Public Accounts Committee on Jan. 31st, 2007

[The Chair, Liberal, Shawn Murphy]

Somebody else may want to pursue that area. I know you were just getting to the start there, Mr. Williams.

[John Williams, Conservative, Edmonton—St. Albert, AB]

I was.

[The Chair, Liberal, Shawn Murphy]

We're going to start with the second round, colleagues, beginning with Ms. Neville, for five minutes.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Thank you very much for coming here today.

I am a visitor to this committee, so I don't have the history, but a number of things come to mind with it.

First of all, I'm really troubled by the discrepancy between your figures, Mr. Marshall, and your figures, Mr. Sloan, in terms of what the actual costs were to the crown. Mr. Marshall, you made a case for saying that with all of your calculations, you believed that moneys were not expended. Mr. Sloan, you came in and said it was a $2.5 million cost to the crown. How do we reconcile this? What are the processes of government that square this circle that just doesn't seem to fit?

[David Marshall]

Tim, can you just walk the committee through some of the considerations that we took into account, and some that the auditor might have?

[Tim McGrath]

In terms of when the Auditor General's people come in and look at the files, as Mr. Sloan had explained, they look at the documents we have on file, including the investment analysis report.

The investment analysis report at this time included a projected number of what we thought the rental rate would be. As a result, the investment analysis report showed that it would be $2.5 million more to go to Place Victoria. When we actually went in and did the negotiation, the rental rate itself was much lower than what we had predicted it was going to be, but we didn't go back and adjust our investment analysis report.

It was noted as a weakness by the Auditor General, through the course of the audit, that we should be updating our investment analysis reports with the actual amounts of the calculations, as opposed to just leaving the document in a forecast type of form. What they did report was the information that they found on the document, but they didn't go back and do the adjustment based on the actual rates achieved, because we had not gone back and adjusted our documents to show the actual rates achieved.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Do you do that now?

[Tim McGrath]

Yes, we do that now.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

So in terms of expenditures, what are the real figures, then?

[Tim McGrath]

In this case, instead of using a $430 rate, which is the rate they had submitted to us through the bid process, the actual rate was $308 a metre.

The other information that wasn't contained in the file was that the client forgo the fit-up, and as a result, the fit-up costs that were included in the investment analysis didn't come to fruition and so there was a cost avoidance. Other costs associated with the client themselves on move costs weren't included in the investment analysis, and that was a further million dollars in IT costs that would have had to have been replicated should they have moved to a new location.

So these are all types of costs that, when we're doing an investment analysis, we take into consideration, as we projected, but then when we went back and actually did the negotiation and the client agreed to forgo so much of the cost, it made sense on an economic basis for them to stay in situ, but we should have gone back and updated our information on our file to capture the cost avoidance and the full impact of the transaction.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

I'm assuming you provided that information to the Auditor General—actually, to Mr. Sloan.

[Tim McGrath]

Yes, there were discussions around that.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Okay.

Do you have any comments on that, Mr. Sloan?

[Bruce Sloan]

We asked for additional documentation.

We have quite a formal process for clearing the facts with departments and setting out that this is the basis on which we've drawn conclusions. We ask the departments if they have additional information.

We did not receive any further financial analysis. Mr. McGrath may have additional information now, which we would be happy to look at, but by the time the audit was finished and signed off, we based it on the documentation that we could see.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Something fell between the cracks, obviously.

Can you, and will you, provide that information to the Auditor General? Obviously, it's here on the record.

[Tim McGrath]

Yes. If the Auditor General wants us to send that information, we certainly will make it available to them.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Thank you.

Do I have more time?

[The Chair, Liberal, Shawn Murphy]

You have 20 seconds.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

You cited a number of instances where a client changes their mind. Can you just briefly, in 20 seconds, tell me what the process is when they change their mind, what the traditional process is, if there is one?

[Tim McGrath]

There is. Now, should a client change their mind, we immediately do a calculation as to what the cost to the Crown will be and we ask for the appropriate level within that organization to agree to absorbing that cost, should that cost come to bear.

I say that, “should that cost come to bear”, because we will try to backfill the space if we've gone too far in terms of making an investment decision. If we haven't and the client is just refusing to move, we will show them what that cost is of their refusal to move. Now, the process is basically to record it in our departmental performance report and a report on plan and priorities so it becomes transparent.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Mr. Sweet, you have five minutes.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Mr. Chairman, if I could interject, I would just like to congratulate the Department of Public Works for putting that information in the DPRs, because this is a great incentive for other departments to realize that when we know what's going on, they're more likely to do things right. So kudos to them.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Williams.

Mr. Sweet.

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

Thank you, Mr. Chairman.

Mr. McGrath, you've made a statement that it was not common, but it does happen, that departments change their mind. Is it common that, when they do change their mind, there's no reasoning for why they change their mind?