Public Accounts Committee on April 16th, 2013

[The Chair, NDP, David Christopherson]

I now declare this 84th meeting of the Standing Committee on Public Accounts in order.

Colleagues, you will recall that we had decided we would hold a public hearing today on chapter 2, “Grant and Contribution Program Reforms”, which flows from the fall 2012 report of the Auditor General of Canada.

Before I go any further on what's in front of us right this minute, I would just like to leave with colleagues something to consider. Should we conclude our rounds of discussion and questions and have time remaining—that would mean if we don't have an extension of the regular question rotation—then I would ask the committee to deal with some committee business. If we don't have time, it can hold until Thursday, but I think it would be in everyone's interest if we could take a stab at some of that work this afternoon if we have the time. I would just ask members to keep that in mind as we get towards the end of the rotation and make a determination on whether they wish to continue or move in camera to deal with a couple of outstanding business matters, one of which is significantly important.

With that, I would like to welcome all our guests today.

We have with us representatives from the Office of the Auditor General, the Treasury Board Secretariat, the Public Health Agency, the Canadian International Development Agency, Human Resources and Skills Development Canada, and Western Economic Diversification Canada.

I will start with the Auditor General and ask Mr. Ferguson to introduce his delegation, if he has anyone with him, and to also commence with his opening remarks.

Mr. Auditor General, you have the floor, sir.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you.

Mr. Chair, thank you for this opportunity to discuss our office's work related to Chapter 2 of our fall 2012 report—Grant and Contribution Program Reforms.

With me today is Frank Barrett, the principal responsible for this audit.

The federal government transfers money to individuals and to organizations of various types, including businesses and other governments. In 2010-11 transfer payments totalled $158 billion. The majority of those payments, $121 billion, were transferred to other levels of government and individuals through programs with ongoing spending authority.

However, a significant portion, $37 billion, was transferred through grant and contribution agreements. Our audit focused on grant and contribution programs.

In our 2006 audit on grant and contribution programs, we found that recipients had expressed concern about the heavy administrative burden associated with applying for programs and with meeting the various requirements of those programs. Later that year an independent blue ribbon panel concluded that the government needed to make fundamental changes in the way it designed and managed its grant and contribution programs.

In May 2008 the government announced an action plan to respond to the panel's recommendations. This plan committed the government to reducing the administrative and reporting burden on recipients of grant and contribution agreements.

In this audit, we looked at the implementation of the government action plan to streamline grant and contribution programs and reduce the reporting burden on recipients.

We assessed the actions of the Treasury Board of Canada Secretariat to meet the commitments made in the government action plan. We also examined specific actions taken by the Treasury Board Secretariat and five federal organizations to meet their respective obligations under the new Policy on Transfer Payments, which was developed by the government in 2008. Our audit work was completed in July 2012.

We found that to date the government has fulfilled most of the commitments it made in its 2008 action plan, which was aimed at increasing efficiencies and reducing the administrative burden on recipients. The Treasury Board Secretariat actively led efforts to develop a new policy on transfer payments. It provided leadership and guidance to federal organizations to make the necessary changes, including coordinating activities across the government.

The other federal organizations we examined have also taken actions on most of their obligations under the new policy on transfer payments. They have consulted with applicant and recipient communities in redesigning their grant and contribution programs, and they have begun to establish service standards. They have also conducted risk assessments of their programs and their recipient communities and have assigned a risk rating to each recipient based on the assessments.

However, Mr. Chair, we also found that neither the Treasury Board Secretariat nor the other federal organizations we audited had assessed the impact of their actions on recipient organizations. Therefore, they were not able to determine the extent to which their actions had helped streamline administrative processes within federal organizations or reduce the administrative burden on recipients.

We also noted that the Treasury Board Secretariat had not provided organizations with adequate guidance to ensure that risk ratings are accurate and remain current, despite the importance of these ratings in determining the controls that should be applied in each case.

Therefore, we found that processes used by federal organizations we examined varied in rigour and depth.

We made two recommendations, both addressed to the Treasury Board Secretariat. The secretariat agreed with both of them. The public accounts committee may wish to ask the secretariat for an update on its efforts to assess the impact to date on the administrative burden of recipients of grant and contribution agreements.

Mr. Chair, this concludes my opening statement. We would be pleased to answer the committee's questions.

[The Chair, NDP, David Christopherson]

Very good. Thank you, Mr. Ferguson.

I have a listing of the witnesses, and for no other reason than the fact that this is the list that's in front of me, we'll hear our witnesses in this order. Following the presentation we've just had, we'll hear from the Treasury Board Secretariat.

I would also ask each of the representatives to introduce their delegation.

So it will be the Treasury Board Secretariat, followed by the Public Health Agency, CIDA, Human Resources and Skills Development, and last, but still important, Western Economic Diversification.

Therefore, Treasury Board Secretariat, Assistant Comptroller General, you have the floor, sir.

[Tom Scrimger, Assistant Comptroller General, Financial Management and Analysis, Treasury Board Secretariat]

Thank you, Mr. Chair.

If you would permit a suggestion, we were going to make opening remarks on behalf of all departments, and I will do this in a few moments. I would be pleased to introduce the delegation of the departments, and perhaps that will save us a few moments. Then we can move from there.

Assisting me today, Mr. Chair, is Sue Stimpson, the chief financial officer of the Canadian International Development Agency. From Human Resources and Skills Development Canada is Ms. Nancy Gardiner, director general of program operations management and accountability. From the Public Health Agency of Canada is Carlo Beaudoin, acting chief financial officer. And from Western Economic Diversification Canada is Donald MacDonald, director general of operations.

Mr. Chair, thank you for the opportunity to speak about Chapter 2 of the fall 2012 report regarding the federal government's grant and contribution program reforms.

In addition to considering the role played by the Treasury Board Secretariat in the reforms, the Auditor General of Canada also examined selected activities undertaken by the five federal organizations I just mentioned. I would like to start by thanking the Auditor General for his work in this file.

As the report notes, the Auditor General last looked at how the federal government managed grant and contribution programs in 2006. At that time, concern was expressed about the heavy financial and administrative burden associated with applying for funding programs and with meeting the various requirements of these programs.

In June 2006, the President of the Treasury Board commissioned an independent blue ribbon panel on grant and contribution programs to recommend measures to make the delivery of grant and contribution programs more efficient while ensuring greater accountability.

In its report “From Red Tape to Clear Results”, published in December 2006, the panel provided recommendations aimed at simplifying the administration of grants and contributions, while at the same time strengthening accountability and risk-based approaches for managing programs.

The Government of Canada' s action plan to reform the administration of grant and contribution programs, announced by the President of the Treasury Board in 2008, outlined how the government would improve the management of grants and contributions as well as the expected results.

The plan consisted of three elements.

First, to build the right foundation, the new policy on transfer payments was introduced. This new policy and its supporting directive and guidelines have clarified accountabilities and simplified administration. The policy reform also established a new regime that is more sensitive to risks and is citizen and recipient focused.

Second, departments developed their individual plans to fundamentally improve their delivery of grants and contributions.

Third was sustained leadership to help guide reform across government. New approaches were developed, shared, and implemented throughout government, such as risk-based management and oversight, simplified approval and claims processing, service delivery standards for recipients, consolidated multi-year agreements, and coordinated recipient audit approaches.

The Auditor General's report has recognized the progress made in implementing the action plan. The Treasury Board Secretariat actively led the policy reform, supported the implementation of departmental action plans and fostered coordinated activities across federal organizations.

Federal organizations are increasingly using recipient monitoring and reporting requirements focused on risks. They are also consulting applicants and recipients on program changes and establishing service standards.

However, the report has also highlighted the need for additional work in two areas.

First we need to better assess the impact of efforts on departmental and recipients' administrative burden. In response, we are undertaking an assessment of the impact of our collective reform efforts, as measured against the expected results in this regard, which were outlined in the action plan.

In collaboration with federal organizations, an assessment will be completed by fall 2013, with a final report made publicly available thereafter. The timing of this assessment aligns with the five-year administrative review of the policy on transfer payments to commence in spring 2013. The results of the assessment will be used to inform this policy review and to identify opportunities to further strengthen the policy.

Secondly, we need to provide additional guidance to federal organizations to ensure that the risk ratings they apply in the ongoing management of their programs and agreements are appropriate and current. We are now working with departments to strengthen the policy guidance related to risk management. The new guidance will provide clearer direction on the need to review and validate risk assessments throughout the life cycle of grants and contributions. We are looking to implement this in spring 2013.

In closing, I would like to acknowledge the ongoing efforts of my colleagues in departments in implementing the action plan.

Mr. Chairman, we look forward to answering your questions, as well as those of the committee members.

[The Chair, NDP, David Christopherson]

Very well. Thank you, Mr. Scrimger. We appreciate that.

Unless there are any interventions to the contrary, I'm ready to take the committee into our rotation.

Seeing and hearing none, I will move to Mr. Saxton, who is our first questioner to have the floor.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair.

Thank you as well to our witnesses for being here today.

My questions will be directed to the Auditor General and to the Office of the Auditor General.

In chapter 2 of your report, you found that the government has adequately implemented the 2008 Government of Canada action plan to reform the administration of grant and contribution programs.

Can you comment on how you came to this conclusion?

[Michael Ferguson]

That was the focus of the audit, to look back at our 2006 audit and assess the recommendations we made then, and to assess the progress the government had made against those recommendations.

Our audit criteria were established based on the work we had done previously, to then determine whether the departments had adequately addressed those concerns.

[Andrew Saxton, Conservative, North Vancouver, BC]

You found that the government had adequately addressed those concerns. Can you elaborate on how you came to that conclusion?

[Frank Barrett, Principal, Office of the Auditor General of Canada]

I can add to what the Auditor General has already provided.

In our report we do have a brief table, exhibit. 2.1, that speaks to the three main chunks of the government action plan, if I can put it that way. The Treasury Board had to provide leadership, to enter into policy reform, and there had to be things happening in departments in terms of departmental action plans being implemented.

In conducting the audit, we looked to see what happened with respect to policy reform, what happened with respect to what the Treasury Board Secretariat did vis-à-vis providing leadership, and what we saw happening within departments. Did we see things actually changing?

While I believe we were clear in the report, there is still more work to do. I think that's acknowledged around the table. We did recognize that there had been significant progress since the 2006 report and that they were taking actions consistent with their government action plan.

[Andrew Saxton, Conservative, North Vancouver, BC]

Are you satisfied that all of the agencies and departments you examined have taken important steps to implement the government's action plan?

[Michael Ferguson]

As you indicated, our overall conclusion, which would have included all of the organizations we looked at, was that the federal government had adequately implemented the 2008 action plan. Again, there were some areas where there's still room for improvement, but overall we determined that it had been adequately implemented by the organizations we looked at.

[Andrew Saxton, Conservative, North Vancouver, BC]

Would you agree, then, that the agencies and departments adequately consulted with their applicant and recipient communities to better serve Canadians within the grants and contributions process?

[Michael Ferguson]

Certainly, one of the things we stated in the chapter was that that had happened, yes.

[Andrew Saxton, Conservative, North Vancouver, BC]

Are there examples that you found particularly innovative or important in the ways proposed by the examined departments and agencies on their efforts to improve their grant and contribution program activities?

[Frank Barrett]

Mr. Chair, I'd be happy to address that question.

I think there were a few key things we saw that were very different from what had been observed in previous years. One of them was with respect to a very strong level of interdepartmental committees. At the deputy minister level, the assistant deputy minister level, and then again at the level of directors and directors general, you had departments come together. Why does that matter? When they're talking about their different programs, that gives them an opportunity to actually foster innovative change.

One of the points we make in the chapter is in paragraph 2.19, where we speak of pilot projects. In fact, they realized they had multiple departments—in this example we raise seven different departments—that all had high contribution agreements with the same organization. By putting all of their agreements together and saying, “Why don't we have one name and address, one common template?” and “Let's see how we can streamline this”, that was an example where they did manage to reduce the number of reports substantially. They went from 126 down to 26, and it's simply because there was now one agreement instead of seven different ones.

[Andrew Saxton, Conservative, North Vancouver, BC]

With regard to the risk challenge function, what would you find acceptable for a risk challenge function? During your audit, did you find any examples of a risk challenge function that could be used as a model?

[Frank Barrett]

Yes. What we point out in the chapter is that not only is it important to establish criteria for determining the risks, and then having a risk-rating scale and doing it, but there has to be some form, as you say, of a challenge function.

Just to highlight that a little bit, if you had a good scale and maybe one individual in a department rating these different agreements, the risk is that if it gets rated on a Friday afternoon, it might not be as rigorous as if it were rated in the middle of the week. It's important within departments to have some form of challenge function to say, “Are we doing it well?”

We did see a variety of different scales. Some departments were certainly stronger than others. In fairness to the departments, though, it's important to note that there wasn't really a lot of guidance on what should be provided, in terms of a risk-rating scale. That's why we made the recommendation to the Treasury Board that this was an area where it should be providing guidance.

[The Chair, NDP, David Christopherson]

Sorry, time has expired. Thank you very much.

We're moving over now to Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, and thank you, everyone, for being with us.

To Mr. Ferguson, if I could, you stated you looked at five programs. Are there other additional programs out there that you didn't look at that would also fall under the category of having contribution and granting programs?

[Michael Ferguson]

Absolutely, there would be many other programs other than the ones we looked at.

[Malcolm Allen, NDP, Welland, ON]

That leads me to the next question.

On page 7 of the English version of your report, at paragraph 2.13, the last two lines read:

We note that the process does not specify how the Secretariat plans to assess the impacts of the policy reforms.

The process you're talking about is actually based on the blue ribbon panel of 2008, which was actually in chapter 2, at 2.1, in the English version. That's the exhibit.

That's really in line with the blue ribbon panel and then the secretariat's action plan. If the secretariat came out with an action plan in response to your recommendation, which it did, in your view is this still correct in the sense that the action plan really won't assess the impacts of the policy reforms?

We're now looking at a piece and then looking at another piece, and we still don't really know the outcomes for the folks who are asking: What is it? Are you helping me or not helping me? Do we know?

[Frank Barrett]

Mr. Chair, I'd be pleased to answer the question.

There's actually a two-part answer to this. We have had a chance in the last couple of days to review the Treasury Board Secretariat's action plan in response to our recommendations. They specify in there, as I understand it, that they're going to be providing guidance to departments on how to go out and gather results-based information so they can roll it up. On the one hand, that speaks to—and perhaps the secretariat could elaborate on this—how they would then have a consistent process for assessing results-based information. The other side of the coin that needs to be appreciated is that once that guidance is provided, departments can start collecting. But up to this date, to my knowledge, in what we saw until last July when we completed the audit, there was no results-based information gathered and rolled up. In terms of a five-year review that provides an assessment, it's not evident to us what the five-year review will be able to say was accomplished from a results base. Obviously they can speak to many activities.

[Malcolm Allen, NDP, Welland, ON]

Mr. Scrimger, did you want to comment on that? I see you're making some notes to yourself; no doubt you've got a comment.

[Tom Scrimger]

Yes. It wasn't the grocery list.

We agree that there was not, as is needed, a consistent way to build a pan-government view of the results of the work of the many departments and agencies. I believe the departments and agencies themselves can certainly tell many result stories and result outcomes of the work they have done, but we did not have a systematic, evidenced-based way of gathering that information. It is one of the things following the Auditor General's work that we have been working at feverishly.

In the upcoming weeks we will be implementing a performance reporting tool with the 28 departments and agencies that represent around 99% of the grants and contributions spending in the Government of Canada. They will be going through an information-gathering stage over the next few months and will bring this back into the centre in the fall, as I mentioned in my opening comments, which will do a number of things for us.

The first thing it will do is give us a benchmark in 2013. We are also asking departments in their work to contrast where they are today and where they were in 2006, 2007, and 2008, so we can get a sense of that movement. That may be difficult in some cases. It may be relatively straightforward in others. But with the work done, and in the extensive way it will be done, it gives us that baseline that on a going-forward basis we can manage.

[Malcolm Allen, NDP, Welland, ON]

I appreciate that.

The obvious question is, why didn't you do it before we implemented the blue ribbon panel? Why would you try to hit a mark where you couldn't actually look at it and say, I needed to get 85%, but I don't know if I wrote the test because I never marked it, so I just don't know. Why would you come through that process without actually asking whether it's successful on the outside?

How did that not happen?