Government Operations Committee on June 16th, 2009

[Chris Warkentin, Conservative, Peace River, AB]

Sure.

In terms of the bridges, I know that we in Canada, like other countries, are concerned about our bridges. We take them for granted until one falls down, and then we're very concerned about them.

In your report, I know you had some concerns. I know the government has accepted the recommendations and the concerns that were identified. Certainly there's been a response from the government in its funding of significant upgrades to a number of bridges. In your report, I guess you did credit the fact that there have been significant amounts being put towards constant monitoring of these bridges and that there wasn't an imminent safety concern. But I'm wondering, if it's important for Canadians, what message do we want Canadians to hear? Should Canadians be concerned about crossing federal bridges? I guess that is the question.

[John Wiersema]

We indicated that the corporation was facing significant funding challenges at the time we did the audit. The Federal Bridge Corporation estimated the cost of maintaining and repairing existing bridges and facilities would be over $614 million over the next five years, and it estimated that it would lack about $371 million in funding. So our concern was that the corporation needed to resolve those significant funding issues.

As the member has indicated, the government has committed significant additional funding to these corporations. We hadn't audited that at that point. At the time we issued the report, we didn't express any concerns about the safety of the bridges at that point in time, but there were significant funding issues that needed to be resolved.

[Chris Warkentin, Conservative, Peace River, AB]

I think it's important that Canadians hear that no one's suggesting bridges are going to fall down.

But will you do an update of this, considering the allocation of funding for these bridges? Do you know if there's an intent to update this or to analyze what's been put forward in terms of funding?

[John Wiersema]

As I indicated in my opening statement, Mr. Chairman, we now do the special examinations of crown corporations once every 10 years, or at such additional times as various parties could request. So we could do a special examination more frequently than that.

We are also the annual financial auditor of the Federal Bridge Corporation. So as part of that work, normally we will make inquiries of the corporation about progress in implementing their responses to our recommendations. We do not, though, do a full-blown, formal follow-up audit. If we get a sense that the corporation is not responding, we might bring that to the attention of the board of directors. But we do not do a formal follow-up audit, with a public report, until we do the next special examination.

[Chris Warkentin, Conservative, Peace River, AB]

I think that answers most of my questions. I know I probably have some time. I don't know if there are more questions from my colleagues, but maybe we'll move my turn to the next round of questioning.

[The Chair, Liberal, Derek Lee]

Okay.

Ms. Foote.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Thank you.

And thank you for being here this morning.

Pardon my ignorance on this, but how many crown corporations are there?

[John Wiersema]

I believe, Mr. Chairman, there are 46 parent crown corporations. A number of crown corporations also have subsidiaries. I'm not sure of the total numbers of those, but there are 46 parent crown corporations.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

So the number 46 here is in fact the total number.

[John Wiersema]

Of parents.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Of parent crown corporations.

How do you decide which agencies you're going to review, of the 46? You said you did 8 last year and 8 this year, so that's 16. How do you decide which ones of the 46 to review?

[John Wiersema]

Well, unlike our performance audits in departments and agencies, where the Auditor General has a great deal of discretion in deciding what she will audit and when she will audit it, the requirements for performance audits in crown corporations are set in legislation. Up until very recently, the Financial Administration Act required us to do a special examination of the parent crown corporations at least once every five years. That's quite a significant audit burden, if you will.

We audit these corporations. Every year we do the annual financial audit, and then we do a full-blown performance audit of the entire corporation once every five years. So in discussion with government officials, we said, well, in our view, crown corporations are getting an inordinate amount of audit attention as compared to government departments and agencies. There are some government organizations we can only visit once every 10 or 15 years, because of the sheer size of government. So with our support, the government amended the Financial Administration Act in early 2009 so that the special examinations happen only once every 10 years.

There is provision in that legislation, though, that the board of the corporation, the minister responsible for the corporation, the President of the Treasury Board, or the Auditor General can do it more frequently if we see the need for it. So when that legislation was passed extending the cycle to 10 years, we looked at our entire portfolio of crown corporations and reconsidered the schedule for the special examinations. Previously, they were all scheduled over a five-year period. We've now stretched the schedule out over 10 years, and we're in the process of discussing that revised schedule with the affected crown corporations.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

I noticed the change to the Financial Administration Act, and I was surprised that you actually supported that going from five years to 10 years. I guess what you're telling me in terms of the burden.... Is that because of the human resources that you have within the Auditor General's purview to do these types of reviews?

[John Wiersema]

It wasn't driven mostly by our resources. Our principal issue or concern was the level of audit activity we were doing on crown corporations when you compared it, for example, to departments and agencies. We issue an opinion each year on the financial statements of these crown corporations, so we're in there every year doing the financial audit, and then these special examinations require us to give an opinion of the corporation as a whole.

It requires a considerable amount of audit effort to do that once every five years when you compare it to government departments. For the Department of National Defence, if I can just pick an example, we do an audit of the department's financial statements each year and we have a long-term audit plan for auditing the Department of National Defence, but we can't even cover the whole corporation over 10 years. We look at it in bits and pieces. We can't cover the whole Department of National Defence over 10 years.

So our principal issue was the relative level of audit attention the crown corporations were getting compared to departments. We're doing an awful lot of audit work in crown corporations and relatively little in departments. As for our suggestion, especially because we've been doing these special examinations since 1984 and many of the corporations get clean opinions where we do not signal a significant deficiency, we raised the question not only of whether this is the best use of our resources in continuing to audit these corporations, but also of the impact that has on the corporations themselves. As I'm sure you can appreciate, auditing an organization puts a significant burden on the management of the corporation as well.

For all those reasons, we supported the government's amendment to the legislation.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

We all know, of course, that a mandate goes with a crown corporation: to provide a service to the public. When you're doing your audit, as it says here, you want to ensure that “assets are safeguarded and controlled; financial, human and physical resources are managed economically and efficiently; and operations are carried out effectively”. Are you also taking into account the mandate of the crown corporation to ensure that they are in fact fulfilling their mandate?

[John Wiersema]

Absolutely, Mr. Chairman. As part of that third objective you talked about--“operations are carried out effectively”--the driving force behind an assessment of whether they have a reasonable assurance that their operations are effective is if they know they are achieving their mandate. That is central to our planning of the special examination. We start with the mandate of the organization, acquire a good knowledge of the corporation's business, talk to stakeholders, and then apply a risk analysis for determining which systems and practices of the corporation we'll be auditing in detail.

Most special examinations will have audit activity in the areas of strategic planning, where they are planning for the long term for achieving their mandate. We will look at how they plan for achieving their mandate. We will look at performance measurement and reporting. How do they know? Have they established performance targets for achieving their mandate? Do they report against those? Are they transparent? Do they provide that information to Parliament?

I think virtually all of the special examinations that we've talked about here today will have discussions of the audit work on strategic planning and performance measurement reporting, all with a view to determining if the corporation has a reasonable assurance that it's achieving its mandate.

[The Chair, Liberal, Derek Lee]

Thank you.

I will just remind you that we're on five-minute rounds.

Monsieur Roy, pour cinq minutes.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

I listened to you and I had difficulty understanding your answers about the Great Lakes Pilotage Authority. Let me tell you why.

Normally, a foreign vessel that enters our waters from the Gulf of St. Lawrence bound for the Great Lakes must have a pilot on board to take it there safely because the masters are not necessarily familiar with our waters.

Are you saying that the Great Lakes Pilotage Authority has a serious problem because the regulations do not reflect reality? Masters and officers on Canadian vessels that sail the Great Lakes—and I mean Canadian, I am not talking about foreign vessels—have to have the proper training and so, to my knowledge, it is not required that they have a pilot on board. It is required for foreign vessels. On Canadian vessels, people must be trained and licensed to be able to sail our waters with no pilot on board.

Is this a safety issue, or just a matter of regulation?

[John Wiersema]

The member is quite correct that foreign ships are subject to compulsory pilotage. However, Canadian ships are exempted from compulsory pilotage if they meet the requirements set out in the Great Lakes pilotage regulations. Our concern is that the Great Lakes Pilotage Authority does not check the competencies and qualifications of Canadian masters and deck-watch officers for ships granted those exemptions. In addition, the authority lacks an objective and transparent procedure for certifying Canadian masters. So our concern applies to Canadian ships, which are exempted from compulsory pilotage. We don't think the authority is doing enough to check the competencies and qualifications of those Canadian masters, and to certify them in the first place.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Is granting accreditation to Canadian pilots something that the Great Lakes Pilotage Authority does? Would that not be the Department of Transport's job?

Unfortunately for you, I taught at the Institut Maritime de Québec. I know what I am talking about. I know that a master's certificate is not issued by the Great Lakes Pilotage Authority, but by the Department of Transport. A ship's master must be properly trained. He cannot sail our waters without having been trained and without having passed exams. To my recollection, the exams come from the Department of Transport or the Canadian Coast Guard . You have to go through college, whether in the Maritimes, or in Quebec or in Ontario before you can take a ship into our waters. I do not mean a rowing boat, I am talking about a freighter or a fishing boat. The licences come from the Department of transport.

Why are you asking the Great Lakes Pilotage Authority to conduct these checks when, as I see it, it is the job of the Department of Transport?

[John Wiersema]

I agree with Mr. Roy. The Great Lakes Pilotage Authority has to work in collaboration with the Department of Transport.

I would like to refer to the specific recommendation we made in our report and the authority's response. We recommended that as the regulatory agency responsible for navigation safety, the Great Lakes Pilotage Authority should implement a more effective mechanism to provide reasonable assurance that Canadian masters and deck-watch officers have the competencies and qualifications needed.

The agency's response was:

A more stringent exemption or certification system would strengthen the Authority's ability to ensure future safety and efficiency of the navigation system. The Authority continues to work with Transport Canada and the major stakeholders to address this deficiency. It expects regulatory amendments that will address the deficiency to be published in 2008.

So the authority committed to work with Transport Canada and other stakeholders to address the two regulatory amendments in 2008. My understanding is that it has not yet been done. But the authority cannot do this on its own. It needs to work with Transport Canada to make those regulatory amendments.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

So this is a delegation of authority from the Department of Transport to the Great Lakes Pilotage Authority. You are saying that the GLPA is not taking proper responsibility for the delegated authority it has been given.

[John Wiersema]

I do not know if we should talk about delegation.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Of course it is delegation because the mandate to recognize the training lies with the Department of Transport.

[John Wiersema]

In our opinion, the Great Lakes Pilotage Authority has to work together with the Department of Transport.