PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 2, 2000

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[English]

The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, ladies and gentlemen. Today the orders of the day are main estimates 2000-01, votes 25 and 30 under Finance, the Office of the Auditor General.

Our witnesses today are the Auditor General of Canada, Mr. Denis Desautels; Ms. Sheila Fraser, the deputy auditor general of audit operations; and Mr. Michael McLaughlin, deputy auditor general of corporate services.

Without further ado, Mr. Desautels, we shall turn it over to you.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman. We appreciate the opportunity this afternoon to discuss our report on plans and priorities and our 2000-01 estimates.

We believe it's very important to obtain the committee's views on the selection of future audit topics as well as on the administration of our office.

This report outlines our performance expectations and the general direction the office wants to take in the next three years. It also provides additional details on our funding requirements and challenges for the coming year.

This year we plan to publish approximately 35 chapters in four reports, including the report of the commissioner of the environment and sustainable development. In addition, to coincide with the end of my 10-year mandate, I plan to present, in February 2001, a “capstone” report to Parliament. This report will provide my perspective on some key management problems facing the federal government, the role and evolution of the legislative auditing during the last 10 years, and the efforts made by the office to identify problems and seek reform in central agencies and in program delivery.

We've provided you with a handout that shows, in summary, the list of the chapters we plan to include in our report for this year and our planned audits for 2001 and beyond. The work for 2000 is well underway, but there is room for adjustment to our plans for 2001 and obviously beyond 2001. We would like to engage this committee in a discussion of issues that we would consider in our audit plan for 2001. Of course, new issues may also be considered as they emerge.

I'd like to take a few minutes, Mr. Chairman, to provide you with highlights of certain chapters that will be contained in our upcoming reports this year.

As you know, this office has frequently identified problems in the management of grants and contributions, and this year we intend to report the results of our audit of specific grant and contribution programs at Human Resources Development Canada. Afterwards, in the fall of 2001, we will present the results of a government-wide audit of grants and contributions.

Reporting on performance and managing for results are essential parts of an effective accountability regime and are goals of the government. In December 2000, we will report the results of a government-wide audit designed to assess the status of performance reporting and managing for results in the federal government. The audit team is contacting various committee chairs and vice-chairs to obtain their views on this subject.

[Translation]

Public service renewal will be an ongoing issue in the years ahead as the government emerges from downsizing and faces new challenges in program delivery and human resources management. In April, we published a study to draw Parliament's attention to the urgent need to deal with longstanding issues and emerging challenges for human resource management in the public service. Your committee will be reviewing this study in the fall, as you know. This year, however, we will examine the progress made in the past decade toward reforming Canada's public service. We will report from a central perspective on the reform efforts, and on the management of human resources in departments and agencies.

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In May 1995, we published a study, Ethics and Fraud Awareness in Government. We also looked at this subject at Revenue Canada in 1998 and National Defence in 1999. Canadians are concerned about integrity in government and they have the right to expect the highest ethical standards in their governments. A new study will be presented this year on promoting integrity in the federal public sector; it will include a framework for discussion and action to meet that challenge.

I have presented only the work we will be doing under the value-for-money component of our business line. The other components of our work relate to statutory audit requirements. This work includes the audit of the summary financial statements of the federal government. In the next year, we will perform additional audit work as a result of the federal government's implementation of the Financial Information Strategy. The FIS initiative, as you know, presents our office with new audit challenges. Extra resources have been allocated to meet these challenges.

In addition, Mr. Chairman, we audit the annual financial statements of about 19 government organizations, including Crown corporations, other entities and territorial governments, agencies and corporations. We are also the auditors of two international organizations, UNESCO, which is based in Paris, and the International Civil Aviation Organization, which is based in Montreal.

[English]

Special examinations of crown corporations are also required to be carried out at least once every five years. The third round of examinations will end in 2000-01. A chapter on accountability and control issues in crown corporations will include a summary of these special examinations.

I'd like to take just a few minutes to briefly review our financial requirements and some of our challenges in the year ahead.

In 2000-01, we plan to spend approximately $56 million. This is made up of our main estimates of $54 million and $2 million in supplementary estimates. Although we have presented our best estimate for the coming year, the timing of the estimates preparation and the direction from Parliament to undertake new work mean that we will need to request supplementary estimates. We will need additional funds for the audit of UNESCO, the special work on the Canadian Wheat Board, and other allocations to cover salary increases under collective agreements.

During the past year—and for the upcoming year—we have had to make some tough choices on what to audit, based on our available funds. We have also looked at our audit techniques and technology to ensure that they are up to date. We are becoming concerned that our current level of funding may not be sufficient to provide the level of service expected by Parliament in the medium and longer terms. We are currently reviewing our funding base and discussing its appropriateness with the Treasury Board Secretariat. We may ask for an increase to our reference level this fall, which would appear in next year's main estimates.

I also want to assure the committee that we continuously strive to improve our own management procedures and systems.

[Translation]

Last year at this meeting, I indicated that the accounting of PriceWaterhouseCoopers had been selected to conduct and external audit of the Quality Management System we use for our annual financial audits. I wrote to you in March this year with the results, and I was very pleased to inform you that we had received assurance that we are carrying out high-quality audits. The practice of auditing quality assurance systems is new to Canada and, to the best of our knowledge, we are the first major auditing organization in Canada to undergo such an independent quality assurance audit. We have started a similar process that will lead to an external audit of our Quality Management System for the other important component of our work, namely value for money audits. We will report back to you as this work progresses.

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At the committee's November 1999 meeting concerning our Office's 1999 Performance Report, members requested, among other things, more information on the status of our observations and recommendations. We are developing a new database that will help us provide better qualitative information on the progress of recommendations we have made in our audits.

Further, we are investing in knowledge management for the Office, using modern technologies to capture and share knowledge that is strategic to the audit practice. We also put a priority on staff training and have designed a new curriculum and courses to respond to challenges facing the Office as our environment changes.

[English]

Before I ask Michael McLaughlin to review the financial aspects of our estimates, I'd like to update you on issues I raised last year with this committee.

First is the subject of our independence in managing staff, as it relates to our ability to negotiate our collective agreements. We've had further discussions with the Treasury Board Secretariat since then, and we agree there is a need for a different formula that recognizes the authority delegated to the Auditor General by Parliament. We need a clear operating framework to enable us to negotiate effectively with our employees. Based on discussions to date, we expect to have this framework in place later this year.

Second, an issue that arises from our status as a separate employer is our ability to apply the terms of the recent pay equity settlements to our affected employees. Our employees, like those of other separate employers, are not eligible for compensation because they were not included in the original complaint by the Public Service Alliance of Canada. However, our employees have always worked under the same terms and conditions, and they feel very strongly they should continue to receive the same benefits, even if they are retroactive. This is a fairness issue that concerns me very deeply.

We've raised the matter of pay equity with the Treasury Board Secretariat and have had discussions that we hope will lead to a favourable resolution. Officials assure us that our concern is being taken seriously and with urgency. We really need to have this matter resolved in order to ensure the continuing smooth functioning of our office.

Finally, last year, in response to committee members' questions and my concern, I raised the issue of how audit appointments are made for various government entities, including alternative delivery arrangements. Since that time we've worked hard on the development of criteria or principles that could assist in making appropriate audit appointment decisions for the future.

The principles relate to an entity's level of financial assistance from government, its financial exposure, and its public policy significance. We're discussing these principles with government officials and getting feedback on their applicability. When we complete these discussions, we intend to make these principles available for discussion with parliamentarians.

Now, Mr. Chairman, with your permission, I'll ask Mr. McLaughlin to quickly take us through some of the charts in our report.

Mr. Michael McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General of Canada): Thank you Mr. Chairman. I'll be making reference to the report itself and page numbers. Where they are different in French, I will refer to the numbers in French as well so everyone can follow along, regardless of the copy.

I would like to highlight some of the financial aspects of our report on plans and priorities. Mr. Desautels has presented the office priorities for the next two years. An overview of the office and its expenditure plan is provided in section 2 of the report on plans and priorities. If we turn to page 7, we see the spending plan for 1999-2000 to 2002-03, with 1999-00 being a forecast year we just completed, and 2000-01 the year we're entering that is under consideration.

The first line provides the expenditure plan, but as was explained earlier, it does not take into account increases that may be necessary for new work or adjustments to collective agreements. As well, as noted in footnote 2, by 2002-03 the total office budget declines by approximately $1 million due to temporary funding provided to audit the implementation of the government financial information strategy, and cost-related to new audit work and new agencies and corporations.

We believe some additional amount will be necessary at that time for our future audits of the public accounts, due to the decentralization of financial records in accordance with the financial information strategy.

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Section 3 of the report provides the five priorities of the office with a link to the main outputs and results we wish to achieve. On page 16, we show the planned spending by business line. These figures are presented on a fully loaded cost basis, that is, all the costs incurred directly by the office are factored into the costing of the office products.

The significant changes from last year are the financial audits of crown corporations and other entities, where the amount allocated has increased by $2.8 million due to the audits of the new territory of Nunavut, and the financial audits and assessments of performance information in the new parks and revenues agencies, plus some smaller corporations. As well, there's a decline of $2.5 million allocated to special examinations, as we come to the end of the third cycle of special examinations.

The other lines for value-for-money audits, environment and sustainable development, and the financial audit of financial statements of the Government of Canada are basically the same as in prior years.

Exhibits 3.8 and 3.9 on pages 22 and 23—page 25 en français—show the rising cost of the financial audits in the other entities and territories. In these exhibits you can actually see the rising costs. These audits require us to provide an annual opinion, and while we're striving for efficiency in cost control, the conduct of these audits is not discretionary. We must do them each year.

We are carefully managing the cost of all of our audits. In the value-for-money area, we have targeted an average chapter cost at $750,000. This is shown on page 17, and page 19 in French. While the cost of individual audits will vary based on the audit's scope, the average audit cost will depend on the audit mix during the year. This average does provide a good comparative indicator.

The special examinations of crown corporations are now completing their third round. The Financial Administration Act requires that each crown have a special examination every five years, and we are not completing the third of those five-year cycles. We are pleased to report a planned decline in the average cost of special examinations. This is shown on page 25, and page 27 in French.

[Translation]

On page 28 in French and 26 in English, there are two important internal indicators. The first is the ratio of hours spent on audit projects. This represents the percentage of time available which staff spend directly on audit products. As we indicated, we have an objective, a range of hours, which we strive to attain. If the ratio is too high, it is possible that we are neglecting activities such as training and designing methods, which are more important for reaching the office's long-term objectives. If the ratio is too low, it is possible that Parliament would not receive all the audits requested throughout the year. Therefore, we strive to maintain a certain balance.

The second indicator on this page represents the number of days of training per year. As indicated, we are above the average recommended by the Canadian Institute of Chartered Accountants. However, we must stay at the leading edge of legislative audits, which means we must invest in our future. We will focus on this component within the framework of our ongoing improvement initiative.

[English]

Section 4 presents the sustainable development strategy for the office. The features of this plan include increased emphasis on the environment in the selection of audit issues; increasing the greenness of our office, in terms of the consumption of environment-friendly products; and the increased awareness by staff of their impact on the environment.

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Section 5 provides summary financial information. This is an extract from the main estimates and highlights the contributions we give to the CCAF, known as the Canadian Comprehensive Auditing Foundation, on behalf of the Government of Canada, plus an estimate of non-respendable revenues, which come from the two international audits, ICAO, or the International Civil Aviation Organization, and UNESCO.

Finally, in table 5.3 on page 30 we show the net cost of the office, including services provided without charge. These include the accommodation charges allocated by Public Works and the insurance premiums paid by Treasury Board Secretariat for employee benefits.

We are currently working with Public Works to renovate our premises, to make more efficient use of space and improve our working conditions. Including these charges, the net cost of the office for 2000-01 is planned in these estimates at $59.2 million.

Thank you, Mr. Chairman.

Mr. Denis Desautels: Mr. Chairman, if I may take a brief moment, I want to say that we do remain very committed to serving Parliament in the very best way we can. So we constantly encourage communication with parliamentarians in various ways so that we may be aware of their needs, concerns and interests, and where feasible we do try to address in our own audit plans. We also work to promote awareness and understanding of matters reported by our office among the people to whom the reports are addressed.

Finally, I'd like to take this opportunity, Mr. Chairman, to thank the committee for its interest and thoughtful suggestions made in its recent report to improve our performance report. We hope that we can implement most of the recommendations you made in our next report, which will be tabled this fall.

In closing, I'd like to add that employees of our office, through their skills and their professionalism, remain very committed to providing Canadians and Parliament with work that I believe is of very high and remarkable quality. It's a privilege for me to lead such a team of dedicated individuals.

On that note, Mr. Chairman, I'd like to thank you. My colleagues and I would be very happy to answer the committee's questions.

The Chair: Thank you, Mr. Desautels and Mr. McLaughlin.

I should perhaps point out that the horizon is starting to show for the end of an era. This will be the last time that Mr. Desautels presents the estimates of his office to this committee. I'm sure there will be many opportunities for accolades and so on over the next number of months, but I want you to know that by this time next year we expect there may be someone else in the chair.

Mr. Mayfield, eight minutes, please.

Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance): Thank you very much, Mr. Chairman.

Perhaps this is not the time for accolades, but it's been a pleasure to meet with the Auditor General of Canada and his staff and to appreciate the professionalism and their concern for doing the best job possible. At least that's my estimate, and I thank you for that, sir.

As Mr. McLaughlin was dealing with his section of the report, he was mentioning that in the opinions that are required, not discretionary, which I think is the term he used, I think at that moment he was looking particularly at Nunavut and the extra costs of providing those opinions. I'm wondering how you manage those non-discretionary additions. Are they built into your budget from previously, or are you left looking for funds to cover new costs that are not in the budget?

Mr. Michael McLaughlin: Mr. Chairman, to respond to Mr. Mayfield, in the case of Nunavut we managed to get additional funds for the audits of Nunavut through an omnibus submission that was made for all of the departments that were affected by the creation of the new territory, so in fact we did get funds in that instance.

In other cases, such as the establishment of the parks agency, the establishment of the revenue agency, the Canadian Food Inspection Agency, and a couple of small crown corporations such as Ridley Terminals, we put together an estimate of the cost of doing those particular audits, which were now no longer at our discretion but had to be done, presented those to Treasury Board, and came out with a formula where they provided some of the funding and we found other parts of the funding within our own budget. It was almost a 50-50 split.

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As for the FIS initiative, the financial information strategy initiative, we've agreed with Treasury Board that we'd put forward some numbers, which we again discussed at length, and we came to the conclusion that after 2001-02 we would again review those numbers to make sure we have sufficient funds to do the audits under the new financial information strategy, because that will in fact cost us more money. The exact amount is difficult to determine before we actually get into this decentralized environment.

Mr. Philip Mayfield: Looking at another aspect of the verbal report that you made today, Mr. Desautels, you mentioned your concern for fairness for your own employees after the PSAC award was given, and that you are in conversation with Treasury Board about this, and I detected some optimism in this. But are you left pretty well to negotiate on behalf of your employees, or is there some mechanism by which you can approach these perhaps non-expected, non-anticipated draws on your budget? How do you handle that kind of negotiation? Do you just go and ask for more money, or is there a way for you to deal with it?

Mr. Denis Desautels: The current situation is a little confusing in the sense that although we are categorized legally as a separate employer, and that's what our legislation calls for, there's not a whole lot we can do with our own employees in terms of collective agreements without getting, first of all, a mandate, a very detailed and specific mandate, from the Treasury Board. So basically we cannot exercise all the prerogatives of a separate employer as you would normally expect.

So while that is true on the one hand, there's a certain inconsistency in that when we talk about pay equity, the position has been taken there that our employees are truly part of a separate employer organization and therefore they're not covered. So there's an inconsistency between the two points of view taken. And it puts us into a difficult situation because we of course do not want to replace the bargaining agents that our employees have, but we do have an interest in ensuring that our employees in all of this are treated in a consistent and fair manner. It's important, of course, for the good of the office and for ensuring the continued productivity of our workforce.

So we are therefore intervening with the Treasury Board Secretariat to get them to find a solution to the present dilemma, and as I indicated in my statement, the negotiations are ongoing. There is, we are told, an attempt to find a solution, but we haven't been able to go further than that at this stage.

Mr. Philip Mayfield: In regard to another aspect of the report you made today, sir, paragraph 6 actually, in which you talk about government-wide audits of grants and contributions, I don't think it's included, but I'm wondering if there's some anticipation of perhaps audits of loans to corporations. And what I'm thinking about are some of the loans made that have a payback that is triggered by the performance of the company. Is there any anticipation of including that in your audits in the future?

Mr. Denis Desautels: I'll ask Mrs. Fraser to answer that question.

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Ms. Sheila Fraser (Deputy Auditor General, Audit Operations, Office of the Auditor General of Canada): Mr. Chair, if I might, I'd like to refer you to an audit we did in Industry Canada that was released just this past spring, I believe. We looked at several of the loan and granting provisions in the Industry Canada programs, and I believe those are probably the ones Mr. Mayfield is referring to.

Mr. Philip Mayfield: Thank you very much.

The Chair: His question was, what's the provision for bad debts? I think that was your question. Is that right, Mr. Mayfield?

Mr. Mac Harb (Ottawa Centre, Lib.): There's no such thing.

Some hon. members: Oh, oh!

Mr. Philip Mayfield: Actually, I am concerned about the amount of money that is so-called borrowed and not returned. That really is at the root of my concern in asking if that's being looked at.

Mr. Denis Desautels: Mr. Chairman, the transactions we looked at in Industry Canada are not really in the form of loans. They are contributions made to certain companies under certain programs where there are repayable arrangements if the company achieves a certain level of sales for the product that's being developed. We did express some concerns about the clarity of some of these arrangements and how this was generally managed. But these are not considered loans as such against which you take a provision.

There are loans being made to corporations here in Canada and abroad through some of the crown corporations as well, such as EDC, the Business Development Bank of Canada, the Farm Credit Corporation, and so on. We look at those every year as part of the audit of those organizations to make sure there's a proper provision for loan losses in each one of those.

But there may be in different departments loans that need to be managed. Across government, as you can understand, there is a variety of loans not just to companies but to other organizations, and there's a need to manage those in a way that results in the lowest rate of losses to the crown.

Mr. Philip Mayfield: I have more questions. I'll ask them in the next round. Thank you.

The Chair: Thank you, Mr. Mayfield.

[Translation]

Mr. Sauvageau, you have eight minutes, please.

Mr. Benoît Sauvageau (Repentigny, BQ): Mr. Desautels, Madam, Sir, welcome. I think I will be brief. I don't think I have many questions.

Mr. Desautels, I would like to draw your attention to paragraphs 21 and 22 regarding pay equity. You only focus on this issue. You say that you are presently holding discussions and negotiations with Treasury Board. I would like to know if you feel optimistic about these discussions and whether you have estimated how much a positive outcome would cost and whether you have a deadline.

Mr. Denis Desautels: Mr. Chairman, we have tried to calculate how much it would cost for our office. The figure would be somewhere between 4 and 5 million dollars for our organization per se.

As to whether we are optimistic, it's difficult to say because these discussions have been going on for a while. I think both sides are fairly frustrated by now. On the one hand, I'm encouraged by the fact that negotiations are still ongoing. However, we're still far from a final settlement.

I think it's something we must continue to...

Mr. Benoît Sauvageau: Do you have a deadline?

Mr. Denis Desautels: I must admit that some of our employees have already written letters to some members. They are becoming increasingly impatient. There is no mention of a deadline in either an Act or an agreement. As it stands, when our employees see that their peers in other departments are receiving their pay equity cheques, they feel more and more frustrated and stressed out.

Mr. Benoît Sauvageau: Thank you very much.

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At the beginning of your presentation, you referred to the coming audit schedule and said that you would welcome any comments we might have. I have a few suggestions.

There are many audits scheduled for 2000, including one on contracts awarded by the Canadian International Development Agency. Could you perhaps give us a typical example, such as Ethiopia? The government said it would give a million dollars to help fight Ethiopia's famine. But later, the government said it would give $10 million and the following week, it said it would give an additional 2 or 3 million dollars.

Is it possible to find out where the money ends up? Once it leaves Canada, where does the money go? How is it spent? I don't know how you could find out. I do not want to know how the money awarded in each CIDA contract is spent, since there are far too many, but I would like to know where the money given to Ethiopia, for instance, goes, or you could choose another country which you may want to focus on. That would be very helpful. Someone within government once told me that international aid is the money taken from poor people in rich countries which is given to the rich people in poor countries, and I would like to find out if that is true. It's just a suggestion.

My second suggestion concerns Heritage Canada. I would like to know whether it would be possible to monitor and check the grants that are offered to language minorities, such as those given to Anglophones in Quebec, compared to those given to Francophones outside of Quebec. Are there any checks that can be made on that issue? Currently, those are my two suggestions.

Mr. Denis Desautels: Very well. I will ask Ms. Fraser to answer your second question regarding Heritage Canada, if you don't mind, but first, as to CIDA, I am noting your suggestion. The work on CIDA is very advanced because it's something that we will have to report upon in October 2000. In this chapter, we deal with how contracts are granted, as you can see. These are the contracts that CIDA would give to an entrepreneur or to an NGO for services rendered or to deliver certain merchandise or certain services abroad. It is possible that among them there are contracts for one-time assistance in certain countries that are experiencing difficulty, because of famine or for other reasons.

Mr. Benoît Sauvageau: Well, you could see if there's anything in another chapter.

Mr. Denis Desautels: Yes. I have noted your suggestion and it is possible that we will be able to follow up on it in the chapter that we are currently working on.

Mr. Benoît Sauvageau: I would appreciate that very much.

Ms. Sheila Fraser: Mr. Chairman, as to Heritage Canada, as you can see, there is no audit of contributions. I may be wrong, but I believe that an audit was done a few years ago of various contribution programs within Heritage Canada, and they will certainly be audited again in a year or two.

I have also taken note of your suggestion. We will take it into account in our planning stage.

Mr. Benoît Sauvageau: Thank you very much. That's all.

The Chair: Thank you very much, Mr. Sauvageau.

[English]

Mr. Mahoney, eight minutes please.

Mr. Steve Mahoney (Mississauga West, Lib.): Thanks, Mr. Chairman.

I'm interested, Mr. Desautels, in what you call your capstone report. I'm glad you didn't call it a headstone report. I'm interested in what you're going to do here in terms of your perspective on management problems facing the federal government. Would this be a compilation, the best of, of what we're going to see over the next 10 years? I hope not.

Mr. Denis Desautels: Mr. Chairman, this is going to be a fairly succinct report that stays at a certain level, and it won't get into too much detail of any single program. We'd like to look at certain of the broader issues we've been trying to advance. When I say “we”, it's not just our office, but government generally.

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We're talking about such things as accountability for results and accountability for delivery of services under alternate service delivery arrangements. There are issues around information technology. There are some issues that cut across government where we, you, and government have been trying to advance the agenda. It will be basically a bit of a report card on how far we've gone and what's left to do in a number of areas like that.

Mr. Steve Mahoney: I've always been interested in the idea of measuring results in government departments. It's not something that jumped out at me when I first arrived here, or in other governments I've been involved with, but it seems to me as a member of Parliament that results can show up in fewer phone calls to your office and a little less stress level. But that's really not what you're talking about. Do you feel we are able to measure results in real terms that the public would understand?

Mr. Denis Desautels: Mr. Chairman, I think there has been good progress made in that general area. When you look at the performance reports that are prepared by each department as part of the estimates process, that gives you basically a good idea of the current state of the art. In some programs it's rather difficult to do because of the nature of the services provided, but in other areas it's easier to measure.

The government has also created, as you know, new agencies, such as the new Canada Customs and Revenue Agency, the Canadian Food Inspection Agency, and the Parks Canada Agency, and in all three cases the legislation creating those agencies calls for a reporting by the agency against its objectives and what results it can show. So there is a cultural shift that is now being reflected even in some legislation that pushes government organizations in that direction.

As far as I'm concerned, we're not completely there yet. There's still room for improving how this is done. But I think there has been good support for that by your committee and other parliamentarians, and I think the bureaucracy and government itself have been on side on this and have been working pretty well along the same path. I think it has gone a long way. We're talking now about refining this and getting the job finished. Well, it'll never be completely finished—

Mr. Steve Mahoney: Someone, who will remain nameless, said to me that the bane of government 10 years ago was the lawyers and today it's the auditors. I'm just sharing a thought and looking for a response. No one needs to get too defensive, particularly the opposition, Mr. Chairman.

If you talk about value for money and measuring results, it would seem to me that in your capstone report you're going to talk about the role and evolution of legislative auditing over the last 10 years. Do you have any thoughts now in terms of whether it has evolved in a way that you think is constructive? Can you measure the results, and is there some way of generally saying that it's beneficial to the Canadian taxpayer?

Mr. Denis Desautels: Mr. Chairman, I hope I can say some of those very positive things at that point. But we ourselves have been basically reporting on our performance, like anybody else.

That being said, legislative auditing here and elsewhere in Canada and around the world has evolved over the last two decades. We hope that while this may at times have caused certain people to have second thoughts about how far this has gone, I think generally the vast majority of members of Parliament have found this new type of reporting, where we go beyond strictly reporting on financial results in compliance with budget, to be quite useful. In other words, we end up reporting—and when I say “we”, again I mean auditors at the federal and provincial levels—on how well government departments have been in fact carrying out the job for which they receive funding.

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I think in many cases it's provided members of Parliament with an insight into the effectiveness of the government that is hard to get from any other source. I can give you as an example some of the work we did on Fisheries and Oceans, particularly our last report on the shellfish fishery in Atlantic Canada. A number of MPs actually found this particular report very helpful, and they got information out of it that they wouldn't have gotten anywhere else.

So on the whole, I feel very strongly that it's been helpful to members of Parliament.

Mr. Steve Mahoney: I didn't mean it as a lob by any means. We always have to examine how much we're examining what we're examining, if you follow me, because you can get carried away. But I'm not suggesting you have. I just wanted to ask the question.

On the issue of pay equity, I'm concerned, frankly. What I see happening is that people within PSAC who are no longer employees of the federal government are being put on the back burner, even though they've been awarded a substantial settlement in terms of the pay equity awards. The government is making sure those still in our employ get their cheques on time, but those who are no longer directly in the employ of the government—and I've had some direct calls on this—are just being fluffed off: “You're going to get your money. Don't bother us. We'll get to you as quickly as we can.” So they've already been told they're going to get the awards, but they can't get their hands on the money.

I don't know if that's something your department would look into, but from the point of view of your employees, is it not really your responsibility, your department's responsibility, to push for your employees to be treated the same as other government employees, as opposed to their writing to their member of Parliament on this?

Mr. Denis Desautels: Mr. Chairman, I agree with Mr. Mahoney that we have that responsibility to argue on behalf of our employees, and that's exactly what we've been doing for quite a few months now. However, the Treasury Board Secretariat holds the purse strings in more ways than one, not just in terms of signing cheques but in terms of providing legal authority to solve the issue.

We have been working very hard. Mr. McLaughlin has been leading our efforts on that front to try to bring this to a resolution. Our employees are frustrated because it's taking so long to do, though I don't think it's due to lack of effort on our part. That's why they have been writing to some of their members of Parliament to make them aware of that situation.

The Chair: So it seems the resolution of the pay equity settlement is not equitable. I'll leave that one with you.

Mr. Mayfield again, for four minutes this time around.

Mr. Philip Mayfield: Thank you.

It's been mentioned that the federal government is delivering programs more and more in partnership with provincial governments. I think your part of keeping track of this is on the federal side, and I believe there is perhaps one exception to that. I'm wondering if, in the light of this exception, there's any plan or thought of pushing forward this idea of concurrent audits any further. What would the resource implications be for your office if this were the case?

Mr. Denis Desautels: Yes, we are making good progress in carrying out more of these concurrent audits with provincial auditors general. We did carry one out not too long ago on the infrastructure program, which we reported here. We had participation from Saskatchewan and Nova Scotia.

The Chair: Wasn't the child tax benefit a joint one too?

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Mr. Denis Desautels: No. Up to now it's been a federal effort, but we hope that when the reporting on child tax benefit results takes place as it should, at that point our provincial colleagues will get involved as well.

But in the plans we gave you with my opening statement, we do talk about the role of the Department of Fisheries and Oceans in the salmon fishing industry in B.C., in salmon farming. That is being done with the cooperation of the B.C. audit office.

We have another one planned for December 2001, which is on the Atlantic Canada Opportunities Agency's grants and contributions. That one will be done with our provincial colleagues in the Atlantic provinces.

Those are two examples, just in what you have in front of you, of carrying out concurrent audits with our colleagues in the provinces.

In terms of resource implications, it really does not have resource implications. In fact if we do this well, it should help, because we should achieve better coverage by working together than we would if we were working completely separately.

Mr. Philip Mayfield: Would there be any other challenges that you would have to address before you became more deeply involved in these types of concurrent audits?

Mr. Denis Desautels: The main challenge we have to address in working together on concurrent audits is maintaining the autonomy of each of the participants to report to their own legislature and respecting the right of their legislatures to receive their reports separately from their own auditors. So we have to make sure we work out the timing and the sequence of reporting in a way that respects the agendas of each of the participants and their legislatures.

Mr. Philip Mayfield: So on the whole, there would be a will from both sides of this arrangement to have this worked out in a satisfactory way, I presume.

Mr. Denis Desautels: There has been on occasion in the past some hesitation about going too far in that direction, because of political sensitivities. There's a bit of a fear that the federal presence would be overbearing, but I don't think that's warranted. I think we can work out something that's satisfactory to everybody. In fact COLA, the Conference of Legislative Auditors, which is our national grouping of auditors general, has a committee that has been struck to promote this kind of effort in the future, more concurrent audits.

Mr. Philip Mayfield: Thank you very much.

The Chair: Thank you, Mr. Mayfield.

Mr. Harb, four minutes, please.

Mr. Mac Harb: Thank you very much for your presentation and report.

I'm very encouraged by what you have said, Mr. Desautels, about Treasury Board and the pay equity issue, because I had the pleasure of meeting with some of your staff on this issue, and quite rightly, it's my hope that it will be resolved very quickly. I spoke with Treasury Board, and they gave me the same sort of signal that was given to you: that hopefully something will come out positively for all involved.

My question to you is this. In your report and in your planned activities, you list a number of initiatives, and I see it's a slightly more ambitious plan than last year and the year before.

Second, since your term is going to end with the fiscal year, how do you normally guarantee or ensure that the future Auditor General will carry out your plan? Is it normally the tradition that the new Auditor General take over from the past one and move on with the plan, or do they have the right to turn around and say, “Look, these are not my priorities, I want to set my own priorities”?

Mr. Denis Desautels: Mr. Chairman, in terms of the first part of Mr. Harb's question on the planned level of activities, we are generally planning to deliver at least as much in 2000 as we did, let's say, in 1999 or 1998, so our level of activity is keeping up and we are trying to be as productive as possible.

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I have to tell you that the office is stretched. We're trying to respond to demands from members of Parliament and different standing committees as promptly as we can, although we can't respond to all of those demands. We've had to say no to some or postpone certain requests, even certain projects that we've had. So we're trying to be as productive as we can, but we are stretched and we are having difficulty responding fully to the demand put on the office.

In terms of Mr. Harb's second question, obviously the plans we are making here and laying out in front of you are meant to be as much as possible a reflection of the office's intent as we speak today. A future auditor general would not necessarily be committed by those plans. He or she would have the ability, the flexibility, to amend those plans as he or she saw fit.

I think we cannot, on the other hand, stop looking ahead and bring the office to a standstill until somebody else comes on board. So we're continuing the planning on a rolling-forward basis, and hopefully the incoming auditor general will be able to adjust that to a certain degree to fit his or her priorities. At least there will be something there to maintain the momentum of the office.

Mr. Mac Harb: I have just one small comment. You're quite right in that. A lot of people seem to look at your office almost as an ombudsman's office to a large extent. Quite often I get constituents who call and they are outraged about something that may or may not have anything to do with your portfolio. At the end they'll say they're going to call the Auditor General to complain about it, and they want him to take action on it.

Do you find from your end too that a lot of people look at you as an ombudsman, more so now than probably five years ago or three years ago? How are you planning to deal with the large number of calls that you are getting from the community?

Mr. Denis Desautels: Mr. Chairman, I guess the more the office is known and recognized by Canadians from coast to coast, the more likely there will be cases where people write to us out of frustration to a certain extent because they haven't been able to resolve their issue through other channels. We do get a certain amount of correspondence of that nature, but of course we always have to look at it through the lens of our mandate.

We are not an ombudsman. We are working for Parliament. We cannot take up individuals' causes. However, we are able, from that correspondence, to gauge whether or not there are some real problems in some parts of departmental operations, and we can adjust our own plans accordingly. We can't take up individual causes and report back to people. We work for Parliament and we have to interpret all of that through our legislative mandate.

The Chair: Thank you, Mr. Harb.

Ms. Phinney, four minutes please.

Ms. Beth Phinney (Hamilton Mountain, Lib.): Thank you, Mr. Chairman.

In paragraph 20, you've mentioned that you need an operating framework to enable you to negotiate effectively with your employees. I get the impression from what you're saying here that you feel you should be operating like an agency. I'm thinking particularly of the revenue agency that was developed. They're still public servants, but they can be moved around internally, can apply internally, and they don't have to go to the public service every time they want to change a job. It doesn't take eight months to move somebody from one area to another. Is that the type of framework you're looking for?

Mr. Denis Desautels: Mr. Chairman, in general terms, yes. Our legislation has set up the office as a separate employer to provide the office with sufficient independence from government to be able to carry out an objective audit function. So in certain respects, we have a fair bit of independence when it comes to hiring people and in terms of remunerating non-union people.

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But when it comes to negotiating collective agreements, that's when we, at this time, still have to go through the Treasury Board Secretariat process and get a mandate each time, a very precise mandate. The framework would enable us to move away from that and really assume full independence, as was intended officially when members of Parliament passed our legislation.

Ms. Beth Phinney: As what we'd call an agency.

Mr. Denis Desautels: That's correct.

Ms. Beth Phinney: You said there are employees like those of other separate employers. How many other separate employers are there who would be in the same situation as you are, not counting ones that have been declared agencies, not counting the revenue agency and...?

Mr. Michael McLaughlin: The employers are listed in schedule A, part II. There are about 20 separate employers listed.

Ms. Beth Phinney: Are they large employers?

Mr. Michael McLaughlin: The larger employers would include the National Research Council, which would be the largest of the separate employers, with about 1,000 or 1,500 employees.

Mr. Denis Desautels: Some of them are quite small.

Mr. Michael McLaughlin: Some of them—most of them—are quite small. Most of them are granting agencies, like the Medical Research Council, that have very few employees. We are one of the larger ones, but we're not the largest.

As I say, there are about 20 of them. They all have different terms of reference within which they can operate. As you noted on the agencies, the agencies have been given quite broad powers that take them outside of the Treasury Board and the Public Service Commission.

In regard to our powers, again, there are different things that seem to come into play that limit our powers as well. We've tried to do comparisons and have found that there are about half a dozen of these separate employers that are very similar to us, but they are all smaller than we are. The ones that are larger than we are seem to be working to a little different regime. Certainly the National Research Council, which is the largest, is having the same difficulties as we are in terms of collective agreements with their employees, in terms of what role Treasury Board plays in setting the negotiating terms and conditions.

Ms. Beth Phinney: Would this be the only group of federal civil servants in Canada who were not part of the negotiations for equity but would now like to jump on the bandwagon and benefit from it?

Mr. Michael McLaughlin: When we did our analysis, Mr. Chairman, we thought there were only six that were similar to us, six that were in fact using the same classification standards and the same pay scales as the Treasury Board employees. Some of the other corporations or separate employers have in fact gone away from the classification standards or have a different basis of compensation, so their ability to line up in a parallel fashion on the pay equity question is again something that Treasury Board would have to look at—each case independently—which is what we had expected Treasury Board to do.

We believe our case is very close to the situation of the employees of the Treasury Board. There are others in that list who are further away, and in some cases they're doing their own pay equity studies.

The Chair: Thank you.

Mr. Richardson, four minutes.

Mr. John Richardson (Perth—Middlesex, Lib.): Thanks very much, Mr. Chairman.

To the Auditor General, I certainly would like to say that we'll miss you in the sense that you've made a great contribution. Things have moved along a lot faster. The reports are out and the reaction time is good.

However, I think the one tool you would have liked to have with you all along is FIS, because if it works, I think it will speed up the work for all of us. With the information flow and the system set up, I think we'll be in good hands. I just want to pass on that we're hoping.... A couple of us are pressing Treasury Board to move a little faster on this. They know it's going to be good for them, but I guess everyone moves at their own pace. I would look forward to that maybe being in place before you go, just to have one run with it.

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I just wanted to pass that on. You've done a good job for us, and some of things you saw that were brought forward, such as FIS, will certainly help speed up reporting and auditing.

Mr. Denis Desautels: Mr. Chairman, first of all I'd like to thank Mr. Richardson for his kind words.

On FIS, you're right, it's taken a long time to get to where we are, but at least now we see things moving in a more definitive way. At this point in my term, I'm trying to assess what unfinished business there may be, and one of the objectives I did have was to try to make a contribution to the quality of financial management across the government.

It's been a tough sell, a difficult effort, but we're seeing movement now, which is encouraging, both through FIS but also through implementing comptrollership concepts in the departments across governments. So those two things are related to each other and seem to be finally moving at a more acceptable pace than before. I hope within the next few months we'll be able to declare at least partial victory in that area.

Mr. John Richardson: Thank you very much.

The Chair: Thank you, Mr. Richardson.

Mr. Desautels, I noted last year you raised the issue of the staff, and I think you now would suggest either that's been resolved or you're looking forward to an appropriate resolution of that issue, right?

I'm also concerned about paragraph 15, where you say:

We have had to make some tough choices on what to audit based on our available funds. (...) We are becoming concerned that our current level of funding may not be sufficient to provide the level of service expected by Parliament in the medium and longer terms.

Would you care to amplify on these comments?

Mr. Denis Desautels: Yes, Mr. Chairman.

On the first issue you raised and the issue we did raise last year, collective bargaining, as we indicated earlier, the Treasury Board Secretariat has basically agreed that there's a need for a framework that would enable us to assume more fully our role as separate employer when it comes to collective bargaining. So we're quite hopeful on that one that before the end of this year this will be resolved.

In terms of levels of funding and choices we've had to make, there are examples of things we haven't been able to do, or to do as quickly as possible, that seem to be of interest to members of Parliament, and there are other internal issues we may have had to put on the back burner to a certain point.

The Chair: Are they serious issues?

Mr. Denis Desautels: Well, I'll give you some examples, Mr. Chairman.

There's some work on Revenue Canada that we've had to postpone, that we had planned for earlier and will now have to be pushed a year or two later.

There's some work on financial management and control that we had planned to do, which also we've had to push back to a certain extent.

We've had requests from a certain number of members of Parliament to look into the whole issue of gun registry and gun control. The position I've taken is I'd like to wait until that is implemented further, but when the time comes, we would like to do something on that. Again, there's a question of resources to be able to do that.

HRDC was another one where the department itself would have liked us to do our work there earlier and report back to Parliament earlier. So it's—

The Chair: I wonder why.

Mr. Denis Desautels: Well, I'm not questioning why, but again, the committee itself is also putting pressure on us to report sooner. But we can only do so much with the resources we have, unless we push back a whole bunch of other things.

Those are examples of requests we've received that we've had to deal with in less than a completely satisfactory manner.

Internally we've had to postpone some investments we should make in technology, in training of our people, in knowledge management, and so on. We haven't had all the resources to take care of that, and eventually you may end up paying a price for that.

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So we think there are justifiable reasons for opening discussions with the Treasury Board Secretariat to adjust the funding level of the office. We've already indicated that to officials of Treasury Board Secretariat, and they've indicated they would like to pursue those discussions with us. We would hope that in doing that, we would have some support from the people for whom we work, the members of this committee in particular.

Over the last eight or nine years, when you look at the level at which we've been operating, we are still spending less money today, with the figures you saw, than we did in 1992 or in 1991, just after I came in. Despite that, we are delivering. We've absorbed the commissioner of the environment and sustainable development, so we've absorbed that new function, and on top of that we're reporting much more frequently than before.

Finally, we are providing services to quite a number of committees. Over the course of a year we typically would appear in front of a dozen different standing committees. We feel we've been fairly productive in managing all of this with a level of funding now that's no higher and somewhat less than it was back in 1992 or 1993.

The Chair: Thank you. As an officer of Parliament and with a mandate of independence, if you ever feel your ability to do your work properly is compromised, I hope you'd feel you could come to this committee. I'm sure we would be more than glad to hear of any concerns you have on that issue. Always remember we are here should you ever feel squeezed in your ability to perform the mandate you've been given by Parliament—not by the government, but by Parliament.

Mr. Denis Desautels: I appreciate the offer, Mr. Chairman.

An hon. member: You're not here for the government; you're here for the House of Commons, and you've been doing a great job.

The Chair: We agree with that. I just said, should he ever feel compromised....

I have a couple of other points. Sometimes I hear—and I'm sure other members may hear this out in the constituencies—that you are reporting continuously on issues, problems, and nightmares that you uncover in government, a litany of problems, and people say “What's the point of the Auditor General? He never seems to be getting anywhere. He's always uncovering more.” I would like you to take that under advisement when you are considering the public relations aspects. We've talked about this at other times, how the public is saying “Isn't government ever going to get their act straight?”

I'll leave that with you. You may want to comment on it if you so desire. It's just something I hear periodically from my constituents and others around the country. They would like to see our government operate well. Your job of course is to point out the things that are not operating well, so public relations are very important for you as well as everybody else.

Mr. Denis Desautels: I can respond very quickly, Mr. Chairman, if I may. This is a myth that I'm fighting all the time.

The Chair: Yes.

Mr. Denis Desautels: I do believe, as you can see from your involvement with our reports, that changes get made and a number of problems eventually do get addressed—sometimes not enough of them and not fast enough, but we are measuring progress. As we reported before, about 60% of our recommendations, thanks in large part to your support, get implemented eventually by departments.

But this is always a delicate balance for an Auditor General. We do look critically at all of our institutions. The ultimate objective is to improve our institutions. We have good, strong institutions in Canada, and we have to be able to self-criticize so that we continuously improve those institutions. I think in the long run we'll be one of the leading countries in most respects.

By doing that, though, there's a danger of course that people you're trying to basically provide assurance to in terms of their institutions will concentrate more on the criticism and get the wrong impression from the work the Auditor General does. So on balance, I have to make sure we keep pushing for improvements, while at the same time being balanced so people don't basically get discouraged by the things we report that need to be corrected.

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The Chair: Thank you.

You reported 18 months ago on social insurance numbers and the problems contained therein. The HRDC department now has a committee looking to review and reform social insurance numbers. I heard a figure of over $1 billion to resolve the issue, and we'll look forward to your follow-up on that issue if that number seems to be appropriate.

One of my constituents, who is one of those computer techies, says he could resolve the issue for a lot less money. I put him in touch with the committee that's involved in reviewing the way they are going to handle social insurance numbers, and they basically brushed him aside. Perhaps I should let you know, as well.

On my other point, I heard just the other day that it was going to cost $700,000 to revamp the cheques the government uses. That seems like an awful lot of cash. You may want to think about these kinds of things.

That's all I have.

If we have no further questions, I have a couple of motions here. One is on the main estimates of the Auditor General, included in votes 20 and 25 under Finance.

FINANCE

Auditor General

Vote 20—Program expenditures ...... $47,328,000

Vote 25—Salary of the Auditor General ...... $212,000

(Votes 20 and 25 agreed to)

The Chair: Shall I report the votes to the House?

Some hon. members: Agreed.

The Chair: Ladies and gentlemen, I would like to thank our witnesses this afternoon, especially the Auditor General, who has done such a fine job over the last ten years. As I said, since we had this opportunity to have you come before us without any other witnesses, we can only commend you for being a fine officer of Parliament. You've done a fabulous job.

Some hon. members: Hear, hear!

Mr. Denis Desautels: Thank you.

The Chair: We'll see him again, of course.

The meeting is adjourned. It will be followed in a few minutes by a steering committee subcommittee.