Public Accounts Committee on April 18th, 2024

[The Chair, Conservative, John Williamson]

Welcome back, everybody.

I appreciate the journalists who are being respectful of the parliamentary rules with regard to cameras. That's greatly appreciated.

Pursuant to Standing Order 108(3)(g), the committee is meeting today to study the Main Estimate, 2024-25, more specifically Vote 1 under Office of the Auditor General.

I'd like to welcome our witnesses.

From the Office of the Auditor General, we have Karen Hogan, Auditor General of Canada; Andrew Hayes, deputy auditor general; Jean-René Drapeau, assistant auditor general; and Paule-Anny Pierre, assistant auditor general.

Thank you for joining us here today, everyone. I appreciate seeing you all again. I feel we're becoming family.

Ms. Hogan, you have the floor for five minutes. It's over to you. Then we'll go to questions from the members.

Thank you.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Thank you, Mr. Chair.

We are pleased to have this opportunity to discuss the work of our office, including our most recent departmental reports.

I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinabe people.

The Office of the Auditor General of Canada serves Canada primarily through auditing and other work that assists Parliament in its authorization and oversight of government spending and operations. We provide Parliament and the territorial legislatures with independent and objective information, advice, and assurance about government financial statements and the management of government programs.

We also assist boards of Crown corporations and audit committees in overseeing the management of government activities. The Commissioner of the Environment and Sustainable Development assists me by focusing on the environment and sustainable development. We also support the development of legislative auditing and accounting standards and contribute to improving public sector auditing in Canada and internationally.

Let me turn first to our 2022-23 Departmental Results Report. We provided this report to Parliament in November 2023. As shown in our financial statements, our net operating cost was approximately $144 million, and we employed the equivalent of 732 full-time employees.

With these resources, we completed financial audits, performance audits, special examinations of Crown corporations, and other reports. In total, we delivered 117 audit reports to Parliament, federal and territorial legislatures and boards of Crown corporations.

In addition, the commissioner of the environment and sustainable development delivered the annual report on environmental petitions and several other reports related to sustainable development and climate change and began work on additional reporting requirements under the Canadian Net-Zero Emissions Accountability Act.

As part of our follow-up work, we updated our online dashboard, which provides a snapshot of the progress that select departments and agencies achieved in areas we previously audited.

As we do every year, we audited the financial statements of 90 federal and territorial government organizations and Crown corporations, including those of the Public Accounts of Canada. We issued clean opinions on 87 of these financial statements. We also presented our annual commentary on our financial audit work.

Our “Departmental Results Report” presents indicators that measure our performance and the impact of our audit work. One of the ways we have historically assessed the impact and performance of audit work is through the level of parliamentary engagement with our reports. In the 2022-23 fiscal year, parliamentary committees reviewed 88% of our federal and territorial performance audit reports, up from 80% in the prior year. I want to thank the Standing Committee on Public Accounts for reviewing all performance audit reports referred to it during this period and for reviewing two reports of the commissioner of the environment and sustainable development.

Internally, in 2022-23, we made progress on initiatives to review and renew the foundations of our work. This included enhancing our process for selecting performance audit topics to reinforce the relevance of our work for Canadians, legislators and the entities we audit. We also made progress on modernizing our IT infrastructure, reducing our environmental footprint, and supporting a healthy and inclusive workplace culture.

I would like to move on now to our main estimates and our department plan for the next fiscal year.

In the previous department plan, we introduced our updated departmental results framework. This framework articulated revised results and the indicators we will use to measure our progress. In this departmental plan, we added targets to our indicators, and we will be reporting on the results of these indicators for the first time in our next departmental results report.

For the 2024-25 fiscal year, our total budget is approximately $128 million. With these resources, we plan to employ the equivalent of 770 full-time employees.

During this period, we plan to issue 90 financial audits, 25 performance audits and three special examinations. These reports are planned on a wide breadth of topics, such as cybersecurity of government networks and systems, the Canada emergency business account, and critical minerals and batteries.

During the 2024–25 fiscal year, we will continue to work on several ongoing internal initiatives, such as our engagement with interested parties, our transformation journey, and initiatives to sustain and further develop a skilled, diverse and engaged workforce. All of these initiatives are fundamental to delivering value to those we audit and meeting the needs of legislators and people living in Canada.

Mr. Chair, I would like to acknowledge the committed, hard-working and devoted team of professionals in my office. I am incredibly proud of the excellent work that they deliver every day.

We thank the committee for its ongoing support and the use of our work. We would be pleased to answer any questions the committee members may have.

[The Chair, Conservative, John Williamson]

Thank you very much, Auditor.

Before I turn to Mr. Stewart, for those of you on the earpieces, I think there was a crack or a crackle. The translators have asked us to be careful with the headpieces, even close to your phones. I'm trying to determine if it's the microphone or the earpiece, but if you can, be aware of that.

Mr. Chen, maybe you can hold your phone away from the microphone. Just watch out. There's an audio issue, and we do not want to harm our translators.

Mr. Stewart, you have the floor for six minutes.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

I'd like to welcome Auditor General Hogan and her team today.

We truly appreciate the great work you do every day to assist this committee and Parliament in our oversight of government spending and operations. It's a challenging task you have with the Liberal government's $480 billion in program spending while running an annual $40-billion dollar deficit.

I believe the work you've done to uncover the historic levels of corruption and fraud associated with the ArriveCAN scandal will have a lasting legacy.

Your recent report reminds me of the work of Canada's first female Auditor General, Sheila Fraser, whose report on the sponsorship scandal rocked Canada's political scene during the last Liberal regime. Auditor General Fraser stated that the troubling transfer of hundreds of millions of dollars in sponsorship funds used “highly questionable methods”. She also referred to the Liberal sponsorship scandal as a “pivotal event with a lasting impact” and said it “broke just about every rule in the book”. Her quotes sound very familiar in regard to your comments to this committee about ArriveCAN.

In her 2011 speech, Madam Fraser also criticized the truly shocking lack of improvements on first nation reserves and said the following: “I actually think it’s quite tragic when you see that there is a population in this country that does not have the sort of basic services that Canadians take for granted.” I've seen this up close as minister of aboriginal affairs in my own home province of New Brunswick.

Your recent reports on housing and first nation communities and on policing show a lot of similarities to Auditor General Fraser's comments. It's very unfortunate to have seen a lack of progress over the past nine years.

The Office of the Auditor General has stated that it is committed to improving socio-economic outcomes for indigenous peoples by increasing opportunities for first nations, Inuit and Métis businesses in procurement processes. For example, you have stated plans to award a minimum of 5% of the total value of all contracts to indigenous businesses.

Because of the egregious misuse of indigenous set-asides that your ArriveCAN audit has uncovered, may I ask if you have considered taking a deeper look at the 5% program, and have you put in place a directive that your office not subcontract with Dalian Enterprises and David Yeo?

[Karen Hogan]

I can start by letting you know that we have never had contracts with Dalian Enterprises.

We have a plan, as you've stated, to help meet the 5% minimum target that the government has set. This past year, I would say, didn't achieve the levels that we were hoping to achieve.

Part of it was that as a result of our audit work, we have introduced an extra layer of rigour, an extra layer of examination, to ensure that the organizations we contract with are truly indigenous organizations. We don't want to issue a contract to an organization that might be a joint venture and was awarded the contract just to meet a set-aside. We truly want to make sure that the work we're giving goes to indigenous people.

We're going to work hard at trying to meet our commitment, but it's more important for me to make sure that it's done in the right way. Based on what we've found, we're also considering whether we want to audit this government-wide, and we haven't really landed on that yet.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

I appreciate that answer.

Also this week, the Treasury Board of Canada Secretariat provided to this committee a report on federal government employees double-dipping as contractors to the Liberal government, which is another disturbing trend you uncovered in the ArriveCAN audit. With the work still under way, 76 organizations in the core public administration so far have reported 140 federal employees who are double-dipping as contractors to the Liberal government.

If I recall, you were quite upset to discover that two or three Office of the Auditor General employees were double-dipping as well. Can you tell us how you became aware of these employees, and what process unfolded once you were made aware?

[Karen Hogan]

I'll ask Andrew to provide you with a bit more detail.

We've continued to look at and run procedures internally. I can tell you that I'm aware of five cases within my organization. Three were employees who had contracts with other government departments, and two of our contractors were either employees or contractors with other departments.

I'll ask Andrew if he can give you a bit more detail about that.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

Yes. Thank you.

I would distinguish between employees who have come forward to disclose that they have external employment and have received proper approval for that versus the ones who haven't. The cases the Auditor General was referring to were largely ones of people not disclosing that they had alternative employment.

In one case, we found that there was a employee who had other employment, and there was a problem because when we hired them, the process for “secret” clearance signalled that there was a problem. In another case, PSPC advised us that there was an ongoing investigation involving one of our employees in a number of other departments. A third case, which is currently being considered, is another case that was brought to our attention.

In terms of the contractors, one of them was identified in the PSPC disclosure about a month ago. There were three contractors working for a number of departments and agencies. The last case was one that we uncovered because we had identified signals that raised red flags.

In all of those cases, we took prompt and immediate action. We've undertaken investigations where appropriate. In the ones that have been completed, either those contractors don't work for us anymore or their employment has been terminated.

[The Chair, Conservative, John Williamson]

Thank you very much. That is your time, Mr. Stewart.

Next up is Mrs. Shanahan. You have the floor for six minutes, please.

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

Actually, it's Jean.

[The Chair, Conservative, John Williamson]

That's fine.

Ms. Yip, you have the floor.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

She'll be next.

Thank you, Chair.

Welcome back. It's good to be discussing the important work the Office of the Auditor General does for all Canadians.

Could you describe, Ms. Hogan, the types of audits undertaken by your office, and how they can be utilized effectively in the public policy process?

[Karen Hogan]

We do annual financial audits of the federal government as well as the three territorial governments, and we do financial statement audits for many territorial corporations and Crown corporations. Those are audit opinions that are given to the boards of directors or to Parliament about whether or not the financial statements accurately present the results of the organization for the year.

I'll tell you that when it comes to the public accounts of Canada, it's really that final accountability loop, so you get to see what was committed in a budget and then, in the financial statements for the year, what actually happened.

Those would be our financial audits. We do about 90 of those every single year.

We also do performance audits. In performance audits, we go into departments and agencies—at times, they include Crown corporations, depending on the program we might be looking at—to determine whether the programs have been managed with due regard to the economy, efficiency and the environment, and whether or not management has put in place ways to measure whether these programs have been effective and provide good value for money for Canadians.

Very closely linked to a performance audit is a special examination. It's about the equivalent of a performance audit, but in a Crown corporation. The parameters of that, however, are dictated by the Financial Administration Act. We must do a special examination for parent Crowns once every 10 years, and it's about processes and whether they have processes in place to safeguard their assets and deliver on their mandate.

We provide all of that to their boards, but we also provide it to Parliament so that you can hold Crowns accountable for managing their assets and delivering against their mandate.

The commissioner of the environment will usually issue performance audits, so he does my job on the sustainable development and environment side. He also has responsibilities arising out of other acts, like the net-zero emissions act and so on, so he provides other reports to Parliament that show whether or not the government is meeting the commitments it has made for sustainable development.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

[Karen Hogan]

There are also petitions.

Petitions are not our audit work, but we do manage the petitions process. It's one that I'm not sure many Canadians know about.

Canadians can submit an environmental petition if they want to how the government is handling certain environmental matters. It's submitted to us; we ensure that a government department receives that petition, and then the department provides a response to Canadians.

We're really more of an administrative box there, but we do provide a summary of all petitions received so that Parliament is aware of what Canadians are concerned about when it comes to the environment.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

That's a lot of work in many different areas.

I would say that funding for your office is probably really important. It allows you to do the work that you've just discussed.

During the first year of the Harper government, your budget was $78.6 million. During the last year, it was only $81.8 million. When Pierre Poilievre was the minister responsible for safeguarding our democracy, he did not ensure that officers of Parliament were funded adequately.

Can you explain to the committee how your office is funded and what adequate funding means for the work that you do?

[Karen Hogan]

That's a very important question.

Our office does seek its funding through the regular parliamentary budget process. We submit a budget request to the Department of Finance, and it goes through the normal process that every department must go through.

You may recall that when I was nominated back in early 2020, my office had been looking for additional funding. At that time, I had put in a request for funding as well. We received the money I asked for, but I then talked about the need for an independent funding mechanism.

I think this is something that so many agents of Parliament should ensure they have. It is difficult for us to ask for money from a department that we audit. There should really be an independent mechanism through which we can turn to Parliament and have some accountability there.

I will tell you that since I received that money back in 2021, we have received additional mandates that have been unfunded. This is a continuous pressure point on my office.

Since 2021, the commissioner has received a mandate in the net-zero emissions act. There are five additional Crown corporations that we have been asked to audit, and none of those audits came with additional funding.

This is something I monitor. I will tell you that very soon I might be saying that if I don't want to impact the number of performance audits that I provide to Parliament, it's likely that I'll be needing additional funding.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Chair, how much time do I have?

[The Chair, Conservative, John Williamson]

You have about 20 seconds.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

That's time for a very quick question.

Has any progress been made since last year on diversifying senior management positions?

[Karen Hogan]

That's a question I have to admit that everyone sitting here, as members of senior management, thinks about and talks about often. I view the employment equity targets as just the minimum that we should meet. We are exceeding most of them, except for representation around indigenous individuals. However, that's our workforce as a whole.

When it comes to management, we are still struggling to meet employment equity targets. It's probably due mostly, in my view, to attrition. Our historical attrition rate has been about 10%. In the past few years, that has dropped to around 4%, and that is much higher in our working level than it is in our management. Management is even less than 4%.

That's an issue that I know we have to tackle in a real, concrete way in the coming months and years. We're very management-heavy. How can I increase diversity in that cadre if there is no turnover?

It's a challenge that we have to face coming forward, because we haven't met the equity targets that we've set for ourselves in management.

[The Chair, Conservative, John Williamson]

Thank you very much.

Ms. Sinclair‑Desgagné, you have six minutes.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Good afternoon, Auditor General.

I'd also like to welcome all the witnesses, whom I thank for being here.

I'd like to expand on the questions raised by my colleague Mr. Stewart regarding these double-dipping employees who hold various positions.

The Department of National Defence has launched an investigation. Mr. Hayes, when you answered the question, to which case were you referring? I'd like to know the status of this investigation into the official who was both a department employee as well as a consultant for the Office of the Auditor General.

[Karen Hogan]

I can give you a quick answer to that question.

The Department of National Defence investigation doesn't involve any employee in my office. I don't have any more details than you just mentioned.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Okay.

However, you talked about internal investigations. Are investigations going on in other departments in connection with double-dipping employees?