HUMA Committee Meeting

STANDING COMMITTEE ON HUMAN RESOURCES DEVELOPMENT AND THE STATUS OF PERSONS WITH DISABILITIES

COMITÉ PERMANENT DU DÉVELOPPEMENT DES RESSOURCES HUMAINES ET DE LA CONDITION DES PERSONNES HANDICAPÉES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 2, 2000

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[English]

The Chair (Mr. Peter Adams (Peterborough, Lib.)): I'll begin by asking the cameras to leave. This meeting is going to be televised on CPAC, but as you know, under our regulations, the other cameras are supposed to leave the room. I'd be grateful if they would do that. Other journalists of course can remain. I'd be grateful if the cameras would leave so that we can proceed with our hearing today.

Colleagues, before we begin—and I would ask the witnesses to excuse me for a moment—I would like to do a couple of things.

First of all, as it's our first meeting following the break, I'd like to give you a sense of where we're proceeding in the next meetings. On Thursday, 4 May, at our next regular meeting, the proposed witnesses are Allan Broadbent of the Maytree Foundation, Julie White of Private Foundations, and Tom Brzustowski of the Natural Sciences and Engineering Research Council.

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This goes back to the questions we posed at our last meetings. Here we're dealing with groups that are in the business of giving out grants of various types and have expertise in it but are either in the private sector or at least at arm's length from government. So we're dealing with one aspect of the questions we were considering.

Then next Tuesday, which is 9 May, the proposal is that we have Arthur Kroeger, whom some of you know from his long involvement in government; Gilles Paquet of the University of Ottawa; and Sean Moore, public policy adviser at Gowling, Strathy & Henderson. Again, these are people who have some sort of external view of grants programs and that kind of thing. I believe one of them at least has written books on this subject. Again, it's part of our questioning that has to do with how grants and contributions should be handled in government, and in this case we're trying to get some vision from outside government.

So that's next Thursday and the following Tuesday.

Paul Crête.

[Translation]

Mr. Paul Crête(Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Mr. Chairman, I am beginning to worry a little bit. I am wondering when we will be able to hear the witnesses that had been suggested to you by the Bloc québécois, including those who are impacted on by the management of the Transitional Jobs Fund. I cannot find their names on the list that you have given us. Moreover, according to that list, the last sitting would be on June 1st. I was wondering whether you had heard that the House would adjourn on that date. I want to make sure that you have contacted these witnesses and that we still intend to hear them.

[English]

The Chair: As you can see, our regular clerk is away at the moment. I'm hoping on Thursday we'll be able to address all the meetings up to and including our meeting with the minister, which will be on 18 May. Is that okay?

Libby Davies.

Ms. Libby Davies (Vancouver East, NDP): Chairperson, at the next meeting then, will we have a list of all the future meetings up to the end of the session?

The Chair: It is my sincere hope that at that point it will be blocked out, the same way as we've done here, with suggestions, and then there can be discussion in the committee.

Ms. Libby Davies: Because as you know, I submitted a motion on Canada student loans and the service providers, and at some point I'd like to know whether or not we're going to have any time to deal with any other kind of business.

The Chair: I would be glad to discuss that, and as you know, I for one have been very, very frustrated. This is important work we're doing, but we've in fact neglected the area of disabilities, the area of higher education, and a variety of things. But my thought on the list, Libby, is that the list will be to do with these hearings. As you can see, we have your motion on our agenda, and I was in fact going to mention it specifically.

Is there anything else on that? So we have the next two meetings fixed.

Now could I ask you, colleagues—and again, my apologies to the witnesses—to look at the budget submission, which I believe you all have? Although this is further down our agenda, this is very important to us. As you know, we have two subcommittees, one for persons with disabilities and the other for children and youth at risk. They have been carrying on their work while we've been conducting these hearings, and it's very important they continue to do so. That's one. Two, it's important we have funds to cover the remainder of these hearings and perhaps do some other work. That's what this budget submission intends.

You'll see it's a submission for $64,000. Virtually all of those moneys are for witness expenses for people appearing either for our hearings or before our subcommittees. So you'll see, for example, under item 6, of the $64,000 or so, $61,000 is witness expenses. We have there for the continuation of these hearings 24 witnesses and a round figure of $28,800. Then below that, for our subcommittee on the status of persons with disabilities, we have 17 witnesses at $20,000. Again, as you understand, for that subcommittee we have very particular witness expenses. It's a bit different from our main committee. Then for the children and youth at risk, you see the figure there.

I'll go to Larry McCormick for discussion in a moment, but I'd like to ask someone soon to move this budget so that I can attempt to get it through the liaison committee and to the House of Commons in order that we can have the funds.

Larry McCormick.

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Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Mr. Chair, I do move acceptance of this budget as proposed.

The Chair: Thank you. Is there any discussion on it?

(Motion agreed to)

The Chair: Colleagues, I'd now like to proceed to our main item of business, if I might. The order of the day is, pursuant to Standing Order 108(2), a study of HRDC grants and contributions.

We welcome as our witnesses today, first of all, the president of CCAF, Jean-Pierre Boisclair; and representing Deloitte & Touche, Colin Potts and Susan Mingie, who are partners in Deloitte & Touche.

We appreciate you all coming here to share your expertise with us on this important matter.

The way we proceed in this committee is we have a statement from the witnesses. Usually we would take both of them now, if that's okay with you. We hope those are fairly short statements, but do take your time. We then proceed to questions from both sides of the committee. I do have a system—some members think I do not—of allocating time, but when you're replying to our members, please simply bear in mind that your reply, which the member wants to hear, is a part of the member's time. So from time to time I'll have to interrupt members, and from time to time I'll have to interrupt you, but I hope you'll engage in the discussion.

I think, Mr. Potts, it's been agreed that you will begin, and then we'll go to Monsieur Boisclair.

Colin Potts.

Mr. J. Colin Potts (Partner, Deloitte & Touche): Thank you, Mr. Chairman and members of the committee. Good morning. Thank you for the invitation to meet with you today.

For the information of members, as the chair has indicated, I'm a partner in the Ottawa office of Deloitte & Touche, chartered accountants. I received my chartered accounting designation in 1971 and was elected a fellow of the Ontario Institute of Chartered Accountants in 1991. I became a partner in Deloitte & Touche in 1976, and for the past twenty years I've spent considerable time working with public sector and not-for-profit organizations.

I have with me Ms. Susan Mingie, CA, also a partner in the Ottawa office of Deloitte & Touche. Ms. Mingie received her CA designation in 1990. She is a member of the financial and special services group of the firm.

Mr. Chairman, it's my understanding that we are here today at the request of the committee to respond to questions the committee may have concerning the report Deloitte & Touche provided to HRDC on the draft action plan in response to an internal audit report concerning grants and contributions made by the department. I was the partner responsible for this assignment. I was assisted by Ms. Mingie and another staff member.

I also understand copies of our report have been made available to committee members. However, I thought it might be helpful if I were to take a few minutes to make a few observations on the nature and scope of our assignment and our findings.

Page 3 of our report describes the purpose of our assignment. In essence, Deloitte & Touche was asked by the department to provide comments on a draft action plan developed by staff and dated January 27. The action plan was designed to address and correct the issues raised in the internal audit report.

We developed a framework in order to analyse the draft action plan. This was used to assess completeness and cohesiveness of the proposed activities. This framework can be found on page 6 of our report.

We reviewed the internal audit report and interviewed the head of internal audit and selected senior officials to gain an understanding of the issues. Our findings can be found in the report. I will not take up the committee's time by repeating them. However, the main messages in our report, which we conveyed to management, are contained in our overall comments, which can be found on pages 4 and 5. I would like to highlight just three.

Firstly, we thought the draft action plan was a good start and addressed the immediate issues identified in the audit report. However, it did not address the root causes of the problem, these root causes being the underlying issues that caused the problem.

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Secondly, we recommended that leadership, accountability, and responsibility for implementation of the action plan be clearly identified. Implementation is key. You can have a comprehensive, well-articulated, and well-written plan, but if there's no senior management commitment to the plan and it is not implemented, then nothing changes.

Finally, as a caution, our report noted that correcting the problems raised in the internal audit report will not happen overnight. While some of the issues can be resolved in the short term, others will take considerably longer.

Thank you, Mr. Chairman. This concludes my opening comments. We look forward to responding to questions the committee may have.

The Chair: Thank you very much indeed, Colin.

Susan, do you have anything to add at this moment?

Ms. Susan Mingie (Partner, Deloitte & Touche): No.

The Chair: Thank you very much.

I now introduce Jean-Pierre Boisclair, the president of the Canadian Comprehensive Auditing Foundation, CCAF.

[Translation]

Mr. Jean-Pierre Boisclair (Chairman, Canadian Comprehensive Auditing Foundation): Thank you, Mr. Chairman. I distributed a few minutes ago a brief outlook of the CCAF. We had previously sent you two other documents, namely The Modernization of Comptrollership in the Government of Canada and Two Sides of the Same Coin, both dealing with comptrollership.

[English]

CCAF is a neutral forum. We bring no particular ideology, political perspective, or advocacy position to bear in finding and championing approaches that will help organizations—usually ones that operate in complex accountability relationships—to exercise good governance, management, and stewardship practices. Neither I nor my organization has had direct involvement with HRDC in the context of the hearings you have been holding.

I've read your interim report, along with the testimony of some of the witnesses who have appeared before you, and I was struck by the question posed in section 5 of the interim report, the question dealing with the critical element of management and control for the administration of public funds.

Just under two and a half years ago I completed a mandate given to me by the secretary of the Treasury Board of Canada to organize and chair an independent panel of senior executives and professionals with both public and private sector experience in large organizations. The government recognized that circumstances had changed and that change was needed in comptrollership thinking and practice.

The purpose of this independent panel was to help the government ensure that its understanding and approach to and capacity for comptrollership is consonant with the size, the business practices, and the risks that face contemporary government. It was also to help chart the course that will see comptrollership be a vibrant support to Parliament for good governance and to the public interest in the stewardship of public funds.

The panel's members are listed on pages 87 and 88 of the English version of the report and on pages 95 and 96 of the French version.

Mr. Chairman and members, I understand an important focus for the work of this committee is on the particular factors that attended the operations of HRDC that were subject to an internal audit. While I don't think I can be of help in relation to those, I am impressed with the importance of the question in your interim report, which really deals at a broader plane.

Throughout the work of the panel I developed a strong sense that help and better understanding were wanted by the executives and professionals of the public service, in keeping with what I sensed was also a genuine and very acute belief on their part in the importance of conducting public business with rigour and with high standards of ethics and values.

However, I was conscious during our work that the government was living in or perhaps just emerging from a period of very significant discontinuity, with fewer people and less money; new business methods, such as partnerships and privatization; the impact of technology on work; and most of all, the challenge to change the culture to focus on results.

As previous witnesses have indicated, these factors can, and I believe in the case of HRDC did, contribute to an environment in which control practices were not in line with reasonable expectations for what they should be.

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Much can and should be learned from the experience, but the need for control to be fundamentally rethought in the current context of the government had been recognized, and the path forward has to a very large extent been identified. Now wisdom, energy, and resources are needed to put into practice what is known to be needed.

Modern comptrollership as advocated by the panel and adopted by the Treasury Board is a set of principles, underpinned by a guiding philosophy, that describes how management wishes to carry out the stewardship dimension of its responsibility to the institution and to you, its governing body.

The panel suggested that key comptrollership principles ought to focus on four things: one, performance information, both financial and non-financial, both historical and prospective; two, risk management; three, control systems; and four, values and ethics.

Fundamental change was the key message of the independent panel's report. In fact, to quote our own report on page 2, “a quantum leap forward” was needed. Although comptrollership was not new to the government, its narrower traditional focus is not justifiable by the conditions and assumptions of the past, which no longer apply.

The independent panel recognized the very strong linkage between the elements of comptrollership I just referred to and general management. The panel was of the view that the four elements of comptrollership go to the heart and soul of executive and management responsibilities at the top and throughout the organization.

The belief that comptrollership is not something that can be delegated entirely to specialists is a major change in approach and thinking from the past. It cannot and should not be stovepiped. This is not about hiring more accountants.

The convergence of key comptrollership principles with general and specialized areas of management has recently been formalized in Results for Canadians—A Management Framework for the Government of Canada. To my knowledge, until Results for Canadians was produced, the overall management philosophy and approach for the government had not been articulated by any government. It's an important and critical step in advancing the management and stewardship agenda. It augers well for the future in that it ties control and management together.

The single most important change proposed in the panel's report was a move to a new guiding philosophy for comptrollership, seeing it move from a command-and-control orientation to a more contemporary one, sometimes called “loose-tight”. A loose-tight orientation combines a strong commitment to central standards and values and to the achievement of results with flexibility to tailor processes and operational approaches to the particular businesses of different departments.

In the current dialogue, there is a danger that government will be forced back to a command-and-control approach that we know does not work. The choice should not be viewed as being between control and responsiveness or service to the public; rather the issue is the right kinds of controls focused on the right risks.

The panel report suggested that substantive and enduring change depends on all key players participating in the change process. It cited Parliament, ministers, the heads of the public service and the Treasury Board Secretariat respectively, and above all deputy ministers, as well as others, as part of what one parliamentary committee subsequently dubbed “a circle of control”. The extent to which modern comptrollership will be achieved rests to a large extent on each of those individuals and groups making their contribution. This wider view of who needs to be involved is also a change in thinking from the past.

I want to be helpful to you and to your fellow parliamentarians. Parliament is a very important part of that circle of control, not simply in the sense of the impact of the criticism that flows from your oversight, but also in the sense of helping to create the very environment for achieving excellence in control and comptrollership. Parliamentarians can be particularly effective by persistently focusing on some key issues that underlie good control—that in effect constitute the foundation for control.

In reading the proceedings and the interim report you recently issued, I saw that a recurring theme was, why does what appears to be needed change often not happen? Perhaps in part the answer is because some important questions about risk and control are not sufficiently part of the control discussion or are not engaged by all key parties whose understanding and agreement are needed.

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The sheet attached to the brief I distributed this morning poses some but by no means all of the questions I believe are important. I would like to refer you to that. I won't run through all of those questions now, but they are significant.

We must recognize that government business inevitably, in certain circumstances of important programming, has risks attached to it. It's not a zero-risk game. We need to agree on what constitute acceptable levels of risk and articulate them, not just after the fact when something goes wrong and then attribute a zero-risk threshold to it, but beforehand, we need to understand what might go wrong and what is liable to go wrong.

We should ask ourselves whether or not we have adequate human and financial resources to deliver programs and to handle the choices we have to make.

We must aggressively and explicitly define reasonable expectations to balance responsiveness and control.

And very important, does performance reporting to government, Parliament, and the public consistently focus on relatively few but important aspects of performance, making performance reporting pragmatic in the best sense of the word?

Other questions are listed on the sheet, but I want to respect the time limit that was provided. They're noted there.

Above all, it's important that we have actions and behaviour that sustain in practice the need to balance sanction and criticism with the imperative to learn and improve from failure and from errors. How we manage the environment of continuous imperfection in this regard is going to be an important key to our success in enhancing control and modernizing comptrollership into the future.

All of the key players committed to contributing to and providing persistent and informed leadership for the control system will be an important dimension. Having the means in place to bridge the interests and the imperatives of all of those different groups—Parliament, ministers, public servants, etc.—will be absolutely critical to fostering the understanding and agreement that is needed around these issues. In other words, these issues have to be put on the table, they have to be discussed and debated, and conclusions have to be arrived at.

If you look at the questions I've provided to you and ask them as you gauge progress, “yes” answers ought to give you some sense of comfort that substantive and enduring change is taking place. If the answers continue to be “no”, the potential for excellence in comptrollership is greatly diminished, and you may be looking only at marginal change.

I'd like to close my comments by going back to a central thought of the independent panel's report: the notion that what we were looking at was a quantum leap forward, not a marginal change. In that context the important commitment the government has made to modernize comptrollership will very much need the nurturing and support of Parliament.

Thank you very much, Mr. Chairman.

The Chair: Thank you very much, Jean-Pierre. We do appreciate it.

Colleagues, as usual I have a long list. I will try to keep this thing moving. The first seven I have are Maurice Vellacott, Bonnie Brown, Paul Crête, Bryon Wilfert, Libby Davies, Larry McCormick, and Raymonde Folco.

Maurice Vellacott.

Mr. Maurice Vellacott (Wanuskewin, Canadian Alliance): I'm addressing my question to Mr. Potts and Ms. Mingie.

I notice in your overall comments in the report you did, you make a point of saying that in order for there to be progress on rectifying things, senior management sponsorship as well as acceptance and commitment from all other parties involved is pretty critical. I key in on the senior management sponsorship.

I think we're all interested in knowing how the private sector would react in a similar situation if problems were turning up over a ten-year span of time. My question to both of you is, what would be done, or what is your impression of what would be done, in the private sector if over the span of a decade, ten years, previous audits showed the same problems showing up and they seemed to be systemic or endemic? What would be done in the private sector overall and in respect to those managers, if those were the same managers over a period of time? What actions, what steps, would be taken in respect to those managers?

Mr. Colin Potts: Mr. Chairman, I'll start the response, and Ms. Mingie may wish to add to my comments.

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The private sector would react to these types of comments in a report from an internal audit group within the organization in a very swift way. But you have to realize the private sector environment is quite different. It's driven very much by the profit motive, the impact on the bottom line. If these sorts of comments coming from an internal audit report were having a negative impact on the corporation's profitability, obviously swift action would have to be taken.

The nature of the action a corporation would take would be very similar to the corrective measures the department has taken in response to this latest audit report, the one released in January of this year. A corporation faced with that would want to identify the real causes of the problem and put in place corrective measures. They would probably seek advice from knowledgeable sources to help them develop a response to it, and they would certainly assign responsibility at a very senior level for ensuring the necessary procedures that had to be changed or the corrective measures that had to be taken were put in place, and that plan would be monitored. And I dare say the audit committee of the corporation would be involved in that monitoring activity.

Mr. Maurice Vellacott: To be specific then, Mr. Potts or Ms. Mingie, my question to you is this. What if, over a period of roughly ten years, previous audits had shown some of the same problems and major flaws in terms of lack of accountability, and what if there wasn't an awareness by the senior executive people of the previous audits or follow-through on changes or corrections? Would possibly dismissals take place if the problems had persisted over that long a time and previous audits had clearly pointed out the same problems? Would there be actions—in the private sector, mind you—such as dismissal of CEOs or movement out, and replacement of those people with others?

Mr. Colin Potts: In the private sector, yes, it is possible there may be dismissals. Again, the private sector environment is quite different. But it would be a question really of the CEO looking at the reasons for the problems. Had there been changes in personnel since the changes happened? Who was accountable? What other staff reductions or impacts may have affected the performance of a particular group where the errors were found? That would be taken into consideration before any dismissals were made.

So it is very difficult to say yes to that particular question. It depends on the circumstances.

Mr. Maurice Vellacott: Yes. If the same people were in place for a significant number of those years over that period of time—and obviously a knowledge of previous audits would be assumed—am I to assume that some pretty direct action would be taken in respect of those people?

Mr. Colin Potts: I think it would be fair to say that if a problem had been identified and the person responsible for it, the particular employee, was aware of it and perhaps given time to correct it, and if the same problem arose again in another five years, that particular employee would likely be under considerable scrutiny, which may result in dismissal.

The Chair: Maurice, you have two minutes.

Mr. Maurice Vellacott: I'll pursue another line of questioning quickly.

You make the point here, and it's a point well taken, about the need to be addressing the underlying issues, the root causes, of the audit findings, and you say these have not been clearly articulated in the draft action plan. I think I understand what you're saying, and I agree with it. In order to get at and improve things, you need to understand.

Sometimes it gets very embarrassing, and it can get down-and-dirty in respect to digging up stuff to find out what the problems are before you know the route or the track you should be on to fix these things. Do you have any inkling of what those root causes would be, or are you just making a general statement here?

I have a sense within our committee as well that the government members in particular want to just get on with the future without really looking thoroughly at what precipitated or caused these things. But I'm convinced that for the good of taxpayer dollars, we need to get at this. Was it partisanship? Was it a slush fund? We need to know what were the issues underlying this before we can get on and correct this and rectify the situation.

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The Chair: This should be a relatively brief response.

Mr. Colin Potts: I'll be brief, Mr. Chairman.

On page 7 of our report we list some of the longer-term issues, what we've referred to as the underlying issues, that need to be addressed. But our report was at a level where we said, “These are the sorts of areas you need to look at to identify the underlying causes.” We did not in our work identify specifically what were the underlying causes that created the problems. But in our advice to the department we have told the department they should themselves look at the structure, human resource issues, process, and information systems in order to try to identify those.

Mr. Maurice Vellacott: Right. So if you don't honestly look at the root causes, you'll never really get at what the solution is. I suppose that's what you're saying.

Mr. Colin Potts: That was our advice.

The Chair: Bonnie Brown.

Ms. Bonnie Brown (Oakville, Lib.): Thank you, Mr. Chairman.

Thank you to our witnesses for coming. We're grateful to Deloitte & Touche for the help they gave the department at the beginning and to Mr. Boisclair's group for the report they did for Treasury Board. Both of you recognized the tremendous change that all government departments, and I guess the private sector as well, are going through at this time, trying to do more with fewer people and new technology and the need for training—all those complicating issues to moving forward.

The first thing I wanted to talk about is what the committee knows is a hobby horse of mine, and that is the perils of partnership. Government is into partnerships with small groups, such as in the grants and contributions files, or with provinces, such as in the labour market development agreements, whereby we transfer large amounts to the provinces. There is some concern in our minds about the accountability back to us, having transferred the money to the group or to the province, as to exactly how it's spent.

But I was thinking that in the private sector, many companies are also into partnership. Some of them are even in networks of people, networks of other companies, to accomplish a certain project, perhaps overseas. How do they track their investment when they actually are not in total control of the decisions being made by the project group, and how do they then remain accountable to their shareholders? Do you have any experience with that?

Mr. Colin Potts: Perhaps I could start to answer, Mr. Chair.

We do see in the private sector this environment of consortiums, groups of companies coming together or organizations who work together on specific projects. But in all of those situations, an individual within each organization would be assigned responsibility for that particular project, protecting, if you like, the particular organization's interests in that joint venture, if I can use that as an example. It would be a very clearly assigned responsibility.

The corporations would rely on monitoring, reporting as to progress, reporting against benchmarks, and perhaps reporting on performance in order to protect their investment.

Ms. Bonnie Brown: So that individual would probably be part of the management team. In other words, if the project were, say, in Taiwan, the company that's investing a large amount of money would probably have at least one person there doing oversight and protecting their interests. Is that what you're saying? It wouldn't just be somebody back at head office who has a file with that name on it.

Mr. Colin Potts: It would depend on the nature of the project, the significance of it, and the role the particular company was playing in that project. Sometimes there are silent partners who perform a very passive role in monitoring their investments. In other situations, in joint ventures corporations can play a very active role, a more hands-on role. It changes and varies depending on the nature of the project and the nature of the investment.

Ms. Bonnie Brown: This whole thing ties into the theme Mr. Boisclair introduced, the tolerance for risk. It seems to me to accomplish good things, you have to have some tolerance for risk. But of course we work in an environment where any small negative result, whether it be money- or performance-oriented, is latched onto by the opposition. So you can say any government of whatever political party has to have some tolerance for risk, but I think most oppositions could be characterized by having no tolerance, because in fact whenever anything goes wrong, they pounce.

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Unlike the business environment, where all the players have to understand that business requires risk-taking, we're in a different business here. I'm thinking the comments you made about getting all the partners to agree on what level of risk is acceptable is almost a dream world for the political realm. I can see that in the business setting and I can see various departments of government partnering and deciding what level of risk is acceptable, but how would you ever achieve that when you consider a government and an opposition?

Mr. Jean-Pierre Boisclair: I'll try to answer the question in this way: certainly not in any perfect way, but certainly I think there's an opportunity to have conversation around risk between members of the governing body, parliamentarians, ministers, and public servants, and indeed to do that not always in a completely unalloyed political fashion. The truth is that if you want a meaningful control system, there is no control system in this world that will reduce risk to zero.

I worked in the aerospace industry for a number of years, and we constructed aircraft parts. There is not an airplane that is flying anywhere in this world that is constructed to be 100% foolproof. That is not economically feasible and it doesn't happen. That is a very difficult discussion to have between people who fly on airplanes, people who operate them, and people who build them, and yet conventions develop around it.

I think quite frankly that if we're looking to operate modern government with a reasonable control system, we're going to have to develop somewhat greater maturity in having those conversations, recognizing—and I've been in Ottawa for 25 years—that this process will never be perfect.

The Chair: Thank you.

Before I go to Paul Crête, could I say, using this business analogy, that if, as happens in my riding, a corporation gives $10,000, for example, to a children's club—they obviously look very carefully before they give it—do they devote enormous amounts of resources to tracking such a donation?

Mr. Colin Potts: Mr. Chairman, no, I don't believe they would. If a corporation makes a donation to a boys and girls club, or the YMCA or YWCA, it does evaluate the organization before it makes the donation, but it would then make the donation believing it to be a worthy cause and something that corporation wants to support. Once it's made the donation and assessed the nature of the gift, there'd be no further monitoring, although if it was a larger amount, a material amount to the corporation, they may want to have some sort of reporting as to how the money is being used. It depends, again, on the nature of the donation and how it's structured.

The Chair: Thank you.

It's Paul Crête, then Bryon Wilfert, Libby Davies, and Larry McCormick.

[Translation]

Mr. Paul Crête: Thank you, Mr. Chairman. I would like Mr. Potts to tell us the specific date of the contract awarded to them by the Department of Human Resources Development to conduct that assessment, as well as the initial deadline that had been given to them for submitting their report.

[English]

Mr. Colin Potts: I'm going from memory, but I believe it was on January 27 that we received the mandate from HRDC to provide advice to them on the action plan the staff had developed. We reported to them, as contained here, on February 2. The work was done in the space of about one week. It was a situation where the department had prepared a draft, wanted advice—and I understand they were seeking advice from other parties as well—so they could take outside advice, pull it together, and then finalize an action plan.

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[Translation]

Mr. Paul Crête: January 27 is the date when the six-point draft national action plan was made public. On that same date, you were asked to prepare an opinion and to submit your report on February 2. February 2 is also the date when Department officials held a press conference regarding this six-point plan and during that press conference, the draft plan was expounded at length. So, on the very same day that you submitted your report, that is February 2, there was a press conference to introduce the six-point plan.

Have you seen a revised version of the plan, a version that would include sections drafted after you submitted your report? Did the Department give you a revised report or action plan?

[English]

Mr. Colin Potts: Yes, the department did provide to us a copy of a revised action plan, which would have been dated about February 3, 2000. They were continuing to revise the plan. As I said, my understanding was they received our report with comments on an early draft. They received comments from the Auditor General and his office on the draft action plan. They received comments from the Treasury Board Secretariat. So other groups were asked to advise the department on the development of the action plan.

[Translation]

Mr. Paul Crête: Mr. Chairman, would it be possible for us to obtain a copy of this revised plan that was introduced by the Department following the comments received from Deloitte & Touche, as well as a copy of the new revised plan that the Department has produced, given that on February 2, the same day you submitted your report, the draft plan was being sold to journalists and that no other report has been made public by the Department since then?

[English]

Mr. Colin Potts: My recollection of the sequence of events was that on or about February 6, 2000, which I think was a Monday, the minister released a close-to-final, if not final, version of the six-point action plan, which took into consideration all of the comments received from the various people they had consulted with. That is the action plan.

The Chair: So in your view, this document has already been published.

Mr. Colin Potts: Yes.

[Translation]

The Chair: Paul Crête.

Mr. Paul Crête: Mr. Chairman, I would appreciate it if we could peruse that document because this Committee has undertaken as a priority to study this issue. I do not remember that document ever being tabled. Perhaps my memory is failing me, but according to the information that we have and the press releases that we have received, the Minister has always held to the initial six-point plan and we have not received any revised plan. If we could obtain that document, either from the Department or from another source, I believe it would be quite useful. In its report, the firm is saying that...

[English]

The Chair: As chair, I'll be glad to look into it. My understanding is that it is on the website. It may have been the report the minister brought with her. I can contact Mr. Potts again to make absolutely sure we're talking about the right thing. I'll follow up and report at the next meeting on this version of February 6, 2000 or so. Is that okay?

[Translation]

Mr. Paul Crête: Agreed. Mr. Chairman, the first recommendation is that this is a progress report, that it is a step in the right direction, but that it does not deal with the underlying causes of the problem. According to you, did the Department incorporate that recommendation and did it take the necessary remedial action in order to deal with the real underlying causes of the problem? For my part, I have had no information to that effect.

[English]

Mr. Colin Potts: To the best of my knowledge, the department has taken action to incorporate, in the final version of the plan, the recommendations Deloitte Touche made to the department that they should look at the underlying causes, along with other recommendations we had and the advice and comments the Auditor General's office had to give on the action plan, the secretariat, and any others they may have consulted.

• 1155

In terms of the specific mandate Deloitte Touche was given, we were not asked to go beyond commenting on the earlier draft. It would be natural then for the department to take all of the advice received and prepare a final action plan. I understand that is what they've done. We have not, as part of our mandate, examined that final action plan in the same detail as the earlier draft. I therefore cannot say anything further about that. It was not part of our mandate.

[Translation]

The Chair: Please ask only a very brief question.

Mr. Paul Crête: Yes, Mr. Chairman. Mr. Potts is saying that he has not made any assessment of the final document. Could he comment on this final report so that we may know whether the three main comments that he made in his summary have been taken into account, namely leadership, accountability and responsibility for the follow-up?

[English]

The Chair: You may make a very short reply.

Mr. Colin Potts: Deloitte Touche do not have a final report. The report you have in front of you is our final report on an earlier version. As I have said, the department consulted widely and took the advice. From the information I have, I believe they accepted the advice they were given from various sources. They were certainly very receptive to the comments and recommendations we made to the department. If they've accepted this advice and incorporated it into the final version of the plan, then I think you have a good plan. But we have no detailed knowledge of that.

The Chair: Thank you very much.

Next is Bryon Wilfert, then Libby Davies, Larry McCormick, Raymonde Folco, and then Maurice Vellacott, Judy Sgro, and Lynn Myers.

Mr. Bryon Wilfert (Oak Ridges, Lib.): First of all, on the document, Modernization of Comptrollership in the Government of Canada, when you look at this, you wouldn't normally consider it to be a stimulating document that you'd want to stay up late to read. However, I found it probably one of the most interesting documents I've had the chance to really go through. As I started to read it, I found it to be quite—

The Chair: Does this reflect on your social life?

Mr. Bryon Wilfert: No, it doesn't reflect on my social life. I don't have a social life these days.

Some hon. members: Oh, oh!

The Chair: That explains it.

Mr. Bryon Wilfert: One of the statements in here was by the late J.R.M. Wilson, who said, “accounting, unlike a science, has no rules that are” fundamental truths. “Judgment is necessary at every step.” Clearly, you spent a lot of time talking about comptrollership and that fundamentally there needs to be a change in the management culture.

The first question I would ask with regard to this report—and obviously it has had its impact on the whole HRDC issue—is I couldn't find in here, although it was probably very late at night, when this was actually dated.

Mr. Jean-Pierre Boisclair: The report was issued in early November 1997.

Mr. Bryon Wilfert: Okay. What is the current status, or the implementation, if any, of what I would consider to be some sweeping suggestions in here, with regard to the way government deals with finances, the implementation of policies, and, in the end, making sure there is clear accountability and transparency?

Mr. Jean-Pierre Boisclair: I can respond to that question as an observer who is obviously very interested to see what happened with our report.

In mid January 1998, Treasury Board ministers, through the President of the Treasury Board, issued a press release to the effect that they accepted the report and its recommendations, and wanted to move forward, with a sense of purpose, in implementing it. Since that time—and I'm sure the officials from the Treasury Board could respond to this a lot better than I—they have recruited a number of departments to, in effect, be lead horses or vanguard departments in implementing this whole approach to modern comptrollership that's described in the report. That process is underway, aided and abetted by the Treasury Board Secretariat.

• 1200

Mr. Bryon Wilfert: Given the fact that this report has now been in existence for a period of time, and given the Deloitte and Touche analysis of the six-point plan, of which one of the things, obviously, I'm interested is in the follow-up... You know, Mr. Potts, you've certainly made an indication that they were on the right track, but taking the comments that we see in this report and given the fact that this should be, in my view, the nucleus for not only HRDC but for pretty well every department... The report talks about the fact that for government standards to be accepted, deputies really have to have a handle on what's going on in each of their departments, and given all of the root causes we've talked about before at HRDC, we understand why that clearly was not the case.

Through you, Mr. Chairman, is there a sense that there is a marriage with the six-point plan and these recommendations in terms of making sure that both are fundamentally changing, that is, both the culture and the application of how we are going to meet, on the one hand, the demands of the grants and contributions with clients, and on the other, the demands of proper management?

Mr. Colin Potts: I'll try to answer that, Mr. Chairman. I believe there is a marriage of the two.

What the department is now trying to do, I believe, if it gets to the underlying causes, if it looks at the organization structure, the processes, the people issues, all a part of what was included in the panel report on modernizing comptrollership, which is a report I also have read with great interest... Therefore, if they can apply those principles to the particular issue they have now with the grants and contributions in making sure they have the right organization structure, the right information processes, etc., and the right control framework, then I think we're on the right track.

The Chair: You have 90 seconds.

Mr. Bryon Wilfert: Again through you, Mr. Chairman, to Mr. Potts, I guess, I always like to ask this question because I always get different answers. In terms of the size of the human resources department—as you know, it was in fact a bringing together of a number of departments—was part of the problem, do you think, that it's not really the manageability issue but that it's too large? Is it simply that we can correct within the system, that within the department there is the ability to do the things we've just talked about, or should there be a fundamental review as to whether or not the department itself should be broken up in order to be more manageable?

I know you talk about agencies, Mr. Boisclair, and you talk about whether or not that is in fact an appropriate route.

The Chair: A short reply, please.

Mr. Colin Potts: I don't believe the problems indicate, Mr. Chairman, that the department is too large and therefore should be broken up. I don't think it's that situation at all. I believe the size is an issue, but there are also a number of very large corporations, etc., and other large departments. One can't go by just the dollars alone or by the number of the people: it's the nature of the responsibilities they have to deliver to Canadians. In a department with the right organization structure, with other frameworks in place, I think it is manageable.

Mr. Bryon Wilfert: Thank you.

The Chair: Next are Libby Davies, Larry McCormick, Raymonde Folco, Maurice Vellacott, Judy Sgro, and Lynn Myers.

Ms. Libby Davies: Thank you, Chairperson.

First of all, I'd like to thank the witnesses for coming here today to help us sort out what's going on here.

In response to an earlier question, Mr. Potts, you were describing some of the differences in how the private sector may respond to reports that have been made about problems and management issues, compared to the public sector. It seems to me that there are some very key differences in terms of what drives the private sector and what drives public decision-making.

Presumably in the private sector, market forces, market demands, and, as you said, the bottom line, drive that, whereas in government, and even in the NGO community, what should drive decision-making is the public good, the public interest. Are there fair and equitable decisions in terms of servicing the people of Canada?

• 1205

The two things that have really concerned me and that I'd like to ask all of the witnesses about are the decision-making process itself and the impact of cutbacks on human resources.

On the first question, clearly in the business of government the political agenda is a factor, but I think one of the issues for this committee, and particularly for the opposition members, has been how much the political objectives and the political agenda influenced the decision-making and rules that existed or didn't exist or rules that were bent. The reason it's important is that at the end of the day we are in the business of providing service to different communities and to Canadians. There has to be a sense of equitability about that, a sense that favouritism wasn't the order of the day. That's one thing that concerns me.

The second issue, which has been raised a number of times, but, I don't know, doesn't seem to get much attention, is the whole issue of cutbacks in human resources within the department. We know that this department has had a loss of about 5,000 people. We certainly heard from the unions what the impact of that has been in terms of the pressure that it puts front-line service workers under. It puts them in a real pressure cooker when there are increasing demands to get through paperwork, to fulfil obligations, and they don't have the resources to cope.

So here's the question I have. Do you feel that the six-point plan, the so-called action plan, will actually address both of those issues, which I think are very systemic to the problems we are dealing with at HRDC? Are they encompassed within the action plan, and will those issues be addressed to your satisfaction?

I'd certainly invite both organizations to comment.

Mr. Colin Potts: Mr. Chairman, if I could respond to that, I believe the action plan does respond to those issues, yes. But let me first say that you're right, first off, when you say the environment is different in the private and public sectors.

In the public sector, there's that balancing of the service delivery with the available resources a department has to deliver the services to the Canadian public versus the control framework we want them to work within. That's all a part of trying to get the right balance. As for the political agenda, yes, it's a different world, again, and that does perhaps have some influence. I do not know whether there was influence at HRDC; it's not a part of our mandate.

But the bottom line is yes, I think that, again, the six-point plan is going to address equipping and supporting the staff. I heard the same rationale for some of the problems when we were at HRDC in the conduct of our work, that the staff reduction was an issue, that there was loss of knowledge, that training had to be improved. They're all issues that need to be addressed as the department moves forward to correct the problem.

Ms. Libby Davies: If I could follow up, your responses are that you feel both issues will be addressed by the six-point plan. In terms of the political environment and how decisions are made, how, particularly, do you think the six-point plan will be addressing that? I've had some difficulty in determining how the six-point plan, which deals more with management issues, is actually going to get at the question of the decision-making process and what rules or guidelines are applied to see that certain projects are approved or not. From your point of view of having had some comment on the original draft, where do you feel that this will be addressed?

Mr. Colin Potts: Mr. Chairman, in the course of our work we did not specifically examine that particular issue.

My comment that it was an issue... I agree with you that in any government organization, in the nature of government, the political realities are sometimes an influence. I don't believe that any plan would necessarily be able to address those. I believe, if I recall correctly, that the Auditor General did have a comment in terms of the role of government and the role of members. I think that was a very important comment that he made and should be kept in mind in terms of applying that principle to the HRDC situation.

Ms. Libby Davies: Thank you, Mr. Chairman.

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Do you feel that question should be addressed? Is that a matter of important management and public interest consideration in terms of how decisions are made by government and whether they're being influenced by political considerations?

Mr. Colin Potts: Mr. Chairman, I'm not sure I'm in a position or equipped to answer that particular question as to whether or not it should be addressed. I believe it's a reality of government operations.

The Chair: Libby, you have just less than a minute.

Ms. Libby Davies: I would just invite Mr. Boisclair to comment, if he would like to.

Mr. Jean-Pierre Boisclair: I'm not sure it's a question that “has” to be addressed in an action plan, but it's a question that has to be addressed in the control, stewardship, and governance system. The relationship between the governing body and the administrators, the public servants, in decision-making is an important one that does need to be addressed. And if there is going to be a close relationship between the two, the implications of that relationship need to be recognized up front, so that we don't appear naively surprised after the fact.

The Chair: Okay.

Libby, thank you very much.

I understand there's been a voluntary change here, so Lynn Myers is going to take Larry McCormick's place, and he's going to be very brief.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): Thank you very much, Mr. Chairman.

Mr. Potts, I want to go to HRDC's action plan, specifically to ask whether or not you have had a chance to review that—and I'm assuming you did—and to see your points on this, whether or not you thought there were gaps in that plan and concerns and problems associated with it. I wonder if you could respond to that.

Mr. Colin Potts: Mr. Chairman, the action plan that we reviewed is the one that was attached to our report. It's dated January 27. In our view, that particular action plan, which was an early draft, did have some gaps, gaps we identified in our report. Particularly, we felt it did not address the underlying issues. It did not necessarily set time lines and responsibility for actions, etc. Read our report. We did address it and advise the department that we felt the action plan should be changed to reflect this.

Remember, this was an action plan dated January 27. It was an early draft, and there have been subsequent to our report... my understanding is the department has taken our advice and the advice of others and revised the action plan.

Mr. Lynn Myers: In terms of long-term issues, are you satisfied that they have been addressed in that plan?

Mr. Colin Potts: Mr. Chairman, the member, I believe, is addressing the final action plan that would have been dated February 6, which I do not have with me. We did not perform any review or analysis of that action plan, but I have had some discussion with representatives from the department who have assured me, who have told me, they valued our report, our advice, and have taken action and incorporated our recommendations in the final plan.

The Chair: Lynn Myers, quite briefly, is that okay?

Mr. Lynn Myers: Yes. Thank you.

The Chair: Raymonde Folco, and then Maurice Vellacott.

Raymonde.

Ms. Raymonde Folco (Laval West, Lib.): Am I next?

[Translation]

To the witnesses, I would like to come back to a subject that we discussed briefly when you answered the question put by my colleague Mr. Wilfert, regarding the size of that Department. When you were asked whether the Department was too large, you answered that you did not think it was.

Given the budgetary cuts that were made in the past 10 years and the problems that resulted from them, each employee of the Department has had to take up several responsibilities rather than one. My question deals precisely with the workload and responsibilities of the employees.

According to your analysis, what is the optimal period of time that a program official should spend on the file of a given organization?

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I am trying to ascertain not the macro-profile, but rather the micro-profile of the functioning of the organization. For example, does the turnaround between regional directors help attain the objective of an adequate management in an organization? In other words, what were the impacts of the major cuts that have been made in that Department as well as in other departments of the Canadian government, the impacts on governance within that Department?

My question is for Mr. Potts, Ms. Mingie or Mr. Boisclair.

[English]

Mr. Colin Potts: The work we did at HRDC did not get to the micro level, so unfortunately, Mr. Chairman, and member, I am not in a position to provide specific answers to your question.

But I would again direct the committee to our report. When we talk about underlying causes, these are some of the issues that need to be addressed, and they can be addressed at the micro level. People can be brought in to look at time and motion studies, etc. There are all sorts of tools available for the department to retain in order to address those issues. We did not address them, but we tried to point the department in that direction.

[Translation]

The Chair: Ms. Folco.

Ms. Raymonde Folco: Mr. Boisclair, don't you wish to answer the question?

Mr. Jean-Pierre Boisclair: Mr. Chairman, I do not have any personal knowledge of the operations of the Department, but when you have to do more with less, on the longer run, it becomes a problem that shows up in the control system. That is inevitable. For me, it is a matter of knowing what level of risk you are prepared to accept in a situation where you don't have all the necessary resources to deliver a program and ensure a hierarchical control. That is the question we must ask. It is a matter of trying to determine what makes sense in such a situation. But in the end, when you have to do more with less, it becomes an unsustainable mathematical proposition.

Ms. Raymonde Folco: Mr. Chairman, I think that my question has been answered in part. Here is the true meaning of my question. We are all concerned about the problems that have plagued the Department and the way in which the Minister is trying to solve these problems. I am more and more convinced that part of the problems are not attributable to mistakes, although some mistakes have certainly been made. I believe that in part, the number of mistakes or even the scope of mistakes are first and foremost attributable to the number of persons who are sharing the workload and secondly to the lack of specialization of these people, because of the staff reductions in that Department.

So I would say that the macro-level study is certainly important, but I would also wish that we would examine the situation and ask questions at the micro-level in order to see, perhaps through time and motion studies, as Mr. Potts has suggested, but in a less specific fashion, up to what point radical changes in that Department prevented staff members from having the necessary knowledge or the required time to adequately check on the files. The consequence of this was that there were major errors in the processing of these files. Thank you.

[English]

The Chair: Maurice Vellacott.

I'm picking up the pace now, okay? So Judy Sgro, Larry McCormick, and Paul Crête.

Mr. Maurice Vellacott: My question revolves around the whole issue of... we've had some talk about getting quick response on things, and then there's the juxtaposition of enforcing financial guidelines.

In the private sector... and I'm aware that no doubt you do audits on the non-profits. When we talk about the private sector, it might not be a bottom-line business; there might be non-profit charitable groups as well. Is that correct? I would assume that you do audits on them.

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Mr. Colin Potts: That's correct.

Mr. Maurice Vellacott: What happens or what do you advise when it appears there's a bit of tension between the two—that goal of getting a quick response, a timely response, and the matter of having financial guidelines? If push comes to shove, what do you tell them to do? Do you just say, well, shovel the money out the door anyhow and wink at the standards? Or do you back off in terms of the dollars that are doled out? How would you approach it, if you audit groups like that and advise them?

I guess Mr. Boisclair would also want to respond.

Mr. Colin Potts: Mr. Chairman—

Mr. Maurice Vellacott: Do you understand what I'm saying in terms of tension between the two here?

Mr. Colin Potts: I think I understand the member, Mr. Chairman, in terms of the tension. There always will be tension in not-for-profit organizations between the desire for a level of service delivery to members, vis-à-vis the resources that the particular organization has to deal with, and with staffing levels, etc.

We work with our clients in that area by trying to work with them to find what is an acceptable balance. What is the extent of risk they are prepared to take by relaxing perhaps certain controls in order to ensure a certain level of service? That balance changes, and it changes by organization and the nature of the organization. There is no one answer to that particular question. It's a matter of an evaluation by the organization that they're prepared to accept this amount of risk in order to meet this demand over here by members. Another organization may say no, I can't afford to take that amount of risk. So they perhaps have to cut back on a service. There's a balance here that's required.

Mr. Maurice Vellacott: Are there groups that are willing to take 85% of files being unaudited—the types of things we found in this fairly scathing audit here? Would you find that non-profit private sector groups would be able to say, I'm prepared to take that amount of risk—the kinds of things in terms of lack of audit, lack of tracking, and so on that would have been here?

Mr. Colin Potts: Having 85% of files not subject to audit sounds a little excessive, but again, what other control mechanisms are in place? What is the value of the contributions in some of these files in terms of the total risk picture? It cannot be isolated. You have to look at it in a broader context. All of the issues surrounding the—

The Chair: I'm going to keep moving, if I might, Maurice.

It's Judy Sgro, please, then Paul Crête.

Mr. Maurice Vellacott: Mr. Boisclair hasn't had a chance to respond.

The Chair: I'm sorry. Excuse me, Mr. Boisclair. Please go ahead.

Mr. Jean-Pierre Boisclair: My answer is somewhat along the line of what Mr. Potts said, and that is that I think you find more rigorous control being exercised with respect to larger-risk items. And if you define risk just in monetary terms, then the larger transactions get the lion's share of the attention and there's a willingness to understand that perhaps some of the smaller things get less rigorous treatment. Now, whether that means there is absolutely no control over that, I don't think it goes down to that level. But there's a hierarchy of control depending upon the transactions.

The Chair: Mr. Boisclair, I do apologize for that. I didn't notice.

It's Judy Sgro, Paul Crête, Libby Davies, then the Chair.

Ms. Judy Sgro (York West, Lib.): Mr. Potts, there's no comment in your report as far as structure is concerned. You talk about clearly designing overall leadership and responsibility for implementation and so on. Given the fact that there have been a lot of layoffs throughout the department, is it your thought that our middle management levels there are... how tight should they be in order to ensure we're following through with exactly what the government's intentions are, to put a tight regime in place to ensure the system is being monitored properly? Is it a level of management that we cut out that allowed this to happen?

Mr. Colin Potts: We did not study the structure of the department, Mr. Chairman, so I'm not in a position to say if it's a level of management that's been cut out that shouldn't have been, or what the cause was. What we did in our report—again, I'll go back to this—is direct the department to investigate and examine these types of issues in order to determine the problem and take the corrective action. I'm not in a position, based on the work we did, to comment specifically in answering that particular question.

Ms. Judy Sgro: I'm sure you've done many audits and reviews, and I was very pleased with what I read in here about the direction and the assistance you've offered us as we become a government that wants to be more accountable and make changes throughout the system.

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I just want to make sure, on the ability to monitor these things and the way the committee itself wants to be involved on a fairly regular basis, if the reporting structure is such that on a quarterly basis reports come through the committee to give us a report on how HRDC is doing with the administration of our grants and so on, for example, is that another level that would help us all to ensure accountability?

Mr. Colin Potts: Yes, if the committee receives reports on a quarterly or six-month basis—whatever the committee decides—as part of its monitoring activities, if that's appropriate, that's another level of monitoring that may be desirable.

The Chair: Judy.

Ms. Judy Sgro: When we talk about government's commitment to change, modern comptrollership and all of the things that happen, is it unusual to have some of the concerns that have been raised in your review, or is it just part of when change is happening that these things happen and the government is on the right track, as far as putting the proper controls in place?

Since 1977, apparently, we've been having these problems, so it's not something that's just come up in the last five years. I'm looking for assurances that we're all heading on the right track, we're going to put the right controls in place, and in 2020 there won't be another bunch of parliamentarians still trying to figure out how to get some controls in place that will keep a tighter rein on things.

Mr. Colin Potts: I certainly believe the steps being taken by the department in the action plan are moving in the right direction. If they marry that with the modern comptrollership initiative and the principles of modern comptrollership, I believe we'll be on the right track.

The Chair: Mr. McCormick.

Mr. Larry McCormick: Thank you very much, Mr. Chair, and thank you to each of our witnesses for being here. I have just a couple of questions.

I'm always concerned, of course, about the faults in the system, and the fact that we all pay taxes and want to get the most mileage we can for our money. But I'm also concerned, in my small role as rural caucus chair for the government, that these programs have been held up now across this country.

Do you think that with the implementation of the six-point action plan these programs can now proceed? Too many things are being held up now and sitting there for all the reasons, yet there is a great need for these constructive programs across the country.

Mr. Colin Potts: Again, that's a difficult question for me to answer, based on the extent of our involvement with the department in helping them prepare an action plan. I would comment that business has to continue, and I understand the department has acted quite quickly in terms of correcting some of the short-term issues, so they can get back to business as usual. I think it can continue while they address longer-term issues.

Mr. Larry McCormick: Thank you, Mr. Potts.

This circle of control is certainly very interesting. Circles go around in circles, yet we can include people; people don't have to be excluded—ministers, deputy ministers, top bureaucrats, all bureaucrats perhaps, and parliamentarians. It hasn't happened very often, of course, with this session, but sometimes we hear about backbenchers and members of Parliament being frustrated because they aren't part of what's happening. I see some interesting challenges and opportunities here, with this concept, for us all to be involved.

I know the previous questioner asked about whether our committee would make a difference for the long term. But my overall question is whether there's any more you'd like to add on this circle of control, whether this should allow our committee to be more involved, and how we could ensure that, Jean-Pierre.

Mr. Jean-Pierre Boisclair: To arrive at the kind of control this committee and parliamentarians would probably feel comfortable with requires them to be involved. I just don't think you're going to get there if you're not involved, ministers aren't involved, and senior people aren't involved at every level. That's been part of the problem in the past. We've defined it too narrowly and just hived it off to some people on the side and said, “Well, you're specialists, deal with it”. That's not the way it works any more, and the government can't operate the way it has to operate and pursue that kind of an approach.

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This is a governing body and this is a governance issue, and my feeling is that if the governing body members can provide understanding at a high level about the key issues that they feel they need to be satisfied on when it comes to control, the system will start to respond to that. It's almost the absence of parliamentarians and others in the system talking about this that creates the problem. Everybody is guessing at what might or might not be acceptable to the next person, the conversation doesn't take place, and everybody is disappointed at the end of the day.

I guess I'm just reinforcing what you said. I think there's an opportunity for members of Parliament, not to try to become specialists in control and comptrollership, but to develop their knowledge of the business and these issues in a way that they can provide the kind of overall leadership and leave the signal inside the system as to what they expect and really think is reasonable and not reasonable.

The Chair: Larry, do you have a comment, perhaps?

Mr. Larry McCormick: Mr. Chair, under your leadership I've heard it said, and believe, we control the future business of this committee—the people sitting around this table. I'm sure we will ensure we are there to be part of this process to help solve the situation. Thank you very much.

The Chair: Next is Paul Crête, then Libby Davies, and two short interventions from Maurice Vellacott and Bryon Wilfert. I will try to wind it up, colleagues.

[Translation]

Mr. Paul Crête: I am directing my question to Mr. Potts. One can find a summary of the action plan on the Internet site. I will quote to you the first three statements on point 5, entitled: "Receiving the best possible advice". Here it is:

We have presented the plan to the Treasury Board's Advisory Group on standards relative to comptrollership on February 3rd and we have taken its advice into account.

We have asked the advice of the Auditor General on February 1st and we have taken into account his suggestions for the plan.

We gave a short-term contract to Deloitte & Touche to obtain their advice on the plan...

In the third statement, it says that a short-term contract was awarded in order to obtain advice on the plan. Do you not see that the Department has taken into account the Treasury Board's recommendations and those of the Auditor General, but that in your case, they have decided not to take them into account? At least, it doesn't say so in the plan. Is this not sending the message that your recommendations on the impacts and long-term modifications have not been accepted by the Department?

[English]

Mr. Colin Potts: I can't respond to the question of what's on the website of the department. I have not looked at their website. My understanding is that they have incorporated our advice.

[Translation]

Mr. Paul Crête: I do not question the honesty of the witness, but I cannot help noticing that currently, at the Department, they are saying that the advice of both the Treasury Board and the Auditor General have been followed, while in the case of your firm, they are saying that a short-term contract has been awarded to you in order to obtain your advice on the plan, but there is no second part to the sentence indicating that your suggestions have been followed. This is an official document from the Department. Does that not appear to you as though the Department has decided not to follow your recommendations regarding the important measures that are to be taken and decisions that must be made in the long term?

[English]

Mr. Colin Potts: Again, with all due respect to the member, I believe this question should be addressed to the department, in terms of their website and when it was updated. I believe the member referred to February 1 on the website. Our report was issued on February 2. Certainly I'm aware they were consulting with the Office of the Auditor General and the Treasury Board Secretariat. All of that advice came together within the space of two to four days. My understanding, from the departmental officials verbally, is they have accepted our advice, with the advice of other groups, and have incorporated all of the advice into the final action plan.

The Chair: Very brief comment, Paul.

[Translation]

Mr. Paul Crête: At Treasury Board, the consultation was made on February 3. The advice of the Auditor General has been obtained on February 1. These are the same dates as for your own firm. If there was a reason to add a sentence saying that your suggestions had been taken into account, according to me, the Department should have put it in there, but I agree with you that it is up to the government and the Minister to answer that question.

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[English]

The Chair: As chair, I'll try to follow this through, the website matter and these other matters, so that we have some information. Colin, we might in fact consult you to make sure we have the dates correct. I'll see that by Thursday we have it as clear as we possibly can.

Next is Libby Davies, then Maurice Vellacott very briefly, and then Bryon Wilfert even more briefly.

Ms. Libby Davies: Thank you, Chairperson.

I certainly agree that it's important we clear that point up, not only for the sake of the committee, but also to inform the witness as to whether or not their advice actually was taken up in the revised action plan.

The Chair: We will have a circle of consultation here.

Ms. Libby Davies: Yes, we'll have a nice big circle, one big happy family.

If you don't mind, Mr. Chair, I'd like to come back to this issue of the decision-making process. It really bothers me that there's sort of a reluctance to get into that part of the discussion and debate, and I find it a little bit frustrating that there's a sort of reluctance to do that.

Some of us around the table today come from a municipal background, which is also a very political environment where political decisions are made, but it's a much more transparent environment. Obviously, it's a much smaller environment. You have members of council representing sometimes different viewpoints and different political groups, but the sense of transparent decision-making is much more evident. I know that certainly Deloitte Touche has done a lot of work with municipalities, so I know you're very familiar with that environment.

The question I'm trying to get at here, on which I would really like to have some comment, because you're here as well to give the committee input into its future work, is how this issue of political decision-making should be approached. I'm not saying it's not right that it exists. We are in a political environment. It seems to me that the issue is transparency and whether or not there's a sense of consistency and equity about decisions that are made. We have a lot of information that shows us that is not the case. I think it's a very key issue to get at. I'm really sort of pushing you on this to get your comments about how that question should be approached through the action plan or other means so that the Canadian public can be assured that public expenditures are being dealt with fairly and openly and that it's not just simply a political exercise. Could you comment on that further please, Mr. Potts.

Mr. Colin Potts: Mr. Chairman, I'll try to comment on that. The member referred to the environment within a municipality, which from my experience is probably different from the federal level, size being an obvious issue there in terms of the involvement of councillors around the council table, vis-à-vis Parliament and all its members in the House of Commons and on the committees. So the structures are quite different. Therefore, it's very difficult to compare them, and I'm not sure that one should.

I think, as Mr. Boisclair indicated, this is an issue for debate but perhaps not a part of the action plan. What should be debated at the political level is what is the extent to which members wish to be involved, again remembering the advice of the Auditor General in terms of the role of government to manage and the role of members of Parliament. You have to get that debate on the table and keep that in mind. Managers have to be able to manage and make decisions, but they should be accountable. As far as accountability reports are concerned, that's when the members can, I believe, receive the information so that they can carry out their responsibility in ensuring that due diligence has been applied by the government.

The Chair: Is that okay?

Ms. Libby Davies: Yes.

The Chair: Maurice, would you be very brief, please? Then we'll turn to Bryon Wilfert, then to the chair.

Mr. Maurice Vellacott: There has been a comment made through the course of the committee here—and again I'd say that I would feel that for the most part it's members on the government side—that seems to imply that the fault of this lies with employees down the line, entry-level employees. My question here is simple. If we just train no end the employees at various levels but there's not a will in terms of the senior level people and their political masters to make some changes, do we really have any effective changes occurring? It's a fairly basic question. You can do video training, Internet training, training no end, but how crucial is that? You make a comment with regard to that in your report here, I see. It's about the senior management sponsorship. So just fill us in, in terms of all this training, not to say it's unimportant, but where's the bigger importance?

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Mr. Colin Potts: Mr. Chairman, I'm not sure one can say one is necessarily bigger than the other. All of these points have to be taken into consideration and have to be applied.

Training is important. The staff on the front line have to be trained so that they will know the programs and rules with which they are working.

But you do need senior management commitment to change, and we've identified that in our report. We said that the success of the action plan is contingent upon senior management sponsorship as well as acceptance and commitment from all parties involved. There's a significant change, therefore, being suggested here that has to take place. Everybody has to work in that direction.

Mr. Maurice Vellacott: It involves a change in will and mindset to follow through—

Mr. Colin Potts: I think a change in will and mindset is part of it, as well as the workload issues, training, delegation of responsibilities, etc. There's quite a wide spectrum of issues that need to be addressed to correct the problem.

The Chair: Bryon Wilfert.

Mr. Bryon Wilfert: Mr. Chairman, again going back to this report, some outstanding comments are made in it. I found the one made by a former departmental comptroller: “We are still unwilling to report bad news.” That's interesting. “In essence, every transaction, complex or simple, is a financial transaction with resource implications.”

It would seem in reading this report that the key element is the role of the financial officer, the comptroller, and the advice and the ability of the deputy minister to receive that advice.

We heard earlier from the Association of Public Service Financial Administrators that not necessarily the right people are in place, because they may not have either the professional or the educational background to administer certain programs. Certainly the role of the internal audit, I think, reflected much of that. There's quite a bit of information in here talking about the importance of it.

But going back to the fact that this report was released back in the fall of 1997, I wish people had taken the time to not only read it, but also to implement it. What I think we need to do, Mr. Chairman, is to make sure that we follow up on this report and find out what the status is across all departments.

I would address this question to any of the witnesses here: in terms of the role of the financial comptroller or financial officer, is it fair to say that they are the linchpin with the deputy minister? In terms of that relationship, how do you see it evolving in terms of making sure that the kind of things we have been going through can be hopefully prevented?

Mr. Jean-Pierre Boisclair: Mr. Chairman, I think the member has touched on a very important point. Part of the problem, quite frankly, that's existed is that historically financial people have been viewed as coming to the table with a very narrow set of understandings that fit into an overall decision-making process. So I think they've had a hard time making themselves heard in that process.

What our report was talking about was the need to grow financial people in the government, to give them a much better understanding of operations, to make them management mature, and to expose them, and at the very same time to take people in the management cadres and give them a little bit more so that they understand how to use that financial product in a controlled context. Then the two have a basis for talking to each other in a meaningful way at the decision-making table. I think that's an absolutely critical linchpin.

So it's not just one or the other; it's both. We have to find that way of cross-fertilizing them. They've been pigeon-holed for a very long time now, and we need to pull them out of there. It won't be easy, because it's almost a generational thing at this point in time. This is a very scary business, to take people out of a zone in which they've been comfortable in a narrow sense and then throw them into a much broader kind of consideration. So this is one that is going to require a lot of nurturing, a lot of care, and a lot of due diligence to push ahead, yet I think it's absolutely critical.

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The Chair: Thanks, Bryon.

I'd like to ask a very brief question. I raised before the point about a private corporation giving $10,000 to a children's club and the sort of procedures they would have in place for that. I wonder if I could take that a little bit further.

Here's a corporation that decides to give $10,000 to each of 100 children's clubs across the country. In my mind, the way they do that—and I'd like you to respond to this sort of as auditors—is that somebody in the organization looks at children's clubs and decides that there is a need in the area of children's clubs. They then come up with a large sum of money, which, divided by 100, comes out to $10,000 each.

That corporation has branches in various places. So then it goes down the system to some front-line person and says, look, we're thinking of giving $10,000 to the children's club in your community; what do you think of the children's club? The person then reports back and says, as far as I know, the children's club is fairly good and the work they do is very good, they've been in operation for ten years and are reasonable citizens of the community, and so on. At that point, somebody releases those moneys and the $10,000 is given away.

Is it not true that this would really be the end of the auditing process, and that if five or ten of those clubs close the doors the day after—by the way, with no criminal intent; they just close—then the corporation would say, okay, we looked at this as carefully as we could, we trusted our people on the spot and we flowed those moneys, and that's the end of it?

If there was a criminal case, obviously there would be a prosecution, but apart from that, once the corporation has gone through those processes, it releases those moneys and that's the end of it.

Is that a reasonable interpretation?

Mr. Colin Potts: That's correct, Mr. Chair. Given the scenario you have just painted, that would be the end of it.

The Chair: Yes, and the auditing stops. At some point there has to be some trust in the judgment of the person who finally delivers the $10,000, and there has to be trust in the organization, which might prove to be ill-founded in some cases, but otherwise the money is out there.

For that corporation, it almost isn't worth their while to go and look for $5,000 out of the $10,000 in this place, and so on. So there has to be some flexibility at that level.

Mr. Colin Potts: Yes.

The Chair: Okay, thank you very much.

Colleagues, on your behalf, I would like to thank our witnesses today, Colin Potts and Susan Mingie of Deloitte Touche.

Susan, we thank you in particular for your contributions. Contributions like yours are treasured here.

I'd like to thank Jean-Pierre Boisclair of the Canadian Comprehensive Auditing Foundation. Jean-Pierre, we thank you very much.

Colleagues, I'm going to adjourn the meeting. We meet again at this same time on Thursday, when our witnesses will be representative of the Maytree Foundation, Private Foundations, and of the Natural Sciences and Engineering Research Council of Canada.

We have one question. Libby Davies.

Ms. Libby Davies: Before you adjourn, could you tell me what happens to these notices of motion that are still remaining?

The Chair: I would be glad to come to them again, but you will notice that yours was mentioned in the budget that we just passed.

Ms. Libby Davies: Yes.

The Chair: So is that reasonable?

Ms. Libby Davies: I did notice that.

The Chair: Thank you. We can bring them up on Thursday if you wish.

Mr. Maurice Vellacott: Which one was dealt with, just the budget approval?

The Chair: Just the budget approval. That's all we dealt with. It's a question of when we get them.

We're going to discuss the witnesses for the remaining—

An hon. member: I'm not going to be here.

The Chair: I'm sorry about that.

The meeting is adjourned.