Evidence of meeting #4 for Public Accounts in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fraser.

On the agenda

MPs speaking

Also speaking

Sheila Fraser  Auditor General, Office of the Auditor General of Canada
Wendy Loschiuk  Principal, Office of the Auditor General of Canada
Ronnie Campbell  Assistant Auditor General, Office of the Auditor General of Canada
Peter Kasurak  Senior Principal, Public Safety and Emergency Preparedness, Office of the Auditor General of Canada

12:10 p.m.

Liberal

The Chair Liberal Shawn Murphy

Ladies and gentlemen, I want to welcome everyone here today. I welcome Sheila Fraser, the Auditor General of Canada, and my colleagues on the committee.

I understand, Ms. Fraser, you have some opening remarks to give. I'll invite you to give them, and perhaps you could also introduce the officials who are with you here today.

12:10 p.m.

Sheila Fraser Auditor General, Office of the Auditor General of Canada

Thank you, Mr. Chair. We are very pleased to be here today to present our fourth status report, which was tabled on May 16.

I am accompanied today by Ronnie Campbell, who is the Assistant Auditor General; and Peter Kasurak and Wendy Loschiuk, who are principals in our office.

Status reports are important because they tell parliamentarians and Canadians what the government has done in response to recommendations made in our past audits. In other words, status reports answer the question, did government take action in response to the Auditor General's reports?

We recognize that some of the issues are highly complex and that some recommendations are clearly more difficult to carry out than others. We take this into account, along with the amount of time that departments have had to act, when we assess whether progress has been satisfactory or unsatisfactory.

In our Status Reports, we give credit where there has been improvement and we call attention to areas where progress has not been satisfactory.

As you know, I have also provided Parliament with an additional report. I will come back to that report shortly. First, let me tell you about the government's actions in response to our past audits.

Taken as a whole, the eight chapters in this year's report paint a picture of mixed progress. For half the chapters, we conclude that overall progress has been unsatisfactory. For the other four, we report satisfactory progress. We also note some problems that have emerged.

We last reported on the management of grants and contributions in 2001. The government spends around $17.5 billion a year on voted grants and contributions. Voted grant and contribution programs are those whose funding requires Parliament's approval each year.

This year I am reporting that for the most part, the government has made satisfactory progress in responding to our past concerns. We found that four of the five departments we audited had satisfactory controls to ensure that recipients of grants and contributions were eligible and were monitored according to risk.

We do note, however, that recipients have said the administrative burden imposed by the government's requirements is daunting. We believe departments should streamline their management of grants and contributions to address this problem.

I am pleased to see that National Defence has made satisfactory progress since 2002 at stopping the decline in the number of trained military members available for duty. Despite the progress, however, the current system of recruiting is not addressing the needs of the Canadian Forces. With growing numbers of people expected to leave in the next 10 years, I am concerned that plans to expand the forces are at risk. National Defence has established a new strategic direction for managing its military human resources more effectively; now it needs to ensure that its policies and practices reflect that new direction.

Concerning the NATO flight training program, we are reporting satisfactory progress in resolving some contract issues. The contractor and the government have reached a settlement for flight instruction that the department had paid for but not obtained in the early years of the program. However, we note that with the current slowdown in training, the department is still struggling to fill training spaces. It is now up to National Defence to make sure it uses the spaces it is paying for.

We found that the Canada Firearms Centre has made satisfactory progress since our 2002 audit in addressing our recommendation to improve its reporting of financial information to Parliament, except for an issue that I will return to in a few minutes.

I am also pleased to report that despite having inherited some serious problems, a new management team has established the organization and systems needed to operate as a government department.

The program's total net cost to March 2005 was reported by the government as $946 million, a little under its earlier estimate of $1 billion. But operational problems remain. For example, there are still problems in the registration database — the Centre does not know how many of its records are incorrect or incomplete.

As well, the information system it is developing is three years late, its costs have grown from the original budget of $32 million to $90 million, and it still is not operational.

Let me now turn to areas where we found unsatisfactory progress in implementing recommendations from previous reports. In fact, in the four areas I am about to mention, the problems are long standing.

Let's start with first nations issues. The federal government has obligations to first nations people that are set out in treaties, government policies, the Indian Act, and other legislation. Past audits have found that the government falls short of meeting these obligations.

This audit focused on 37 recommendations that we made to five federal organizations between 2000 and 2003. Some of these recommendations address serious issues that are important to health and well-being, including mould in houses on reserves and monitoring prescription drug use. Overall, we found unsatisfactory progress in addressing our recommendations, and in some key areas, little has been done.

Where our recommendations were implemented successfully, some of the critical factors appeared to be coordination of programs, sustained attention by management, and meaningful consultation with first nations. These lessons can guide the federal government as it moves forward in fulfilling its responsibilities to first nations people.

We found unsatisfactory progress by the Canada Revenue Agency in managing the collection of tax debts. While the vast majority of taxes are paid on time, the tax debt owed to the government by individuals and corporations totals over $18 billion. The Agency has known for many years what it needs to do to improve its collection of tax debts, but its efforts have fallen short. And it still is not gathering critical information that it needs to understand and manage the growing tax debt.

The Agency has set ambitious goals in its strategic vision for the future of collections, but it has not specified how it intends to reach those goals. Without detailed planning and diligent attention by management, I am concerned that the Agency will have a hard time improving the way it manages collection.

The issue of financial information is a long-standing problem in the federal government, and we report that progress is unsatisfactory. I am disappointed that departments and agencies have been slow to improve the quality of their financial information, and I regret having to repeat this year after year.

In addition, we found that departments and agencies have been slow to correct weaknesses in key financial systems and controls. The federal government handles billions of our tax dollars every year. To do this well, it is vital that it have good, complete financial information.

Departments and agencies are still not using accrual financial information as a regular management tool. If they were using it, they would have a very different and more accurate financial picture of their revenues, expenses, assets, and liabilities. When all the costs are visible, managers are more likely to consider those costs when making decisions.

Our observations on the leasing of office space demonstrate the need for good financial information. We are reporting unsatisfactory progress by Public Works and Government Services Canada in managing its leasing of office space for federal public servants. We found that the basic information needed by property managers still does not exist, is inadequate, or is difficult to get. To make the right strategic decisions, managers need information that is timely, accurate, and complete.

PWGSC shares responsibility for decisions on office accommodation with its client departments and the Treasury Board Secretariat. This, and the way government funding works, means that the most cost-effective option is not always the option chosen. The result can be additional cost to the taxpayer, as several examples in our report illustrate. The government should ensure that the system provides the right incentives for managing well, which includes selecting the most cost-effective option.

Finally, let me turn to the additional report that was tabled on Tuesday.

Departments and agencies need to give Parliament good estimates of their spending plans and to report their actual spending properly. In our opinion, significant costs incurred by the Canada Firearms Centre in 2003-04 were not properly reported to Parliament, and the government did not follow its own accounting policies. Had these costs been properly recorded, the centre would have exceeded its voted appropriation that year, unless it had been granted supplementary estimates. We consider this a serious matter for Parliament's attention, because the ability of the House of Commons to approve government spending is fundamental to Parliament's control of the public purse.

Mr. Chair, that completes our overview of the report. We would be pleased to answer any questions that members might have.

12:20 p.m.

Liberal

The Chair Liberal Shawn Murphy

I want to thank you for your report, Ms. Fraser.

We're on a tight timeframe here, with a steering committee at 2 o'clock. I plan to end the meeting at 2 p.m. sharp, so we can have a brief steering committee meeting, then all be back in the House for the Australian Prime Minister's address.

Mr. Wrzesnewskyj, you have eight minutes for the first round .

12:20 p.m.

Liberal

Borys Wrzesnewskyj Liberal Etobicoke Centre, ON

I'd like to go to chapter 2, which deals with recruiting and retention. I noticed in the report that some of the key categories have the lowest retention rates, for instance, engineers and doctors. I don't have it tabbed, but it appears that we end up losing 70% of the doctors soon after the armed forces train them. As well, there's a somewhat smaller, but very significant, number of engineers who depart once the component of learning their trade and profession is dealt with. We seem to have extreme difficulties in retaining those individuals.

How is that being addressed? There are many opportunities in those professions outside the armed forces; they're highly paid. We have a problem across the board, but in those particular professions, did you identify the reasons why the problem is that acute?

12:20 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

Mr. Chair, that is absolutely right and it reflects well the problems we noted in attrition in the armed forces. There are certain categories in which the turnover rates are very high. In the armed forces overall, I think it's about 6%. But as we mentioned, there are some, such as the medical officers, where it's 71% within 10 years of joining the armed forces.

We did not get into the reasons behind this. I believe the armed forces themselves have done some preliminary work. I'll ask Ms. Loschiuk if she could expand upon what has been done and what's been planned.

12:25 p.m.

Wendy Loschiuk Principal, Office of the Auditor General of Canada

Mr. Chair, right now the department is looking at each of these individual occupations to try to understand why some have such a high turnover and others do not. It's quite an involved piece of work.

At the time of the audit, they were trying to get down into that a little more. They were focusing some retention surveys. They were working with people who had been assigned specifically to understand the occupations. But they haven't completed that work for all areas yet. What we do point out in the chapter is a lot more needs to done to really understand why individual groups have such a high turnover and to figure out ways to address those problems.

12:25 p.m.

Liberal

Borys Wrzesnewskyj Liberal Etobicoke Centre, ON

Without getting into multi-year studies, which tends to happen in departments, and trying to figure...I think it's pretty simple, and the average person would understand what the problem is. You have a profession that's very highly paid, and there's a great demand for those professions outside the armed forces.

Besides studying the problem, are they proposing solutions in terms of how they contract the people they will educate and on whom they will expend a tremendous amount of our armed forces' resources? I think I read that with the engineers, for instance, the average training cost is $250,000, and then we lose a very significant proportion of these people soon after training. To my mind, it doesn't require a great deal of study. What it requires is a change in the contracting with people who are using the armed forces to receive their education. Then they salute, say good-bye, and off they go to the private sector.

12:25 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

Mr. Chair, I would refer the member to paragraph 2.52, showing that National Defence did in fact conduct surveys. There are a number of reasons mentioned there. Interestingly enough, salary does not appear to be one of the main issues.

So it would seem that the problem is more complex, when they talk about things like “uncertainty about the future of the Canadian Forces”, “leadership and bureaucracy”, and “lack of fairness”. That's why we're recommending that they need to do much more in-depth probing to be able to actually understand what the issues are.

12:25 p.m.

Liberal

Borys Wrzesnewskyj Liberal Etobicoke Centre, ON

You've referenced paragraph 2.52. This was across the board, right, not specific to those particular professions?

12:25 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

That's right, it was across the board.

12:25 p.m.

Liberal

Borys Wrzesnewskyj Liberal Etobicoke Centre, ON

My questions were specific to those professions. They do not match what's happening across the board; the numbers seem to skew very significantly in those particular professions.

If you go back to paragraph 2.50, you talk about motivators and the age groups that we'd like to motivate. For instance, 6% of young males have maybe some interest, but when you throw in the component of the potential of being offered free education, that jumps to some 30% who would consider a career. Obviously there's a motivator for people to go into the armed forces, to be trained in a career that will in the future provide tremendous benefits. So the motivators are there, but we don't have the specifics.

I just think it's pretty simple to connect the dots on that, and it's an issue that should be addressed, especially if we're going to take on--after last night's vote--war missions. We know that those categories, engineers and especially medical doctors....

I'd hate to think that we have this huge hole in the armed forces when it comes to doctors, when we're sending our soldiers into harm's way.

12:25 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

All I can say is that I think that sums up pretty well the findings of the audit, that there is a significant issue. If the various categories required for deployment cannot be filled, that deployment cannot occur. There have to be doctors and technicians and so on to support the deployment or it can't be done.

So there is a very significant issue, as we mentioned here, in certain of the categories. Already the turnover is very high. Going forward, if there is to be an increase in the armed forces, then the whole approach to recruiting and retention has to be reworked.

12:30 p.m.

Liberal

Borys Wrzesnewskyj Liberal Etobicoke Centre, ON

So it could well be, especially in those categories, where a number of years' training is required...and these are key individuals. When we're sending our soldiers into harm's way, we may not be providing them with the type of personnel, with professional personnel as backup, to allow them to enter these difficult zones, knowing and being confident that should they be in harm's way and injured....

There are unnecessary, serious consequences or risks that we're putting our soldiers--

12:30 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

I would hate for the committee to arrive at that conclusion. When there is a deployment, the people required for that deployment must have the training or certification or whatever is required for what they have to do, or else they wouldn't go.

So it's not that they would leave without the proper level of technicians. It's just that if there were no technicians available, they wouldn't be able to deploy.

12:30 p.m.

Liberal

The Chair Liberal Shawn Murphy

Thank you very much, Mr. Wrzesnewskyj. That concludes your portion of the round.

Monsieur Nadeau, huit minutes, s'il vous plaît.

12:30 p.m.

Bloc

Richard Nadeau Bloc Gatineau, QC

Thank you, Mr. Chairman. Good afternoon, Ms. Fraser, ladies and gentlemen.

I am going to proceed randomly, according to the chapters that affect me the most and that concern me given my parliamentary duties.

I would like to ask you a question about recruitment in the armed forces. Historically, the Canadian Forces have not been very tender towards Quebeckers and French-speaking Canadians, during their training. I am talking about providing services in French to soldiers, so that they develop a sense of belonging in the armed forces, which is their own, and where it should be just as normal to speak French as it is English. That is the theory, but not necessarily the practice.

Did this attitude show up as an aspect that could explain problems with recruitment?

12:30 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

That is not an issue that we looked at, Mr. Chairman. Instead, we examined some of the communities that were targeted, such as the aboriginals, women and visible minorities. We did not make a distinction among the linguistic communities.

12:30 p.m.

Bloc

Richard Nadeau Bloc Gatineau, QC

Is it an ongoing problem? Can it be said that the Canadian Forces, for one reason or another, have always had some problems recruiting, or has it worsened in the past five or ten years? Has recruitment become a problem recently, or is it an ongoing one?

12:30 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

I am going to ask Ms. Loschiuk to answer.

12:30 p.m.

Principal, Office of the Auditor General of Canada

Wendy Loschiuk

Mr. Chair, we found that in effect the Canadian Forces were able to show some improvement. There was difficulty trying to get their trained effective strength up and to meet recruiting targets. You can compare the figures from our previous chapter in 2002 on recruiting targets with their targets now. We found they were doing a bit of a better job in being able to meet their targets. One of the big issues we had in 2002 was that they were not getting close to their targets; now they are at least getting close to the targets they needed to bring in.

12:30 p.m.

Bloc

Richard Nadeau Bloc Gatineau, QC

Last night, during the debate on Afghanistan, the Minister of National Defence told us that the Canadian Forces' mission in Afghanistan would be extended by two years, in response to the requirements as expressed by the Afghan head of state and NATO. The minister also stated that Canada would nevertheless be in a position to respond to other situations elsewhere. He said that Canada could provide support in Darfur, which would be no easy task, and even Haiti.

Considering that we have been in Afghanistan for four years, and given the situation that you noted, would Canada, as a responsible state, be in a position to carry out new missions elsewhere in the world at the request of the UN, specific countries or NATO, in accordance with its military or international development alliances?

12:35 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

Unfortunately, Mr. Chairman, it is impossible for us to answer that question, since we did not conduct that kind of analysis in this audit. However, if the committee were to decide to hold a hearing on this audit, that would be the kind of question to put to the officials from National Defence.

I am going to go back to one of our concerns. As was said earlier, in these missions, there are some key employment categories where turnover is very high. We are concerned with the Canadian Forces' ability to recruit and retain these people. That could have an impact on the Canadian Forces' ability to carry out missions in the future.

12:35 p.m.

Bloc

Richard Nadeau Bloc Gatineau, QC

I would like to ask one final question on the Canadian Forces. I have the impression that we are now seeing more soldiers returning here in caskets than during the period that preceded the conflict in Afghanistan. Perhaps my perception is wrong and there were as many before, with the peacekeepers, but I doubt it. Is that not hindering recruitment? Are there not talented people, quality people who could fill those positions, but who, seeing these caskets...

12:35 p.m.

Auditor General, Office of the Auditor General of Canada

Sheila Fraser

We cannot answer that question either. It is up to the Canadian Forces to comment on that.

12:35 p.m.

Bloc

Richard Nadeau Bloc Gatineau, QC

Let's now move on to the first nations. You audited the funds that the department spends on programs for aboriginal people. We are talking about $8 billion. You said that it was difficult to see how the money had been allocated.

In my riding, there are aboriginal people living off-reserve. There are serious conflicts among certain groups that I will not name. Based on what you are telling me, the way the money is distributed to the aboriginal groups living off-reserve is set out in a treaty or an agreement, but once the money is handed over to the group leaders, the situation becomes less clear.

Is it out of fear, because we do not want to interfere or out of political correctness that no one looks into what happens to the money for off-reserve housing? People are complaining. The situations on reserve also exist off-reserve. These situations are deplorable.

Does the department face any constraints when it comes time to do the audit?