Public Accounts Committee on June 4th, 2024

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

So there was a desire to potentially hinder a cybercrime investigation.

Is that correct?

[Karen Hogan]

That is a possibility, and Granby Police is aware of the facts. We communicated with them during our audit, and now that our report has been made public, they can read it and contact us if they have any questions.

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

Did you share with the RCMP some of the things you found in your audit? If so, what are they?

[Karen Hogan]

We did not share that with the RCMP. We very rarely communicate with the RCMP before our reports are made public. Usually, once the report is made public, the police services can read it and communicate with us.

However, we have identified another situation that worries me a lot. It concerns a report that was received by the CRTC about child sexual exploitation material and that was not sent to the RCMP.

I had a lot of communication with the CRTC and I decided, in April 2024, to inform the RCMP, which responded very quickly to our report.

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

Very good.

I would like to move on to the other violation cases, which are more of an administrative nature, although they are still violations of statutes.

Let's start with the violations that relate to professional services contracts. In the report on the McKinsey firm, a number of elements are noted. The processes were clearly not followed on many occasions. You had already pointed this out in the report on the ArriveCAN application, and you are pointing it out again today.

However, this does not seem to be the case only for processes relating to the McKinsey firm or the ArriveCAN application. The phenomenon seems to be more widespread.

Is that correct?

[Karen Hogan]

That is correct. I don't think there's any reason to believe that the results of our audit are limited to McKinsey. I would expect to find that the rules are not followed in the awarding of other professional services contracts and procurement contracts in general.

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

Your answer is clear.

Your report states that 71% of the contracts awarded to McKinsey were awarded non-competitively. This means that 29% were awarded competitively.

However, even in cases where so-called competitive contracts were awarded, the processes were sometimes not fully competitive, to the extent that the selection criteria were sometimes too restrictive, which you noted in your report.

In the case of contracts awarded non-competitively, only a small proportion—around 20% of the contracts awarded to McKinsey—were on a standing offer. Thus, 50% of the contracts awarded to McKinsey were awarded non-competitively, and there were no standing offers. Even when a standing offer was put in place, it was done following a non-competitive process.

[The Chair, Conservative, John Williamson]

I invite you to ask your question, Ms. Sinclair‑Desgagné.

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

Ms. Hogan, is that situation worrying you?

[Karen Hogan]

I am always worried when a contract has been awarded non-competitively and the justification is not sound. A non-competitive process should be an exception.

Therefore, it is very important that the justification for using such a process be sound. The fact that 71% of contracts are awarded non-competitively concerns me.

What also worries me is the extent to which non-competitive processes are used in all departments and agencies and in all Crown corporations. Many do not adequately justify the use of these processes.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Desjarlais, you have the floor for six minutes, please.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I want to thank the Auditor General and her team for conducting this important audit into what Canadians already experience and already know—that there is this growing concern of mismanagement and inefficiencies in the federal government.

I think the Conservatives do a good job in reference to categorizing the problem, which is this big, bloated bureaucracy, but we find that the other half of that truth is that it's actually a private sector entity that's continuing to bloat our expenses. Whether it's ArriveCAN or this particular instance, we see that private firms continually take advantage of the vulnerability of our federal public service when we know that federal public servants can do the work.

We continuously see flagrant disregard for rules from consecutive governments. We heard from our Conservative colleagues just now that they want to forget that they also were not following the rules. The report that you've tabled here is about 2011 to 2023. Rules were not followed. Those rules were important to make. As you said in your statement, those rules are in place “to ensure fairness, transparency, and value for Canadians—but they only work if they are followed.”

Would you say that those rules were not followed between the same period of time of 2011 to 2023?

[Karen Hogan]

You're correct in that our audit covers a 12-year period, which is a very lengthy time. We would have held the departments and agencies and Crown corporations to the rules that existed at the time the contract was awarded. The frequent non-respect of these rules was all over the 12 years in question, throughout nine out of 10 departments and agencies and eight out of 10 Crown corporations. It's very frequent.

It's time for the government to really refresh and remind everybody about all the procurement rules and make sure they're being followed.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I appreciate that statement because I think it's important for our colleagues. If we want to take this issue seriously, actually deal with this issue seriously, we have to take into consideration that this has been a long-standing issue. There have been consequential, consecutive governments that have done this, and I find it so disingenuous that, oftentimes, particularly my Conservative colleagues always want to paint this picture that it only existed recently.

It doesn't serve Canadians well when we know that consecutive Conservative and Liberal governments, as your report makes very clear, have had rules in place but didn't follow them. They just don't follow the rules. It's convenient that Conservatives continually harp on the fact that it can't be them, but as a matter of fact, the problem is with consecutive governments doing this.

I want to make certain that in our discussion on this report—particularly, Mr. Chair, when we summon this report for investigation, when we table this report so that we summon witnesses—we focus on the true, genuine need to deliver results for Canadians, which are transparency and fairness, and actually recommend solutions that are going to fix this permanently.

To continually use this as an opportunity to make cheap shots at just one government, whereas they also were in government during the time of this audit period, means they have to do some honest reflecting—honest reflecting about making this work. They are harping on me right now because they don't want to actually deal with the fact that they are the ones who did this. They didn't follow the rules, and then the Liberals followed suit and didn't follow the rules.

I find it so difficult in this committee oftentimes. It's just the Bloc and the New Democrats who want transparency here. We're the only ones who actually want to fix this issue. The Conservatives are laughing because they want to make this into a partisan game when, as a matter of fact, this is serious money.

I appreciate the Auditor General for pointing out the fact that these rules have been consistently and flagrantly disregarded by Conservatives and Liberals, and it's important as committee members that we take this issue seriously. I beg their pardon on this because I hope that they can take it more seriously than they have today.

I will turn my attention to the findings of your report, 5.31, the finding related to procurement strategies that “were structured to make it easier for McKinsey & Company to be awarded the contracts”.

How is it possible that the procurement strategies that were undertaken, particularly the policies that create these procurement strategies, were structured or even altered when McKinsey & Company...prior to their bidding on these projects?

[Karen Hogan]

Out of the 97 contracts that we looked at, six of them appeared to be designed to suit or to favour McKinsey. You can appreciate that, when there are 20 organizations, almost every contract is a uniquely different story, so I'm going to try to keep it somewhat general.

I would tell you that in four of the competitive contracts, we found that there was a change in strategy that made it easier for McKinsey. We're not saying that you can't change your procurement strategy, but you need to really justify why you are changing a strategy to award a contract to a specific vendor.

In two of those cases, we found that the procurement strategy was a competitive one, but that there were questions raised by bidders around the narrowness of certain criteria. We didn't see documentation about how those concerns were addressed. In the end, there was one bidder, and it was McKinsey who received the contract. Those are the cases where it looks like it was done to suit them.

When you look at the national master standing offer, we did find in a couple of cases that two departments waited a little over a year, actually, for the national master standing offer to be available with McKinsey for benchmarking services, when there were other standing offers for benchmarking services that could perhaps have addressed their needs.

Again, it's about documenting why. When you're going to go non-competitive, why are you doing it? I can't underscore enough the importance of making that clear and transparent.

[The Chair, Conservative, John Williamson]

Thank you very much.

Beginning our second round, Mr. Perkins, you have the floor. I understand you're going to be splitting your time with Mrs. Block.

Do you want me to cut you off halfway, or will you...? That's fine. I just want to be clear.

You have the floor for five minutes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

In your report, Auditor General, on the SDTC, which the public knows is the NDP-Liberal green slush fund, you mentioned that the 90 conflicts of interest of Liberal Prime Minister hand-picked appointees who were in a conflict of interest totalled $76 million.

Am I right that they didn't follow conflict of interest rules?

[Karen Hogan]

I would say that the foundation really poorly manages conflicts of interest in general—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Ma'am, I just hope you could stick with the....

[Karen Hogan]

Yes, I'm going to stick tight.

They don't have an effective system to maintain conflicts of interest or the mitigating measures. We found 90 cases where their records showed that members of the board had declared a conflict of interest, were involved in the discussion and then voted on awarding funding to a project. That should not happen. That violated their own policies for conflicts of interest.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

They did report them, because further on you also say there are 96 cases where directors declared conflicts of interest that the department knew about. Are those 96 in addition to the 90?

[Karen Hogan]

We found that there were 96 cases that were actually well done. It was declared, and the minutes of the meetings properly show that individuals had recused themselves. However, there were 90 cases where that was not the case. When we spoke with the members of the board in question, they told us either that they didn't have a conflict of interest or that they had—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

There are 186 cases where there's a conflict of interest.

[Karen Hogan]

I'm going to look to make sure. Yes, overall—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

What's the total of the two in dollar values, because you only list $76 million for the group of 90. What's the total for the 96?