Public Accounts Committee on June 19th, 2025

[The Chair, Conservative, John Williamson]

Good morning, everyone.

I call the meeting to order.

I would like to welcome you to meeting number 2 of the House of Commons Standing Committee on Public Accounts.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders.

Members, I believe, are all in the room today in person, although of course members have the option to join us remotely using the Zoom application.

Before we begin, I'd like to ask all in-person participants to read the guidelines written on the updated cards on the table. These measures are in place to help prevent audio feedback incidents and to protect the health and safety of all participants, with particular emphasis on our interpreters. You'll also notice a QR code in the card, which links to a short awareness video.

I'd like to remind participants of the following points.

Please wait until I recognize you by name before speaking. All comments should be addressed through the chair. Members, please raise your hand if you wish to speak, whether participating in person or via Zoom, and catch either my eye or the eye of the clerk. The two of us will manage a speaking order if one is necessary.

Pursuant to Standing Order 108(3)(g), the committee is beginning consideration of reports 1 to 4 of the Auditor General of Canada and reports 1 to 4 of the Commissioner of the Environment and Sustainable Development, published earlier this year and referred to the committee on Tuesday, June 10.

I would like to welcome our witnesses from the Office of the Auditor General. Thank you for coming in today, and thank you for agreeing to come in a little earlier.

We have Ms. Hogan here, the Auditor General of Canada. It's nice to see you. Thank you again for being here.

We have Mr. Jerry DeMarco, commissioner of the environment and sustainable development. It's nice to see you again. We also have Andrew Hayes, deputy auditor general. It's nice to see you.

We are also joined by Sami Hannoush, principal, and Nicholas Swales. It's nice to see you as well.

I understand that we will have two opening statements of five minutes each. I believe, Ms. Hogan, you will begin.

You have the floor.

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

Good morning. Thank you, Mr. Chair, for the opportunity to appear before the committee to discuss our recent reports.

I would like to begin by acknowledging that we are gathered on the traditional unceded territory of the Algonquin Anishinabe people.

You've introduced who is joining me today. We also have other members of our management team responsible for a few of the other audits that are present so that we can fully address any questions that the members may have.

Before turning to our reports, I would like to take a moment to briefly outline the role of my office for the benefit of members newly appointed to this committee, while also acknowledging those of you who are returning and who are already familiar with our mandate.

As Auditor General of Canada, my role is to provide Parliament with independent and objective information on how public funds, programs and services are managed on behalf of Canadians, supporting your efforts to hold government organizations to account. We do this through financial audits, performance audits and special examinations of Crown corporations.

Within my office, the commissioner of the environment and sustainable development plays a key role in auditing the federal government's actions on environmental protection and sustainable development, and in monitoring progress towards Canada's climate and sustainability commitments. Together, we are happy to support Parliament and all of its committees in any way that we can.

Your insights and feedback are vital to shaping our work. We exist to serve Parliament and strive to continuously adapt to meet your needs. For example, our update on past audits was launched in 2021 to answer Parliamentarians' questions about departments' progress in implementing our previous recommendations. We received feedback from the House of Commons and the Senate, and we will be introducing a new approach to following up on recommendations in the near future.

Turning now to our recent reports, we will be making a joint opening statement, beginning with the commissioner.

[Jerry V. DeMarco, Commissioner of the Environment and Sustainable Development, Office of the Auditor General]

Thank you.

The reports I am presenting today all involve issues that are fundamental to achieving sustainability.

I'll begin with our audit of Canada's national adaptation strategy, which aims to coordinate climate change adaptation action across Canada.

We found weaknesses in the strategy's design and implementation. Key elements were missing, such as a prioritization of Canada's climate change risks. We also found that the adaptation action plan, which is central to a national strategy, was not comprehensive.

Additionally, two major components of the strategy—the Federal, Provincial, and Territorial Bilateral Action Plans, and the Indigenous Climate Leadership Agenda—were still being developed.

While the 2023 release of the strategy was an important first step, it came nearly 20 years after we first recommended the development of a strategy to adapt to Canada’s changing climate. Urgent action is still needed to deliver meaningful results for Canadians’ health, safety and livelihoods.

Turning to our audit of Environment and Climate Change Canada, Fisheries and Oceans Canada, and Parks Canada, we examined how they identify and monitor critical habitat for species at risk. The loss and degradation of habitat is the primary threat for most species at risk.

While all three organizations used the best available information to identify critical habitats, they were often slow to gather the additional information needed to fully understand species' needs. In addition, we found that monitoring on federal land was limited, making it difficult to assess whether actions were delivering intended results.

This is the final audit in a series that focused on the implementation of the Species at Risk Act. Across all these audits, we observed delays and gaps in information that have hindered the protection and recovery of species at risk. To meet Canada’s 2022 biodiversity commitments, departments must improve data collection and monitoring to prevent further species loss.

Our next audit examined whether Fisheries and Oceans Canada effectively led the development of an integrated approach to managing marine resources in the Pacific, Arctic, and Atlantic oceans. We found that while the department collaborated with partners in five priority regions, the resulting plans were high-level and did not lead to concrete actions.

Progress on marine spatial planning, a newer and internationally recognized process adopted by the department in 2018 to coordinate when and where human activities should take place in the oceans, has also been limited. Nearly 30 years after integrated ocean planning became law, Canadians are still waiting for meaningful implementation. With worsening climate change and increasing pressures on marine resources, the department must step up its leadership.

My final report looks back on over 30 years of federal sustainable development actions and outlines six lessons to help Canada improve its performance and build a better future.

Implementing sustainable development is proving to be an immense challenge in Canada. Despite setting national and international targets, Canada has made the least improvement among all G7 nations in meeting the United Nations sustainable development goals.

The report calls for a more integrated approach to sustainable development that incorporates social, economic and environmental factors in decision making, policies and programs. Other lessons include stronger national leadership and deeper collaboration—especially with Indigenous governments and peoples.

This completes the summary of my four reports.

The Auditor General will now review the key findings of her reports.

[Karen Hogan]

Thank you, Mr. DeMarco.

I will turn first to our audit of registration under the Indian Act. Registration gives First Nations people access to vital services such as on-reserve housing, financial support for post-secondary education and health benefits not covered by other programs.

We found that Indigenous Services Canada poorly managed the registration process. The department averaged almost 16 months to make a decision on complex registration applications, exceeding its six-month service standard. Even on applications prioritized for reasons such as medical emergencies, the department took on average about 10 months to deliver a decision.

Indigenous Services Canada has the mandate to gradually transfer registration responsibilities to first nations communities, working with community-based registration administrators and trusted source organizations that help people apply for registration. However, we found that funding for trusted sources was unpredictable and unstable, and that the funding formula for community-based registration administrators had not changed since 1994.

Registration under the Indian Act plays a central role in recognizing first nations people under Canadian law. It gives access to important services and benefits, but people are waiting far too long for decisions.

Our next audit examined the Department of National Defence's project to replace Canada's aging CF-18s with advanced CF-35A fighter jets. We found that the estimated costs of the future fighter capability project have significantly increased, and the project faces several risks that could jeopardize timely introduction of the new fleet.

The Department of National Defence originally estimated that the project could cost $19 billion. The audit found that this figure was based on outdated information, and that by 2024, the projected costs had increased to $27.7 billion, almost 50% more than the original estimate. This figure does not include essential elements needed to achieve full operational capability, such as certain infrastructure upgrades and advanced weapons, which would add at least $5.5 billion to the total estimated cost.

The audit also revealed other important risks, including a potential shortage of qualified pilots and delays of over three years in the construction of two new fighter squadron facilities for the CF-35s. The resulting need to develop interim facilities solution will further increase infrastructure costs.

Maintaining a strong fighter-jet capability contributes to the safety and security of Canadians. This large multi-year project requires active and ongoing management to control risks and costs to ensure the timely rollout of the CF-35 fleet.

Our next audit looked at the federal government’s efforts to right-size its office space to minimize costs and free up underused properties for potential conversion into affordable housing. In 2017, Public Services and Procurement Canada, or PSPC, estimated that half of the government’s office space was underused and planned a 50% reduction by 2034.

Our audit found that PSPC had made little progress in its efforts over several years to reduce its office space. The department estimates that the office space reduction will result in savings of about $3.9 billion over the next 10 years. However, it achieved less than a 2% reduction from 2019 to 2024, mainly because of a lack of funding.

The Canada Mortgage and Housing Corporation, or CMHC, supported by Housing, Infrastructure and Communities Canada, is mandated to transform surplus federal office properties into affordable housing through the federal lands initiative.

The audit found that while CMHC was on track to meet the initiative's 2027-28 target to secure commitments to build 4,000 new housing units, the target is based only on commitments, and that only 49% of units will be ready for occupation by 2027-28. Public Services and Procurement Canada and federal tenants need to accelerate their efforts to reduce the office space they occupy and contribute to increasing stock for housing that is sustainable, accessible and affordable.

Our final audit examined the government contracts awarded to GC Strategies Inc., an Ottawa-based information technology staffing company.

From April 2015 to March 2024, 31 federal organizations awarded 106 contracts to GC Strategies. We found that federal organizations frequently disregarded government procurement rules meant to ensure fairness, transparency and value for Canadians.

For example, federal organizations are responsible for assessing the level of security required for a contract and for verifying that the people doing the work have the necessary security clearance. The audit found that, in 21% of contracts examined, organizations lacked documentation to show that they had confirmed security clearances.

The audit also found that federal organizations disregarded government requirements to monitor the work performed by contractors. The organizations frequently did not have evidence to show who performed the work, what work was done, or whether the people doing the work had the required experience and qualifications.

The findings of this audit echo those of previous audits that also showed deficiencies in how public servants applied federal procurement rules.

This report does not include any recommendations, because I don't believe that the federal government needs more procurement rules. Rather, organizations need to make sure that public servants understand and follow existing procurement rules.

Mr. Chair, this concludes our opening remarks. We would be pleased to answer any questions the committee may have.

[The Chair, Conservative, John Williamson]

Thank you very much, Auditor General.

We'll begin our first round, and to refresh everyone's memory, the first round will consist of three members who get six minutes each. I'll remind both returning and new members that I do time and watch the clock, but I've made it a practice to try to not cut off witnesses as they're answering if they exceed the time. This is unique to this committee. I'll continue to do that unless I'm instructed to do otherwise. I find it gives our witnesses an opportunity to respond to questions in a serious manner. If it goes on too long, I will have to eventually curtail them, but I think that witnesses generally do understand that we are on a timeline here.

The caveat, though, is that you have to finish your question before your timeline ends. I will not let you go over your time to ask your question, so you do need to monitor your time. However, I do want to always give our witnesses, both the Auditor General's office and department officials who come in, time to answer in a serious manner.

We will kick things off.

Ms. Kusie, you're the first questioner of the 45th Parliament's public accounts committee. You have the floor for six minutes, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Mr. Chair.

Thank you so much, Auditor General, not only for returning to the public accounts committee but for the outstanding work that you and your team continue to do for Canadians as we continue to evaluate the expenditures of this Liberal government here heading into its 11th year.

By now, all Canadians are aware of the scandal of GC Strategies. It was $64 million across 31 departments. For you yourself, this is even the second report, not the first, relative to this scandal and GC Strategies. In addition to the reports that you have completed, the procurement ombud has made appearances across committees and indicated grave concern about procurement regulation and how this is followed. This certainly circles back to the report here today.

What GC Strategies did was egregious, and no organization, entity or corporation, big or small, should ever be able to do this to Canadians and the Canadian taxpayer. However, it's evident once again from this most recent report that this government let them do it. They weren't willing to support a motion in the House of Commons that banned GC Strategies for life; they supported, rather, a paltry seven-year ban. You yourself said in your own words that the rules are clear: that no more policies are needed, that no recommendations are needed here, that the government need only follow and enforce the rules.

Why, based upon your intense evaluation, is this Liberal government incapable of following and enforcing the rules?

[Karen Hogan]

I think that's a question that we asked ourselves through many procurement audits that we've done over the last couple of years: What is driving the behaviour that we are seeing in the public service?

I think I would point to two things. What is it about the procurement process in the federal government so that a staffing company is the mechanism that is typically used for IT services? Is it because the procurement process is complex or that those delivering those services don't want to wade through all of that and are happy to just go through a staffing company? I do think that that's something that the government needs to figure out.

There might be certain services for which staffing companies make sense and other services for which they don't. The rest, I think, then rests with the public service. Why aren't the rules known, and why aren't they being applied?

That is why I didn't see the necessity to issue new recommendations. I think it's essential to go back to the basics and understand the rules, but I also think that the government needs to figure out if there are too many rules and start taking off doubled-up rules or rules that aren't adding any value so that this can be a faster process in the future.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Yes, but fundamentally, it is the ministers who have oversight of the public service and must ensure the rules are being followed and enforced.

There was a new report issued today that federal managers are now required to sign an oath stating that “they thought about” it—that they've thought about the expenditures before they spend the money. Would you be able to expand upon this new regulation that has been put in place that federal managers must think about the money they're spending before signing for it?

[Karen Hogan]

I have to admit that I'm not sure I know the language of the oath you're talking about.

I do know, following our work on ArriveCAN, that in the first report we issued on professional services, which included contracts on McKinsey, there was a requirement added that someone in the procurement process needed to attest that they knew all of the rules they needed to follow and that they had followed them.

That's a good reminder, but in my mind, it's just another step. I really do think that it's time to decide whether there are too many rules, because after my audits or internal audits or third parties or the ombud's work, more rules are constantly added, and eventually it just becomes too much for people to be able to apply them with due diligence.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

What I'm hearing you say, then, is that signing an oath saying that public servants thought about the expenditures will not solve the problem, according to your evaluation.

[Karen Hogan]

Well, I think signing an oath is important. It's a good reminder of the responsibility that comes with the delegated authority. When an individual in a department or a Crown corporation is given authority to spend taxpayer money, it's good to recognize the burden and the responsibility that comes with that, but I'm not sure that it will make sure everyone understands all the rules. I do think there is a need to go back to some training and perhaps streamline rules if necessary.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Indeed, and ministers do sign an oath when they take office that they will serve Canada and its citizens faithfully. We have seen here that they have failed once again.

In your estimate, then, perhaps you can expand on your comments as to how we can hold both managers and ministers, who oversee the public servants, accountable to enforce the rules, because that's all you really want to see: Are the rules followed and enforced? How can we ensure ministers will do that?

[Karen Hogan]

I wouldn't expect that a minister would be involved in day-to-day procurement practices in a department. There are rules that state that when a procurement goes over a certain threshold, ministers need to be involved in the approval process, but in the day-to-day.... Most of the contracts we looked at over the two audits on professional services were just about day-to-day contracting.

I do think that a minister should ask the deputy head about how they are ensuring that rules are followed and that good value for money is always achieved. It comes down to those with that delegated authority within departments to be aware of the rules, to apply them and to know why it's important to achieve value for money.

Value for money doesn't always mean the lowest price: It means the best service or best product for the government at a competitive price.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you for your work.

Thank you, Chair.

[The Chair, Conservative, John Williamson]

Thank you very much.

I want to remind people in advance that when the witness has exceeded the time but is wrapping up, members also must not interrupt. If members try to interrupt and ask a pointed question, I end it right there. There's time for the witnesses to give their answers, not for members to try to get in one last question or clarification. There'll be time for that later.

Right now, Ms. Yip, you have the floor for six minutes. Welcome back. It's nice to see you.

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

Thank you, Chair.

Good morning. It's so good to see all of you back, Auditor General and the environment commissioner. What you do is very important, and certainly the scale and breadth of the topics you study are important, and we all should see their value. Thank you for that.

I would like to turn to Report 4, which is on the professional services contracts. Thank you for your work on this report.

In your remarks, Ms. Hogan, you mentioned that the government may have too many rules. Could you elaborate on that?

[Karen Hogan]

Well, during our audits, we kept trying to figure out why we were seeing the behaviour that we were seeing. When we spoke to public servants, some at times were unaware of some of the requirements that existed in the procurement rules. I think that would be particularly true when we were looking at some of the lower-dollar-value contracts—contracts under $40,000—many of which were contracts that were issued to GC Strategies.

By default, the procurement rules are competitive, because that usually ensures a better price, but there are some exemptions. One is if the contract value is under $40,000. The requirement, however, still exists for whoever is going to issue that contract to say that they need to make sure that this is the right market rate or that they're not paying too much, so they need to do something: email other vendors or do a web search—something. We found that this was often missed, that no one confirmed whether the price was the market price. However, that is a requirement. That's why I say that there are things that seem to be basic to ensure good value for money that are not necessarily always known, which brings me back to why I believe there needs to be a good reminder of the rules and then, to make this more efficient, an analysis or triaging to see whether there are just too many.

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

Given that no new recommendations were made, would that suggest that prior guidance is still relevant and applicable today?

[Karen Hogan]

I did issue recommendations in my first report on professional services contracts. There were recommendations issued in the ArriveCAN report. The procurement ombud has recommendations. I think those are very relevant still.

However, I don't see the value in telling the public service to follow the rules that are already in place, because that creates the need to put an action plan in place—to say what? Is it to say, “Yes, we will”? Well, I think it's about how to make sure that everyone knows what the rules are and how they should be followed. In my view, I think the rules are clear. Now it's about just making sure that everyone who's involved in procurement processes knows them and applies them.

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

Have the action plans with regard to those other reports, the ones with recommendations, been implemented? Has there been progress?

[Karen Hogan]

The report that we just issued in June actually took us back to the exact same time frame of the other reports, so we were looking at contracts between 2015 and 2024. I know that following those first two reports, there were some changes made and some reminders and some training.

I can't tell you whether it's having an effect yet, because I went back to look at the same period of time, so I wasn't surprised to see that we had the same findings; it's because we were looking at the same period of time. I think that time will tell whether or not the reminders will have an effect, but looking at whether there should be a reduction in the rules or a streamlining of the rules is a step that has yet to be done, and I really do encourage the public service to take that step.

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

Do you feel that some public servants may have a tough time following the rules?

[Karen Hogan]

I know that the public servants we meet simply want to do right by Canadians. That's why one of the things I talk to departments about is that there may be too many rules and that this may be slowing down the process and that in the need to serve Canadians better, individuals are going around those rules. That could be a reason, and that's why I think the public service needs to figure out exactly why.

I know that Andrew would like to add something if you would allow me, Mr. Chair, to pass the floor to him.

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

One thing that I think might help public servants is if simplification can be implemented. We found in, for example, our McKinsey report—and it would apply more broadly—that the understanding of the way that standing offers are used, and particularly whether they're competitive or not, is an area that Public Services and Procurement Canada and central agencies can make easier for the public service to understand and, by virtue of that, make it easier for them to follow the rules.

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

Do you feel that perhaps there might need to be more training in this area?