, will that data, over time, have more integrity just because licenses have to be renewed and registrations will be taking place on an ongoing basis?

[Sheila Fraser]

That is possible. I guess we could probably say yes.

There were two issues that we raised about quality of data. One was the actual description of the weapons that were in the database; the other one was the addresses, and we note in here the percentages of returned mail and suggest that the centre could use other address databases within government to validate addresses. So we're basically suggesting that they have other methods in place to verify and improve the quality of the information in the system.

[The Chair, Liberal, Diane Marleau]

Okay, thank you.

Mr. Alghabra.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Thank you, Madam Chair.

Good morning, everybody. Thank you for being here today.

Good morning, Madam Fraser. It's good to see you again.

The question I have for you is about your comments regarding the recording of the costs, the ones that were recorded in the following year, where the response of the government was that it had consulted the Comptroller General before making that decision to record the costs in the following year. How do you reconcile that? Government departments may go to the Comptroller General to seek advice or guidance, and the advice is given and followed. How do we find a check and balance to ensure that such decisions will comply with the rules and regulations?

[Sheila Fraser]

Excellent question, but I'm not quite sure how to respond to it. We would have expected the government to follow its own accounting policies.

In this case, we do not believe they did, and we believe there were $21 million in costs that were not recorded in the correct year, and if they had been recorded in that year, the government would have had to go back for supplementary estimates and authority to spend that money.

We view this as a serious issue, otherwise we wouldn't have raised the issue in a report. I guess one of the checks and balances is that we do have reports like this—hopefully rare and far between—but perhaps the Comptroller General would want to address their view of the matter.

[The Chair, Liberal, Diane Marleau]

Mr. St-Jean.

[Charles-Antoine St-Jean]

Thank you very much, Madam Chair. Thank you for this opportunity to answer that question.

Reference is being made here to events that took place in January, February and March 2004. As the Auditor General mentioned, this is a very serious matter, which I also take very seriously.

I began my job on June 1, 2004. A few weeks after I took up my position, I was made aware of the complex nature of this matter. I was told that there were different accounting and legal opinions on the subject.

The departments are responsible for the proper keeping of their books. Deputy ministers are responsible for preparing their financial statements and for what are called public accounts plates. Where there are problems of interpretation, they consult their colleagues at the Treasury Board Secretariat and Office of the Comptroller General.

When the question was brought to the attention of the Treasury Board Secretariat in early 2004, it was noted that supplementary parliamentary appropriations might be necessary. A number of differing opinions within the Office of the Comptroller General and Treasury Board Secretariat led us to consider the question from various standpoints.

The Canadian government and the public sector in general live in two worlds. There is the pure accounting world, that is to say the world of generally accepted accounting principles, or GAAP, and the world of parliamentary appropriations. While the former operates exclusively here in Canada on what is called an accrual basis, parliamentary appropriations must be recorded on a modified cash accounting basis. That has changed over the years, more significantly in 1991, to include what is being referred to here, that is to say the payables at year-end policy, which provides that certain expenses are recorded against parliamentary appropriations at March 31 of every fiscal year, where certain conditions are met.

In general, this type of situation does not cause a problem, but, in this case, problems of interpretation led various people to view the situation in different ways. They wondered whether this should be debited from parliamentary appropriations or recorded under the payables at year-end provision. The amount of $21.8 million was entered in the Canadian government's accounts payable at March 31, 2004 for public accounts purposes. However, it was not debited from the centre's parliamentary appropriations at March 31, 2004.

As the Auditor General said, when there appeared to have been a technical error and so on for 2002-2003, that was the subject of a number of discussions and decisions in 2003-2004. The decision was therefore made to opt for this accounting treatment. Legal opinions were obtained, which led the government to think that it shouldn't be debited from parliamentary appropriations, but rather recorded for public accounts purposes. That, briefly, is the situation regarding that matter.

[The Chair, Liberal, Diane Marleau]

One very short comment.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

I was going to ask Mr. Baker about how he sees the future of the Canada Firearms Centre with the recent changes that the government has made.

[William Baker]

In terms of the announcements that have recently been made by Minister Day on the Firearms Centre, those are matters completely of government discretion around policy and expenditure, which is the entitlement of governments to make. What I can say is that however the program evolves into the future, I'm confident that it is on a much more stable footing from a management control and accounting and parliamentary reporting perspective than it ever has been in the past. Whatever happens, I think parliamentarians can rest assured that they will be in a position to get good information about the program on a go-forward basis.

[The Chair, Liberal, Diane Marleau]

Thank you.

Mr. Kramp.

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

Thank you, and welcome to all.

I have three areas of concern and so obviously I'll have three questions. One question will go to Madam Fraser, another to Mr. Baker, and another to Charles-Antoine St-Jean.

My first area of concern is cost overruns. Madam Fraser, I'd ask you, if you would, to elaborate a little on this. We have an expenditure that is probably one of the most massive cost overruns in Canadian history. How do you run any business having expenses come up basically 500 times your calculations? It's just beyond belief. Can you give me a brief encapsulation of how any government could take a department like this and have it so out of control that we have massive overruns? What were the major contributing factors to the massive overruns?