Public Accounts Committee on May 5th, 2016

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We're over time already.

We'll go back to Mr. Godin, please.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chair.

Mr. Ferguson, I feel that your organization has expertise in this matter. So I am going to continue with my previous question about efficiency inside departments.

Can you point us to any possible solutions? You have probably consulted other organizations and other governments around the world that have implemented measures to increase the efficiency of each of their departments. Even if you have not held such consultations, can you still give us some possible suggestions for measures that would improve the efficiency of our departments?

[Michael Ferguson]

That really is a difficult issue, but it is also a very important one.

In the past, we have often noticed that, when departments assess the performance of some of their programs, they measure only the aspects that are the easiest to measure, not necessarily the most important. Often, it is easy to measure a certain part of a process but that is not the entire process. It is therefore possible that there are problems in evaluating the results of the same program, although there is a way to measure only one aspect of it.

Departments have to focus on results. They must find an effective way of determining whether a program can provide the anticipated results. That is the first thing to do, I feel. Second, of course, they must have all the data they need in order to implement measures that allow the progress of a given program to be measured.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

It is human nature to look at the easiest solution and to overlook the tougher ones.

From your experience in the matter, is it your opinion that departments have all the tools they need to improve their efficiency? Is it a question of using the tools or a question of process?

[Michael Ferguson]

The policies, the guidelines, the practices and the skills exist. I know that some programs are complex but, in general, the departments have a quality process that makes sure that all the steps towards the desired results are in place.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Now I want to talk to you about the report on VIA Rail.

Paragraph 2 deals with the governance of VIA Rail. In the last line, you state: “The significant deficiency could also compromise the Corporation’s medium- and long-term viability.”

Can you tell us more about that? As I read that sentence, I am a little concerned.

[Michael Ferguson]

We talk about the problem in that paragraph because VIA Rail has no long-term strategic direction and the government has not approved one. It is very important for VIA Rail to have a long-term direction so that it can focus on its situation and improve its activities.

Of course, we are very concerned that this significant deficiency compromises VIA Rail's medium- and long-term viability. In my opinion, this is really a very important long-term issue for VIA Rail.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Ferguson.

We'll now move to Mr. Harvey for five minutes.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

I have a couple of questions. I want to start on the drug plan and Veterans Affairs. I have a serious problem with two paragraphs in this report. It says:

To recap our findings, Veterans Affairs Canada has not managed its drug benefits program in a way that considers the impact on veterans.

And number two,

We found that while Veterans Affairs Canada used some cost-saving strategies to manage the cost of the drug benefits program...it has not assessed whether these strategies are working as intended. That means that the Department does not know whether it is using the right strategies to prudently manage the taxpayer dollars that are used to fund veterans’ drug benefits.

I want to be on the record as saying that I find it disturbing. I'm all about saving money, cutting costs, accountability, and trying to make sure that we do our best to manage taxpayer dollars. What I find disturbing about the findings in this report is if I could assume that there was one department where we weren't basing our decisions upon cost-cutting measures, it would be drug plan benefits for veterans. As somebody who has the utmost respect for our armed services and for veterans in general, I find it very disheartening that we're basing our strategies upon cost-cutting measures in that department.

I want to know what your thoughts are on your findings within the context of that and where you think the future lies with that.

[Michael Ferguson]

The department has a strategy for containing the cost—not necessarily cutting the cost, but making sure that the costs of this program are reasonable and that they're able to deliver as much as they can within the money that they have. One of the strategies that they've put in place was a generic substitution policy that said, wherever possible and as long as it's acceptable to the prescribing physician, generics should be substituted for name brand drugs. That was one of the measures they put in place to manage the cost of the program.

What we've identified is that even though they've put that strategy in place, they haven't gone back to see how effective it is, whether it's working, or whether it's being done in all of the instances. They haven't done an evaluation on whether that particular strategy is working. Similarly, they have negotiated reduced dispensing fees with pharmacies, but again haven't gone back to analyze the success of that part of their program either.

There are ways that they can make sure they are containing the costs of the program while still making sure that veterans are getting access to the prescription drugs that they need.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

A lot of that falls right into the same realm that we've been talking about, which is data management and a lack of data management in the majority of the departments. They're not following up to find out whether they're using the right drugs or whether or not the strategies they've put in place are effective.

That carries right over into my next question, which is based on the venture capital action plan. We talk about data management, and I feel as though this entire action plan was flawed from the get-go and that they didn't even absorb the data that was out there departmentally before starting this program.

I have no idea about the amount of fees that should be applied to fund managers over the lifetime of the plan, but your comments said that one of the flaws was the double layer of management and how that could affect the performance and give less control of capital to the limited partners. You also said that the exit strategy was probably not the best strategy to start with and that there were other fund models that used a strategy that allowed the public sector to withdraw from it before the completion of the program.

I feel that this data management problem is broad and is across all departments, and that maybe we need to dig into that more.

[Michael Ferguson]

I guess there is an aspect to the venture capital action plan audit that has to do with data, but fundamentally we were satisfied with the work done by the organizations at the time—Department of Finance, Department of Industry, and the Business Development Bank of Canada—to try to identify the need—the gap, if you will—in the venture capital world.

They held consultations with stakeholders, so in designing what they thought would be a way of filling that gap and meeting that need, they did a lot of that work. Part of the thinking that went into the design was about saying that they were going to use a fund-of-funds model, which meant there were going to be those two layers of management fees, so all of that was part of the structure.

But certainly, I do agree that the issue now is how they will know whether the investments that are being made are actually going to lead to companies that can commercialize their ideas, that can commercialize the research and development and the innovation. The main measure that they have in place is the rate of return earned on the investment, but that's not something that can be measured for a number of years.

I think what we've identified in this case as essentially the missing information, if you will, is that there are not enough short-term measures to be able to identify whether the companies that are receiving the investments are moving down the road towards being able to commercialize their original ideas and the original innovation. I think that's really where the focus needs to be now, in terms of the $400 million that the government has already put into this program.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Ferguson.

Thank you, Mr. Harvey.

We'll now move over to Mr. Christopherson, please.

[David Christopherson, NDP, Hamilton Centre, ON]

Very good. Thank you, Chair. I appreciate the opportunity to continue.

I want to stay on the data issue. I only have a couple of brief moments. I have to say, and I would say to my colleagues, that I see a unique opportunity here for us in a way that hasn't been as obvious, at least in my memory, for a long time, having served on this committee now for 12 years, and that is to show the synergy of two entities working together.

There's the Auditor General and the work that they do and there's the public accounts committee, but many times even politically we don't make the connection that the two are part of an overall system. In my experience, for emerging democracies the first step in getting democracy is to have relatively free and fair elections that allow the political will of the people to be expressed. That's step one, which is why so many of us go to Ukraine to try to help them get to that first step in having that kind of representative government.

Almost the immediate second step, if you take a look at the creation of our country, was that one of the first things that happened after we got the major pieces of Confederation in place was that the Office of the Auditor General was created, and within a couple of years there was this committee.

They're often seen as two entities, but they're the same thing and they work together. That's why, and I'll be brief, the IMF and the World Bank, even in terms of Ukraine and the money they want to invest there, were sending out a message to the world saying, “Look, we're ready to invest billions in there, but frankly they haven't got the systems in place to guarantee the money won't be stolen before it ever gets to the public treasury.“

What they wanted to do, and the call that went out, was to help get... The World Bank and the WTO—get this—were looking to Ukraine to strengthen their auditor general public accounts system.

I take that big macro picture and bring it down to the micro, in that we now have an opportunity for the balance of this Parliament to take the advice of the Auditor General, who has not only underscored this issue, but is pleased, in his opinion, with the fact that we have picked up this torch and are running with it. We appreciate his looking at this in that macro sense.

For the rest of this Parliament, Chair, could I suggest we ask our analysts to prepare for our consideration that when we're doing report writing we take into account all that we've said here. Remember, the Auditor General gave us all the tools we need. Through I think it was Madam Shanahan's questions, but somebody else asking good questions, StatsCan was identified as a good example of doing what needs to be done in the way that it should be done.

I ask through you to our analysts, Chair, using that as our baseline, if they can bring back to us something for us to consider, such as a bit of a template whereby we make this a priority question. We make it clear to all the government deputies and ADMs that we're coming on this issue, and when you get an Auditor General's report for the balance of this Parliament, we're going to have pointed questions.

The Auditor General said there hasn't been, in his opinion, enough pointed questions. He's recommending to us in his gentle, diplomatic way that departments are not necessarily being questioned in the way they should be, and that we ought not take at face value some of the issues around data collection and what's acceptable—i.e. percentages, etc.—and what's not. We need to identify the fact that it's not as if the government has to create something new, because in order to come up with those clean audits that I was bragging about a little while ago, they have to have the instruments in place that allow them to manage data.

We have every opportunity here, Chair, to put a template in place that says for this Parliament and for the next few years, this is going to be a priority for us. It will be macro overall and everything coming in. I think in doing that, Chair, we can also carry this message to our national conference, because this is fairly new in terms of its obviousness, if I can say that. We have the work of the AG and the work of this committee, and the two together will allow us to address this issue on a macro basis and do ultimately what we're trying to do, which is change behaviour.

Thank you, Chair.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Christopherson.

That certainly would be one topic we can talk about in our steering committee and maybe to our Auditor General.

I'm going to Mr. Arya next, but is this something that would be symptomatic in the provinces as well, do you think? You're recognizing it federally here and you certainly work with the provinces. Is it perhaps the case that across the country each government is dealing with concerns on data?

[Michael Ferguson]

Well, Mr. Chair, I spent much of my career working in the province of New Brunswick, and yes, I would certainly say that all provincial jurisdictions are struggling with how they collect and manage administrative data. They are struggling to make sure that they know what they need and they know why they need it and are collecting it in the right way and have the systems in place to make sure it is properly stored so that they can use it. I think it is probably a consistent theme.

As I have said before, it is probably now 30 years since we have had these sophisticated systems in place. We have a lot of data from a lot of systems. There are also some old systems that are harder to get data from. Nevertheless, there are a number of sophisticated systems. It is obvious that a number of federal departments struggle with maintaining the quality of that data, and I think it would be fair to say that a number of provinces have a similar struggle.

[The Chair, Conservative, Kevin Sorenson]

Thank you, sir.

Now we will move on to Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

Thanks.

I would like to ask some questions about the venture capital action plan.

First, specifically, what was the role of BDC in selecting the fund manager? You mentioned that one of BDC's roles was to support the venture capital expert panel. I would like to know who the members of that panel were.

You also mentioned that the venture capital expert panel was appointed by the Minister of Finance, and “...the three organizations assessed the applications and interviewed applicants.” It appears that BDC was not only giving advice but was also involved in the process of selecting the fund managers. When another committee, the industry committee, had BDC there, I asked the question, and basically they replied that their involvement was post-selection of the fund manager.

I would like to know if BDC was ever involved in the selection process for the managers, especially when we see that one of the fund managers selected did not even apply to be one?

[Michael Ferguson]

I am going to ask Mr. Domingue to give you the details.

I don't have the names of the panel. I think it would probably be better for that information to come from the Department of Finance.

I can ask Mr. Domingue to describe the role of BDC in this selection process.

[Richard Domingue, Principal, Office of the Auditor General of Canada]

This initiative was led by the Department of Finance, with the support of, at the time, Industry Canada and the BDC. BDC did some ex ante analysis before the initiative was announced. Mr. Ferguson referred to the analysis they did to identify the market gap.

In regard to their participation in the selection process, they were rather observers. They were not specifically involved. They were not members of the expert panel. They were basically supporting the Department of Finance in selecting the fund-of-funds managers.

[Chandra Arya, Liberal, Nepean, ON]

Is it that expert panel that selected the fund manager who did not even respond to the expression of interest?

[Richard Domingue]

Sorry...?

[Chandra Arya, Liberal, Nepean, ON]

The responsibility of selecting the fund manager who did not even submit an expression of interest lies with that expert panel, meaning with the Ministry of Finance.

[Richard Domingue]

Exactly.

[Chandra Arya, Liberal, Nepean, ON]

Okay.

Second is that, of course, only time will tell whether the investments we made in the technology companies are successful and whether they are successful in commercializing the technologies that this fund has invested in.

I think we have already failed in one of the primary objectives. As you mentioned, one of the primary objectives was establishing “a self-sustaining, privately led venture capital ecosystem” in Canada. Whenever we in the government make huge investments like this $400 million, in addition to the core objective of actually helping the companies commercialize their technology and grow, we should also look at the additional benefit. Here, one of the objectives was to create an ecosystem. That did not happen.