[Recorded by Electronic Apparatus]
Wednesday, May 17, 1995
.1730 
[Translation]
The Chairman: Welcome everyone. As planned, today's meeting will be on the 1995-96 Main stimates, Vote 35, Auditor General of Canada.
I will start by giving the floor to Mr. Desautels, who will make an opening statement. Mr. Desautels, please introduce the people with you this evening.
Mr. L. Denis Desautels (Auditor General of Canada): With me today are Mr. Ronald W. Warme, Deputy Auditor General; Mr. Raymond Dubois, whom you met yesterday, also Deputy Auditor General; and Mr. Michael McLaughlin, Assistant Auditor General in charge of planning, among other things.
Thank you for the opportunity to make some comments on my Estimates for 1995-96. First I would like to say that in the past year events have taken place that will have a significant impact on the work of my Office for years to come.
The passage of amendments to the Auditor General Act to allow my Office to table reports on audits three additional times per year means that you will be served with more timely information. This also means that, based upon this Committee's reports to the House, corrective action can be taken sooner with the potential for earlier savings for the public purse.
The 1994 annual report to the House of Commons contained recommendations, which, if acted upon in conjunction with endeavours already under way by audited organizations, have the potential to realize increased tax revenues and substantial dollar savings as well as indirect savings through increased improvements in efficiency and effectiveness. We estimate these contributions could result in benefits in excess of $2 billion. Examples of similar past savings are provided in the Part III document on pages 20 to 23 in English and 21 to 24 in French.
These are ways by which we want to improve the value of the Office to its stakeholders. With this in mind, we undertook, two years ago, a fundamental review of our role and responsibilities through a Strategic Framework Initiative.
[English]
One of the objectives of this initiative was to be even more responsive to our stakeholders, including this committee. If the demand for input and advice from our office is a reasonable indicator, then we've been quite successful. During 1994-95 we were invited to appear as witnesses at 49 committee hearings, including those of this committee, and 12 other committees of the House and the Senate called upon our office to provide testimony in that same year. In addition, the work that has been done by the government to develop legislation to create a commissioner of the environment will result, when passed, in a much improved basis for efforts to promote sustainable development.
On the other side of the coin, in terms of our office's capabilities, is the government's restraint and deficit reduction measures. I totally support budgetary restraint measures. In fact, I've spoken out at length on the whole issue of deficits and debt. It means, however, our office must share the pain.
.1735
Because this meeting deals with our estimates, I will now deal directly with the impact of these numbers on what we've done and where we're going.
We have provided a hand-out that shows the impact of these measures on the office. As you can see, our estimates for 1995-96 will be 10% below the 1994-95 expenditures. These reductions, exclusive of the funding for a commissioner of the environment, will continue by about a further 10% by 1997-98. This will be our office's lowest expenditure level since 1987-88. By contrast, government expenditures have grown by more than 30% since 1987-88.
The hand-out also shows the level of funding tentatively approved by Treasury Board should the function of commissioner of the environment be established. Funds will still have to be approved by Parliament once the bill has been passed.
[Translation]
Other than funds for the Commissioner, the questions are: «what do these expenditure reductions mean in terms of service to Parliament», and «how will we accomplish these reductions»?
Before dealing with these questions, let me reiterate my support for what the government is doing to reduce the deficit. Unless the deficit is brought under control, the reduced dollars left after servicing the country's debt will have to be further rationed for all programs, including those of my Office.
The reduction of OAG expenditures in 1995-96 will actually mean some reductions in audit coverage. While we do not intend to reduce the quality of the remaining work that we are able to do within the reduced funding framework, there are risks involved with this reduced coverage. I believe it is important that your committee be aware of these risks.
The reductions in expenditures and the related staff reductions in departments and agencies will have impacts in many areas.
[English]
In some cases, critical decision-making will have pushed down organizational levels, shortcuts may be taken in the name of efficiencies, program evaluation functions will be squeezed, internal audit capabilities will be reduced, and internal controls and financial reviews on expenditures will receive less emphasis, in an effort by public service managers to continue an equivalent level of program delivery. These events, when combined with reduced audit coverage by our office, exacerbate this risk potential. In short, the risk within the organizations we audit could increase significantly.
I'll now address how we will accomplish the expenditure reductions we are aiming to achieve in our office. We've had to look at ways of rationalizing our activities, and particularly those of an administrative and technical support nature, in order to protect to the maximum possible the resources left for direct auditing.
Accordingly, we've undertaken one of the largest reorganizations within our office since I became Auditor General. This has resulted in appreciable reductions in, and merging of, administrative support activities, as well as the pairing of professional development and training; reductions I'm hoping do not come back to haunt us. Our overall training program, for example, has been cut by 10% for 1995-96, including reductions of 50% in our professional conference activities.
We've done a thorough expenditure review. The review will be dynamic, as we continue to look for cost-saving opportunities as we go. We will, for example, continue to reduce numbers in our administrative and technical support functions and thereby ask the remaining managers and staff to increase their workloads.
[Translation]
In its second report to the House last year, your committee expressed concern about the staff reductions in this area of the Office. Your concern was the potential negative impact of professionals having to assume a greater burden of support work, to the detriment of audit work.
There is no doubt that this trend will continue. Unfortunately, in these times of restraint, there is little alternative. Our challenge is to ensure that while the audit coverage declines, the quality of the remaining coverage is protected.
.1740
To offset some of these reductions, we have invested heavily over the past few years in technology. With the application of new electronic audit tools to keep pace with the accelerated level of technology developments in audited organizations, we have been able to somewhat offset the impact of further reductions of audit staff. Unfortunately, our ability to continue to rely on technological help is, as described on page 27 of the English text and page 28 of the French text of our Part III, becoming more and more limited. So, given the above, what do we plan to deliver?
I would like to briefly summarize our audit plans for the next three years.
[English]
We will, of course, have to conduct in the next year and the years that follow, annual audits, as usual, of the public accounts of Canada and the several crown corporations of which we are the designated auditor. In addition, we annually audit financial statements of departmental agencies, as well as federal-provincial arrangements at the request of the Governor in Council or the Minister of Finance.
We also expect to start the third cycle of special examinations of crown corporations in 1996-97, pursuant to the Financial Administration Act. Similarly, in the value-for-money area, we are scheduling periodic reports to Parliament for our work in departments.
Some of the things we plan to include in upcoming reports are an audit of the regional economic development departments and agencies, to be reported in the fall of 1995; a review of the major sources of management information and how it's used, in May 1996; and an audit of the peacekeeping activities of two departments, also to be reported in May 1996.
Audit work of the debt and deficit, the budgetary process, the human resources, disability programs and social programs will also be reported in 1996. In the part III document - I believe on page 10 - we list the issue areas we are addressing. We have also provided you with a hand-out listing the chapters we intend to publish in 1995 and 1996.
[Translation]
The question that is invariably asked by your committee each year is whether I have enough money to do the job I think is necessary. The answer could never be an unequivocal ``yes''. The funding levels required to give a ``yes'' answer would not be realistic even in good times, let alone under today's conditions. As during previous periods of restraint, we have endeavoured to focus our audit coverage on those areas that we believe had the highest risks. We will continue to do so.
This will ensure that you are getting the "biggest bang" for your audit dollar.
[English]
Mr. Chairman, I now would like Mr. Warme to continue and to take you through the actual document, the 1995 estimates book.
The Chairman: Please go ahead, Mr. Warme.
Mr. Ronald M. Warme (Deputy Auditor General, Professional and Administrative Services Branch, Office of the Auditor General of Canada): As Mr. Desautels has just offered, I'd just briefly like to do this with you.
I intend to basically concentrate on the resources we're asking for, both in people and in dollars, that we think we need to do the job for 1995-96.
Before addressing these resources, just allow me to attempt to put the job the office has to do in some kind of perspective. Our job, obviously, is auditing. We audit about 200 organizations with expenditures ranging from a few thousand dollars to several billions of dollars. As Mr. Desautels just said, we audit all federal government departments; we audit crown corporations; we audit special agencies; we audit both the Northwest Territories and the Yukon governments, their agencies and their territorial corporations; and we audit several large United Nations organizations as well.
In addition, as required, we perform audits requested by the Minister of Finance, such as the tax collection agreements with the provinces and the audits requested by the Governor in Council. We audit expenditures, revenues, assets and liabilities.
.1745
The aggregate value of these numbers in the organizations I've just mentioned is about $1 trillion, or the equivalent of about 20 General Motors corporations. That's a huge audit responsibility.
Carrying out this mandate, we have a staff of about 575 individuals, as you saw in the book. That's equally split between men and women. Close to half our staff are qualified accountants. About 20% hold post-graduate degrees in such fields as business administration, engineering, political science, sociology and law. We further supplement these, as you've seen in our estimates, with short-term contract help for expertise on an as-needed basis.
Much of the audit work we perform is not readily visible. What was not tabled last week in our first periodic report, and will be later in the year, are the public accounts of Canada and the financial statements of various crown corporations and agencies that we audit. This work, unless the opinions are qualified, generally receives very little fanfare, yet it represents about $20 million of statutory audit work that the office must carry out each year.
So I hope that little bit of background helps to put some of our funding requirements into perspective. Accordingly, I would like to start on page seven of our document, page three in English, which shows some of the financial requirements we have for next year.
On page seven, exhibit 3, you see that last year in our estimates we asked for $56.5 million. This year, as you can see as well, we're asking for $51.3 million. The basic reason for these changes is that we need $1.6 or so million less to do our special examination work this year because of the cyclical nature of special examination work.
As Mr. Desautels pointed out in his remarks, the government's restraint program has produced for us a $4 million reduction in this year's estimates. The only two basic increases we have are some funding for UNESCO of $363,000, and we're going to have to pay this year for our translation services.
So that's the $51 million we need this year, which is down about 10% from what we had last year.
If you'll turn to page 10, once again, as Mr. Desautels hinted, there are seven main thrusts we have and will continue to try to come to grips with and provide information to you about. They are: stewardship information; efficiency, productivity and cost-effectiveness in government; revenue collection; public service renewal; environmental protection and sustainable development, which with the new commissioner of the environment is obviously going to get more attention; information technology; and competitiveness.
On page 11, we note that the organization we have put together to accomplish this work is headed, obviously, by Mr. Desautels. He has three branches. He has an executive branch, which basically gives the overall policy direction for the office. There's a professional administration services branch, which provides the direct audit support to the audit function. As well, of course, we have our largest branch, the audit operations branch, which carries out our audit activities.
If you'll turn to page 13, this deals with the staff we have used over the years and intend to use this year to in fact do this work. You can see on exhibit 8 on page 13 that our staff hasn't changed a great deal over the last 10 years, but that this year, when we produced this report back in November of 1994, we thought we would use 573 people.
The reality is that because of our internal operational review and because of the restraint measures of the government, that 573 will, in all likelihood, be down to around 540 to 550 before the year is out. We don't know the exact number, but it certainly will be lower than 573. The exhibit at the bottom of the page merely takes that 573 and breaks it down by category.
.1750
Pages 15 through 24 make up a new section this year. I'm not going to go through that in detail with you, but this attempts to explain to the reader what we have to do, and continue to do, to respond to our clients' and our stakeholders' needs.
We have highlighted, for example, our most significant initiatives over the past several years. We have provided some quantitative indicators of the significance of the recommendations we have made. For the first time, we are soliciting feedback on how we can continue to improve the overall effectiveness of our work. This section, we feel, provides some very interesting reading.
Page 29 is an attempt to compare the expenditures we.... This is the estimates we received last year of the $56.5 million compared with the estimates we hope to receive this year, of $51.3 million. It breaks it down into the personnel categories; the goods and services categories that we spend; the capital requirements; our transfer payments to the CCAF; and the total, as you can see.
Page 31 shows how we do our costing in the office. I won't go into a lot of detail here, but I think it's important to note that it's not only the $51 million that we use to cost all our products. Rather, we add to that those services provided without charge by other departments.
In that little schedule at the top, you'll see that there is accommodation provided by the Department of Public Works, for which we don't pay. There are some cheque issue services provided by the Department of Supply and Services for which we don't pay, and there are the employee insurance premiums that Treasury Board pay for, that total $6.2 million.
To cost out all our products, we add that $6 million to the $51 million in the box at the bottom of the page, as you can see, for a $56.8 million total program cost.
If you'll turn to page 32, you'll recall that I mentioned 573 full-time people, but we don't do all our work with just our own staff. We in fact hire contract people on an as-needed basis. The equivalent person-year use of those contract people amounts to 35 individuals. So the total complement if we stick with the figure of 573 is, in fact, 608.
The last thing I just want to share with you is the end of this booklet, pages 34 through 40, which shows the culmination of all the work we did in 1993-94 with the money provided to us at that time. In those days, it was total net program cost of $63 million. These are all of the products in all of the work we do on a fully costed basis showing the dollars we've spent on each audit and the hours we took to do them.
Mr. Chairman, that briefly is our estimate document for 1995-96. I'm sure Mr. Desautels will answer all the questions you may have now.
The Chairman: Thank you, Mr. Warme.
[Translation]
Mr. Desautels, is there anything you would like to add?
Mr. Desautels: No.
The Chairman: We are then going to start with the questions. Mr. Fillion, you have ten minutes.
Mr. Fillion (Chicoutimi): Welcome to the Auditor General. I have before me Annex 1, an expenditure comparison of the financial requirements. The data are the same than in the expenditure plan, in Part III.
My question is mainly about the Commissioner of the Environment, who reports to your Office. You present here estimates for the three coming years. Does that mean that they will be employees from your office transferred to the new Commissioner, or will he have a brand new office that starts with nothing and will have to hire staff specialized in this field?
.1755
Mr. Desautels: The amounts in the Annex are for either new or contract employees, as well as related expenses. The Commissioner of the Environment must have a decent size office to assist him, which will, of course, mean new salaries to hire people with relevant technical skills. The Commissioner will also have a budget to occasionally hire outside consultants, and some departmental audits may require additional staff.
New resources will have to be added because the purpose of the new legislation is to provide for more environmental auditing. Yesterday, you saw some examples of contaminated sites and radioactive waste. Under the proposed legislation, we are being asked to do more than before, and these amounts will enable us to hire the necessary resources to reach those goals.
Mr. Fillion: If I understand correctly, no employees from your office will be transferred. You mentioned 608 earlier when referring to contract and permanent employees. Is that additional staff? When the Commissioner of the Environment's office is set up, will extra staff be hired beyond this 608 people?
Mr. Desautels: The figures in the booklet do not include the additions that will be made after the Commissioner of the Environment Act is passed.
Mr. Fillion: That means an increase in staff at the Auditor General's Office, but there will be a section that works directly with the Commissioner of the Environment. Since you had to reduce your staff by 10%, just like everyone else, do you think any of those people could help the Commissioner of the Environment?
Mr. Desautels: It is quite possible, Mr. Fillion, that some of the new Commissioner's tasks could be carried out by existing staff. For instance, the new Commissioner will have to ensure all petitions received are forwarded to the appropriate department and that the minister responsible answers them in time. Afterwards, we will have to table a report in Parliament on all that. Some secretarial work could certainly be carried out by someone who would otherwise be asked to retire.
Mr. Fillion: Earlier, you said that you didn't want the jobs with the Commissioner of the Environment to be gold-plated, if I may use that term. You forecasted expenditures of $1.2 million for 1995-96, whereas the following year, you forecasted double or triple that amount. Is that due to the transition period, or will there be extra money added every year to make those people's jobs gold-plated?
Mr. Desautels: That is easy to explain. In the draft legislation, every department must publish its action plan for the environment and we must audit the department's efforts to implement that plan.
.1800
The Act stipulates that departments will have up to two years to table their first action plan. Then we will begin verifying these action plans. So part of the act will not come into effect immediately, in any event not for us, and that's why we don't need to hire everyone right away.
Mr. Fillion: There is an exhibit on page 19 that shows the status of recommendations and observations that you have made since 1989. I don't know whether I'm misinterpreting the exhibit, but I can see that the percentage of recommendations fully implemented is decreasing with time. Obviously, if I look at the progress made, I can see that it has reached a balanced level.
However, it appears that the role of the Auditor General is to ensure that his recommendations are fully implemented. Furthermore, you stressed in your opening remarks that implementing your recommendations enables the State to collect additional tax revenues and to provide fair service to all Canadians. So I find it odd that the percentage of recommendations fully implemented was 40% initially, and by 1992, had dropped to 10%.
Mr. Desautels: Mr. Fillion, the differences that you noted are due to the fact that the departments usually need some time to decide exactly what they're going to do to respond to our recommendations. So the further you go back in time, the higher the percentage is, because the departments had more time to decide what measures to take and to how to implement them.
In my view, what counts is the total of the two figures that we have provided you with, 20% and 43%. About 63 or 64% of our recommendations have been implemented or are well on their way to being implemented. The different percentages from year to year reflect the time that the department had or didn't have to implement our recommendations.
The Chairman: I agree with your answer, Mr. Desautels. The time element is important. However, the 1989 report year is somewhat distinct from the following three report years, 1990, 1991 and 1992. The important part of the column is the black part. It represents the recommendations that are no longer relevant, and the part above that shows progress not satisfactory, and then at the very top, the entity disagrees with recommendations. What's important is that the black part of the column is around 70% in 1989. Why is it that this level was about 60 or 63% in the other years? Is there an explanation for this? Is it just due to time? Can we expect it to be higher for 1990, and for 1991... Do you think that it's really the time factor at play here? The level was about the same for the three years following 1989, whereas the 1989 report year was distinctly higher.
Mr. Desautels: It's mostly the time factor, but in some cases, we certainly have to return to the fray more than once before we can convince people that our recommendations are relevant. So if we have more time, we are better able to reduce the areas where progress is not satisfactory. In some cases, we can succeed by returning to the attack once again...
.1805
Mr. Fillion: So in other words, you practically have to wait seven years to find out what percentage of your recommendations have been followed satisfactorily. You need an entire follow-up for the 1992-93 period.
Mr. Desautels: I'm not convinced that a seven-year follow-up is necessary to have a good idea of that percentage. We already have a fairly good idea with...
Mr. Fillion: After seven years, you're at 80...
Mr. Desautels: The longer you wait, the more reliable the results are, but I think that a good percentage of our recommendations are indeed adopted.
Mr. Fillion: Does this exhibit also reflect the status of your work when the government gives you a specific order? For instance, you had received an order from the government concerning the conflict between the Quebec government and the federal government concerning the Oka crisis, we've been waiting for a report, and this report has not arrived. We don't know when it will be coming out. Do you follow the same process for recommendations about departments? Do you take the same approach? Will 80% of your recommendations be implemented within a six or seven-year period?
Mr. Desautels: I don't think that we're talking about the same timeframe at all. We were asked to look at the Quebec government's claim for the Oka crisis last winter. We will report on this matter within a month or two at the most. So the report will come out in June or July. In all, we're talking about six or seven months to do the work, not six or seven years.
Mr. Fillion: In your view, what would be a reasonable deadline for satisfactory implementation of your recommendations? Would it be three or four years? What do you think a reasonable deadline is?
I believe that when you receive an order from the governement, you try to work faster and respect the government's deadline, but you can always get an extension, and you use that right. Should your recommendations be implemented by a four or five-year deadline?
Mr. Desautels: I believe that the government can do better than the figures we have here. I would hope that it could speed up implementation of our recommendations. To attain that goal, your committee's work is extremely important. The earlier the committee examines certain recommendations and calls departmental officials to testify, the more likely Deputy Ministers and departments are to respect their commitments. There's no one response to that question. Some of our recommendations are rather complicated, and I'm the first person to acknowledge that, and they may require changes that take more time than others. Some recommendations are easier to implement, and so you cannot apply a single rule. But I hope that with time, we will be able to improve that.
Mr. Fillion: If you had to find ways to improve the implementation of your recommendations, would you have suggestions for various agencies and departments in order to improve their performance? I find that it takes a lot of time to implement these recommendations. It's as if they expect time to settle these matters. That's how they see it.
.1810
I don't think that's what Canadians expect. They expect problems to be resolved within normal deadlines. Do you have any suggestions for these agencies and department so that they can settle these matters faster?
Mr. Desautels: Unfortunately, I don't have any magic solution. Everyone has to monitor the situation constantly and keep up the pressure. We can play a role in that regard. We're trying to do that with our follow-ups. If the committee asked for regular reports from all the departments which have received recommendations from us, that will increase the pressure and help improve results. We could perhaps even go further and automatically ask for responses from everyone as soon as a report is tabled, but in my view, a formal request from your committee to the departments in question would have a very salutary effect.
Mr. Fillion: Given that your staff levels are being reduced by 10%, will you be able to ensure follow-up as you see it? For example, you would like to see regular follow-ups to improve the implementation of recommendations. I can't understand how you'll be able to get such results given that your budget is being cut next year and once again the year after that. Does this mean that your staffing levels were too high, and that you're going to be able to carry out your normal work, despite these cuts?
Mr. Desautels: It must be recognized that if our staff is cut by 10%, some things will suffer. We are going to do all we can to find ways of improving our effectiveness, but some things certainly will suffer. We won't be able to cover as many things as in the past, and that will deeply affect things. It certainly will affect the follow-ups that we normally carry out and the resources that we can expend on follow-ups for previous reports. We are going to do all we can to minimize the negative impacts, but we musn't fool ourselves: there will be a price to pay for these cuts.
[English]
The Chairman: Mr. Harper, do you have any questions?
Mr. Harper (Churchill): I really don't have too many questions, Mr. Chairman, but I have some comments I would like to make at this point.
I would like to begin by saying that I think your department has been doing an excellent job, and the job you've been doing is going to become even more important as we get into this downsizing and cost cutting. The fact that 49 committees called for your department to testify indicates how important the job is that you are doing. I suspect that over the next little while that demand is going to increase, and I hope you have the funding there for it.
Over the years you've done a very excellent job of highlighting the importance of the deficit and the debt and the threat it poses to this government, and indeed to all Canadians. When we start looking down the road at 1996-97, trying to find out how to deal with what will potentially be a $52 billion debt-servicing cost, that's going to squeeze all departments, including yours. I think you said that very well in item 12 of your remarks, that the reduced dollars left after servicing the country's debt will have to be further rationed for all programs, including your office. That message has to go right across the board.
You are showing leadership by example, and I applaud you for what you're doing here. I think that has to be done in order for your department to have the credibility when it goes into these other departments demanding similar reductions. A further three-year reduction of 15% for a total of a 25% reduction is really admirable.
I applaud you and your department for this. As I said, that truly is leadership by example. You recognize the seriousness of the problem and you're dealing with it.
.1815
There are going to be some risks involved; there's no question about that. In a way I hate to see that, but I think the alternatives to our not taking these risks pose an even greater risk.
I don't have any questions. I'll just close by saying I think this is a wonderful move by our Auditor General to really highlight that his department understands the severity of the situation. I hope that message spreads across all departments.
Thank you, Mr. Chairman.
Mr. Desautels: I would just like to reassure Mr. Harper and the committee that we fully realize the risks we're facing. As I said, because we're cutting back on a number of functions, there are increased risks in departments that things could go wrong. We're fully aware of that and we're going to do our utmost to minimize that so our presence is still felt out there.
I think we feel a deterrent effect by our presence across the government, and I also think we have a positive effect through the recommendations we make. We're going to continue to be as vigilant as we can and keep that risk down.
Mr. Harper: I know you will be, based on your past performance. Thank you.
The Chairman: Mr. Telegdi.
Mr. Telegdi (Waterloo): Thank you, Mr. Chair. Through you to the Auditor General, I look forward to future vigilance.
I do have a concern when you mention that you might not be able to perform the work in the same depth. I think many times when you do audits, it's that extra bit you do that will uncover something that should see the light of day. I hope that doesn't get impaired.
The committee received a letter from the Chamber of Commerce in Kitchener-Waterloo, which is my constituency. They're quite supportive of the role of the Auditor General in dealing with waste and being a watchdog on departments.
One of the things they complained about in the letter was chapter 5 of the 1994 report. They considered that An Innovative Society and the Role of Government was a gross abuse of the Auditor General's mandate. They would like to know the cost of this extravagant study, which comes across as far too simplistic for the money that must have been spent.
What's your response to chapter 5 in the report? How much did it cost, and do you consider that subject to be within your mandate?
Mr. Desautels: Mr. Chairman, let me try to deal with that.
First of all, the costs of that chapter came in at $380,000. This is the time value of the resources put into that effort and this is a reasonable cost compared with most chapters.
I find it unfortunate that the Kitchener-Waterloo Chamber of Commerce did not appreciate the thrust of that chapter. It happens from time to time. We don't convince 100% of the people 100% of the time.
The Kitchener-Waterloo Chamber of Commerce in the past has been very supportive of the work of our office and has always done a thorough review of our report every year, which we've appreciated. Somehow they didn't appreciate this particular chapter. As I said, you can't convince 100% of the people 100% of the time. We've had people who found this particular chapter quite helpful, useful and insightful.
It was written in a style that was simple to understand. It's a subject you could leave up to very intellectual people to discuss, but we tried to capture this in a way most people would understand. Some people have called it simplistic. I'm not sure if I should take this as a compliment or as a criticism. I think it was written in a language that was understandable.
.1820
Mr. Chairman, I believe that kind of thing is well within the mandate of the Auditor General. In the past we've conducted other studies of this nature that have been, in a sense, the trigger for certain changes that took place. For instance, we did work in past years on well-performing organizations within government. We did work on cultural issues within the public service, which had led in part to the Public Service 2000 effort. We feel it's quite appropriate for us to invest what I think is a modest portion of our budget in this way.
We don't do this every year. We do this particular type of exploratory study at best once every two years, and normally I think we get good value for it. Sometimes the value comes with a bit of a delayed reaction. It's not immediate overnight.
There hasn't perhaps been enthusiasm for this one when it came out, but since then it's been gathering a certain amount of interest. I would just like to remind the committee that twice when we had the deputy minister of Industry Canada here, I think he cited this particular chapter as something that's been influencing the science and technology milieu in some fashion.
As I said, you can't win 100% of the time. I still believe that was quite a good-quality effort.
Mr. Telegdi: Perhaps you can communicate that to the Chamber of Commerce. Regarding the chamber itself, it used to be two chambers, the Kitchener chamber and the Waterloo chamber. Then they came together because they thought that would be more efficient. Being in the heartland of Canada's technology triangle, they're quite forward-looking, so maybe they didn't feel the benefit as some other organizations might who don't have their sense of development.
The other area I would like to question is when you audit a department, do they make available to you all the audits done internally and all the studies done by other areas of government on the department itself?
Mr. Desautels: Mr. Chairman, first of all, let me address Mr. Telegdi's previous point.
I have already responded to the Chamber of Commerce, and I hope they feel my answer will be helpful.
In terms of your other question, our own act provides that we have access to all internal documentation within a department. That includes internal audit reports, of course. If there have been special studies carried out within a department, if we're aware of them and we ask for them, we're entitled to receive them. Our act gives us that access.
Mr. Telegdi: What if you're not aware? I take it you then don't get them.
Mr. Desautels: Of course, you normally have to ask for something in order to get it. I think our people are quite experienced and try to keep a watchful eye on the various departments. If something has taken place, they keep informed. I think they have a good enough knowledge of the entities they're responsible for that I would hope it wouldn't happen very often that they would be totally unaware of something important taking place in a department.
.1825
Mr. Telegdi: One of the frustrations I've found as a member of Parliament is my access to information, which was certainly not my experience at the municipal level. As a matter of fact, if anybody in the bureaucracy withheld information from us at that level, they'd be gone.
I happened to stumble onto something that I wish I'd never heard about. It involves a small part of the military, and relates to the moving of household goods and personnel. What amazed me is the number of audits that have been done, be it by internal audit of the military, Consulting and Audit Canada, the Bureau of Competition Policy, Criminal Investigation Branch, which was the latest one - every report obtained under the Freedom of Information Act.
As a member of Parliament, I ended up getting a copy of it. The reporter felt sorry for me, that I didn't have one. He thought I really should have one since I was a member of Parliament.
What amazed me was the number of audits done, the cost of those audits and the fact they could be sat on, buried, never to see the light of day.
If you went over there, how would you know, for instance, if the Bureau of Competition Policy did an audit, a review, of a particular situation unless they happened to tell you?
What I'm trying to get at is when you do an audit, as a matter of course, we should have some kind of legislation that says that anything that might be relevant to your audits should be put forward to you so you are aware of it. Otherwise, if you didn't know that study existed, which is done by another department of government, you wouldn't be aware of it. You wouldn't ask, and not asking, you might end up repeating a lot of the work, whereas some of that work could already be completed for you.
Mr. Desautels: Whenever we undertake an audit of a particular program, activity, or project, we spend quite a bit of time planning this work. We spend quite a bit of time probing to make sure we have all the facts and all the available information, reports and so on pertaining to that particular activity, program, or project.
As I was saying earlier, I think our people are trained to be able to force out, if you wish, all that information at the start of a particular project. What this doesn't do, and that's maybe what is behind your question, is people won't come to us and offer all kinds of information about a program that we're not actually looking into at that point in time.
If you're talking about the costs of moving personnel and households in DND, we may not be aware of all those studies unless we decide to do an audit of that area and then we'll make sure all those studies are identified and made available to us. Obviously, it's impossible for us to know about all the studies going on, but we do know about what's happening in those programs we decide to audit.
Mr. Telegdi: First, given all the audit functions government has itself and seeing that they're fairly standard across the board, I wonder if your department can oversee them, and second, even review some of those studies that are done by the various audit branches within departments.
.1830
I'm wondering if that might be a good way for you to decide what areas you might want to pick and do audits on. Would it give you a bigger bang for the dollar if you tried to utilize some of those and standardize?
What happens is a lot of these audits that get done never see the light of day. Your department has a bully pulpit, if you will. You make it public, it sees the light of day and receives attention. So I'm just wondering if some of those functions could be helpful in doing your work.
Mr. Desautels: We have fairly good working contacts with internal audit groups as well as program evaluation and review groups within departments, but of course we don't have any authority over those organizations. I don't think we should, either, because they really are part of those departments.
From time to time we do carry out an audit of the effectiveness and efficiency of those organizations. As a matter of fact, in 1993 we reported on the whole internal audit function and the whole program evaluation function across government, and had some fairly serious criticisms to make.
In short, I guess we do use those departments and activities as a source of information for us. We keep good contacts with them. On the other hand, we cannot actually order them. We cannot direct those people in any way. They belong to the department.
Mr. Telegdi: Thank you.
[Translation]
Mr. Fillion: An interesting issue is raised in paragraphs 66, 67 and 68, on page 24. It's the whole issue of fraud and dishonesty. I don't know whether that part influenced the ethics report that you tabled recently.
I see that issues having to do with honesty are brought to your attention in various ways. Could you tell the Committee what the scope of these issues is? Could you give us some examples of honesty issues that were brought to your teams?
Wouldn't it be important to create the position of Ethics Commissioner, as was done at the Department of the Environment, given that this issue is raised publicly on a regular basis? Haven't we got to that stage?
Mr. Desautels: Our office regularly receives complaints from taxpayers or officials about certain acts that they believe are inappropriate or sometimes dishonest. We have a small group of five or six people who specialize in forensic auditing, and they have the required training to assess the validity of such complaints. They are the people responsible for dealing with these complaints. As I said, we receive them regularly. I wouldn't say that we get a ton of them everyday, but we do get a few every week.
.1835
Of course, we can't follow up on many of these complaints because we quickly see that there isn't any information or that the person's complaint is frivolous. We think that this service we provide serves as an outlet for people who are frustrated by the system in one way or another.
Mr. Fillion: Could you provide the Committee with a list of these questions raised by taxpayers and public servants? You say that there's a team that handles these complaints. There has to be an inventory or a catalogue of these complaints. In addition to the questions, could we get the answers that you provided to these people? Could you provide us with the complaints that you've investigated and submitted replies for?
Mr. Desautels: Mr. Chairman, I'd like to give that some thought. As I was saying earlier, there are privacy considerations and principles at play. We can't follow up on many of these complaints because there's a lack of information or the complaint is frivolous. If you don't mind, I'm going to ask my legal counsels for their advice just to find out what kind of information I can provide to the Committee, and then I'll be able to help you. I'd like to help you, but I want to make sure that I'm not making a blunder, given the nature of the information that we have.
Mr. Fillion: Ever since I've been attending meetings of this Committee, you've been regularly asking agencies and departments to evaluate their programs and to streamline and so on. Are you doing the same thing in your own office? Do you evaluate your programs regularly in order to improve them or perhaps even to do away with them? Do you yourself do what you require of the departments?
Mr. Desautels: Basically yes, but I wouldn't say that we have programs. We have one program.
Mr. Fillion: Well, let's call them subprograms or activities.
Mr. Desautels: We regularly re-examine all our activities. We even have a unit that reviews all our audits regularly. We also ask people outside the organization for advice about some of our practices to make sure that we're on the right track and to help us improve our own performance in most cases.
As you can see in this year's estimates, we are trying to measure our effectiveness, our impact. At the same time, we are trying to measure our efficiency in certain ways for certain costs. I think that we are doing more of these things than most of the departments that we criticize. Just like Caesar's wife, we must be beyond any suspicion. You can see some of our initiatives in the estimates, but we're doing more than what is shown here to make sure that we're doing our work effectively and that we're responding to the needs of members of Parliament with high quality, relevant reports.
Mr. Paradis (Brome - Missisquoi): I'd like to raise two points. First of all, perhaps we could turn back to page 19. A few moments ago, Mr. Fillion was telling us about Exhibit 12, which shows that the percentage of recommendations fully implemented decreased over the years, from 1989 to 1992.
.1840
I thought that was at the end of a conservative government. Is there less follow-up on the recommendations when a government has been in power for a long time?
Mr. Desautels: As we said earlier, the chart in Exhibit 12 shows the compliance level by year and provides a good explanation of the phenomenon Mr. Fillion referred to. Of course, and I am being very open here, there is a window of opportunity for us every time there is a change of government or a new Parliament. It is always much easier then to have our recommendations accepted. It is always easy to blame things on previous governments. Of course that makes our recommendations easier to accept, but I do not want to rely on that. If our recommendations are relevant, we should be able to convince any government at any time to implement them.
Mr. Paradis: Various departments hand out many provincial subsidies to organizations and individuals. During your audits, do you ever check to see whether a subsidy recipient is managing the funds received in an appropriate manner and whether the funds are being used for the intended purpose? Subsidies for human resources or health are a good example. Do you ever go to see the beneficiary of government subsidies to check whether the funds are being used in accordance with the information provided on the application?
Mr. Desautels: Mr. Chairman, only on very rare occasions do we do what Mr. Paradis describes. We first like to ensure the department managing those subsidies is doing the work properly, on the one hand and on the other hand, that the department's internal auditors do spot checks to see whether the individual or organization is complying with the subsidy conditions. We focus more on the department's responsibility to carry out internal audits. Only in exceptional cases would we feel the need to do the audit ourselves. It is not common practice.
Mr. Paradis: If one of your auditors finds something unusual during a departmental review, would he suggest the internal auditors look into it? That is what you are saying. It is up to the department's internal auditors to look into that type of occurrence rather than you.
Mr. Desautels: During our audit of a subsidy program, if we notice that neither the department's managers nor the internal audit branch are paying close enough attention to subsidy conditions, we will immediately tell them they must be more careful. That is part of our responsibility in terms of making recommendations.
Mr. Paradis: It is similar to the Atlantic subsidies that we saw yesterday.
Mr. Desautels: I am not sure what you are referring to exactly, but we do regular audits of some of the subsidies given to economic opportunities or development agencies. If the agencies do not do what they should, we reproach them immediately and recommend they correct their practices. Occasionally we even visit a subsidized firm.
.1845
Mr. Paradis: During yesterday's meeting we read in your report that three companies had become incorporated to get the transportation subsidies for the Atlantic region. That prompted you to meet with the beneficiary to see whether they were relatives. That is the case where you went to see the subsidy recipient, where you analyzed the situation to see whether the subsidy recipient had complied with the standards or not.
Mr. Desautels: That type of check can be done without necessarily going to see the beneficiary. Information can be obtained through other means. However, as you say, we had clearly established some ties between the subsidy recipient and the carrier. That is an example of a case where we did go quite far, perhaps not as far as actually visiting the beneficiary.
Mr. Fillion: I have two short questions.
First of all, with regard to your audits of the Commissioner of the Environment would it be possible to have the breakdown of costs at any given time? That is not too confidential?
Mr. Desautels: It is no problem. We could get the information to you within a day.
Mr. Fillion: I would appreciate that. My last question is this: for the past few years, the government has been asking people to cut staff, budgets and so on. In your reports, I noticed there was a section on program review. Very rarely have I seen anything on services.
When departments or organizations are asked to cut staff, I wonder how that affects Canadians. Do you audit the direct impact service cuts have on the public?
Let me give you an example. For some services provided to seniors, staff will be replaced by voice mail. The same is happening in other areas, where voice mail is being used for front-line services to Canadians. Has that been looked into?
Mr. Desautels: Mr. Chairman, the answer is clearly yes. In fact, in each report, you will find a number of examples of programs we audited that have a ``client service'' dimension or an impact on taxpayers, the Canadian public. In the report we reviewed yesterday, for example, there was reference to Health Canada, the Health Protection Branch. That has a direct effect on the taxpayer.
Our chapters on environmental protection also have a direct impact on some people and those residing near contaminated sites. In the previous report on resources development, we in fact...
Mr. Fillion: Excuse me. There are personalized services such as unemployment insurance, counters...
Mr. Desautels: Mr. Fillion, you are the one who gave the example of programs delivered by the Human Resources Development Department, namely services to seniors. We drew parliamentarians' attention to the fact that the telephone service was far from meeting the needs of clients and other similar problems related to client services.
We are concerned about it and are in fact doing something in that area. We want to go further with that type of service. In the list of chapters we will publish in 1996, there will, in fact, be one entitled "services to the public". So it really is on our list and you will see a lot more of it!
Mr. Fillion: Thank you.
[English]
Mr. Shepherd (Durham): Maybe I'm being redundant, because I've been in and out of the room a couple of times, but who audits the Auditor General?
.1850
Mr. Desautels: There is an external auditor appointed by Treasury Board that does a financial audit of our office every year. The name of the firm is Welch & Company.
Other forms of audit of our organization take place, if you want to go beyond that. For instance, we're subject to audits by organizations like the Public Service Commission and the Commissioner of Official Languages. Also, for your information - and you'll appreciate this - we are subject to professional inspections by the various provincial institutes of chartered accountants.
I could go on, but it starts with the audit by Welch & Company, and there are other forms of audit we're subject to.
Mr. Shepherd: I guess Welch & Company's audit results don't form part of this process.
Mr. Desautels: No. Their results are reported separately.
Mr. Shepherd: To Treasury Board.
Mr. Desautels: It's tabled in the House at some point, when it's completed. It's a public document.
Mr. Shepherd: Are they giving you clean opinions these days?
Mr. Desautels: We've had clean opinions all the way through.
Mr. Shepherd: One of the things members of Parliament find frustrating - and it's the nature of the process, I guess - is when these reports are filed before the committee, the events often have significant time factors between them, sometimes years. Of course the comment we hear from the departments is these problems have all been solved since then.
I wonder if there isn't another process that could be developed so that, maybe prior to appearing before the committee, some kind of smaller follow-up could be done to monitor whether in fact the problems being enunciated have been addressed. In other words, is there some way of validating, to some extent, the opinions of members of various departments?
Mr. Desautels: That's a tough question. I'm not quite sure how to answer it, to be honest.
We all have an obligation to your committee - ourselves and the departments that come in front of you - to make sure we agree on the basic facts and that the committee in fact has the right information in front of it when it debates certain questions. And that doesn't apply only to this committee; it applies to other standing committees as well. I think we have an obligation to make sure we're starting from the same base and saying the same things.
We try to do that. Our people at the working level have contacts with the departments that might be called here. If we know we're not on the same wavelength, we try to make sure things get corrected before we come here.
That doesn't necessarily eliminate completely the areas of disagreement; you'll always have that. In a way, it's healthy to have areas of disagreement from time to time. It shows the independence of the organizations.
But I think we have that obligation. I hope in the future we will all pull it off properly.
The Chairman: Can you come back in a minute with your next question? Mr. Paradis has to go to the airport in a minute, and I want to have a quorum to adopt a motion before he goes.
Mr. Shepherd: Yes.
[Translation]
The Chairman: For several years now, our committee has reported to the House on the Auditor General's budget to set an example for the rest of the committees. I shall ask you to agree to the following motion dealing with the budget of the Auditor General. Is vote 35 agreed?
.1855
[English]
FINANCE
- Auditor General
Vote 35 agreed to
The Chairman: Shall I report vote 35 to the House?
Some hon. members: Agreed.
The Chairman: Okay.
You can go on with your next question.
Mr. Shepherd: I guess the dilemma a lot of people on the committee have is, if you take a snapshot of the proceedings here, we see two windows. On one hand we see constant audit reports and repeating problems that haven't been addressed over a number of years in one department. On the other hand we see people coming from the department and saying everything in the last report is being dealt with and they're going through the process of developing it.
In some ways we wonder whether the comments from the department are realistic and whether in fact the problems have been solved as well as they are representing to us. Because of the time factor, it's very difficult to get a picture of that.
Mr. Desautels: Again, I don't know if I have a satisfactory answer for you. I'm conscious of the frustration you're expressing. I don't know if, underneath your question, you're more or less suggesting we should do an update of all our comments before coming back to this committee to discuss a chapter so that we have as current information as possible.
I'm hopeful that with the advent of periodic reporting, which we've just seen, we'll be doing things in a more timely fashion. The time lag you're talking about and therefore the risk of being out of sync with each other I think will be diminished. I'd like to see how periodic reporting plays out in that respect.
Mr. Shepherd: I don't mean to extend the amount of your investigative work and therefore push your budget back up, but we've dropped some of these issues. We only have so much time to spend on Correctional Services; therefore, bang, we drop it and don't come back to it for four or five years. Then when we do come back to it, we say ``Gosh, this thing is pretty much the way it was five years ago'', irrespective of some of the comments being made to the committee that ``No, things are fine. We're taking care of it. We've changed this and we've changed that''.
I guess it's that aspect that could make this more current. I don't know what the solution is; I'm just throwing out ideas. Perhaps, prior to coming to the committee, something very brief could be done to see whether, on a one-to-one basis, the system is much the same as it was at the time the audit was done. That would give us more of a clarification as to where it is today. I just throw that out to you.
Mr. Raymond Dubois (Deputy Auditor General, Audit Operations Branch, Office of the Auditor General of Canada): I sympathize thoroughly with your frustrations, Mr. Shepherd.
It's very difficult to move large organizations. Over the years we have not lost faith, and we have kept pushing on the system. When we do an audit, we specifically discuss all the observations and recommendations with the department. We try to get them to take action. Then we publish the report and hope the public accounts committee will call the department and add to the pressure for them to commit to specific actions.
.1900
We systematically follow up after two years. In some cases in the past the PAC has taken certain departments to task, has asked them for progress reports on a six-month basis and has pursued the matter to satisfaction.
Having done all of that, we still have these types of graphs where the system doesn't seem to move as fast as we would like it to move. There are many reasons for that, but from where we stand, we'll just keep pushing. Hopefully, with the help of the committee, between the two of us, if we push, maybe we'll get them to move a little bit faster. We'll just keep at it.
[Translation]
The Chairman: The question raised by Mr. Shepherd is an interesting one, but I was thinking your reports could not cover everything, because government is too huge. You cover as much as possible, but it is, nonetheless, only a portion of it.
The committee also looks at some of what you cover. We do not cover everything, but I would say that even though we have not yet covered all chapters, with the supplementary reports you will be publishing in the future, it may be easier for us to react more quickly. I wonder whether we couldn't do things differently.
If there isn't time to review everything and to summon all the witnesses, if there isn't enough time to cover every chapter, perhaps we could ask various departments, government agencies or organizations to provide a type of feedback or follow-up.
Last year, we took some steps in that direction. We wrote a letter to every organization or department that had not been reviewed. Perhaps it would be a good idea to have a systematic structure for every chapter that has not been reviewed when your report is published. Perhaps there is some way we could do a follow-up.
Basically, you provide a department's bill of health. You also suggest some solutions, but it is up to the department to design the action plan and schedule for corrective measures.
Perhaps through this committee we could set up the following system: if we think we will not be able to study some chapters, perhaps a letter should automatically be sent to those departments to tell them the Auditor General has noted a particular situation. If the committee does not have time to meet with you, it expects you to provide an action plan to correct the situation as well as a work schedule. What do you think of that, Mr. Dubois?
Mr. Dubois: Mr. Chairman, I think that is a very good idea. If the committee systematically contacts every department in our chapters and asks for required updated information to correct the shortcomings we indicated, that would help us a great deal and would accelerate matters.
In fact, without saying so directly, a letter from the committee would indicate to departments that if they provide a satisfactory answer, they will not have to appear before the committee. That might motivate them to react. It may incite them to act more quickly and to submit action plans to you sooner to avoid having to make a public appearance before the committee.
It would also provide us with additional information you could use to choose which departments would be asked to appear, depending on the quality of their responses.
The Chairman: There should be a regular follow-up because if we hear about something six or seven years down the road, as Mr. Shepherd pointed out... Obviously, you cannot cover the same organizations and departments every year in each of your chapters.
.1905
It would certainly be an interesting option the committee could look into. As soon as a report is published, the committee could systematically write to every department and organization that was reviewed. Some of them would be asked to appear, but there would be a follow-up on everyone of them.
[English]
Mr. Telegdi: When you do an audit of a department, you meet with them before you publish. I take it they tell you what corrective actions can be taken and you make suggestions, as good auditors do. Depending on the quality of the report, the quality of the cooperation and the quality of the plan, you could make our work a lot less. This is just following up on what's been said.
We'd still have to do audits, but we'd end up doing audits on the people who are least compliant, if you will. You'd have to have a way set up for us to monitor the progress that has been made.
Mr. Desautels: At the completion of an audit or towards the later stages of an audit, we do of course discuss our findings and our recommendations with the department. As you no doubt have noted, in just about all of our chapters we indicate the department's response to our findings and our recommendations. Sometimes they don't agree with what we say, but we still publish that as part of the report.
So we have a good idea, when we finish an audit, what the department agrees to and whether or not they intend to implement our recommendations. Sometimes we also can tell that they've already started implementing before we finish the audit. It actually happens quite often. That gives us a good starting point for our follow-up action, which we can initiate a year or two from then.
In fact this is what we do in practice. When we do a follow-up of a department, we don't redo the same kind of audit we did the first time. We try to get just enough evidence to indicate they have in fact moved, and moved satisfactorily, on the recommendations we made the first time, so that we can then report back to you.
So what you're describing is in fact quite close to what we do when we talk about following up our previous reports.
Mr. Telegdi: [Inaudible - Editor]...problem cases, then we could do a much more thorough job.
Mr. Desautels: We actually focus to a large extent on the problems or the exceptions. If, when we do the follow-up, we can get pretty quick evidence that something has been fixed, then we can stop right there, provided that evidence is valid. Then we can move on to those where there seems to be more of a problem.
[Translation]
The Chairman: Before adjourning the meeting, I would like to tell members that the subcommittee met and received information contained in the Auditor General's supplementary report published last week. It will be added to our agenda and we will invite witnesses for chapter 6, which deals with the Atlantic Region Freight Assistance Program. We will hear the witnesses in June.
[English]
Messrs. Warme, Desautels, Dubois and McLaughlin, thank you for coming.
[Translation]
The meeting is adjourned.