Public Accounts Committee on Nov. 7th, 2006

[Wayne Wouters]

There are different kinds of consequences. There are what we call the institutional consequences, in terms of certain principles or policies that we set out in the Treasury Board that we expect departments to comply with. We cannot police every single transaction--it's simply not possible--but we do try to monitor compliance, particularly in the areas in which there are significant risks to the government. We expect the departments to basically follow our policies.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

What happens if they don't? How would you spot-check? Do you do an audit of them?

[Wayne Wouters]

No. We have a number of different sources that we look at. As I said, we undertake an assessment of their overall competency in the department through our management accountability framework assessment, we review the Treasury Board submissions that come in, and we review internal audits, so we make a determination of whether these departments are in fact complying with the policies and directives and standards. If they fail to do so, we do have a number of measures we can take to address that.

Of course, it is essentially the role of the clerk to assess the overall performance of a deputy minister. I have been specifically asked by the clerk to provide, on an annual basis, my assessment of the performance of a deputy minister when it comes to management of the department. I do that on an annual basis, and that is fed into the overall process by which the clerk will undertake his performance assessment of a deputy minister.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Ratansi.

Thank you, Mr. Wouters.

Monsieur Laforest, vous avez sept minutes.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you Mr. Chairman.

Good afternoon.

From the outset, you said that the two main tasks, i.e. management policy development and monitoring as well as expense management and financial oversight, apply to all departments or organizations managed by the Treasury Board.

When the Treasury Board develops management policies, these become unique standards of reference. On the other hand, as we look at these departments, we see that they also administer tremendous budgets. Even large companies often do not have budgets as extensive as those. There are surely organizational cultures within each of those departments or organizations.

Do contradictions not arise, occasionally if not often? Indeed, when we speak of organizational culture, we know we are dealing with the implementation of an internal management system. Does this not come into contradiction with what the Treasury Board Secretariat is putting forth? In addition, does this not cause a stir within the department? Don’t certain departments give you more problems than others with regard to the Treasury Board’s centralized policy?

[Wayne Wouters]

I'm going to let David Moloney speak to that.

[David Moloney, Senior Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat]

Yes, certainly.

What the Secretary mentioned concerns the deputy minister of each entity, department or other agency.

Each deputy minister is responsible for ensuring, and being prepared to insure, the minister and Parliament that policies will in fact be respected. Moreover, that is part of the Treasury Board Secretariat’s oversight: in accordance with the framework of that analysis, we don’t only review the policies but also departmental practices.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

I will clarify my question further. With regard to the difficulties that you face in implementing new management policies — we know that Bill C-2 will be soon adopted and that it will generate other responsibilities —, do some departments pose more specific problems than others do? If so, what are these problems?

[David Moloney]

Some departments perform better, it’s true. However, I cannot personally comment on their success in implementing or following-up on policies.

[Wayne Wouters]

Perhaps I could add to that. This is why departments over the past number of years have fully adopted our management accountability framework--which is nothing more than that. It's a framework by which they manage their departments. It's been built on modern comptrollership. It sort of takes many other approaches and brings them together as a management framework.

On an annual basis we undertake an assessment of overall management performance. Yes, some departments are much stronger in their performance in certain areas of management than other departments. I guess our objective is to try to ensure that overall management competency is increased in all departments so we can identify that and follow up with the departments, which we do.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Given what you have just said and your mandate for internal oversight, what powers have you been given in cases where you have found that things are not working properly in a particular department? Do you have the power to intervene? Can you explain?

[Wayne Wouters]

Under our system, which is going to be reinforced again by Bill C-2, at the end of the day the deputy head is responsible for the day-to-day management of the departments. We undertake assessments of the management competencies of the departments. We then identify them and work with them. We will say, over the next year these are three or four areas that we think you should work on; we'll work with you. Of course, part of my overall assessment of a deputy head will take that into consideration. We basically provide that oversight function with the deputy heads to ensure they follow through and address some of the deficiencies they have in their own departments.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Laforest.

Mr. Fitzpatrick, seven minutes.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

We've had an interesting experience with the two reports on the firearms issue here this fall. I'd like to direct some questions in that context to clarify it.

We had the unusual situation where the deputy minister of a department, along with other officials, decided to reject the directions and the legal opinion of the Acting Comptroller General. She got her own legal opinion and pursued her own course of action.

In the final analysis they must have checked with Jeffrey Skilling and Ken Lay of Enron to come up with something that was reported in public accounts as a recorded unrecorded liability. I'm not an accountant, but boy, it seemed awfully creative to me. I think this whole episode was bizarre, to say the least. It wasn't a proud day. Parliament was left in the dark about the whole episode, and this probably violated the Constitution of Canada and the Public Administration Act.

Our committee has recommended that in the future, if there are any disputes between a deputy minister and the Comptroller General, the Comptroller General's judgment is conclusive and final on the matter. They are the referee. They blow the whistle and call the shots, and the deputy minister takes their directions from that.

What is your reaction to that recommendation, sir?

[Wayne Wouters]

We'll want to look at that recommendation very carefully. It clearly is one approach.

I come back, in trying to assess the recommendation, to asking how does that recommendation align again with the accounting officer model that we're putting in place, which is, they are responsible and they must sign off the accounts for their department? So looking at how that model should work, it's that as an accounting officer I'm ultimately responsible for signing off the accounts of my department.

In doing so, I would seek the advice of the Comptroller General from this perspective. I think the Comptroller General's advice should weigh very heavily on my decision. So am I'm prepared to go as far as what you've proposed? I think we have to look at that very carefully in terms of what it means for the accounting officer model.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Sir, I think I have the gist of what you're saying, and we're waiting for the official response in due course.

Another area of concern with the firearms registry is that it was originally budgeted at, I forget what, $80 million or $50 million by Allan Rock, I think it was, and we all know where this thing has gone. It's $1 billion. We've had some reports here, and we're scratching our heads, really wondering after all these years where we're actually at with this program.

In the Auditor General's report too, she basically made some observations about her concerns that maybe there wasn't a management cycle in this program. To me, that speaks to a lack of a management system in place, lacking in what management people call “continuous improvement processes”, and so on. It would seem logical to me that our auditors, whether they're internal or the Comptroller General or whoever it is, if they're auditing a government program and they don't see a good system in place or they see something that may in fact be out of control, would see that some action takes place so that costs don't balloon from $80 million to $1 billion. Then we're all scratching our heads on the recorded unrecorded liability to try to package up this nonsense.

Would you see that being a legitimate area of pursuit by Treasury Board, to make sure that government programs do have a good management system in place, and that they aren't running off the rails, jumping from one computer programmer to another?

[Wayne Wouters]

I won't comment on the specifics of the firearms project, but to answer your question, yes, I think that is an important objective of the Treasury Board Secretariat. As well, as you know--and the Comptroller General has been here--we feel it's very important, and again it's consistent with the accounting officer model, that as we move to that model we must ensure that the deputy heads have very good oversight functions within their own organizations. So this is why we've already implemented the new internal audit policy, which significantly strengthens that function. It identifies where problems can arise.

At the same time, the chief financial officer model...all of those areas are absolutely critical, building the capacity, building the oversight in the departments—

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Sir, if I could just make a comment, if we'd had a good system in place on that we may have saved ourselves a considerable amount of money in this case. To let the thing go on for year after year of excessive spending without getting things in place, and we still have all sorts of problems with this thing.... We went through it and we've identified a whole lot of problems with this registry, even after spending all the money. I find taxpayers in the country have a legitimate reason to be upset with the controls we have in place, and that this thing wasn't nipped in the bud and brought under control long ago.

I think Mr. Sweet had a question too, if I could just turn the limited time I have left over to him.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Mr. Wouters, thank you for being here.

Mr. Pacetti referred to it directly, Ms. Ratansi indirectly, and Monsieur Laforest, and also just taking into consideration Mr. Fitzpatrick's example of the mismanagement of the firearms registry, you've been asked directly here today to give us an idea about what kinds of corrective measures are taken when the Treasury Board policies are not followed. It would make me feel, with the very indirect answer we've had, that there's absolutely no consequence.

Could you give us, clearly, some practical examples of some corrective measures that have been taken if somebody's outside of the policies?

[Linda Lizotte-MacPherson, Associate Secretary, Treasury Board Secretariat]

Perhaps I could.

An example would be in the case of an IT initiative when a department is coming in for effective project approval and we start to see some budget overrun or some early warning signs. We'll look at the capacity of the department. That may be in the size and the complexity of the initiative.

Recently what we've done is identified that project as a major crown project; strengthened governance and oversight reporting into the secretariat; provided closer monitoring by ourselves, and more checks and balances where the department has to ask for additional authorities from ministers. That would be one example. Another one could simply be working with the department to look at how they may strengthen some of their training, working with the school there, if we're seeing a recurring problem in the department.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Sweet.

Thank you, Ms. Lizotte-MacPherson.

Mr. Christopherson, seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

And thank you for being here today.

The Auditor General said earlier she felt we needed better clarification from your end of things on how you see the roles and responsibilities of the relationship between you and the deputies. And then in your comments you've made reference to the relationship between the deputy heads and the Comptroller General in one sentence.

But I have to tell you that I'm still not clear, and what Mr. Fitzpatrick was offering is where we were heading. We need that teased out a little more in terms of how to answer that, this role of the Comptroller General and where he or she fits into the decision-making.

The firearms registry keeps being referenced. It's not all politics. Part of it is, let's understand that. But part of it is that if that had not happened, you'd be using a hypothetical. In my experience, you wouldn't dare use a hypothetical so outrageous, because one would say you'd have to stay within the real world. So we do have a real-world example of an outrageous situation.

So at the end of the day--and let me give you a heads-up--this committee is going to need to be satisfied that we have a process in place that will deal with that, because it was a real-world example of something that can never happen again, ever, under any party.

I'm still unclear--I'll speak for myself--as to how you envision this relationship between the Comptroller General, the Auditor General, the deputy head who is now an accounting officer, your role in that, and our role. That's what we're seeking. We've got some interesting comments from you, but we're far away from being able to dig in and get a sense of where this is going and find out where we agree or disagree.

My question to you is this. I can't find an organization chart. The closest thing I can find is on page 45 in our package, but it talks about your organization chart and not the organizational relationship we're looking for, so please start with the basics and let us know how you see this working.

And we're very interested in who gets the final say in these things. For instance, when you talk about a department head and the Comptroller General getting together, who has the final say? When it becomes you and the minister of a department, where does that go from there? This is what we want to get at.

[Wayne Wouters]

Thank you, Mr. Chair.

Those are very good questions, and unfortunately there's no simple answer to all of this. If I could start again with the department, at the end of the day, as I said, the deputy head has the overall responsibility.

Through the various mechanisms we're putting in place, we're trying to ensure that issues like those that have been raised here do not happen again. We're trying to ensure that, first and foremost, they have very good oversight capacity, whether that's in the area of financial management, procurement management, or HR management, and that they have in place solid internal audit functions, that they have in place a chief financial officer, and that the rules of the game for them are there, first and foremost.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm sorry, I have such a short time that I'm going to be very rude and interrupt. And I apologize for being rude. But we had that before. That was the problem: the deputy had the final say, and we ended up with a political decision rather than an accounting decision. What we want to hear is that this is not going to happen again.