Thank you, Mr. Chair.
I'm pleased to have an opportunity to outline for members of this committee as briefly as possible the actions of Public Works and Government Services Canada as they relate to the matter before you today. Our chief risk officer, Mr. Shahid Minto, accompanies me.
Consulting and Audit Canada is a special operating agency operating within Public Works and Government Services Canada. Its services are available only to federal government organizations and, on request, to other public sector and international organizations.
CAC provides a full set of government-oriented consulting and auditing services to the public sector. It may augment its in-house resources with private sector consultants to the benefit of its clients. It has also provided procurement services by contracting for external resources for the benefit of its clients. I believe it is this contracting service that is of interest to the committee at this time, and I will address it in more detail.
Shortly after my appointment in the summer of 2003, the Auditor General issued a report on the Privacy Commissioner Radwanski situation in September of 2003. In that report CAC was cited for having inappropriately placed some resources under contract for the Office of the Privacy Commissioner. As well, I was concerned that CAC was conducting auditing, consulting, and contracting services in the same organization, and I wanted to better understand if there was sufficient segregation of these functions in line with emerging trends in the auditing and consulting professions.
As a result, I asked that CAC conduct a thorough internal review of their contracting practices, as well as a review of their mandate and practices relating to segregation of duties. The internal review started in June 2004 and began to show some disturbing signs that the contracting work done by CAC on behalf of other departments had serious flaws. The chief auditor of CAC verbally shared this with me in September. At the same time he advised me that some of the contracts he had independently selected for audit and that he was concerned about, contracts relating to the RCMP pension fund and managed by a particular CAC employee, were also being investigated by the RCMP themselves.
This led to our retaining the services of KPMG forensic audit to dig into the matter more deeply. As well, I asked our chief risk officer to take over the mandate review. Initially KPMG was asked, as you heard, to look into 31 contracts put in place by a particular employee for the NCPC; it's actually 30 contracts, and one other by another employee.
As the findings of this work started to emerge, we asked KPMG to explore whether the same contractors who were engaged in the NCPC were also being sent to other clients. This resulted in a further 14 contracts being reviewed, 13 of which were with Abotech. Internally we referred to the investigation report of these 45 contracts as the KPMG 1 report. I believe the committee has obtained the KPMG report on this investigation.
The findings were of sufficient concern to me that I asked KPMG to widen its scope and to conduct a series of further investigations. First they looked at all high-risk contracts managed by this particular employee over the three-year period 2002-2005. We called this report KPMG 2. The findings confirmed, and provided further evidence of, poor practices followed by this employee.
Next, since this employee alleged that he was only following normal accepted practices at CAC, I asked KPMG to look at all high-risk contracts managed by all CAC employees for all clients during the period. We call this report KPMG 3. The conclusion was that while there was evidence of poor practices, they were not as serious or as widespread as those found relative to the particular employee.
Finally, I asked KPMG to do a review of what actions management had taken over the three-year period to exercise control over the operation and to ensure good practices were followed. That was KPMG 4. The findings were that management had indeed taken several actions, and that improvements in control had occurred over the three-year period; however, for a variety of reasons, they were not as effective as they should have been.
Mr. Chairman, we took several actions as a result of this series of findings. First of all, the employee in question was terminated. The contracting authority for Consulting and Audit Canada was removed at an early stage in these investigations.
The KPMG reports and files were referred to the RCMP. The Abotech file was also referred to the Ethics Commissioner. Consulting and Audit Canada was restructured to separate consulting from auditing. Key management staff received sanctions. Contracting staff at CAC were reprimanded and received additional training and supervision as required. The Office of the Auditor General, the Privy Council Office, and the Treasury Board Secretariat were kept fully informed through the process.
The RCMP has advised us that there is no evidence of fraud. As well, additional investigation by Public Works' own fraud investigations directorate of the records of Abotech and other contractors involved in this file found that records were properly kept and work appears to have been done as contracted for.
As you are aware, CAC has charged the RCMP some $666,000 for work conducted in obtaining and administering contracts on behalf of the NCPC. We have already refunded $200,000 of this fee to the RCMP in light of the poor practices of one of our employees. We are currently in discussion with the RCMP on how the responsibility for what happened in connection with the improper contracting practices should be shared, and we expect to resolve this matter very shortly.
I will be happy to answer questions.
