Public Accounts Committee on Feb. 10th, 2009

[The Chair, Liberal, Shawn Murphy]

I'd like to call the meeting to order. Bienvenue à tous.

Colleagues, pursuant to the Standing Orders, today's meeting will deal with all chapters of the December 2008 Report of the Auditor General of Canada.

I should point out that we also have with us today, and we're very pleased to have with us, the Commissioner of the Environment and Sustainable Development, Mr. Scott Vaughan, as well as Mrs. Fraser, of course, the Auditor General. She is accompanied by Mr. Neil Maxwell, the Assistant Auditor General.

Mrs. Fraser, welcome to the committee. Mr. Maxwell and Mr. Vaughan, welcome to the committee. And welcome to everyone else.

There is no other department or agency here. We're just going to hear from the Auditor General on the eight chapters that were tabled in Parliament last week. As well, if anyone has any questions or comments on the five chapters from the Commissioner of the Environment and Sustainable Development, he is here also for the purpose of answering any questions.

Without any further delay, I'm going to ask the Auditor General for her opening remarks.

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

Thank you, Mr. Chair.

We are very pleased to present our December 2008 reports, which were tabled in the House of Commons last week. The tabling of these reports, as you know, was delayed because Parliament was prorogued, so most of the audit work we are reporting on was completed in the spring of 2008.

Again this year, our report to Parliament reflects the diversity and complexity of the issues on the federal government's agenda. It is to be expected that an organization as large and complex as the federal government, with annual spending of around $230 billion, does some things very well and has difficulties in other areas. Our report shows this wide range of accomplishments and challenges.

In 2006-2007, federal transfers to the provinces and territories amounted to about $50 billion, or just under 23 per cent of federal spending.

We undertook a study to inform parliamentarians about the main mechanisms used to transfer funds to the provinces and territories. Members of Parliament have told us it is not always clear which transfers have conditions attached, and what the nature and extent of the conditions are.

The study explains that while some transfers involve conditions on the use of the funds, others do not. Where there are no conditions, the provinces and territories have no legal obligation to spend the funds for the purposes intended by the federal government. The clean air and climate change trust fund, which Scott will elaborate on later, is one example.

This year we examined how Health Canada has responded to commitments made by first ministers in the past to report on health indicators. We found that while Health Canada has published health indicator reports, the reports do not fulfill the broader intent to report to Canadians regularly on the progress of health care renewal. The report, Healthy Canadians, has given statistics on indicators, such as wait times reported by patients for diagnostic services, but it does not give enough information to help readers understand what it means.

Reports on health indicators are meant to inform Canadians about progress being made on key priorities, such as quality of service. However, Health Canada's report falls short.

Other national organizations publish similar reports. Health Canada needs to review its role and its approach to health indicator reporting.

Let me now turn to the Canadian Food Inspection Agency and its protection of Canada's plant resources--that is, how it deals with the risk presented by invasive alien plants, seeds, plant pests, and diseases.

The sheer volume of imports makes it impossible to inspect all shipments. Given that the volume has more than doubled in the last seven years, it is critical that the agency focus on the greatest risks. We found that management has no systematic way of knowing if its procedures are adequately designed and operating effectively to keep invasive alien species from entering and becoming established in Canada.

Our audit findings are serious. The Agency needs to conduct a comprehensive assessment of the way it handles imports under its plant health program.

Two chapters in this report deal with management practices at the Canada Revenue Agency. The first one looks at how CRA manages its IT investments.

The Agency invests about $175 million a year in large, complex systems that affect Canadians. We found that it has developed a sound approach for choosing and managing its investments in the future. However, we found problems in most of the projects we looked at.

The agency needs to ensure that its new approach to managing its investments is rigorously applied so that they deliver the intended benefits. In addition, the agency faces the prospect of having to replace about one-third of its national applications, and it has recognized that its current resources may not be sufficient. It needs to manage its IT investments as a portfolio in order to make the difficult choices that lie ahead.

Our second chapter on the Agency looks at people management.

The CRA has made major changes in people management and it expects they will lead to reduced costs and more efficiency.

However, we found that the Agency has had difficulty with its new staffing process, which employees said was frustrating and confusing, partly because it continues to change.

An efficient staffing process is critical in light of the recruiting challenges the agency expects to face in the coming years. It needs to reflect upon its approach to staffing before pushing ahead.

Turning to our chapter on the Correctional Service of Canada, we found that the agency has not been taking advantage of possible savings through more efficient deployment of its security staff. We found that overtime costs have risen, while the number of prisoners has remained relatively stable. The Correctional Service has not analyzed the impact of overtime on salary costs or the potential advantages of hiring more staff.

Similarly, we found that the agency could be missing out on savings in the way it purchases food, clothing, and cleaning supplies for its 58 institutions.

While we understand its focus on safety and security, Correctional Service needs to analyze what these goods and services are costing it and whether there are more economical and efficient alternatives.

We also looked at how the government oversees small government organizations.

Despite their size, small federal entities can have a significant impact on Canadians. We found that central agencies have not paid enough attention to the oversight of these organizations and the unique challenges they face, in particular their limited capacity.

Small entities do not have the systems and resources of large departments and may have only a few key people responsible for several functions. Sometimes this situation can lead to problems, as we have found in previous audits. Central agencies have been aware for several years of the problems facing small entities, yet they have done very little to address the problems. It is time for concrete action.

We looked at PWGSC's contracting for professional services to help it deliver its own programs. We found that the Department followed the government's rules when awarding most contracts. A fair, open and transparent award process was a significant finding in a department that spends over $1 billion a year on contracts for professional services.

However, we found problems in the management of some contracts once they had been awarded.

While the department has proper rules in place, it needs to do more to ensure that contracts are properly managed after they have been awarded. The department has agreed with our recommendations and is taking steps to correct the problems we identified.

Mr. Chair, I would now like to ask the commissioner to provide you with a brief overview of his report.

[Scott Vaughan, Commissioner of the Environment and Sustainable Development, Office of the Auditor General of Canada]

Thank you, Sheila.

Mr. Chair, I am pleased to be here today to present my first report. Let me begin with three general observations drawn from the report.

First, the government cannot demonstrate that the money it is spending on some important environmental programs is making a difference. Second, the government is not ensuring that measures to limit harmful air emissions are working. Third, the government has not yet translated sustainable development into concrete practice.

Canadians expect the government to tackle environmental degradation. The government needs to know what works, what doesn't, and why. However, our audit work for this report found gaps in the information needed for Parliament to know how well the programs we examined are working or whether adjustments are needed.

Let me begin with the environmental programming at Agriculture and Agri-Food Canada. While agriculture generates billions of dollars for Canada's economy, pollution from the farm sector also represents a significant environmental burden. Public concern about its effects is growing. Agriculture and Agri-Food Canada has spent $370 million to encourage farm practices that protect the environment. However, after five years the department cannot show whether these environmental programs are leading to improvements in environmental quality on the farm.

We also looked at Environment Canada's management of severe weather warnings to Canadians. Severe weather events like tornadoes and blizzards can result in injury or loss of life and cause significant damage. Being able to issue advance warnings accurately allows Canadians to prepare.

We found that the department lacks an effective national approach to verify the timeliness and the accuracy of the more than 10,000 severe weather warnings it issues each year. We also found that the assets of its weather observation network, including radar and surface stations, are not managed adequately to ensure that the network can continue providing the data needed by the department to issue and to verify severe weather warnings.

Environment Canada is considered a world leader in weather services. Each day, it provides a valuable service to Canadians. However, as severe weather events are expected to become even more severe and frequent due to climate change, the weather service faces fundamental challenges and risks to the durability of its systems. We recommend that it adopt a long-term strategy to guide its decisions.

The Report also discussed examples of measures the government has used to reduce air pollution. In order to be credible to Canadians and the rest of the world, the government's programs for reducing air pollution must be able to produce measurable results. In that respect, most of what our audit found was disappointing.

For example, we looked at the regulations on gas pumps aimed at limiting the release of toxic vapours such as benzene when people refuel their cars and trucks. We found that Environment Canada has done almost no enforcement of these regulations. As a result, it does not know whether the regulations are working.

Another example is the clean air and climate change trust fund--$1.5 billion transferred to the provinces to reduce greenhouse gas emissions and air pollution. Although Environment Canada claims that certain reductions will be achieved, the trust fund has no conditions requiring the provinces to report on how they use the money and what was achieved. This will make it difficult for Environment Canada to support its claims that greenhouse gases will be reduced by 16 megatonnes per year between 2008 and 2012 as a result of the fund.

We also looked at the Public Transit Tax Credit, a plan designed to encourage Canadians to switch to public transportation. Although this is a commendable goal, we found that actual reductions in greenhouse gas emissions were disappointing relative to the $635 million cost.

Lastly, we looked at a pollution prevention plan, intended to lower the emissions of a harmful toxic substance, acrylonitrile. We found that since that substance was declared toxic almost eight years ago, total emissions have not been lowered but rather have increased three-fold.

My report also includes chapters on environmental petitions and sustainable development strategies.

Mr. Chair, we would be happy to answer any questions committee members may have.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mrs. Fraser.

Thank you very much, Mr. Vaughan.

Just before we go to the first round, I understand this hearing is televised, so I do want to explain that the Office of the Environment and Sustainable Development is part of the Office of the Auditor General. Last week both the Auditor General issued her report, with eight chapters, and the Commissioner of the Environment and Sustainable Development issued his report, with five chapters, and that is the reason they're both here today. We're very pleased to have both of them.

First round, Mrs. Ratansi, seven minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you, Ms. Fraser and Mr. Vaughan, for being here. I'm not a person who goes into long preambles, but as for today's questioning, I have to set the groundwork so that you understand where I'm coming from.

The overarching concerns that I see in all eight chapters of the AG's report and the five chapters of the environmental commissioner's report have been a lack of accountability, a lack of governance, and incompetency in management. But my major concern—and I'm going to deal with the environmental area—is that I feel ideology overrides evidence.

I used to sit on the environment committee, and the Conservatives at that time did not believe in climate change. Kyoto was there, but you rightly pointed out that the UN Millennium Ecosystem Assessment has said that the environment has transformed over the past 50 years, and that there is a correlation between environmental degradation and food safety, health, and weather.

You also indicate that the National Cancer Institute of Canada states that 40% of women and 45% of Canadian men will develop cancer. So we all know that the environment is important and that we have to manage it. Whether we like it or not, we are going into global warming. You also stated that the government has an important role, and that it has tools that it should use such as regulation, economic measures, pollution prevention, and voluntary agreements.

One of the things that were very disconcerting to me was the $1.5 billion for the clean air and climate change trust fund, which is transferred to the provinces. So I shall ask you five specific questions.

One, how does this program work, if you know?

Two, who is the trustee of this fund, from a federal government perspective?

Three, are there any memorandums of understanding between the provinces and the federal government regarding the management and the use of this fund?

Four, in your audit, would you be able to trace the money? Would you know where it has gone, or how it has been used?

Five, in your opinion, what is the environmental impact of the $1.5 billion?

I'd like to start with those.

[Scott Vaughan]

For most of those questions, I will have to defer to the Auditor General. What I can answer would be your question about how the program is working.

To our knowledge, the program comes within the overall context of trust funds—there is a transfer from the federal government to the provinces. After that transfer, we are not able to look at the programs that have been put in place by the provinces. That extends beyond the Office of the Auditor General. So we've only looked at the nature of the trust fund. The difference between this and what the Auditor General said in her introduction is that the climate change and clean air trust fund set a target, which was 16 megatonnes per year over five years. There's no means by which we are able to track how that fund will be used to reach the target, because it is transferred to the provinces. The provinces have no mechanism or obligation to report what climate change or other programs they will implement. We don't have the mandate to look at the provinces themselves.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

There is neither a trustee nor a memorandum of understanding?

[Sheila Fraser]

Perhaps I can help to clarify this. This trust is similar to many other trusts that we've mentioned in the study in chapter one. Some $27 billion has been transferred to the provinces using this mechanism. The trustee is a financial institution, so the funds are deposited by the federal government in a financial institution, and then the provinces draw down those funds within a certain time period, which is often stipulated. I hesitate to use the word “agreement”, but there is a document that specifies by what time the funds should be drawn out by the provinces. Essentially, this is the only condition in those agreements.

You'll see in the lists in the exhibit that different purposes have been announced. A lot of them deal with health. Some deal with housing, others with patient wait-time guarantees, others with policing. But there are no actual conditions requiring the provinces to spend the money for those purposes, or to present results other than to their own public. These funds would go into their consolidated revenue funds and would be audited by their legislative auditor, who would then report to their own population.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

So if a province drew it down and it went into the CRF, nobody would know whether it was utilized for environmental purposes. That's number one. And number two, nobody would be able to trace the value of the return on investment of the $1.5 billion. Correct?

[Sheila Fraser]

We did not go to the provinces to see what the provinces were specifically doing. But certainly at the federal level there is no requirement for the provinces and territories to report to the federal government on how the funds were used, nor on the results that were achieved with the funding.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

What is the relationship between the clean air and climate change trust fund and the ecoTrust?

[Scott Vaughan]

The only relationship is that they are two important measures that the government has identified in their climate change plan of 2007-08. They are two separate plans dealing with a similar issue of how to reduce the emissions of greenhouse gases. They're not working in tandem, if that's what you're asking. They're separate plans.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

And they are both non-accountable, according to your statement.

[The Chair, Liberal, Shawn Murphy]

Your time is up.

Thank you very much, Ms. Ratansi. Thank you, Mr. Vaughan.

Madame Faille, sept minutes, s'il vous plaît.

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

Thank you, Mr. Chair.

Once again, welcome to our committee. I am always happy to discuss issues related to IT management and service contracts. I'd like to tie my question in, Mrs. Fraser, with your 2006 audit report that focused on large IT contracts awarded.

In the case of this audit, did you focus on small contracts rather that on large ones, as was the case in 2006? I think that in 2006, you looked at some of the larger contracts that were being awarded. Is that correct?

[Sheila Fraser]

In our 2006 audit, we looked at the management of government-wide IT projects with a view to determining if sound TBS practices and policies were being respected. This time around, we looked at the management of CRA projects and found some shortcomings. We examined eight projects and only two met the criteria set by the Agency. However, our intention was not specifically to follow up on the 2006 audit.

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

In February 2008, the committee tabled a report with recommendations, including one that you had put forward, namely that in the case of large projects, PWGSC should be asked to prove that these projects cannot be broken down into smaller projects. I believe the TBS was also asked to come up with a detailed plan on IT management by September 2008.

Have you heard of any progress being made on that front?

[Sheila Fraser]

As far as I know, there has been no follow-up action.

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

I see.

[Sheila Fraser]

I'm not sure what became of these requests, given the elections and the prorogation of Parliament. Perhaps the committee should resubmit its request to the department for a follow-up. Perhaps this is a question for the committee chair.

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

Fine then.

Nevertheless, you did say that the government should try to break large projects into smaller, more manageable ones. Correct?

[Sheila Fraser]

Yes, if it all possible.

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

Regarding information technology contracts, can you tell me what the value was of the eight projects you audited and list the names of the firms involved?

[Sheila Fraser]

I don't believe any firms were actually named. These were projects managed by CRA.

According to Exhibit 5.2, the budgets for these projects vary between $400,000 and $97 million. I don't have the details. I assume these are contracts. We were looking at project management in general and not at specific contracts awarded in conjunction with these projects.

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

In recent years, have you noticed that the way in which CRA manages its information technology has gotten worse? I mention this because pay-related problems have been reported in the news this week. The problem affecting the Shawinigan Tax Centre should have been resolved a year ago. Some employees who have been on the job for 10 weeks have yet to receive a paycheque. I was wondering if you had noted any problems on this front, if the situation had improved any, or if matters had gotten worse.