Public Accounts Committee on Oct. 5th, 2017

[The Chair, Conservative, Kevin Sorenson]

Good morning, everyone. This is meeting number 69 of the Standing Committee on Public Accounts.

We are continuing our study of “Report 1, Management of Fraud Risk”, from the spring 2017 reports of the Auditor General of Canada.

I'll remind everyone that we began this on Tuesday. We heard from the various different departments and from our Auditor General on Tuesday. They will not be giving another opening statement. We will carry on the meeting from where we are.

We have returning Mr. Michael Ferguson, the Auditor General of Canada; Paul Glover, president of the Canadian Food Inspection Agency; Bill Matthews, comptroller general of Canada, the Treasury Board Secretariat; Simon Kennedy, deputy minister, the Department of Health; Hélène Laurendeau, deputy minister, the Department of Indian Affairs and Northern Development; Ian Shugart, deputy minister, the Department of Foreign Affairs, Trade and Development; and Marie Lemay, Department of Public Works and Government Services.

We will now proceed with questions from the members. So that we can understand the format here, we're going to begin with how we ended. There are two departments still to report in regard to the mandatory training. Then we will go back to the first round of questioning without hearing another witness.

We thank Mr. Kennedy. He answered the question of Mr. Christopherson in regard to mandatory training. Mr. Christopherson asked how we can be certain any training is being adhered to, when we have training that's laid out and only 20% in some departments are taking that training.

We will now move to Mr. Glover.

[Paul Glover, President, Canadian Food Inspection Agency]

Let me begin by saying that we absolutely agree that 34% is not an acceptable number.

As Mr. Kennedy said earlier this week, we take a risk-based approach to these things, so while it is mandatory, we are targeting those we feel need it the most.

With respect to the number, we have a fair number of transients and students, so if we take out those people who are with the agency for less than three months—because we have surge work during the summer, and other things—that number jumps to 59%. That's still not acceptable—we would agree—but it's higher.

With respect to our inspectors, virtually every inspector who has gone through our prep training before heading out into the field—so, 100% of those—have, after graduating probation, gone through values and ethics training, including the issue of fraud.

With respect to our 1,300 delegated managers who are responsible for signing, they have all had to, again, complete the delegation training, which includes a module on values and ethics.

When we look at some of the areas where we feel there is greatest risk, then I have a certain degree of confidence to share with the committee that we have a number significantly above the 34%. Again, as I said in my opening, that's still not acceptable. That's why, at the beginning of this fiscal year, we wrote into all of my executives' management contracts that mandatory means mandatory, and it is part of their performance objectives to make sure we achieve that.

We will be following up. We are approaching the six-month, mid-year review to give them feedback. We have a quarterly report that is shared with us at the management table to ensure that we are actually doing what we said we would do.

The final thing I would share with the committee in terms of confidence is that we take this very seriously, beyond just the mandatory training. Within the Canadian Food Inspection Agency we have an inspector general's office, whose role is to take a look at the work of inspectors to make sure that, when presented with this information, they take the same or consistent action. That's a way for us to see if somebody is taking action that looks a little different from what would be the norm. In the same way we would mine our procurement data for variabilities that would be flags that there is something a bit off, we look at what our inspectors are doing to make sure they are behaving in a consistent manner.

So, I certainly agree that 34% is not where we need to be. We'll be taking action to increase that number. However, we have been focusing on those areas that are at greater risk. We have also made it mandatory in terms of the performance agreements of our executives, and we will be following up with them to make sure this number is moving up significantly and quickly.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Glover.

We'll now move over Ms. Lemay.

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

Thank you very much, Mr. Chair.

We too find this unacceptable, the numbers that we see in the report. I have to say I was surprised by what I saw. I didn't think it reflected the way we actually operate at PSPC.

I'd like to tell you a bit about what we do. Maybe that explains the numbers that we have.

The first thing is that in every letter of employment, the employee signs the letter, and agrees that they will abide by the code of values and ethics. They will look at the conflict of interest and let us know, and fill in the forms within 60 days of their appointment. They undertake the obligation to take the course of values and ethics through that. Now, I think part of the issue—and it goes back to data and collection of data—has been that this is how we verify that and collect that information.

The second thing we do is we focus a lot on the high-risk areas. For that, where the sense of reassurance for us is that no one will get their delegated authority without having taken that course. That was a bit of the check for us.

Again, I'm not sure that we have the appropriate tools to report some of this so what we did was launch, in April, a management system to actually track and help managers track that so we can report on the numbers, be able to track them in time, be able to be sure that we do as, Mr. Glover said, what we said we would do.

We've also introduced a new online ethics awareness tool. We've also introduced a new online course to identify and report fraud and wrongdoing. That was launched in May. I have to say that in preparing for this committee...I'm going to go back and see what areas we're actually going to make it mandatory. I think not leaving it as an option for some of the high-risk areas is going to be important. We're going to do that.

We also have conflict of interest training that was updated in the spring. We have introduced a number of measures since the report to build on what we were doing already. I think the tracking and making sure we have the tools to really ensure that we're doing what we said we would do, that we keep managers and executives aware of that, and we give them the tools to track that, is very important. We've put that in place.

[The Chair, Conservative, Kevin Sorenson]

Okay.

Just on that, so we get it right, are you saying that you don't have the capacity to track? You also said the tools to track. I'm just wondering. What are the tools to track? Isn't it just an Excel document?

[Marie Lemay]

The new system that we have in place is called ALTO. It is an online virtual tracking tool that allows us to follow the training of our employees in a virtual environment, which we didn't do before.

A lot of this was left to the managers to track and make sure employees took the training that they had to do. We're moving from that to really making sure that we have a centralized repository of who's doing what and when, so we can actually go in and make sure that people are doing it.

So, now we have the tools and we do have the capacity to do it.

[The Chair, Conservative, Kevin Sorenson]

All right.

We're going to have a fair bit of time on this. I think we'll now go back to the first round of questioning. We'll eventually get back to it. We'll stay on this question, I'm sure.

We'll go to Mr. Arya, please, for seven minutes.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Chair, I represent the riding of Nepean, in Ottawa. I keep hearing a lot of complaints on the three practices that apparently Treasury Board has accepted that could lead to fraud. The first is contract splitting, that is, unnecessarily dividing a requirement into a number of small contracts. The second is inappropriate contract amendments, and an agreed addition to or deletion from a correction or modification of a contract that is inappropriate. The third is inappropriate sole-source contracting.

I keep hearing quite a bit from a lot of contractors, especially the small contractors, that these are quite widespread in several federal departments.

I would like to ask our deputy ministers to comment on how prevalent these practices are in the contracts awarded by the departments. That's the first question.

Also, the Auditor General also found all organizations had controls for procurement. They had systems to protect and detect fraud, but he points out that these controls were not always applied, even when they were mandated. My second question would be, how many cases have you found where the mandatory checklist was not followed? If they were found, what actions were taken against the managers?

I'll start with the deputy minister for Public Works and Government Services, Ms. Marie Lemay.

[Marie Lemay]

Mr. Chair, if you'll allow me to say so, the comments of the honourable member really resonate with me. This is completely unacceptable. We have practices in place. At PSPC we manage more than 50,000 contracts a year. We have to have a rigorous framework and rigorous processes. If you'll allow me, I'd like to give you a sense of the things we have put in place.

There are obviously the codes of conduct. I said in my opening comments that we have codes of conduct not only for employees but for procurement officers. We also have something that I think is fairly unique: a departmental oversight branch. We have put under one branch the investigations, the good practices. We have an investigation capacity at PSPC to make sure that if we hear or receive complaints we have teams who can look into them, make recommendations, and take appropriate measures.

We introduced, as you probably know, an integrity regime back in 2015. We're starting consultation to see whether we can improve it. Also, just recently—in April—we launched a fraud tip line. That was for us a completing of the circle. It's a partnership with the RCMP and the Competition Bureau. If anybody has a complaint and wants to be—

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry. My time is quite limited. In how many cases have you found fraud, and what actions have you taken against the managers?

[Marie Lemay]

Internally, on a weekly basis now, we do the checks. I'll provide you the numbers; they have improved quite a bit since we started doing this on a weekly basis. We've improved the quality of the data, which is something the Auditor General had identified—

[Chandra Arya, Liberal, Nepean, ON]

Please send the data later. Thanks.

[The Chair, Conservative, Kevin Sorenson]

Mr. Arya is right. So that our deputy ministers understand, he is given just a set number of minutes. Try, therefore, to make your answer as concise as possible so that we get to hear from others as well.

[Chandra Arya, Liberal, Nepean, ON]

Let me move to the Department of Indian Affairs.

[Hélène Laurendeau, Deputy Minister, Department of Indian Affairs and Northern Development]

We've put a few measures in place to make sure we can track these things. Some of them were in place, but some of them have been improved since the report from the Auditor General.

We now have a documentation protocol to ensure consistency in contract hard copy files, allowing us to track better whether there are trends that should be preoccupying us.

We also have bolstered our procurement fraud risk sessions and have made sure that all procurement officers will have increased their awareness in order to be able to detect—because we're focusing on detecting—and then correct as needs be.

We also have launched guidelines on quality assurance—

[Chandra Arya, Liberal, Nepean, ON]

Guidelines? As the Auditor General points out, there are controls in place on paper. His point is that they're not being followed. My question, then, is: when you detect breaches, what are you doing about them?

[Hélène Laurendeau]

When we detect them, we either do an audit or we verify or investigate, if we have any suspicion that there could have been fraud associated with them. If need be, we will take measures to ensure that the situation is corrected, if it's a problem of ignorance or lack of awareness. If we have any indication that there is actually mismanagement, we take the disciplinary measures that are required.

[Chandra Arya, Liberal, Nepean, ON]

Before I come to Mr. Paul Glover, I would like to ask Mr. Shugart a question.

In the missions abroad, there is always a risk of corruption and fraud with respect to immigration cases. Do the visa officers posted in missions abroad administratively come under the jurisdiction of the head of the mission, or is it with the immigration department?

[Ian Shugart, Deputy Minister of Foreign Affairs, Department of Foreign Affairs, Trade and Development]

The procedures would be put in place, and the ultimate authority would be with the Department of Immigration. Functionally, however, on a day-to-day basis the head of mission has responsibility.

[Chandra Arya, Liberal, Nepean, ON]

If there is fraud or a corruption allegation, who exactly deals with it?

[Ian Shugart]

In one such case, we were doing a routine inspection of the mission. Misbehaviour was identified in the course of that, and on the spot we interrupted that individual's functional work and then immediately worked closely with IRCC to conduct the investigation and take the remedial action.

[Chandra Arya, Liberal, Nepean, ON]

I'm still confused. If there's a systemic fraud somewhere, is it ultimately the immigration department that actually manages it?

[Ian Shugart]

Not quite. The individual would be the employee of the immigration department, and therefore the ultimate action and so on would be enforced by immigration at headquarters, but in the post, the head of mission would take the appropriate action. The interaction between the two departments would be immediate so that we would be working together on it.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much. We're out of time.

We now go to Mr. Nuttall, please, for seven minutes.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you to each of the deputy ministers for joining us today.

I want to follow up on some questioning from Mr. Christopherson last Tuesday.

It says here that the Auditor General could not calculate the percentage of Global Affairs employees who received training because the department did not have the information needed to make the calculation.

To our representative from Global Affairs, I can imagine what it would be like if this were a CRA audit of one of our private businesses. If they don't have the information, we figure out a way to get that information from those individuals.

Why is this information not kept on hand? Was it misplaced?

In every area of the private sector and government in which I have worked, when there has been a previous request for something in the past, especially from the Auditor General, whether in this department or elsewhere, it is incumbent on the individual, the department, or the business to maintain that information and have it readily available at any point for an audit, because you never know when that's coming.