Public Accounts Committee on Nov. 30th, 2010

[The Vice-Chair, Conservative, Daryl Kramp]

Good morning to you all and welcome to our witnesses.

I'll be filling in for our chair, Joe Volpe, who is a little under the weather this morning.

Today we'll be studying chapter 4, “Managing Conflict of Interest”, of the 2010 fall report of the Auditor General of Canada.

At the conclusion of our examination and testimony today, we will take a brief period of time to discuss the notice of motion from Madame Faille.

We will call on our witnesses for opening statements. We will first have, from the Office of the Auditor General of Canada, the Auditor General herself, Sheila Fraser. We will then call on Daphne Meredith, the chief human resources officer. Then we will call on Michelle d'Auray, Secretary of the Treasury Board of Canada. Assisting them as well, we have Ronnie Campbell, assistant auditor general, and Tom Wileman, principal. Welcome to you all.

Madam Fraser, would you kick us off with the opening statement, please?

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

Thank you very much, Mr. Chair.

We thank you for this opportunity to meet with the committee to discuss chapter 4 of our 2010 report, “Managing Conflict of Interest”. As you mentioned, I'm accompanied today by Ronnie Campbell, assistant auditor general, and Tom Wileman, principal, who are responsible for this audit.

This audit examined what the Treasury Board of Canada Secretariat and five selected departments have done to ensure that public servants can recognize a conflict of interest, however it arises, and know how to deal with it.

In previous audits we had found conflicts of interest in contracting and grants and contributions programs in three departments, that being Agriculture and Agri-Food Canada, Natural Resources Canada, and Public Works and Government Services Canada. We included those departments in our audit, as well as Canadian Heritage and Human Resources and Skills Development Canada, which are active in the same program areas.

Conflicts of interest bring into question the integrity and fairness of the decisions made by public servants in departments and agencies across the government. Conflicts of interest can be apparent, potential or real conflicts between work-related duties and private interests, and they do not relate only to financial benefits. If not properly addressed, conflicts of interest can increase the level of distrust and cynicism toward government, and over time, affect the legitimacy and effectiveness of government action.

The Treasury Board of Canada Secretariat plays an important role, but we found that it is not providing sustained support to departments. Two areas that have suffered are policy guidance and training with content from the secretariat's policy centre for values and ethics.

No new policies have been put in place, although these were required by legislation dating back to 2007. In addition, policy guidance is lacking in some areas and out of date in others. Work on training that meets common needs has not been completed nor fully implemented. Policy guidance and training are important for ensuring that public servants across the government have a common understanding of conflict of interest.

To prevent serious cases of conflict of interest, the secretariat needs to continue to support departments and agencies in identifying and managing such cases. This support will help departments analyze risks and assess how effective their efforts are in the area. This collaboration is key to ensuring that issues are detected and addressed as early as possible, ideally before any wrongdoing can occur, and to preserving the credibility of the Canadian public service.

The five departments have put in place mechanisms and assistance to address conflict of interest, and overall have met their obligations under the current policy. They have set up units to deal with values and ethics, designated senior officials to help public servants resolve issues, and provided guidance and training.

Departments need to identify areas where the possibility of conflict of interest is greatest, and devise strategies to address these situations. The three departments with previous cases of conflict of interest have addressed the specific issues from those cases. However, none of the departments had completed their reviews of all areas at risk.

We recommended that the departments take timely action to resolve conflicts of interest; complete their risk assessments, with regular reporting in high-risk areas; and improve their training efforts.

We also recommended that the secretariat provide better support to deputy heads on policies and guidance, as well as on common training. The secretariat has agreed with our recommendations. The committee may wish to ask them about their specific planned actions and completion dates.

Mr. Chair, this concludes our opening statement. We would be pleased to answer any questions that the committee may have.

Thank you.

[The Vice-Chair, Conservative, Daryl Kramp]

Thank you, Ms. Fraser.

Now we'll go to Madam Meredith.

[Daphne Meredith, Chief Human Resources Officer, Treasury Board Secretariat]

Thank you for inviting us to appear before the committee on chapter 4 of the Auditor General's fall report on managing conflict of interest.

The secretariat welcomes this report and agrees with the two recommendations concerning us.

Of course, values and ethics, including conflict of interest, are not new concepts. They've been embedded in the public service culture for over a century. However, in 2003 the public service values were codified in policy and were also formally included in our leadership competencies and in our management system. Not only are they codified, they are measured. Values and ethics is one of the six indicators measured every year in our management accountability framework assessment of deputy heads.

The code itself is a condition of employment for all employees and is featured extensively in training for public servants offered at the Canada School of Public Service.

Mr. Chair, let me add that deputy heads have the primary responsibility for managing conflict of interest within their organizations. The secretariat, through my office, supports deputy heads in that role. My officials meet regularly with departmental values and ethics practitioners and champions to share best practices and tools.

Our attention is very focused on these issues, especially since we are developing a new values and ethics code for the public sector and a new policy on conflict of interest and post-employment, which are expected to come into effect in spring 2011.

The new code will apply to all federal government organizations, including separate employers and crown corporations. Departments and agencies are also developing their own codes of conduct to address their individual operational environments and unique risks. The secretary will tell you more about this in a moment.

Concerning the report, the Auditor General found that departments generally have measures in place to manage conflicts of interest. However, she recommended that the secretariat work with deputy heads to identify their common needs for policy advice, guidance, and related training on conflict of interest and that we support deputy heads in meeting those needs. We agree with these recommendations.

My office has worked, and continues to work, with deputy heads, first, to identify where deputies need guidance on conflict of interest and the best ways to provide it, and second, to identify, in partnership with the Canada School of Public Service, the course material needed to support the new policy on conflict of interest and post-employment and the new code.

Mr. Chair, the government is committed to ensuring that Canadians are served by a public sector guided by strong ethical standards, and we are pleased to respond to the Auditor General's recommendations with the constructive and positive actions I have outlined here.

This concludes my opening remarks.

Thank you.

[The Vice-Chair, Conservative, Daryl Kramp]

Thank you, Madam Meredith.

We will now hear from Madame d'Auray.

[Michelle d'Auray, Secretary of the Treasury Board of Canada, Treasury Board Secretariat]

Thank you, Mr. Chair.

Daphne Meredith provided you with the overview and our response to the Auditor General's report. I'd now like to briefly add some elements from the perspective of a deputy head and an accounting officer.

The values and ethics code and the conflict of interest measures it contains set the overarching principles that apply to the public service as a whole. Based on these principles, every organization and every deputy head must take them into account and apply them to his or her organization to manage conflicts of interest. To do that, they must take their business lines, the variety of their stakeholders, and of course their mandate into consideration.

Determining when a conflict of interest exists can be quite complex. Conflicts can appear in several forms, and what constitutes a conflict of interest in one organization may not necessarily materialize in another.

I have been the deputy head of three organizations and in each one of these, I have led discussions with my management team and our employees on what constitutes a conflict of interest.

For example, at Canada Economic Development for the Quebec Regions, we promoted dialogue and put in place mechanisms so that employees could be totally comfortable to ask questions on conflict of interest and to disclose any conflict (real or potential) related to the grants and contributions we were reviewing and awarding.

The situation was different at the Department of Fisheries and Oceans, where potential conflict issues could arise about fisheries management regulations. In this case, employees are not allowed to hold a fishing licence. All that to say that conflicts of interest vary depending on the nature and activities within a given department.

At the Treasury Board Secretariat, where I am currently posted, conflict of interest risk management is done through a broad approach, since our employees have access to key information via departmental submissions. Consequently, every deputy could provide examples of risks and issues that they have to pay attention to in their organization.

Because some of these cut across multiple organizations, one of the ways Ms. Meredith's team helps departments is to provide a forum to share best practices through the values and ethics network.

Ultimately, deputy heads are responsible for applying the code and imbedding its principles and practices in their organization and with their employees. In so doing, they have to identify the risks inherent to conflicts of interest—apparent, perceived, or real—and take steps to mitigate them by developing tools and guidance to support their employees. It is also the responsibility of the employee to manage and identify his or her conflicts.

We are available to answer your questions.

Thank you.

[The Vice-Chair, Conservative, Daryl Kramp]

Thank you very much to all of our witnesses.

We will start our first round of questioning now, for seven minutes.

Our first questioner will be Mr. D'Amours, please.

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

Thank you, Mr. Chair.

Thank you to all our witnesses for being here.

Auditor General, I noted something you said in item 7 of your opening statement: “No new policies have been put in place, although these were required by legislation dating back to 2007.”

Ms. d'Auray, you appeared before this committee not too long ago. You are fortunate to be able to come before us so often. I am convinced that you feel that way.

Do you remember having had regrets... I forget the words, and I do not want to speak for you. It was regarding another issue. It so happens that we were discussing delays at Treasury Board Secretariat regarding the implementation of a number of standards.

Today we are told that “no new policies have been put in place, although these were required by legislation dating back to 2007.” We remember the timeframes you had to produce the reports. You said that you were publishing the first reports required under the act, and that there were delays with the other reports because there was no such requirement in the act. In this case, things are set out in legislation. How come the Treasury Board Secretariat has not put any new policy in place?

[Michelle d'Auray]

Thank you, Mr. Chair.

Like you, I do not know if I won the lottery. Be that as it may, the questions here are always relevant and serious, and it is a pleasure for me to answer them.

The act states that there must be a new code and, consequently, a new policy on conflict of interest management. That said, there is no void. The code established in 2003 is still in effect. The act does not provide any date. However, it does state that the code must apply much more broadly. The act does not only cover the core public administration, but crown corporations and other agencies as well. We have therefore undertaken a series of consultations, because this would be the first time that a code would apply to those organizations. All that takes time.

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

Ms. d'Auray, allow me to make a comment.

The excuse that I am hearing, in part, is that the act does not contain any date. The legislation calls for the implementation of new policies, and it is regrettable to hear that there is no date. I understand, but at a certain point, one does have to exercise judgment. The act does not state that you must implement a policy by a certain date, but it does require you to do so. Today, three years later, still nothing has been done.

Moving on, I have a question for Ms. Meredith. The following is stated on page 2 of your opening remarks:

Our attention is very focused on these issues, especially since we are developing a new values and ethics code for the public sector and a new policy on conflict of interest and post-employment, which are expected to come into effect in spring 2011.

Ms. Meredith, could you tell me which government, and in what year, required that those tools be implemented in 2011?

[Daphne Meredith]

We're following up, Mr. Chair, on the requirements set out in the Public Servants Disclosure Protection Act of 2007, which asked us to come forward with a values and ethics code and conflict of interest provisions within that.

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

Are you sure, Ms. Meredith, that those measures were called for in 2007 and not in 2005?

[Daphne Meredith]

This is the act that came into effect in 2007.

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

When was the legislation adopted? Was it not in 2005?

[Daphne Meredith]

I think it was passed in 2007.

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

It might be necessary to clarify that. In fact, I believe that it was in 2005. It might have been implemented in 2007. Was it not in 2005? I wonder if someone could give us a clear answer on that. Is there someone here who could tell us whether the legislation was implemented in 2005 or in 2007? When was the process launched?

Ms. Fraser, do you have any idea?

[Sheila Fraser]

I have a copy of the act. It is stated that it received royal assent in November 2005, but came into force in 2007.

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

That is was I was getting at. It received royal assent in 2005, which means that everyone knew what was coming. The act came into force in 2007. We are now in 2010 and are being told, Ms. Meredith, that both tools should be implemented in spring 2011. I regret to have to say this but I wonder whether we will get the same kinds of responses each time we hear from Treasury Board Secretariat officials.

Measures should have been put in place, developed and prepared in such a way as to give all public servants the tools they need to do their work. December 2010 is at our doorstep. At least three years, if not five or six, have gone by since these measures were adopted and officially implemented by Treasury Board. These are serious questions. Is there a lack of rigour or seriousness within the department? When laws are adopted requiring the implementation of certain measures, do people simply say that these things do not need to be taken seriously, that they will get their wrists slapped or that this will eventually be forgotten?

[Michelle d'Auray]

Mr. Chair, I am quite aware of the timelines that you have mentioned. However, changes have been made to the organizational structure that must also be taken into account. The Canada Public Service Agency was responsible for developing the code. And yet, the agency was abolished and its functions were integrated into Canada's Treasury Board Secretariat. The integration and reorganization did take quite a lot of time and effort. That is not to say that work on the code and the policy stopped, but things took a little longer because we had to focus on integrating Treasury Board's new roles and responsibilities.

Nevertheless, as Ms. Meredith indicated, we also conducted a thorough and comprehensive consultation with various organizations. We are still gathering comments on and responses to the various drafts.

This is the first time that a code is being developed for the entire public service. We are also settling legal issues. And so we still have a little work to do on a number of legal issues regarding the scope of job offers and employment conditions that we can apply at this point in time.

This is not a simple matter. Principles are straightforward, but implementation issues are quite complex.

[The Vice-Chair, Conservative, Daryl Kramp]

Thank you, Madame d'Auray.

Now Madame Faille, for seven minutes, please.

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

Thank you, Mr. Chairman.

I'd like to thank my colleague for having broken the ice when it comes to the issue of conflict of interest.

This isn't the first time. Indeed, several reports noted situations of conflict of interest. I've been paying special attention to this since 2004 and I reviewed practically all the internal audits of the various departments that appeared before us.

I have one specific question. I don't know if you remember the episode of the logical model regarding the Integrated Relocation Program, which resurfaced last September. A little earlier, Ms. Meredith mentioned that perhaps we needed to specify certain dates, for example the date a code came into force. However, I would like you to explain the difference between the new code and the one that existed previously. Certain people, including retired deputy ministers, come and divulge things in our offices, which enable us to complete certain analyses. For example, if you're an assistant deputy minister and you witness dubious activity, are you going to denounce your deputy minister? What's the process? You take part in the meetings.

Lastly, I raised the issue of the logical model because the Auditor General had been called to appear at the same time as the officials from the Treasury Board Secretariat and PWGSC and that's the first time we ever heard of the logical model. Access to information requests, questions on the order paper that were tabled and the questions put in the House of Commons enabled us to reveal that in fact, that logical model did not exist and that it had been used simply to explain this to the committee.

Ms. Meredith, now that you know that this logical model does not exist, now that you're no longer with PWGSC and that the senior officials who were there at the time are no longer there, are you in a position under the new code to inform your new boss of such incidents?

[Daphne Meredith]

We have, under the Public Servants Disclosure Protection Act, provisions that allow employees to disclose incidents of wrongdoing in the workplace. We report every year on the disclosures that have been made. So this is really quite an important provision that we have to reinforce ethical practices in the public service, including those concerning conflicts of interest.

[The Vice-Chair, Conservative, Daryl Kramp]

Madame Faille.

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

Let's go back here. At the time, would you have had any protection if you had disclosed dubious practices?

[Daphne Meredith]

Before the Public Servants Disclosure Protection Act and with the issuance of the 2003 values and ethics code, there was a provision for each department or agency to have a senior officer responsible for internal disclosure, which then allowed employees to make disclosures internally in the department. As well, there was the public service integrity officer, to whom they could make disclosures as well.