Government Operations Committee on June 1st, 2006

[Mike Wallace, Conservative, Burlington, ON]

Again, I obviously have some naive questions, but when the department submits its spending requests for the year, are they split between major capital and operating? Is it in the sense that if you want to spend more on capital, it's coming out of the operating side? In terms of a department making its decisions, and where the Auditor General says we should be buying more often--not always, I don't imagine, but more often--if I'm a head of a department, can you just explain the process?

[Tim McGrath]

In our case, we have what I would call a unique funding situation with Treasury Board in that we have a national investment strategy that is approved by Treasury Board in terms of the funding protocol. Based on the size of our inventory, we receive a fairly consistent capital fund, on an ongoing basis, for both the recapitalization of the assets and the ongoing capital requirements. So in our case, in the case of Public Works, we do receive some funding for capital reinvestment in the assets.

When we get a request from a client department, they're subject to what's called the 13% rule, which is that funds are allocated to Public Works based on the number of employees a particular program will house. We then take that funding into our appropriation and proceed with the financial analysis to determine the best way to deliver that particular program. If we need to move money from our operating vote to our capital vote, we do that as part of a Treasury Board submission to Treasury Board ministers to make that recommendation.

[Mike Wallace, Conservative, Burlington, ON]

Okay, now I know how that works.

I have a question for the Auditor General. I've seen you twice now. Both times you talked about information systems, management systems, one that was way over cost and one that doesn't work. Based on your experience, do we have a general problem with information services and the management of information here in Ottawa?

[Sheila Fraser]

Madam Chair, that is an issue that comes up in many of the audits, that the systems do not provide all the information that managers need to manage well. I think that is due to a number of reasons.

First, the complexity of managing the federal government has certainly increased over time. The departments too--and even within departments--tend to be very stovepiped, so when information does exist, often the systems don't communicate with other systems. So you can't get all the information you need, simply because of technological limitations.

I think the other reality is that when government is allocating funds, the programs and the direct services are obviously going to be given higher priority than some of the information management systems. I suspect that this is the reality.

[Mike Wallace, Conservative, Burlington, ON]

Do I have more time, or not?

[The Chair, Liberal, Diane Marleau]

No, I think that's it, but I think you'll have more time later.

Mr. Alghabra.

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

Thank you, Madam Chair.

[The Chair, Liberal, Diane Marleau]

We are now down to five minutes.

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

Madam Fraser, to follow up on that question, I looked for exhibits and pictures. I didn't see any. So can you help me understand better--because I'm slow--the problems with the information system, exactly? What were the difficulties with the information system? I know it says that there is no information available. What exactly does that mean?

[Sheila Fraser]

I will let Mr. Sloan respond to that.

[Bruce Sloan, Principal, Office of the Auditor General of Canada]

Thank you.

I think, as Mrs. Fraser said, that there are some problems with stand-alone systems that don't communicate well with each other. In one example we were specifically looking for in the audit, we were trying to understand what the original budgets were for the fit-up costs and how those budgets had changed over time and what the actual expenditures were against those.

What the department was indicating to us was that it was going to take a fair amount of manual intervention to get at that information. It did exist in their hard files, but to readily retrieve it in a quick way was not an easy task. So I think that's some of it.

I know the department is moving to a new financial system shortly, which should help.

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

Okay. Mr. Marshall, can you maybe tell us a little bit about the future plans for the information systems management?

[David Marshall]

Certainly. Obviously moving to big information systems is a big investment, and it's complex. We have been working on reorganizing, reorienting, how we do our business before we launch into a new systems investment. So that's been happening over the last couple of years.

As Bruce Sloan has pointed out, we do have information it's difficult to get at sometimes. Whenever we do make a decision, we are very careful to ensure that all the information is brought together. But on an ongoing basis, on any one day, you can't push a button and say, you know, here's the status. And we would like to get there.

So we are shortly going to go out to the business community to see if we can acquire a service provider or acquire systems that are used by big real estate operators and adapt them to our needs. That's what we're about to do.

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

That's exactly what I was going to ask. I'm sure there are tonnes of large private corporations that are managing large sizes of real estate that probably have some systems. I think this will play into what Madam Chair was asking about, an overarching or a long-term strategy that looks after the long-term vision for the various departments. I think having a system that provides that information is essential for us to understand where we are at and where are the holes that probably can fulfill someone else's needs. I look forward to seeing an information system, hopefully that doesn't over-cost the way the gun registry did. I think that would help us a lot.

Thank you, Madam Chair.

[The Chair, Liberal, Diane Marleau]

I think you'll see a lot of over-costs in any system. It just appears to be a problem with them.

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

Especially with information systems, they are very difficult, but if we find somebody and share some of the best practices with any of the other private corporations, we can probably benefit a lot and find a shortcut to get to the answers.

[The Chair, Liberal, Diane Marleau]

Ms. Thibault.

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

In your statement, Mr. Marshall, you said that you intended to reduce the space allocated to public servants in the interest of a pragmatic exercise and that you obviously were counting on certain partners.

In this regard, the Auditor General's report tells us something that is rather out of the ordinary. As you mentioned earlier, of the leases reviewed, it was found that some departments had used their own budget to fit up their premises. When there were cost overruns, the Auditor General told us that there was a problem. So this is not a trivial matter; it has to do with the whole matter of accountability.

What do you plan to do or what are you doing, because I assume that your objective is to comply with standards, to act on this? What will Treasury Board do with respect to accountability? This must be done in other cases when departments are slightly or very delinquent, if I may use that word. What steps will be put in place and what will the timelines be to ensure that this happens as infrequently as possible, or never again?

[David Marshall]

Madam Thibault and Madam Chair, the issue of enforcing standards is very important, because everybody has reasons for being special, and different, and so on and so forth. We've done two things. In the past, if a department said they wanted more space than the standard or they wanted a better fit-up, as long as they had a budget to do that, they went ahead and did it, so we really couldn't control that.

Where we are now is that we have reached two situations. First of all, we have taken the standard that has existed for a while of 18 square metres per person. We have created models or samples of that and are showing people and organizations. In fact, the Auditor General's office complies with that standard. We have taken people to see these offices and have shown them that it's not scary, it's perfectly reasonable, and so forth. We have created a fit-up package that's less expensive than the older one by about $87 per square metre. As I pointed out, the secretariat has been very helpful to us in getting very strict with departments about not overspending those limits.

So it's a combination of basically cutting budgets--they have cut our budget to comply with the standards, so the money is gone--and not allowing departments, even if they have a budget, to do so easily. Today, first of all in terms of the space, there is no option, we simply enforce it. We have brought down the average usage of space from 21.4 square metres per person to 20.5 square metres a person. That's already quite a reduction, and we're moving to about 18 square metres. In terms of the fit-up, even if the department has the money, the Treasury Board has asked them to come to Public Works to approve such extras and we haven't approved any so far, so it's starting to bite now. I think that good sense is prevailing now.

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

I have a question for the Treasury Board representatives regarding the recommendation on page 218 of the English version of the report. It states that Treasury Board should develop a plan for departments to use financial information on an accrual-based budgeting and appropriation approach, and so on. I was surprised to see the Treasury Board Secretariat's response, which said, and I quote: “[...] the engagement of an independent contractor to conduct a comprehensive study [...]”. That was the first initiative.

The second, which I think is a better idea, is to develop a pilot project. I would like you to tell us how long it will last, how you will select the departments, and who will evaluate it, because that is very important as well.

I cannot believe that yet another study would be done. You represent an office in which both Canadians and parliamentarians have absolute confidence, and yet you were talking about another comprehensive study to be done by a private contractor. Do we not have the data and the expertise required? Why are you going to do that, and how much will it cost? I would be very interested in knowing that, Mr. Libbey. How much will the study cost? When do you expect it to be done? When will you be implementing it? How will you evaluate whether or not it was useful?

[Jim Libbey]

Thank you for the question.

Madam Chair, I can address the question of the study of the concepts of accrual accounting, and with respect to the pilot project, I'll pass that over to my colleague Mr. James.

The study has actually been completed, Madam Chair. It was carried out over the period from September to March this past year. It has been presented internally to one of our policy committees in the Treasury Board Secretariat, and the next step is to work on how we actually go about making a final decision.

We asked the consultants to give us some options to look at, to give us a rough idea of what it would take to implement these options, in terms of time and cost and approach and the readiness of departments and agencies to actually do this work. So we need to do that.

In the context of other things that are happening, we did the study as a joint project between the Office of the Comptroller General and the expenditure management sector. As I mentioned earlier, both those groups have a strong interest in the study because there are appropriations that are legal concepts and there is accounting, which is a concept that we have more control over.

I think we have good ground to work from, but we do need to go through some consultations. There are other exercises that have been launched. One is the review of the expenditure management system that was launched in budget 2006. The other one was launched more recently in the context of the Federal Accountability Act, and that was a committee--a blue-ribbon panel perhaps--which is in the process of being established to look at financial management in government and financial management policies. So these things should all come together. I think those two initiatives are expected to be reported upon by the end of this calendar year, so hopefully we can put some sort of package together there. Unfortunately, I don't have details on how those things will unfold yet. I don't think anybody does.

Perhaps Mr. James could talk about the pilot project.

[Blair James]

We think these pilots are extremely important because of the principle at play here. We undertook a review of all capital assets across government in the past couple of years. The number one recommendation that came out of departments had to do with the barrier that departments face at the end of the fiscal year, in that you either spend the money or lose it; it lapses. So they asked us if we could do anything to try to fix that.

Fixing it, of course, is a little more difficult than just proposing it, because there are legalities involved here. We are talking about the Financial Administration Act and ministerial responsibilities. So with the concurrence of our colleagues in the Department of Finance--because this would have significant influence in moving money from one year to another--we've identified three individual departments that have representative large capital assets, and they are in good standing with us. They have long-term capital plans in place that we think are achievable.

On that basis, we will provide them with the authority to not have to worry about the end of the fiscal year, so they don't have to make what we call suboptimal decisions. If they are renovating a building or buying a piece of capital equipment and something happens to the contract very late in March, right now they're stuck. They lapse the money for a very useful thing, only to have the invoice show up in April. Then they have to rejig their budget.

So it creates a tremendous amount of consternation within departments to try to manage that. Individual managers have told me that they have two or three individuals who, from January to the end of March, do nothing but look at contracts and make sure deliveries are being made so they don't lapse them.

I think this is a very important principle. We support the pilot and will be recommending it to ministers within the next couple of weeks. We hope to get the results of that. We think we'll have significant results within the first year of operation. Our plan is to try to expand that to all departments because of the factors that Madam Fraser alluded to earlier with this artificial barrier at the end of the fiscal year.

[The Chair, Liberal, Diane Marleau]

Mr. Albrecht.

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

Thank you, Madam Chair, and thanks again to Ms. Fraser and all the officials who have taken their time to be here today.

I think all members of this committee, and probably all members of Parliament, are concerned about the expenditure of taxpayers' dollars, but we are particularly concerned when we see what we perceive to be the wastage of taxpayers' dollars, or the example of 800 Victoria Place. Sometimes I think it's too easy for us to depersonalize that over-expenditure by calling it expenditure of the Crown. We need to remind ourselves every time that individual taxpayers are paying those extra dollars--often the hard-earned dollars of people who are working very hard to meet their own needs.

I also understand the shared responsibility issue we face, but I still feel that at the end of the day one department, person, or subgroup needs to make the final call. I'm hopeful that it's made on the basis of some clearly established policy. So I'm happy to see the objective of reaching 18 square metres as the average amount of space.

If I understand the figures correctly and my math is somewhat accurate, going from 21.6 square metres to 18 square metres is roughly a 16% reduction. Is it realistic for us to get to that, at least in a very short period of time? If that's the average, to get to 18 square metres you'll need to have some smaller groups as well. Are you finding a lot of resistance to that smaller demand, if I can say that, or at least expectation?

Have we considered the long-term consequences of that, since many of these leases are for 10 to 15 years? Certainly we're not going to start knocking out walls just to achieve an objective on paper, so that will mean renegotiating, and all of those things.

If you could address some of those questions, I would appreciate that.

[David Marshall]

Certainly. This is a very important driver of total cost, so if you did nothing else and reduced the amount of space you used over a period of time by 15%, you should have a 15% lower cost. On $3 billion a year, that's a very important goal.

So we took a forward look at the leases that are expiring each year and what the opportunity will be. Not all of them will be relocations, as some will be in situ. We have a very detailed plan worked out for what opportunity exists each year, and we are steadily closing in on that opportunity as we go forward. I'll turn to my colleague to elaborate more.

Tim, I believe we have a five-year or longer plan.