Government Operations Committee on May 30th, 2006

[Sheila Fraser]

No, we didn't examine that aspect.

[Caroline St-Hilaire, Bloc, Longueuil—Pierre-Boucher, QC]

I'd like to go back to Mr. St-Jean. A little earlier, you really lost me, consciously or unconsciously, when you tried to explain the history of accounting standards and parliamentary appropriations. Beyond your explanation, it's the future that troubles me. We clearly understand that errors were made in the past, willingly or unwillingly, consciously or unconsciously. In future, what will ensure that your colleagues, or other individuals, won't make the same mistake?

[Charles-Antoine St-Jean]

Thank you, Madam Chair.

As I mentioned a little earlier, that's a very serious question. When I took up my position, I examined the situation and wondered what factors had led to these misunderstandings and different positions. I reached a general diagnosis of the situation using control elements that already existed within the federal government. A certain number of measures have already been taken to prevent any reoccurrence of this kind of situation, in which different perspectives are not brought to the Auditor General's attention at the appropriate time.

As I've previously indicated to my government colleagues and to the Auditor General, in this kind of situation, the Auditor General should be called immediately when a question arises concerning possible alternative accounting treatments. This is a practice that is regularly seen in the private sector, where there are different points of view. Outside auditors are then called in to clarify the situation and state their views. You may agree or disagree, but you at least know what the positions are at the appropriate time. This procedure was implemented this year for certain major transactions. We're making the protocol more formal in order to ask the Auditor General to provide us with advance audit opinions in the case of somewhat complex transactions and those for which different accounting treatments are possible.

We've also adopted a new audit policy that will lead to the creation of independent audit committees for each of the major departments. That will make it possible to review these transactions at the appropriate time. In general, this kind of protocol — and this is also seen in the private sector — means that the audit committee will ask the senior director of finance whether certain transactions could have been reported differently, what those transactions were, and why that was done. The audit committee will put the same questions to the auditor. The debate can take place at that point. We have two or three years to establish the audit committees. That will be a long-term effort, but it will be a major part of our strategy to prevent a repetition of this kind of situation.

In addition, we are reviewing all financial management policies in order to clarify roles and responsibilities so that, in future, when questions are put to the various officials of the central agencies, everyone knows what the various roles are and what the prevailing opinion is. As you know, the deputy ministers are responsible for administering their departments and for their financial statements. In future, the Comptroller General will have to inform the deputy minister formally whether he disagrees on the accounting treatment. Responsibility will always fall to the deputy minister. However, the Auditor General will be required to advise the deputy minister of his opinion formally, with a copy to the Treasury Board Secretariat.

In addition, for the first time this year, as of March 31, 2006, we asked that all departments and agencies present financial statements for each of their departments in their issues report, which you'll see in the fall. This is the first time this will be done. Financial statements won't be audited this year. We'll give the 23 largest departments until 2009 to get set up so that it is possible to have an auditor's opinion on the financial statements. Ultimately, I expect that the financial statements of the largest government organizations will be audited independently, which will make it possible to discuss these issues at the appropriate time.

Lastly, on March 31, 2006, I asked my colleague to establish a cut-off routine for receiving confirmation from all senior financial officers at the federal government as to whether, as of March 31, 2006, other transactions could be subject to alternative accounting treatment and to tell us what measures have been adopted. This information will be shared with the Auditor General in June and July, before the accounts are closed on March 31, 2006, once the information is received.

[The Chair, Liberal, Diane Marleau]

Mr. Albrecht.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you, Madam Chair.

And thanks to Ms. Fraser and all of the officials for being here today.

The one concern I have as an newly elected member of Parliament is that I think we as members are responsible for taxpayers' money being spent. The particularly troubling part for me is that knowing the scrutiny this registry was under by the public and by parliamentarians, it would seem to me that to use any creative accounting mechanisms to try to hide or not disclose the true cost was not a good move, at best.

If in a very high-profile case like this, when you would think one would be trying to be doubly safe, significant dollars were misplaced, how can we be sure that this isn't happening in many of our other departments as well? I don't know exactly who to address that question to--possibly Ms. Fraser.

[Sheila Fraser]

What I can tell you, Madam Chair, is that we do an audit. Our audit is of the summary financial statements of the government. We do not audit individual departments or agencies and we also do not audit appropriations. In some places there are audits of appropriations. We don't do that when we audit the summary financial statements. We look to see that the overall financial statements of the government are presented fairly. Obviously that involves what we call materiality or margin of error, which is large. It's $1 billion. So if we are looking at particular departments and agencies, there is a possibility that there could be an error significant to that particular agency but that would not be significant to the financial statements as a whole.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I have a second question then.

I think Mr. Baker mentioned that the cost of the long gun registry is roughly in the area of $15 million. Is that the kind of savings we could expect?

[William Baker]

Madam Chair, if I just might be clear on that, the total amount spent in the fiscal year 2005-06, the year just completed, on registration of all firearms, the budgeted amount, was roughly $15 million. Of course the final expenditures have not yet been reported to Parliament, and some part of that would be for long guns.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

To follow up on that, whatever the amount is, if it's $5 million, it's taxpayers' money and it does not take into account the individual contribution of the gun owner who has to pay to register. It does not take into account the aggravation of paperwork and all of those factors. Given the lack of evidence that the long gun registry is effective in reducing crime, because many of these owners are duck hunters and farmers, really what evidence is there that this should be continued in terms of the benefit to the cost ratio?

[William Baker]

On the latter point, I think in terms of the evidence of the value of registration, this is something that ultimately has to be determined by government, and it's a question of what you get for the taxpayers' money. And I appreciate there are trade-offs and an opportunity cost associated with that. That is not a question I can answer.

In terms of the reporting--and I'll ask the experts on either side of me to correct me if I'm wrong--I'm not aware of any program in government where the costs reported to Parliament include compliance costs incurred by others. We try to ascertain that when regulations are put in place. It's part of the Treasury Board policy on that, but we do not report on it.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I respect that and I understand that's not a factor in any of the programs. I'm simply pointing out that from a member of Parliament's perspective, we have to weigh all of those factors if we're trying to come up with a decision, and I have no evidence that public safety has been increased. And even if it is a relatively small amount of dollars in terms of the big picture--we could say, well, it's not much so let's just forget it--I'd say those small amounts add up to big amounts when you add them all up, and I've been given no evidence today to suggest that we should continue it, from a political perspective.

[The Chair, Liberal, Diane Marleau]

No response, I guess?

[William Baker]

If I may, I have just two things. As public servants, we endeavour to provide parliamentarians evidence of what government is getting for the money. When it comes to registration, frankly, it hasn't been in place long enough to be very definitive about that. We can tell you the extent to which police use it. Others could challenge the extent that they rely on it. And they're two very different questions. Ultimately, it comes down to a judgment by government as to whether this is the best use of taxpayer money.

[The Chair, Liberal, Diane Marleau]

Thank you.

Mr. Alghabra.

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

Thank you, Madam Chair.

First I just want to comment that I don't want to be in a position in which I defend the error that happened, but I do want to remind my colleagues, especially those across, that they are in government now and they're going to be responsible for a lot of the upcoming audits. I just want to remind them about not being overly melodramatic and being careful with their comments. Sometimes I wonder if you guys are aware of that, but actually it's good for us on this side.

I'll get back to you, Mr. Baker. I know it's a government decision, but from what you've seen so far or what decisions have been made or what you know--I know it's been assigned now to be managed by the RCMP--what is the future of the system that's in place, the centre in Miramichi and the staff and the processes that have been implemented and the investment in all of this equipment and databases? What is the future?

[William Baker]

The announcement that took place a week and a half ago regarding the transfer of responsibility to the RCMP, first of all, was done under the provisions of the Public Service Rearrangement and Transfer of Duties Act. All it does in the short term is move the statutory responsibilities, the people, the assets, the facilities from the Canada Firearms Centre, which was a separate agency of government, to the RCMP, and the commissioner of the RCMP has been named the commissioner of firearms to give him the authority to manage that program.

In terms of what may happen later, that will depend of course on decisions made by government with respect to funding level structure, integration of the program into the RCMP, and of course the legislation. As we speak, the legislation is as we know it.

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

Do I have time for another question?

[The Chair, Liberal, Diane Marleau]

You have three more minutes.

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

Madam Fraser, we've heard about the chronological order of why this error was made--different interpretations, different discussions. How widespread within different government departments are disagreements on a judgment call about a recording of cost?

[Sheila Fraser]

I'm afraid, Madam Chair, I can't really respond to that, because we came across this doing the audit of the Firearms Centre, so we were not advised of this earlier. There may be other situations like this going on in government of which we are not aware. I really am not in a position to be able to answer that question.

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

Thank you.

[The Chair, Liberal, Diane Marleau]

Mr. Kramp.

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

Thank you.

Perhaps I can get back to my third question, Mr. Antoine St-Jean.

The fact remains that money was spent without parliamentary approval. Parliament was misled. Outside of Parliament that's fraud. It's totally misrepresenting expenditures. I have two concerns.

Number one, I'm really pleased to see the accounting methods and the levels of control that you have implemented now to ensure this doesn't happen again. You just went through a number of them in a previous question. If possible, I'd like this committee to have a written copy of the responses that you have taken to this file, so we would be able to have a further evaluation and hopefully be assured that will provide a solution so this doesn't happen again in the future. That would the one point.

The second point, though, that I'd like to take on this is, who bears responsibility? Mr. Bonin made a very good question: where does the buck stop? We can recall dealing with public accounts before. Is this ministerial responsibility? Is it deputy ministerial responsibility, and which minister's responsibility? Does the responsibility come back on your shoulders? Wrong decisions were made. Improper, potentially illegal decisions were made. Who bears the cross for this?

[Charles-Antoine St-Jean]

Thank you very much, Mr. Member, for those two questions.

The action plan that has been referred to by the member, Madame St-Hilaire, is part of the response to the audit report—pages 22, 23, and the fifth one is also being put in place. So those are some of the actions taking place.

As for the second question, the accountability for statements of the department always rests with the deputy minister. That being said, the deputy minister sought advice from many parties and made the decision in the end not to recommend going for a supplementary estimate. But there were many differing pieces of advice dealing with this; there were some very technical issues in terms of, was it a liability, was it a debt, and what time should it be recorded? So I would just qualify that there was a difference of opinion in terms of how it should be recorded.

Where I am a bit chagrined with all of this is that it should have been brought to the attention of the Auditor General at the time the decision was made. I think that's been put in place for the future, so that any time there is a major difference of opinion on matériel that could have an impact on reporting to Parliament it should be brought to the attention of the Auditor General for her views on the matter. Again, maybe the deputy minister and minister will defer, but at least they will know at that time. I think that's the lesson learned from this.

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

Okay. Thank you.

Madam Fraser, the one cost that has never been evident—at least I've never seen it, though many people have asked for it via access to information requests—is the actual compliance costs or enforcement costs, the thousand police officers that it takes to be able to be involved and to go out and do security checks, etc., and on and on and on. Many people have asked us to come up with the costing on this, because obviously it would then just add more and more costs to this boondoggle. Do you have any figures at all, and have you had any investigation that would reveal any of this? Would it double the cost of the registry? Is it half the cost of the registry, or a third? Do you have any broad quantification for me?