Public Accounts Committee on Oct. 5th, 2017

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

Thank you, Mr. Chair.

I thank all of you for being here. I know that appearing before the Standing Committee on Public Accounts requires a certain time to prepare, and I know that your teams provide exceptional support to you. Once again, I thank you for having come here.

The Government of Canada is the largest Canadian employer; it has some 300,000 employees. Of course the fraud risks are significant.

While preparing for this week's meeting, I attempted to find out the number of frauds committed within government in order to see if this is an issue.

I thought I might find a government site, perhaps the Secretariat of the Treasury Board site, where these data might be grouped together, but I did not find any. Perhaps it exists somewhere. So I went to consult every department's website. Frankly, I had to stop after about 20 or 25 minutes, because I was running put of time to do this.

And so I will put the question to the Auditor General.

Following the audit you conducted, can we consider that the scope of fraud makes it an issue? Were you able to compare this year's results with those of previous years? Was the implementation of all of the measures followed by an improvement, the status quo, or did the situation worsen?

[Michael Ferguson]

Thank you for your question.

In paragraph 1.3 of the audit report, we mention that “there is no reliable estimate of the monetary effect of fraud on the Government of Canada”.

We simply presented the issues that are in the report, those that existed at the time the report was prepared. And so it is impossible for me to tell you if the situation has changed.

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

I will now put a question to Mr. Matthews. His answer will probably be yes, but I'll ask the question anyway.

Given what the Auditor General has just said, and what he mentions in his report, is there any way to centralize this type of information? In this way Canadians and members of Parliament could have a better idea of the situation, know whether the important mechanisms that were put in place did or did not have a significant impact, and determine if the proper measures were taken.

In fact, I am trying to find out whether it would be possible to get a better overall picture of the situation, given that the Government of Canada is the biggest employer in the country.

[Bill Matthews]

Thank you for your question.

As the member said, given the size of the Government of Canada, there will certainly be fraud.

That said, the third volume of the Public Accounts of Canada contains information on the loss of public funds.

That table is the losses that we are aware of. The bigger question is whether there are losses that we're not aware of. That's an impossible question to answer.

What I would tell you is that over the years we have shifted the balance between prevention and detection. In the past, we spent a lot more time auditing, detecting fraud after the fact. We have shifted with a new policy on internal control; I'm going to say it was about five years ago. Departments have to do an ongoing assessment of their internal controls, which includes risk of fraud.

I think one of the questions in this audit is whether that link to fraud and internal controls is explicit enough, or do we have more to do from a policy perspective? That's one of the questions that this audit has us thinking about.

[The Chair, Conservative, Kevin Sorenson]

To quickly interrupt—and then I'll let you go back to that, Mr. Matthews—when you say “we” have this responsibility, are you speaking specifically of Treasury Board?

[Bill Matthews]

No, it's actually a policy that Treasury Board issues. It tasks each department with doing an annual assessment of their internal control environment, on an ongoing basis.

They have to disclose what they've done to monitor the internal control environment. That includes audits, but more importantly preventative measures. They're on the hook, then, to also take action on any known weaknesses. There are known weaknesses. The internal control environment is not perfect.

That, to me, is the biggest shift we've seen, that disclosure and that focus on internal controls.

The take-away for me on this is whether we have done enough to ensure that in that internal control assessment we've put enough emphasis on fraud as being part of it.

[The Chair, Conservative, Kevin Sorenson]

Go ahead, Mr. Massé.

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

Thank you, Mr. Matthews.

You see my brain has now shifted to English, so I'll shift back to French.

As I was saying earlier, it is important that members and Canadians assess the situation correctly and be able to know if other measures need to be taken. It's important to keep that in mind.

I have another question with regard to the Auditor General's examination. I am staying with the same theme, that is to say the management of fraud allegations.

You say that the Canadian Food Inspection Agency has to keep a complete and exhaustive log to follow up on allegations and the implementation of corrective measures. That recommendation was made because there was no adequate system to manage fraud allegations. The agency said that the corrective measures would be put in place by the end of March 2018.

Mr. Glover, where are we at, six or seven months after the Auditor General's report? I would like to have an update on the actions you have taken.

[Paul Glover]

Thank you for your question.

I am happy to inform you that we are going to put in place the necessary system to collect all of the data to ensure that all of our measures are up to date and coordinated. We increased the number of people who manage the allegations in order to be able to give an answer faster. The turnaround to provide an answer is about 40 days, which is shorter than in the past.

We are confident. There is a continuous improvement process. We are putting the system in place and making sure that it functions as expected and that we have the necessary human resources to manage the fraud allegations.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much. We're two minutes over, actually, Mr. Massé.

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

You took four minutes of my time.

[The Chair, Conservative, Kevin Sorenson]

Mr. Christopherson, please.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair.

I just want to say at the outset of my remarks that this has been a good hearing. I know we were concerned about the number of deputies we were bringing in and trying to fit into our usual time frame. When we do that, we end up so bunched up and squished that we kind of just skate over everything.

I really enjoyed the fact that we had that extra seven-minute round on something this complex, with this many witnesses to really give us the chance to kind of flesh things out. I find that it has been a very good hearing.

I want to thank Mr. Nuttall in particular for picking up where I was, because now I have only a couple minutes left that I want to use to close the issue, at least for me, of the mandatory training, Chair.

I seek some guidance from you. I know that we have an hour. We didn't say what we were going to do with it. We have it for this. I know we also have in camera business.

[The Chair, Conservative, Kevin Sorenson]

Yes, we have about 10 minutes at the end. We'll leave five to 10 minutes for that, so we have lots of time.

[David Christopherson, NDP, Hamilton Centre, ON]

Excellent, that's great.

If I can get the assurance—and it sounds like I have it from you—that I can come back to my two or three minutes on the mandatory training, what I would like to do now, Chair, with your permission, is to throw my formal time that's left in this five-minute slot to Mr. Lefebvre so that he may pick up on where he was because I really thought he was starting to get some traction there.

I think it's in our interest to see that continue.

[The Chair, Conservative, Kevin Sorenson]

We'll throw the schedule away and go back to Mr. Lefebvre with the condition that I allow Mr. Christopherson to come back, maybe on a Liberal timeslot.

Go ahead, Mr. Lefebvre.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Christopherson, for that.

I am going to follow in the same vein regarding internal monitoring. Mr. Matthews just talked about this in reply to Mr. Massé's questions.

I would like to go back to examples you provided in your replies, because one thing concerns me. It is all well and good to say that we are going to do internal audits, but how will you do that? I know that those details are determined internally, but we the members of the committee do not have those details. That is the issue. Often if follow-up is not done properly internally, that is where things go wrong.

Ms. Lemay, I know that you have been wanting to say something for a while. Just before, I simply want to give you some idea of where I am going with this.

In a reply regarding employee training and the management of conflicts of interest, you said that in January 2017 another column would be added to declare any conflicts of interest, and that people can choose between “none”, “real”, “potential”, or “apparent”. That was the only answer you gave us.

That worries me a bit. I would like to hear about the follow-up. As you said, you award 50,000 contracts a year. There have to be impeccable internal controls and that is what concerns me.

I know you wanted to speak. I will give you a minute and then I will take back the floor.

[Marie Lemay]

I no longer know which point I wanted to speak to.

Let's talk about conflicts of interest, since that is the topic of your question.

In his report, the Auditor General indicated that Public Services and Procurement Canada had good measures to deal with conflicts of interest. In the letter we give to employees, we ask them to complete a form within 60 days. Afterwards, we assess the conflict, we return the letter to the employee, and we send a copy to the manager.

However, one thing was missing in our system. We had all of the information, but we did not record the decision we made. We shared the decision with the employee and the manager, but it was not entered in our log. So we added that column to make sure that we closed the loop.

There are two other points I'd like to go back to.

First, you asked a question about the internal process. One very important thing changed and that is how we determine the risk profile. It often used to be done according to an ascending process from bottom to top. We changed our approach and now things come from upper management and the employees. As you can see in our risk profile this year, fraud was detected. This is very interesting for us.

There is one last thing I wanted to say. Indeed, internal controls are very important. However, as deputy minister, I believe it is really very important that we give as many opportunities as possible to employees so that they can let us know if something is not right. Consequently, it is very important to create a culture where people and entrepreneurs will feel that they can disclose things and know that we will follow up.

And so we have a multitude of possible entry points. The challenge is that if we do our work well, our numbers are going to increase.

[Paul Lefebvre, Liberal, Sudbury, ON]

That is clear. And that is what we want; it means it's a success.

I want to go back to the risk issue. You are trying to identify all significant fraud risks, naturally. But how do you assess the nature of those risks? And then what measures do you put in place to mitigate those risks? That is what is important.

[Marie Lemay]

Regarding procurement, for instance, we went into further detail. At each step of the process, we have different groups and committees that identify the risks, determine what we are going to do, and what measures we will put in place.

[Paul Lefebvre, Liberal, Sudbury, ON]

And are there people responsible for that at every step along the way?

[Marie Lemay]

Absolutely.

[Paul Lefebvre, Liberal, Sudbury, ON]

We talked about the human aspect and its deficiencies. The Auditor General and Mr. Matthews mentioned this as well. Sometimes, someone may not fill out the questionnaire properly. Nevertheless, we have to have checks and balances and follow-ups. Are you still working to put that in place?

[Marie Lemay]

Absolutely. However, as several of my colleagues said, we are all very aware of the need to deliver the message continually. We don't just do it once, twice, or three times; we do it constantly.

[Paul Lefebvre, Liberal, Sudbury, ON]

This takes us back to the example my colleague just mentioned, that is to say an incorrectly entered address or a mistake in the name of a company. There have to be follow-ups. I think that was not done in the past. Once the entry was made, there was no follow-up.

What mechanisms do you need internally to ensure that best practices are put in place?