Public Accounts Committee on March 12th, 2009

[The Chair, Liberal, Shawn Murphy]

I would like to call the meeting to order and extend to everyone a very warm welcome.

This meeting, ladies and gentlemen, is called pursuant to the Standing Orders, and we're dealing with chapter 7, “Economy and Efficiency of Services--Correctional Service Canada”, of the December 2008 Report of the Auditor General of Canada.

Today the committee is very pleased to have with us, from the Office of the Auditor General Canada, Mr. Hugh McRoberts, the assistant auditor. He's accompanied by Mr. Gordon Stock, principal, Public Safety and Emergency Preparedness Canada, Justice. From Correctional Service Canada, we have the commissioner and accounting officer, Mr. Don Head.

Mr. Head, you are very much welcome to the committee.

Perhaps before we do start, I just want to point out to committee members that with your materials you will see a report on the meeting of the steering committee held on Tuesday, March 10. There's nothing in the report that requires any ratification from this committee, so the information is circulated for informational purposes only.

Having said that, I am going to now turn the floor over to you, Mr. McRoberts, for the opening comments from the Office of the Auditor General.

Thank you very much.

[Hugh McRoberts, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair, for inviting me to discuss chapter 7 of our December 2008 report, “Economy and Efficiency of Services”, an audit of Correctional Service Canada.

With me today is Gordon Stock, principal of the public safety team responsible for this audit.

Correctional Service Canada has an obligation to ensure the safety and security of the Canadian public and its own staff, as well as criminal offenders sentenced by the courts to two years or more in prison. It provides custody and care to 14,500 inmates in 58 federal institutions across Canada and spends about one-third of its budget, about $642 million, on common institutional services and goods, such as security, food, clothing, and cleaning services.

This audit looks at the business side of running institutions. We examined whether CSC's management ensures that goods and services for its institutions are procured, managed, and delivered with sufficient attention to economy and efficiency. Specifically, we focused on whether food, clothing, and cleaning products of the desired quality are obtained at the lowest available cost and whether related services are delivered efficiently. We also looked at security services, in particular at whether CSC is efficient in the deployment of correctional officers among institutions, including the use of overtime.

Savings that are achieved through better management of costs can be reinvested in areas that the Correctional Service has identified as priorities. Given that in its 2007-2008 Report on Plans and Priorities, CSC said it had exhausted its ability to reallocate existing resources in order to meet its challenges, we expected that the Correctional Service had done such an analysis.

We found that Correctional Service did not manage the provision of food, clothing, and cleaning products in a way to obtain assurance of best value at lowest available cost. In most cases, quantities of food and cleaning products needed for the 58 institutions were not analyzed at the national level. Instead, individual institutions determined the quantities of food and cleaning products they needed and carried out much of their own purchasing at the local or regional level. This means the agency was possibly missing opportunities for savings available through higher-volume purchasing. In addition, CSC had not analyzed either the overall cost of preparing food inside the institutions or whether there were more economical alternatives. While it managed most clothing purchases at the national level, a substantial percentage of purchases were still made locally by institutions.

At the time of the audit, Correctional Service employed approximately 6,200 correctional officers, with an annual salary cost of approximately $570 million. CSC is developing a model for a more consistent approach to allocating correctional officers amongst institutions by introducing national standards for deployment. The model is based on the estimated minimum number of officers required to maintain a safe and orderly medium-security institution. However, this model has not yet been adapted to suit each institution, nor has its potential impact on the need for overtime been assessed.

Overtime costs have continued to increase, even though the number of prisoners and the reported number of violent incidents has remained relatively stable. Correctional staff point to the changing offender population and therefore the need to keep certain criminal groups away from others as one reason for increased overtime. In the last six years, overtime has significantly exceeded the amount budgeted. At the same time, spending on rehabilitation programs, training, and building maintenance has been less than the budgeted amounts. While we recognize that some overtime is necessary to deliver security services, we found no overall strategy or policy designed to control the use of overtime and little analysis of the impact of overtime on salary expenses and programs and of whether using overtime is more economical than hiring additional personnel.

In examining the increased use of overtime, we noted that some employees' leave records had not been updated consistently to reflect actual leave taken. In the month tested, as many as one third of absences in the eight institutions that were selected for examination were not recorded in the human resources management system. Unrecorded leave allows for additional leave to be taken later by the same employee, and as this is unscheduled leave, it will likely result in additional overtime costs.

While we understand its focus on safety and security, Correctional Service Canada needs to be better at the business side of running institutions, including analyzing the cost of its goods and services and determining whether there are more economical and efficient alternatives. We found little direction from national headquarters to institutions on how to manage their operations more economically and efficiently. CSC had not performed sufficient analysis to understand its costs, implemented and monitored suitable performance measures for economy and efficiency in its operations, or explored alternatives to identify potential savings.

As responses to our recommendations from Correctional Service Canada were quite detailed, the committee may wish to request an update on their progress in responding to our recommendations.

Mr. Chair, thank you. That concludes my opening statement. We will be happy to respond to the committee's questions.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. McRoberts.

Mr. Head, your opening comments, please.

[Don Head, Commissioner, Correctional Service Canada]

Thank you, Mr. Chair.

Good afternoon, and thank you for the opportunity to be able to respond to the Auditor General's report on economies and efficiencies as it relates to Correctional Service Canada.

CSC, Correctional Service Canada, fully agrees with the recommendations included in the Auditor General's report. We aim to improve upon our economies and efficiencies of services that we provide across the country in our institutions and in our parole offices from coast to coast.

The recommendations are clearly linked to the priority of making our government and our organization more effective and efficient while producing quality public service results for Canadians.

As noted in the report, Correctional Service Canada has already taken some action to improve its practices and is committed to addressing all the recommendations. I am confident that all the recommendations will be fully addressed over this coming fiscal year leading up to March 31, 2010. We will continue to remain transparent as we integrate the recommendations into our work and we will continue to ensure that we are as efficient as possible at all levels of management within our organization.

Progress has been achieved on addressing many of the recommendations, which also contribute to our transformation agenda, particularly in the area of finding greater efficiencies and effectiveness for the delivery of federal correctional services across the country. For those of you who may be unaware, the Correctional Service Canada transformation agenda was developed to respond to independent review panel recommendations submitted to the Minister of Public Safety in 2007. The report included 109 recommendations, all with the overall goal of improving the public safety results for Canadians. As we implement the various recommendations from the review panel's report, we will be exploring opportunities for economies and efficiencies in many different areas. We'd be glad to explain some of those to you.

As well, CSC completed a strategic review in 2008, and over the next four years we will be implementing the decisions arising from that process, which are linked to the economy and efficiency of services within our organization.

Correctional Service Canada is committed to ensuring that our business practices are conducted in accordance with the laws and policies regarding the use of public funds. One of our key priorities is to continue to strengthen management practices in the areas of financial management, human resource management, and values and ethics, in order to ensure that we operate with accountability, integrity, and openness.

I would like to briefly comment on the recommendations within the Auditor General's report.

CSC agrees with the recommendations, as I pointed out, concerning centralized purchasing. Correctional Service Canada accepts that several efficiencies and economies could be realized from centralized purchasing of certain food items and various goods that are used within the institutions across the country. As we move forward on this front, we will also do an assessment of the potential impact on smaller local economies to ensure that we keep a balance between economies and efficiencies on the one hand and centralized purchasing on the other. We will also attempt to balance the need for economies and efficiencies in our overall centralized purchasing approaches to ensure that they help and assist us in producing the effective public safety results that Canadians expect.

CSC is also part of a Public Works and Government Services Canada pilot to introduce changes to contracting procedures for construction and maintenance in an attempt to streamline the process and develop a stronger procurement organization. This will help us to develop a structured approach to manage purchasing and procurement generally, including detailed forward procurement planning. It will also assist us with strategic planning, as it will identify improved departmental procurement actions, efficiency gains, cost avoidance, and better general management use of Public Works and Government Services Canada tools, services, and best practices.

As most of you know, CSC is a very complex organization, as the nature of its mandate requires operations to run on a 24/7 basis. I'm sure you're all aware that overtime is a regular occurrence when operating a business that is never closed. The management of overtime can become quite complicated while balancing various operational issues, including training, emergency escorts, hospitalization of inmates, and emergency crisis situations such as riots or hostage-takings. We are committed to ensuring that overtime is kept to a minimum, that its cost is justified and approved, and that leave is managed in an effective manner. In order to do so, we are enhancing our monitoring and analysis of expenditures and alternatives to overtime, as well as financial and performance information related to all aspects of our operation.

I've asked that each of my regional deputy commissioners review overtime expenditures and management controls regularly at their management team meetings, and in turn we will monitor this at the national executive management committee meeting every quarter.

In closing, I wish to thank the committee for this opportunity to speak on CSC's efforts to improve on the economy and efficiency of its services. I welcome all of the questions you might have today.

Thank you, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Head.

We are now going to go to the first round. That's seven minutes each.

Mr. Oliphant.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Mr. Chair, and thank you to both the organizations here.

I want to begin by congratulating both of you for your very different work, which I think is very valuable work for Canadians.

First, to Mr. McRoberts, I followed the news accounts after the auditor's report was released, and they seemed to sensationalize the lack of efficiencies and the costs. However, when I read your report, it would seem to me fairer to say that your concern was the lack of study or proof or monitoring of these expenses, as opposed to the actual expense limit. Is that a fair understanding?

[Hugh McRoberts]

Yes, that's entirely correct. What we were looking for was evidence that the commission had done the types of analyses they should have done in order to be assured themselves, and to provide others with assurance, that they were spending their money with due regard, rather than attempting to prove, which one couldn't do in the context of an audit, that they were incurring excessive costs.

[Rob Oliphant, Liberal, Don Valley West, ON]

Did you, in the comparative studies, look at other correctional services around the world and the cost per incarcerated person to have an understanding that perhaps they were out of line, or was it simply that you did not see the audit controls that you thought should be there?

[Hugh McRoberts]

We did both, Mr. Chair. We talked to representatives from other correctional services, both within Canada and internationally, and we also looked at other institutions that were engaged in the mass delivery of things like food and cleaning products, both in the hospitality and hospital industries, to understand the types of economies that they had been able to achieve through analysis of their purchasing practices, particularly with the changes in the way in which food and other types of services are now being packaged and delivered. Comparisons on a head-to-head basis were simply not possible because there were too many other variables, but we were convinced, looking at the practice of others, both in corrections and in other industries, that it was reasonable to expect that doing the type of analysis that those industries had done would yield potentially significant savings.

[Rob Oliphant, Liberal, Don Valley West, ON]

What about the argument that local economies can actually be as great in 2009 as across Canada, given the fact that in this jurisdiction—I don't know of any hospital chains that are across Canada and would cover this kind of distance. They're provincial jurisdictions. So I'm wondering how you compared that.

[Hugh McRoberts]

We also talked to people in the hospitality industry who are involved in supplying food services to very large chains, some of which operate not only in the large cities but in the small towns of Canada. Again, the indications were that in that environment, economies were possible.

Again, we recognize that the answer is not necessarily straightforward. We were not advocating a particular solution, but simply that there were enough changes in the nature of the industry and that others were realizing, in a variety of circumstances, sufficient economies that we believed it was important that Correctional Service Canada begin to look at the various options.

[Rob Oliphant, Liberal, Don Valley West, ON]

In your report you said, regarding the deployment of staff, that CSC had not performed sufficient analysis of the model, such as cost-benefit analysis, or had not looked at other alternatives in staff deployment. What do you mean by that? What alternatives?

[Hugh McRoberts]

There were a variety of issues there. I think one of the key ones was that the model really needed to be expanded—and I think Corrections agrees with us on this—to look more at the implications for overtime and whether or not there were circumstances in which essentially what looks like overstaffing on the surface can in fact be cheaper than paying overtime on a net per-hour basis.

[Rob Oliphant, Liberal, Don Valley West, ON]

I was just wondering, were you talking about outsourcing of staff, or privatization of certain services? Was that in your mind?

[Hugh McRoberts]

No, Mr. Chair, we were simply talking about the analysis—the way in which existing staff were organized.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank goodness.

I have a couple of questions for Mr. Head. It's nice to see you again. I have a great respect for your work and your agency. Frankly, I appreciate your accepting the auditor's statements. I think that is intelligent, gracious, and wise.

Do you have enough money to do the job you are mandated to do?

[Don Head]

With the infusion of moneys that we received over the last several years through Budget 2007 and Budget 2008, I think we're well positioned to produce the kinds of public safety results we have been producing for the last several years. One of the jobs we have as part of our transformation agenda is to look at how we can become smarter and better at delivering several of our services, particularly programs and interventions to offenders, so that we can improve on the results we've been delivering.

There are some areas in which there are more challenges than in others. For example, the issue of mental health is a significant challenge for our organization. Challenges around responding to the needs of aboriginal offenders are significant. The task we have at hand right now is to decide, looking at the way we do business with the money we have, whether there are other potential efficiencies or economies that we can realize by doing business slightly differently. If there are not at the end of the day, then we would be looking at making appropriate submissions based on improving results.

[Rob Oliphant, Liberal, Don Valley West, ON]

Of course, our hope is that you do your work with economy and efficiency.

You have anticipated my concerns, which are around mental health. It seems to me there will be a great need for further money from this government to do the kind of work that I think Canadians are expecting you to do. I would be encouraging you to undertake the efficiencies work, to help make the case that you're underfunded in those two particular areas that are of great concern to me: first nations and aboriginal people, and also mental health issues.

The last question is whether you have managed to spend this year the $122 million from the 2008 budget.

[Don Head]

It's come with various specific initiatives attached to it. That $122 million is an accrual number over a couple of years. The cash number is higher than that, because there is a capital component to it. We have made some significant inroads in moving the agenda along in many different areas.

I can answer that later.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Oliphant.

Madame Faille, vous aurez sept minutes, s'il vous plâit.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

I'd like to welcome all of you to this committee. I have a few questions, in particular my first one which concerns supplying hospital and hotels and comparisons in terms of substantial savings. Can you give us some concrete examples of how hospitals and hotels have saved on the cost of purchasing food?

[Hugh McRoberts]

I will ask Mr. Stock to address this, but there are limits on how much we can say, because the information that was given to us is proprietary to the industries involved.

That said, I'll ask that Mr. Stock respond.

[Gordon Stock, Principal, Public Safety and Emergency Preparedness Canada, Justice, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

There are two aspects to where the savings can be realized. The first one is in the terms of the contracts themselves. Longer-term contracts with an ability to come back to renegotiate the prices achieve some savings, both on the administrative side and also in terms of being able to negotiate a better price with the suppliers.

The second part of it is within the distribution side. If you have a large operation, especially within a hotel chain but also within, for instance, Correctional Services—it's across the country—the distribution side does not mean it has to come from a central location. The contract can be done in such a way that it can be sourced locally and then delivered to the institutions. Depending on the terms of the distribution, savings can be realized at that end of the equation as well.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Correctional Service Canada operates facilities in remote regions. I'd like you to consider two cases in Quebec where programs have been put in place to address the problem of junk food in hospitals. Hôpital Sainte-Justine has a wonderful program to manage the cafeteria and food services. Hydro-Québec runs a similar program at its facilities. How did Hydro-Québec rise to the challenge of providing its employees with cafeteria services and with managing the junk food problem? In the private sector, Standard Life and a number of other companies run food management programs. I would simply like to know if Correctional Service Canada addressed the issue of junk food in the analyses it conducted.

[Don Head]

Our menus are based on Canada's food guide. We have dieticians who review, on a regular basis, the menus that are produced and sign off on those.

In terms of junk food per se, there's the odd menu that has french fries on it or certain other foods that you may consider fast-food types of food. The traditional junk food that children would eat—the candy bars, the chips—are not supplied by CSC. Inmates are able to purchase that through what are called inmate canteens. They use their own money to purchase that. We don't supply that.

The foods we buy are based on our menus. Our menus are reviewed by dieticians.