Thank you, Madam Chair.
We thank you for this opportunity to present the results of two of our audits in our November 2006 report: chapter 8, allocating funds to regulatory programs at Health Canada; and chapter 10, award and management of a health benefits contract.
With me today are Ronnie Campbell, assistant auditor general, and Louise Dubé, the principal responsible for the audits of Health Canada.
Chapter 8, “Allocating Funds to Regulatory Programs”, focuses on one of Health Canada's core roles, that of regulator. Regulatory programs for which Health Canada has primary responsibility play an important part in furthering public health and safety. The audit examined three programs that regulate the safety and use of products commonly used by Canadians. Those are, consumer products such as cribs, medical devices such as pacemakers, and drug products such as prescription drugs.
The audit found that Health Canada does not know if it is fully meeting its regulatory responsibilities as the regulator of product safety, medical devices, and drug products. The department needs to determine the activities that must be carried out in the three programs audited in order to meet the department's regulatory responsibilities. Program managers have indicated to management that some core compliance and enforcement activities are insufficient to protect the health and safety of Canadians. At the present time, the department does not know whether it is above or below the minimum level of activity required in the three programs.
Health Canada also needs to determine performance targets for these activities. The audit found that performance indicators have been developed for the three programs, but few have measurable targets. Without targets, it is difficult to determine what a program has achieved compared with what it was intended to achieve.
Health Canada needs to determine the level of resources required to carry out the activities necessary to meet its regulatory responsibilities. We found that Health Canada's system of allocating its resources among various branches and programs is based on the previous year's funding, rather than on plans and sound financial and performance information.
The audit found that the budget for core funding for the three programs audited has significantly decreased over three years: 10% for the Products Safety Program, 32% for the Drugs Program, and 50% for the Medical Devices Program. Furthermore, the total funding allocated to two of these three programs has remained constant, but the demands on the programs are increasing. This makes it difficult for program managers to fully meet the Department's regulatory responsibilities.
These three elements together—the required activities, the defined performance targets for these activities, and the necessary resources to do this work—would provide the Department with the information needed to demonstrate whether it is meeting its regulatory responsibilities and whether adequate financial resources are being allocated to regulatory programs.
We are pleased that Health Canada has agreed with our recommendations and that it has already undertaken steps to improve its process for allocating resources. The Department has redesigned the operational planning process, which at the time of the audit, was scheduled to be implemented in 2006-07.
Madam Chair, because this area is so critically important to Canadians, your Committee may wish to ask Health Canada to provide you with a detailed action plan and a timetable for its implementation, and to provide the Committee with regular progress reports.
Let me now turn to chapter 10, “Award and Management of a Health Benefits Contract”.
The audit raised concerns about a contract at Public Works and Government Services Canada that was awarded to First Canadian Health Management Corporation in 1997 to provide claim processing services for Health Canada's non-insured health benefits program. The contract was valued at $45.7 million for the first five years, with two, two-year renewable options valued at $14.8 million and $14.4 million respectively.
The non-insured health benefits program provides medically necessary health-related goods and services not covered by other provincial, territorial, or third-party insurance plans to eligible first nations people and Inuit. Goods and services provided under the program include drugs and dental and medical supplies and equipment.
We raised two important observations in the report. The first observation relates to Public Works awarding the contract to a company that did not meet one of the mandatory requirements related to financial stability. One of these requirements was that bidding companies were to provide evidence of their financial stability and current financial position through their sources of working capital. However, the department's files did not contain evidence of any of the bidder's sources of working capital. We therefore concluded that Public Works should not have awarded the contract to any of the bidders.
The second observation relates to Health Canada's management of the contract. The audit found that Health Canada did not comply with provisions of the Financial Administration Act when making payments to the contractor to reimburse the service providers for the costs of the drugs and dental and medical supplies that have been provided to eligible First Nations and Inuit people. From the beginning of the contract to January 2006, Health Canada made payments of about $2.6 billion out of the Consolidated Revenue Fund without certifying that value had been received. I am happy to report that the Department is now properly authorizing payments.
Madam Chair, this concludes my opening statement. We would be pleased to answer your Committee's questions.