Public Accounts Committee on Oct. 28th, 2010

[Andrew Saxton, Conservative, North Vancouver, BC]

I'd like to go to Canada's economic action plan.

This was one of the largest stimulus programs that has ever taken place in Canada. Would you agree with that?

[Sheila Fraser]

Absolutely. It was a $47 billion program that was to be carried out over two years.

I sincerely doubt there has been anything like that in recent history.

[Andrew Saxton, Conservative, North Vancouver, BC]

You place the emphasis on sound risk management.

Can you highlight what actually took place in that regard?

[Sheila Fraser]

As we mentioned, I think this audit is really about the delivery of the program and how it was established.

As you can imagine, when we saw that the government wanted to get this money out very quickly, we were somewhat concerned that people might disregard some of the controls that were in place. We were very pleased to see that there was a lot of attention paid to identifying risks, managing them, and at the same time speeding up the approval processes and the processes to flow the funds out.

We give a lot of credit to the public servants who worked extremely hard to deliver these programs very quickly while at the same time ensuring there was responsible management of the programs and appropriate controls.

In particular, I would like to note the work that was done by the internal audit groups. We saw that they changed their plans, in some cases carried out audits to give assurance to senior management, and in other cases provided advice on how programs should be established. We were actually able to rely on the work that internal audit had done, which hasn't happened very often in the past.

I think the public servants deserve a lot of credit for what they have done.

[The Chair, Liberal, Joe Volpe]

Thank you, Madam Fraser. Thank you, Mr. Saxton.

Madam Fraser, before I go to the next intervener, I'd like to ask a couple of questions.

We are all very anxious to make sure that everything is transparent, that there's accountability, precision of information that comes forward, and that it is critiqued at all times.

You said something a moment ago about jobs and the action plan, etc. About a year ago, I personally raised the issue of $19.5 million that was contracted to a company in Wisconsin--Avalon Rail--in order to renovate a dozen VIA rail cars.

Did you look at that contract?

[Sheila Fraser]

No, we would not have looked at that.

[The Chair, Liberal, Joe Volpe]

This would have been in September 2009.

[Sheila Fraser]

This is part of the economic action plan?

[The Chair, Liberal, Joe Volpe]

Right.

[Sheila Fraser]

We did not get into a lot of the specific projects. We looked at whether the projects were approved, whether they met the eligibility criteria. The second audit we will be doing, which will be tabled in about a year from now, will get into more of the specific projects that occurred. That may be one that would be selected. I don't know.

[The Chair, Liberal, Joe Volpe]

I'm hoping, because I have a little bit of a problem with my geography. I thought Wisconsin was outside of Canada. It might have a difficult time meeting the criteria established by the department.

[Sheila Fraser]

All the projects we looked at met the eligibility criteria.

[Andrew Saxton, Conservative, North Vancouver, BC]

Mr. Chair, we have a lot of things to cover today, and I don't think there's a clarification anymore. Could we move on to the next...?

[The Chair, Liberal, Joe Volpe]

You might find my next comment clarifying as well.

You mentioned something a little while ago about the helicopter, the military equipment acquisition. I just wanted to understand what you said in terms of your concern. I thought I heard you say that if there were funds that would have to be attributed to something that had not been calculated in the overall initial price, National Defence would have to make an adjustment to its annual budget later on. I thought I heard you say that.

[Sheila Fraser]

If there are expenses that have to be incurred to operate, be it helicopters or whatever, and the department has not received sufficient funding for that, they will obviously have to reallocate funds from somewhere else. They have indicated that they were looking at possibilities of reducing operations or reducing training in order to find the money that had not been estimated.

The example that I think we used is the Cyclone. They had initially estimated that the cost of all of the in-service support for the Cyclone would be equal to the cost they're currently spending for the Sea Kings. They have since discovered that in fact it will cost over a billion dollars more for the Cyclone than for the Sea King. There has not been any additional funding given to the department for that, so they will have to reallocate a billion dollars, potentially, within the department to be able to pay for that in-service support.

[The Chair, Liberal, Joe Volpe]

Or cut back on military operations.

[Sheila Fraser]

Well, they've indicated to us that it could be the number of hours of flying, the training; there are various options open to them. But they have indicated that it is one of the possibilities, yes.

[The Chair, Liberal, Joe Volpe]

Mr. D'Amours.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Thank you, Ms. Fraser, as well as the people from your office, for being here with us this morning.

I want to start with paragraph 6.59 of your report and come back to certain sections that you have identified. You are talking of helicopters and the fact that the department said that they were already available, that they were already in production and that the technology was already integrated. Moreover, the department assessed the risk as being low to medium in these three areas.

In the light of your investigation, would you say today that the procurement of these helicopters, given the information I have cited, still poses a slight-to-average risk?

[Sheila Fraser]

It was clear at the time, in 2006, that the project was much more complex. We then saw that the project was much more complex than had been indicated to cabinet at the time. The modifications were very significant. Obviously, in 2006, we may not have known about all of the modifications, but we did know that there were significant modifications.

Consequently, the decision-makers should have been better informed about the nature of these modifications and not being told that this equipment existed already and that such an acquisition involved a risk level ranging from slight to average.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

It was therefore an error to state that the risk level ranged from slight to average.

[Sheila Fraser]

Yes, we do not consider that this was a file with a slight level of risk.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

We also acknowledge, Madam Auditor General, that a minister is accountable and also a decision-maker. When information is presented to the minister, he is responsible not only for doing his homework but also for ensuring the validity of the information before signing off. I think that we all agree with this statement. Do you also agree?

[Sheila Fraser]

Yes, but the minister is not an expert in helicopter technology.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Nevertheless, the minister is surrounded by people who should be able to help him make the right decision, validate the information properly.