PACP Committee Report

INTRODUCTION

Periodically, Canada hosts summits of international leaders. Canada has hosted the Group of Eight (G8) Heads of State Summit on four previous occasions—July 1981 in Montebello, Quebec; June 1988 in Toronto, Ontario; June 1995 in Halifax, Nova Scotia; and June 2002 in Kananaskis, Alberta. In the past, federal funds have been made available to the regions hosting these events. For example, in April 2001, Québec City received about $4.5 million for the Summit of the Americas, and Kananaskis received $5 million for the June 2002 G8 Summit.

In June 2008, the federal government announced that it would host a meeting of the Group of Eight Heads of State at a summit on June 25 and 26, 2010 in Huntsville, Ontario. In February 2009, the government announced the creation of a $50 million fund for the host region, Parry-Sound Muskoka.

In its Spring 2011 Report, the Office of the Auditor General (OAG) presented a performance audit on the G8 Legacy Infrastructure Fund. This audit examined how the fund was established and funded, and how projects were selected.^[1]

On October 5, 2011, the Interim Auditor General presented to the House of Commons Standing Committee on Public Accounts (the Committee) the findings of this audit, as well as other audits included in the Spring 2011 Report and the 2011 Status Report. He was accompanied by Wendy Loschiuk, Assistant Auditor General, and Ronnie Campbell, Assistant Auditor General. Members of the Committee asked a number of questions about the audit of the G8 Legacy Infrastructure Fund during this meeting.

The Committee held a specific hearing on this audit on November 2, 2011. Appearing before the Committee were the Honourable Tony Clement, President of the Treasury Board, and the Honourable John Baird, Minister of Foreign Affairs. They were accompanied by Michelle d'Auray, Secretary of the Treasury Board of Canada, Treasury Board of Canada Secretariat (the Secretariat); Yaprak Baltacioglu, Deputy Minister, Department of Transport; John Forster, Associate Deputy Minister, Infrastructure Canada; and Richard Dicerni, Deputy Minister, Department of Industry.

PARLIAMENTARY APPROVAL OF FUNDING

In February 2009, the then Minister of Industry, the Hon. Tony Clement, announced that the federal government would provide funding to the 2010 G8 Summit host region for infrastructure related to the summit. Minister Baird told the Committee that, “Up to $50 million was available.”^[2]

The Deputy Minister of Transport, Infrastructure and Communities, Yaprak Baltacioglu, explained to the Committee that officials from the department had recommended that the then Minister of Transport, Infrastructure and Communities, the Hon. John Baird, use the Border Infrastructure Fund to fund G8 projects due to the limited time available. She said:

When the new money came into the department, the department did not have that much time to get the program up and running. The projects had to start within weeks. Therefore, departmental officials tried to find the most expedient way to administer this program. Getting new funds and programs off the ground, and getting all of the authorities and approvals done from scratch, often takes anywhere between four to six months. So the idea of using the border infrastructure fund came up as a way to administer the program appropriately but in a more expedient approval time process. New money was added into the border infrastructure fund, with separate terms and conditions around this legacy fund. Again, as we said, that was what was deemed to be a wise way of proceeding at that time. Within months of that, the officials were thinking that we should have done a stand-alone fund, because we could have gotten the approvals probably in the same timeframe; a lot of flexibilities came in with the economic action plan in terms of getting the memoranda to cabinet approved, Treasury Board submissions approved, etc. At the time, they didn't know. They looked at the past process, and that was the recommendation that was made to the minister.^[3]

On the recommendation of public servants, the government decided that the Border Infrastructure Fund would be used as the vehicle to administer and deliver funding for this initiative, and that summit-related infrastructure projects would be exempt from the terms and conditions of the Border Infrastructure Fund. The government established new terms and conditions for G8 Legacy Infrastructure projects.

In November 2009, the Supplementary Estimates (B), 2009-10 were tabled in Parliament. The document included an $83 million item for the “Border Infrastructure Fund relating to investments in infrastructure to reduce border congestion.”^[4] Of this amount, $50 million was intended for G8 Summit projects. The OAG concluded that the government was not transparent about its purpose when it requested Parliament’s approval of the funds because Parliament was not provided with a clear explanation of how the funds were to be spent.

As not all of the funds were spent in 2009–2010, the government included, in the Supplementary Estimates (A), 2010-11, a $10 million item for “Funding for Border Infrastructure Fund related to projects in support of the 2010 G8 Summit.”^[5] Although this description does indicate that the funds are related to projects in support of the 2010 G8 summit, the OAG concluded that the wording used by the government was also not sufficiently clear because it suggested that the projects somehow related to border infrastructure, which was not the case.

The OAG recommended that the Secretariat should review the practice for determining the information presented to Parliament in the estimates, and that it should amend its processes to ensure that Parliament is presented with clear and accurate information about how funds will be used. The government has accepted and agreed to this recommendation. The Treasury Board of Canada Secretariat’s response is as follows: “For similar circumstances, the Treasury Board of Canada Secretariat will undertake to provide increased transparency of such programs in the Estimates.”^[6]

The Secretary of the Treasury Board, Michelle d'Auray, told the Committee that the reason the funding for the G8 Infrastructure Fund was not clearly identified in the supplementary estimates was due to the Secretariat’s processes:

It is a technical process we have that when a subprogram is a subset of a program, in this instance the border infrastructure fund, we roll up all of the subprogram elements into the main program heading. It's a technical aggregation, and in that sense, it is appropriate for us to do that. We have done that for over a hundred years. It is simply an aggregation of a subprogram element into a main program. There is no element of error. It is essentially a technical process that we go through. We recognize that in some instances that aggregation may be at a too-high level.^[7]

The Secretariat agreed with the OAG’s recommendation, as set out earlier in the report. In its response, the Secretariat said that, for similar circumstances, it will undertake to provide increased transparency in the presentation of the estimates. The Minister of Foreign Affairs and former Minister of Transport, Infrastructure, and Communities, the Hon. John Baird, emphasized the government’s commitment to addressing the issue, stating, “The Auditor General has said we should have been clearer to Parliament when we presented those estimates. While this had been done for many years, she's right, it should have been, and next time it will.”^[8]

The Secretary of the Treasury Board described the actions taken by the Secretariat to respond to the OAG’s recommendation:

We have instituted two things within the Treasury Board Secretariat based on the Auditor General's advice. First, for initiatives of a horizontal nature, we have described with greater detail in the estimates. We are also for the first time, as you will see shortly, providing information on horizontal initiatives from previous estimates as well as the current estimates, so that the tracking of funds can now be done. That's a new development. We have also instituted some very clear guidelines inside our organization, because we're the ones that provide departments with their estimates sheets for them to sign off. Where there are specific subprogram elements that provide different parameters or additional parameters to existing programs, those will now be listed separately. We have had a tradition of aggregating them, and we recognize that may not be as transparent or as clear. We recognize that. As a result, where there are subprograms with different parameters or additional parameters, those will then be identified distinctly. They will still be under the heading of the main program so that the funds can be tracked under the program authorities all the way through. The program elements are also reported in departments' performance reports. They are also reported in the public accounts. Members of Parliament can see them all the way through--from the main estimates, to the supplementary estimates, to the departmental performance reports, to the public accounts.^[9]

The Committee agrees with the OAG that it is important that the estimates present clear and accurate information. Without adequate information, it is difficult for Parliament to closely examine the government’s spending plans outlined in the estimates and subsequently review how it spent funds, as set out in the public accounts. The Committee recognizes the government’s commitment to accountability and transparency and believes that the actions taken by the Secretariat will sufficiently improve the clarity and transparency of information presented to Parliament in the estimates with respect to subprograms.

PROJECT SELECTION

Municipalities, communities and stakeholders submitted 242 projects for funding under the G8 Legacy Infrastructure Fund. Of these, 33 projects were put forward by the Minister of Industry to the Minister of Infrastructure; 32 projects were approved by the former Minister of Infrastructure for funding, and one project was withdrawn by a municipality.

The OAG attempted to examine how project submissions were reviewed and selected, but departmental officials told the OAG that they were not involved in the application intake or the identification of priorities for funding, and thus they were not able to provide information or documentation on the selection process.

The Minister of Foreign Affairs, the Hon. John Baird, testified that he was the only minister with the legal authority to approve projects:

As the Minister of Infrastructure Canada, I was the only one who had the legal authority to approve projects. By all means, projects were selected by my colleague, identified, recommended, but he did not have any approval process; only I, as Minister of Infrastructure, had that authority.^[10]

Minister Clement played a coordinating role as outlined by the Deputy Minister of Infrastructure Canada, Ms. Yaprak Baltacioglu:

Those words do matter in the selection process. Minister Clement, as he outlined in his opening remarks, working with the local communities and the leadership, identified priority projects for funding consideration. These identified priority projects were given to Infrastructure Canada. Infrastructure Canada did an assessment of these projects against the terms and conditions of the program, and we did provide advice to Minister Baird for his approval of the 32 projects and also for him to sign the contribution agreements. Minister Baird signed the contribution agreements and any other documentation that's required, as the minister legally responsible for the fund.

Minister Clement, as the recommending minister, has also signed documents, but his involvement from our perspective was symbolic. In our view, these things were approved according to the procedures.

Following that, the documents were sent to the various proponents, and they signed. Following that, the involvement of the ministers ended there, and we ended up administering the program. We communicated with the proponents in terms of their bills and how to pay them, etc.^[11]

The President of the Treasury Board and former Minister of Industry, the Hon. Tony Clement, told the Committee that he primarily played a coordination role for the intake of projects; that is, he was an interlocutor between the federal government and the local community. He stated several times that he was not involved in project selection. The Minister explained the process:

Now, since there were far too many project ideas for available funds, and since some of the ideas clearly fell outside federal jurisdiction, I then proposed to the mayors a simple, straightforward process through which they could focus on the project proposals that really mattered to them and the region. I suggested that they, amongst themselves and with their councils, identify their top priorities and, based on their own judgment, weed out those proposals they considered to be of low need or outside federal jurisdiction. Since other mayors didn't want to submit proposals via the Huntsville mayor, I offered my constituency office in Huntsville as a depository where proposals could be dropped off and from there forwarded to federal officials. These suggestions received a positive reception by the mayors and community leaders, and they worked cooperatively to identify their top priorities. Essentially, each mayor reviewed the proposals for his or her area and brought forward only those they considered a priority.^[12]

The Minister explained that there was no documentation for the review of the 242 projects because the mayors reviewed the projects themselves and only 32 projects were submitted to Infrastructure Canada.

The Interim Auditor General told the Committee that he thought adequate documentation to support decisions is important. He said, “I am very concerned that documentation was not available within the federal government to explain how or why these 32 projects were selected. Supporting documentation is important for transparency and for accountability.”^[13] He went on to say, “In my opinion, the lesson learned from that is quite simple. There is a role for public servants to play and they should be allowed to play it to ensure proper processes are followed and that the programs are administered transparently.”^[14]

The Interim Auditor General also expressed his view that more rules are not necessary, stating:

I don't think this is a situation that requires more rules. I believe the rules are there. This office has taken the position in the past, and I absolutely support that position, that we don't need more rules. What we need is consistent application of the existing rules. I'm not waiting for the government to say it put a new rule and procedure into place, because I don't think it's necessary in this case.^[15]

The President of the Treasury Board acknowledged that the process could have been better. He said, “In hindsight, it may have been better for infrastructure officials to review all 242 initial proposals and not simply encourage the local mayors to collaborate and focus their requests in the interests of efficiency and time.”^[16]

The Committee agrees, as appropriate processes and documentation are important for accountability and transparency, which help maintain Canadians’ trust that public funds are spent prudently and with probity. The Committee recommends:

RECOMMENDATION 1

That the Government of Canada ensure that all decisions on the intake and selection processes for infrastructure funds be appropriately documented.

Notwithstanding improvements that could be made in the selection of projects, it is important to note that the audit found that, for the 32 approved projects, Infrastructure Canada had set up mechanisms to administer the contribution agreements. The Interim Auditor General told the Committee that, “once the projects were selected and handed over to Infrastructure Canada, Infrastructure Canada officials did a good job in administering those projects and ensuring that the government received what it paid for under those agreements.”^[17] He also commented, “I can say that Infrastructure Canada administered the contribution agreements for each of these projects in a prudent and responsible manner.”^[18]

The Deputy Minister of Transport told the Committee that the department had completed its due diligence regarding the G8 infrastructure projects. She said, “The department ensured that all of the bills that were submitted were reviewed, and we accounted for everything that we paid for. As well, we ensured that actual results were achieved in terms of building public infrastructure as a result of this fund.”^[19]

CONCLUSION

The OAG concluded that the government could have been more transparent in the way that it presented the request for spending authority for the G8 Legacy Infrastructure Fund in the supplementary estimates. The OAG was also concerned by the lack of documentation for the selection of 32 projects for funding from the initial 242 projects submitted.

The Committee agrees that improvements need to be made, and the government has committed to making changes. The Committee trusts that subprograms will be better identified in the supplementary estimates and that the project selection process for infrastructure programs will be properly documented.

The Committee also notes that all of the 32 projects submitted for funding were reviewed by departmental officials for eligibility. The officials subsequently monitored the administration of the projects and determined that all funds were accounted for and spent appropriately. In the end, the government received what it paid for, and a lasting legacy was left for the residents of Parry Sound—Muskoka. As the Interim Auditor General told the Committee, “The public servants did a good job in administering the agreements once the projects had been selected and ensured that Canada got what we paid for in those projects.”^[20] Additionally, John Forster, Associate Deputy Minister at Infrastructure Canada, said, “in the end the fund was approved for $50 million; about $45.7 million was approved for projects, and the final expenditures were $44.8 million. All bills and claims have been paid out and verified with reports.”^[21]

^[1] Auditor General of Canada, Chapter 2, “G8 Legacy Infrastructure Fund,” in Spring 2011 Report, (Ottawa, 2011).

^[2] House of Commons, Standing Committee on Public Accounts, Evidence, 1^st Session, 41^st Parliament, November 2, 2011,  Meeting 12, 1545.

^[3] Meeting 12, 1700.

^[4]    Treasury Board of Canada, Supplementary Estimates (B), 2009-10 (Ottawa, 2009), p. 237.

^[5]    Treasury Board of Canada, Supplementary Estimates (A), 2010-11 (Ottawa, 2010). p. 152.

^[6] Chapter 2, p. 45, response to recommendation 2.15.

^[7] Meeting 12, 1630.

^[8] Meeting 12, 1625.

^[9] Meeting 12, 1705.

^[10] Meeting 12, 1555.

^[11] Meeting 12, 1555.

^[12] Meeting 12, 1535.

^[13] House of Commons, Standing Committee on Public Accounts, Evidence, 1^st Session, 41^st Parliament, October 5, 2011, Meeting 6, 1535.

^[14] Meeting 6, 1645.

^[15] Meeting 6, 1610.

^[16] Meeting 12, 1540.

^[17] Meeting 6, 1540.

^[18] Meeting 6, 1645.

^[19] Meeting 12, 1545.

^[20] Meeting 6, 1540.

^[21] Meeting 12, 1545.