PACC Committee Report
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HOUSE OF COMMONS
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INTRODUCTION Pursuant to Standing order 108(3)(e), the Standing Committee on Public Accounts has the honour to present its TWENTY-SEVENTH REPORT The Standing Committee on Public Accounts has considered Chapter 25 of the December 1998 Report of the Auditor General of Canada (Transport Canada - Investments in Highways) and the Committee has agreed to report the following: INTRODUCTION The federal government makes transfer payments to the provinces and territories to improve the Trans Canada and provincial highways, to promote safety, and to encourage economic and regional development. The federal government, through Transport Canada, has spent over $ 1,6 billion dollars worth of investments in provincial-territorial highways over the last ten years. These investments were mostly administered through a series of ad-hoc programs. At the time of the audit, Transport Canada was involved in 24 multi-year cost-sharing agreements with provinces and territories, largely under seven separate highway investment programs. These programs are, in effect, contribution programs where continued federal funding is conditional on the compliance and performance of the applicable federal-provincial-territorial agreements. The goal of the audit was to determine how well Transport Canada has managed, administered and reported on its highway investment initiatives. The Auditor General also assessed the department’s performance in discharging its other responsibilities related to overall federal spending on highways. It was in the context of these issues that the Standing Committee on Public Accounts decided to consider the findings of Chapter 25 of the December 1998 Report of the Auditor General of Canada (Transport Canada – Investment in Highways). The Committee met on the 16 March 1999 with Mr. Denis Desautels (Auditor General of Canada), Mr. Shahid Minto (Assistant Auditor General) and Ms. Basia Gadomski-Ruta (Principal responsible for Transport Canada). Ms. Margaret Bloodworth ( Deputy Minsiter), Mr. Louis Ranger (Assistant Deputy Minister, Policy), Mr. Ron Sully (Assistant Deputy Minister, Programs and Divestiture) and Mr. Ralph Jones (Director, Surface Programs) represented Transport Canada. OBSERVATIONS AND RECOMMENDATIONS In his opening statement, the Auditor General summarised the audit findings under six principal headings. First, the National Highway Transportation Policy is twenty-five years old and has never been updated. Second, information supplied to decision makers has not always been accurate or complete. Third, federal review to support project approval lacks rigour. Fourth, there is poor record keeping and little monitoring and analysis to support highway investment decisions. Fifth, the audit found instances in which, contrary to federal statutory requirements, payments were made before the required environmental assessments were completed. And finally, during the last five years, the department assigned only nine people to deliver its highway investment programs and to administer 24 federal-provincial highway agreements, involving the review, approval, monitoring and reporting on over 600 projects and many more construction contracts. The audit found that the department did not do much of what it was supposed to do under the agreements (1540). The Auditor General further noted that Transport Canada has yet to conduct a formal evaluation of its highway investment program despite the fact that it has been involved in making federal-provincial highway investments for many years. The Auditor General was concerned that the Department lacked key information it requires to plan for the future and to make informed recommendations to government when it considers new highway investment initiatives. The Auditor General also raised the issue of tolls. Although tolls have been applied for almost ten years, none of the federal-provincial agreements dealt with the issue until recently, nor has federal policy been amended to address the matter. Furthermore, Transport Canada has yet to complete any analysis of the impacts of tolls or transfers of highways to the private sector on traditional funding arrangements and other matters. Given the $ 1 billion dollars’ worth of investment already spent, the increased public interest in the matter and the federal commitment to spend several hundred millions dollars more over the next few years under the existing federal-provincial agreements, a clear position on the matter is essential. In conclusion, the Auditor General noted that Transport Canada had committed itself to a number of initiatives to deal with many of the concerns identified by his audit and stated that he found the Department’s response encouraging (1545). Ms. Margaret Bloodworth then described the various initiatives undertaken by the Department to address the issues outlined in the audit. Stating that "in general, the administrative framework that is in place for these contribution programs has served both our provincial partners and the federal government well", the witness acknowledged that there was room for improvement, and stated that the Department would adopt many of the Auditor General’s recommendations (1545). Under the heading " Managing programs and administering agreements", Ms. Bloodworth outlined the various steps the department has undertaken to respond to the audit’s observations and recommendations. Ms. Bloodworth explained that the administrative agreements contribute money to highway construction and is not directly involved in building of roads, a matter of provincial jurisdiction. She indicated that all improvements to the agreements "will continue to ensure that we perform only those functions necessary to protect the federal financial interest" (1545). Regarding the national highway policy, Ms Bloodworth quoted the Minister when he appeared before the Standing Committee on Transportation in November 1997. The Minister, Mr David Collenette, stated that if the federal government decided in the future to invest in highways, he would prefer a more integrated national approach guiding these bilateral agreements, in which the policy objectives of both levels of government are specified. However, no policy decision on continued funding has yet been made by the federal government. Regarding alternative financing arrangements, the Deputy Minister agreed that the policy on tolls in particular needs to be further updated and clarified. She stated that this matter had been subject of discussions with provinces and territories as part of the work of the Federal/Provincial/Territorial Working Group on Public-Private Partnerships. Ms. Bloodworth informed the Committee that the department is working with the provinces and territories to "ensure that a policy is ready to be included in future highway agreements" (1550). Some committee members were clearly concerned about the Department’s lack of consistent policy direction regarding the treatment of alternative financing arrangements, particularly the treatment of toll highways. The Committee notes that the Department is currently engaged in discussions with the provinces and territories in an effort to clarify policy direction in this area., The Committee believes that these discussions must produce timely results and therefore recommends:
The Committee was informed that the federal government had not updated the National Highway Transportation Policy since 1974. Over the last 25 years, a number of substantive events in highway transportation have occurred, especially in the areas of highway financing, safety, and federal/provincial relationships. It is important to establish an up-to-date national highway transportation policy to ensure relevant and adequate guidance for managing Transport Canada’s highway investment programs. Consequently the Committee recommends the following:
The Committee learned that many federal departments are involved in highway investments. Over the last 10 years, $ 3.5 billion in highway infrastructure expenditures were carried out by Public Works and Government Services Canada, Agriculture and Agri-Food Canada; Indian and Northern Affairs Canada, Canadian Heritage (Parks Canada); the Canadian Infrastructure Works Program, and Transport Canada. The 1974 National Highway Transportation Policy directed Transport Canada to play a lead role in co-ordinating information on highway investment at the federal level for the government’s consideration, and to chair an interdepartmental committee to facilitate the process. The committee was required to prepare a comprehensive annual report on federal spending, as well as plans for potential future involvement in highway projects (25.23). The interdepartmental committee remained active only until 1985, and the comprehensive annual report was last published in 1990-91 due to lack of resources. In 1992, the federal government reinforced Transport Canada’s lead role in co-ordinating information on the condition of federal roads and level of spending. To date, according to the Auditor General, Transport Canada has not fulfilled its lead role of co-ordinating and reporting comprehensive information on federal involvement in highways (25.28). It was noted that Transport Canada, in its response to the Auditor General’s recommendations, committed itself to form and chair an interdepartmental highway committee to co-ordinate information on federal government highway expenditures (25.29). However, when questioned about the operational status of the interdepartmental highway committee, Ms Bloodworth indicated that it had already been formed but also admitted that, to date, it had not yet met (1705). In light of the above, the Public Accounts Committee recommends:
The audit uncovered many shortcomings concerning Transport Canada’s management of highway investment programs and administration of federal/provincial agreements. Examples were found of incomplete or inaccurate information supplied to decision makers, lack of rigour in the project review process, poor record keeping and little monitoring and analysis to support highway investments, information on federally funded highways is incomplete and fragmented across the Department. The audit found instances, contrary to federal statutory requirements, of payments that were made before the required environmental assessments were completed. Notwithstanding the many weaknesses found in the Department’s financial management system, the staffing levels assigned are clearly insufficient to properly deliver the highway investment programs and administer federal-provincial highway agreements. According to the Auditor General, the Department "did not do much of what it was supposed to do under the agreements (1540)". From the testimony of the witnesses, the Committee noted that the staffing allocated by Transport Canada to manage the highway investment programs and administer the federal/provincial agreements did not permit the Department to fulfil its obligations. Further, the information management systems could not compensate for insufficient staffing levels. The Committee recommends:
Finally, the Committee is concerned that the legal requirement for environment assessment prior to funding approval for highway investment programs is not always adhered to. In some cases, the audit found that payments were issued to individual projects before the completion of environmental screenings. When questioned about this Ms Bloodworth stated that "we do believe that we have fulfilled all of the obligations with regards to the application of the Canadian Environmental Assessment Act (CEAA) to specific projects (1605)". She also stated that the Department couldn’t fully demonstrate compliance to the CEAA, because of incomplete documentation. In contrast, Ms. Gadomski-Ruta of the Office of the Auditor General indicated that the evidence showed that, for some highway projects, payments were indeed issued prior to the completion of the environmental assessment (1615). Given the respective positions of the Department and of the Office of the Auditor General of Canada, the Committee therefore recommends the following:
CONCLUSION The Committee is concerned about Transport Canada’s weak performance in managing and administering its highway investment projects. The Auditor General points that "the programs themselves have been managed and administered more like grant programs than the contribution programs they are (25.03)". What is apparent is not so much the observed shortcomings in the existing managerial and administrative framework, but rather the Department’s failure to adhere to its own guidelines and rules. While the Committee acknowledges the Department’s current initiatives to address the issues identified in the audit, clearly a more serious effort must be directed to ensuring greater compliance and accountability from Transport Canada’s highway investment programs. Pursuant to Standing Order 109, the Committee requests that the Government table a comprehensive response to this Report. A copy of the relevant Minutes of Proceedings (Meetings Nos. 57 and 61) is tabled. Respectfully submitted, JOHN WILLIAMS Chair |