Public Accounts Committee on May 2nd, 2007

[The Chair, Liberal, Shawn Murphy]

Colleagues, I'd like to call the meeting to order and extend to everyone a very warm welcome. We're pleased to have back with us the Auditor General of Canada, Sheila Fraser. She is accompanied by assistant auditors Hugh McRoberts, Andrew Lennox, and Richard Flageole.

Ms. Fraser, it's a pleasure to see you back. You haven't been here lately. Have you missed us?

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

Of course, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

Ms. Fraser is here to present to the committee her May 2007 report of her office. However, before we hear from the Auditor General, I want to point out that the meeting was originally scheduled for two hours with the Auditor General and then we would go in camera and have one hour talking about reports. Unfortunately, there are five votes scheduled for 5:30; the bells will ring at 5:30, I believe. There's no point in trying to bring the meeting back to assemble for another 10 or 15 minutes after the vote, so we will adjourn the meeting at 5:30, at the regular normal time, and will not be going in camera to talk about reports.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

A preliminary matter, if I may, Chair.

[The Chair, Liberal, Shawn Murphy]

Mr. Fitzpatrick.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

I understand that to date one of the key witnesses for Monday's meeting is very difficult to find. Nobody seems to know where he is. I'm highly suspicious, as this is a well-publicized hearing. I don't know what this individual is up to, but I have to say it, I have to emphasize that this guy has to come before this committee. I think for all concerned, sooner would be better than later. He's not going to get away with his games, if he's playing games. If there's something we can do beyond the normal process to make sure we get this person before this committee, I say so be it.

[The Chair, Liberal, Shawn Murphy]

I'm going to ask the clerk to speak to the issue Mr. Fitzpatrick has brought up. It has been brought to my attention that the clerk has yet to locate Mr. David Smith, who we have scheduled to appear before the committee on Monday afternoon as part of the RCMP investigation. It certainly surprises me that he has not been able to be located, but again, I'll ask the clerk to address the committee and tell us what the problems are.

[The Clerk of the Committee, Mr. Georges Etoka]

Mr. Chairman, I have contacted all my contacts—the RCMP, Public Works, and other contacts—to try to locate Mr. David Smith and there have not been any positive results. Nobody seems to know where he is. I'm still looking.

[The Chair, Liberal, Shawn Murphy]

Mr. Clerk, is it that they don't know where he is or that they can't locate him? There are two different issues here. Somebody must know where he is.

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

Does he get a pension cheque?

[The Chair, Liberal, Shawn Murphy]

No, he wouldn't get a pension cheque.

[The Clerk]

With your permission, Mr. Chair, I've got two kinds of answers. The first one is that they don't know where he is. The second answer is that since he doesn't work with them, or he has no contract with them, they really can't tell me where he is because it's a privacy matter.

[The Chair, Liberal, Shawn Murphy]

Mr. Williams.

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

Thank you, Mr. Chairman.

I certainly appreciate what Mr. Fitzpatrick had to say and the concerns he has and I think you have and the clerk has about finding this particular witness for Monday. But I'm back to what I've raised in previous matters, Mr. Chairman. This is an administrative matter. You are the chair, you have a clerk, and if there's a problem, then you and the clerk should bring a report to the committee for us to make a decision and a recommendation, or a recommendation and a decision. We can't have individual members of the committee, be it Mr. Wrzesnewskyj or anybody else, driving this committee.

It's time we started acting much more professionally and that the administration of this committee do the job properly so that we can do it for Canadians who wonder why we have these huge line-ups of witnesses and people coming back three and four times and so on.

I appreciate what Mr. Fitzpatrick has to say, but I do say there is a process and we should follow that process.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

I have a point of order, Chair. There seemed to be an insinuation that one person decides the agenda of this committee. If you check the record, you'll find that the committee decides by vote, and a majority of votes decide the committee agenda. I think that was an inappropriate comment.

[The Chair, Liberal, Shawn Murphy]

That wasn't a point of order.

Mr. Poilievre.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

We need to hear from David Smith. The KPMG report, audit, indicates that his company was intimately involved in what seems to be a very sinister contracting scheme involving public funds, and in particular funds from the RCMP, to do little or no work. Contracts passed among four or five people, none of whom did any work at all. Then the end product was a recommendation that the originator of the make-work project should keep his job. That's what the KPMG audit shows. It does resemble quite stunningly the modus operandi—witness during the sponsorship scandal. The contracting aspects of this investigation are very critical because they do involve improper enrichment of very well-connected individuals.

I think the clerk should rely on the expertise of committee members who might have an idea of where he is. The House of Commons might have records of his address, because of course he was a member of this House of Commons and he was paid by the House of Commons. So obviously his cheques, or at least his pay stubs, would have been mailed to him. Presumably he wasn't hard to locate under those instances. Perhaps the Liberal Party would have knowledge of his whereabouts, given that he was a member of the Liberal caucus. Perhaps the Liberal House leader or whip, who always keeps that kind of information—including cellphone numbers and e-mails, etc.—close by in the event of emergencies, would have the ability to locate Mr. Smith.

I note that Mr. Smith's name has been in the newspaper a number of times with regard to this investigation, and I would find it highly surprising if he were not aware of this committee's interest in seeing and hearing him. Perhaps we'll have to run an advertisement around the capital region, where I'm told he lives, so that he might hear that he is being sought out by this parliamentary committee.

I will conclude by saying it is a startling development that someone who was so intimately involved in these money-for-nothing contracts has now seemingly vanished from the face of the earth. He was a public official and very well known, and he was someone who was very easy to locate only a year and a half ago when he was in Parliament. So I don't think there's any excuse for not having him, and I look forward to seeing him located and put right in front of us on the stand.

Thank you.

[The Chair, Liberal, Shawn Murphy]

There's just one brief intervention from Ms. Sgro.

I'm going to ask the clerk to take a very aggressive tack to try to locate Mr. Smith. If there's anyone in the committee, of course, who has any facts or information that might assist the clerk, please contact the clerk, and we will certainly do everything in our power to locate him.

I should say, too, that we've had this problem before, on two other occasions, in locating former deputy ministers who had retired. We do not get any cooperation from the Minister of Public Works. They issue pension cheques, not to Mr. Smith but to the two previous deputy ministers, and they won't give us that information. They say it violates the privacy concerns.

Your points are all well taken, and we will be looking at this very aggressively.

Ms. Sgro.

[Judy Sgro, Liberal, York West, ON]

I'm certainly glad to help, if I can, in finding Mr. Smith. I don't know him, other than the fact that he was a colleague. Other than that, and recognizing his name because it's a very common name, I know absolutely nothing about the man other than what I've read, mostly in the KPMG report. Evidently Mr. Poilievre is ready to get his daggers into him pretty quickly.

Let's be very fair here. When you're looking for people, it's not always easy with a name like David Smith, possibly. I would ask the clerk to make sure he looks under his wife's name, as another idea, and to thoroughly make sure he goes through 411. Let's not start this by thinking somebody isn't anxious to come here, because their job is—if they've been asked to come. If they don't come voluntarily, we have the resources to get them here.

That's not a very good way of starting the hearing, so I would like to make sure that the clerk makes every effort possible to locate the individual, under his name or his wife's name. I would like to ensure that the clerk has done his job so that we don't have to get into the other avenues that we certainly can use as a committee.

[The Chair, Liberal, Shawn Murphy]

I'll turn it over to the Auditor General.

[Sheila Fraser]

Thank you, Mr. Chair.

We are very pleased to be here today to present our report of May 2007, which was tabled in the House of Commons yesterday.

As you mentioned, I am accompanied by Assistant Auditors General Hugh McRoberts, Richard Flageole, and Andrew Lennox.

Let me begin with the management of the Forensic Laboratory Services by the RCMP. We undertook this audit at the request of the House of Commons Standing Committee on Justice, after it heard conflicting testimony in 2004 and 2005 about the performance of the labs.

We found that in a high percentage of cases, including many involving violent crimes, the labs were not meeting their turnaround targets for providing forensic results. And the backlog for DNA analysis is increasing.

We examined the RCMP's system for ensuring the quality of lab results. On paper, their quality management system looks good, but we found it was not always being applied and could not assure senior management about the quality of DNA analysis. We did not examine the scientific methods they used.

Most of the problems our audit found were also raised in our 1990 and 2000 audits. It is disappointing to find them still unresolved. The RCMP needs to develop a realistic action plan to fix these long-standing problems.

We also audited, in chapter 4, the Canadian agricultural income stabilization program, also known as CAIS, after a request by the House of Commons Standing Committee on Agriculture and Agri-Food.

Over the years, Agriculture and Agri-Food Canada has developed a number of programs to provide income support to agricultural producers when their farm income drops due to circumstances beyond their control. The CAIS program is the most recent of these. In 2005-06, the department spent more than $1 billion on the program Canada-wide.

This is a program with a highly complex method of calculating benefits to producers, based on the information they submit to the department. Producers have complained they did not understand how the department calculated their benefits. There were also long delays before they were told whether or not they would receive a benefit and in what amount.

We also found that some of the department staff who processed applications were also acting as paid consultants and helping producers prepare the applications. This practice contravenes the conflict of interest provisions in the values and ethics code for the Public Service, and it could have provided an unfair financial advantage to some applicants. The department has since told employees to stop this activity.

Since the completion of the audit, the government has announced its intention to change the CAIS program. In reviewing the program, the department should look for ways to simplify its delivery of farm income support and make the process more user friendly.

We also looked at financial assistance programs for post-secondary students. We found that Human Resources and Social Development Canada and the Canada Millenium Scholarship Foundation have good controls to ensure that loans, grants and bursaries are delivered in the right amounts to eligible students.

I am pleased by the good management practices we found in these programs, aimed at giving young Canadians better access to higher education.

The department and the foundation have taken appropriate steps to make students and their families more aware of the financial assistance available to them. The department has also improved its communication to students about measures available to help them manage their debt.

However, although the department committed to completing an evaluation of the Canada Student Loans Program in 2006, it has not yet done so. We think the department should evaluate this program to see if it has indeed improved access to higher education, as Parliament intended.

Turning now to the management of human resources at the Department of Foreign Affairs and International Trade, the department operates 170 missions in 111 countries around the world. Its people conduct diplomatic relations, provide assistance to Canadian individuals and businesses, and advise the government on international issues.

Carrying out Canada's international objectives depends on having the right people in the right place at the right time. We found, however, that the department is struggling to do this. Unless it acts now, the situation will only get worse.

In the next few years, more than half of the department's employees in the management category will be eligible to retire. The department has not been planning adequately to meet these challenges. It does not have a complete picture of the people, competencies, and experience it will need in the future, and it lacks basic information needed to manage its human resources.

In addition, it does not pay enough attention to the management of locally engaged staff in missions abroad, who make up half of its workforce.

Finally, the department lacks the flexibility it needs to provide Canadian staff with cost-of-living compensation and incentives for hardship conditions at missions abroad. This makes it difficult to find people willing to accept some postings in certain foreign countries. Barriers to spousal employment are another deterrent.

This lack of flexibility is an important, long-standing problem. It is time for the department and the Treasury Board Secretariat to work together to resolve it.

We also looked at the modernization of the NORAD system used for air surveillance and control in Canada, a project that began 12 years ago. The Canadian government originally approved about $93 million for the Canadian part of the project to define requirements, develop a new system, and build an above-ground complex to house it.

The project has been marked by delays and cost overruns. Neither National Defence nor the government made appropriate use of mechanisms available for managing large, high-risk projects like this one—for example, designating it as a major Crown project.

It was expected that with the construction of a new complex, National Defence would be able to close its underground complex at North Bay, Ontario, and save an estimated $16 million a year in personnel and operating costs. It turned out that at the time of our audit, the department was still operating both facilities because there were questions about the security of the new building before it could be used as planned. The anticipated savings have yet to be realized.

There were several signs that this project was in trouble. The cost escalation and the delays should have prompted more rigorous reporting and oversight.

National Defence intends to continue with upgrades to the new system. But first, it needs to resolve the problems we found in this audit. The government also needs to ensure that these large, high-risk projects are subject to better oversight.

We move now to the delivery of legal services to the government. The Department of Justice Canada can be characterized as Canada's largest law firm, with about 2,500 lawyers and a budget of close to $1 billion in the last fiscal year. The services it provides to the federal government and its departments and agencies include legal advice, drafting of legislation and regulations, and representation in court.

Since our last audit in 1993, the complexity and volume of litigation have increased significantly. The cost of legal services provided by the department has more than tripled.

We found that the department has made progress in its management of litigation risk and its management of legal agents. However, most areas have not fared as well.

We found that the department does not have a system to ensure consistent quality in the legal services it provides to the federal government. While it has elements of quality management, it does not know whether they are functioning as intended.

We also found that its current financial arrangements with client departments provide few incentives to control costs and manage the increasing demand for legal services.

The department has been aware of this problem for several years, but its efforts to resolve the matter have resulted in little improvement.

It is surprising how little progress has been made since our 1993 audit. As do many of Canada's large law firms, the Department of Justice Canada needs someone like a chief operating officer to oversee the administration of the department.

Finally, acquisition and travel credit cards can be a convenient and efficient way for the federal government to obtain and pay for goods and services. Many federal departments are encouraging their use—total spending with these cards was about $825 million in 2005.

We examined the acquisition and travel card programs in the three departments that, together, account for about half the total acquisition card use and a large portion of the travel card use in the government.

I am pleased that we found no abuse of government credit cards, and the departments have good controls in place.

However, the controls are not always applied consistently and rigorously. In some cases, transactions were verified and certified by individuals who lacked the authority or by the individual cardholder who charged the transactions in the first place.

The more the cards are used, the greater the risk of misuse. Departments can reduce those risks by applying their controls rigorously. This is another case where the government does not need more rules, it just needs to make sure existing rules are followed.

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

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Fraser.

We're going to go to the first round of seven minutes.

I should note also that there was no leak of this report, which is a very positive development.

Mr. Rodriguez, seven minutes.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Mr. Chair.

Madam Auditor General, it's always a pleasure to see you. I'd like to welcome you and your colleagues.

Let's come back to the RCMP. You said that these problems are long-standing. How long-standing are they exactly?

[Sheila Fraser]

We carried out two audits, one in 1990 and the other in 2000. The two audits basically revealed the same problems.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Was any improvement made between 1990 and 2000?