Evidence of meeting #59 for Public Accounts in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was controls.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Michael Ferguson  Auditor General of Canada, Office of the Auditor General
Nicholas Swales  Principal, Office of the Auditor General
Joanne Butler  Principal, Office of the Auditor General

4:15 p.m.

Conservative

The Chair Conservative Kevin Sorenson

Good afternoon, everyone. This is meeting number 59 of the Standing Committee on Public Accounts, Wednesday, May 17, 2017.

I remind everyone that we are televised today. I will also mention that because we have been interrupted with two votes already, we are approximately 45 minutes behind, so we're going to adjust somewhat the time periods in the questioning and cut those back, but everyone will still get a chance. We can perhaps see what happens at “quittin' time” too, and whether we want to stretch it out a little longer, but we're scheduled to go until 5:30.

Today we are beginning our consideration of the spring 2017 reports of the Auditor General of Canada.

Our witnesses are from the Office of the Auditor General of Canada. We welcome Mr. Michael Ferguson, the Auditor General of Canada, and his team of professionals. He has with him here today Joanne Butler, principal; Richard Domingue, principal; Andrew Hayes, principal; and Nicholas Swales, principal. They are all part of his team and are prepared to answer questions from our members.

I would invite the Auditor General at this time to proceed with an opening statement before we proceed to the rounds of questioning.

Mr. Ferguson, go ahead, please.

4:15 p.m.

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

Thank you.

Mr. Chair, I am pleased to present my spring 2017 reports, which were tabled in the House of Commons yesterday. I am accompanied by Richard Domingue, Nicholas Swales, Joanne Butler, and Andrew Hayes.

In the past, I have said that departments need to understand the way people interact with their programs as a way to improve their services to people. With this series of audits, I see a very clear theme that how government programs are described on paper is often different from how the departments put those programs into practice, and that matters to people.

Let's start with our audit that focused on whether Finance Canada, Global Affairs Canada, and the Canada Border Services Agency carried out their roles to collect customs duties on the many goods imported into Canada each year. In 2015-16, federal government revenue from those duties was more than $5 billion. We found that the Canada Border Services Agency and Global Affairs Canada did not adequately control the entry of certain goods, such as dairy products, chicken, beef, and eggs. As a result, some goods were imported without appropriate permits. Had these goods been properly controlled at the border, $168 million in duties in would have been assessed on them.

We also examined the $20 minimum value for customs duties on imports by mail or courier. This amount has not changed since 1992, but the volume of incoming parcels has increased significantly. The agency did not have the staff to inspect them all. This means that duties were not assessed in all cases where they should have been. Overall, in our view, the way Canada assesses customs duties and controls goods coming into the country is complex and difficult to administer, which means there is a different system on paper than in practice.

In another audit, we looked at what the Canada Border Services Agency and Immigration, Refugees and Citizenship Canada did to manage the risk of their staff being corrupted. We concluded that while the agency and the department recognized that their employees could be vulnerable, they need to better train their staff and use the information they already have to identify potentially inappropriate actions. For example, we were able to use the agency's information to estimate that over the course of a year, border services officers did not collect the information they were supposed to collect on the people who entered Canada in some 300,000 vehicles. We found that Immigration, Refugees and Citizenship Canada appropriately processed visas at Canada's overseas missions. However, Global Affairs Canada should make sure that all locally hired staff have completed their mandatory ethics training.

Let’s turn now to the temporary foreign worker program, where there has been some progress, but where differences remain between what's done in practice and how the program is described on paper.

This program is meant to help employers fill job vacancies when qualified Canadians aren't available. Employment and Social Development Canada is supposed to make sure the program is used only to respond to real labour shortages.

Overall, the reforms that the department introduced in 2014 have helped to reduce the number of temporary foreign workers needed in Canada. However, those reforms fell short of ensuring that employers hired temporary foreign workers only as a last resort.

In many cases, the department just took the word of employers that they couldn’t find Canadian staff. Again, the department didn't use its own information, such as employment insurance data, to determine whether Canadians could fill the jobs. We saw indications that unemployed, experienced Canadians may have been available to work at fish plants, but temporary foreign workers were hired instead.

Let’s turn now to our audit of mental health support in the Royal Canadian Mounted Police. In May 2014, the RCMP was one of the first federal organizations to roll out a mental health strategy. It was meant to contribute to a psychologically healthy and safe workplace, and to better support employees.

We found that the RCMP’s implementation of its strategy fell short of meeting members’ mental health needs. The RCMP didn't allocate enough resources to implement the strategy. Sixteen percent of members waited too long to access the services they needed. In a few cases, members waited more than two years. This strategy is important for the RCMP, for Canadians, and for the government as a whole. It must succeed. The RCMP must fix the problems we identified and ensure the successful implementation of its mental health strategy.

In another audit, we looked at civil aviation infrastructure in Canada’s north, where air travel is the only year-round way for many remote communities to connect to the rest of the country.

In our view, Transport Canada wasn't actively engaged in dealing with known infrastructure challenges at remote northern airports.

The challenges include insufficient runway lighting and navigational aids. Given that windows to land and take off are restricted in the north, such gaps can make a critical difference, for example in a medical emergency.

In another audit, we looked at how the Canadian Food Inspection Agency, Global Affairs Canada, Health Canada, Indigenous and Northern Affairs Canada, and Public Services and Procurement Canada managed their risk of fraud.

We saw good practices in each organization. Some conducted fraud risk assessments or properly justified their contract amendments or use of sole-source contracts. However, no single organization covered all the basics of fraud risk management.

We're concerned about the fact that certain organizations hadn't implemented controls to manage the risk of internal fraud. For example, few employees had received mandatory training on values and ethics, and cases of potential conflict of interest took too long to resolve.

In another audit, our goal was to examine Canada's progress on its 2009 commitment to phase out inefficient fossil fuel subsidies. We found that Finance Canada still had not defined what an inefficient fossil fuel subsidy was, nor could the department tell us how many inefficient fossil fuel subsidies there could be. We asked Finance Canada to provide us with its analyses of the social, economic, and environmental aspects of these subsidies. The department did not give us that information. Therefore, I cannot give Parliament or Canadians assurance about Finance Canada's work on this file.

As a result of this, we provided, with our spring reports, a message from the Auditor General that describes the trouble we had accessing certain information that we needed to complete our audits. Overall, I am very concerned that Finance Canada did not give us all the information we needed to do our work. Hopefully, the recently issued order in council signals that the government is willing to work with us to ensure that we do not encounter similar problems in the future.

Our spring reports to Parliament also include our audits on three crown corporations, the Canadian Museum of Nature, Defence Construction Canada, and the Freshwater Fish marketing corporation. Overall, we found that both the Canadian Museum of Nature and Defence Construction Canada managed their operations well. However, in the case of Freshwater Fish marketing corporation, we found problems in board oversight, at the management level, and in day-to-day operations that were so extensive that the corporation is at a high risk of not meeting its mandate. Fundamentally, we would expect a crown corporation to do much better, and there is room for significant improvement at the Freshwater Fish marketing corporation.

Lastly, I'm pleased to introduce a new product that we released. It's not an audit, but a commentary on our audits of the financial statements of federal organizations. These audits account for almost half our workload.

Financial audits provide parliamentarians with useful information for overseeing government organizations that spend taxpayer dollars to serve Canadians.

The federal public sector produces hundreds of complex financial reports each year. We developed this new product to help parliamentarians understand and navigate the mass of financial information produced by individual organizations and by the government as a whole.

To close, I want to go back to the theme that weaves many of these audits together.

Departments must make sure that they implement their programs in the way the programs were designed and communicated to Canadians. The programs won't produce their intended results if the departments fail to put into practice what they said they were going to deliver.

Furthermore, we still see examples where departments didn't use their own data to help them understand and improve their results.

So, while many of the issues we've raised in these audits are concerning, I think many of them can be fixed, and fixing them will lead to better results.

Mr. Chair, that concludes my opening statement. I'll be happy to answer your questions.

Thank you.

4:25 p.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you very much, sir, and we want to thank your team, as well, for the spring report.

We'll move into the first round of questioning, and we're going to try to hold them to five minutes.

We'll go to Mr. Harvey, please, for the first five minutes.

4:30 p.m.

Liberal

TJ Harvey Liberal Tobique—Mactaquac, NB

Thank you all for being here today, especially you, Mr. Ferguson.

I just want to touch quickly on your audit on the temporary foreign worker program. I'm reading through the recommendations here around how the department is rolling out that program as opposed to what you feel the policy is.

In the past I've been very critical of the program from the standpoint of somebody who's accessed the program. You referenced geographical data around unemployment levels and other available workforce data, but from my experience, I sometimes question—I have questioned—the accuracy of that data in terms of the delivery of the program. Just because unemployment trends may signal one thing, it does not necessarily mean that all those people are ready, willing, and able to go to work in any type of job.

I just want to get your thoughts around what you feel the biggest challenges in the program are. Do you feel part of it is a case of there not being enough ears to the ground in terms of what's going on in different jurisdictions? Would the program be better developed in the future to take into account more regional differences and differences between industries?

4:30 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

Certainly, we did say in the report, for example in paragraph 5.98, that we found the department did not know whether the program was having unintended consequences such as suppressing wages, allowing businesses to rely on foreign workers instead of hiring Canadians, or discouraging capital investment and innovation. That's one place where we said that the department needed to be doing a better job of actually understanding what the impact of the program was.

We also identified that the department was not using all of the information that it had available in order to assess whether there really were labour market shortages.

We also pointed out, in paragraph 5.59—and I think this is going to be something that will be interesting to keep an eye on—that in 2014, the Department of Employment and Social Development and Statistics Canada started developing a survey to collect information on job vacancies and wages. The department expected the survey to provide it with information that it could use to assess labour markets when considering applications to the program. They're spending quite a bit of money on this; at the time of the audit, it was estimated to be $14 million a year to identify that type of information. Hopefully, they will be able to use that information to get a better sense of where there may be those labour market shortages.

4:30 p.m.

Liberal

TJ Harvey Liberal Tobique—Mactaquac, NB

My comments, of course, are my own. They're just reflective of the experience that I had with that program within private industry, in the processing industry. The company that I worked with previously had around 120 employees, of whom 15 were temporary foreign workers. The reason we had 15 temporary foreign workers is that I had put out a call for 20 vacancies, and we followed the labour market impact assessment rules. We were doing that advertising not to access the program, but to get local labour. At the end of our collection period, we had 157 resumés for 20 jobs, all from within the catchment area. But when I called each of those people to come for an interview, fewer than 50% of them were willing to come for an interview. Under the last round of changes to the program, if people were within an hour's drive, they had to apply for the job regardless of whether they had the intention of filling it. But a person's not going to travel for an hour for a $12- or $14-an-hour job, which these happened to be. They were labour jobs in a production environment. Of those people I called in for an interview, I think there were 57 who accepted and came in. Of those, we brought 17 back for a second interview with my superior, and we ended up hiring five. I filled the other 15 with temporary foreign workers, because there just wasn't the labour pool there to support the jobs.

If I had looked at just the raw data, it would have indicated that there was more than enough labour in the area to fill those vacancies. The question was whether or not all of the people who qualified to do that job were willing to do it.

4:35 p.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you, Mr. Harvey.

I don't know if there's a comment there. That wasn't really a question, but it was a good observation.

We'll go now to Mr. McColeman.

4:35 p.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

Thank you, Mr. Chair, and thank you, Mr. Ferguson and your staff for being here today and for your work on these reports.

I'd like to focus on “Report 3—Preventing Corruption in Immigration and Border Services”, the third chapter.

Is there any evidence, either anecdotally or found through the auditing process, of actual cases of fraudulent behaviour or corruption in the Canada Border Services Agency or the immigration department?

4:35 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

In the course of the audit, we didn't identify any specific cases of corruption. We identified a number of instances where the controls were not applied in the way they should have been applied.

Of course, I am aware of some situations that have been in the media over the last couple of months, where there have been some accusations against officers of the Canada Border Services Agency. Not all of them were working at the border; two were working at Pearson airport. So some of these cases have been reported in the media.

We didn't identify, in the course of the audit, any specific instances of people not following their controls because of corruption, but we did find instances where the controls weren't followed as they should have been.

4:35 p.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

What would we expect fraud and corruption to look like in these agencies?

4:35 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

I guess, at the end of the day, if a member of one of these organizations were involved in corrupt activity, it could mean this person was aiding somebody to get either people or goods into the country illegally.

4:35 p.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

I'd like to move on to one of your special reports. It's the one where you did a special examination of the crown corporation Freshwater Fish marketing corporation. Obviously, it is a disturbing report, pretty much seeing everything falling apart at every level of that particular corporation.

Is it fair to ask you whether this corporation, whatever the good intentions might have been when it was started...Should such an examination be relevant today? Should the government even be in this business of freshwater fish marketing?

4:35 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

Whether this type of an organization should exist or not is a policy decision of the government. What we found was that we would have certainly expected that a crown corporation would be operating much better than Freshwater Fish was doing.

Freshwater Fish was established in 1969. Since then, there have been a number of changes to the environment it works in. In the past, it was able to buy all of the fish products produced in Manitoba, Saskatchewan, and the Northwest Territories. Saskatchewan is no longer a part of that; now they have to have specific agreements with fishers. Manitoba has signalled its intent to withdraw as well. Their working environment is very different.

I think a consideration of the environment the corporation works in is something that should be done. In fact, part of the problem we found in that special examination was that the corporation hadn't updated its strategic plan since, I think, 2011. They hadn't updated their risks since, I believe, 2014. Just from an organizational point of view, they weren't doing enough to understand the changes in the environment they were working in or the risks they were facing. I think some sort of an assessment of the environment the organization is working in would certainly be something that should be done.

4:40 p.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you very much.

We'll now move to Mr. Christopherson.

4:40 p.m.

NDP

David Christopherson NDP Hamilton Centre, ON

Thank you very much, Auditor General, and your team.

I'd like to focus, if I may, on your special message to us. This doesn't happen very often, thank goodness. I've only seen it once or twice in my 12 or 13 years here. I want to set it up by reading the opening paragraph. Keep in mind that this is the process by which the Auditor General brings problems. If there are problems at all in terms of his work, this is how it's done. It's a message to us, and then it's in our lap.

Chair, the opening paragraph of this message is as follows:

I have prepared this message to inform the House of Commons—as subsection 7(1)(b) of the Auditor General Act instructs me to do—that we did not receive all the information we needed for two of the audits we presented as part of the spring 2017 reports of the Auditor General to the Parliament of Canada.

Further on, it says:

In both cases, Finance Canada confirmed the existence of the information we requested. However, as the Department considered this information to be confidential to Cabinet, it determined that it could not provide the information to our auditors.

We understand clearly that there are certain things that are exempt from your reach. That's cabinet confidentiality, where there's advice to ministers, recommendations to the government, and anything pertaining to the debate that takes place. That's confidential, and it should remain so. However, all the information—analysis, reports, any kinds of submissions that feed into that recommendation—is all fair game, because it's just analysis. Oftentimes what the Auditor General needs to do is to confirm that it was done, which is the case here.

As I understand this, and it gets a little complicated, you, Auditor General, were denied the information initially, and—my words—the current government was brought kicking and screaming, to the point where they finally passed an order in council that released the information as far back as the beginning of this government.

Number one, a severe crack on the wrist for having to be forced to do what they should have done by law, but an acknowledgement that they did do the right thing at the end of the day and that the immediate problem is solved.

However, Chair, we still have two problems, as I see it. One is that there's more information needed. This audit is not concluded. It remains unfinished business because the Auditor General could not get the information.

The government, again kicking and screaming, has brought us as far back as when they took power. We don't have that information going farther back, and apparently it's the Clerk of the Privy Council or someone in a senior bureaucratic position who has the responsibility to protect the things that need to be kept confidential from previous governments. We have sorted it out with the current government, but not with the previous.

I'll ask, but I don't think you yet have a definitive legal answer for us. We may end up calling in the parliamentary law clerk. As far as I'm concerned, the right of Parliament to demand papers, documents, and persons is absolute. It seems to me that if Parliament says we want that document, there's a way to get it, especially since it's not captured by cabinet confidentiality.

We need to find a way to force that document into the light of day, as the law commands that it should. However, we also need to be riding shotgun and putting pressure on the Privy Council to live up to their word to not just do the order in council change—I don't have time to get into the details—but the other thing the Auditor General wants going forward is based on a first principles approach. It's not every document listed as it comes along, but rather a set of principles that says these are the types of documents you can access. That will remove a lot of this.

I didn't leave a lot of time, but are there any thoughts that you have on that, Auditor General, especially correcting me if I have any of my understandings wrong?

4:45 p.m.

Conservative

The Chair Conservative Kevin Sorenson

Go ahead.

I will give you extra time, but there won't be supplementary questions while he answers.

Go ahead, sir.

4:45 p.m.

NDP

David Christopherson NDP Hamilton Centre, ON

Thank you.

4:45 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

Generally, I think the way that you've characterized a lot of it is right, from a factual point of view at least.

What we now have is an order in council that would allow us to get access to the budget documents that we asked for after November 2015. What we were looking for was analysis and some of that analysis would have been done before November 2015. That order in council would not cover that, as you said.

Even getting access to the analysis that was done after November 2015—which the order in council would give us the right to do, but which we have not yet asked for, so we haven't received any of that information—wouldn't allow us to come back and tell you whether, throughout the course of all of these tax measures, Finance Canada did all of the analysis that they should have done. I think it's important to remember that.

As I said in my opening statement, I consider the most recent order in council to be a good step and hopefully it shows the willingness on the part of the government to continue to work with us to find a lasting solution, but the order in council isn't sufficient. It isn't going to solve the problem, in the long term, because again, it is the same type of approach to fixing the problem as we've seen before and those types of solutions tend to work for a while, but then another problem crops up.

We need to get to a better solution. Hopefully, the order in council is a signal from the government that we will be able to work with them to get to that long-lasting solution.

4:45 p.m.

Conservative

The Chair Conservative Kevin Sorenson

Thank you very much, both for the question and the observation.

We'll now move to Mr. Lefebvre.

May 17th, 2017 / 4:45 p.m.

Liberal

Paul Lefebvre Liberal Sudbury, ON

Thank you, Mr. Chair.

Thank you, Mr. Ferguson, for appearing before us to discuss these very important reports.

My question concerns report 3, entitled “Preventing Corruption in Immigration and Border Services”. You established a sample over a 12-month period. You then estimated that, out of 19 million vehicles, about 300,000 entered Canada without being inspected. Can you explain how you reached this figure and tell us what type of inspection the report talks about?

I often cross the border, and I'm always asked to stop and show my passport. That's why I have trouble understanding how we can enter Canada without being inspected.

I also want to know what sampling method you used.

4:45 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

I'll start answering, and then I'll ask Mr. Swales to add a few details.

I want to specify that it wasn't a sampling method, initially. We reviewed the information regarding 19 million vehicles, and we identified issues in 500,000 cases. We selected a sample from these cases. We first analyzed the entire population, and the sample then helped us determine that the issue concerned 300,000 vehicles.

Mr. Swales may be able to provide a few more details.

4:45 p.m.

Nicholas Swales Principal, Office of the Auditor General

Thank you, Mr. Chair.

The inspection process that is followed when people arrive by vehicle consists of two steps: the officer must ask them certain questions, collect their identification documents and enter the information into a computer system.

Each time that process takes place, the computer system takes note of it. We have checked whether, every time a vehicle arrived, that process left a trail in the electronic system as it should have. In our sample, even in the 500,000 cases, we noted that not all the necessary steps appeared in the computer system.

4:50 p.m.

Liberal

Paul Lefebvre Liberal Sudbury, ON

Thank you very much.

I think it would be very worthwhile to come back to this during our consideration of that report.

I would now like to put a question to you about aviation in northern Canada.

You studied 117 airports, right?

4:50 p.m.

Auditor General of Canada, Office of the Auditor General

Michael Ferguson

I think it was 119 airports.

4:50 p.m.

Liberal

Paul Lefebvre Liberal Sudbury, ON

In item 6.9, it says that 117 airports were considered.

I would like to know how many of those 117 airports are located in predominantly aboriginal communities.