[Recorded by Electronic Apparatus]
Thursday, October 26, 1995
.1106 
[English]
The Chairman: We now have a quorum. I call the meeting to order.
Good morning, colleagues.
Mr. Auditor General, are you under a tight time constraint right now?
Mr. Denis Desautels (Auditor General of Canada): No.
The Chairman: I don't want to lose my quorum for some preliminary motions. Mr. Gilmour from the Reform Party has already indicated to me that it's just pro forma.
Colleagues, if it's okay, we need to establish a subcommittee. I need a motion that, pursuant to Standing Order 108(1), a subcommittee of the Standing Committee on Government Operations be established, to be composed of Ian Murray as chair and four other members to be named by the chair after the usual consultations and filed with the clerk, to specifically study Bill C-84, the regulations act, and to report thereon to the committee; that on presentation of the said report it be deemed adopted; and that the chair of the committee present it to the House on behalf of the committee.
Mrs. Chamberlain (Guelph - Wellington): I so move.
Motion agreed to
The Chairman: There's a couple of other things that go with it.
Madam Clerk, do I need to go through all those?
The Clerk of the Committee: They have a copy, but maybe you can specify the allocation of funds. Those are the usual things.
The Chairman: I believe you all have a sample of the motion. Can I dispense with reading it?
Some hon. members: Yes.
Mr. Gilmour (Comox - Alberni): I so move.
The Chairman: Okay. So it can be so moved and adopted as circulated.
Motion agreed to
The Chairman: The only other point is that the members of the Standing Joint Committee on the Scrutiny of Regulations be invited to attend and take part in the proceedings and that a research officer be provided to the subcommittee by the Library of Parliament and that he or she be allowed to question the witnesses. I need a special resolution for that. Is that moved?
Mrs. Chamberlain: I so move.
Motion agreed to
The Chairman: Thank you, witnesses.
Colleagues, on your behalf, I want to welcome this morning Denis Desautels, the Auditor General of Canada; David Rattray, an assistant auditor general; and Michael McLaughlin.
I believe, Mr. Auditor General, you have an opening statement.
Mr. Desautels: Thank you very much, Mr. Chairman.
We are indeed pleased to be here with you today to discuss the role, the responsibilities, the mandate and the work of the Office of the Auditor General of Canada.
As you have indicated, I am accompanied today by David Rattray, who is the assistant auditor general responsible for the audit of Public Works and Government Services and some of the agencies of the Government of Canada that fall under your committee's mandate, and by Mr. McLaughlin, who is the assistant auditor general responsible for strategic planning and human resources management of the office.
.1110
I'd first like to say a few words about who we are. The Auditor General is an officer of Parliament, independent of the government of the day, responsible for auditing government operations and providing information that helps Parliament to hold the government to account for its stewardship of public moneys. My mandate is set out in the Auditor General Act and in the Financial Administration Act, both of which are appended to our annual report for the convenience of members of Parliament. The key sections of our act are section 5, which require us to audit the accounts of the Government of Canada, including compliance with rules and regulations, and section 7, which covers, among other things, the value-for-money components of our mandate, or the three E's of economy, efficiency, and effectiveness.
The office mission is essentially to provide audit information, advice, and assurance to Parliament, and to encourage accountability and best practices in government operations. We have given ourselves some guiding principles, and I will mention those very quickly. First is to serve the public interest, then to be cost-conscious, then to care about people, to promote innovation, and to be committed to excellence. Commitment to excellence includes a commitment to the highest standards of integrity not only in the work we do but in the work we examine across government.
Our client is Parliament, but there are other stakeholders. The Canadian taxpayers, the media, government itself, and bureaucrats are interested in our work. Parliament in turn includes many stakeholder groups. One of our challenges, of course, is to remain independent and objective while serving these various groups.
Our main products are the annual and additional reports to the House of Commons and the annual opinion we express on the financial statements of the Canadian government, which is contained in volume I of the Public Accounts of Canada. We audit over 150 departments and agencies. We also give separate opinions on the financial statements and operations of over 40 crown corporations and conduct special examination reports on most of these. In addition, we audit the Governments of the Yukon and the Northwest Territories and three United Nations agencies.
All this work is carried out by a staff of some 540 employees, augmented, as the need arises, by specialists hired on a contractual basis.
[Translation]
I would like to say a few words on our special relationship with the Public Accounts Committee. The reports of the Auditor General are automatically and permanently referred to the Public Accounts Committee in accordance with the Standing Orders of the House of Commons. The committee reviews a fair number of our chapters every year and regularly tables reports in the House which are vital to ensuring greater accountability by government, since these reports require an official response from the government. The Committee also examines the estimates for the Office of the Auditor General and reports on these every year.
Our Office also responds to requests for assistance from other standing committees. We accept invitations to appear before other committees inasmuch as they do not conflict with the plans or priorities of the Public Accounts Committee.
On that note, we welcome invitations such as yours. We want parliamentarians to let us know what is of interest to them and to the extent committees have concerns, would like to hear them. We consider very seriously the needs of various stakeholders in the elaboration of our audit plans.
Since 1977, when my office first received its expanded mandate that included value for money auditing, annual reports to Parliament have included several hundred chapters covering a broad range of subjects involving departments, agencies and central agencies, as well as Crown corporations. Many chapters have been the subject of hearings, and subsequent reports, by both House and Senate committees.
Many of our chapters have focused on specific issues, programs or activities but others have included topics that deal with much broader aspects of the management of government operations.
Like the focus of your committee, several of our audits and studies have looked beyond individual departments to include topics or issues that are multi-departmental in nature, or where primary responsibility for policy, monitoring or delivery rests with the central agency or a common service provider.
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Many have dealt with the need to bring greater clarity to policies, roles, program delivery or monitoring involving central agencies and departments. Others have focused on issues within or between departments or agencies that provide common services to the rest of government, while others have dealt with management concepts. In addition, we have also dealt quite extensively with the control and accountability framework for Crown Corporations.
[English]
Finally, many of the observations and recommendations we've raised deal with changes that are needed to improve the overall operations of government. I would like to provide a few recent examples of audit work or studies that may be of interest to your committee. I have grouped my examples under four main headings: government-wide or sectorial issues, common service issues, management studies, and crown corporations.
Starting first with government-wide or sectorial issues, in 1993, as part of a three-part regulatory review, we reported on aspects of parliamentary control over the raising of revenues by fees. We were concerned that Parliament cannot readily scrutinize the user fees established by contracts and other non-regulatory means. We recommended that Treasury Board review and report to Parliament on the adequacy of the current framework for establishing user fees and provide Parliament with government-wide summary information on fees being charged, the revenues raised, and the authorities under which they're established.
In 1993 we reported on the functions of internal audit and program evaluation across government. For internal audit, we found that 30 years of effort to establish effective internal auditing had not resulted in a uniformly high standard of internal audit throughout government. We concluded that for internal audit to achieve its potential, more effective direction and support from central agencies and departmental management were required, as were more innovation and flexibility in the internal audit community itself.
For program evaluation, we concluded that the performance of the function had fallen short of its potential. Although we were able to point to several instances of good evaluation, among the problems noted were: limited coverage, lack of timeliness and relevance, uneven quality, and a focus on operational issues as distinct from the tougher questions relating to program relevance and effectiveness.
The 1994 ``Information Technology'' chapter reported on reaping the benefits and managing the risks of information technology. The chapter identified a need for vision, selecting the right projects, and managing the risks associated with them well.
Chapter 12 in the latest report, October 1995, goes further and examines and reports on four major government systems under development and the management of risks associated therewith. Only one project seemed to manage the risks well. One was cancelled and the other two needed corrective action.
In 1994 we devoted four chapters to a sectorial audit of science and technology. We commented on the overall management of departmental activities as well as the management of scientific personnel in federal research facilities. We also formed conclusions and recommendations about income tax incentives for research and development. We concluded that the government needs to have a clearer sense of what it is trying to achieve and to direct its efforts in a way that would yield maximum return.
Also, the present allocation of funds among various fields is more incidental than the result of a well formulated strategy. In the 1994 budget the government announced a major science and technology review, and we understand that this review is nearing completion.
The public accounts committee held three hearings on these chapters and will soon issue a second report on the results of those hearings.
[Translation]
Let us now quickly turn our attention to another matter, namely common services issues.
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In 1994, we conducted a follow-up of audit reports issued between 1987 and 1991 covering aspects of centralized procurement and the banking and accounting services of the government. We have identified opportunities to achieve more fully the public purposes of centralized procurement, weigh more carefully the costs and benefits of secondary objectives of procurement activities, improved productivity and improved systems development capability.
Many initiatives have been introduced that should lead to significant improvements. We believe more audit work by the Office of the Auditor General and the department itself will be needed to assure management and Parliament that solid progress is being made.
Chapter 12 of the 1994 report, Aspects of Real Property Management, concluded that the government could do better in the strategic management of its real property portfolio including the area of incentives. Improvements are needed in management tools and practices such as information systems and the government needs to review the existing policy and management frameworks, including the present roles assigned to the custodial departments and central agencies. In addition, in a separate chapter, we reported on Public Works management and operation of Crown owned office buildings. The Public Accounts committee called the Treasury Board Secretariat for a hearing on May 5th 1995, on Chapter 12 and issued a report in June of this year.
[English]
Moving quickly to management studies, the subject of public service reform is one on which I appeared before this committee in 1994. We had reported in 1993 that lessons learned from studying reform initiatives in Canada and other jurisdictions showed the need for a more coherent approach in this country. There continues to be a need to modernize our administration and to renew the public service. As I have previously stated, the prospects for successful reform would be enhanced with strengthened parliamentary oversight on the government's efforts, and my office is ready to assist in this manner.
In 1994 we also reported the summary of conclusions of a joint study carried out by the Treasury Board Secretariat and our office, with participation from private sector people, on the subject of special operating agencies. A copy of this study was also provided to your committee.
Finally, in the area of crown corporations, during the past five years our office has reported on the control and accountability framework for crown corporations that is set out in part X of the Financial Administration Act. Reports in 1991, 1993, and in chapter 10 of our October 1995 report concluded that the control and accountability framework is a sound legislative framework and one that, in our view, has been working well over the eleven years it has been in force.
At the same time, based on the results of our second cycle of special examinations, which are a form of value-for-money audit, we have reported concerns about the application of the framework. For instance, many corporations do not have a well-articulated corporate vision or set of values or goals or do not report the extent to which they are achieving their objectives. Therefore, chapter 10 of our 1995 report sets out our views on how the issues raised may be addressed through improved fulfilment of responsibilities for governance.
Finally, Mr. Chairman, I believe our office is in the unique position of being able to comment on government activities that cut across departmental lines. So far I've talked mostly about past reports, but I should say that our future reports will include work on sectorial and government-wide issues. In particular, we will be interested in the developments in information management, financial management, and questions of service to the public, which will be a first audit of this area by our office. Finally, we will continue our interest in the reform of the public service. Of more particular interest to this committee could be audits we're planning related to asset management and common service issues.
.1125
Mr. Chairman, this completes my opening statement. My colleagues and I would be pleased to respond to any questions you may have.
The Chairman: Thank you very much for your presentation, Mr. Desautels.
I invite Mr. Gilmour to begin.
Mr. Gilmour: Welcome to the committee, gentlemen.
I'd like to inquire how open your department is. I understand if you're dealing with science and technology or something you're focusing on a particular area, but this committee covers a number of areas: CMHC, post office, Public Works. In an area you may not be looking at specifically at a particular time, could people within this committee, or the committee itself, approach your department and get information on those areas? How secure - and I'm thinking of freedom of information and this type of thing. How free is this information from your department?
Mr. Desautels: Our obligation is to report our findings to Parliament. As you know, when we report to Parliament on a particular issue, in order to make it easily understood and readable by Parliament we do have to condense hundreds of hours of work into twenty pages or so. So you are right, on certain specific issues on which we've reported we probably have more detail than we are able to put in a particular chapter. If individual members of the House want to question us on issues on which we have reported, we are very cooperative in explaining, expanding on, the subject matter on which we've reported.
Where we won't be able to do that, Mr. Gilmour, is with issues on which we have not yet reported to Parliament. As I was saying earlier, our prime obligation is to Parliament itself as a whole, and we are quite careful about sharing information on which we have not yet reported to Parliament. Once we've reported to Parliament, we're quite open about expanding on specific subjects.
Mr. Gilmour: Perhaps, Mr. Rattray, you could give a summary of the reports over the last number of years that affect this committee. Do you happen to have it handy, or could you furnish it at a later date, basically so we can see where you've been and so we don't cover old ground?
Mr. David Rattray (Assistant Auditor General, Office of the Auditor General):Mr. Gilmour, I could make that available to this committee.
Mr. Gilmour: Perhaps you're aware of a move by the government on moving tenders. This is moving DND people and government service people. I'm not at all sure where it is, but my understanding is that the service is going to go to a single bid. I was wondering, first of all, if you were aware of this move. I'd appreciate your comments on the efficiency or non-efficiency of such a move. I know a number of the moving people are particularly concerned that it focuses all the...basically it's all going to one individual right across Canada, as opposed to a number of moving companies, which currently do it. Are you aware of the move and could you comment on it?
Mr. Desautels: I was not aware of this particular intention as such, although I could askMr. Rattray if through his work in the department he has come up with that question. Let me just inform the committee that there is more to this question of moving households than the issueMr. Gilmour just raised. In fact, the chairman of the public accounts committee wrote to me back in May 1995 to ask if we would do some work in that area and inform the committee of our findings. The concerns of the committee, though, related more to allegations of irregularities in that particular activity.
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We have conducted some preliminary work, and I will be reporting back to the chair of the public accounts committee in the next few days on the results of our preliminary work in that area. But that does not necessarily cover the efficiency within which that activity really takes place. It has to do more with alleged irregularities.
In terms of the efficiency with which that activity is being carried out and the wisdom of the proposed tendering process, we're not in a position to comment on that at this time.
David, do you have anything to add to that?
Mr. Rattray: Thank you.
We are aware that there is a move by the interdepartmental committee to possibly move to a single supplier for moving services, but it isn't currently part of the audit work we're doing to track this as it goes through its consideration. We'll have to look at it at a future date.
Mr. Gilmour: Mr. Chairman, I'll pass for now, and perhaps there might be time for a second round.
The Chairman: Maybe; we'll see how the time goes. Thanks, Mr. Gilmour.
Mr. Duhamel, please.
[Translation]
Mr. Duhamel (Saint-Boniface): I'd like to thank Mr. Desautels and his colleagues for their thorough presentation. I have two questions and I think they are linked. I do not know whether you will see the link. I'll put them immediately to be sure of getting an answer to both.
I've a great deal of respect for the institution of the Auditor General. I can say in all honesty that I think it is an essential institution. But I do have some questions. Recently, some people wondered whether you had examined things in sufficient detail. I'd be interested in hearing your comments.
Secondly, with respect to government policy, it is incumbent upon you to comment on such matters and to express an opinion on whether a policy is a good one or, in your view, inadequate? The reason why I'm asking this second question is of course that I do not have the answer. But it does seem to me that the Auditor General cannot comment on policy. I'd also like to hear your comments on this.
[English]
The second question is really a question of equity and fairness. I know there's always an attempt to be fair, because these issues are always very sensitive, but I want to bring your attention to a couple of things.
In your latest report you mention that the Northumberland Strait Crossing project shows definite improvement over previous megaprojects, specifically in the protection of the Crown. That's a positive statement, and I think it's welcome, because obviously some people have seen that.
Then I also see comments such as the ones with respect to the common departmental financial system, which is cited in your report as an example of an information technology project that has encountered problems. As well, the public service compensation system is another example of a project that has encountered problems. You do point out that it's not a total failure; there were some problems, but there were some benefits. But did you highlight those benefits sufficiently?
I have in front of me a document entitled Charting the Seas of Information Technology: Chaos, by the Standish Group. In here it points out there are tremendous difficulties in the private sector.
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If my memory serves me correctly, there is some reference to this. For example, the Standish Group research shows a staggering 31.1% of projects will be cancelled before they even get completed. It indicates that 52.7% of projects will cost 189% of their original estimates, and it goes on.
On the success side it shows 16.2% for software projects. When I read that section, to be perfectly frank, I got the impression the government had been a big failure. Somehow it wasn't put into the overall context that there are failures and you have to call them as you see them. I accept and respect that, but always within a context.
May I have your comments on that as well.
Mr. Desautels: Let me try to deal first with the question of dealing more with the role of the Auditor General and who audits the Auditor General. This question is often asked, so I'm used to it.
To summarize briefly, there is an annual financial audit of the Office of the Auditor General conducted by an independent auditor appointed by Treasury Board, by the name of Welch & Company.
We are also subject to a number of other specific audits. The Public Service Commission, for instance, audits our staffing and classification. The official languages commissioner also audits us from his perspective.
We also have our own internal auditing, which we call our practice review unit. In addition to that, we are subject to regular inspections by the provincial institutes of chartered accountants in provinces where we have offices, to certify that we meet their standards.
We also hire outsiders on contract from time to time to examine certain of our procedures. I'm referring here to firms like Price Waterhouse or KPMG, which have, in the last couple of years, done some work for us in that area.
In addition to that, we participate through crown corporations in a number of joint audits with other auditors, where the efficiency of our own processes is put to the test.
I believe we are also subject to a lot of public scrutiny, because all of the work we do is actually public. Our work does get judged through the public scrutiny process.
Finally, I believe our work is also scrutinized quite closely by parliamentary committees. In the course of a year we appear in front of twelve to fifteen different parliamentary committees.
This summarizes the processes we're subject to.
Mr. Duhamel: Is it too much?
Mr. Desautels: I'm used to that. The question I maybe haven't answered that could be in the back of your mind is whether we are subjected, on top of that, to the same kind of examinations we carry out on departments. The short answer is that our legislation, the Auditor General Act, does not provide for that.
Mr. Duhamel: What about commenting on government policy? That was part of that question.
Mr. Desautels: Yes, I was going to get to that. One of our basic principles is that our office has to stay away from commenting on government policy.
Our starting point in the work we do is the legislation and programs that have been approved by Parliament. Our task is to assure Parliament that these programs have been properly carried out in accordance with the wishes of Parliament. Our basic thrust is to stay away from criticizing or commenting on policies adopted by government and, in turn, by Parliament.
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In some cases, it's difficult to avoid completely touching that issue, because some of the operational issues we run into may have an impact on policy. Inversely, some of the policies adopted may have certain consequences that I sometimes feel members of Parliament ought to know about.
These are difficult judgment calls for us to make, but our basic principle is to exert every effort to avoid being dragged into policy discussions. I must confess it's not always easy because sometimes the line isn't very clear.
In terms of your last question about balance in our reports, we try to be fair and we try to be accurate. As you noted, some of the chapters we have written do have a positive spin.
The fixed-link chapter is a good example. Based on previous megaprojects we have looked at, we were concerned that the same mistakes could be made with the fixed link. That's why we went in early. I believe providing Parliament with assurance that something is working reasonably well is a useful service. However, we obviously can't do that all the time.
The other chapter that you pointed to, the one on systems under development, is one where the situation was worrisome. The amount of money at stake in that specific area is huge. Again, there we called it the way we saw it. I believe we did not exaggerate any of the problems we saw.
We were quite aware of the report to which you referred, the Standish Group report. In fact, I think we referred to some of those statistics ourselves, but I don't think that takes away from the seriousness of the issues we raised in government.
Even though you might argue that the private sector is not doing that much better, I'm nevertheless quite concerned because of the magnitude of the projects presently under development in government. In addition to the four systems we looked at, there are 20, if not 25, other significant projects being developed, with a value of over $2 billion. I think we described the situation in a balanced way on this one.
Mr. Duhamel: I want to make sure I wasn't misunderstood. I did not suggest that you'd over-exaggerated and I'm not sure you said that either, but I want to make it perfectly clear.
Here's the point I was making. If I'm asked to lift 100 pounds and nobody of my age range can lift 100 pounds, I'm seen as a failure in lifting the 100 pounds, but in context it's not so bad after all. I was asking whether or not the context, the overall context, was sufficiently explained to show that even though it is a worrisome problem, as you've described it - here's the way the Auditor General's office sees it - was it or was it not sufficiently compared to sectors in the private sector? That's the only point.
However, I retain what you said. You try to be fair. You call them the way you see them, and I respect that.
The Chairman: Thanks.
Mr. Bélair, you have a question, but before that, I have a question that is following up on who is auditing the Auditor General.
Mr. Duhamel: A lot of people.
The Chairman: We've all read a recent article that appeared in The Globe and Mail by a University of Moncton professor and an opinion piece in The Ottawa Citizen about your report being a bark, not a bite.
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I listened carefully to your reply to Mr. Duhamel, our colleague, about the kinds of audits, but doesn't it boil down to the fox being in charge of the chicken coop here when you say, well, yes, we conduct our own internal investigations? I'm not being negative. I'm trying to go on a plateau of being helpful to you.
You acknowledged to my colleague that you're governed by your legislation. In that context, is it time for new legislation? Who asks you that question?
Obviously Public Accounts is dealing with specific issues and the larger, generic, global issue, if I can explain it in that way, of who's auditing the Auditor General. And I don't mean audit; I mean evaluate, examine, look at your role. You have 600 employees. You have a budget of $50 million-odd. The American Congress recently has directed an external audit.
I'd be curious, sir, if you would consider commenting on the kinds of things I've just mentioned.
Mr. Desautels: Mr. Chairman, the possibility of changing our legislation to incorporate some provision that would make possible the call of an independent review of our office is something that could be considered in the future if and when the members of Parliament felt that was important and was needed. I for one would not object to that.
In the meantime, I must say the public accounts committee, as I think you know, is the committee to which we really relate, year in, year out, and they've been quite conscious of that. I suppose when our legislation was last opened they could have decided to add that in. In their wisdom they decided not to. But if at some point this was felt to be important and needed, I for one would not have any objections.
I'd just like to make a slight correction to what you said, if I may. In fact most of the processes I've described here are external processes. So it's not as though we're the only ones in charge of the chicken coop here. Just about all the things I've described except our internal practice review unit are external groups coming in or accepting our work.
The Chairman: I accept that they're external, but they strike me as soft, in the sense that they're not necessarily a continual comprehensive scrutiny. I'm not suggesting we need or do not need to do that. One of the reasons I personally viewed it as of interest to have you come before our committee was that as a government operations committee, dealing more with the central operations of government, we thought there might be some interest in, first, doing what you've done today, which I want to thank you for doing, obviously explaining your involvement...but more importantly, to look at how we might help you improve yourself. It was in that vein that I raised it.
Mr. Desautels: Could I add one more comment? As I said earlier, we have a particularly direct and fairly active relationship with the public accounts committee. The public accounts committee is in a position to ask for just about any explanation it wants on the operation of our office. As I said in my opening statement, we do appear in front of them each year, regularly, to review our estimates and our plans and so on. I guess if the public accounts committee wanted to get some help in doing its work vis-à-vis our office, that would be quite legitimate.
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We've tried as well, Mr. Chairman, to be as open as we can possibly be, and we try to do that through the part III estimates the public accounts committee reviews. We've added to that part III, and I believe we're generally leading the pack on that, indicators of performance. This is a fairly recent initiative, something I've tried to work on since I've become Auditor General. I think if members take a close look at that they'll get some idea of how we're trying to measure and track our own effectiveness in fulfilling the mandate we've been given. I don't think I should take you through that today, but there are graphs and we've tried to break down our work into its components and illustrate how we've managed, we think, to achieve or set objectives in each of these areas.
The Chairman: I didn't want to spend too much time on it, but it was apropos to what my colleague has raised.
Mr. Bélair, please.
[Translation]
Mr. Bélair (Cochrane - Superior): Welcome, Mr. Desautels.
You will remember that last year when Mr. Jean-Robert Gauthier was still a member of Parliament, he tabled in the House a bill aimed at increasing the number of reports made by the Auditor General to Parliament. Can you fill us in on what has happened since?
Mr. Desautels: We all know that fortunately, Mr. Jean-Robert Gauthier's bill was adopted by Parliament and that our Act was amended so that we can make more than one report a year.
Mr. Bélair: Is it at your discretion or at the discretion of Parliament?
Mr. Desautels: It is up to us to decide how we wish to use this new flexibility. The legislation allows us to make three reports in the course of the year in addition to our annual report. Nineteen ninety five was the first year we availed ourselves of this opportunity. We produced two periodic reports along with the annual report we will be tabling in November. So this means we have prepared three reports out of a maximum of four allowed by the legislation.
Mr. Bélair: What type of follow-up is there when you submit your additional reports along with your general report to Parliament? Does your office do any follow-up to determine whether your recommendations are implemented and the appropriate corrective steps are taken?
Mr. Desautels: I'm glad that Mr. Bélair asked this question because it does give me an opportunity to dispel a number of myths that may exist. We do have a very rigorous follow-up system to our recommendations and reports. We automatically review the issues or departments raised in these reports two years after the initial report in order to inform Parliament to what extent our recommendations have been implemented or simply to report on what has taken place since then. In each annual report there is a chapter devoted solely to the follow-up on recommendations of previous reports.
Of great assistance to us is the fact that the Public Accounts Committees examines a significant part of our reports, calls witnesses from the departments and usually makes a report following such hearings, report to which the government must respond within a prescribed period of time.
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As a result of such action on the part of the Public Accounts Committee, its reports and the government's requirement to respond, a great many things take place without people necessarily realizing it. There are many changes or corrective measures taking place in the federal government's management systems following the various procedures I have just described.
Mr. Bélair: I would now like to look at the other side of the coin, Mr. Desautels. Has a department ever asked the Auditor General to carry out an audit? Is there really an innate fear within the departments that leads them to keep their distance from the Auditor General?
Mr. Desautels: Both situations exist and are real. There are people who don't really like to see us; I tell them that it's like going to the dentist, that it doesn't hurt very much and that it's for their own good. But generally, we manage to agree on auditing projects we want to carry out.
Mr. Bélair: But does the government ask you to?
Mr. Desautels: Yes, sometimes. They aren't official requests, but department officials and deputy ministers suggest looking into certain programs in certain areas, because they have their own doubts and concerns and they want us to help them clarify the situation in those sectors.
Mr. Bélair: Have you ever had the opportunity to cooperate with the RCMP in certain specific cases? You don't have to reveal secrets, but are you asked on occasion?
Mr. Desautels: We only come into contact with the RCMP in circumstances where we've discovered something that might have a criminal side to it.
Mr. Bélair: And you come into contact with them rather than the opposite?
Mr. Desautels: Yes.
Mr. Bellemare (Carleton - Gloucester): I'm pleased to see you again, Mr. Auditor General. Having spent five years on the Public Accounts Committee, I know very well what you can do and what you must do. I've always gotten a very positive impression of your office and activities. I think it would be interesting if you could explain to the committee the difference between an attest audit, a comprehensive audit and a forensic audit, in case my colleagues are not aware of these definitions.
Mr. Desautels: Mr. Chairman, the point of an attest audit is to give an opinion on financial statements or particular financial reports, such as the public accounts of the government of Canada or the financial statements of Crown corporations or other government agencies.
What you've termed comprehensive auditing is auditing the quality of the management of an agency that does not lead to attesting financial statements, but rather to comment on the quality of the management of certain programs or agencies.
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You spoke of forensics auditing. That is what is sometimes known as juricomptabilité in French. In that area, we carry out inquiries into fraudulent or irregular situations. It is a very specialized type of audit, and at the Office we have a very small group that handles that activity.
Mr. Bellemare: Let's go back to Welch, which carries out your audit. It would do an attest audit rather than a comprehensive audit. Many say that it should carry out a comprehensive audit. Is it an attest audit what the Welch company does?
Mr. Desautels: Welch carries out an attest audit of our financial statements, as well as a compliance audit concerning different rules and regulations of the federal government. Not only must the financial statements be in order, we must also have followed all regulations concerning budgets, contracts given out, and so on.
Mr. Bellemare: That is where people often without knowing the definition, look for the comprehensive audit. When I left the committee, you spoke of starting the forensic audit. I thought, given your comments, that you now had a small group taking care of that.
Mr. Desautels: Yes.
Mr. Bellemare: Are you doing this in cooperation or in conflict with the people from forensic auditing at the RCMP?
Mr. Desautels: The small group that handles this activity for us works in our office and deals with cases that were referred to us or that we identified. This groups works neither in cooperation with the RCMP nor against it. If, when doing this kind of work, we uncover situations that have a dimension that might be considered criminal, we tell the RCMP. So in that sense, we collaborate. We carry out the first step of the work. If that leads to something, fine! In that type of situation, we tell the RCMP.
Mr. Bellemare: Does that mean there's duplication? Does the RCMP hire private sector auditors or does it use your data when acting on facts?
Mr. Desautels: I don't think there's any kind of duplication. Quite the contrary. Our office and the RCMP sometimes lack the resources to follow up on some of these situations.
Mr. Bellemare: Could you tell me about the nasty comment one hears, to the effect that your office has a bark but not a bite. I'm glad they didn't say woof! Those who drafted these sections seem to be saying that the auditor general has the right to impose penalties. If you were to ``bite'', you would have to have the authority to attack or to bring proceedings against them. Do you think that might potentially be the Auditor General's role or do you think it should just be the Treasury Board's responsibility?
Mr. Desautels: First of all, Mr. Bellemare, I must tell you that we always try to report in a balanced and responsible manner. In certain cases, this doesn't suit journalists because they'd like to have more sensational things, names, that type of thing, but that isn't our role.
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We're working for you, the parliamentarians, and we report in a way you'll understand and will be useful to you.
As to possibly imposing penalties, that clearly is not our role. We report to you, and it is then up to parliamentarians to act and take the necessary measures in various situations. Actually, the reaction of parliamentarians can be different from one case to the next, but we don't have the authority to impose sanctions on officials. It is up to Parliament or other government authorities to do so, if necessary.
Mr. Bellemare: Such as the Treasury Board or the Department of Justice.
Mr. Desautels: Depending on the nature of the problem.
Mr. Bellemare: Thank you.
[English]
Mrs. Chamberlain: I'd just like to pursue that line of questioning a little more. I'm going to refer to the same article about this barking and biting. It says the Auditor General's department audited 43 parent crown corporations and found ```one or more significant deficiencies' in a staggering 80% of them''. Then it makes another reference to that same kind of thing further down; it says, ``At 45% of the agencies audited, Desautels reports `operations not carried out effectively'''.
In your opinion, what would be one or two of the most obvious examples of the government not spending public moneys as wisely as it could be?
Mr. Desautels: That is not an easy question for me to answer today.
The chapter on crown corporations that this article refers to did not name specific crown corporations. That is a source of frustration to some journalists, as I can see. We tried in that chapter to come down to some overall judgment on the management structure that's been put in place for the crown corporation portfolio. We have therefore identified certain areas of improvement in this framework, and we used the specific sample we carried out to support the overall conclusion.
I don't have it with me today, but in each of the overall conclusions, there are specific crown corporations that either scored well or scored badly, whether it be on clarity of mandate or whatever. I've had discussions with certain crown corporations on the clarity of their mandate. They felt their mandate was clear enough as far as they were concerned and we felt differently.
I'll just give you one example. The Federal Business Development Bank was an example of where we argued about the clarity of their mandate. We argued and argued.
Mrs. Chamberlain: Was there a conclusion on that? That's good to know.
Mr. Desautels: Eventually. We're not claiming our work had any influence on it, but eventually, as you may know, there was new legislation brought in to modify the mandate of the Federal Business Development Bank, including changing its name. So on that particular issue there was an eventual resolution of the problem, but that's just one example among many.
We did not want to start naming crown corporations in our report, because there is a difference between crown corporations and government departments. Our work in crown corporations is governed by the Financial Administration Act, whereas the work we do in departments is governed by our own act. The reason behind that, as you may appreciate, is to maintain some form of arm's length relationship with the crown corporation. So we tend to respect that particular principle, as long as that exists.
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Mrs. Chamberlain: Further to that, because you earlier indicated a wish to help me as a member understand clearly, I personally find it much easier to deal in specifics, as opposed to talking about mandates, strategic plans or moving oneself from A to Z. I really like specifics. I really like black and white. I understand them.
So if we pursue the Federal Business Development Bank a little more, and if you want to pick that one out as having an influence on it, perhaps, and you changed its mandate or possibly helped to change it, can you tell me what that moved from? Tell me what good you did. I need to understand that.
I don't understand why - it's not just you; a lot of people come before us - and I don't understand the real good they do. So tell me, in that very specific case, what were you able to achieve?
Mr. Desautels: The argument we had on the clarity of mandate - and that could be applied to other crown corporations too, Mrs. Chamberlain - meant the government was funding an activity and was not in the position to determine, after the fact, whether that funding produced the results it wanted; whether it was useful and was achieving the objectives members of Parliament had in mind when they created the entity and approved its funding year after year. I don't want to talk only about this particular case, but I want to illustrate the impact an unclear mandate can have for members of Parliament, generally, and for government as a whole.
It means you end up funding activities, and you can't tell over time whether that was the right thing to do or whether it's producing proper results. Other crown corporations have clearer mandates, and when you give them money you can extract afterwards a proper accountability for the money being spent.
I think with a clearer mandate, in this particular case, you can insist on specific results you want that organization to achieve. I think if we do that across government we will advance the cause of good public management. But you're right that we you can do that on a case-by-case basis. I appreciate your comment that you want to deal in specifics and I note that.
Mrs. Chamberlain: For a change.
Mr. Desautels: I think it's also important - and maybe we've done too much of that - to understand the broader issues around public administration and government management. We can't lose sight of the forest for the trees. You don't want to get involved strictly in micro-management either. Certain of these micro-issues do have a broader policy impact as well.
Mrs. Chamberlain: I understand that. I appreciate your context of broader issue and really bow to it respectfully, but I also find there are too many broad issues. We really have to be more specific.
Should you come back again at some point and should I be here - it is a very likely proposition that I may never move from here - I would very much like you to bring some specifics on where we've gone wrong and perhaps how we've corrected it. I don't think this is a gloom-and-doom scenario at all. I don't wish to paint it that way, but I think unless we really know where we've come from very specifically rather than broadly, we can't really know how well we've done. Thank you.
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Mr. Gilmour: To broaden on Mrs. Chamberlain's comments, the areas that this committee will cover - and I'll miss a few - are Public Works, which includes buildings and lands and leases, the Mint, the post office, and Canada Mortgage and Housing.
Perhaps you would be so kind yourself, or Mr. Rattray, to give two specific examples in those departments where you see concern, where public funds are not being handled as well as they could.
Mr. Desautels: I'll ask Mr. Rattray to elaborate on my answer, but if you think of Public Works, as an example, we have reported in the last while on the management of the various properties belonging to the Crown, particularly in the building side of things. I'll ask Mr. Rattray to elaborate a bit more on that. I think you'll find in there specific conclusions, or possibilities for saving money in managing that portfolio.
Mr. Rattray: Two examples I would give quickly, off the top of my head.
The first deals with real property management, which we reported on in 1994. We looked at the role of the Treasury Board, specifically its Bureau of Real Property Materiel, as well as a number of government departments and how they managed their real property.
We had areas where we specifically stated that, with better management systems and tools and so on in place, we felt additional savings could be effected through better management practice. We also felt, on real property, that the asset wasn't being managed as well strategically as it should be. We gave examples there where we thought incentives might be useful for future savings or better management of the assets.
That subject also resulted in a public accounts committee hearing in May of this year and resulted after that in report number 14 in June back to the House of Commons. So that outlines a number of areas dealing with savings specifically.
The other area - for example, if we look at Public Works and Government Services - is probably in the competitive contracting area, a subject of interest to this committee. In 1994 we did a fairly extensive follow-up of reports that we provided from 1987 through to 1991 and outlined a number of areas there where we felt there could be future savings through more emphasis on performance measures and better practices with competitive contracting. We also have outlined a number of areas in that follow-up and in previous reports specifically where we thought there could be improvements in that very broad area.
Currently, we have an audit that is just getting under way looking at contracting performance, which we're expecting to report to Parliament in November 1996. It will take in many of the aspects that we've previously reported and carry those forward.
The Chairman: Colleagues, on your behalf, I want to thank the Auditor General and his officials.
There is one area, sir, that as a committee we're sifting through at the moment and one that's of great concern to the Treasury Board minister. It involves the non-competitive contracting that has been going on under $30,000. You might be aware of the fact that, according to the Treasury Board report, 59% of all government contracts for the fiscal year 1993-94 were non-competitive, representing about $8 billion and over 100,000 contracts. We're in the final stages of trying to formulate some sort of a study in the area.
Do you have any advice or any work that's ongoing that you might want to offer us, or some suggestion as we frame our study?
Mr. Desautels: I'll ask Mr. Rattray to answer that, because he is doing some work in that area.
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Mr. Rattray: Mr. Chairman, it's a little difficult to give advice with the Auditor General sitting on my left, but I will try to give advice and he can have the last say on whether it's advice he would like to give.
As I mentioned earlier to Mr. Gilmour, we are undertaking an audit of contracting performance. One of the areas an auditor must put forward before starting such an audit is basically the criteria or the norms against which you would expect to manage. As far as this particular study, we have laid out five criteria and I can make those available to the committee. I won't take the time to read them, but -
The Chairman: I understand from a researcher we already have those.
Mr. Rattray: Okay. As far as our own work, we'll basically be looking at areas of competition and will include four to six different product and service lines and involve five to six different departments. But again, given the time constraints, this is for reporting in November 1996.
The Chairman: We have two concerns we're curious about. One is the competition issue. One is the access issue. In other words both are under OBS. I think the lack of entry issue on OBS is one of the things we're going to be touching on to make sure all Canadians, particularly small and medium-sized businesses in Canada, the essence of competition, have an opportunity to be able to access when the government or crown corporation needs a service. There's a real consensus that's emerged from this committee. That's the area we're going to be focusing on.
So we would be very grateful if you could give us any hints or a heads-up for areas you think we might want to pursue as we embark on this study, which will be announced probably within the next few days.
Mr. Desautels: Mr. Chairman, I think we could meet with the clerk of the committee and both exchange our plans, and maybe through that process pass on whatever useful advice or information we have. But in planning our own work we will also take into account the particular concerns you've expressed this morning. I've noted them. Even though you're covering them, we'll make sure those concerns are incorporated in our own plans.
The Chairman: Thank you very much. I appreciate you being here.
Colleagues, the meeting is adjourned.