PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 13, 2000

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[English]

The Chairman (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, ladies and gentlemen. I call today's meeting to order pursuant to Standing Order 108(3)(e), consideration of the April 2000 Report of the Auditor General of Canada.

Our witnesses this afternoon are from the Office of the Auditor General: Mr. Denis Desautels, the Auditor General of Canada; Ms. Sheila Fraser, the deputy auditor general; Ms. Maria Barrados, assistant auditor general; Mr. Richard Flageole, assistant auditor general; and Mr. Shahid Minto, assistant auditor general. So there's quite the lineup this afternoon.

Mr. Desautels, we will turn it over to you for your opening statement.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you, Mr. Chairman.

My colleagues and I are pleased to have this opportunity to meet with your committee to discuss our recent report and the priorities letters we sent to you.

First, on the positive side, chapters 1 and 2 note that we found some improvement in the quality of services delivered by the federal government to Canadians, and in chapter 8 we report that although future challenges exist in a post-deficit environment, Canada's program of debt management is, overall, a well-run operation. This is good news, because debt service costs absorb about 25 cents of every dollar of government revenues, or roughly $42 billion a year.

But this report also points to significant problems that we reported ten years ago. Immigration, RCMP services, the education of Indian children living on reserves, and the management of people of the public service are areas that require Parliament's urgent attention.

I know the committee cannot deal with all the subjects we raised in this report, so I have provided a list of proposed priorities, presented in the same order as in the report. I hope this is useful to the committee in preparing plans for hearings.

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[Translation]

Mr. Chairman, in Chapter 3, we conclude that there are serious deficiencies in the Canadian Immigration Program, specifically in the economic components, which recruits skilled workers and business immigrants.

Immigration offices abroad are overtasked; controls to protect the health and safety of Canadians are deficient; and Citizenship and Immigration Canada is highly vulnerable to fraud and abuse. In addition, the quality and consistency of the Department's decisions leave it open to criticism.

The deficiencies we noted jeopardize the steady flow of talent and skills that immigrants bring to our labour force, as well as the economic and social benefits that immigration can offer. They also seriously weaken the level of protection for Canadians that was contemplated in the Immigration Act.

It is highly questionable whether Citizenship and Immigration Canada has the capacity it needs to meet the annual immigration levels set by the government.

Employees responsible for processing applications in offices abroad are deeply concerned about the present state of affairs. I share their concern.

Last Thursday, the Minister of Citizenship and Immigration tabled Bill C-31 to amend the Immigration Act and announced other measures to correct the deficiencies noted in our chapter. While the Bill responds to some of our concerns, for example, in providing better protection against fraudulent applications, the majority of the problems we observed are not directly related to the Immigration Act. The Department still needs to resolutely address these longstanding issues.

In Chapter 4, I draw to your attention another important issue, namely the education of Indian children who live on reserves.

Indian and Northern Affairs Canada is responsible for ensuring that Indian children receive an education comparable with that of other Canadian children, and without neglecting their cultural needs. Unfortunately, the record of educational achievement of these children continues to lag far behind.

The Department also needs to resolve other major issues such as articulating its role in education, developing and using appropriate performance measures and improving operational performance.

The situation is complex and urgent, and the urgency will increase as more demands are placed of education as a result of an increasing population on reserves, and changes in technology and in provincial education programs upon which the Department relies.

[English]

Chapter 6 deals with significant problems in the handling of tax credit claims for scientific research and experimental development. This program, administered by Canada Customs and Revenue Agency, involves about $2 billion a year in tax credits claimed by corporations.

The lack of clarity about the eligibility of SR&ED projects has resulted in inconsistencies in assessing claims and unresolved claims dating back to 1985. The claims involved represent hundreds of millions of dollars in tax credits.

Since the creation of the SR&ED program, there have been disagreements between claimants and administrators, and also among administrators. Clearer rules are urgently needed to deliver and administer the program effectively and efficiently.

We also found that the program is marginally cost-effective. According to an evaluation performed by the government, the economic benefits of the programs exceeded the cost by only $20 million to $25 million.

Police across the country, courts, parole boards, customs and immigration officers, and employers have a vital need for national services, such as laboratory services and criminal records, provided by the RCMP. The safety of all Canadians depends on the timeliness, accuracy, and accessibility of these services. However, in chapter 7 we conclude that the RCMP's services do not always meet the needs of their users.

There are long delays in providing the results of DNA analysis, and there are backlogs of fingerprints and criminal history records waiting to be entered in the Canadian Police Information Centre. CPIC is the system that captures or provides crucial online information 24 hours a day to Canada's law enforcement community. Last year it was unavailable 11% of the time.

It's imperative that senior management at the RCMP follow through on commitments to eliminate backlogs in many of the services and to improve efficiency.

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In chapter 9 we return to the longstanding issues surrounding human resource management in the public service. There is an urgent need to simplify, streamline, and strengthen the current human resource management regime. It is also crucial that roles and responsibilities be clarified in areas whose management is shared among deputy ministers, the Public Service Commission, and the Treasury Board.

Many other studies over this period of more than 30 years have pointed to the need for administrative, legislative, and structural changes, and yet some of the key issues remain unresolved. The current framework governing human resource management in the core public service is unduly complex and outdated. Administrative systems are cumbersome, costly, and outmoded. Public service staffing is a major source of frustration, both to managers and to employees. Finally, the system is rule-bound and inefficient.

Fundamental changes are required. The government and the Public Service Commission need to pay attention to simplifying the current legislative and administrative framework for human resource management. They also need to engage Parliament in making these changes.

Human resource management in the federal public sector involves many players, a number of pieces of legislation, and a range of complex issues. The PAC, your committee, Mr. Chairman, with its oversight responsibility for public administration in the federal government, is well placed to examine the issues raised in chapter 9. A review by this committee, however, would likely involve a number of hearings.

It's important to deal with these problems now, when the public service faces significant challenges within its workforce and an increasingly competitive labour market.

Mr. Chairman, I hope all of the chapters in the April report will be of interest to the committee and to members of the House. As always, we look forward to working with the committee over the next few months. I thank you, Mr. Chairman, for your attention in this opening statement and would be happy to respond to your questions.

The Chairman: Thank you, Mr. Desautels. We notice you said “over the next few months”, but we intend to be out of here at the end of June, so we have lots of work to do between now and then.

Mr. Mayfield, eight minutes please.

Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance): Thank you, Mr. Chair.

There's certainly at least a couple of weeks' work in the paper Mr. Desautels has presented.

I was wanting to ask the Auditor General about the situation he raises about children on Indian reserves. I believe I read in a previous statement that the cost is about $1 billion a year to provide these educational services, and that doesn't include costs of buildings or maintenance. One thing I've never been involved with is costs of education. If I work it out, it's about $8,500 per child. Would this cost be comparable to other educational costs? Are you aware of what it costs other school boards and constituencies to educate children, sir?

Mr. Denis Desautels: Mr. Chairman, it would be possible to make comparisons with different school boards, but we didn't do that. One of the reasons we didn't do that is that the circumstances in which these native schools operate are quite different from most of the school boards we know, particularly in urban areas. Many of these school boards are in very remote areas of the country, difficult to access. The number of students in some of these schools is very small, so the cost per student is obviously going to be higher than you would find if you looked at a local school commission. Because in our view the data was not really comparable, we didn't do any of these comparisons.

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Mr. Philip Mayfield: I have some familiarity with the difficulty. As I look at the problems in schools on reserves, I note that in the school district in which my home is, there is a whole apparatus for looking after the educational system. There's not only the teachers, but the administration and the inspectors. There seems to be a whole system to keep education on track.

When I talk about the problems on reserves, though, the Department of Indian Affairs frequently tells me it is the responsibility of the local people on the reserve to administer the money and to see that it's done properly. Do you see any problems in that system? Do you have any recommendations on how that might be dealt with?

Mr. Denis Desautels: I think the chapter points out the dilemma that's involved here. The situation we're facing is that the department has been devolving services to first nations and first nations therefore have been assuming more and more responsibility for these various programs. Education is the same thing. First nations have been assuming much more responsibility for the administration of these programs within their own tribal councils.

The department, on the other hand, by legislation in the Indian Act, is still responsible for those programs. Therefore it has to come to grips with its current responsibilities. What are they? Are they simply a funding agency that transfers money to first nations and that's the end of their responsibility, or do they still retain responsibility for the results achieved with that money? Technically the latter is correct. The legislation still holds the minister responsible.

At this point in time the department is not too sure what its role is. In fact, it's been moving more toward full devolution and has not maintained much capacity to assess the efficiency or the effectiveness of these programs.

Mr. Philip Mayfield: I'm sure you're aware that what I'm trying to do is to establish some of the parameters of the problem as you and your people have seen them.

I want to raise another little aspect of this. Parents on reserves get frustrated about what is happening in their schools and not happening for their children. In some instances they have the opportunity to take their kids out of a school on the reserve and put them in the public school. This often creates... I wouldn't say a problem, but it does create a situation where the school board then has to provide resources for buses and teachers for extra children and this kind of thing.

I hear from the school people, the public school system, that they sometimes, if not frequently, don't get paid the money they're expecting for doing this. Then they have their constituents complaining that there's double funding for native children and it's not getting through. Are these problems that you have picked up in your audit? If they are, are there comments you'd care to make about them? It would be handy if I'd read it myself.

Mr. Denis Desautels: Yes, there is a section in the chapter, starting with paragraph 4.69, which deals with the funding and certain issues relating to that and disputes that can arise in different places. What we're saying is that the department needs to have a bit more information on that. Right now they haven't been necessarily tracking that very closely, again because of their position that the first nations are responsible once they've received the money.

So we touch on that, as I said. We feel the department needs to have a better handle on the nature of those problems.

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Mr. Philip Mayfield: The unfortunate part of this whole situation is that, as you've indicated, it's probably going to be twenty years before we catch up so that the native children are receiving an equivalent education with non-native children. I'm wondering if you see a way this could be perhaps fast-tracked. That's better than a generation of children. It's a very sad state of affairs, in my mind, considering that so many people on reserves don't have education already, and many of them are hungering for it and seeking it. Do you see a way that perhaps the committee could work with the Department of Indian Affairs to fast-track this problem?

Mr. Denis Desautels: We don't offer any magic solutions in our chapter. We do recognize in the chapter that this is a very complex problem and there's no single solution you can apply across the country. There are over 600 first nations with very different backgrounds and cultures and different ways of doing things. The department has to have the will of course to close that gap a lot faster, but it has to do so in a way that is very flexible, where it can recognize the differences in first nations across the country.

The starting point to really get going with that is to develop a clearer understanding of what the department's role really is vis-à-vis education in this era of devolution.

Mr. Philip Mayfield: Thank you, sir.

The Chairman: Thank you, Mr. Desautels.

Thanks, Mr. Mayfield.

[Translation]

Go ahead, Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): Good afternoon, Mr. Desautels, ladies and gentlemen. Welcome.

Mr. Desautels, you must have felt a little like a politician last Wednesday when you gave your press conference. You didn't know what the media was going to focus on, and you had to be somewhat surprised. You gave a good performance, but much to the surprise of all parties, reporters zeroed in on some interesting points which didn't come up during your in camera presentation. I'm talking about the RCMP.

You're suggesting that the committee focus on these priorities in the following order: first, immigration, second, aboriginal affairs, third, R&D and fourth, the RCMP. Given the media's interest, don't you think we should focus first on immigration and the RCMP, given that these are two "national security issues", so to speak? Given the media's response, do you think you need to change anything in your report?

Mr. Denis Desautels: Mr. Chairman, in our letter to the committee, we recommend that it focus its attention on four chapters, including Chapter 7 on the RCMP. However, as I stated earlier, in our letter, we list these chapters in the order in which they appear in the report.

Mr. Benoît Sauvageau: Good.

Mr. Denis Desautels: It wasn't our intention to establish priorities in our letter to the committee. In all, we recommended that you look at four areas, but you can proceed in whichever order you like.

Mr. Benoît Sauvageau: I'd written down the figures, and I just noticed that the reference is to an ascending order. Thank you. I hadn't noticed that.

Let me start again. In your opinion, do you think immigration and the RCMP should be two priorities issues for the committee to consider, given the implications for national security?

Mr. Denis Desautels: Mr. Chairman, clearly the chapter on immigration is of utmost importance. The situation that we've described in our report is very serious and needs to be addressed as soon as possible.

We are all aware that the minister has announced some major changes and I think it would be a good idea to see how these changes will correct the deficiencies identified in the chapter. We could have an interesting discussion on this at some appropriate time, because the department is poised to implement new initiatives. Therefore, the chapter on immigration is an important chapter and in light of what's happening, the quicker you review it the better.

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Mr. Benoît Sauvageau: I want to draw a connection between human resources and immigration. If my memory serves me correctly, you have already tabled a report on federal public servants working abroad. You reported that they are often underpaid, that they don't stay long in government and that they leave to work in various private sector companies in the field of international relations. When we proceed to study human resources, should we also be trying to draw a connection between human resources and human resources working abroad?

Mr. Denis Desautels: Mr. Chairman, chapter 9, which focusses on human resources management, does not deal solely with federal public servants working in Canada. It deals with all public servants, whether they work in Canada or abroad.

Mr. Benoît Sauvageau: That's good, because those working abroad are having some problems. Would you not agree? I believe you've already considered the plight of federal public servants working abroad. Correct?

Mr. Denis Desautels: Mr. Chairman, as I recall, we reported some time ago on the agreement in place between the government and foreign service officers and on the remuneration of these individuals. The government discussed this matter and broached the subject with unions. This continues to be a timely matter. Recently, the press reported on tensions between this group of employees and the government.

Mr. Benoît Sauvageau: Given that questions about immigration will undoubtedly arise during the course of these discussions, I will refrain from broaching this matter in depth. Thank you very much. I think you're right about national security issues. This will point our steering committee in the right direction. Thank you very much.

[English]

The Chairman: Thank you, Mr. Sauvageau.

[Translation]

Ms. Jennings.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you very much for your presentation, Mr. Desautels. I have several questions for you about your chapter on immigration, specifically about the discretionary power that many immigration officials here in Canada and those working abroad in immigration offices enjoy.

You seem to feel that these officials, with their discretionary power, do not, first of all, have the proper training needed to make appropriate decisions, that secondly, the level of resources is inadequate and that thirdly, these persons collectively seem to be afraid to reject applications because the legislation stipulates that applications are subject to a review by the Federal Court.

Much of the work done by MPs representing ridings in large urban centres with large ethnocultural populations involves immigration. Families request our assistance. For example, they have invited a relative living abroad to come for a visit and the officer working in the visa office of the country of origin has determined that the relative does not really meet the visitor criterion and has therefore rejected the visa application. Families come to see us and provide us with the appropriate paperwork. We receive an authorization from the person applying for the visitor visa, whether it be in Iran, Pakistan or Afghanistan. We believe the person is a genuine visitor. We then instruct the person to request a ministerial visa from the minister. Sometimes, the minister comes through with visa and the person does visit the country, before ultimately heading home.

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When we see cases like repeatedly in some countries, we have to conclude that either the officers who have the discretionary power and responsibility to issue a visitor visa are simply incompetent, or they haven't received the proper training for the job they do.

Are you satisfied with the response you received from the Department of Immigration concerning the problem identified in your report? I'm not completely satisfied with the response provided.

Mr. Denis Desautels: I'll let Mr. Flageole answer your question.

Ms. Marlene Jennings: Fine.

Mr. Richard Flageole (Deputy Auditor General, Office of the Auditor General of Canada): I think you've identified clearly the overall problem with the process. The final outcome is the decision or ruling rendered. The role of these officers is to render a decision and many factors come into play.

In our chapter, we raise some serious questions about the quality of the decisions rendered. Among other things, we point to the fact that all officers have not been properly trained to make these decisions and that they do not have the tools, means and time needed to accomplish this task. We are especially concerned about the absence of any mechanism to monitor the quality of the decisions rendered.

We observed a lack of uniformity in the decisions rendered and we make a note of this in the chapter. We identified major differences between the approval rates of certain officers who theoretically are processing similar cases. With a wide sample of cases, one would expect to see some uniformity as far as decisions are concerned.

The other point you raised is very important. We mention in the chapter that we surveyed all departmental employees. One issue often mentioned was the question of possible legal recourse. Of particular concern to us is the impact this can have on the attitude and behaviour of officers. In my view, the people who process applications are worried about all of this. Several mentioned that the aim of the program was now being able to justify rejecting an application instead of choosing an immigrant who meets the requirements. This is indeed cause for some concern.

Ms. Marlene Jennings: May I interrupt you?

Regarding this apparent concern over the fact the system appears to be set up so as to be able to justify decisions before the courts, and not with a view to making sound decisions based on objective criteria, did you look at a sample of cases to see what percentage of decisions involving immigration applications were appealed, whether or not these decisions involved economic immigrants and family class cases?

Based on my experience, sometimes it only takes one or two appeals for an organization to adopt an attitude whereby its main concern is being able to justify its decisions, rather than making fair decisions. That's not necessarily the way things are. Logically, if all applications are made outside the country, this means that the majority of applicants who have their applications rejected have neither the means nor the opportunity to appeal the rulings. Filing an appeal is much easier for people who are already in the country on a visitor or temporary work visa and who have had their application for landed immigrant status rejected. It's much simpler for these individuals to appeal than it is for those outside the country. I have to wonder if these concerns on the part of employees are warranted.

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Mr. Richard Flageole: Mr. Chairman, in paragraph 3.40 of Chapter 3, we don't give specific figures, but we do mention that the number of decisions brought before the Federal Court has increased substantially in recent years. We have not examined these cases or analysed them to see if the decisions were justified or not.

Are we satisfied with the department's response? Again, many factors impact the quality of the selection decision. Last week, the minister announced some initiatives to address many of these components. Improvements have been promised in terms of training, tools and computer systems. By making improvements in these areas, we will ultimately improve the quality of the selection decisions.

Ms. Marlene Jennings: Thank you.

The Chairman: Thank you very much, Ms. Jennings.

[English]

Mr. Mayfield, please. We're on the second round here, but since I think we will have time, we'll give you say six minutes on the second round.

Mr. Philip Mayfield: Thank you very much. I may need it; I may not. I don't know. We'll see.

In looking at the statement you've made today discussing some of the problems you have encountered, I see when you're discussing human resources management, there's a statement, “The system is rule-bound and inefficient.” I just try to put myself for a minute in their shoes and think about what it would be like to work in that kind of milieu.

As you talk to officials in various departments, it seems as though they don't have freedom to make the decisions they're employed to make. If they make the wrong decision, someone is going to be appealing. Nothing is clear-cut. There seems to be very little satisfaction in it. And the process seems to become so complicated and almost solidified.

Would it be fair to ask you, or any one of the officials with you, Mr. Desautels, are we looking at perhaps a more general problem than not enough money, or too much money, or not enough people, or a lack of organization? Are we looking at a cultural problem in our bureaucracy where we need to have a cleaner approach to making decisions?

Do we need to be able to accept that sometimes we have to say no, and maybe it's not appealable, even though it seems we waste a lot of time going through the appeal process? Of course it's not a waste of time. If you don't get your way, you try it two or three times and you finally do get your way, I guess.

I'm really looking at the way our system seems to be so cluttered with a process that never comes to an end. Do you have any comments about that in a general way? Or is that not in the scope of an auditor?

Mr. Denis Desautels: No, we can comment on that. Mrs. Barrados and I have had many discussions about that. I'll start very quickly, but I'll ask Dr. Barrados to complete my answer.

The current system is the result of an accumulation of practices that were all adopted with a good intent and certain laws that were passed by Parliament with a good intent. When you put all of those things one on top of the other, at the end of the day you have a pretty heavy system, which makes it hard for people to make management decisions as rapidly as they would like. So basically, as a result of all of this accumulation, you have a system that's, as we call it, rule-bound.

I'll ask Dr. Barrados to expand a bit on the background that took us there.

Ms. Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chairman, the question can start us on the road of explaining all the complexities, and that probably would take a lot longer time than we have, but I'll try to be brief.

The issues we're raising in the chapter are not really issues of money. They're very much issues of systems and organizations, and yes, cultural issues are associated with that.

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The argument we're making is that it is really very important now, today, with the pressures the public service is facing, the labour market in the larger context, that some rather assertive action be taken to streamline the whole human resource management system. That's not to say, though, that a lot of the traditions that are there are not important to maintain.

We don't want to do anything to suggest that we're not interested in protecting the rights of employees. The merit system is a valuable system if you make it work properly. The notion of public service values and a public service that is independent from the political process—these are very good principles, but, as the Auditor General has said, we have created this system that is too heavy and too rule-bound so it doesn't do what we need it to do, which is respect these values yet put people who are qualified and can do the job in place to do the job that all Canadians expect them to do.

Mr. Philip Mayfield: As a follow-up on that, I wouldn't want you to think I'm criticizing people; what I'm talking about is the system here. But it seems to me that when you encounter individuals who have a job to do, sometimes they feel less than free to do the job you might be expecting them to do. They're never sure whether they are really in charge, whether they are accountable to someone else, whether what they do will be appealed to someone else. It seems to be so cluttered that if I were in a situation like that I would rather go fishing, which is kind of a natural thing from where I come from anyway: when you run into trouble you go fishing.

When we're looking for people to do a job, it's not just money they're looking for; they're looking for a situation in which to invest their lives, to have some satisfaction, some pleasure in the work, something they can identify with. It seems to me that, as you suggest, someone needs to take the initiative. I want to know if what I'm thinking about, perhaps, is at least slightly on the right track. I'm wondering if the public accounts committee, in your mind, would be the place to begin discussing these questions, not only among ourselves, but with various departmental officials and maybe push the envelope a bit to see what could be changed.

Ms. Maria Barrados: There are a lot of very good people in the public service doing a good job. But the point of the chapter is that the system for the management of the human resources—the hiring, the staffing, the classification, the pay systems, and moving people out if that's necessary—is just too cumbersome, slow, inefficient, too rule-bound.

As the Auditor General suggested in his opening remarks, I think the public accounts committee is an excellent committee to deal with these issues of public administration, because you have many players here: you have the Public Service Commission, you have the Treasury Board, you have the Privy Council. The Clerk of the Privy Council is taking a leadership role, in addition to the deputy ministers in departments. So you have this big complex of big players and then you have a series of small players that all have a role to pay. I think it's an excellent topic.

Mr. Philip Mayfield: Mr. Chairman, before I let go of this, I'd like to say to you and to the committee that if you and the subcommittee have not discussed this, I, for one, would think it would be a worthwhile discussion on how you might give focus to this as a project for our committee.

The Chairman: We certainly appreciate that, Mr. Mayfield, and we'll certainly take that under advisement. And not only you, but the Auditor General is also expressing an interest that we pick up on this subject. So I would expect and hope that we actually do.

Ms. Jennings.

Ms. Marlene Jennings: Thank you, Mr. Chair.

I want to come back to the issue of more court cases. And let me explain very briefly why I'm concerned about that. You've cited no statistics here—for instance, a chart that shows how many cases or requests, applications, were made in 1990, how many challenges, etc. Then we can see if there in fact is a real growth because the number of applications is growing. So we'd say generally 10 years ago for 10% of those applications that were refused there was an appeal, and today it's still 10% but the numerical number has increased because the applications have increased.

I'm concerned about that, because before coming into politics I was in a situation where I worked with an administrative tribunal. We received complaints and we held public inquiries into those complaints. And when the system changed from the power of recommendation to the power of imposing penalties, it was a big change. You suddenly had in the community that was affected people saying that, my God, there are more cases that are going to hearings, etc., whereas the statistics showed that there were not. The difference was that the conclusions were now executory, which they had not been before. They were only power of recommendation.

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So I'm concerned whether the perception on the part of the public servants in the immigration department is in fact rooted in fact. Secondly, even if it is, there is the fact that you yourself have underlined that they have not been receiving proper training to be able to properly exercise discretionary powers. This is causing a problem. There is not uniformity in decisions in cases where you would have expected that over a large sample there would be some form of uniformity.

That to me then says there is good reason why you have court decisions that are overturning decisions. And the attitude of management and of the employees toward that should be that there's a problem, and we need to fix it—the problem is on our side, and what tools do we need in order to fix it, rather than simply take a defensive attitude and say there are more court cases.

So if possible, if those statistics are available, I would really appreciate receiving that to see whether it's rooted in fact. And secondly, it's quite possible that it is, but if it is tied in with the very serious lackings that you yourself have pointed out—the lack of proper training, the non-uniformity of decisions where one would expect it, in the area where discretionary powers are being exercised by the employees—then that would tend to support why you have these court cases.

Mr. Richard Flageole: We don't have the exact figures. I'm sure they can be obtained from the department or we can obtain them from the department.

Overall, there are not that many cases. What we say again in paragraph 3.40 is that the number has been growing in the last couple of years, but we don't have the information as a percentage of what it was before. But again, we can obtain the information.

If I could comment, at the end of paragraph 3.88, where we talk again about the framework for the quality of decisions, I think the message is quite clear that there is a need to improve again the training, the tools, and the monitoring of the decisions. We conclude at the end by saying that this would contribute to the making of sound, well-justified, and documented decisions. And this is really key: it will have an impact too on the number of cases that will be brought to the Federal Court or the number of cases that can be turned down at the Federal Court.

Ms. Marlene Jennings: Thank you.

Mr. Chair, I've completed my questioning. Thank you.

The Chairman: Thank you, Madam Jennings. Everybody is being so prompt and courteous today.

Mr. Mayfield.

Mr. Philip Mayfield: I wasn't quite ready for you, but I will be, sir.

I was looking at the scientific research and experimental development comments that you made, Mr. Desautels. In paragraph 6.60 you mention the inconsistencies in assessing unresolved claims dating back to 1995. Do they go back beyond 1985, or is this as far back as you have gone in this audit?

Mr. Denis Desautels: I'll ask Mr. Minto to respond.

Mr. Shahid Minto (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chairman, this current program started in 1985, and that's as far back as they go.

Mr. Philip Mayfield: I see.

I think there's something called the “fairness provision”, where before such and such a date it doesn't capture people who have to be dealt with in unusual circumstances. Are you aware of that? Are you aware of that fairness clause?

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Mr. Shahid Minto: Yes, we are very much aware of that. There is a fairness package, if you want to call it that, within the department. What that does is if a taxpayer is caught up in some very unusual circumstances—for example, there is an illness in the family or there is a fire in the business—and you are unable to file and pay your taxes, the interest and the penalties are waived, and for the taxes there are provisions made to be paid over time. That is the fairness package, and it applies not just to this program, but to all programs.

Mr. Philip Mayfield: I'm thinking of an instance when a group of employees were coerced by their employer to sign over their income tax refunds, and this was all done with the authorization of Revenue Canada at the time. Yet somehow or other somebody changed their mind. Is this the nature of the inconsistency you're speaking of here?

Mr. Shahid Minto: No, not at all. I think what you're alluding to sounds like almost a deliberate fraudulent action somebody undertook.

In this chapter we are talking about inconsistencies in the way Revenue Canada assessed the claims they received for SR&ED. Let me refer you to chapter 6, paragraph 30. In some cases the tax service office rejected claims if projects or expenses were poorly documented. In other cases financial auditors and science reviewers helped taxpayers prepare the claims. There were some places where people were getting standard letters saying sorry, your documentation is not up to scratch; take it back. In other cases people were spending up to a thousand hours helping people do their claims.

Then there are the next four paragraphs, where we give you specific examples of the kinds of inconsistencies. Some people were offered a second science review. Most people were not even aware that was available. Some people got two science reviews. Somebody even got four science reviews. Those are the kinds of inconsistencies we're talking about here.

Mr. Philip Mayfield: Just to clarify, Mr. Minto, I was not alluding to fraud. I was alluding to a program where it seemed as though someone changed their mind about whether this was an appropriate scientific project. I'm not trying to deal with constituency problems here. I'm just trying to understand if that is the nature of the problems you're discussing in your comments here today.

Mr. Denis Desautels: Mr. Chairman, I think what has been raised by other people, and maybe that's what Mr. Mayfield is alluding to, is that tax shelter schemes were developed around scientific research, a lot of which were refused and reassessed therefore by Revenue Canada, with the end result that many of the people who invested in these schemes had to repay what were for them significant sums to Revenue Canada. So there have been some well-documented cases of that. But that's a different issue from what we're discussing in this chapter.

Mr. Philip Mayfield: That's the clarification I was seeking. Thank you very much.

The Chairman: Thank you, Mr. Mayfield.

Mr. Lee, you have some questions.

Mr. Derek Lee (Scarborough—Rouge River, Lib.): Thank you.

On the immigration procedures issue, I relate very much to your comments on the issue of consistency and quality of decision. It's a very useful comment, especially as the House embarks on the study of a new immigration bill, out of which there will be new immigration regulations and perhaps a reworking of the current model. I am confident that there will be some management deficiencies injected into the process under the plans for the new legislation. At least that's how I understand it.

But my question relates to the soft edges, which may in fact always be in an immigration program. I'm referring to the likelihood that even if you had a perfect model, a perfect system, under our rule of law—and this is the case in many countries—there is always the potential for appeals of an administrative decision, appeals of a quasi-judicial type of decision, a judicial intervention under the statute followed by an appeal of the judicial decision, sometimes under the terms of the administrative law, sometimes under the statute, sometimes under the charter. Mr. Mayfield referred to process. There is potentially a ton of process added in.

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I'm curious as to how you or your office would make a judgment about those add-on procedural avenues when in some cases you might view them as abjectly inefficient and costly and someone else might view it from the point of view of law and the charter and say that's the best decision we ever had in the whole history of the Immigration Act. It may have cost us $25 million to litigate it and slowed down thousands of applications, but it's the best decision that has ever been made for the little guy. I'm assuming that when you would look at that, you would say, my God, this is absolutely unacceptable, the worst investment of taxpayers' dollars we've ever seen; look at all this inefficiency and delay. Yet under the rule of law we just hit a home run. So the Auditor General is Doctor No, and the citizen is out celebrating. Where do you stand on that paradigm?

The Chairman: Not your normal question, Mr. Desautels.

Mr. Derek Lee: I'm sorry, have I strayed?

Mr. Denis Desautels: Mr. Chairman, we certainly don't want to pretend that we know better than the courts do, that's for sure, and we're not making any judgments on that. We didn't even go back and re-analyse decisions that had been made in order to determine whether or not the right judgment was made even though there was no court appeal of that decision. So we didn't second-guess the judgment of the officers who made these decisions.

However, we did talk to many of the people making those decisions. We visited quite a number of immigration offices around the world and saw first-hand how they were working. We talked to them, and we even conducted a survey among these people to make them feed back to us what they felt. They're the ones who are saying that in the circumstances under which they're working, they're not certain they're making the right calls all the time.

We're not trying to suggest that we're second-guessing them or that we know better than the courts. Quite the opposite. But I think it's useful to feed back to you as a member of Parliament what things are like out there. The people we talked to are very dedicated people. They're working hard, but, in their words, they're working under very trying conditions. They're not just saying that to complain or to get a better deal. What we saw was quite flagrant and quite observable. So I think that kind of feedback is useful. I believe the senior management in the department is completely onside. They think our conclusion is a fairly tough conclusion, but they accept it. They think it's correct.

The Chairman: A short question, Mr. Lee.

Mr. Derek Lee: On the conceptual issue of appeals of administrative or quasi-judicial decisions, in any immigration file there might be an average of three, four, five, six, or even a dozen decisions made with reference to different criteria. Have you as Auditor General seen, developed, or commented on the possibility of an appropriately efficient appeal paradigm—in other words, something that would say nobody gets the right around here to make a decision that can't be appealed, but if it's an administrative decision, we think that in terms of management efficiency you should get one appeal and that's it, and anything beyond that should be by leave only? Have you come across that, either in the immigration file or in your other work in government, where you've felt compelled to develop a management efficiency view of appeals?

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The Chairman: Mr. Desautels.

Mr. Denis Desautels: I'll ask Mr. Flageole to answer this one.

Mr. Richard Flageole: Mr. Chairman, we haven't made any specific comments on how they should do it.

Maybe just to clarify, contrary to the family class, there's no appeal mechanism on decisions for economic immigrants. You can have a judicial review to the Federal Court, meaning that they will have to hear the case again, while on the family class you have an appeal mechanism.

I think that the main message we wanted to carry here is that it is imperative for the department to make sure it has the tools and the means to ensure that the decisions that will be made by the officers will be decisions of quality and will have a reasonable level of uniformity. It will always remain a question of judgment. I don't think they will be right 100% of the time. That's the key message we wanted to give.

I think there's a proposal in the legislation tabled last week that says they would need permission to go to the Federal Court. That's a new mechanism that has been put in place.

But again, we're back to the case for the department to ensure that quality and uniformity of decisions will be optimized in the department.

The Chairman: Thank you, Mr. Lee.

Madam Jennings, a brief intervention.

Ms. Marlene Jennings: Are you satisfied with the immigration department's response on the issue of the medical side, in terms of the medical controls?

When I read your report and saw that the requirements in terms of infectious diseases, for instance, were set forty years ago, I mean, my God, I couldn't believe it. The health and immigration departments and the provinces are trying to come to some kind of an agreement as to what tests should be used in order to determine whether or not that person can be admitted into Canada and we're using criteria that were developed forty years ago. We have infectious diseases today that didn't exist forty years ago.

Are you satisfied with the immigration department's response?

The Chairman: Are you talking about how the disease didn't exist or how the test didn't exist?

Ms. Marlene Jennings: In some cases, the disease—to our knowledge—didn't exist.

The Chairman: Mr. Desautels.

Mr. Denis Desautels: Mr. Flageole.

Mr. Richard Flageole: Mr. Chairman, the answer is yes, we are satisfied with the response of the department. However, we got the same response ten years ago, so—

Ms. Marlene Jennings: Okay, I'm going to interrupt you right there.

Mr. Richard Flageole: The response on paper—

Ms. Marlene Jennings: If you received the exact same response ten years ago and nothing has changed, how can you come here today and say yes, you're satisfied with the response you're getting now? It is exactly the same response we got ten years ago, and nothing has changed in the ten years.

Mr. Richard Flageole: What they are saying in the response is that they agree and that they will make a decision. I think the minister announced publicly that that decision will be made between now and this fall, so again, we will see. We're expecting a decision on medical admissibility criteria.

Ms. Marlene Jennings: I want to hear from you if you don't get that decision.

The Chairman: Hope springs eternal, Madam Jennings.

Ms. Marlene Jennings: I'm an optimist.

The Chairman: Yes.

I have a few questions myself, Mr. Desautels, on your chapter on education on reserves.

I was appalled to find, first of all, that 20% of children of school age on reserves don't go to school; that there is a 70% failure rate—i.e., 30% graduate; that it cost $65,000 per person on special needs students in some cases; and that the department had agreements that were, in some cases—as I think in one case you pointed out—eight years out of date: one had expired in 1992 and hadn't been renewed.

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Now let's take this $65,000 special needs cost: was that a legitimate thing, or was somebody padding the costs somewhere along the line?

Ms. Sheila Fraser (Deputy Auditor General, Office of the Auditor General of Canada): Mr. Chairman, we did not look at this specific case. This is information that we acquired in the department. We did not audit this specific case—

The Chairman: Because you don't have the authority to go to the reserve and do the audit.

But did the department question it? Had the department questioned this cost?

Mr. Denis Desautels: Mr. Chairman, we can ask Mr. Wilson, if you wish, to come and answer your question.

The Chairman: Mr. Wilson, do you want to take a chair there, please?

There might be more of you than there are of us. We're becoming intimidated.

Voices: Oh, oh!

Mr. Grant Wilson (Principal, Audit Operations, Office of the Auditor General of Canada): We always have backup, Mr. Chairman.

Mr. Chairman, the $65,000 that was stated was just an example of the kinds of costs that are incurred on special needs. For instance, we indicated that in one region $581 per student is allocated. In this particular region, the special needs range from $2,000 to $65,000. The issue here was not that the $65,000 was either high or low, but rather that the department didn't have a mechanism to ensure that the special needs of the students were actually being met. There were expenditures being allocated there, but there was no assurance of the department that the special needs were being met.

The Chairman: So the department was quite prepared to spend $65,000 per student, and it didn't say “This is a lot of money. Is this exactly what the student needs?” The department didn't ask the question...

Mr. Grant Wilson: Mr. Chairman, this is really a sign of the overall concern we have with respect to the role the department is playing concerning first nations. The department does not know, for instance, actually how much money is being spent by first nations on education. They also don't know—

The Chairman: But you didn't answer my question, Mr. Wilson. As far as you're concerned, the department did not ask the question of the reserve. It did not say, “This is a lot of money. Is this an appropriate amount?”

Mr. Grant Wilson: We never asked the department whether they had asked that question, but we knew that the department did not have the mechanism to ensure that the money was actually going to where they had allocated it.

The Chairman: So you didn't bother to ask the question because you knew the answer, and the answer was no, they hadn't.

What about that lack of agreement?

Ms. Marlene Jennings: On a point of order, Mr. Chair, I don't believe that's what the witness responded.

The Chairman: No, I just—

Ms. Marlene Jennings: I believe what the witness responded was that they did not ask the question of the department, so they have no way of knowing if the department asked the question of the reserves. However, I think your point you wanted to make was that even if the department had asked the question, it doesn't have sufficient mechanisms in place to allow them to determine that the answer they received was factual.

The Chairman: Yes, I did infer, Madam Jennings. There's no question about it. There's no question that I inferred.

Getting back to the lack of agreements, the agreement expired in 1992. Nothing happened. Nobody got their fingers rapped. Nobody asked the question: don't we have to extend this thing...

Mr. Grant Wilson: Mr. Chairman, the department felt the expiration of the agreement would be better met by having a more general comprehensive agreement. What was happening in that period of time, between 1992 and the current year, was negotiations to establish a reasonable kind of—what do we call it?—an umbrella agreement. We are concerned, of course, and we recommend that agreements be established between each first nation to accommodate the specific needs of each first nation.

The Chairman: Well, that's great, but it seems to be that no agreement... The department's view is that no agreement for eight years is better than the old agreement. Now, I don't know these agreements, but are they the authority under which the funds flow?

Mr. Grant Wilson: Well, Mr. Chairman, what the agreements are is a sort of subset. The actual funds flowing to the first nations are under contribution arrangements, which are the financial transfer arrangements or the contributions, the CFAs, which we talked about last year.

The Chairman: Yes, we've talked about them before—

Mr. Grant Wilson: Yes.

The Chairman: —and I'm not too happy about them either.

On scientific research and experimental development, paragraph 6.39 says, in this specific case:

At the time this claim was filed, the taxpayer had poorly documented the science work and expenses. The staff at a tax services office spent over 10,000 hours on the audit and $300,000 on a science report.

Was this primarily to fill in the gaps in the application, Mr. Minto, or Mr. Desautels?

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Mr. Shahid Minto: Mr. Chairman, this case was very poorly documented, and the taxpayer kept on changing his position—

The Chairman: He kept changing his position.

Mr. Shahid Minto: There was new or different information, so a lot of time was spent on reconstructing the claim. A lot of time was spent on the audit, but a lot of time was also spent helping the taxpayer reconstruct the claim.

The Chairman: So this is a new service that Revenue Canada is offering?

Mr. Shahid Minto: I think Revenue Canada has always been helpful to the taxpayer.

The Chairman: That's most generous indeed.

You know I had an accounting business before I got into the political game, and I don't recall 10,000 hours of help from Revenue Canada and $300,000 in consulting fees, and so on.

Then it goes on to say that the subcontractor claimed the tax credit, right?

Mr. Shahid Minto: Yes.

The Chairman: Then he sold the work to the main contractor, who, under the rules—and I agree, they have since been changed—claimed the tax credit again?

Mr. Shahid Minto: Yes.

The Chairman: You mentioned that through the confidentiality of the files, even though Revenue Canada had audited the subcontractor, found that claim to be legitimate, had all the information in the file, and paid out the claim, when it came to the general contractor, who didn't have the file of the subcontractor—he estimated, or as I understand it, generously overestimated, the amount that qualified for the tax credit—then because there was no information in his file as to exactly how much qualified, Revenue Canada estimated it. Am I right?

Mr. Shahid Minto: Mr. Chairman, in fact the taxpayer did the estimate. The taxpayer did the carve-out, not Revenue Canada.

The Chairman: So the taxpayer did the carve-out and said we're entitled to claim the tax credit of this amount. Then it was estimated, and he overestimated, or was generous in his estimate?

Mr. Shahid Minto: Mr. Chairman, according to the taxpayer files and as is noted in the chapter, Revenue Canada had a very good indication of what that cost should be.

The Chairman: From their audit of the subcontractor?

Mr. Shahid Minto: And other audit work they had done in the area.

The Chairman: But they were unable to transport that in?

Mr. Shahid Minto: No, Revenue Canada auditors were able to transport it, and they were able to have some estimate—not an exact amount—of what ballpark it should have been in.

The question here really became that this was what they could substantiate from documentation the taxpayer noted in the case and made representations on, and the rest of the amount that was allowed was without validation of the representations.

The Chairman: Without validation of the representations by the auditors whose signatures...

Mr. Shahid Minto: So there were two sets. The amounts that were finally allowed were almost double what the taxpayers could substantiate from the documentation.

The Chairman: Was this research, which we credited to the subcontractor and to the general contractor, put out in the public domain and sold, generating all kinds of economic activity?

Mr. Shahid Minto: Mr. Chairman, they were two taxpayers. I have not talked about them as contractor and subcontractor.

The Chairman: I used the term. That's my terminology, for simplicity. I have a simple mind.

Mr. Shahid Minto: Mr. Chairman, you'll appreciate that while you have every right to ask the questions, we are restricted by section 241 of the Income Tax Act in how much information we can give you.

The Chairman: Yes.

Mr. Shahid Minto: We do have access to the information; we know it. But if I give you any information, it might help identify the taxpayer, and you know the House and this committee has a long history of protecting the confidentiality of taxpayer information. So I'd like you to reconsider the question, perhaps.

The Chairman: Okay.

Mr. Desautels, do you support Mr. Minto in asking for protection under section 241?

Mr. Denis Desautels: Yes, I do, Mr. Chair.

The Chairman: Okay, we'll respect your opinion and leave that issue alone.

Are there any other questions? I have a multitude, but I think we'll leave them to the actual hearings, and we'll leave it at that.

• 1645

There being no further questions, before we adjourn, since it doesn't look as if we can have a steering committee through a lack of quorum, on Tuesday, May 2, we have set up a meeting on the main estimates of the Office of the Auditor General of Canada. That will be followed by a steering committee at that time to discuss the letter the Auditor General has given us.

On Thursday, May 4, we have scheduled draft reports for chapters of the 1999 report that was tabled last December, and the following week is also for a draft report. So even if we have the steering committee on Tuesday, May 2, and reporting to the main committee on Thursday, May 4, the clerk tells me that gives him sufficient time to line up the witnesses. Since we have only about four issues—the Auditor General has recommended five—my intention at that time would be to deal with the four and leave the human resource management regime until we come back in September, because the Auditor General stated that a review of this chapter would likely involve more than one meeting. And when we come back in September we'll be expecting our report, I presume, Mr. Desautels?

Mr. Denis Desautels: In early October.

The Chairman: In early October we'll be expecting another report, so for the couple or three meetings, assuming that the House is not dissolved...

Do we have to reconstitute the meetings of the committees in September, Mr. Clerk?

The Clerk of the Committee: There will be a new list tabled in the House, and there may be a break there.

The Chairman: So it might take a couple or three weeks to get the committees up and running.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Mr. Desautels, you're planning to report on the activities of HRDC in October. Is that correct?

Mr. Denis Desautels: Among other things. We will be tabling a report on HRDC in October, but we will also have a number of other chapters ready for you at that time.

Mr. Benoît Sauvageau: How thoughtful of you.

[English]

The Chairman: The clerk will be setting up, tentatively, the witnesses for these four chapters, and we'll leave human resource management to the fall, but that will not be confirmed until we have the steering committee meeting on May 2.

Are there any other points?

A voice: No.

The Chairman: The meeting is adjourned.