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REPORT TO THE HOUSE

Tuesday, May 28, 1996.

The Standing Committee on Public Accounts has the honour to present its

FIRST REPORT

Pursuant to Standing Order 108(3)d), your Committee has studied Chapter 12 of the Auditor General's October 1995 Report (Systems under Development: Managing the Risks). The Committee held a meeting on this subject with representatives from the Treasury Board Secretariat and the Office of the Auditor General on November 28, 1995.

INTRODUCTION

When the Auditor General's Report was tabled last October, chapter 12 elicited many comments from all sides. On the one hand, everyone recognizes the importance of investing in information technologies in order to reduce operating costs or improve services provided to taxpayers. On the other hand, hundreds of millions of dollars are presently invested in systems that are under development, and the Auditor General stated in his report that these investments were at risk.

Because of the lawrge amounts at stake, the Auditor General decided to publish his observations in October rather than in his annual report. He hoped in doing so that there would still be time to influence the three projects under development that were reviewed in chapter 12, as well as the twenty or so other projects that have been initiated across the federal government. The Public Accounts Committee held the same view. The Committee wanted to know, among other things, whether the government had embarked on a review of projects currently under way in order to conduct a risk asessment and make the necesary changes to respond to the Auditor General's observations. The Committee also wished to look into the ways in which new projects were managed. Given this context, the Committee decided to invite the Treasury Board Secretariat, rather than a particular department, to the meeting.

BACKGROUND

Responsibility ofr systems under development is shared among a number of organizations. Treasury Board approves the projects and the funding required to implement them, on the basis of recommendations from the Treasury Board Secretariat that the Secretariat draws up following an analysis of the business case developed by the department involved. As a central agency, the Treasury Board Secretariat is responsible for the project management framework, and monitors progress against established directions and goals. The departments must manage the development and implementation of the system and perform ongoing maintenance and operation of the system after implementation.

The Treasury Board Secretariat has identified 25 large systems development projects, with a combined budget of more than $2.1 billion. The Audtor General's audit examined four of these major systems under development. Its conclusions are alarming. The Auditor General found that only one of the four systems reviewed--Transport Canada's Integrated Departmental Financial and Materiel Management System (KIDFS)--is currently being managed in a way that deals effectively with the risks associated with the project. Of the remaining three, the Public Service Compensation System (PSCS) has been terminated by Public Works and Government Services Canada; the Common Departmental Financial System (CDFS), being developed by Public Works and Government Services Canada, has only a small number of committed users; and the Income Security Program Redesign (ISPR) requires continued corrective action by management of Human Resources Development Canada to reduce project risks.

The Public Accounts Committee looked at the Income Security Program Redesign previously when it studied chapter 18 of the Auditor General's 1993 Report (Programs for Seniors); it recommended at that time that a progress report on this initiative be submitted to the Committee every year until completion.

OBSERVATIONS AND RECOMMENDATIONS

At the start of the meeting, Mr. W.E.R. Little, Deputy Secretary and Deputy Comptroller General, acknowledged the Government's poor showing with regard to large systems development projetcts, although he also stressed that there has been some success stories. He also pointed out that the issue was already under review when the Auditor General tabled his report. The Secretariat has launched a review, in cooperation with the departments, of the 25 projects currently under development. Mr. Little stated that he was in a position to provide some guarantees that the work currently being done would enable the TBS to take measures in the case of the 25 projects, and to develop a framework for new projects. He described some interesting observations that had been made during the review. First, the Treasury Boawrd Secretariat is not convinced that senior management provides the necesary support in all cases to overcome obstacles as they arise in a project. Second, the Treasury Board Secretariat has realized that not all projects are rigorously managed and is concerned about the way in which changes are handled over the course of a project. Third, the Treasury Board Secretariat has concerns about accountability, authority and responsibility and is taking steps to ensure that reports are submitted on systems under development.

Mr. Little gave the Committee a copy of an action plan that makes suggestions for improvements to the existing management framework in order to find solutions to the problems identified. The plan describes tasks to be performed from now until March 1997. Two components of the management framework--governance and review--are of particulawr importance. With regard to governance, Treasury Board wants to set up a clearer accountability framework. Project funding would be approved in phases, not as a block; the next funding phase would not be approved unless the standards and objectives set for the earlier phase have been achieved. In terms of review, Treasury Board would establish effective mechanisms for monitoring the status of projects and assessing their performance. The Board would also perform complete sanity checks, no longer having to depend solely on the person in charge of the project, but by conducting independent reviews, audits and peer reviews. Treasury Board also intends to conduct more assessments of specific projects, by insisting that the departments provide the resulds of their own assessments in a format that will allow Treasury Board to gauge the results and to be sure that deparqtments are following the appropriate procedures to bring their projects on line.

The Committee notes that the Treasury Board Secretariat has responded positively to the Auditor General's observations as set out in chapter 12 and that it intends to take specific measures to resolve these issues. However, as the Auditor General pointed out during the meeting, the Treasury Board Secretariat will need a great deal of support and cooperation to make sure its approach will be successful. The Treasury Board Secretariat can set up the best management framework, but it will be useless if it is not applied. Only time will tell whether the new management framework will make it possible to maximize the return on investments in information technology.

During the meeting, the members of the Committee discussed their concerns about the management of systems under development, and other points for consideration in the new approach put forward by the Treasury Board Secretariat. They stressed the importance of sponsorship, ownership and accountability to the success of the project. Senior management must be truly committed to a project when they are spending taxpayers' dollars on its development. As Mr. David Roth, from the Office of the Auditor General, said so clearly at the meeting on November 28, 1995: ``The project sponsor-- is the individual who understands the value of a project to the organization, to the government as a whole, who relates the importance of that to the business objectives, and who continually supports and pushes the project. At the end of the day, that person is looked upon as the one who drove the project to a successful completion, or who did not succeed.''

The second point that the Committee considers of importance is accountability. The Committee feels that the Treasury Board Secretariat should find ways of motivating people at all levels so that they are completely committed to their project and understand the importance of carrying it through to completion. At the same time, the Treasury Board Secretariat must tell them clearly that they are accountable. However, even with the best of intentions, it may happen that projects do not develop as they are expected to. According to a study carried out by the Standish Group, which included both private and public sector organizations (some of the results were reported in chapter 12), ``a staggering 31.1 per 100 of projects will be cancelled before they ever get completed.'' It is essential that managers have the tools to identify projects in difficulty and to terminate them when they prove to be beyond repair. The Committee is concerned about the fact that the Office of the Auditor General pointed out that the Public Service Compensation System was in real danger before the department decided to terminate the project. The Committee wonders if this decision would have been made, and especially when it would have been made, if the Auditor General's observations had not been made public. The Committee is of the view that accountability mechanisms must be finely tuned, or else it will be even easier to feel no responsability for the failure of a project or to camouflage one's inability to complete a project successfully. It seems that the such mechanisms for rendering accounts are to be incorporated in the new administrative framework. However, the Committee is not convinced that there is adequate control, on the part of the Treasury Board Secretariat, of projects that are under way. Despite Mr. Little's statement that he has undertaken in collaboration with the departments, an examination of the 25 projects, allowing for certain measures to be taken, the Committee is still not totally reassured on this issue. In fact, Mr. Little also indicated to the Committee that he would like to have the means at his disposal to monitor the development of those projects more closely. He has, moreover, asked his group to find a way to gather information and to monitor the development of certain projects in particular. For Mr. Little, monitoring the establishment of projects is a question of time and available means and he indicated that his staff was limited in number. Given these facts, the Committee believes that allocation of additional resources to Mr. Little's group would be a good investment, since it could limit excess spending and allow for the more rapid identification of projects in danger. As a result, the Committee recommends:

Third, the Committee supports the Government's intention to implement systems in ``smaller, more chewable chunks'' that have the advantage of providing obvious results and benefits more quickly. However, the Government will have to be alert as it is important not to lose sight of the final goal of implementing projects in small chunks.

In addition, as the Auditor General remarked during the meeting, in making the move to smaller, more chewable chunks, ``it is even more important to have a clear idea of where you are going over time and to have a plan that is rigorous enough to ensure that these small projects fit within a longer term project or a longer term strategy.''

Furthermore, the Committee understands that it is the responsibility of departments to manage the development and implementation of systems under development and that the Treasury Board Secretariat must rely on them to obtain the desired information. However, as a central agency, the Treasury Board Secretariat must have a global vision of the Government's informatics portfolio''. It is important that those who are to make the decision whether to approve a project have access to comprehensive data on anticipated and real costs, the risks associated with the project and progress reports. The Treasury Board Secretariat must ensure that the departments are gathering this information and sending it to the TBS in a timely fashion.

At the meeting, the Committee asked the Treasury Board Secretariat for a report stating whether the target dates for completion of each of the 25 projects were likely to be met. The Committee also wished to obtain a list of the names of those heading the projects. Furthermore, the Committee wanted to be kept informed about whether the projects were successes or failures as they were completed. Mr. Little agreed to provide this information. Considering the magnitude of the investment in information technologies, the Committee is of the view that this type of information may be useful for parliamentarians and should be provided on a regular basis.

It does not think this will be an undue burden as the Treasury Board Secretariat has already asked the departments to develop a mechanism for assessing the risks associated with each of the 25 existing projects, and in terms of new projects, the Treasury Board Secretariat must have this information on hand in order to free up the funds the department needs to move on to the next stage. Consequently, the Committee recommends:

CONCLUSION

The Committee is well aware that there is no miracle solution for the challenges involved in its project management. The Committee feels that the Treasury Board Secretariat, having gove through a proces of soul-searching, is now on the right track with the establishment of a new management framework. The Committee recognizes that the Treasury Board Secretariat alone will not be able to change the methods currently used to implement and manage systems development projects. The departments have a crucial role to play in this. In the prevailing context of budget cutbacks, the government can simply not afford to put millions of dollars into low-yield investments. From this point of view, it is important that the Treasury Board Secretariat show greater leaership so that all departments will be in a position to respond to the opportunities and challenges of implementing information technologies across the federal government.

Pursuant to Standing Order 109, the Committee requests the Government to table a comprehensive response to this Report.

A copy of the relevant Minutes of Proceedings (issue No. 36 of the First Session and Issue No. 1 of the Second Session of the 35th Parliament which icludes this Report) is tabled.

Respectfuly submitted,

Thursday, June 20, 1996.

SECOND REPORT

In accordancee with its Order of Reference of Thursday, March 7, 1996, your Committee has considered Vote 30 under FINANCE in the Main Estimates for the fiscal year ending March 31, 1997 and reports the same.

A copy of the relevant Minutes of Proceedings (Issue No. 1 which includes this Report) is tabled.

Respectfully submitted,

MICHEL GUIMOND

Chair.

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