Public Accounts Committee on April 22nd, 2010

[The Chair, Liberal, Shawn Murphy]

I call the meeting to order.

I extend to everyone here a very warm welcome.

Colleagues, this meeting is to deal with the spring 2010 report of the Auditor General of Canada. Five chapters were tabled on Tuesday of this week, and there is one chapter dealing with special examinations.

As has been our practice in the past, we have the Auditor General before us to deal with all five chapters--all six chapters, actually, if you want to. She is accompanied by Sylvain Ricard, assistant auditor general; Nancy Cheng, assistant auditor general; and Ronnie Campbell, assistant auditor general. On behalf of the committee, I want to extend to each of you a warm welcome.

Before I ask the Auditor General for her opening remarks, I want to deal with a minor point of business. You have before you, colleagues, the minutes of the steering committee meeting that was held yesterday. I'd like to get those minutes approved, if possible.

However, before we do so, the clerk has recommended an amendment on chapter 2, which is that after the word “That”, we're going to insert the words “in relation to the committee's study of Chapter 3: Income Tax Legislation of the Fall 2009 Report of the Auditor General, the chair be authorized”--and then I'm continuing--“to write to the government requesting an update”--

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Chair, could you tell us where you are?

[The Chair, Liberal, Shawn Murphy]

I'm on paragraph 2 of the minutes of the steering committee. They call it the fourth report.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Yes, okay.

[The Chair, Liberal, Shawn Murphy]

On chapter 2, the clerk is recommending that these words be inserted after the word “That”: “in relation to the committee's study of Chapter 3: Income Tax Legislation of the Fall 2009 Report of the Auditor General”. Then we continue on with “the Chair be authorized to write to the department requesting an update on the Miscellaneous Statute Law Amendment Program”.

This is not a major issue, colleagues, but we did find the actual wording of the program. Our report on that particular chapter has been tabled in Parliament, and we're just writing the department and pointing that out and perhaps asking for an explanation as to why they have never considered using that program.

With that, we'll vote on the amendment moved by Mr. Dreeshen.

(Amendment agreed to)

Next is the motion relating to the minutes, as circulated.

(Motion agreed to)

Okay, thank you very much. Now we're going to go to the main business, which is to hear from the Auditor General.

Ms. Fraser, the floor is yours. Thank you very much.

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

Thank you, Chair.

We are pleased to be here today to present our spring 2010 report, which was tabled in the House of Commons on Tuesday, April 20. I am also presenting an overview report on the electronic health records initiative in Canada.

As you mentioned, I am accompanied by Assistant Auditors General Ronnie Campbell, Nancy Cheng, and Sylvain Ricard.

Several chapters of my report, along with the overview report on electronic health records, touch on government investments involving billions of dollars. To provide maximum benefits and to ensure that investments produce the anticipated results, I urge the government to plan and budget for them over the long term.

The federal government relies on information technology systems to deliver programs and services to Canadians. Many of these systems are aging, and several are at risk of breaking down. Even if systems are currently working, a breakdown could have severe consequences. At worst, some government programs and services could no longer be delivered to Canadians.

We found that the chief information officer branch of the Treasury Board of Canada Secretariat is aware that aging IT poses significant government-wide risks. However, it has not formally identified the issue as an area of importance for government. Furthermore, it has not established or implemented government-wide strategic directions to address this issue.

The renewal and modernization of IT systems can take many years and require significant investments, which must be planned and budgeted for over the long term. The Treasury Board Secretariat should prepare a report on the state of aging IT systems across government and develop a plan to address it.

My report addresses the government's implementation of key changes required under the 2003 Public Service Modernization Act. That act is a complex undertaking designed to transform the way in which the federal government recruits, manages and supports its employees. Progress has been achieved, but it is a process in transition and its effects are not yet apparent.

We found that the key changes required by the legislation have been implemented, but there is limited information about the results they have produced. That information is needed in order to determine whether the results achieved come up to expectations. Judicious management of human resources is crucial to the effectiveness of the public service and the quality of services provided to Canadians. The government needs to ensure that this initiative is successful.

We also looked at the rehabilitation of the buildings on Parliament Hill. Public Works and Government Services Canada has identified serious risks to key systems, risks that could affect Parliament's operations. These buildings are part of Canada's heritage and are critical to Parliament's operations. The governance arrangements are hindering rehabilitation work, while the buildings continue to deteriorate.

Responsibility for the Parliament buildings is split among many organizations, decision-making and accountability are fragmented, and there is a lack of consensus on priorities. These weaknesses result in delayed decisions and projects, and they contribute to increased project costs and risks.

The long-standing governance problem, which we and others have raised over many years, has to be resolved. In our view, responsibility for and accountability for the Parliament buildings should rest with the Senate and the House of Commons.

I will now move on to the Northwest Territories, where sustainable and balanced development depend on the implementation of several key measures.

The agreements finalized with aboriginal groups define governance structures and the ownership of land and resource rights, and are important for economic development and environmental protection. They help provide a level of certainty and predictability for business, industry, communities and governments.

Our auditors found that Indian and Northern Affairs Canada has made real efforts to clarify these structures and rights in the negotiations that led to the settlement of certain land claims. However, in other regions where negotiations are ongoing, the Department has not put in place an adequate regulatory system to protect the environment.

In addition, Indian and Northern Affairs Canada and Environment Canada have not met their responsibility to monitor the cumulative environmental impact of development. The federal government has specific obligations relating to effective governance, environmental protection and capacity building to provide for sustainable development in the Northwest Territories. Failure to meet these obligations could mean missed economic opportunities, environmental degradation and increased social problems in Northwest Territories communities.

We also looked at whether Agriculture and Agri-Food Canada is managing its research activities to meet its goal of promoting excellence in research and increasing collaboration with other research organizations. The department has a history of successful collaboration on individual research projects with other organizations, but the more complex collaborations we looked at were not managed well, causing a significant loss of goodwill among key partners.

In addition, the department has not identified the human and financial resources needed for a strategic direction, nor the equipment and facilities it requires. Much of its laboratory and agricultural equipment is past its useful life.

The department's research is important to Canada's food production and to Canada's ability to compete internationally. We found serious problems in areas that are fundamental to conducting research, such as managing funding, capital assets, and human resources.

My report reiterates the salient points in the special examinations of 11 Crown corporations done in 2009. It should be noted that the salient points do not reflect what may have happened since those reports were submitted to the boards of directors of the Crown corporations in question.

In a special examination, significant deficiency is any major weakness that could prevent a Crown corporation from having reasonable assurance that its assets are safeguarded and controlled, its resources are managed economically and efficiently, and its operations are carried out effectively. In three Crown corporations, we found one or more significant deficiencies that we reported to the appropriate minister. The three corporations were the Canada Post Corporation, the Canada Science and Technology Museum Corporation and Marine Atlantic. In two of the three cases, Canada Post and Marine Atlantic, the deficiencies identified related to capital spending and the financing of that spending.

Mr. Chair, my office and six provincial audit offices have carried out separate concurrent audits of the development and implementation of electronic health records. Electronic health records are expected to reduce costs and improve the quality of care, but this pan-Canadian initiative involves significant investments and challenges.

My colleagues and I encourage stakeholders to report comprehensively on progress made and benefits achieved. We also encourage the committees of each legislature to continue monitoring this complex initiative.

We thank you, Mr. Chair. This concludes my opening statement. We would be pleased to answer any questions that committee members may have.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Fraser.

We are now going to the first round of questioning, which is a seven-minute round. The first questioner will be Mr. Lee.

Mr. Lee, you have seven minutes.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Thank you, Mr. Chairman.

I want to thank the Auditor General and the many staff who work on these matters. I know hundreds or thousands of hours are synthesized into your seven or ten minutes of remarks. A lot of good work is being done, and I thank everyone in the Office of the Auditor General for that, as I'm sure all parliamentarians do.

I want to focus my remarks first on the aging technology issue. I think you'll probably agree that this is an exercise in accident prevention, and were nothing to be done, at some point there would be risk of a catastrophic failure somewhere in the public service that would have huge financial and legal implications.

You've only looked at about half a dozen departments. Are you looking at other departments generally, on the same set of issues? Are you looking at other departments beyond your spring report?

[Sheila Fraser]

We are not planning to look further at other departments on this issue. That would be something the committee might wish to explore with government. The government has indicated that they will be asking all departments to do an assessment of the state of their IT systems and to develop a master plan to deal with the results. At some point in the future, obviously the audit office will go back to see if that has actually been done and to see the risk mitigation strategies that have been put in place, but we are not planning to go into more individual audits in departments at this time.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

I know you've quite properly looked to Treasury Board to provide appropriate cross-government and cross-departmental leadership, but in looking at your grading of the departments, I see that the circles and the half-moons seem to focus on Citizenship and Immigration and Public Works and Government Services. In relation to either of those departments, did your office uncover any accidents or minor failures related to the potential of a bigger failure in IT?

[Sheila Fraser]

I would say, Chair, that specifically we did not, although we do note in the report that the Department of Public Works and Government Services indicated that the pension and pay systems were rated as being at very high risk and that they were in the process of replacing those two systems. I think the pension system is now probably pretty well complete and running, but those two systems were indicated as being at very high risk.

I should also mention to the committee that we are doing a follow-up to an audit that we did on the management of large IT projects. That follow-up will be coming this spring. Included in it is the global case management system at Citizenship and Immigration Canada.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

So there's progress going on out there, all the while looking at the potential for a failure. I know that if there is a failure with pension cheques, many of the recipients go right to the telephone to register their discontent.

I will take a moment to focus on the Parliament buildings issue. As I walked up to the Hill this morning I said to my assistant that it must be tough finding stonemasons and materials to rehabilitate these buildings, because they were built 100 years ago and you can't get the stuff at Home Hardware.

We've had a chance to discuss this in other locations, but it seems to be your view that Parliament itself should generate the leadership so there's no confusion later or during the process about who's really in charge. Parliament itself is a two-headed monster. It has the Senate and the House, and we're used to working together sometimes.

As you looked at this, did you have the opportunity to scope out the possibility of the kind of mechanism where Parliament, the Senate, and the House, would say, “Okay, Public Works, Treasury Board, we're going to take over the management of all these projects”? Did you scope that out with any of the players?

[Sheila Fraser]

We recognize that there will have to be some organization or mechanism put in place by Parliament to manage and assume responsibility for the Parliament buildings. How precisely that is done will be up to the two houses of Parliament and Public Works to determine the models of that. Over the years different options have been developed and discussed, but we were not comfortable going to a recommendation on a specific model.

We do note in the report how other countries are doing this--for example, the chief architect in the United States. I know that the two parliamentary bodies and Public Works are quite aware of how this is being managed in the U.S. and Great Britain. We expect that a proposal will be developed by them on how this organization would function.

I was fortunate enough to have a tour of some of the rehabilitation work going on. Should the committee decide to look at this chapter, it might be worthwhile for members to actually see the rehabilitation work. We walk by these buildings every day, but I look at them quite differently now after having had that tour. It might be interesting for the committee to have a tour so that the project and the scope of the project could be explained to you. I think Public Works would probably welcome that.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Lee.

Madame Beaudin.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Thank you, Mr. Chair.

Good morning, Ms. Fraser.

I would first like to address chapter 1, which deals with information technology. In fact, I would like confirmation from you. At page 19, it says that Public Works and Government Services Canada has been asked for a decade to do studies with definite timelines, estimated costs and measures to mitigate risks. And yet at page 18, it says: "PWGSC does not prepare a Department-wide IT investment plan beyond a one-year period." Nonetheless, we know that the Department has undertaken certain initiatives. Money has been allocated by Treasury Board to modernize systems. Money has been allocated by Treasury Board and Public Works.

Could you give us some details about those projects and tell us whether they were carried out internally or were subcontracted?

[Sheila Fraser]

Unfortunately, Mr. Chair, I am not aware of those details. That question should be put to the department. In doing the audit, we simply considered existing risk analyses and planning on this subject. We noted that there was information at Public Works, but that it was located within each division of the department. That means there is no overall plan or replacement planning covering more than one year.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Let's talk about the action plans. For all these departments you examined, particularly the three that present risks, have they established action plans?

[Sheila Fraser]

Yes, the three departments have system replacement plans and have evaluated the costs. As noted in the report, the total cost estimate is $4 to $5 billion. Using their parliamentary appropriations, they may have about $3 billion. There is therefore a $2 billion shortfall for the three departments in terms of funding.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Does Treasury Board monitor these situations and implementation of the action plans?

[Sheila Fraser]

Some mechanisms exist for major projects in the government, but in terms of this audit, we criticize the fact that the Chief Information Officer Branch has no plan or comprehensive view of the status of information technology in the government, and no estimate of the costs to be planned for over the next few years. We can assume that there significant amounts will need to be invested that have to be spread over an appropriate period. Obviously this calls for planning and a comprehensive view. We hope the government is doing this—it has indicated its agreement—and is starting to get information from the departments.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Knowing that it is urgent in terms of information technology and the aging of these systems, should they not be thinking about adopting a mechanism to ensure that projects are not overestimated?

[Sheila Fraser]

I would expect that in each department there is a rigorous cost estimation process. However, it goes beyond that. At the same time as the systems are replaced, there has to be a review of the way things are done. I think this opportunity has to be taken. Not just replace one computer with another, but also ask whether there are new work techniques. We would expect that each department will meet this challenge rigorously, but also that the Chief Information Officer Branch will do it as well.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Do I have any time left?

[The Chair, Liberal, Shawn Murphy]

You have three minutes.