Public Accounts Committee on Nov. 5th, 2018

[The Chair, Conservative, Kevin Sorenson]

I call the meeting to order.

Good afternoon, colleagues and guests.

This is meeting 117 of the Standing Committee on Public Accounts on Monday, November 5, 2018. I would remind all that we are televised today, so we have a good number in the audience. If you would turn your cellphones or other devices to silent mode or vibrate, please, that would be greatly appreciated.

We are here in consideration of “Report 2—Disposing of Government Surplus Goods and Equipment”, of the 2018 Spring Reports of the Auditor General of Canada. We're honoured to have with us today a long list of witnesses.

From the Office of the Auditor General, we have Mr. Jerome Berthelette, Assistant Auditor General of Canada, and Martin Dompierre, principal; from the Department of Public Works and Government Services, Ms. Marie Lemay, deputy minister, and Nicholas Trudel, director general, specialized services sector, integrated services branch; from the Canada Revenue Agency, Mr. Bob Hamilton, commissioner of revenue and chief executive officer, and Kami Ramcharan, chief financial officer and assistant commissioner, finance and administration branch; from the Royal Canadian Mounted Police, Mr. Dennis Watters, chief financial and administrative officer; and from Shared Services Canada, Mr. Ron Parker, president, and Mr. Stéphane Cousineau, senior assistant deputy minister, corporate services.

Welcome.

If time permits, colleagues, we may go in camera at the end of this meeting, although I don't necessarily foresee it. I don't want to cut any questions short, as we have a number of departments here today, but if we do have time, we will go in camera.

Also, if we have more time than expected, we may look at the Phoenix report, but I'm not certain that we'll have time for that.

We will turn this over to you, Mr. Berthelette. We've seen you at many of these meetings. You've come and addressed us before. Welcome.

[Jerome Berthelette, Assistant Auditor General, Office of the Auditor General]

Thank you.

Mr. Chair, thank you for this opportunity to discuss our spring 2018 report on the disposal of government surplus goods and equipment. Joining me at the table is Martin Dompierre, the Principal who was responsible for the audit.

We completed our work on this audit in March 2018, and we have not audited actions taken by federal organizations since then.

All Government of Canada departments and agencies have movable assets, including vehicles, furniture, machinery, and other goods and equipment. When a federal organization no longer requires assets, it can dispose of these surplus assets by either transferring them to other departments or agencies, or by selling, donating, recycling, or scrapping them.

Under the Surplus Crown Assets Act, Public Services and Procurement Canada is responsible for the disposal of all surplus assets unless this authority has been given to another department or agency.

This audit focused on whether selected federal organizations disposed of surplus goods and equipment at the appropriate time and in a manner that maximized benefits. These benefits included selling assets for the best possible return, reusing or refurbishing assets that were still in good condition, donating assets to organizations that could benefit from them and disposing of assets in an environmentally sustainable way.

Overall, we found that the Government of Canada's accounting suggested that federal departments and agencies sold their surplus assets for less than two-thirds of the value estimated as the assets' remaining future benefit to the government.

On the basis of our analysis, we found that all federal organizations chose to sell surplus assets rather than extend their use by transferring them to other federal organizations. Efforts to transfer assets through GCTransfer accounted for just over 4% of total requests to sell or transfer assets during our audit period.

In addition, three of the four organizations we audited didn't always do costing analysis to justify their decisions to sell assets instead of choosing another disposal method. At these organizations, 65% of the files we tested didn't have costing analysis to justify the disposal method selected.

We also found that the Canada Revenue Agency had adopted practices to reuse its own assets. These practices resulted in savings of more than $4.5 million over three years.

Finally, we found that Public Services and Procurement Canada (PSPC) was effective at selling the goods that it received through GCSurplus. However, we found that the department had little incentive to pursue other disposal methods because the department depended entirely on commissions from the sale of government assets to operate GCSurplus.

We are pleased to report that all four federal organizations agreed with our recommendations.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Berthelette.

We'll now move to the Department of Public Works and Government Services with Ms. Marie Lemay.

[Marie Lemay, Deputy Minister, Department of Public Works and Government Services]

Thank you very much, Mr. Chair. I want to thank you and the members of the committee for this opportunity to discuss the Auditor General's report on the disposal of surplus goods and equipment in the Government of Canada.

As you've said, I have with me at the table Nicholas Trudel, who is the director general of the specialized services sector. Also in the room with us is Marty Muldoon, who is our chief financial officer.

The focus of the audit that we're here to discuss was to determine whether federal organizations disposed of surplus goods and equipment at the appropriate time and in a manner that maximized benefits.

As to the scope of the Auditor General's report, three of the recommendations relate to the departmental disposal of surplus assets, which falls under the responsibility of each organization.

A fourth recommendation relates to a common service, the GCSurplus program, which is provided to government departments and agencies for the disposal of their surplus assets.

I will take a few moments to explain this common service provider role. If you have any questions later, Mr. Trudel and I will be able to make clarifications.

GCSurplus offers advice and guidance to departments on disposing of surplus assets. This includes offering solutions related to reusing, recycling and end-of-life disposal in an effort to reduce its physical, financial and environmental footprint.

GCSurplus also provides an online platform for the disposal of assets through sale to the public. Assets can be posted on gcsurplus.ca, which provides Canadians with a platform to view, bid on or buy surplus Government of Canada assets through a closed bidding process. It's a bit similar to Kijiji or eBay.

Users can bid on assets ranging from sleeping bags to office furniture to vehicles. The website is supported by 10 sales centres across Canada that house and distribute surplus assets.

With GCSurplus, we always strive to obtain the best value for the Crown. I would like to note that the Auditor General's report found that PSPC was effective at selling the goods through GCSurplus. In 2017-18, the website processed over 29,000 sales transactions, with approximately $57 million in gross proceeds of sales.

Within the GCSurplus program, we also offer what's called GCTransfer, a platform for federal government materiel managers to advertise and transfer surplus assets from one department or agency to another. Through this online platform, all members of the federal public service can view assets available for transfer.

I would like to point out that the scope of GCSurplus is limited in a few respects. First, there are certain departments that are not required to dispose of their assets through PSPC. Some of those have been given the authority, either by legislation or under the Directive on Disposal of Surplus Materiel, to manage their own disposition efforts.

Second, departments are responsible for the life-cycle management of their assets, including their disposal. They are not compelled to use the disposal services provided by PSPC unless they dispose of their assets through sale. Departments can make their own decisions to donate surplus materiel, transfer it to another department, or simply scrap it.

Now I'll turn to the Auditor General's findings. I can tell you that my department has accepted in full the findings and recommendations of the Auditor General, and we have put forward an action plan to effectively address each recommendation.

As the department responsible for disposal decisions around our own assets, our action plan includes several measures.

PSPC will review its asset life-cycle processes to ensure the disposal of its own assets meets the criteria laid out by the Auditor General, and we pledge to do this in the most cost-effective manner.

We will undertake a review to identify mechanisms to donate surplus assets in a fair and transparent manner, and PSPC will implement a standardized process to document disposal decisions. We've committed to implementing this process no later than spring 2019.

Our action plan also includes enhancements to our role as a common service provider, in particular by expanding services under GCSurplus and by encouraging the donation and reuse of assets across government.

It's important to note, Mr. Chair, that PSPC is limited in its scope. As I mentioned earlier, departments are by and large free to do what they want with their surplus assets without involving the common service provider, GCSurplus.

In addition, we are bound by the Treasury Board policy on management of materiel and their directive on disposal of surplus materiel when it comes to the disposal of surplus materiel through donation or transfer. According to the directive's requirements, decisions related to donation or transfer are made by the department disposing of the surplus asset. Once a decision to donate is made by the department, that department is directly responsible for making that donation. GCSurplus currently plays no role in donating surplus goods on behalf of other departments.

That is why we've engaged with the Treasury Board Secretariat to explore how GCSurplus could assist departments and agencies with donations of surplus assets by matching them with suitable charitable and non-profit recipients. We're looking at possibly leveraging our existing platforms and processes to make it easier for departments and agencies to donate in an open, fair and transparent way.

To this end, GCSurplus is leading a test of a proof of concept to see if we can find a new method of disposing of assets that contributes to the Government of Canada's broad social goals—helping under-represented communities and groups that face social inequities, as well as groups that promote environmental responsibility.

In June 2018, the first donation case was launched in the National Capital Region, in collaboration with the RCMP, who had approximately 400 first aid kits for donation. Feedback and lessons learned from this case will help inform a proof of concept. It will be evaluated for one year to establish overall service requirements for a potential pilot strategy.

In addition, the department has also agreed to conduct an analysis of all types of assets by class to determine whether they can be transferred for donation or reuse.

We will also engage with the material management community to increase awareness and encourage the use of the GCTransfer tool. Collectively, we expect these actions to be completed by spring 2020.

I want this committee to know that my department takes great pride in our stewardship of public funds, and our responsibility to efficiently dispose of surplus assets is part of that. I can assure you that we are fully committed to meeting the recommendations of the Auditor General while respecting our current policy, and we believe that we have a sound action plan to make it happen.

That said, Nicholas and I are happy to answer any questions you may have regarding the actions that I've laid out here today and how we intend to go through them.

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Ms. Lemay.

We'll now turn to Mr. Bob Hamilton, commissioner of revenue and chief executive officer of the Canada Revenue Agency.

Welcome, sir.

[Bob Hamilton, Commissioner of Revenue and Chief Executive Officer, Canada Revenue Agency]

Thank you very much, Mr. Chair, and thanks to the committee for giving me the opportunity to appear before you today in my capacity as commissioner of revenue and chief executive officer of the CRA.

With me is Kami Ramcharan, who is the CFO and assistant commissioner of the finance and administration branch at the agency.

We are pleased to appear before you today to discuss the findings, as they relate to the CRA, of the Office of the Auditor General's spring 2018 report which assessed the disposal of Crown assets.

As a matter of process, the CRA seeks to extend the use of its Crown assets before it considers replacing or disposing of them. This approach is good for the environment and ensures sound management of public funds.

Once CRA assets are no longer required but are still in good working order, the CRA initially offers the assets for reuse within the agency or, where practical, offers them for transfer to other federal departments and agencies prior to considering other methods of disposal.

For example, the CRA routinely donates surplus IT equipment, including computers, to programs such as Computers for Schools and the CRA's own community volunteer income tax program.

As noted in the report, while the CRA is not subject to the Treasury Board policy, the agency manages its disposal of assets in compliance with internal policies and directives that are similar to Treasury Board policies. This is made possible by the CRA Act, which gives the CRA full authority over all matters relating to general administrative policy, including the management of its resources, services, property, personnel and contracts.

Mr. Chair, the CRA welcomed the Auditor General's positive assessment regarding the CRA's reuse and refurbishment of its surplus assets. As you heard earlier, the Auditor General's report also found that over the fiscal years 2014 to 2017, the CRA's practices resulted in savings of more than $4.5 million compared to the cost of buying new furniture.

In addition, the report provided four recommendations to maximize benefits when disposing of Crown assets, one of which refers to the CRA: to review our internal processes to facilitate the donation of surplus assets. We feel that's a good suggestion, and we will undertake this review.

The CRA welcomes the opportunity to work in partnership with other organizations to create a government-wide approach that would facilitate an efficient, fair and transparent donation process.

This concludes my formal remarks. I welcome any questions the committee may have about the CRA's disposal practices.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Hamilton.

We will now move to the Royal Canadian Mounted Police and Mr. Dennis Watters, chief financial and administrative officer.

[Dennis Watters, Chief Financial and Administrative Officer, Royal Canadian Mounted Police]

Good afternoon, Mr. Chair and honourable members of the committee. Thank you for inviting the RCMP to speak to you today in view of “Report 2—Disposing of Government Surplus Goods and Equipment”, of the spring 2018 reports of the Auditor General of Canada.

I am joined today by my colleague Nathalie Guilbault, our director of materiel and movable assets, to help answer specific questions you may have on the RCMP's action plan relating to the report.

The RCMP agrees with the recommendations of the Auditor General and is working to implement an action plan that addresses the three recommendations related to our organization.

As with the other federal departments, the RCMP is responsible for adhering to the TBS Policy on Management of Materiel, which states that disposal of surplus materiel assets is concluded as effectively as possible, as soon as possible after they become surplus to the requirements of program delivery, and in a manner that obtains highest net value for the Crown.

The RCMP will take this—that is, the best value for the Crown—as the overarching criterion as it moves forward in addressing the audit recommendations relating to the RCMP.

I will now summarize the Auditor General's recommendations and the RCMP's action plan.

The first recommendation is that the RCMP review the asset life-cycle processes, including procurement, to facilitate and encourage the transfer and reuse of assets.

The RCMP will address this recommendation in its entirety by December 31, 2019, with a number of expected outcomes. There will be a complete review of asset life-cycle processes. A finalized disposal guidance document will be provided to those with delegated financial signing authority for disposal of materiel assets, encouraging the use of GCTransfer across the RCMP prior to GCSurplus where feasible. Options for solutions for the reuse of internal RCMP assets will be examined and implemented where deemed feasible and cost-effective.

The second recommendation is that the RCMP should review internal processes to facilitate the donation of surplus assets.

Again, the RCMP will address this recommendation in its entirety by December of 2019, with a number of expected outcomes. Internal processes will be reviewed relating to the donation of surplus assets. Discussions will continue with the Treasury Board Secretariat regarding the directives pertaining to the donation of surplus materiel. Public Services and Procurement Canada is working on an initiative intended to facilitate the donation of surplus assets in an open and transparent manner. The RCMP has been engaged with PSPC in supporting this initiative with a proof of concept. Should it become successful, a pilot is anticipated for 2019-20.

The third recommendation is that the RCMP should keep sufficient documentation to justify the disposal methods they selected. The RCMP should consider standardizing their forms to ensure consistency, and consider all factors when making disposal decisions, such as disposal cost, asset value and environmental impact. Again, the RCMP will address this recommendation in its entirety by December 31, 2019, with a number of expected outcomes. We'll develop a disposal form for the RCMP that allows for the documentation of disposal decisions while strengthening the approval process. We'll implement an electronic approval system that aligns with the delegated financial signing authorities and allows for performance measuring and reporting.

The RCMP is confident that the expected outcomes of the action plan will address the recommendations of the Office of the Auditor General. The RCMP will ensure internal processes are reviewed and will encourage all methods of disposal including transfers, reuse, and will facilitate donations. The RCMP will ensure that all factors are considered when making disposal decisions in an effort to dispose of surplus goods and equipment in a manner that maximizes benefits to the Crown.

Thank you for the opportunity to speak to you today. My colleague Nathalie Guilbault and I look forward to answering your questions.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Watters.

Last but certainly not least, we will move to Mr. Ron Parker, president of Shared Services Canada.

Go ahead, Mr. Parker.

[Ron Parker, President, Shared Services Canada]

Thank you, Mr. Chair.

I too am pleased to be before you today on this Auditor General's report. I'm accompanied by Stéphane Cousineau, Shared Services Canada's senior assistant deputy minister.

As members of this committee know, SSC was created in 2011 with an ambitious and unprecedented mandate to modernize the Government of Canada's IT infrastructure. We deliver email, data centre, network, and workplace technology services to departments and agencies to support the delivery of government programs and services.

Our organization is mandated with completing the largest public sector merger in Canadian history.

There have been some challenges, but we have made real progress in enabling digital services to Canadians.

The best way to sum up this progress is by looking at our customer satisfaction survey results.

Those results have consistently been on an upward trend since the first survey three years ago. Everyone at SSC takes pride in these results. They reflect the tremendous determination of our employees to serve our customers with quality services.

To build on this momentum, we have welcomed a number of new faces. Last year alone, over 1,200 employees joined our department. This was an important milestone for our organization. It demonstrated that we are becoming an employer of choice for people who are looking to build their careers.

Our mandate also received a very significant boost in budget 2018. It provided over $2 billion to SSC over six years to ensure that the Government of Canada is properly resourced to address evolving IT needs and opportunities and can properly and proactively address cybersecurity threats. This investment represents a renewal and a reset for SSC. In particular, budget investments are helping us undertake a thorough review of our asset base so that we can better manage the infrastructure we have and identify critical needs, including the disposal of those assets. This will ensure effective and efficient management of existing government IT assets, from their identification to their maintenance to their disposal.

It may sound straightforward, but when SSC was set up, there was no comprehensive database cataloguing the assets the department inherited from 42 other departments in over 8,000 locations across Canada and the world. As such, one of our ongoing challenges has been to make sense of this very complex environment. Not only the asset base but also how those assets are connected to each other is a big question. As I said, we're making good progress.

I'd like to turn now to the recommendations from the report, which we have accepted. I'm pleased to note that we have taken action in response and have implemented all of the recommendations. We also continue to work with our stakeholders to ensure that all processes are being followed.

Allow me to provide a few updates on the three recommendations that apply to us.

Recommendation 40 noted that Shared Services Canada should review its asset life-cycle processes to facilitate and encourage the transfer and reuse of assets.

In response, we are defining the full life cycle of materiel management, including the development of a more robust materiel management operating model. This will result in a singular view of asset management across the department's service lines that will include security and logistical requirements, performance metrics and disposal strategies. It will also allow us to continue leveraging the Computers for Schools program for Android and iPhone devices.

The recommendation in paragraph 2.41 noted that SSC should review its internal processes to facilitate the donation of assets. In response, we put in place an approved standard for materiel transfer and donation. It outlines the process and parameters that cost centre managers must follow for surplus materiel and equipment. In response to the recommendation, we will also continue to monitor and assess the standard and look for opportunities for improvement.

Finally, the recommendation in paragraph 2.53 notes that SSC should keep sufficient information to justify its disposal methods. In addition, the organization should standardize forms and consider cost, value and environmental impact.

In response, Mr. Chair, we updated our processes, practices and tools as part of efforts to keep sufficient documentation to justify the disposal of assets. Today, all of our managers have to use the new template that requires justification of the disposal decision. As well, we undertook communications and engagement activities to raise awareness among stakeholders and get their feedback and participation in the new approach.

Mr. Chair, as it continues to implement these decisions and actions, SSC will collaborate closely with its partners to ensure that the disposal of surplus assets is conducted in an efficient, cost-effective and responsible manner.

Thank you, Mr. Chair. This concludes my opening statement. Mr. Cousineau and I are happy to take your questions.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Parker.

We'll now move into the first round of questioning.

Monsieur Massé, you have seven minutes.

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

Thank you, Mr. Chair.

First, I would like to thank all the witnesses who are here with us. We are very pleased that you are participating in the committee's work. I also thank your respective teams who helped you prepare for this meeting.

Mr. Chair, if I may, I would like to come back to the opening statement by Mr. Berthelette from the Office of the Auditor General, from which I will read an excerpt:

On the basis of our analysis, we found that all federal organizations chose to sell surplus assets rather than to extend their use by transferring them to other federal organizations. Efforts to transfer assets through GCTransfer accounted for just over 4% of total requests to sell or transfer assets during our audit period.

Ms. Lemay also mentioned in her opening remarks that “GCSurplus offers advice and guidance to departments on disposing of surplus assets.”

My first question is for you, Ms. Lemay.

Does your department provide advice to departments so that they use GCSurplus more than GCTransfer?

[Marie Lemay]

It is up to the departments to decide whether they want to sell, transfer, donate or recycle their assets.

In our new approach, we are clearly promoting the transfer, but of course, it is up to the departments. As the official from the Office of the Auditor General pointed out, the profits from sales go to the departments, but in the case of transfers, there are no profits.

Mr. Trudel is in charge of the program and can give you more details.

[Nicholas Trudel, Director General, Specialized Services Sector, Integrated Services Branch, Department of Public Works and Government Services]

We promote transfers first, before sales. The transfer percentage is low because one department has to need a surplus asset from another department. Most departments make full use of their assets before disposing of them, so they are very used. Often, to reduce their costs and to have more modern equipment, departments consider purchasing new equipment, not reusing an asset that is at the end of its useful life.

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

Thank you.

My next question is for Ms. Lemay again.

Are departments solely responsible for determining the final use of their assets? If not, is a central agency responsible for developing major policies or guidelines in this area?

[Marie Lemay]

Actually, we're all subject to the Treasury Board directive.

Where there is some latitude is in the area of donations. The current Treasury Board policy doesn't allow PSPC or GCSurplus to make donations on behalf of departments. The departments are the ones who must deal with it directly.

We are trying to see if there is any openness on the part of Treasury Board. We are in the process of testing, and there will be a pilot project. We started with the RCMP, in fact, with PSPC's assets. We are currently examining the possibility of promoting donation. We will need Treasury Board's support for that, but there seems to be some openness on this. We hope that this can work.

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

Thank you. I appreciate your answer because I sort of had the same opinion.

As MPs, we manage offices in our respective ridings. We are trying to use the services to make donations, particularly for technological tools or computers that have reached their expiry dates. I must admit that it is quite difficult to make a donation, although the needs are great in a region like ours, where people's economic situation is quite difficult. I'm glad to hear what you're telling us.

Do you think the Treasury Board Secretariat should modernize its policy or directives to facilitate the work of PSPC and the departments it serves?

[Marie Lemay]

We are working with the Treasury Board right now. The first step is to see if there is a need for this and how donations, organizations and different departments can be matched. There seems to be a desire and need in this regard. I'm convinced that if this is positive, the Treasury Board will help us to make this change.

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

That's great.

I'll now turn to the representatives from the Canada Revenue Agency.

The representative of the Office of the Auditor General mentioned that the agency had adopted certain practices to reuse its own assets. It seems to be working well, since it has saved the agency $4.5 million, if memory serves. I know that the agency isn't subject to the Treasury Board's policy.

Mr. Hamilton, could you explain what allowed the agency to reuse its assets in another way?

[Bob Hamilton]

Thank you for the question.

Our situation is a little different from that of other departments. We have more power over the direct sale of our assets than other departments. The agency has imposed a moratorium on its desks and chairs, among other things. The agency's policy is to transfer used assets from one office to another for reuse. As you mentioned, this measure has been a success and saved a lot of money. Our power is a little different from that of other departments.

[The Chair, Conservative, Kevin Sorenson]

Thanks, Mr. Massé. Your time is up.

We'll now move to Mr. Kelly.

[Pat Kelly, Calgary Rocky Ridge, CPC]

Thank you. I'll continue with the CRA.

If I understood it correctly, the CRA offers equipment to other departments of the federal government through GCTransfer. Do you also participate for acquisition purposes with that program?

[Bob Hamilton]

As mentioned, we have some unique authorities. We have more authority to buy and sell than a normal department does. In this case, in the example we were just referring to, we actually had a policy of forcing ourselves to reuse furniture within the agency. There was a moratorium on buying new furniture. You had to reuse first. That results because of the authority that we have, but also because of a policy that we put in place.

Also, on a broader scale, we can donate equipment to schools, and we have our own community volunteer program and can provide surplus IT equipment to them.

[Pat Kelly]

Thank you.

On the $4.5 million in savings identified by the Auditor General, is that basically all a function of just making do with older furniture? Is the furniture piece really the key here?

[Bob Hamilton]

I would ask Kami if she wants to break that down, but certainly the furniture and equipment we have within the office was what the policy was targeted at, and that, as I understand it, was the main source of those benefits.

Kami, I don't know if you want to elaborate on that point.