Public Accounts Committee on Feb. 10th, 2009

[Sheila Fraser]

As I mentioned, for about $5 billion of the various transfers, there are conditions that the moneys have to be spent for the purposes of that program. For some of the large transfers—I recall an audit we did on the health transfer—there is of course the Canada Health Act, which has a number of conditions. Things may have changed, but the last time we looked at it—which I believe was in 2002—while there were conditions, there was actually no enforcement of those conditions. Then for the bulk, such as these trust funds, there are essentially no conditions. So the provinces do not have to spend the money for the purposes intended, although they may have a moral obligation to do so, and there is no accountability back to the federal government, though there would be, of course, accountability to their populations.

[Andrew Saxton, Conservative, North Vancouver, BC]

It seems that provincial and territorial governments are often in a better position to determine regional priorities. How do the oversight mechanisms provincially compare to the oversight mechanisms federally?

[Sheila Fraser]

I'm afraid I can't answer that, because I don't audit the provinces.

[Andrew Saxton, Conservative, North Vancouver, BC]

Here's another question. Are the existing mechanisms to transfer moneys to the provinces and territories working effectively, and do you see an increased use of trusts?

[Sheila Fraser]

We note in the report that there has been an increased use of trusts. Trusts were first introduced in 1999, so for the last 10 years trusts have been used.

I could hazard a guess that there may be less trust money transferred through trusts over the next few years, because it has occurred largely in a period of surpluses, when the federal government has had surpluses, which would appear not to be the case at least for the immediate future. We didn't note any transfers through trusts in the last budget, for example. As we state in this, this is strictly a policy decision as to how this money is flowed. We do not make any recommendations or even any comment. It was simply an information piece for parliamentarians to understand what these mechanisms were--were there conditions attached or not--and what the accountability provisions were.

[Andrew Saxton, Conservative, North Vancouver, BC]

Do you see any other mechanisms that one could use that might improve the accountability?

[Sheila Fraser]

There are a number of mechanisms. I think we'll have to see.

For example, regarding the funding on infrastructure, in the past these have been largely tripartite agreements between the federal, the provincial, and the municipal authorities, with conditions as to how the funds would be used, and then reporting on that. But again, as I said, these are policy and, quite frankly, political negotiations that occur between the federal government and the provinces, and it is up to those authorities to decide the conditions and the accountability provisions that they wish to put in place.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Before we start the second round, Mrs. Fraser, I would just like to clarify a point so that it's absolutely clear. This arises from the questions of Ms. Ratansi and Mr. Saxton on these trust funds.

It's my view, of course, as you know, that it destroys the chain of accountability and destroys any notion of accountability that we have here in Ottawa. But to be absolutely clear, as the auditor, you're giving your professional opinion that the money has been booked and sent, but you cannot give us any professional opinion that the money has been spent for the purposes that they said it was going to be spent for.

[Sheila Fraser]

That is correct for the trusts. The money has been recorded as an expenditure. In most cases it would have been transferred through financial institutions to the provinces, but there are no conditions that the funds be spent, and there is no mechanism to know if the funds have been spent for the purposes that were announced.

[The Chair, Liberal, Shawn Murphy]

My second question is over to you, Mr. Vaughan.

I'm dealing specifically with the $1.517 billion climate change and clean air trust fund. At the time that was announced, the statement was made that this would result in a reduction of 16 million tonnes of greenhouse gases on an annual basis. Given that there's no mechanism for any kind of accountability, would you agree with me that this is just someone's wild guess and there's absolutely no factual basis for that statement?

[Scott Vaughan]

On the first part, there's no obligation on the part of the provinces to report back on what they're doing within their provinces. There are a lot of climate change programs at the provincial level, and these are serious programs, but there's no mechanism for the provinces, under an obligation, to report back on what they're achieving.

In terms of the analysis itself, there was some analysis done, but what we said was that the analysis was weak and flawed, because there was not a rigorous set of assumptions. So there was some analysis, but it was not the analysis that we would have expected.

[The Chair, Liberal, Shawn Murphy]

Finally, assuming that some of these moneys were spent on environmental issues, whether it be climate change or clean air, we have no way of knowing, from a federal government point of view, whether it was incremental, new money spent on the environment, or whether it was a replacement of existing programs or services.

[Sheila Fraser]

That's correct.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Mrs. Crombie, you have five minutes, please.

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

Thank you, Mr. Chairman.

Thank you, Auditor General. I've always had great admiration and respect for your work.

I'll try to cover two chapters, because I'm not sure if you'll have a chance to get back to me or not. I'd like to start by taking another look at the CFIA, which Mr. Christopherson directed our attention to earlier--the Canadian Food Inspection Agency, chapter 4.

I must admit that I was completely dumbfounded when I read about the operations in CFIA. I thought there was a profound lack of controls, no accountability, pure incompetence, and an utter disregard for procedures. In fact, I wonder how the government could allow such egregious lack of accountability to occur.

You yourself list some of the more egregious actions: the difficulty in delivering timely assessments, the backlog for requests and of assessments, non-risk-based surveys that don't identify new threats, inspections that are inconsistent or not completed at all, programs unsupported by information management technology, no tracking systems, programs lacking management processes, lost documents, no risk-based approach, no adequate quality assurance process for shipments, no national tracking system, poor communication, no quality management, and no progress from a 1996 audit. I'm surprised the CFIA hasn't been shut down. Now we learn there are increasing volumes.

In your conclusion you state that the agency lacks an effective integrated risk management approach. You identify significant problems in risk mitigation in processes, some of which I've already listed: lack of management systems, inadequate information management technology, weak information management, and lack of appropriate coordination between branches.

Why has this agency not been shut down or mandated to operate with tighter supervision and controls?

[Sheila Fraser]

I think the member has resuméd our findings very well. Why this has occurred I'm afraid I can't answer. It would be up to the head of the agency, and perhaps even the minister responsible, to respond to that question.

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

Perhaps we could make an inquiry to the minister as to why these actions have not been followed up on. Is that procedural?

[The Chair, Liberal, Shawn Murphy]

It would be the committee's decision whether or not we have a hearing on that chapter.

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

There seems to be profound mismanagement here.

I'll proceed with my second question while you're agreeing on the line of procedure.

In chapter 2, “Governance of Small Federal Entities”, I found that there was a real lack of governance there as well. You yourself report that governance regimes are not working well. Reporting requirements are burdening small entities. Committees have been set up to address these small entities, but they lack the capacity to build, sustain, and improve internal services such as finance, HR, and IT. Sharing can address some of these challenges.

With these smaller federal entities this governance does not involve a board of directors or another governing body. Would it not be a good idea that a board of directors assist with strategic plans, budgets, governance, and general accountability?

Second, I noted that portfolio coordination needed improvement, and I wondered why an officer of portfolio affairs wasn't standard for each of the small entities.

Third, would some of the small entities benefit from a horizontal audit?

Fourth, do you recommend that the reporting burden be reduced? What administrative services could be shared?

Finally, what best practices have you observed in other jurisdictions that would alleviate some of these issues?

Thank you.

[Sheila Fraser]

Thank you, Chair.

On the question of boards, those might be appropriate, or certainly departmental audit committees might be appropriate for some of these agencies, but they vary significantly in size, and some can be as small as five or six people. To impose a board on a lot of these might actually not make their life any easier. There might be more people on the board than in the agency. So it's really a question of much better portfolio coordination and giving these smaller agencies the support that they need to be able to do their work effectively.

Regarding an officer of portfolio affairs, we note in the report that there are certain departments that have one, and doing so would appear to be a best practice.

On the question of horizontal audits, when we look at a particular issue, we will include the agencies that are within it. I know that the internal audit function of the Treasury Board Secretariat is also doing horizontal audits and has set up, actually, an internal audit function for these small agencies so that each one doesn't have to have its own internal auditors. That is moving, and they're also setting up an audit committee that will cover all those small agencies as well. I'm not exactly sure where all that is at, but those are good practices that are coming into effect.

On reporting, the issue there is that every agency and department, be it the Department of National Defence or an agency of six people, has to produce the same number of reports, which we say are 100 a year. It is very time-consuming and very burdensome, and there are questions about what that information is actually being used for.

There have been some initiatives undertaken on the human resource question and reporting and trying to streamline some of that, but there really is a need to simplify and streamline and reduce the complexity of these things and the numbers of these things, because these agencies simply don't have the capacity to deal with all of them.

Finally, the whole question of support services and shared services is critical. Many of the agencies do not have the budgets to be able to have a financial management expert, a human resource management expert. We have seen cases in which they've gotten into trouble because of that. There was an initiative in the federal government to have them share services with large departments. I question how effective that will be, because I'm not sure that the large departments will pay the attention that might be required to the smaller agencies. Some of the smaller agencies are sharing services between themselves and some are offering services to others. There's a question about the mandate and the MOUs that are put in place to make sure roles and responsibilities are clear.

We have noted a practice that has been introduced in the province of Quebec, where there is a common service for smaller agencies, a bit like a service bureau, if you will, for smaller agencies, and it will actually do the transactions for them. There are various models, and I think the Treasury Board Secretariat is certainly aware of these issues, but there hasn't been a lot of progress on it.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Crombie. Thank you, Ms. Fraser.

Just to deal with Ms. Crombie's inquiry, the committee will be holding hearings on certain chapters. Whether those will include chapter 4, “Managing Risks to Canada's Plant Resources”, will be a decision made by the committee itself. The steering committee will have recommendations. They will be presented to the committee on a Thursday meeting and then that'll come forward.

Thank you very much.

Mr. Kramp, you have five minutes.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

Welcome, again, Mr. Vaughan, Mr. Maxwell, and Madam Fraser.

As are most of the reports that I've seen from the Auditor General, this one is a good news/bad news story. I think it's a reflection of life itself. I'm encouraged that your comments show that for the most part there's a fair bit of accountability. The spending of the $230 billion per se is for the most part well managed for the various departments. Of course, you've definitely dug deep and found a number of areas of concern, and we're thankful for that. That gives us an opportunity to go even deeper and to then make the recommendations so that all Canadians can benefit. So I thank you.

There's one in particular I'd really want to delve into just a little bit with you, maybe because I happen to have a little bit of personal knowledge on it. I was in the food service and hospitality business for 35 years. I cannot believe what I'm hearing in this. In your statement you've mentioned that you have serious concerns with Correctional Service Canada not paying attention to the economy of their services. You've stated that they actually don't know their food costs. Is that correct? How general a statement is that?

[Sheila Fraser]

Mr. Chair, they know the food costs at the local institutional level, but nationally there is no management of food costs across the board nor any analysis of different options as to how they might have more economy and efficiency in food services.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Right. So if you're an independent or a major chain and/or an institution such as this in private industry and or even another organization, they would have food costs down to a point of a percent. Here, all the factors that should be coming through with good management...we don't even know what shrinkage or theft or pilferage is there if they don't even have an idea of what the food costs are, to start with.

How extensively did your department go into a lot of the components of food cost such as the quality grade, the efficiency and the effectiveness of buying groups, the training of the staff, and the capacity of their record-keeping system to be able to monitor?