Public Accounts Committee on June 9th, 2009

[The Chair, Liberal, Shawn Murphy]

I'd like to call the meeting to order and welcome everyone here. Bienvenue à tous.

This meeting, colleagues, visitors, and witnesses, has been called pursuant to the Standing Orders to deal with chapter 5, “Passport Services--Passport Canada”, of the 2009 Status Report of the Auditor General of Canada.

The committee is very pleased to have with us today the auditor herself, Sheila Fraser. She's accompanied by Wendy Loschiuk, assistant auditor, and John Reed, principal.

From the Department of Foreign Affairs and International Trade, we have the deputy minister and accounting officer, Len Edwards.

From Passport Canada, we have Christine Desloges, the chief executive officer; Jody Thomas, chief operating officer; and Gary McDonald, director general.

Again I want to extend to everyone a very warm welcome, but before I call upon the Auditor General for her opening remarks, I just want to introduce to the committee Mr. Brandon Jarrett, who's from the Australian National Audit Office. He's in Canada to do the preliminary scoping work for the peer review audit, which will be conducted over the next 12 months on our Office of the Auditor General.

Mr. Jarrett, welcome to the committee. Welcome to Canada.

We're now going to hear from Ms. Fraser, then from Mr. Edwards if he has any opening comments, and then Madam Desloges.

Ms. Fraser.

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

Thank you, Mr. Chair. We thank you for inviting us to discuss chapter 5 of our 2009 status report on passport services.

As you mentioned, I'm accompanied today by Wendy Loschiuk, assistant auditor general, and John Reed, principal, who are responsible for this audit.

We have looked at Passport Canada several times over the last few years in audits on managing identity information, setting government fees, and sharing intelligence. This agency not only provides a very important service to Canadians by issuing the travel documents needed to cross borders but it also plays a role in ensuring our security.

In 2005, we reported that as border security tightened, especially as concerns travel to the United States, Passport Canada had struggled to meet heightened expectations for security and growing demands for service.

We found in 2007 that there was some progress made in addressing our concerns but that the agency still had work to do. Indeed, after the U.S.-imposed Western Hemisphere Travel Initiative phase 1 came into effect in January 2007, Passport Canada found itself unprepared for the overwhelming number of passport applications from Canadians wanting to fly to the United States. As a result, there were significant delays in the processing of passport applications and increased waiting time at passport offices.

Following hearings in 2007, this committee issued a report criticizing the agency's planning for the surge in passport applications. The committee asked for an action plan to detail how Passport Canada would prepare for another possible surge in demand before the next WHTI phase, and I understand that action plan was presented to the committee.

As you know, WHTI phase 2, which requires Canadians and Americans to have a passport to enter the United States by land and sea, came into effect on June 1.

In this Status Report, we looked at actions by the agency since 2007 to identify and correct the problems it had during the first WHTI deadline.

For this chapter, we kept our scope focused on how the agency is getting passports to Canadians who need them. We did not look at security this time.

Our audit found that Passport Canada has taken action to identify what went wrong in 2007 and to address those problems. In our opinion, Passport Canada was better prepared for the western hemisphere travel initiative, phase two, deadline. The agency conducted several lessons-learned exercises to identify causes and solutions. It improved how it forecasts and monitors demand so that it can better react to changes. It increased its capacity for processing and printing passports, streamlined how it managed walk-in applications at its passport offices, and hired more staff.

Passport Canada has been very active in reaching out to Canadians about the need for a passport. It launched a national communications campaign informing Canadians about the June 2009 deadline and encouraging them to apply. It opened clinics in selected communities to reinforce its message and to accept applications.

The agency made it possible for Canadians to submit applications at some Service Canada outlets and local post offices, and it also revamped its website. We found that Passport Canada has taken reasonable steps to do what it can to inform Canadians, improve access, and at the same time try to influence demand for its services.

In our audit we wanted to know what plans the agency has should demand increase beyond current operational capacity. We found that the agency has prepared a broad contingency plan that includes several actions that would be triggered by such things as excessive lineups or delays in standard turnaround times.

Detailed planning was still under way at the time of the audit, but in our opinion there were still some critical gaps. For example, the agency has not yet determined how much its operational capacity would increase by taking certain contingency actions, or what level of excess demand would trigger action. In addition, the agency had not specified who had the authority and responsibility to initiate those contingency actions.

Our status report contained recommendations aimed at helping Passport Canada respond to surges in passport demand, and the agency has agreed with those recommendations. The committee may wish to get further clarification from Passport Canada on the actions they have taken.

Mr. Chair, this concludes my opening statements. My colleagues and I would be pleased to answer any questions that committee members may have.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Fraser.

We're now going to hear from Mr. Len Edwards, Deputy Minister of Foreign Affairs and International Trade.

Mr. Edwards.

[Leonard Edwards, Deputy Minister of Foreign Affairs, Department of Foreign Affairs and International Trade]

Thank you, Mr. Chairman.

Good afternoon, everybody. I am pleased to appear before the committee today, along with Christine Desloges, who is the new chief executive officer of Passport Canada, Jody Thomas, and Gary McDonald.

I am particularly pleased to be able to talk a little bit about the significant work that has been done by Passport Canada to prepare for the possibility of demand surges in the future.

In 2007 the Auditor General noted that Passport Canada did not have a formal contingency plan to handle unexpected increases in demand for passports. I am happy to say that this is no longer the case. Passport Canada now has robust measures in place to address sudden changes in demand. Ms. Fraser, as you've just heard, has recognized this progress in her 2009 status report.

In fact, since the audit for the 2009 Status Report was conducted, Passport Canada has made even more progress in this area. The agency has completed its contingency planning initiative with the development of rolling actions plans, which allow Passport Canada to put in place appropriate responses to increases in demand.

In her report, the Auditor General asked that Passport Canada determine to what extent each contingency action would increase the agency's operational capacity. Although it is difficult to quantify the effect of each contingency plan on capacity, the agency has defined the objective of each measure on operational capacity, as well as the benefits that are expected. The situation will be monitored closely by Passport Canada's tactical response team.

The Auditor General also asked what volume of applications would trigger the need to take action, particularly actions that require some time such as the hiring of extra staff.

I would like to report that Passport Canada has identified triggers for each contingency action, including longer waiting times, longer lineups in regional offices, processing times beyond published standards, and printing delays. These triggers are reviewed on a regular basis, depending on the situation at the local, regional, and national levels.

The response strategies cover all areas to ensure that the agency can apply capacity gains in intake, processing and printing, and public communication tools.

Ms. Fraser asked that the roles, responsibilities and authorities for launching the contingency plans be identified. This is also complete. The chief operating officer is responsible for the launching of most contingency actions at the national level. Some minor actions will be launched at the local level. Passport Canada is also ready to seek the authority of the minister of Foreign Affairs, if warranted.

The inability to accommodate increases in mailed-in application volumes was one of the main sources of a backlog during the 2007 crisis. As the Auditor General noted in her report, Passport Canada took substantial actions to increase capacity by opening a new processing and printing plant in Gatineau for applications received by mail. The agency has also expanded and modernized many of its 33 regional offices. Since August 2008, it has also added 40 new receiving agents to examine passport applications, bringing the total to 197 Canada Post outlets and Service Canada offices.

Passport Canada took measures to streamline the processing of applications by identifying critical steps, roles, and responsibilities. It changed its work flows and improved internal reporting to better monitor the number of applications processed.

In her status report, the Auditor General also mentioned Passport Canada's communications campaign--she has referred to it again this afternoon--that encouraged Canadians to apply for passports in advance. The agency began early in 2007, as a matter of fact, working to prepare Canadians with proactive efforts. In 2007 it ran public notices explaining the new and simpler guarantor policy, in which the passport requirement of the first phase of the western hemisphere travel initiative is mentioned.

Passport Canada also ran two phases of public notices on its simplified renewal process, in which the requirements of this initiative were highlighted.

In the summer of 2008, Passport Canada spent close to a million dollars on a large-scale national radio and print advertising campaign, to let people know about the Western Hemisphere Travel Initiative requirements. It put out a direct mail campaign in the last summer as well, targeting Canadians living within 50 kilometres of a U.S. border as well as Canadians living in the United States.

As well, the agency distributed posters and pamphlets at provincial tourist information centres, rest stops, border stations, airports, U.S. missions, Passport Canada offices, and Service Canada centres. In 2009 all public notices regarding passport clinics mentioned the June 1 deadline.

Passport Canada ran an Internet advertising campaign in the spring, encouraging Canadians to apply early. This ad appeared on several popular websites, such as the Weather Network, Météomédia, Sympatico/MSN Canada, Yahoo! Canada, la Toile du Québec, Travelocity Canada and Expedia Canada.

The agency has been working to make its website more user-friendly, including improvements this spring to the online forms. Interactive application forms are now easier to use. Clients can type directly into the fields and then print out the forms without needing any kind of online account. The other advantage of these new interactive forms is that they reduce the possibility of errors. This is thanks to a 2D bar code that is automatically generated in the corner of the form as the user types. This bar code, which represents the data that has been entered into the form, can then be scanned by a passport agent in mere seconds.

Another important outreach initiative that was put into place after the 2007 crisis is the passport clinics held by our Mobile Passport Unit.

The objective of this initiative, now in its third year, is to provide passport services to remote areas and border communities. The Mobile Passport Unit increases accessibility to passport services, especially in rural regions, and minimizes delays due to incomplete applications.

In 2007 and 2008, Passport Canada's mobile passport unit held over 109 passport clinics across Canada. Another 150 such clinics are planned for 2009-10 in places such as Sarnia, Brandon, Barrie, Collingwood, Lethbridge, Abbotsford, Brossard, Prince George, Petawawa, Longueuil, Lloydminster, Brockville, Granby--the list goes on--Charlottetown, Summerside, Kelowna, Vernon, Perth-Andover, Chatham, Penticton, and Gander, among others.

Finally, I would like to thank all members of the committee for giving me this time to speak about the changes and improvements at the passport office.

I would now like to invite Christine Desloges, the new chief executive officer, to give you a brief description of the agency today following the implementation of the June 1 deadline.

[The Chair, Liberal, Shawn Murphy]

Madam Desloges.

[Christine Desloges, Chief Executive Officer, Passport Canada]

Merci, monsieur. Thank you very much.

Mr. Chairman and members of the committee, thank you for inviting me to speak to the committee today.

The week that I officially started as chief executive officer of Passport Canada is the week that the Auditor General's status report was tabled, so that was my great luck. I was already proud to be joining an organization with such a solid track record, and the positive results of Madam Fraser's evaluation of Passport Canada's state of readiness gave me another reason to be proud of the organization that I am now heading.

In her report tabled on March 31, Ms. Fraser concluded that Passport Canada had made satisfactory progress in implementing actions and developing contingency plans to prepare for any unexpected rise in the volume of passport applications leading up to June 1, 2009.

On June 1, as you know, phase 2 of the Western Hemisphere Travel Initiative, otherwise known as WHTI, came into effect. This American law tightened travel document requirements for people entering, leaving and even flying through the United States. As of June 1, anyone crossing the border by land or water needs a valid passport, a NEXUS or FAST card, or an approved enhanced driver's licence.

Well, that date has come and gone, and I'm proud to say that volumes were, and are still, up. In fact, yesterday was our highest volume ever per day. We were over 25,100 per day, and we are up to the task, Mr. Chairman. I would like to share with you some of the history of the challenges that Passport Canada has faced, and how we have adapted in response.

When the first phase of WHTI came into effect on January 23, 2007, it became evident that Passport Canada would need to undergo some very radical changes. As of that date, Canadians flying to, from, or through the United States needed a valid passport. You'll recall the long lineups, the disgruntled applicants, the long processing times, and the general frustration that resulted as Canadians applied for passports in record numbers.

Well, radical changes have indeed been made since that time. As Ms. Fraser noted in her report we took many measures to ensure that we were fully prepared to meet Canadians' needs. We learned a lot from the 2007 crisis and this time around, I am happy to report that we weathered the storm successfully.

You will be interested, Mr. Chairman, to know that the same volumes that provoked the crisis in 2007 are now what we call, in French, monnaie courante.

Take as an example the extremely difficult month of January 2007. During that month, we received around 500,000 passport applications, which created a logjam for the processing capacity that existed within Passport Canada at the time.

However, in the period from January to May of this year, about 436,000 passport applications were filed in our electronic system each month, with no trouble at all. During these months, 99% of all applications were processed within published processing times. The remaining 1% of applications could not be processed within that timeframe for various reasons. They were incomplete, or else additional verifications were needed to clear a security alert or verify a guarantor. Applications sometimes also got delayed during our quality audit checks, which are in place to ensure the integrity of the documents we are delivering to the clients.

As you can see, our agency has been able to make important gains to its service capacity in just two years.

Our entire organization has grown since the 2007 crisis, both in experience and in size. As mentioned by my deputy minister Mr. Edwards, this has included the opening of Passport Canada's new state-of-the-art processing plant in Gatineau and the expansion of some regional offices. And our workforce has grown by around one-third since January 2007.

I feel confident that the extensive preparatory measures taken will allow us to deal successfully with large volumes and sudden surges in demand. I am happy to report that, nine days after the WHTI deadline, we have indeed shown that we are up to the challenge.

When the Auditor General mentioned our campaign encouraging Canadians to apply early, she said that only time would tell whether or not Canadians would heed our advice. Our goal, as the June 1 deadline approached, was to keep passport demand high and steady, and that's exactly what we've achieved. I think it is safe to say that our communication campaigns and preparatory efforts have paid off.

I would like to conclude by telling you how proud the Passport Canada team across Canada is of the fact that the Clerk of the Privy Council mentioned our service excellence in his annual report to the Prime Minister last March. It was a great honour to have Passport Canada's hard work recognized in this way. We have truly come a long way since the 2007 crisis.

In closing, I would like to say that though June 1 has come and gone, the job is not done. We anticipate that Canadians will continue to apply in high numbers in the coming months. Everyone at Passport Canada remains vigilant, because we may yet see another rise in demand. If so, we will be ready.

Merci beaucoup for this opportunity to speak to you today.

[The Chair, Liberal, Shawn Murphy]

Merci, Madame Desloges.

The first round is for seven minutes, and Ms. Crombie will start.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Welcome to everyone.

I want to congratulate you on quite a commendable audit. I think it's one of the better ones we've seen, actually, so congratulations to you.

My first question is for Madam Auditor General. I notice that the 2005 audit looked strictly on the security-related issues, and the 2007 followed up. In 2009 you decided not to focus on the security issues, perhaps because you thought they were satisfactorily resolved, and you looked at the anticipated surge of applications instead.

I just wanted to go back to what some of those security issues were, if you felt they had been resolved, and why you decided not to focus on them at all for this audit.

[Sheila Fraser]

I will start, Chair, with perhaps the last question first.

This was a very narrowly focused audit to see if the passport office had resolved the issues it had faced in the 2007 surge for demand with, at the time we did the audit, the upcoming phase two of the western hemisphere travel initiative. As well, I believe we were also encouraged by this committee to go back and do a follow-up audit. So it was, because of timing, very narrowly focused. We didn't go into the security issues.

I would be very hesitant to comment on what the status is now of the security issues we have raised, not having done a more recent audit. But when we looked at it in 2007, we had noted that there was satisfactory progress and that they had resolved many of the issues we had seen in 2005.

Perhaps I could ask Ms. Loschiuk to maybe go through some of those issues.

[Wendy Loschiuk, Assistant Auditor General, Office of the Auditor General of Canada]

Certainly.

I will have to draw your attention back to the 2005 chapter. Fortunately, I happen to have it in front of me.

Some of the recommendations basically looked at, in dealing with the security of the passport application, the integrity of the information, guarding information. We went back and looked at those in 2007.

I'll draw your attention to the 2007 status report. Overall, we found that they had work to do still, but they were making progress in looking at tools and training to identify documents. They were making progress to make sure their key employees with access to critical assets were cleared.

These were the kinds of issues we had looked at back then, and found that basically Passport Canada was moving forward on those issues. We have not looked at it since 2007, so I cannot give you an update from that point.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Is there any desire to go back and look at those again? Are there significant risk concerns that warrant you going back and looking at them again?

[Sheila Fraser]

It is certainly not in our immediate plans, given that there was satisfactory progress noted in 2007. I think we can see that the passport office does respond to the recommendations. The status report we tabled in March indicates they do go through quite extensive lessons learned.

So we have no immediate plans. I would suspect at some point, of course, that security will come back as a major issue and that we would include it again in that audit.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thank you.

I will direct the balance of my questions to the Passport Canada office.

I would like to look at the forecasting model. It had been an issue previously. It hadn't been working very successfully. You had forecast a demand of 4.7 million in 2008-09, and in fact 6.1 million in 2009-10. Of course, we understand that was because the western hemisphere travel initiative kicked into place on June 1.

Has the forecasting model been improved? Has it been able to predict the demand more accurately?

[Leonard Edwards]

I will answer that and then perhaps Madam Desloges may have a comment.

We discovered going back to 2007, as you said, that the model was not providing as accurate results as we wanted. We revisited that model, and if you're interested in the details of the model, I'm sure one of my companions here can provide it.

To give you an example, we forecast 4.35 million passports for the last fiscal year, and in fact we issued 4.38 million, which is not bad in terms of a forecast and a result.

Entering into the deadline around the June 1 factor, we were somewhat apprehensive, I'd have to say, to know whether our forecasting model was really working all that well in the buildup to the June 1 deadline. In fact, in April our forecast was for 432,000 passports and we actually issued 423,000. Again, that's pretty close. In May we estimated 389,000, and here we got a little higher in terms of actuals with 429,000.

We're pretty comfortable with the forecasting model. It seems to be operating pretty much as we expected.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Last year you noted that the prediction was slightly lower than the actual. Your revenues rely on the accuracy, obviously. If the forecast is lower, how will it affect your business planning?

[Leonard Edwards]

The general point is that during the peak year in 2007, we had a fixed passport fee and the revenues have come in higher than expected. Perhaps they are a little lower than expected last year, which means that the passport office is operating at a bit of a deficit now because of the lower number of passports, but the funding model is such that we can work with the surplus in the early years to pay for the deficit right now.

I don't know if my colleague wants to comment on this.

[Christine Desloges]

Indeed, the forecasting model was a very important thing for us because, as you rightly pointed out, there is a connection between volumes and revenues.

Over the years we have worked with a panel of experts on best practices and on how we could strengthen our forecasting methodology. We have also worked with the Conference Board of Canada. We used a combination of past trends together with the research that is done across the country by the board.

We also do monthly surveys to test the interest of Canadians. This is a consumer-driven business. It is difficult to forecast. We adjust our forecast every three months in order to be able to see what the evolving trends are.

For example, with the recession, of course, it did have an impact, and we did have to adjust our forecast. This is an area where we will continue to work very conscientiously, because it has an impact. We of course adjust our budgets accordingly.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Crombie.

Before we go to Madam Faille, I urge all members to keep their questions as short and succinct as possible.

To the witnesses, the answers should also brief and relevant to the question.

Madam Faille.

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

Thank you.

I have questions on passport processing fees. Although Passport Canada is self-funded, it still manages to keep costs for certain products very low. From what I see in this document a 24-page adult passport costs $57.75 and a child passport around $57.05. However, costs to produce these passports are far higher.

Do you consider this in your model and in the way in which you plan to limit costs for your agency? Do you keep certain amounts aside as a reserve? If so, under what legislation?

[Christine Desloges]

The cost of an adult passport is currently $87, which includes $25 in consular fees. The fees for children's passports are subsidized. So, we are currently using a costing methodology to identify the cost of each product. I will defer to Gary so he may give you further details on this methodology.

[Gary McDonald, Director General, Policy and Planning Bureau, Passport Canada]

It should be stated that the $57 figure you referred to was our unit cost last year. At this point, Passport Canada is losing $7 for each passport it issues.

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

How much?

[Gary McDonald]

Seven dollars. We have been dipping into the surplus accumulated over previous years, as Mr. Edwards mentioned earlier on, because we operate with renewable funds and we can use the surplus we had in the bank to pay off the deficit.

In terms of...

Well, I will keep it at that.

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

You say you are allowed to manage a renewable fund. Under what legislation can you carry over amounts from one year to the next?

[Gary McDonald]

I think it is the Revolving Funds Act. It exists, and a number of government programs are funded on a revolving fund basis.