Public Accounts Committee on Dec. 13th, 2016

[The Vice-Chair, NDP, David Christopherson]

I now declare this 39th meeting of the Standing Committee on Public Accounts in order. Colleagues, you will note that we have the “Report of the Auditor General of Canada to the Board of Governors of the International Development Research Centre—Special Examination Report—2016”.

We have with us representatives from the Office of the Auditor General, as well as a representative from the International Development Research Centre.

I would ask you to introduce yourselves before you speak. We will give both offices an opportunity for opening remarks, and we'll begin with the assistant auditor general.

You have the floor, sir.

[Sylvain Ricard, Assistant Auditor General, Office of the Auditor General of Canada]

My name is Sylvain Ricard.

Thank you, Mr. Chair, for this opportunity to discuss our special examination report on the International Development Research Centre.

I am accompanied today by Lissa Lamarche, the principal responsible for this audit.

As you know, a special examination seeks to determine whether the crown corporation's systems and practices provide reasonable assurance that its assets are safeguarded and controlled, its resources are managed economically and efficiently, and its operations are carried out effectively.

Our examination covered the period between August 2015 and March 2016.

Overall, the centre had in place good corporate management practices for governance, strategic planning and risk management, and performance measurement and reporting. However, our examination identified a significant deficiency in the centre’s board of governors' complement. We found that the board did not have enough members to ensure it maintained the statutory quorum of seven members, despite the centre’s efforts to proactively identify to the minister the skills gaps created by the departure of particular governors, as well as potential candidates with the necessary profile. This threatened the board’s ability to validly conduct business, repeatedly putting at risk its ability to fulfill its oversight and decision-making responsibilities.

As noted in our report's subsequent event section, in June 2016, the Minister of International Development and La Francophonie announced the appointment of a new chairperson and six new governors to the board. The new board complement of 12 members will help the board ensure and maintain a quorum, and thus validly conduct business.

We also found that there was room for improvement in the centre's management practices. We noted that the centre was inconsistent in integrating project-level activities into corporate-level activities. Specifically, the performance measures it used at the project level did not align with or adequately inform the measurements at the level of strategic objectives. Further, projects did not have clearly defined implementation activities to support the centre's strategic objectives.

We found that the centre managed its research projects and donor agreements well. However, we noted that, for its new area of parallel funded partnerships, the centre was still developing its systems and practices. We found that in engaging with these potential parallel partners, the centre did not have a systematic approach to assessing partners and the risks that it might be exposed to from these parallel partner agreements.

The centre agreed with all of our recommendations and prepared an action plan in response to our concerns. However, because our audit work was completed in March 2016, I cannot comment on any measures the centre has taken since then. The committee may wish to ask the centre's officials to clarify what measures the centre has taken in response to our recommendations.

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

Thank you.

[The Vice-Chair, NDP, David Christopherson]

Very good, merci.

Mr. Lebel, you have the floor.

[Jean Lebel, President, International Development Research Centre]

Mr. Chair, honourable members, good afternoon.

My name is Jean Lebel, and I am the president of the International Development Research Centre, or IDRC. It is my pleasure to appear before you today on behalf of the centre.

Thank you for the opportunity to discuss the Auditor General of Canada’s special examination of IDRC. This special examination has provided the centre with valuable strategic insights, and we were pleased by the report’s constructive findings. Where the report provided recommendations, we accept them and have a plan in place to implement the necessary changes. I will outline that plan in a moment.

First, I would like to provide a brief overview of IDRC, including our mandate, our legislative obligations, and how we report to Parliament. This is important within the context of the special examination.

IDRC was established as a crown corporation in 1970. It reports to Parliament through the Minister of International Development and La Francophonie and is part of Canada’s foreign affairs and development efforts. The centre is required to report to Parliament through an annual report, tabled before Parliament by the minister. The centre also responds to questions from Parliament on an ongoing basis.

IDRC’s vision is knowledge, innovation, and solutions to improve the lives of people in the developing world. The centre’s current five-year strategic plan was introduced in 2015. It guides IDRC’s work through three strategic objectives: to invest in knowledge and innovation for large-scale positive changes, to build the leaders in research for today and tomorrow, and to be the partner of choice for greater impact. These strategic objectives drive the decisions we make on a daily basis about the people, projects, and institutions we support worldwide.

Let me give you a few examples.

In Colombia, research has resulted in fortified potatoes that are more nutritious, produce higher crop yields, and are more resistant to disease.

Other projects are economically empowering women, such as one in India that is connecting women-owned local businesses with global supply chains.

Innovations are improving access to education, such as a project that is using digital tools and resources to improve the accessibility and quality of education for Syrian refugee and host community children.

Those are just a few examples of the new and ongoing projects we support each year.

Regarding the special examination report, its findings confirm that IDRC has in place good corporate management practices for governance, strategic planning and risk management, and performance measurement and reporting.

In total, the report found that 17 of 20 systems and practices met the applicable criteria. Two were found to meet the criteria, with improvement needed. The report found one significant deficiency in relation to appointments to the board.

The report concluded that there were no significant deficiencies in IDRC’s systems and practices for corporate management and the management of research projects and donor agreements.

The report did make three recommendations. IDRC has implemented an action plan in response to these recommendations.

First, the report found a “significant deficiency...related to the ongoing delays in Board of Governor appointments over which the Centre did not have control.” The report found that IDRC has in place the processes to assess skills and competency gaps in the board, as well as to proactively identify and communicate needs and upcoming vacancies and propose potential candidates to the minister.

IDRC accepts this recommendation. Action was taken to address this issue in June 2016, when a new chairperson and six new governors were appointed through the Government of Canada’s new open, transparent, and merit-based appointments process. I should add that this was the first time this process was used. This brings the number of our governors to 12, thereby ensuring quorum.

The second recommendation is that IDRC should put in place a systematic approach to integrate its strategic direction, risk management, and performance measurement and reporting with the centre’s project planning and monitoring.

IDRC accepts this recommendation. All research projects supported by the centre must speak to one or more of the centre’s strategic objectives, which I mentioned earlier, as mandated by existing centre systems and processes. Failing this, the projects are not funded.

The coordination and reporting of program intentions and results against strategic objectives can always be further improved. IDRC management developed new processes and systems in 2016 that better allow data to be gathered, tracked, and studied against the strategic objectives.

This systematic approach means data can continue to be gathered efficiently over the course of the five-year strategic plan, so until 2020. These changes have been incorporated into the centre’s annual performance report submitted to the board of governors.

Regarding risk, an external assessment was done in 2015 on the centre’s integrated risk management program. The assessment recognized many good risk management practices, but it also identified areas for improvement.

As a result, management drafted an action plan, which was presented to the finance and audit committee of the board of governors in February 2016.

Specifically, the action plan focuses on further strengthening the integrated risk management approach by establishing a more robust methodology, improving the process of identifying risk, and ensuring appropriate communication channels exist.

This work is on track and is expected to be completed by the end of 2018.

The third recommendation is that IDRC should establish a systematic approach to assessing risk associated with parallel partnerships prior to entering into agreements. We also accept this recommendation.

One of IDRC's strengths is that it can mobilize other institutions and funds toward meeting common goals, thereby increasing the impact of Canada’s aid efforts. IDRC has a rigorous risk assessment process already in place for partnerships where IDRC receives funds from third parties. However, we are more and more entering into what we call parallel partnerships, where we work alongside partners to achieve common goals, but where IDRC does not administer the funds. For example, IDRC and Tim Hortons are working together on the common goal of increasing coffee farmers' ability to adapt to the effects of climate change, based on new research.

Working alongside partners in this way, including the private sector, requires thorough risk assessment. That is why IDRC has recently reviewed and strengthened its parallel partnership risk assessment and authorization systems, processes, and controls. This objective was completed in September 2016.

Mr. Chair, honourable members, I hope you have found these remarks informative. We are pleased with the results of the special examination.

Thank you for the opportunity to be here today, and I look forward to your questions.

Thank you very much, Mr. Chair.

[The Vice-Chair, NDP, David Christopherson]

Thank you. You'll hear from colleagues that we appreciate your being here.

Here are two quick things before we start, if I may. One, I note that neither the chair nor the vice-chair is here. Is there any particular reason?

[Jean Lebel]

As stated in the IDRC Act, the president of IDRC is responsible for the running of the day-to-day operations and is accountable on the running of the centre and its financial system as well as its operational system. Therefore, I am the public officer, VC of the organization, and I represent the organization on these matters. The chair is chair of the board of governors, but by the IDRC Act of 1970, I am the one who has the authority to speak at the committee.

[The Vice-Chair, NDP, David Christopherson]

I'll leave it to colleagues if they want to make an issue of that. I recognize your role, but normally the idea is that the top of the house is here to answer. Chairs are usually accountable, and so we look for that. You could have been in their place. I leave it to colleagues. It's unusual. Normally we have a chair or a vice-chair here to be accountable because they are on the flow chart at the top of the house.

The second thing is that I wanted to give you a compliment, to thank you for the action plan to the extent that it got here in good time before the meeting. We like to emphasize that it is appreciated.

With that, we'll begin the regular rotation and go over to the government members. I understand they are splitting time between Monsieur Lefebvre and Madame Shanahan.

Monsieur Lefebvre, you have the floor, sir.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr Chair.

I am going to echo Mr. Christopherson's comment. We are very glad to have you with us, but it would have been nice to have someone from the board of governors appear before the committee.

That said, I would like to congratulate you. According to the Auditor General's report, you've done a good job leveraging your strengths and capacities.

One of the major deficiencies pertains to board of governor appointments, and that has been addressed. It should be noted that you are not the one responsible for appointments; the government is. We therefore understand that there have been delays.

I want to commend you for your strategic plan. You addressed the recommendations with some fairly swift measures.

I have a question about your new action plan. You said the plan had been presented to the finance and audit committee of the board of governors in February 2016, but you didn't say whether they had accepted or rejected it. Was the plan approved?

[Jean Lebel]

It was actually the risk management plan that was presented to the finance and audit committee in February 2016. They accepted it. It sets out, in sequence, the activities that will be carried out until 2018. You may wonder why they are coming to an end in 2018.

[Paul Lefebvre, Liberal, Sudbury, ON]

I'd like you to clarify what the outcome of the action plan will be. Could you also explain why it is ending in 2018?

[Jean Lebel]

Thank you, Mr. Lefebvre. That's a great question.

In 2015, IDRC had an external assessment of its entire risk management system done.

We reviewed our risk management system. Under our previous system, risks were relatively buried in a countless number of risks that we would add up year after year. Now we have a much more robust method based on a handful of risks. Five were identified and approved by the board of directors.

This is a model that requires constant consideration by the centre's management. The vice-president of corporate strategy and communications is in charge of that, and an executive committee addresses risk management on an ongoing basis.

Twice a year, we conduct a risk assessment, and we evaluate our risk tolerance as well as related mitigation measures.

Although the responsibility falls on the executive committee, all centre employees have to contribute, given the activities we carry out in developing countries.

Our basic approach to projects has always incorporated risk management, but now, we do a much better job of addressing it. That is true for project risk management right through to corporate risk management. It's a continuum that is rooted in a whole. It requires training and involves technical knowledge, such as how to build risk registers and track risks.

It may seem like a lengthy process, but the finance and audit committee considered it to be a robust plan. The committee accepted the plan, which is currently being put in place.

Thank you.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you.

[The Vice-Chair, NDP, David Christopherson]

Madam Shanahan, you have about three and a half minutes.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you, Chair.

Thank you very much for being here today. I just want to pick up on the deficiency regarding the board complement. I realize the problem has been resolved, but I am still intrigued to know how long this problem existed, because the gap seems to have been for several years. So I'm asking Monsieur Ricard and Madame Lamarche if you did any investigation as to how long this gap existed on the board.

[Sylvain Ricard]

We know exactly how long it existed.

Before I forget, I'd like to mention something that may not be obvious in relation to the appointment problem.

There is a challenge we face. Unlike the practice in most crown corporations, when the term of a board of governors member is up, the member cannot stay on the board until a replacement is found. That is the case for IDRC and a few other crown corporations.

Under the Financial Administration Act, in most crown corporations, when the term of a board of governors member is up, the member can stay on until a replacement is found. That is an added challenge that IDRC and a few other crown corporations face when it comes to the timely replacement of board members.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I see. That's very interesting. It's a problem IDRC could face systematically.

Mr. Lebel, could you elaborate on that a bit? I don't want to see it happening to you anymore.

[Jean Lebel]

The gap existed from November 2012 until this past June. Over the past four years, we lost our quorum three times. We had to get rather creative in delaying board of governors meetings until the appointments were made.

We have competency skills for the governor, according to our mandate and the legislation. We provide, on a regular ongoing basis, information to the minister's office on the need for these nominations. Ultimately, they make the decision. Over the years, these decisions have always come to us for maintaining a minimum quorum, but that has not been seen as an optimal governance situation by the Auditor General. It's resolved now, and I think with the new nomination process that has been announced by the government last February, I believe—and we have been the first agency to go through this system—it's a robust system to nominate people to agencies and crown corporations. We will see with time if this is effective, but for the moment I can tell you that we are in ongoing conversations with the minister's office, as well as with the bureaucracy, and I consider this no longer to be an issue.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

That's very reassuring.

Chair, do I have any more time?

[The Vice-Chair, NDP, David Christopherson]

You're right on the money. I appreciate that. Thank you very much.

Mr. McColeman, you now have the floor, sir.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you, Chair.

First, I want to start with underscoring the chair's concern. The concern is that when you have a governance board, there's a person in the chair for the governance board, who I believe—even though you are the top paid management CEO of the organization—has the power to carry forward the board's directives in terms of implementation. Am I correct in assuming that? Or do you have a veto power over the board?

[Jean Lebel]

The act states that the board—and I have the board charter here—is responsible for the normal board duties and the oversight in terms of strategic direction and advice to management. I am the implementer of the advice provided by the board. I am accountable, whether it is on finance or whether it is on the operational day-to-day business.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Okay. So you're accountable to the board?

[Jean Lebel]

Absolutely.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Then that answers the question of the chair, which is, the chair of the board should be here. We will expect that, sir, if we have follow-up with you, because that is the individual who represents the governance of your organization at the highest level.

[Jean Lebel]

I'm also appointed by an order in council.

I accept this, and I will carry it forward to our chair, Margaret Biggs. When we received the invitation, I was advised by the secretary of the board and our legal counsel that I should appear. If we made a mistake there, I'm sorry about it. We will definitely address it. Thank you for this comment.