Public Accounts Committee on April 23rd, 2007

[D/Commr Paul Gauvin]

So then immediately we went back to Great-West Life and said, look, you have to give us a refund of this money. After they gave us a refund, we credited the pension fund, as we should, and then they charged it to the premiums.

The argument here between Mr. Frizzell and us is whether or not we can charge administration of insurance to the RCMP appropriations, and what I said is that we don't have that authority. There are some discussions with the Treasury Board Secretariat, and hopefully in the not-too-distant future we'll be able to iron out all these issues, but right now, that is the situation, and we have a legal opinion to that effect.

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

Okay, I have a quick question to Staff Sergeant Frizzell.

You found $570,000 diverted to the pension fund. As far as I recall, that was the end of your investigation. Were you given the time and the authority and the capacity to investigate the how, the why, and the wherefore of that transaction, or were you pulled off the case?

[S/Sgt Mike Frizzell]

I was pulled off.

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

That's unfortunate, Mr. Chairman. I have some other questions too.

[The Chair, Liberal, Shawn Murphy]

I have you on the list again here.

Monsieur Roy, vous avez trois minutes.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman. Very happy to be here. As a matter of fact, I would like to thank you for your words of welcome. We have already had occasion to work together on other committees, and I much enjoyed working with you.

My question is for Mr. Gauvin.

I have read the documents, and a good many witnesses have told us that the account bearing the number 2020 was used for numerous expenditures that had absolutely nothing to do with the pension fund.

Would you agree with those statements? Is it true that numerous expenditures were charged to the 2020 account and that you authorized this, even though these expenditures had nothing to do with the pension fund?

[D/Commr Paul Gauvin]

Thank you, that is a good question. I would like to answer in English, if you do not mind, because that would be easier for me.

That's exactly what happened. The Auditor General has said that, the internal audit has said that, and so has the Ottawa Police Service investigation--that $3.4 million was charged to the pension fund that should not have been charged there.

Immediately after finding that out, we reversed the entries. But there's no way.... In the RCMP, we have 1.6 million lines of coding a year.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

I am going to stop you there, Mr. Gauvin. I would like to have a clarification. We are talking about the pension fund. How much money does the RCMP devote each year, in-house, to the management of the pension fund? I am not talking to you about outside management. Within the RCMP itself, what is the annual management cost?

I agree with Mr. Williams. It should not be that difficult, with a computerized system, to collect the premiums from the members and to pay out the RCMP's contribution to a manager. We all agree on that. I would like to know how much it costs the RCMP, annually, to manage the RCMP's pension fund account.

[D/Commr Paul Gauvin]

It is very complicated, and I do not have the number here. I will provide it to you.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

I am going to put a different question to you. Compared with other public pension funds within the federal government, or for that matter any other government, what percentage of the amounts collected do you devote to the management of the retirement fund?

Would it be 3%, 2% or 1%? If you were suddenly faced with a dramatic increase in the management cost, you would be asking yourself some questions. There are, at present, rules governing the management of pension funds. The management cost must not rise above a certain percentage of the amount held in the pension fund. If the pension fund is costing you 10% of its value to administer it, that is unacceptable. If it is costing you 5%, then you must start asking yourself questions. In the private sector, the percentage would be 2,5 to 3% maximum.

[D/Commr Paul Gauvin]

For the year 2005-06, the administrative cost for pensions was of $11,798,000.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

That is an increase of 10%. You have a problem.

[D/Commr Paul Gauvin]

It's an increase. But I want to explain why.

We know that all the moneys for the pension are now invested by the investment pension board. The return last year was 17%. In the past, it would have been approximately 8% for the long-term bonds. In order to make that 17%, we had to pay the investment board $5.7 million, but they returned nearly three times what they would have returned had it been government bonds.

Yes, it's costing more, but there are reasons why it's costing more, and it was an excellent decision, obviously. And the year before that, I think it was even higher than that.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Gauvin.

Merci beaucoup, Monsieur Roy.

Mr. Williams.

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

Thank you, Mr. Chairman.

Back to Staff Sergeant Frizzell, you stated you raised this issue but you were taken off the case. Did you discuss the $570,000-odd with Inspector Roy?

[S/Sgt Mike Frizzell]

Actually, it was he who brought it to my attention.

May I address Mr. Gauvin's earlier comments about their catching the money going from the pension to the insurance?

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

Okay, quickly--

[S/Sgt Mike Frizzell]

That is not true in the slightest. It was the investigation that found the money going from the pension to the insurance. What happened is that Great-West Life sent a bill to the RCMP. It went to finance, whereas normally Great-West Life was just paying it. It went to finance, which then sent it to procurement, both shops under Mr. Gauvin's responsibility. They then called NCPC. A quick contracting was done, and the contract was done for well over the signing authority of the person who signed it.

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

Who signed it?

[S/Sgt Mike Frizzell]

It was a then inspector in the Mounted Police.

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

Did they just cover it up, do you think?

[S/Sgt Mike Frizzell]

I would like to say that Mr. Gauvin perhaps didn't understand what happened there, but it certainly wasn't his shop that found it.

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

Legitimized is probably covering up. He legitimized it, rather than covering it up?

[S/Sgt Mike Frizzell]

Perhaps he misunderstood it.

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

Misunderstood it, okay.

Just a second, Mr. Gauvin. I'll get to you in a second.

So you're saying you discovered this money. You mentioned pension to insurance. I thought it was insurance to pension.