Public Accounts Committee on June 19th, 2018

[The Chair, Conservative, Kevin Sorenson]

Good afternoon, colleagues.

This is meeting number 106 of the Standing Committee on Public Accounts, Tuesday, June 19, 2018.

We are here this afternoon in consideration of the message of the Auditor General in his 2018 spring reports. I would again remind each one of us that we are televised today.

We are honoured once again to have with us this afternoon Mr. Michael Ferguson, the Auditor General of Canada.

Colleagues, before we proceed with what may be our last meeting before the summer recess, I would like to take this opportunity to thank our Auditor General for his many appearances before the committee during the last six months of this year, and last fall.

Your reports and the many recommendations you've made in them go a very long way to improving many aspects of the federal government's programs and policies. We all very much appreciate your good work and willingness to work with this committee.

I would also like to thank our clerk and our two analysts for the tremendous job they have done in keeping us on track, providing sage advice, and producing quality reports that we can all be proud of.

Now, Mr. Ferguson, we turn to you for some introductory remarks, if you have some. We look forward to them. We will then go into our regular rounds of questioning.

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

Thank you.

Mr. Chair, thank you for this opportunity to discuss the message that I included as part of our spring 2018 reports.

I am familiar with the testimony of the Clerk of the Privy Council when he appeared before this committee last week. I first want to say that I agree with the clerk that he and I have had many fruitful direct, honest and respectful conversations about our work. The frankness of this public conversation won't change that.

Also, as he said, we were able to work together to achieve a mutually acceptable order in council that clarifies our right to access information. And I would sincerely like to thank him for that. I would also like to acknowledge the efforts of the Standing Committee on Public Accounts that facilitated our ability to arrive at a mutually acceptable solution.

Mr. Chair, as I understand it, the clerk referred to my message as an opinion piece. He is correct. The message does express my opinion that we need to find the root cause of the Phoenix project failure and other incomprehensible failures. It's an opinion piece based on my almost seven years as Auditor General of Canada, 40 years of performance audits done by our office, and the fact that all the government's controls did not prevent the Phoenix failure from happening.

The message was motivated by my profound belief that the federal government has important services that people in Canada need and rely on, and that the federal government has hard-working civil servants who are dedicated to the work that they do. In that message, I pointed to the fact that the Canadian civil service is ready and willing to do the heavy lifting to improve the culture.

In my opinion, Phoenix has tarnished the reputation of the federal government, both at the political level and at the civil servant level. Therefore, we all need to look deeper to understand how Phoenix and other incomprehensible failures happened—at what the root causes were—and we need to prevent any more from happening in the future.

In my message, I said that the bottom line is that a change in the culture of the federal government will be the best hope to prevent incomprehensible failures in the future. I described aspects of the culture that—in my opinion—may have contributed to the Phoenix failure. I admit in the message that I may not have captured everything in my description of the culture.

People will disagree with some, or maybe even all, of my description. But there has to be a conversation about the culture of government.

As I said in my message, Phoenix failed thoroughly in an environment that has a management accountability framework, risk management policies, program evaluations, internal audit groups, departmental audit committees, accounting officers, departmental plans, departmental performance reports, pay-for-performance compensation, and audits by the Office of the Auditor General.

I believe it would be too simplistic to think that just adding a few more rules or another policy will, this time, prevent any future incomprehensible failures.

I originally decided to write the message because I expected people would feel that the performance audit we did on building and implementing the Phoenix pay system did not adequately answer the question of who was to blame for Phoenix and how it could have been possible.

That took me to the need to explore the question of how the government's culture enabled Phoenix; so I described some aspects of the culture that, in my opinion, contribute to problems.

For example, policies are sometimes applied as cover to avoid blame; there is a reverence for checking boxes; there has been an erosion of deputy minister influence partly because of the short tenure of deputy ministers; ministers tend not to get excited by back-office administration projects, and so they expect the budgets and timelines of those projects to be strictly managed; governments have tried to stay in the safe space of administering payments instead of being an active partner with indigenous people to improve outcomes; the measure of success on indigenous programs has become the amount of money spent, rather than improved outcomes; and compliance with all government rules has become impossible because of their sheer volume.

My message was not intended to say that I had the answer to the culture issues; in fact, I said that I don't have a set of instructions to deal with the issue. It was intended to start a conversation about how government culture contributed to the Phoenix failure.

The message does reflect my opinion, and as such, I am prepared that some people will say that's just his opinion. But I stand by it, and I believe that I said what needed to be said, whether people agree with it or not.

To close, Mr. Chair, I sincerely want to thank the public accounts committee for being an early participant in this culture conversation.

I am now ready to answer your questions

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Ferguson. We appreciate your work and your straightforward message today. I think we're all reminded that you are an officer of Parliament and that you report to Parliament. The clerk who was here is a very important officer who reports to cabinet and is the chief civil servant, and so there are two different responsibilities. We appreciate your bringing this message to Parliament.

We will now go to the first round of questioning.

Mr. Massé, you have seven minutes.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

Mr. Ferguson, thank you for joining us again today to talk about chapter zero, or your message.

As you know, this report has made a lot of noise and waves. The officials received it as criticism. They clearly reacted to your message, and public service executives also received it as a criticism. Of course, the public also reacted, given the items in the report.

Because of my perspective, background and experience, I disagree with the evaluation, as I have taken part in developing programs and services and modernizing the legislation, which has enabled many Canadians across Canada to receive quality services from many public servants. Their goal is to serve Canadians well. We could list a number of their accomplishments.

I could name various accomplishments throughout my career at the Translation Bureau and the Department of Justice. We developed an exceptional document imaging service in Matane. I could talk about modernizing financial support programs for farmers. I could talk—as I told you last time—about the modernization process used to modernize the program that allows Canada's retired public servants to receive their pensions. Approximately 684,000 former public servants receive their pensions regularly.

Is everything perfect? Clearly, it's not. There is always room for improvement. Clearly, in your message, you focused on some aspects, including the implementation of Phoenix. It is no secret that it is a failure, clearly. When the Clerk of the Privy Council appeared before the committee, he used the words I used in my discussion with you. He talked about a “perfect storm”. I have called it “the perfect storm” myself. In my opinion, it was caused by the previous government's refusal to accept that the cost of implementing Phoenix went from $150 million, as originally planned, to $300 million.

As the Clerk of the Privy Council said, it would have taken a minister with great courage to go to his colleagues and tell them that, for various reasons, the cost of implementing Phoenix was higher than what had been estimated. That was not done. The officials were probably told sorry, but they had to operate within the budget allocated to them and they would have to deliver on their commitments on time and on budget.

This “perfect storm” also included 40-year-old technology, a massive layoff of payroll experts—in fact, 700 people had to be laid off—and the centralization of operations in Miramichi. A very large number of employees did not have the necessary experience to engage in this sort of centralization at the time. They have done a remarkable job, and continue to do so, with the tools at their disposal. I repeat that, in my opinion, it was a “perfect storm” generated by a budgetary issue. That is at the root of all this.

You said that it was important to ensure that officials and managers were telling the truth to the authorities. I think the officials told the authorities the truth, but the authorities should have listened. In this case, I don't think they listened to them. This is at the heart of the issue before us. I am sure that the authorities at the time told them that they had to carry out the project on time and on budget, and that they had to ensure that they delivered on their commitments.

That said, I agree with what the Clerk of the Privy Council said about the changes. When there are 27 collective agreements and 79 different classifications, and each of those classifications has different pay levels, it is very complex. If we want to ensure the success of Phoenix...

As an aside, we inherited the Phoenix problem. I can assure you that our government is committed to finding solutions to this problem. This is important for public servants. They all deserve to receive the correct pay at the right time. That being said, there are improvements to be made to ensure better pay service, and I think that means simplifying the whole classification process.

I have been talking for a long time, I'm sorry. I have one minute left. I would like to hear your recommendations.

What recommendation would continue to improve services to Canadians? If there was something you would like the government to focus on, what would it be?

[The Chair, Conservative, Kevin Sorenson]

Mr. Ferguson.

[Michael Ferguson]

It's the same message I often repeat: the importance of focusing on objectives and results. Of course, I understand and agree that federal public servants take their work seriously. They work very hard for Canadians.

However, it is also important that the government create a culture that will help them do their jobs properly. The issue is the same, because all the rules from recent years are still in place. They are the reason why it was possible to have an incomprehensible failure like Phoenix.

Answering your question by saying that it is important to have other rules and policies is not enough. I think it's important to look at the current culture and see whether there are changes to be made to it.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Ferguson.

We'll now move to the opposition side, Mr. Nuttall.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you, Mr. Chair.

Thank you, Auditor General, for presenting here today and for providing your message in the report.

I've already been on the record saying that I thought this message was incredibly strong. I think it sets a tone for all departments within the Government of Canada that we need to move, as you said, to a results and outcomes or target-focused culture, one that doesn't yet exist. There are things that exist in that place. You outlined that the amount of money spent seems to be measurable, or how good the press conference or Twitter ad or Facebook message is that comes out of it from whatever minister. I must say that you weren't just talking about a single government; this is a culture that has perhaps been pervasive over a number of years.

However, I have to register my serious concerns with the comments that were just brought by my colleague Rémi Massé when he says it's a perfect storm. When you say it's a perfect storm and it's just a bunch of things that happened, that reduces our ability to find accountability. It says that everything that could go wrong, went wrong, so better luck next time. I do not believe that's what Canadians are looking for. More important than that, I don't believe that the Canadian public servants, who were impacted so terribly before and after Christmas by this, feel that way about it.

The other thing I want to take exception to is the comments—and it was in translation, but I think this is pretty easy—“I know that they were probably...”. I don't think you can say “I know” and that “they were probably” in the same sentence to define what did or didn't happen in relation to either requests for funding to and from the minister six years ago. It's either “probably” or “I know”. You can't have both in the same sentence.

Therefore, it's really important that we stick directly to the facts. Here's a fact. A report had been commissioned earlier by, I believe—and if you can confirm this, Auditor General—Scott Brison, President of the Treasury Board. That report was finally given to the Treasury Board two weeks in advance of Phoenix going live. Is that correct?

[Michael Ferguson]

Are you referring to the Gartner report?

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Yes, sir.

[Michael Ferguson]

My understanding is that the Gartner report was commissioned, yes, in December, I believe, of 2015, and it was completed in February of 2016 just before Phoenix went live.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

So you had access to that report in putting together your second report on Phoenix. Who had access to that report?

[Michael Ferguson]

I wouldn't be able to give you a complete list. I'd have to go back, but the report was prepared by Treasury Board. My understanding is that Treasury Board gave it to the project executives responsible for the Phoenix project. Who saw it within Treasury Board or exactly everybody who saw it, I wouldn't know. I just know generally of it, that it was commissioned by Treasury Board, and they gave it to the project executives.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Did you have any evidence of this report at Treasury Board making it to any political staff, or to politicians themselves?

[Michael Ferguson]

Again, once things get behind the doors of what goes to ministers, there's the world of cabinet confidence that we can't get into, so I don't know how that would have been distributed in terms of the minister or the minister's political staff. I wouldn't know that.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

We have a report that was delivered two weeks before Phoenix went live that basically said there were some major problems with it, and lo and behold, Phoenix went live, and we don't have a single signature anywhere from the minister, saying, “It's okay to go. I'm signing off on this.”

[Michael Ferguson]

We couldn't find any documentation of the approval to go live with Phoenix.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

When I submit a $100 expense to the taxpayers of Canada, I have to sign off on it. When our public servants—the same ones who were affected so severely and work so hard for us—submit a tiny expense within their departments, they have to sign off on it, but nobody signed off on what appears to be at least a $500 million miss, which go much, much higher by the time we're done. I think we're talking about expenses in the neighbourhood of $1 billion to get the system up and running to the satisfaction of what officials hoped it would be be able to do at the outset.

[Michael Ferguson]

That is one of the fundamental things you expect to find when a new IT system is put in place. You expect to see the sign-off by the system owner saying that the system is ready to go into production. We couldn't find that type of documentation in the case of Phoenix.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Mr. Auditor General, obviously the Clerk of the Privy Council had some words that perhaps did not fall in line with what your message was. Some of it, I think, he took exception to, and some of it he said he agreed with, but when looking at the words “incomprehensible failure”, he certainly took exception to that.

I think you have said that, yes, it was an opinion related to the culture. You've said that here today. This is an opinion based on years and years of service in your field and years and years of service to the people of Canada.

Is it not an incomprehensible failure that this system was launched without a signatory representing the minister or the minister himself?

[Michael Ferguson]

Well, I don't know about the minister per se, but certainly you would expect to find—as I said, it's just normal practice in putting an IT system in place—a signature from the system owner. I think perhaps they had some difficulty in defining the system owner, but in this case, you would have expected that to have come directly from Public Services and Procurement Canada and that there would have been a sign-off saying that the system was ready to go.

That's one aspect of the many different things that we found, including their cancelling the pilot project, not doing all of the testing, and going ahead, even though they realized that the Miramichi pay centre was not ready. All of those things combined are what make Phoenix an incomprehensible failure.

Again, it's very comprehensible to understand all of those decision points where a different decision could have been made. What's incomprehensible is how all of them could have been missed.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Ferguson.

Mr. Nuttall will have time to come back.

Mr. Christopherson, please. You have seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thanks, Chair, and thank you, Mr. Ferguson.

I've been wrestling with this ever since we received it, but more in terms of where we go with this, as opposed to whether or not I agree with it. I have to say that on at least two other occasions this Auditor General has come to us with “macro messaging”—I'm talking to colleagues now.

One message early on in the term was on data. We committed unanimously as a committee to picking up that torch and running with it. Every time we saw a data problem in any of the reports, we were going to pull that out and highlight it. We were going to use this parliamentary session to drill down that we're doing a lot of things right with data, and also to focus on the key things that we're not doing, such as keeping them up to date and doing proper analysis.

The other message that comes to my mind, Chair, was to do service well, which I believe was with respect to the EI report—but I stand to be corrected—where we found that the bureaucracy was measuring internal steps and was quite pleased with the time frames it was taking to move something along within the process, completely ignoring the fact that people were waiting on the phone for 20 minutes to get an answer, only to be disconnected because the powers that be didn't want that call to be included as a completed call. The Auditor General's point was that all of that measurement really doesn't have any significant impact if, at the end of the day, the citizens who receive the service aren't getting the service, and he put it under the rubric of “do service well”.

Now, for the third time in this Parliament, we've received another macro message, telling us that in the opinion of our Auditor General there are incomprehensible failures here. More importantly, if we, collectively, as a government don't take some action—and we're a part of making that government work as efficiently as possible—then some day in the very near future, there's going to be a committee sitting here that's going to have another set of incomprehensible failures. In fact, the Auditor General went so far as to say that if the government followed up on every single recommendation he made vis-à-vis Phoenix, we would still have incomprehensible failures in the future.

To me, the pressure is on us now. What do we do? That's what I've been wrestling with: exactly what do we do? To do nothing, in my opinion, is not acceptable. To write a report that says nothing is not acceptable. The work and mandate of this committee is too important. Too many people are relying on us and the system that we have, with the Auditor General and the public accounts committee, to make sure that we address these kinds of things.

I want to say this very clearly because to me it's very important. I was one of those who didn't hide my reaction to the words of the Clerk of the Privy Council. However, in his remarks he did say, or was telling us, that he didn't have any direct executive relationship with deputy ministers, which is where this discussion of culture needs to happen.

I was listening very carefully to the words of Mr. Wallace, who is the secretary of the Treasury Board. I have to tell you, colleagues, if that had been the initial response—what Mr. Wallace said in response to this report, as opposed to what the Clerk of the Privy Council said—my reaction would have been completely different. In fact, I would have been thrilled, because without directly contradicting his colleague, the Clerk of the Privy Council, in my view, the secretary of the Treasury Board pretty much said, “I hear you. I understand, and here's what I'll do.” You'll recall, colleagues, that we pushed him. I, in particular, pushed him hard, because I thought we were going to get another set of the Clerk of the Privy Council remarks, and I wasn't having it.

It didn't happen. He gave what I thought were very good answers in recognizing that this is big and that it's system-wide, and he took it very personally. Again, I was impressed. He said, “Look, I'm responsible, and my obligation is to get this fixed.”

I have to tell you, colleagues, I'm going to pretend that the Clerk of the Privy Council didn't even talk. He's entitled to his opinion, too. I'm far more concerned about what the secretary of the Treasury Board said. He has hands-on work with the deputy ministers, and he has actual oversight in terms of their challenge function, and ensuring that Treasury Board guidelines are followed.

Having said all of that, I think we should get down to what we can do. I know that I'm running out of time, and forgive me for using all of my time again as I always do, but twice, Mr. Ferguson, you said today that the intention is to start a conversation about how government culture contributed to the Phoenix failure. As you state in paragraph 13 of the text of your remarks, “But there has to be a conversation about the culture of government.” Help me understand what you think we might be able to do to start or further that conversation, or to be a positive part of having that conversation take place.

Can we have your thoughts, Mr. Ferguson?

[The Chair, Conservative, Kevin Sorenson]

Mr. Ferguson, please.

[Michael Ferguson]

Thank you.

As I say, what I was trying to do was to start the conversation, and I think I did that. I appreciate that the committee is picking up on that. I was also quite frankly happy with what the deputy minister of Public Services and Procurement Canada said when it came to her conversation about needing to change the culture within her department, and the need to allow people within her department to speak frankly. I think we've already heard both of the people who were here, the secretary and the deputy minister, talking about the need to make some changes to culture. The secretary talked about the need to make sure that Treasury Board policies are implemented in substance, not just in form, which I think is right.

One thing we need to consider in our work as well is that maybe we have been too easy on the Treasury Board Secretariat in some of our audits. We have accepted the Treasury Board Secretariat's role as a sort of policy-maker, and I think maybe we need to be much more insistent that they also have a responsibility to make sure that their policies are being implemented the right way. That doesn't mean they have to be holding departments' hands all the time, but they should have some way of knowing whether the policies are being accepted and implemented the right way.

The last thing I will mention was passed to me just before the hearing. I don't know if you would want to do this, and I wasn't aware of it before now. The public administration and constitutional affairs committee in the U.K. House of Commons has just put out a report called “The Minister and the Official: The Fulcrum of Whitehall Effectiveness”. There's a parliamentary committee in a Westminster culture like ours that in fact has studied this very question about how ministers interact with officials. Again, I don't know whether you want to do that type of a study, but at least looking at that report might give you some ideas.