Thank you, Mr. Chair.
I am very pleased to be here to present my November 2006 report which was tabled last week in the House of Commons. As you mentioned, I am accompanied by Assistant Auditors General Douglas Timmins, Hugh McRoberts and Ronnie Campbell.
This report covers a broad array of government activities, from the government's system for managing spending, to public service ethics, to contract management, to programs that contribute to the health and well-being of Canadians. The report includes four audits that we had planned to report last spring. Because of changes to the parliamentary calendar, as a result of the federal election, we deferred reporting them until now, with an update of our audit findings.
Let me begin with how the federal government makes decisions about spending public funds.
The expenditure management system is at the heart of government operations, because every government activity involves spending. Over the last six years, federal spending has grown from $162 billion to $209 billion a year.
An effective system to manage spending is essential to getting the results the government wants and to being accountable to Canadians for what is done on their behalf.
We found that the current system does not routinely challenge ongoing programs to determine whether they are still relevant, efficient, and effective. I am concerned that the system focuses on challenging new spending proposals and pays too little attention to ongoing spending.
Also, in many cases, the distribution of funding is not aligned with what is needed to deliver the program.
Finally, we found that departments rely more and more on supplementary estimates to get funding for some items, instead of including them in the main estimates. This means that Parliament does not see the full range of proposed spending when it approves the annual spending plans.
The government is reviewing the expenditure management system, and I encourage it to resolve the weaknesses we have identified.
However, good systems in themselves are not enough. They must be applied correctly and ethically. Departments and agencies can take several formal measures to ensure proper conduct. In Chapter 4, we examined key aspects of these measures in the RCMP, Correctional Service Canada, and the Canada Border Services Agency.
We found that these public safety agencies have ethics programs but that many employees are not aware of them.
Also, only about half of the employees believe their organizations would act on reports of misconduct, and many do not think those who report misconduct in the workplace are generally respected.
It takes more than formal programs alone to encourage employees to report wrongdoing by colleagues. Employees have to be confident that management will take action on reports of wrongdoing.
Heads of agencies in particular should demonstrate the highest ethical standards of integrity, and when they fail to do so, public trust and confidence in government suffer. In chapter 11, unfortunately, we report one case of unethical behaviour by a senior official, the former correctional investigator.
The behaviour we observed on the part of the former correctional investigator, and the fact that it persisted over a long period of time and was not reported, are extremely disturbing.
This kind of conduct is certainly not typical of the public service, and I would caution all not to generalize from isolated examples to the public service as a whole. In my experience, the majority of public servants adhere to the high standards expected of them.
In Chapter 9, we looked at the problems related to the RCMP pension and insurance plans. These problems came to light only after employees complained.
We found that the RCMP responded adequately to an investigation of abuse and waste, but we also found that broader issues remain.
The RCMP needs to find a way to ensure that investigations of its actions are -- and are seen to be -- independent and unbiased. It also needs to assess the impact of a recent court decision on cases that warrant disciplinary action.
In Chapter 3, we note that the federal government still has problems managing large information technology projects. These projects involve a lot of money, and it's important that the rules and processes in place for managing them be rigorously followed.
In the last three years, the federal government has approved funding of $8.7 billion for new business projects with significant use of IT.
Although a framework of best practices for managing large IT projects has existed since 1998, we found several of the same problems we have reported in the past. Only two of the seven large IT projects we examined met all the criteria for well-managed projects.
The persistence of these longstanding problems is extremely troubling, not only because they involve large public investments, but also because of lost opportunities to improve business practices and services to Canadians.
This report also includes two chapters on major contracts that had serious shortcomings in the way they were awarded and in how they were managed.
In chapter 5, we looked at the handling of two contracts to relocate members of the Canadian Forces, the RCMP, and the federal public service. In 2005, the program handled the relocation of 15,000 employees at a cost of about $272 million. Government contracts should be awarded through a process that is fair, equitable, and transparent. We found that these contracts were not, despite various warning signs. The request for proposals contained incorrect information, which gave an unfair advantage to the bidder who had the previous contract. The management of these contracts also had serious shortcomings, and in fact, members of the Canadian Forces were overcharged for the services provided to them.
In chapter 10, we found that the government failed to respect basic requirements in awarding and managing a major health benefits contract. This contract, worth millions of dollars, was awarded even though Public Works and Government Services Canada did not ensure that all the mandatory requirements were met, and for the next seven years, Health Canada managed the contract without respecting basic financial controls.
I am encouraged to see that the contract management issues in Health Canada have since been corrected.
We also looked at how Health Canada allocates funding to its regulatory programs.
In Chapter 8, we looked at three programs that regulate the safety and use of products commonly used by Canadians: consumer products such as cribs, medical devices such as pacemakers, and drug products such as prescription drugs.
In an area so critically important to Canadians, Health Canada needs to know what levels of monitoring and enforcement its regulatory programs must carry out to meet its responsibilities, and what resources are needed to do the work.
We found that Health Canada does not have this information and therefore cannot demonstrate that it is meeting its responsibilities as a regulator.
In chapter 7, we looked at how Indian and Northern Affairs Canada manages the treaty process with first nations in British Columbia on behalf of the Government of Canada. The Auditor General of British Columbia also presented a report last week on the provincial government's role in the process. This treaty process is important to all Canadians. Among other things, it could help first nations people in B.C. improve their standard of living, and it could result in significant gains to the economy.
Since negotiations began in 1993, one final agreement has been initialled and two more are seen as imminent. However, no treaty has been signed and costs continue to grow. We found that the federal government needs to better manage its part in the B.C. treaty process. Negotiating treaties is complex, it takes time, and it can be very difficult. The government needs to take these challenges into account and rethink its strategies based on a realistic timeline.
In Chapter 6, we report on the Old Age Security program. Approximately 4 million people receive Old Age Security benefits, amounting to about $28 billion a year. The number of beneficiaries is expected to double in the next 25 years. Errors that affect even a small percentage of clients can still represent a very large number and be very costly.
We found payment errors in fewer than one per cent of applications. We are pleased at this low rate of error. We are also pleased to see measures such as an outreach program and a simpler application process to make Old Age Security more accessible to seniors.
We also looked at a case where the government created an obstacle to the effective operation of a foundation that it established to support its environmental goals.
In chapter 12, we noted that a clause inserted by the Treasury Board Secretariat in the government's most recent funding agreement with Sustainable Development Technology Canada prevented the board from making decisions at any given meeting where the majority of members present were federal appointees.
Finally, two chapters of this report note that we were unable to audit certain aspects of government operations because we were denied access to information and analysis collected and prepared by the Treasury Board Secretariat. Public servants based their denial of access on a narrow interpretation of a 1985 order in council that spelled out our access to cabinet documents.
After numerous discussions with government officials, the issue was finally resolved three weeks ago through the issuance of a new order in council that clearly acknowledges my need for access to the analyses performed by the Treasury Board Secretariat, and I thank the government for responding to our concerns.
That concludes our opening statement, Mr. Chairman. We would now be happy to take your questions.
Thank you.
