Public Accounts Committee on March 26th, 2009

[The Chair, Liberal, Shawn Murphy]

I'd like to call the meeting to order. Bienvenue, everyone.

This meeting, colleagues, is called pursuant to the Standing Orders to deal with chapter 2, “Governance of Small Federal Entities”, of the December 2008 Report of the Auditor General of Canada.

The committee has before it a lengthy and distinguished list of witnesses.

First of all, we have from the Office of the Auditor General of Canada, the Auditor General herself, Sheila Fraser. She is accompanied by Richard Flageole, assistant auditor general, and Tom Wileman, principal.

From the Treasury Board Secretariat, we have the Secretary of the Treasury Board, Wayne Wouters. He's accompanied by John Morgan, assistant comptroller general, and Frank Des Rosiers, assistant secretary.

From the Canada Public Service Agency, we have Mitch Bloom, vice-president, strategic policy, planning and research.

From the Privy Council Office, we have Karl Salgo, director of strategic policy. Madam Santi, assistant secretary to cabinet, was supposed to be here, but can't be because of illness.

Those are the witnesses, but before we go to the opening comments from the Auditor General, there are a couple of housekeeping items I want to deal with, and a point of order.

First of all, I would like at this time to deal briefly with the minutes of the steering committee. Those minutes have been circulated. They're in front of you. There are only three paragraphs. I don't believe there's anything contentious there. The chair would entertain a motion for their adoption.

So moved by Madam Ratansi.

Is there any discussion?

(Motion agreed to)

Then, of course, there's the draft committee schedule also in front of you.

The second item I want to deal with is Madam Faille wanting to make a clarification to the blues of the last meeting.

Madam Faille.

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

This will be very brief. When I asked some questions about a public consultation, I requested documents, videocassettes, minutes and presentations. However, the deputy minister argued that there weren't any videocassettes, but that audio cassettes of the conference were available. I didn't want there to be any confusion or limit as to which documents he will be providing us on the public consultation. The blues state: “[...] make public the videocassettes [...]”, but they aren't videocassettes; this isn't a tape with pictures, it was an audio tape. I simply wanted to mention that to the committee and to see whether there was any objection to amending the blues to include the words “audio cassettes” and forwarding the request to the department to provide the audio cassettes.

[The Chair, Liberal, Shawn Murphy]

Are you saying videotapes and audiotapes?

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

No. The deputy minister mentioned to me afterwards that there were no videocassettes, but there was audio. It's not on video; it's on audio cassettes.

[The Chair, Liberal, Shawn Murphy]

So you want the blues to refer to audiotapes.

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

Yes.

[The Chair, Liberal, Shawn Murphy]

Is there any objection to that amendment?

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

It's a minor modification.

[The Chair, Liberal, Shawn Murphy]

Just for the record, we will be writing the department to take note of that change.

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

Thank you.

[The Chair, Liberal, Shawn Murphy]

On the last item before we go to the opening statements, Mr. Christopherson, you indicated that you have a point of order.

[David Christopherson, NDP, Hamilton Centre, ON]

I do. Thank you very much, Chair.

I seek your guidance. On March 5 this committee adopted a subcommittee report that states that “all departments and agencies of the federal government that have been subject to a performance audit by the Office of the Auditor General of Canada provide a detailed action plan to address the audit findings and recommendations--including specific actions...”. It goes on.

My understanding is that at the last meeting we had with Public Works, we had such a document. It was an excellent document, actually, but I'm not seeing one here. I've just heard--it doesn't matter from where--that the response was that the answers we want, the action plan, are in the responses in the report. Of course, my understanding, Chair, is that what we want is the latest update on this, so that we don't have, as colleagues will recall, officials coming in and saying, “We have an action plan on that, we're all over it, and yes, we'll get it to you later.” That's why we moved this thing. We'd like to see those ahead of time so we can incorporate them into our thinking and our asking. Again, we had that on Tuesday, but we're not getting it here.

I'm just a little unclear on it. Is that something we're expecting to be tabled with us before every meeting? Or do I have a wrong interpretation? I seek your guidance, Chair.

[The Chair, Liberal, Shawn Murphy]

That is basically correct, Mr. Christopherson. The committee did adopt that motion. We are looking for action plans, and we did have a very fulsome one from the Department of Public Works and Government Services at the last meeting.

We could question Mr. Wouters on that. We would like to have a more fulsome action plan. I'm just going to quote from paragraph 2.76:

The Treasury Board...response. Agreed. The Secretariat is currently developing a service strategy that will include options for delivery of services and will take into consideration administrative shared services arrangements. The Secretariat will address the issues related to small entities in the overall strategy.

We can get into this in the questions. Perhaps Mr. Wouters may want to get into it in his opening remarks, but the committee would be looking for something much more elaborate than that statement as to what is being done, when it's being done, etc. So we are looking for a detailed action plan dealing with recommendations that have been accepted by your department emanating from the Office of the Auditor General.

Is that okay, Mr. Christopherson?

[David Christopherson, NDP, Hamilton Centre, ON]

I believe so. The only other point I would make is that it's also meant to be an update. Both the audit and the responses can sometimes be months old by the time we get to them, so it's not only to give us more detail but to bring us right up to speed on the current aspect of the recommendations and the action plans that are being brought forward.

I see the Auditor General nodding, so we're on track, as you understand it, of what that was intended to be. Great.

Thank you, Chair.

[The Chair, Liberal, Shawn Murphy]

Let's get a response both from the Auditor General and from the Secretary of the Treasury Board during the presentations and questions. Before the end of the meeting, we'd like a little more clarification as to this particular issue.

Mr. Weston.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

At the risk of delaying our witnesses, I think what you bring up, Mr. Christopherson, is a good idea since we are an accountability committee. I wonder if the clerk could keep track of these scheduled commitments. When people say they will come back to us within 90 days, it would be great to have a calendar like this with those types of commitments docketed, because I think that's the only way we will reliably keep track of them, and it might make those commitments a little more substantive.

Is that your idea?

[David Christopherson, NDP, Hamilton Centre, ON]

No, that was a motion we already passed a couple of weeks ago.

[The Chair, Liberal, Shawn Murphy]

The point that Mr. Christopherson made is that we are asking--and sometimes it won't be feasible--for the action plan prior to the meeting taking place, like the one we got at the last meeting with Public Works and Government Services. In this case, it's not quite as detailed. In fact, it isn't detailed at all. So we will be looking for more elaboration, and the clerk will follow up, as per your request.

So those are three preliminary items to deal with. I'm now going to call upon the Auditor General for her opening remarks.

Ms. Fraser.

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

Thank you, Mr. Chair. We thank you for this opportunity to meet with the committee to discuss chapter 2 in our December 2008 report entitled “Governance of Small Federal Entities”.

As you mentioned, I'm accompanied today by Richard Flageole, assistant auditor general, and Tom Wileman, principal, who were responsible for this audit.

Small entities are typically organizations with advisory, regulatory, or quasi-judicial functions. They have fewer than 500 employees, or annual expenditures below $300 million. Despite their relatively small size, these organizations can have a significant impact on the health, safety, and quality of life of Canadians.

We looked at the arrangements by which the Treasury Board of Canada Secretariat oversees small entities. We also asked the heads of 51 small entities for their views, focusing on six in particular. We looked at oversight and coordination, reporting requirements, and shared services.

Mr. Chair, the two long-standing problems that need to be addressed are the reporting burden and shared services. Your committee could play an important role in ensuring remedial action.

Small entities face a reporting burden. With limited capacity, they have to meet the same central agency and statutory reporting requirements as do large departments. Reporting requirements in areas such as financial and human resources management play their part in ensuring prudent and effective management and accountability. However, the number of required reports is high--in fact, over a hundred per year--and filling them out is a complex and labour-intensive activity. Over the last five years, the Treasury Board Secretariat has acknowledged the need to reduce the reporting burden. When we completed our audit in May of last year, the secretariat's response to our recommendation was that they had developed action plans. The committee may want to ask about the progress that has been made since then.

Another key issue is shared services. Small entities do not have the systems available to large departments and may have only a few people responsible for key administrative functions. They often lack the capacity for internal services such as finance, human resources management and information technology. Sharing services is a way to address these problems.

The Treasury Board of Canada Secretariat has undertaken a number of studies since 2001, and has recognized the need for shared services in small entities. Yet little has been done. A major initiative on shared services proposed by the Secretariat over the next three to five years has not included small entities.

We found that several small entities are sharing services, but face serious risks in the absence of a framework from central agencies. These risks include unclear roles and responsibilities and a lack of agreed-upon standards.

Last May, the Secretariat was developing a service strategy intended to address the issues facing small entities. The Committee may wish to ask about the strategy and what has been done to date.

Our audit also found that mechanisms for oversight and coordination need attention. In particular, the Privy Council Office and the Treasury Board of Canada Secretariat have not issued practical guidance to ensure effective coordination between the activities of a department and the small entities in its portfolio. Small entities told us that communication and interaction with the portfolio department has been inadequate.

In contrast, the recent creation of a central internal audit function is a positive step, potentially allowing for better monitoring by the secretariat.

That concludes our opening statement, Mr. Chair. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Fraser.

We're now going to hear from Mr. Wouters, Secretary of the Treasury Board.

[Wayne Wouters, Secretary, Treasury Board Secretariat]

Thank you. Bonjour.

On this issue of the action plan, perhaps I could comment on that in the conclusion of my comments and we can have a bit of discussion on this, if you like, Mr. Chair.

Thank you for your invitation to appear before your committee to discuss the Auditor General's findings on the governance of small entities. My colleagues from the Treasury Board Secretariat and PCO have been introduced.

The Government of Canada is committed to building a culture of strong management in all its operations. To that end, we welcome the Auditor General's recommendations to improve the governance of small federal entities.

Her findings contribute to the work that is already underway to foster good governance throughout our operations.

I think many of you know what the picture is for small entities, but perhaps I could describe them a bit for you. There are about 50 small federal entities, generally defined as organizations that have fewer than 500 employees or annual approved expenditures of less than $300 million. They can mean organizations with as few as two employees, like the Northern Pipeline Agency, as well as organizations with over 400 employees, like the National Capital Commission. Together, these organizations represent less than 1% of total government spending. Their functions vary considerably. They can be administrative, quasi-judicial, regulatory, or advisory bodies. Like the mandates of the agencies themselves, the legal obligations of agency heads also vary considerably.

When you consider how many small entities there are, there have been few, albeit highly visible, significant management failures. I can assure you that the deputy heads of small entities take their jobs very seriously. In fact, over the past year and a bit, both the PCO and the Comptroller General have significantly increased their efforts to ensure that all newly appointed deputy heads of these small agencies fully understand their roles and responsibilities. This is done through one-on-one briefings on their key responsibilities, including financial and human resource management and the functioning and machinery of government.

As the government's management board, one of the Treasury Board's key responsibilities is to set management policies that make clear the accountabilities of departments and agencies for the full range of management functions. We support departments by providing guidance and tools and by developing capacity in key functional communities through learning and development activities. The responsibility of the deputy heads is to ensure the day-to-day management of their departments in compliance with Treasury Board policy.

TBS carries out its oversight of departments based on a risk assessment done through a number of tools, including audit and evaluation results and our own Treasury Board submissions. TBS reviews incidents of significant non-compliance and makes decisions on whether to intervene or take further oversight action.

TBS also relies on our management accountability framework assessments to measure the management performance of government organizations and to help deputy heads better understand where they are performing well and identify opportunities for improvement. These assessments are done for small agencies as well.

Now I would like to turn to the Auditor General's observations and recommendations with respect to the governance of small entities, beginning with oversight and coordination. We are very pleased that the Auditor General recognized that our policy on internal audit is sensitive to the situation of small departments and agencies.

Internal audit is an independent and objective organizational function that provides assurance to deputies, and reinforces good stewardship practices and sound decision-making.

Smaller organizations may not have the tools or the resources to undertake regular internal auditing work. This is why our internal audit policy mandates the Comptroller General to provide horizontal and other internal auditing on behalf of small departments and agencies.

In her report, the Auditor General recommended that central agencies provide more practical guidance on portfolio coordination. Portfolio coordination refers to the process used by ministers and deputies to ensure that the organizations within their portfolio cooperate and support each other while respecting, of course, statutory authorities and varying degrees of independence.

PCO has increased its guidance to portfolio deputies, and Karl can provide more information on that, if you wish. TBS has done so as well.

Earlier, I talked about the management accountability framework. As part of the annual assessment, portfolio departments are assessed on their performance with respect to portfolio coordination. Over the past three years in the 20 large departments that have portfolio management responsibilities, the results have been positive, and what's more important, the trend is on the upswing.

The guidance we have given to portfolio departments to explain how we are assessing them on coordination criteria is paying off. That said, we are also putting this guidance into a practical information piece or guide that will be available in a draft form in the coming weeks.

The Auditor General also commented on the need for better information to assess financial management and control. On this front, it really is a question of striking the right balance. We need to have sufficient information to ensure appropriate oversight, while recognizing that a one-size-fits-all approach is not necessarily the best for small agencies. This is taken into account in the MAF assessments and in the criteria developed for each round of MAF.

That is why we only assess small agencies every three years while large departments and agencies are assessed annually.

The same principle holds true with respect to reporting requirements. As the Auditor General points out, reporting requirements are an essential part of the governance regime. We need sufficient reporting, but we also recognize the capacity issues of small entities in producing these reports. Again, it's a question of striking the right balance.

The area that generates one of the highest reporting requirements is the human resources front. I think here we have made important strides to streamline these requirements. In fact, we have reduced the number of questions on our human resource reporting portal by 85% and have simplified those that remain.

We've also achieved similar success in reducing the people management reporting requirements under the MAF. In fact, in the current round of MAF, we have cut the volume of documentation to be submitted for these agencies in half.

The reporting version is a long-standing issue, and it stems from a number of different areas. An important part of the reporting burden is legislative. For example, all departments and agencies, large or small, have to report under the Access to Information Act and the Official Languages Act. In addition, many organizations have legislation that requires an annual report.

Another source of reporting is our own Treasury Board policies, and we are working hard to address this component as we streamline our policies and directives.

Finally, there are also significant requirements for parliamentary reporting. The reports on plans and priorities and the departmental performance reports are two examples. On this front, the challenge is not just for the public service but also for parliamentarians.

I do believe we've come a long way towards achieving the right balance in our dealings with small entities. We continue to strive to ensure the appropriate oversight, while respecting the capacity of small entities and taking into account the risks of their operations.

Those are my concluding remarks, Mr. Chair. I would just comment on the action plan.

I do apologize, I wasn't aware that this is now a motion that this committee had passed. Maybe I should have been, but I wasn't aware that this is now a requirement. If it is, the one question we will need to look at is that when the government does submit recommendations based on the Auditor General's reports, there is usually an action plan in those reports, but they're fairly high level. I think probably what members are looking for is more detail. I think we can answer them, but we do not have a report today.

The question we will have to ask is if it's the government who issued the initial set of recommendations, is it the government or the minister...or who is responsible for issuing the reports? This is something we will have to follow up on, based on your motion. But we can understand that in some ways having this pulled together in one detailed document may be a much better way to go than always having us try to answer all the questions.

We take the motion seriously, and we will follow up. If, in this particular case, you feel we need to do one later, then we will definitely go back and give that serious consideration.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Wouters.

We're now going to hear from the Canada Public Service Agency.

Mr. Bloom, do you have any opening comments?

[Mitch Bloom, Vice-President, Strategic Policy, Planning and Research Sector, Canada Public Service Agency]

No, I have none.

[Wayne Wouters]

Actually, Mitch is now a part of the Treasury Board Secretariat. There were some machinery changes, and that organization has been wrapped up under the office of the chief human resources officer as part of TBS.

[The Chair, Liberal, Shawn Murphy]

And I understand, Mr. Salgo, you do not have any opening comments. Okay.

Thanks very much to both of you. We will have Mr. Wouters clarify that issue on the action plan. The committee is very specific as to what it's looking for. I don't think it's a matter for consideration. We are very specific in what we're looking for.