Public Accounts Committee on June 4th, 2024

[Andrew Hayes]

I have one clarification.

It was the Granby Police Department, not the RCMP, that we were talking about in the report there, although we did not name that organization.

Yes, we will provide you with the information that we can on the individuals involved from the documents that we have.

[Frank Caputo, Conservative, Kamloops—Thompson—Cariboo, BC]

It sounds like it could—

[The Chair, Conservative, John Williamson]

Thank you, Mr. Caputo. That is the time, unfortunately.

Mrs. Shanahan, you have the floor for five minutes, please.

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

Thank you, Chair.

Again, I'd like to thank the Auditor General for being here today with her team to provide these three reports to us.

As is often the case, there are overriding themes in the reports, and I'd like to ask the Auditor General a couple of questions, namely around the conflict of interest rules. That's the one recommendation that you brought forward in the professional services report.

However, I must say, given that the scope of this report was from 2011 to 2023, when I was sitting on this committee in the 42nd Parliament, many of the reports that we were seeing from the Auditor General at the time had to do with, for example, unconscionable delays in delivering service on disability payments. We know what was going on during that time, and it was that there were many cuts to the public service.

I'm wondering what was going on in the public service from that time. Was there a lack of capacity? Was there a lack of guidelines on how to address conflicts of interest and how to provide proper documentation? Was there a lack of oversight? What were some of the causes, do you think, Auditor General, of this problem?

[Karen Hogan]

These are really big questions spanning 12 years. The public service has changed so much over the course of 12 years.

I would start by telling you that, as an auditor, if you haven't documented something, it didn't happen. It's important, if you're making a judgment call or if there is a potential conflict of interest, that you ensure you're properly documenting decisions, mitigating measures.... It's all about being transparent. I think I would come back to those fundamentals. It's about showing transparency and accountability to Canadians.

I think there's a bigger, broader conflict of interest conversation going on now across the public service. You're right that many of the reports from my office over the last 12 years have noted issues. Most recently, I've done that as well.

In regard to conflicts of interest, you need to worry about real conflicts and also the perception of conflicts of interest. An individual shouldn't be seen to have benefited from public funds. You need to make sure, as a public service, that you set up your personal life and your work life in such a way that they don't interfere. You always need to look unbiased and fair to Canadians. What we found at the Sustainable Development Technology Foundation was really a significant lapse in the management of conflicts of interest.

One recommendation we issued under our professional services contracts was to provide clarity and to be more proactive: to declare if you have a potential conflict of interest when you're part of a committee that is evaluating bids in a competitive process. Competitive processes should be the way to go, and when you do that, you want to make sure there are no biases that are introduced in those evaluations. We believe that relying on the annual declaration for public servants isn't enough. You should be much more proactive.

In fact, we saw certain Crown corporations, especially Export Development Canada, being really good at doing that. That's why we felt the recommendation should be to all in this audit, but I would say, more generally, that everyone in the public service should be thinking and talking about conflicts of interest so that we manage them better.

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

Thank you for that, Auditor General, because you have testified that, in other instances where the public service has programs, something they have to deliver, using professional services is not something that is untoward, but there must be a justification for it. I can only think that, with the pressure on the public service, for reasons that we all know over the last 12 years at different times, certain practices must have crept in and were not properly addressed.

Would you say that could be addressed by...? I know you have said it, but I just want to hear it from you again. Do we need to add more rules? What would be the game-changer here?

[Karen Hogan]

I think your question touches on an important element of determining what should be done by everyone at the start of a procurement process. Before you decide that you want to issue a contract, you should figure out what you need this contract for. Is it to help with capacity issues? Is it to fill a skills gap, or is it because you want to go and get a different perspective, a different way of doing things? Once you've done that, then you figure out the right procurement vehicle to meet your needs.

I have said it before, and you're right. It isn't about creating more rules here. It's about applying the existing rules, but that really comes with making sure that everyone understands those rules and their individual accountability in a procurement process, and then documenting when you need to make justifications or exceptions. Issuing contracts on a non-competitive basis is an important exception that should be well justified and documented.

[The Chair, Conservative, John Williamson]

Thank you very much.

I'm going to have a lightning round here. Members of the government and the official opposition will each have two minutes and the other two parties will have a minute each.

Mr. Berthold, you have the floor for two minutes.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Mr. Chair.

Good morning, Ms. Hogan. It's good to see you again.

Ms. Hogan, I'm going to quote the titles of the three news releases that were issued today: “Policies frequently disregarded by federal organizations when awarding professional services contracts”; “Significant lapses in governance and stewardship of public funds at Sustainable Development Technology Canada”; and “Canada’s response to cybercrime hindered by government’s siloed, disconnected approach”.

You've raised more issues in these three audit reports than in any of your previous reports. There really is a problem at the moment when it comes to the awarding of contracts in the government.

Is that correct?

[Karen Hogan]

I would say that the extent to which policies were not followed in terms of contracting and risks to value for public money varied across organizations.

This is the first time we've been able to look at how Crown corporations and departments or agencies award contracts. We found that this lack of compliance exists in all organizations.

The government should take a step back and say that everyone has to understand the directives and policies and that they must be followed.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Ultimately, if I understand correctly, these lapses are found everywhere—that is to say favouritism and rules not being followed when it comes to public bids. These are significant lapses in the management of organizations.

Shouldn't a clear message be sent to the entire public service that such reports are unacceptable?

[Karen Hogan]

Yes, that must be done. The lesson I would take from all of this is that it's important to have proper oversight. Monitoring is necessary. Whether we're talking about the awarding of contracts or the governance of a foundation, it is important to closely monitor the use of public funds and ensure compliance with policies and statutes.

There are a lot of examples here that concern me. I think we really need to go back to the basics of how to properly manage public funds.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

At the end of the day, it's a matter of following the rules, and not of adding new rules.

Is that correct?

[Karen Hogan]

I don't think adding more rules helps the situation. It is really a matter of following the existing rules and determining the root cause of what we are seeing.

We would have to see if there are too many rules and if they are too complicated. We have to evaluate that process as a public service.

[The Chair, Conservative, John Williamson]

Thank you very much, Ms. Hogan and Mr. Berthold.

Up next, we have Ms. Yip for two minutes, please.

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

Thank you.

Auditor General, in your opening statement, you mentioned the total value of contracts awarded to McKinsey & Company during the period we reviewed totalled $209 million, of which $200 million was spent. What happened to the other $9 million?

[Karen Hogan]

As I mentioned earlier, there are 97 contracts here, and they're all kind of unique. I would cite probably two things. One is that the contract is still ongoing, so they perhaps could spend the full amount of the contract. However, in other instances, the ceiling or the full amount of the contract was not spent.

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

Your report makes it clear that rules were not followed adequately during the awarding of professional services contracts, and some of my colleagues have focused their questioning on the awarding of contracts to McKinsey.

Can you please remind us, again, of the percentage of dollars that went to McKinsey?

[Karen Hogan]

When you look at the bucket of professional services that McKinsey provided and compare it to the spend across the public service for professional services contracts, McKinsey accounts for 0.27% of that spend.

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

How statistically significant is 0.27%?

[Karen Hogan]

It's a tiny percentage.

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

That's right.

[Karen Hogan]

However, the problems, I think, are not unique to McKinsey. The problems are something that I would expect to see more broadly across professional services and contracting. That's why everyone needs to be reminded of all the rules and the importance of following them for transparency and accountability.

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

What are some of the changes that SDTC made quickly in the light of your report?

[Karen Hogan]

Do you mean some of the changes that SDTC made?