PACC Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 3rd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Tuesday, April 27, 2004

1535

The Chair (Mr. John Williams (St. Albert, CPC))

Mr. Rodney Monette (Assistant Deputy Minister, Government Operations Services Branch, PWGSC Former Quick Response Team)

Ms. Myra Conway (Director General, Finance, PWGSC Former Quick Response Team)

Mr. Steve McLaughlin (Director, PWGSC Former Quick Response Team)

The Chair

Mr. Rodney Monette

1540

1545

The Chair

Mr. Rodney Monette

The Chair

Hon. Shawn Murphy (Hillsborough, Lib.)

The Chair

Hon. Shawn Murphy

The Chair

Hon. Robert Thibault (West Nova, Lib.)

The Chair

Mr. Dennis Mills (Toronto—Danforth, Lib.)

The Chair

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)

Mr. Rodney Monette

The Chair

Mr. Jason Kenney (Calgary Southeast, CPC)

1550

The Chair

Mrs. Judi Longfield (Whitby—Ajax, Lib.)

The Chair

Mr. Rodney Monette

The Chair

Mrs. Diane Ablonczy (Calgary—Nose Hill, CPC)

Mr. Rodney Monette

Mrs. Diane Ablonczy

Mr. Rodney Monette

Mrs. Diane Ablonczy

Mr. Rodney Monette

Mrs. Diane Ablonczy

Mr. Rodney Monette

1555

Mrs. Diane Ablonczy

Mr. Rodney Monette

Mr. Steve McLaughlin

Mrs. Diane Ablonczy

Mr. Rodney Monette

Mrs. Diane Ablonczy

Mr. Rodney Monette

Mrs. Diane Ablonczy

Mr. Rodney Monette

Mr. Steve McLaughlin

The Chair

1600

Hon. Robert Thibault

The Chair

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Ms. Myra Conway

Mr. Steve McLaughlin

Mr. Odina Desrochers

Mr. Rodney Monette

Ms. Myra Conway

Mr. Steve McLaughlin

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

1605

Mr. Rodney Monette

Mr. Steve McLaughlin

Mr. Odina Desrochers

Mr. Steve McLaughlin

Mr. Odina Desrochers

Mr. Rodney Monette

The Chair

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Steve McLaughlin

The Chair

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.)

1610

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

The Chair

Mr. Rodney Monette

The Chair

1615

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Mrs. Marlene Jennings

Mr. Rodney Monette

Ms. Myra Conway

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Ms. Myra Conway

Mrs. Marlene Jennings

Ms. Myra Conway

Mrs. Marlene Jennings

Ms. Myra Conway

Mrs. Marlene Jennings

Ms. Myra Conway

Mrs. Marlene Jennings

1620

Ms. Myra Conway

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

Mr. Rodney Monette

Mrs. Marlene Jennings

Mr. Rodney Monette

The Chair

Hon. Joe Jordan (Leeds—Grenville, Lib.)

Mr. Rodney Monette

Hon. Joe Jordan

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Mr. Rodney Monette

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

Ms. Myra Conway

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

1625

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

The Chair

Mr. Jason Kenney

The Chair

Mr. Jason Kenney

The Chair

Mr. Jason Kenney

The Chair

Hon. Robert Thibault

1630

The Chair

Hon. Robert Thibault

The Chair

Hon. Robert Thibault

The Chair

Hon. Walt Lastewka (St. Catharines, Lib.)

The Chair

Hon. Walt Lastewka

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

Ms. Judy Wasylycia-Leis

Mr. Rodney Monette

The Chair

1635

Mr. Rodney Monette

Mr. Steve McLaughlin

The Chair

Ms. Myra Conway

The Chair

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Mr. Jason Kenney

Mr. Rodney Monette

Mr. Steve McLaughlin

Mr. Jason Kenney

Mr. Rodney Monette

Mr. Steve McLaughlin

Mr. Jason Kenney

Mr. Steve McLaughlin

Mr. Jason Kenney

Mr. Steve McLaughlin

1640

Mr. Jason Kenney

Mr. Steve McLaughlin

The Chair

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, CPC)

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Mr. Rodney Monette

Mr. Peter MacKay

Ms. Myra Conway

The Chair

1645

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Hon. Shawn Murphy

Mr. Rodney Monette

1650

Hon. Shawn Murphy

Mr. Steve McLaughlin

Hon. Shawn Murphy

Mr. Steve McLaughlin

Ms. Myra Conway

Hon. Shawn Murphy

Ms. Myra Conway

Hon. Shawn Murphy

Ms. Myra Conway

The Chair

Mr. Odina Desrochers

The Chair

1655

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

1700

Mr. Steve McLaughlin

Mr. Odina Desrochers

Mr. Rodney Monette

Mr. Odina Desrochers

Mr. Rodney Monette

The Chair

Mr. Rodney Monette

The Chair

Ms. Myra Conway

The Chair

Ms. Myra Conway

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

1705

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Ms. Myra Conway

Mrs. Judi Longfield

Mr. Rodney Monette

Mrs. Judi Longfield

Mr. Rodney Monette

Mrs. Judi Longfield

Mr. Dennis Mills

Ms. Myra Conway

Mr. Dennis Mills

Mr. Rodney Monette

Mr. Dennis Mills

Mr. Rodney Monette

Mr. Dennis Mills

Mr. Steve McLaughlin

Mr. Dennis Mills

Mr. Steve McLaughlin

1710

The Chair

Mr. Steve McLaughlin

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

Mr. Steve McLaughlin

Mr. Dennis Mills

Mr. Steve McLaughlin

Mr. Dennis Mills

Mr. Steve McLaughlin

Mr. Dennis Mills

The Chair

Mr. Dennis Mills

The Chair

Mr. Rodney Monette

Mr. Dennis Mills

Mr. Rodney Monette

The Chair

Mr. Dennis Mills

Mr. Rodney Monette

The Chair

1715

Hon. Robert Thibault

The Chair

Mr. Vic Toews (Provencher, CPC)

The Chair

The Clerk of the Committee (Mr. Jeremy LeBlanc)

Mr. Vic Toews

The Clerk

The Chair

Mr. Odina Desrochers

1720

The Chair

Mr. Vic Toews

The Chair

Mrs. Marlene Jennings

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 034

3rd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, April 27, 2004

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. John Williams (St. Albert, CPC)): Good afternoon, everybody.

The orders of the day, pursuant to Standing Order 108(3)(g), are chapter 3, “The Sponsorship Program”, chapter 4, “Advertising Activities”, and chapter 5, “Management of Public Opinion Research”, of the November 2003 report of the Auditor General of Canada, referred to the committee on February 10, 2004.

Our witnesses this afternoon are from Public Works and Government Services Canada, the former quick response team: Mr. Rodney Monette, assistant deputy minister, government operational service; Myra Conway, director general, finance; Steve McLaughlin, director; and André Auger, director, consulting and audit Canada, NRC operations and national programs.

Before I move on, I have to table a document from Public Works and Government Services dated April 27. It's signed by the deputy minister, Mr. David Marshall, and it is addressed to Jeremy LeBlanc, our clerk.

Dear Mr. LeBlanc:

At its hearings of April 22, 2004, the Standing Committee requested: “that the Committee request Public Works and Government Services Canada to provide a detailed breakdown of the disbursements made under contract EP043-9-0037 with respect to the sponsorship of the Pan Am Games in Winnipeg in 1999. Of particular interest are details on the $1,591,420 in production costs.”

The attached table responds to this request and is provided in both official languages.

I trust this will be satisfactory to the Committee.

That is tabled and public.

Moving on to our witnesses this afternoon, I understand that they have an opening statement, and then we'll get into questions.

We'll do the swearing in.

Mr. Rodney Monette (Assistant Deputy Minister, Government Operations Services Branch, PWGSC Former Quick Response Team): The evidence I shall give on this examination shall be the truth, the whole truth, and nothing but the truth, so help me God.

Ms. Myra Conway (Director General, Finance, PWGSC Former Quick Response Team): The evidence I shall give on this examination shall be the truth, the whole truth, and nothing but the truth, so help me God.

Mr. Steve McLaughlin (Director, PWGSC Former Quick Response Team): The evidence I shall give on this examination shall be the truth, the whole truth, and nothing but the truth, so help me God.

The Chair: Thank you very much.

I say the following to everybody:

...the refusal to answer questions or failure to reply truthfully may give rise to a charge of contempt of the House, whether the witness has been sworn in or not. In addition, witnesses who lie under oath may be charged with perjury.

That is from page 862 of House of Commons Procedure and Practice, by Marleau and Montpetit.

There are a couple of other issues. One is a statement with regard to individuals. You're appearing before us as public servants, so that does not apply. Also, the statement with regard to legal advice being paid for by the government does not apply.

The floor is yours.

Mr. Rodney Monette: Thank you.

Mr. Chairman, members of the committee, thank you for the invitation to brief you today on the activities of the PWGSC quick response team, or QRT, as it was known.

My name is Rod Monette. I am presently the assistant deputy minister, finance and corporate services, at the Department of National Defence. In May 2002 I was assistant deputy minister, government operational service, at PWGSC, where I was responsible for the Receiver General for Canada, government compensation, finance, and the corporate planning functions of the department.

With me are Mrs. Myra Conway, who was, and still is, the director general of finance at PWGSC, and Mr. Steve McLaughlin, who in May 2002 was director of national capital operations, real property branch, and who became the director of the quick response team.

[Translation]

Mr. Chairman, with your permission, I will provide a bit of history on the mandate, the work and the findings of the QRT.

The QRT was first established on May 7, 2002. Its purpose was to respond to questions regarding the sponsorship program, to review related files and documents, and recommend appropriate actions. The QRT was comprised of financial, procurement and audit specialists from within PWGSC and Communication Canada. The team completed its review work and was disbanded on July 15, 2002. Steve McLaughlin, the Director, subsequently prepared a report which was tabled in Parliament on October 10, 2003. Mr. McLaughlin's responsibilities regarding the sponsorship file, and my own, ceased at that point. Ms. Conway's involvement continues to the present day.

[English]

Between early May and mid-July 2002, a high-level review of 721 sponsorship files, spanning the period 1997-98 to 1999-2000, was carried out to determine their completeness and to report on any areas of concern. Our procedures included site visits to several of the advertising and communication agencies.

As I mentioned, the initial review of 721 files was intended to assess file completeness. Based on this initial assessment, the team then focused its review on 126 files. The 126 sponsorship files reviewed in more depth were chosen because they met at least one of the following criteria: they were of a high dollar value--that is, over $500,000; they were at that time subject to allegations or public scrutiny; or they had known deficiencies such as the absence of post-mortem reports.

The 126 files we selected represented a dollar value of approximately $106 million, which was about 70% of the total dollar value of the 721 files we looked at more broadly.

The goal of the focused review of 126 files was to determine what funds had been expended and when, determine which organizations or individuals received these funds, examine deliverables outlined in the contracts, determine the extent to which the deliverables were provided, determine if the Financial Administration Act and government regulations emanating from the FAA were followed, and lastly, determine if the file should be recommended for referral to the RCMP or Justice Canada. The Financial Administration Act, Treasury Board contracting policies, the Treasury Board policy regarding losses of money and offences and other illegal acts against the crown, and departmental policies guided the file review process.

During the review of the 126 files of primary interest, several key concerns were identified, including incomplete and complex project files and contracts with vague deliverables, resulting in difficulty in determining whether deliverables were met; changes to communication agencies, such as name changes and mergers, and changes to their affiliations, which added to the complexity of the files; absence of reports in files; potential overbilling and potential errors in rates of pay and inadequate reporting; apparent breaches of the Financial Administration Act, Treasury Board policies, and departmental policies; and subcontracting without a competitive process.

Throughout the period of our review and subsequently we briefed and provided information to both the RCMP and the Office of the Auditor General.

¹ (1540)

[Translation]

The final report of the QRT was tabled in the House of Commons on October 10, 2002. It was also posted on the Department's web site. The report contained five recommendations. The first recommendation was that the files requiring the attention of Justice Canada and/or the RCMP be recommended for referral. Referrals were in fact made during the period from May 2002 to July 2002. I understand that cases are presently being investigated by the RCMP, and that some charges have been laid.

[English]

The second recommendation was that time verification audits be carried out in order to assess value for money.

The third recommendation was that the government initiate recovery of funds where warranted.

The fourth recommendation stipulated that potential breaches of the Financial Administration Act, Treasury Board policies, and PWGSC departmental policies be investigated.

The fifth recommendation called for subcontracts to be reviewed and referred to Justice Canada to determine whether recovery action was appropriate.

Ms. Conway has current knowledge of the response to these recommendations and would be pleased to speak to these follow-up actions. They are as follows.

Regarding time verification audits, Consulting and Audit Canada has initiated audits of certain communication agencies that previously did work under the sponsorship program. Through these time verification audits the government exercised its right to examine these agencies' detailed records. However, the records maintained by these contractors were not adequate to support proper investigations of this nature, and most of the audits have been closed or terminated.

Regarding recovery, the government has written to a number of private sector firms requesting they provide evidence that the goods and/or services paid for by the government were delivered and that no overpayments were made. To safeguard the taxpayers' interests, a sum of money, $3.65 million, is being withheld. It is to be used if necessary to offset the amounts that were previously paid, but for which appropriate deliverables to the government cannot be ascertained.

[Translation]

With respect to the fourth recommendation of the QRT, regarding non-compliance with the Financial Administration Act, the Committee heard from Mr. Marshall that an administrative review has been completed. The first phase of the administrative review, a review of specific sponsorship files, was conducted by an independent forensic audit firm, Kroll Lindquist.

Two reports were produced. The reports identified issues of potential non-compliance with the Financial Administration Act, government contracting policies and regulations and delegated contracting authorities. The second phase in the administrative review consisted of interviews with the employees involved. None of the employees implicated are currently employed by PWGSC. Recommendations were referred to the relevant department and agencies who have taken appropriate disciplinary action.

¹ (1545)

[English]

Finally, the department is examining a number of subcontracting situations and pursuing these in consultation with Justice Canada officials, and as I mentioned earlier, RCMP referrals have been made.

Mr. Chairman, speaking on behalf of my colleagues, this concludes our summary of the activities of the quick response team. We believe our work, building on earlier audits and reviews, was very helpful and provided a solid base to the Auditor General, the RCMP, and the department in conducting further work. My colleagues and I are pleased to take your questions.

Thank you. Merci beaucoup.

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

I would have thought that when we asked the quick response team to come forward to tell us where it was at, you would have a table, a chart, or a list of the 126 files you've examined demonstrating what was in the file and what was not in the file, and for the 721 files the same thing. You tell us you referred a number of files to the RCMP, you referred some to the justice department, and you've had discussions with the Auditor General. We have your statement, but we're not in possession of any real documentation to ask you anything other than general questions based on your analysis, which you've been working on for two years.

You mention even the Kroll Lindquist report, which we asked for several weeks ago, and we're still waiting for it. When are we going to get that, for example?

Mr. Rodney Monette: Mr. Chair, we have a database that has some very specific information regarding the 126 files and 721 files. I am prepared today to answer very detailed questions; for example—because I've been following the committee—if the committee wants to know whether there were invoices or contracts or post-mortem reports, on all of that, I can provide the committee with information.

We have prepared and we can do our best to provide the committee with some good information and perhaps follow up with details the committee would request.

The Chair: Mr. Murphy and Mr. Thibault.

Hon. Shawn Murphy (Hillsborough, Lib.): On a point of order, Mr. Chairman, I'm inclined to agree with you. Could we not get a summary before we go into this hearing cold? I would have thought for the 127 contracts we would have a summary showing whether there was a post-mortem and whether there was a contract, and we'd cut this down. Instead of having a—

The Chair: A general discussion—

Hon. Shawn Murphy: —a four-hour meeting, we could cut it down to focus on what we're supposed to focus on.

The Chair: That's what I thought we were going to receive this afternoon: some clear, specific information.

Mr. Thibault, Mr. Mills, and Mr. Desrochers.

Hon. Robert Thibault (West Nova, Lib.): Thank you, Mr. Chairman.

The Chair: Mr. Mills, then Mr. Desrochers.

Mr. Dennis Mills (Toronto—Danforth, Lib.): I find myself, Mr. Chair, agreeing with you totally. I was sitting here waiting for the last two weeks for a big, thick document, backing up line by line—not unlike the quality of work that was done for the Pan American Games—information on all the projects. I really think this is what we were expecting, and I think all members need to have it. It's called the X-rays.

The Chair: Monsieur Desrochers.

[Translation]

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Mr. Monette, what mandate were you given when you were asked to produce some documents? Were you asked to produce documents of a general nature, or more detailed documents pertaining to specific files? I'm quite prepared to comment on the documents that you turned over, but I would like to know precisely what you were asked to produce.

[English]

Mr. Rodney Monette: Thank you, Mr. Chair and Mr. Desrochers.

I was asked to come to explain what the quick response team did back through the eight weeks we worked through the summer of 2002 and to basically support the recommendations we made. In addition to that, we prepared ourselves by going through the questions the committee had with respect to things such as file completeness, the quality of the files, and a number of other issues, to answer questions the committee has.

We weren't requested, or certainly I was not requested, to provide any detailed breakdowns, Mr. Desrochers.

The Chair: Mr. Kenney is next, and we'll cut it off there.

Mr. Jason Kenney (Calgary Southeast, CPC): Mr. Chairman, I just wanted to say I agree with the desire of you and other members to receive more comprehensive information, but I would like to point out in defence of our witnesses that only one of them, I believe, continues to work in the branch concerned. It would be rather difficult for public officials outside, without immediate access to these files, to go digging around producing a comprehensive report when they're coming to us from other departments they've since moved to.

I don't think we should blame the witnesses for the lack of the information we're looking for.

¹ (1550)

The Chair: Okay, thank you, Mr. Kenney.

I guess we all just assumed it would happen this way, and you know what happens when one assumes.

Mrs. Judi Longfield (Whitby—Ajax, Lib.): Mr. Chairman, the witnesses have come with documentation. Is there anything there they could share with us? They have a huge binder; they'll be quoting from the things. I would hope they might table some of that information.

The Chair: We're going to start a round of questions.

Just let me ask you one question, and we have asked this. Are you able to tell us about the Kroll Lindquist report that we have specifically requested? Are you actually in the area that would be dealing with supplying that information to us? Does anybody have any idea why we don't have it yet?

Mr. Rodney Monette: The Kroll Lindquist report was not a matter where the team recommended that work be done. And Mr. Chair, I'm aware of the general results of that report, but I'm not in possession of it and don't think any members of this particular team have that report.

The Chair: Okay. Well, be as candid as you can.

We'll now turn it over to Ms. Ablonczy for eight minutes, please.

By the way, I was going to say we should wrap this up around five o'clock, if possible. We have some motions to deal with and matters like that.

Ms. Ablonczy, you have eight minutes, please.

Mrs. Diane Ablonczy (Calgary—Nose Hill, CPC): I'm just looking over your findings. They sound very similar to the findings of the Auditor General that we are studying in this committee. Did your findings diverge in any significant way from those of the Auditor General?

Mr. Rodney Monette: Mr. Chair, Ms. Ablonczy, our findings were generally consistent with those of the Auditor General, specifically in the areas of having difficulties in some files assessing value for money, finding instances of non-compliance with the Financial Administration Act, and also finding instances of non-compliance with contracting guidelines. In those areas they were very similar; however, the Auditor General went into some areas where we couldn't. For example, the Auditor General could look at crown corporations and dealt with some reporting-to-Parliament issues.

We, on the other hand, could do something the Auditor General couldn't: we could go to visit some of these companies and find out the quality of their systems and files, which she didn't have a right to do under her particular mandate.

Mrs. Diane Ablonczy: I was just about to mention that. Specifically, when Mr. Boulay from Groupe Everest was here, he said it was the duty of the ad agencies to keep the details of the work, not that of the government. Does that accord with the process you observed?

Mr. Rodney Monette: Yes, that is correct. These organizations have a requirement to maintain records and to support the work they have done for the crown.

Mrs. Diane Ablonczy: But you have just told us, “—however, the records maintained by these contractors were not adequate to support proper investigations of this nature.”

Mr. Rodney Monette: Some of these companies tended to have reasonably good records. For example, Vickers & Benson, Palmer Jarvis, Groupe Everest, and Compass Communications, based on our initial review, tended to have reasonably good systems of internal control and reasonably good records, when we went in and had a look at them. However, there were other companies, such as Groupaction, Lafleur, Gosselin, and Communication Coffin, where these records were not as good and we didn't have the same level of confidence. That's why we subsequently recommended, through our report, that a time verification, which is basically supporting the labour costs in these billings, be undertaken.

Mrs. Diane Ablonczy: In your report you stated that reporting in many of the files suggested that there may have been a pattern of overbilling by certain communications agencies. Could you tell the committee which communications agencies had files suggesting that there may have been overbilling?

Mr. Rodney Monette: I know your time is precious here, and I don't want to take it up unduly, but I should provide a context for that, because there were really three types of files. There was one group of files that were quite good, and those are essentially from the four companies I mentioned. There were other files that weren't good. Out of the files that weren't good, which tended to be, as I mentioned, from those four companies, you had two kinds. You had one type where there simply wasn't enough information, so it was very difficult to assess value, and the Auditor General commented on that. Then you had a second kind of file where there were actually things on the file that didn't make sense. For example, when we looked at Coffin Communications, there were cases where the hours being billed did not seem at all consistent with the value the government was receiving.

We had a number of other files in those companies as well, the companies I've mentioned where the systems weren't as good, where there were cases of apparent overbilling or things that just didn't make sense to us.

¹ (1555)

Mrs. Diane Ablonczy: Thank you for that.

In your report you also noted that in certain cases commissions were levied on work that had been subcontracted by an agency to one of its own affiliated companies—in other words, in-house subcontracting. In your estimation of the contracts that involved subcontracting to in-house or affiliated companies, what percentage involved commissions being levied on work performed in–house? How common was this practice?

Mr. Rodney Monette: Could Mr. McLaughlin take that question, please?

Mr. Steve McLaughlin: I wouldn't be able to give you a percentage, but it was extremely common. All the ad agencies tended to have subsidiary companies that did what we call production work.

Mrs. Diane Ablonczy: You say it was extremely common. In your view, is it appropriate for a commission to be paid to the ad agency while the same 15% commission is paid to the in-house subcontractor?

Mr. Rodney Monette: I don't think we had an opinion on that, given that we're not really experts in the business. There are many cases where the Government of Canada does contract with the prime contractor and there are subcontracts, and as long as the contract with the prime contractor is a good contract, with value for money, that's the protection the government has in respect of getting value for money. So it's not uncommon, and it really depends on having that main contract done well.

Mrs. Diane Ablonczy: You also note that in some cases changes to the communications agencies, name changes, mergers, etc., contributed to the complexity of the files. In your opinion, were these moves designed to make the paper trail convoluted, so to speak, so that it would be more difficult to track where the money went? Did you get a sense that this was a deliberate device?

Mr. Rodney Monette: I should say that what we did wasn't an audit per se, it was a review. As a professional accountant, I've been trained that to have an opinion, you have to have sufficient, appropriate audit evidence. I was never able to get to the point where I had a view on that. There just wasn't enough audit evidence to support one way or the other. It kind of goes to intent.

Mrs. Diane Ablonczy: How common was it?

Mr. Rodney Monette: There were probably a number of circumstances where there were various subsidiary firms that were part of an overall project.

Steve, do you have any comment on that?

Mr. Steve McLaughlin: Again, it was very common. You did see the firms buy each other out. The subsidiaries come and go.

As to your question, it is difficult to say whether it was done purposefully or not. We had concerns about that when we were reviewing the material.

Also, I would say on the subcontracting issue, we did seek--and I understand it's still active--legal advice on what recovery action the government could take based on the subcontracting. Subcontractors are separate legal entities, but they're part of the umbrella company. The key point is whether or not three bids were obtained prior to a production subcontract being let.The fact that the work was directed to a sub-entity would be fine if there were three bids and the cheapest bid was taken. But the contracts were not consistent, there wasn't that consistent requirement throughout the contracts. But generally speaking, that was a requirement of the subcontracting, that three bids would be received.

The Chair: Thank you very much, Ms. Ablonczy.

Monsieur Thibault.

º (1600)

Hon. Robert Thibault: I don't know if this is in order. I'll trust your judgment on this one. It might help everybody in their questioning.

The witness, in an answer to Ms. Ablonczy, mentioned that a lot of the files had problems and there were a few companies that had problems, speaking specifically of Communication Coffin. If you think it's right, would you ask the witness whether all the files associated with Coffin were problematic?

The Chair: I'm not going to ask that question. I understand charges have been laid with Coffin Communications, so I'll be circumspect about questions that would isolate them for that particular reason.

However, I would ask the witnesses, when they say things like “it was common”, what does common mean? Is it virtually all, half? With the 126 files that you examined, does common mean 30 or 100? Try to be more specific in your answers, please.

Monsieur Desrochers.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

Mr. Monette, have you read the AG's report in its entirety?

[English]

Mr. Rodney Monette: Yes.

[Translation]

Mr. Odina Desrochers: And what about you, Ms. Conway, and you, Mr. McLaughlin?

[English]

Ms. Myra Conway: Yes.

Mr. Steve McLaughlin: Yes.

[Translation]

Mr. Odina Desrochers: Were you suprised by Mrs. Fraser's findings with regard to the Sponsorship Program?

[English]

Mr. Rodney Monette: Personally, I was not surprised. The Auditor General had a deeper review, particularly in the area of crown corporations, so she had information we did not have. But no, I was not surprised.

Ms. Myra Conway: No, exactly the same thing.

Mr. Steve McLaughlin: And I was not surprised either.

[Translation]

Mr. Odina Desrochers: Mr. Monette, you alluded to 126 files reviewed as part of your work. Nowhere is mention made of the role played by Crown corporations. Was that a deliberate oversight?

The AG's report refers to Crown corporations involved in transactions associated with the Sponsorship Program, and yet you make no mention whatsoever of them. Why is that?

[English]

Mr. Rodney Monette: We could examine some of the crown corporation transactions based on information from our files, but we did not have a legal mandate to go into the crown corporations, which the Auditor General, I understood, did have through an order-in-council. So we couldn't go in and look at them the way she could.

[Translation]

Mr. Odina Desrochers: Regarding the contracts awarded and the AG's findings, were you aware that some advertising firms were receiving funds which were then funnelled to Crown corporations through Public Works. Were you aware of that fact?

[English]

Mr. Rodney Monette: I would say, as a senior financial officer in the Government of Canada, those transactions would not be normal. They were unusual. I guess what struck us as a team was that as they happened, there would be charges and various commissions levied on the transfer of the money. We have concerns with respect to the value that was being received by the taxpayers through those transactions.

[Translation]

Mr. Odina Desrochers: If I understand correctly, you claim that you were surprised to see the advertising firms charge a 15 per cent commission each time money changed hands. Funds would come in and would subsequently be moved from Public Works to VIA Rail or to the Old Port of Montreal Inc., for example. The fact of the matter is that these funds were transferred to the Crown corporations listed in the AG's report.

[English]

Mr. Rodney Monette: That's correct, we did find that unusual. I believe our reviews were reasonably consistent with the findings of the Auditor General on that.

[Translation]

Mr. Odina Desrochers: Mr. Monette, in addition to stating that in the case of certain files, advertising firms received a commission each time money was transferred, you pointed out that often the firms themselves and their affiliates were involved in the tendering process, the implication being that these contracts were not really put out to tender, because they always went to the same firm.

Could you give us an example of one such case?

º (1605)

[English]

Mr. Rodney Monette: Mr. McLaughlin, do you want to answer?

Mr. Steve McLaughlin: I'm not entirely sure I understand the question, to be honest with you.

[Translation]

Mr. Odina Desrochers: You indicated to my Conservative colleague that according to your review, it appeared that often the bids received were from one firm agency and from two affiliates of the same firm. I have to assume that the owner of the agency and of the affiliates was thus assured of getting the contract.

Could you give me a specific example of one such case?

[English]

Mr. Steve McLaughlin: I don't think your understanding of how the process worked is entirely correct. What we were talking about relative to the lack of three bids was what I would refer to as a production contract. If you take a look at the expenditures throughout these files, there are really two types. One is a sponsorship, which is for an event, cultural or sporting. The second is what we would call a production contract, to do with the creation of materials, media placements, and things of that nature. What would happen is that a firm would get a production contract from us, or a mixed contract, partly sponsorship, partly production, and they would subcontract the actual production of material. What we would expect to happen is that they go out and get three bids for the subcontracted material. That's what I was referring to. We saw no evidence that this was done through the course of our investigation. People would come forward with visibility plans and requests for sponsorships, so they were not bidding against each other, they were proposing something to be done.

[Translation]

Mr. Odina Desrochers: Mr. Monette, did you look into the work done by Media/IDA Vision, a communications firm established in 1998 to follow up on sponsorship initiatives? Were you able to ascertain the type of work that was done by this firm?

[English]

Mr. Rodney Monette: That work was completed by Consulting and Audit Canada. As I understand it, with the books and files of Media/IDA Vision and Groupe Everest, they're basically the same operation. My understanding of their systems, procedures, and internal controls is that they're generally quite good, and we had reasonable confidence in their files.

[Translation]

The Chair: You have one minute.

Mr. Odina Desrochers: Mr. Monette, you stated that you read the AG's report. It details a very specific transaction regarding the Maurice Richard series. Approximately $68,000 was paid to Groupe Everest, while another amount was paid to Media/IDA Vision.

When Mr. Boulay testified before the committee, he was asked repeatedly what type of work had been done in exchange for the fee paid. In all cases, he justified the charges by referring to the work done by his second firm. As far as you know, what sort of work did Groupe Everest do, aside from the work of Media/IDA Vision?

[English]

Mr. Rodney Monette: Steve, are you more knowledgeable on that file than I am? I think you probably are.

Mr. Steve McLaughlin: Mr. Boulay owned both Media/IDA Vision, which functioned as the agency of record, and Groupe Everest, which functioned as a commercial agency, much like Lafleur or Gosselin. So they are actually two distinct agencies with two distinct functions. The agency of record functioned like the banker and comptroller, and Groupe Everest functioned like another ad agency.

[Translation]

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

You have the floor for eight minutes, Mrs. Jennings.

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman.

Thank you very much for coming here today and for sharing this information with us.

According to your opening statement, you reviewed 721 sponsorship files in total and did a more in depth review of 126 files in particular.

Is it fair to assume there was nothing out of the ordinary about the other 595 files, that there was no evidence of any major irregularities and so forth? Is that a fair assumption?

º (1610)

[English]

Mr. Rodney Monette: If I understand, you're asking if the balance of the files were in good condition. I don't think we could conclude that, although we would say they were generally better files. As I mentioned earlier, the files for those companies that were good ones were in pretty good shape.

Mrs. Marlene Jennings: Okay.

You named four companies as keeping good records and quite good files: Vickers & Benson, Palmer Jarvis, Groupe Everest, Compass Communications. Could you tell us the value of the total contracts during the period you audited for each one of those four companies, and the number of actual files, either out of the 721 or the 126 you examined, either initially or more closely? Then I'd like you to do the same thing for Groupaction, Lafleur, Coffin Communications, and Gosselin.

Mr. Rodney Monette: I anticipated this question in preparing—

Mrs. Marlene Jennings: So you've got the answer.

Mr. Rodney Monette: I have an answer for you, and I think there's a little more to come.

The committee has been provided with a table of production costs. If I understand, the total dollar value in sponsorship was about $250 million, with about $150 million for events. That takes you down to about $100 million in production and commission costs. Out of that $100 million, about $80 million is for production. Over the three years we looked at, that's approximately $70 million of, to be accurate, $84 million. Anticipating this, I went back and checked the $70 million, and it's almost exactly half and half. So for the companies I mentioned as having pretty good records it came to be $34 million, for the companies I said didn't have good records it was $36 million. If you extrapolate that over the full six years—and I didn't have the database for the latter three years—and presume that the work flowed roughly the same way, which, frankly, may or may not be an appropriate assumption, you would have about half and half.

Mrs. Marlene Jennings: Thank you.

The Chair: Half and half, that's a dollar figure of...

Mrs. Marlene Jennings: Stop my time. Thank you.

Mr. Rodney Monette: Of the production and commission costs.

The Chair: You said $84 million was for production costs. You came down to $34 million and $36 million, I think. One was for the ad agencies that were fairly good and one was for the ad agencies that were not good.

Mr. Rodney Monette: That's correct, Mr. Chair.

The Chair: You talked about extrapolating. Does that mean you have to double that to get back up to $250 million over the six years?

Mr. Rodney Monette: No, Mr. Chair. I extrapolated that to the total production and commission costs, which are actually about $104 million. I came out to about half and half. We were looking at this question today through our database, and I don't think you can necessarily make an assumption that the events are partitioned the same way among companies as the production costs.

The Chair: We'll leave it there. I'm still confused.

On a point of order, Mr. Mills.

Mr. Dennis Mills: The committee is fully aware that from mid-2000 the 37-point program kicked in, which was the last half.

The Chair: But that wasn't my question, Mr. Mills.

Mr. Dennis Mills: You can't extrapolate and presume that the same thing happens after a 37-point program.

The Chair: I didn't say that. He said over three years, take the three years, but the program was over six. I thought if you took it over six, then the numbers would double again.

Mr. Rodney Monette: No, and I'm sorry, Mr. Chair, if I've created confusion. Perhaps I could just start again.

The whole program is about $250 million over six years, and the events part of that is approximately $150 million. In fact, the exact numbers were $255 million, less $150 million, which gets you down to $105 million. That $105 million was for production and commission.

Then I went back to the three years we looked at, 1997-1998 to 1999-2000, and looked at the table that's been provided to this committee, which shows $70 million in production costs over those three years. That works out to the half-and-half.

And then—

The Chair: Oh, the half-and-half is $70 million and $80 million, adding up to $155 million? Or no, sorry, I'm wrong.

º (1615)

Mr. Rodney Monette: I simply took the half-and-half on the $70 million—and I fully accept that this may not be an appropriate extrapolation or postulation—and said that if the work was distributed among the companies for production and commissions only over the latter three years the same as the first year, you would again have a half-and-half on the $104 million, approximately.

I'm not saying that extrapolation was based on science; it was just a rule of thumb. So it was on the $104 million, Mr. Chair.

Then I said that on the amounts for events, their distribution among the companies could be totally different from the distribution of the commissions and fees. But I was not able to ascertain that—

The Chair: Did you say that if you applied the same extrapolation back for the full six years, you'd have a different number again? Is that what you ended up by saying?

Mr. Rodney Monette: No, I was saying that on the production and commission you would probably have about a half-and-half again. So half of the $104 million would likely have been—and this is rule of thumb, grosso modo—to the good companies that had good records, and half of that $104 million would have been to the companies that tended to have the not-so-good records.

The Chair: Okay.

Madam Jennings, back to you.

Mrs. Marlene Jennings: Thank you.

The Auditor General audited 53 sponsorship files. I'm not talking about the advertising, opinion research, etc. Of the 53 sponsorship files that she audited, do we find those in the 126 files that you looked at closely, or in the 721 files?

Mr. Rodney Monette: Mr. Chair, Ms. Jennings, with respect to the 126 question, I don't know the answer to that, and I don't know if my colleagues do either.

Myra, do you know?

Ms. Myra Conway: She audited the period of time up to almost the present day. Our files on the 126 were in an earlier period, so some of hers would not have been included in either of the two lots that we looked at.

Mrs. Marlene Jennings: Are you in a position to give us the information as to which files you audited, either the initial examination of 721 or the in-depth audit of 126 of the 721, that form part of the 53 sponsorship files that the Auditor General audited? Yes or no. Are you in a position to provide it, if not today, in writing?

Mr. Rodney Monette: Yes, we can.

Mrs. Marlene Jennings: Fine. Thank you.

Now, the Auditor General's report in chapter 3, page 31, paragraph 3.108, says:

We audited a sample of 25 project files from September 2001 to March 2003. We found that in general these files were better managed.

This is after the 37-point program kicked in.

Thank you. Okay.

Now, coming to the issue of the Pan-Am Games, Winnipeg 1999, is this one of the files—because one of my colleagues has raised it several times—that was referred to the RCMP?

Mr. Rodney Monette: No, that was not referred to the RCMP, and it was generally a good file.

Mrs. Marlene Jennings: Thank you.

Is this one of the files that has been referred to the special counsel to recover moneys?

Mr. Rodney Monette: I believe not, no.

Mrs. Marlene Jennings: Thank you.

Now, the Team Canada China file, is this one of the files that was referred to the RCMP?

Mr. Rodney Monette: No.

Mrs. Marlene Jennings: Is this one of the files that's been referred to the special counsel to recover moneys?

Mr. Rodney Monette: No, Madam.

Mrs. Marlene Jennings: Thank you.

Now, I have another question. This is for you, Ms. Conway. I see from the notice that you are director general of finance at Public Works.

Ms. Myra Conway: Yes, that's correct.

Mrs. Marlene Jennings: And I see that you were at Public Works at the time of the sponsorship program.

Ms. Myra Conway: No, that's not correct.

Mrs. Marlene Jennings: That is not correct?

Ms. Myra Conway: No. I joined Public Works in March of 2002, so I was there after Communications Canada had been formed. So I wasn't there during the time of the sponsorship program.

Mrs. Marlene Jennings: So then it would be wrong for anyone on this committee, or any members of the public listening to these hearings, to think that you would have had any dealings with the sponsorship program, or any responsibility for it as a public servant from afar or closely.

Ms. Myra Conway: It would be wrong to think that.

Mrs. Marlene Jennings: Thank you.

I want to make that clear, because it doesn't give the timelines that you were director general of finance at Public Works, so people might make that conclusion, and I wouldn't want them to do so.

º (1620)

Ms. Myra Conway: I thank you for that.

Mrs. Marlene Jennings: Thank you.

How much time do I have, Mr. Chair?

The Chair: One minute.

Mrs. Marlene Jennings: I have one minute.

I would ask that when you provide the information or breakdown by companies—which we have the total amount for by year—could you also break it down to the events or tie it in to the events? I'm assuming you would be able to do so. Will you be able to provide that to us?

Mr. Rodney Monette: Yes, we can.

Mrs. Marlene Jennings: On behalf of my colleagues, thank you for coming here. You have provided us clarity, notwithstanding the misunderstanding about the kind of documentation we wanted you to bring to us. I think you've been able to provide some clarity to this committee and members of the public who are watching, and hopefully some of the media are picking up on it as well.

Mr. Rodney Monette: Thank you.

The Chair: Mr. Jordan had a point of information.

Mr. Jordan, please.

Hon. Joe Jordan (Leeds—Grenville, Lib.): Thank you, Mr. Chair.

If the witnesses are in the process of jotting down what Madam Jennings wanted them to provide the committee with, is it possible for us to have a description—perhaps not now, but maybe in writing later—of what constitutes a complete file, in your view, if a description exists?

Mr. Guité talked about there obviously being an invoice. Well, just an invoice is clearly not a complete file.

Is that definition of a complete file defined in regulation? Is it just accepted practice within the department or the ministry? Is it in the contract in terms of who's supposed to keep what?

Mr. Rodney Monette: Mr. Chair and Mr. Jordan, we can do that now or later, as you wish.

Hon. Joe Jordan: I guess it's more for the committee.

The Chair: It's Ms. Wasylycia-Leis' turn, for eight minutes.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Mr. Chairperson.

I'd like to thank Mr. McLaughlin, Mr. Monette, and Ms. Conway for your appearance here today.

I would agree with my colleague Marlene Jennings, and say that we appreciate your help and your openness today, especially following a very difficult week that ended up with Mr. Guité. That's where I want to start.

Mr. Guité said that of course there were no problems and that there wouldn't be a problem, because “We've got the cheques”. There was a proper contract with a proper invoice, and cheques were paid. I know that you weren't there at the time, but you are immersed in the operations of the department now. Was that the case back then, and were you able to determine if that was the case?

Mr. Rodney Monette: Mr. Chair and Ms. Wasylycia-Leis, we were able to determine that most of those files—in fact, just about all of them—did have contracts and did have invoices. However, as a senior financial officer, I can tell you that the simple existence of a contract and an invoice is not necessarily sufficient to determine that there was value for money. In fact, many of the contracts did not have good articulation of what was being asked for, and many of the invoices had very little detailed information, which was not sufficient, in our view, to ascertain value for money.

Ms. Judy Wasylycia-Leis: So we have two problems. One, we've got the evidence that there were contracts and invoices, but Mr. Guité says they disappeared.

Mr. Rodney Monette: Ms. Wasylycia-Leis and Mr. Chair, we actually did find those documents. In some cases, we had to go to the agencies themselves; in other words, they may not have been in the government's files, but we went to the agencies' files to find them.

Ms. Myra Conway: I would like to correct that. In almost all cases we found a contract and an invoice on the file, perhaps just those two pieces of paper. The issue, when we needed to go to the agencies, was the substantiation behind those. We found in many cases, as my colleague has said, extremely limited information included on those two pieces of paper, but it's correct to say they were there.

Ms. Judy Wasylycia-Leis: Which is the second problem I was going to identify--and I think the Auditor General stated this quite clearly: the absence of any clear documentation showing the purpose of the project, the criteria it met, and the evaluation of it. Was it the case back then that whoever held your positions in government operations didn't ask for more information, or they did and they were blocked? Was there obstruction in getting that kind of accountability? What do you think happened back then?

Mr. Rodney Monette: The people who were in our jobs at that time would have had some functional accountability, from a finance point of view, in providing directions, but the actual reporting relationship of this organization didn't go up through any of the positions we are in. Finance officers were responsible for setting policies and practices, but the actual day-to-day administration would not have been with either the previous director general of finance or the previous senior financial officer, at least after 1997, as I understand it.

º (1625)

Ms. Judy Wasylycia-Leis: Where was it? Was it within the CCSB?

Mr. Rodney Monette: The CCSB, as I understand it—and you're far more expert on this than I am—reported to the deputy minister after 1997. There should normally be people schooled in finance and these practices responsible for trying to make sure things happen the right way, but the actual day-to-day management of that would have gone up through the reporting chain.

Ms. Judy Wasylycia-Leis: So the accountability for the financial end of things wasn't with the normal place in the department. It went through the deputy or was enclosed within the actual CCSB group within the department.

Mr. Rodney Monette: I wasn't there at the time, but as I understand it, they operated very independently.

Ms. Judy Wasylycia-Leis: So they had their own financial capacity. It was a self-contained unit.

Mr. Rodney Monette: Yes.

Ms. Judy Wasylycia-Leis: We have a copy of the five-page report of your team as it appeared on the web page for the department. When this was released back in 2002, the Globe and Mail reported that this was a sanitized version and there was actually a longer document, a 16-page document. Was there a 16-page document? Do you have it? Can we have it?

Mr. Rodney Monette: There was a longer document. It refers to a number of very specific files that we referred to the RCMP and other pieces of information. The RCMP asked, and maintained as recently as last Friday, when we spoke to them, that we not discuss cases it is currently investigating criminally. I don't have the document, because I'm in another department, but the department is in possession of it, and I understand there are some disclosure issues that the RCMP is requesting the department be very careful with at this time.

The Chair: On a point of order, Mr. Kenney.

Mr. Jason Kenney: I think you just missed this exchange, Mr. Chair.

The Chair: No, I didn't. I think I got most of it.

Mr. Jason Kenney: Okay.

Mr. Monette was saying the RCMP has requested that former team members not discuss particular files or their reference to the RCMP. I was a little concerned, because Madam Jennings was actually asking whether particular files had been referred, and Mr. Monette did give that information. Perhaps you could caution committee members not to go there in the future.

The Chair: On the longer report, you mean?

Mr. Jason Kenney: We shouldn't be inquiring about which files they referred to the RCMP and which they didn't.

The Chair: I think it's quite okay. The question I was going to ask was how many had been referred, but I don't think it's appropriate that we ask for names and stuff like that. As I mentioned earlier regarding Mr. Coffin, charges have been laid concerning Coffin Communications. If there are questions specific to Coffin that would identify them, having our witnesses answer perhaps in a negative form regarding these files wouldn't be apropos, I think. That's just a general caution, but how many files have been referred would be a legitimate question.

Mr. Thibault.

Hon. Robert Thibault: I don't want a decision from you, I would just like you to give some thought, perhaps with our legal counsel, to exactly how to deal with it. Because I agree with Mr. Kenney, if we keep asking whether this one is different, we end up with a residual—

º (1630)

The Chair: A process of elimination.

Hon. Robert Thibault: It must be. We have already heard that we have a number of firms that are clean and a number of firms that have questionable practices or a questionable number of files. It runs the risk that out there in the community people who are beneficiaries of some of those things may wonder whether their community event that was sponsored might have been through one of these questionable practices, whether that's in the grey area. It might not be the case at all, but they do not know. So perhaps we could have a look at that and report later.

The Chair: I have thought about the community events. The Auditor General did say in her main points, chapter 3, page 1, “Documentation was very poor and there was little evidence of analysis to support the expenditure of more than $250 million”, and that included a lot of the sponsorship programs, community events, as well as the big hockey arenas and so on. This is a public inquiry, and if people felt that they delivered value for money, they have nothing to concern themselves about, I think. Those who thought there was an opportunity to get away with less than value for money maybe do have something to concern themselves about.

Hon. Robert Thibault: But the community organizers may be wondering about the communications company that was managing the program. They have no way of knowing.

The Chair: I know, and I don't have any way of protecting them either.

Mr. Lastewka.

Hon. Walt Lastewka (St. Catharines, Lib.): Mr. Chair, Mr. Kenney and Mr. Thibault make a very good point, but I think the response team has responded in saying these companies' reports and files were good or very good and the other ones were questionable. There is nothing wrong with saying that, but digging any deeper would be incorrect, as Mr. Kenney said. As you mentioned, if they have done things properly, they shouldn't be worried anyway.

The Chair: That's right.

Hon. Walt Lastewka: But digging any deeper into that might be—

The Chair: I am not sure. Be judicious in your questions, that's all we can say. If you need more information, ask him without identifying, for example, one particular agency. If it is a serious matter, just be judicious, and we'll try to get through as best we can and get the information you would like as well.

Ms. Wasylycia-Leis, you've got two minutes.

Ms. Judy Wasylycia-Leis: One of your findings had to do with Groupaction and a survey of websites dealing with the gun registry. The report said Groupaction received almost $150,000 for this survey. Can you comment at all on this finding?

The Chair: Do you have something there?

Ms. Judy Wasylycia-Leis: I am actually quoting from a 2002 The Globe and Mail article by Daniel Leblanc.

The Chair: Okay.

Ms. Judy Wasylycia-Leis: I wonder if you can comment at all on this finding, what documentation was found on the files, and what concerns you had with respect to this particular file.

Mr. Rodney Monette: With respect to that particular company, we found that the files were often lacking. In some cases they didn't have enough information to substantiate value, in other cases there were things we found unusual. We are going into a lot of detail on some of these files. This is the area where we have been asked not to comment in great detail.

Ms. Judy Wasylycia-Leis: Sure.

We heard some interesting testimony, particularly from Mr. Guité, when asked about the benefit to taxpayers from some of these moneys allocated to agencies. At one point—I referred to it this morning as well—he talked about loss leaders. Is there any identifiable concern at the fact that agencies may take a loss on some projects, so that government can help deal with that loss and provide assistance to an agency to balance things out? Is there any practice within government on that?

Mr. Rodney Monette: I have thought about that question. I can't answer on behalf of all of government, because I don't know, but in my experience through eight or nine different departments and as a senior financial officer, I have not come across what I would call the portfolio management approach that was suggested. I would simply say, without being able to comment on that particular industry, I have not seen that as common practice.

The Chair: Thank you very much. It would be difficult if a competitive bidding process were managed all the time so that you could bid low on one, but with no guarantee that you could recoup your costs by bidding high.

You mentioned that there are contracts in virtually all the files, but they are not very good contracts. Is there any evidence that these were backdated or how many were being backdated?

º (1635)

Mr. Rodney Monette: I would ask my colleague Mr. McLaughlin.

Mr. Steve McLaughlin: I never saw evidence of a contract being backdated, but obviously I thought the contracts were not in keeping with normal government contracts. You would see a contract with perhaps a two-line statement, “advertising or support for the following events”; they would name events, but there were absolutely no specifics with respect to deliverables. That was the part that surprised me, but I did not personally see evidence of contracts being backdated.

The Chair: But how could you identify a backdated contract?

Ms. Conway.

Ms. Myra Conway: I'm not sure that it would be technically backdating, but we've seen work that was begun prior to the contract's actually being undertaken and paid for within the time of the contract.

The Chair: You mentioned that the CCSB was a self-contained unit. Is that a normal thing within government? Aren't there the checks and balances from all different processes coming in to ensure that you don't have a self-contained unit that can run away like this?

Mr. Rodney Monette: That is not normal, Mr. Chair.

The Chair: Do you know who set it up?

Mr. Rodney Monette: I wasn't there at the time, and I don't know the circumstances.

The Chair: Did anybody check to see how and why it was set up?

Mr. Rodney Monette: They may have. That isn't something we have done in our work.

The Chair: Okay.

Mr. Kenney, I understand you're sharing your time with Mr. MacKay. Is that correct?

Mr. Jason Kenney: Yes, if you could let me know when we're half way through, four minutes.

Thank you very much to our witnesses for appearing before us.

You seem to have made an estimate about production costs versus commissions. Have you made an estimate of the total amount that was overbilled in the 126 principal files you reviewed?

Mr. Rodney Monette: I don't believe we did. Steve?

Mr. Steve McLaughlin: No, we did not.

Mr. Jason Kenney: In your submission today you talk about seeing evidence of overbilling. What, for you, would constitute such evidence? How do you define overbilling?

Mr. Rodney Monette: I will let Mr. McLaughlin answer this, because he has seen those files.

Mr. Steve McLaughlin: Typically, you would take a look at the output, and then you would, in your own mind, try to come to grips with whether the number of hours spent was reasonable. Many of the files involved a fixed price. If you say I will give you this report and I want $250,000, that is a fixed price, so if you have an output, that's the price. But on many of the contracts people would be paid at a per diem or hourly rate, so they would have an output and a number of hours billed against that output. One report in particular comes to mind, where, looking at it, I would guesstimate 10 to 20 hours of labour to construct that report, and we were billed for 300 hours. I think of another instance, where the goal was to have the Canada wordmark put on a ski hill, and again, we had close to 300 hours billed to produce that.

So those were the types of things where, though there was an invoice, a contract, and an output, we weren't satisfied that they represented sufficient value to the public.

Mr. Jason Kenney: Let's just be clear about this. In some instances an agency of record, such as Groupe Everest, would receive a 3% commission for the value of the total contract, and in addition they would receive a 12% commission. Further, they would charge the government on a per diem or per hour basis for so-called production costs. Is that it?

Mr. Steve McLaughlin: I wouldn't consider that to be accurate. You have to understand that Mr. Boulay ran Media/IDA Vision, which was the agency of record, and Groupe Everest. That causes confusion, but they are distinct and performed two distinct roles. There was only one agency of record through our review period, and that was Media/IDA Vision. It was the only one that took the 3% and functioned in that manner.

Mr. Jason Kenney: All right, but my focus was on the commission, which was variable, but sometimes 12%, as being on top of the per diem or per hour cost, or so-called production cost. Is that accurate?

Mr. Steve McLaughlin: Again, it comes down to the specific cases involved. If they were having a sponsorship, that's where you'd get the commission.

What an ad agency would do is propose an event for a sponsorship for the Government of Canada. That's where they would get the 12% commission generally, although I saw 15% and I saw other numbers. But then on a production contract, you would see more along the lines of their saying okay, you gave a $50,000 sponsorship to this event; now we're going to support this event by running an event with media placements, so we'll charge you per diem for the work involved in getting that subsidiary work done in support of the sponsorship.

º (1640)

Mr. Jason Kenney: In terms of the first category you identified, the Auditor General highlights situations where ad agencies were involved in simply transferring funds, apparently, from Public Works to, for instance, the company that produced the Maurice Richard series. In those instances, did you see any evidence on the files of any concrete value added by the ad agency?

Mr. Steve McLaughlin: No.

The Chair: Time, Mr. Kenney.

Mr. MacKay.

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, CPC): Thank you, Mr. Chair.

I similarly thank all of you for being here and for the work you've been doing, the tremendous amount of work you've been doing on this issue.

I want to begin with a general question as to why public opinion research contracts didn't form part of your review.

Mr. Rodney Monette: Mr. Chair and Mr. MacKay, as I recall, at the time we were really focused on where there were significant problems, and as I recall, at the time there didn't seem to be, at least from our perspective at that time, any significant problems there. So we just didn't focus on it.

Mr. Peter MacKay: All right. So you weren't directed towards or away from that. You simply didn't see that as part of the mandate.

Mr. Rodney Monette: No, Mr. MacKay, we weren't directed one way or another, no.

Mr. Peter MacKay: On the issue of mandate, where did that actual mandate come from? What were the parameters of your review, as you understood it?

Mr. Rodney Monette: Basically, Mr. Chair and Mr. MacKay, it came from a direction from my deputy minister, Janice Cochrane, to me.

Mr. Peter MacKay: From the deputy minister.

Mr. Rodney Monette: That's correct, from the deputy minister.

The Auditor General had just completed a report on three Groupaction files with significant concerns, Mr. MacKay. I am sure the committee has heard about that. The deputy minister basically told me, I want you to get some folks together, get the facts, and try to get to the bottom of some of these issues.

Mr. Peter MacKay: Then much of the working basis of what you did in this review came actually from the Auditor General's report and the things she highlighted. You would agree with that.

Mr. Rodney Monette: Mr. Chair and Mr. MacKay, when we started our work we had the Auditor General's Groupaction report. Those were on the three contracts. The Auditor General found some very specific things, and actually concluded that there was non-compliance with the Financial Administration Act. So we saw those things and then we did our work.

Our work certainly was much broader than the Auditor General's initial work. So there was a very narrow focus by the AG on the three contracts, we did some broader work, and then the Auditor General did broader work again, if I could explain it that way.

Mr. Peter MacKay: Some of your findings, Mr. Monette, really mirror, if I could use that word, the findings of the Auditor General, particularly when they pertain to the lack of documentation and the difficulty that she experienced in determining, I guess, the big question here as to value for money.

Are you able to tell us which of the files you looked at, which firms, were the ones that you felt were most wanting in terms of lack of documentation?

Mr. Rodney Monette: Yes, Mr. Chair and Mr. MacKay, we can do that. The firms that seemed to have better files on site and better systems of internal control were Vickers & Benson, Palmer Jarvis, Groupe Everest, and Compass Communications.

The firms that seemed to have files that had poorer documentation, more problems, and poorer systems of internal control were Groupaction, Gosselin, Lafleur, and Coffin Communications.

Mr. Peter MacKay: Would you agree with me, Mr. Monette, that those last four you mentioned received upwards of 70% of the actual contract work in this period you were looking at? And that's an approximation.

Mr. Rodney Monette: Mr. Chair and Mr. MacKay, I don't have that figure. I'm not saying that's wrong, but I just don't have that figure.

Mr. Peter MacKay: Would you mind just checking on that and getting back to us on that?

Mr. Rodney Monette: We can attempt to do that, Mr. MacKay.

What I can tell you, though, is that out of the production costs over the period we looked at, which was $70 million, $34 million of the $70 million went to the firms with better files, and $36 million of the $70 million went to the firms with the not-so-good files.

Mr. Peter MacKay: All right. That's an interesting breakdown.

My last question is perhaps for Ms. Conway. Can you confirm that Earnscliffe is currently leasing the Chambers Building property--that's right beside the PMO, as I understand it--from Public Works, and could you tell us what they're paying in terms of rent at that location?

If you don't have that with you, maybe you could provide the committee with that information.

Ms. Myra Conway: No, I don't have that information. I will seek to obtain it from my colleagues and provide it, if the chair feels it's appropriate.

The Chair: Okay, Mr. MacKay, thank you very much.

I want to get back to this self-contained unit that you said was highly irregular. I understand that the contracting unit for the sponsorships came together with the advertising management group in 1994, that in 1996 Ernst & Young advocated that it be returned to normal departmental processes, and that the management response was that they would do this, but it didn't happen. Do you have any idea why?

It was identified in 1996 that you had a self-contained unit that was contrary to regulations. It was identified by the auditors. They said put it back the way it should be. The management group said yes, we will. It didn't happen. Any idea why?

º (1645)

Mr. Rodney Monette: Mr. Chair, I joined the department on April 30, 2001, so I can honestly and truthfully say that I don't know.

The Chair: Can you look into it and write us a letter as to why the action of the Auditor General... First of all, who put it together, who allowed it to come together, or who recommended... There must be some correspondence around that issue. And why was the management response to the Ernst & Young audit not activated? Can you do that?

Mr. Rodney Monette: We will undertake to provide the best information we can, Mr. Chair.

The Chair: Thank you very much.

Mr. Murphy, please.

Hon. Shawn Murphy: Thank you very much, Mr. Chair.

I have a general question, and I invite an answer from all three of you people here today, on this whole issue of why it happened.

You people, it sounds to me, have had a long career in financial control in the public service. We have had witnesses come before this committee and indicate that this is not the way the system works, that generally it works well, and procurement is done in a fair, transparent manner. That said, this situation we're dealing with, you'll agree with me, is somewhat of a mess. We're being asked by Parliament why it happened...and that it should not happen again.

Sirs and madam, this question is not in any way to excuse or defend any political people, because it appears to me that at some level—we're not exactly sure what level—there was political direction on some of these files. But we have a secondary control there, and that is the bureaucracy, the machinery of government. Public Works and Government Services had an experienced deputy minister at the time. He sat in that chair and said he wasn't in the loop. I was dumbfounded by that statement.

Now, I don't want you to say that you weren't there, or that you...because this is just a general question.

Ms. Conway, you've been involved, and you're involved there now. From a bureaucratic point of view, why was this allowed to happen?

Who wants to start?

Mr. Rodney Monette: Mr. Chair and Mr. Murphy, I, like others, have thought a lot about this, and I think there were three what I would call “environmental” conditions, and then one very specific.

I know time is short here, so I'll try to go through this very quickly.

The first environmental condition, in my mind, and I say this without prejudice but simply as fact, is that during the nineties there were budget reductions. Again, I say that without any prejudice. When there were budget reductions, decisions at the time had to be taken as to where those budget reductions were going to be made. In some cases, they came out of compliance structures, or the structures that do checks and balances. They were tough decisions that were taken at the time as appropriate to the risks that were perceived at that time.

The second factor, and this is not just a government kind of environmental factor but I think one that you would find in many different institutions in the private sector as well, is that there was very much a focus on service and innovation. There's a good description of that in the Clerk of the Privy Council's report to the Prime Minister on the public service, tabled a couple of weeks ago, March 31. It basically says that people were very focused on service and innovation but were not paying enough attention to doing things right and making sure that the transactions were accorded the proper scrutiny that was needed.

The third environmental factor, from my perspective as a finance officer, is that many big systems were being put into place, and with the introduction of technology--again, this goes to the private sector as well, where there are also many instances of control breakdowns--we didn't re-engineer our business processes around that introduction of technology. We didn't reassess the risks associated with that, and how human judgment should apply in these big systems. I think it's affected many institutions.

So if you take that general milieu, if you will, and you get an organization that's operating very independently, on their own, with a mission, you sort of have all the ingredients for that kind of thing to happen. It's like you have the yeast and the light and the heat--and, you know, something can happen.

That would be my assessment of it, Mr. Murphy.

º (1650)

Hon. Shawn Murphy: Mr. McLaughlin.

Mr. Steve McLaughlin: I guess to the broader question you're commenting on, I really don't know why it happened. From a technical standpoint, all of the program decisions there are made by the executive director, all of the contracts to get something done are signed by the executive director, and all of the invoices to action payments are signed by the executive director. So there was no segregation of duty; you basically have a person making all of the choices, and—

Hon. Shawn Murphy: Why was that set up that way? You people are the ones...

I know that you weren't in the job, Ms. Conway, but there was somebody or a deputy in your position. Why did those people, who were supposed to be looking after the purse, allow that to happen? Do you have any kind of an explanation? I know that you're not responsible, and we're not accusing you of anything, but do you have any kind of a sense as to why this was so, from a bureaucratic point of view?

Mr. Steve McLaughlin: No, I don't. I don't know how to respond to the question. I don't know.

Ms. Myra Conway: I have racked my brains about that, and I have no more satisfactory answer than my colleagues do. I think that Rod's explanation about the climate at the time is one consideration.

I also think that it was a time when program managers were anxious, in general, to get on with delivering their programs, and were somewhat impatient with the rules and regulations. It was the time of “Let the managers manage”, and so on. So there was a climate that permitted a very independent and very strong executive director with a clear sense of the importance of what he was trying to do... There was a climate that permitted this.

All of the time, when we are looking after financial controls, we are faced with somewhat of an impatience or a push and shove between program managers, who want to get on with doing their programs with the minimum amount of fuss, and people like us who are the ones who come along with the controls. At that time, the balance had swung way too far the other way, so it permitted this particular set-up to occur.

It was like an airplane accident, and so on. If you review accidents, you find in fact that there was no one particular thing that caused them. It was a whole series of things that came together at the same time and created the right mix to create the explosion.

That is my explanation.

Hon. Shawn Murphy: I have one other point. We've looked at it from the ad agency point of view, but let's continue our discussion of it from the bureaucratic point of view.

Are you aware of, and did you make, any recommendations for bureaucrats to be disciplined as a result of this problem?

Ms. Myra Conway: I think you've had a number of witnesses who have come before you say that there was a disciplinary process put in place. First of all, there was an administrative review, followed by some disciplinary action against some public servants, none of whom are still working within Public Works. Some of the public servants have retired, and are therefore beyond disciplinary action. As for the exact details of that, I am not familiar with exactly who was disciplined, and at what level; but I think that a number of witnesses have indicated to you that there was disciplinary action against some people.

Hon. Shawn Murphy: Are you satisfied that the necessary controls and checks and balances are now in place, so that this will never happen again?

Ms. Myra Conway: I am satisfied that we have strong controls. I am satisfied that we have good audit processes that would catch something before it was ever allowed to get to the level it is now. I don't think it would be safe to say that it would never happen again, but I don't think it would ever happen for as long a period of time as it seems to have done.

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

[Translation]

Mr. Desrochers for eight minutes.

Mr. Odina Desrochers: If I understand correctly, Mr. Chairman, I'm the last speaker before we go to future business.

[English]

The Chair: No, I expect that we'll have Ms. Longfield and Mr. Mills.

º (1655)

[Translation]

Mr. Odina Desrochers: You realize...

[English]

The Chair: I said approximately five o'clock. I didn't say five o'clock exactly.

[Translation]

Mr. Odina Desrochers: It's just that we need to discuss future business, Mr. Chairman, and some votes have been scheduled for this evening. I just wanted to keep you apprised of the situation.

Mr. Monette, regarding the review you conducted and the production fees charged by the communications firms, were you able to determine if indeed the government got value for the money it spent, as Mr. Guité and many of the witnesses have maintained?

[English]

Mr. Rodney Monette: Mr. Chair and Mr. Desrochers, I would say there were some cases where it was very difficult to assess because of the lack of documentation, and it was really hard to form a judgment. Then there were other cases where it appeared that there was no value because, as Mr. McLaughlin mentioned earlier, there were a huge number of hours billed for something that would not take that long to do, from what we could see.

So, yes, we did find some cases where there appeared not to be a return back to the taxpayer.

[Translation]

Mr. Odina Desrochers: You're saying that upon reviewing the invoices, some things weren't clear or some of the amounts billed didn't correspond to the work that had been done.

Could you elaborate on that finding for me?

[English]

Mr. Rodney Monette: Mr. Chair and Mr. Desrochers, with the particular file that Mr. McLaughlin mentioned, for example, where there was a post-mortem report, you would look at that report of a certain number of pages and think, “Gee, it would only take somebody 15 or 20 hours to produce this report, yet 300 hours were billed”. You would look at it and your common sense would say, “There's something out of kilter here”.

That would be an example. There were several examples like that.

[Translation]

Mr. Odina Desrochers: Given the complexity of the audit you conducted, there's no need for you to mention specific files. However, did you notice in the case of a number of files if the amount billed didn't quite correspond exactly to the product that was delivered or the number of hours it would have taken to do the work?

[English]

Mr. Rodney Monette: Mr. Chair and Mr. Desrochers, yes, we did notice that in several files. That's correct.

[Translation]

Mr. Odina Desrochers: Again, without naming any files in particular, could you tell us how many of the 126 files reviewed appeared to show signs of overbilling, in your estimation? It must have jumped out at you when normally the job would have taken 15 hours and a bill was submitted for 300 hours.

Of the 126 files that were reviewed more closely, how many cases of possible overbilling did you flag?

[English]

Mr. Rodney Monette: Mr. Chair and Mr. Desrochers, as I recall, out of the 126 files, there were about 57 files that seemed not to be bad and that seemed to be reasonably complete. They were associated, for the most part, with the companies I mentioned earlier. Then there were about another 67 files with problems that we identified, with probably the most significant problem being our inability to assess value for money. For sure, that was probably the predominant factor there.

[Translation]

Mr. Odina Desrochers: What you're telling me, Mr. Monette, is that you realized products had been delivered, but that the agency had overbilled, which could explain why the firms received such large commissions. When the charges increase, so too do the commissions.

[English]

Mr. Rodney Monette: Mr. Chair and Mr. Desrochers, that is correct.

[Translation]

Mr. Odina Desrochers: That could explain in part the $100 million that went to these firms.

So then, if I understand correctly, the firms increased their rates and overbilled. Since the commission is tied to the fee charged, this could explain why the commissions were much higher than if the work had been done on schedule, without any inflated invoices being submitted.

[English]

Mr. Rodney Monette: Mr. Chair and Mr. Desrochers, where the production fees would have been overbilled or over-inflated, yes, my understanding is that the commissions would have been overbilled as well.

But I should mention that for a portion of those production fees for certain companies—in fact, for about half the companies in the period we reviewed—things did seem to be reasonably accurate and we were comfortable with it. So it was about half and half, roughly speaking.

» (1700)

Mr. Steve McLaughlin: The one before—

[Translation]

Mr. Odina Desrochers: Excuse me, Mr. McLaughlin, but are you saying that half of the invoices were correct, and the other half inaccurate?

[English]

Mr. Rodney Monette: Just as a general rule of thumb, if I could say, when you look at the production fees of $70 million that are related to the period of our review, or the work that we did, about $34 million of the $70 million were related to firms that we generally had confidence in, and for whom the files seemed to be reasonably good; and $36 million were from companies where we had less confidence.

I would not extrapolate that to say that the $36 million itself was necessarily overbilled. We didn't do that detailed calculation, but I would say the predominant problem that we associated with that $36 million would have been overbilling.

[Translation]

Mr. Odina Desrochers: Mr. Monette, I have an extremely delicate question to ask you. I don't want you to name names and drop hints of any kind, but you state in your report that in light of your findings, you called for some cases to be the focus of a criminal investigation.

Of the 126 files reviewed, how many cases are currently being criminally investigated, further to your recommendations to Justice Canada or the RCMP?

[English]

Mr. Rodney Monette: At this point, in terms of the RCMP investigations, I will be honest with you, I really don't know how many files they're looking at, and if I did, they would have asked me not to say.

I know what we referred, and I know we had a very ongoing communication with them.

The Chair: How many have you referred, Mr. Monette?

Mr. Rodney Monette: I believe it was thirteen files, which I think were the three from the Auditor General and then the ten that we had referred.

The Chair: Under judicial review, that you referred to the Department of Justice...?

Ms. Myra Conway: For the Department of Justice, we haven't been taking it at a file approach. We've been working with our Department of Justice colleagues more from an agency perspective.

The Chair: Okay.

Ms. Myra Conway: But I think in terms of the ten and three, which does sound like a small number in comparison, the RCMP used this as the base and from then on have just gone their own way in terms of their own investigation.

The Chair: Your time has expired.

Mrs. Longfield.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, you used up some of my time with your sub-question.

[English]

The Chair: I know, Mr. Desrochers, but you had about seven minutes, and we're trying to get as many people to have an intervention as possible. I was going to ask the question that you were asking to—

[Translation]

Mr. Odina Desrochers: Next time, Mr. Chairman, I would appreciate having my full eight minutes of speaking time.

[English]

The Chair: Well, your time has expired, Mr. Desrochers.

Mrs. Longfield, you have four minutes. I understand that you are splitting your time with Mr. Mills.

Mrs. Judi Longfield: Yes, starting now.

Just to recap, you're going to provide us with the 721 files that you had included in the initial review. You're going to provide us 126 files that you selected for a more in-depth review of that. Could you tell us which ones you had said were good and which ones of those were problematic?

One of the other questions was how many files you had referred to Justice Canada and to the RCMP. You say you referred ten and there were three from the Auditor General.

Ms. Myra Conway: To the RCMP.

Mrs. Judi Longfield: Yes, to the RCMP.

On the second recommendation, I want to know how many time verification audits were initiated.

Ms. Myra Conway: We initiated four, with four companies, but because of their records in three of the cases, we weren't able to do anything.

Mrs. Judi Longfield: So three were closed.

Ms. Myra Conway: And on the fourth one, we've been unable to gain access to the company.

Mrs. Judi Longfield: Who made the determination to close those files, those audits?

Ms. Myra Conway: This was at the recommendation of our auditors at Consulting and Audit Canada—

Mrs. Judi Longfield: Okay.

» (1705)

Ms. Myra Conway: —and then we made the decision.

Mrs. Judi Longfield: On your third recommendation, how many private sector firms were requested to provide evidence that goods and/or services paid for by the Government of Canada were delivered and that no overpayments were made? I want to know how many, and I want to know how many have complied with this request. Has there been any money withheld as a result?

If you don't have information now, could you provide it to the committee?

Ms. Myra Conway: We asked eleven companies to provide us with information, and as a result of that, we originally held back funds from five companies, one of which we were ordered by the courts to pay.

Mrs. Judi Longfield: So it's only four.

Ms. Myra Conway: Yes.

Mrs. Judi Longfield: How many complied with your request? You asked eleven companies.

Ms. Myra Conway: Almost all. I think probably two have not complied with our request.

Mrs. Judi Longfield: So of the eleven companies, four have had money withheld. There were five, but one was paid back, so are there two that potentially could be held back.

Ms. Myra Conway: No, we've held back money from all the companies where we felt we had strong justification to do so.

Mrs. Judi Longfield: Okay, and that was the four.

Ms. Myra Conway: That was the five, and one we paid back.

Mrs. Judi Longfield: All right.

On the fourth recommendation, I know you don't know who they were, but do you know how many were disciplined?

Ms. Myra Conway: No, I'm afraid I don't know that. I believe ten were investigated, but whether they all resulted in discipline, I don't know.

Mrs. Judi Longfield: On the fifth recommendation, how many subcontracts were reviewed and how many were referred to Justice Canada?

Ms. Myra Conway: That is something that is, as I say, more related by agency, and it would have been the four.

Mrs. Judi Longfield: Four. So of 126, it's actually a fairly small number, even though the dollar value may be in the $34 million range, and you don't know how much of that was appropriate spending, just that you don't have records or verification. Is that a fair recap?

Mr. Rodney Monette: Mr. Chair, Ms. Longfield, there are really three categories of files—the files that were pretty good, and those were associates with—

Mrs. Judi Longfield: Fifty-seven.

Mr. Rodney Monette: —well, $34 million on the production fees. And as for the others, there are two kinds—some where there really wasn't enough information to know, and then some where there were problems.

Mrs. Judi Longfield: Okay, thank you.

Mr. Mills.

Mr. Dennis Mills: Thank you very much.

Mr. Monette, Mr. McLaughlin, Ms. Conway, were you aware that from 2000 on a 37-point program was put in place?

Ms. Myra Conway: Yes.

Mr. Dennis Mills: So what would cause you to think that the qualitative work that happened on the remaining $35 million would be the same, or as suspect as the work from this 1997—2000 period?

Mr. Rodney Monette: Again, Mr. Chair, Mr. Mills, I should probably apologize for the way I explained those numbers. I think it's probably created some confusion.

When I extrapolated, I was simply trying to extrapolate as to the amount of money that would relate to the various companies.

Mr. Dennis Mills: Yes, but that's a hell of an extrapolation.

Mr. Rodney Monette: Yes, but I was not necessarily inferring that there were problems with those files in 2000.

Mr. Dennis Mills: Fair enough.

Now, in terms of Mr. McLaughlin, you talked about overbilling and you looked at outputs, fixed prices, per diems. Could you please give us an example where there was a 15-page report and you analyzed it and said you didn't think the taxpayer was getting value for the hours that had been billed for this particular report?

Mr. Steve McLaughlin: Actually, I'm capable of giving you a specific example, but I've been counselled not to, because, as is appropriate under government policy, in the areas where I feel there is a loss to the crown, I've reported it to authorities.

Mr. Dennis Mills: Well, what was the...

Mr. Chair, this is a very sensitive issue. The witnesses here today said that they are not experts in the business. You could have ten creative directors or creative people working in a room for a whole week, developing a strategy, designing an approach. That's 300 hours. And you might end up getting a 15- or 20-page report out of that, which could in fact, if it met the overall objective, be value for money. I'm not saying it was, but I'm trying to get to the bottom of how the judgment was made.

Mr. Steve McLaughlin: Well, if you refer back to the policy on losses of money and offences against the crown, I'm obligated as an officer of the crown to report a potential loss to authorities if I see one. I had concerns about things I saw—

» (1710)

The Chair: Do you report it to the RCMP, or higher up the line?

Mr. Steve McLaughlin: Well, first I report to my superiors, but then ultimately to the RCMP. Ultimately, the courts of Canada will decide whether there were illegal actions taken against the crown. In my opinion, there was cause for concern about it, and slowly it gets to the right authorities.

Mr. Dennis Mills: So it's out of our purview—is that what you're saying?

The Chair: Well, I think what he is saying is that we are getting into the realm of criminal investigations, which is not the mandate of this committee.

Mr. Dennis Mills: I realize that.

I want to go to the issue of subcontracting to sister companies.

If I were an advertising agency and I won a bid to produce a television commercial, say for the Nagano games, and I decided that the creative work was to be done in the head office company, but I subcontracted some of the production to a sister company, if I had won the overall bid, is there some kind of a guideline that wouldn't allow that kind of a relationship to happen, Mr. McLaughlin? I'm just trying to understand that.

Mr. Steve McLaughlin: My concerns are relative to the contracts we had in place. If you had a requirement in a contract with the Government of Canada to seek three bids on subcontracted work and you did not, then I would have a problem with that. If you did not have that requirement in your contract, then, again, that wouldn't be a concern to me.

Mr. Dennis Mills: You've mentioned that there were four agencies totalling approximately half the work where there didn't seem to be a problem, but that there were some problems in the other half. Were you suggesting that the subcontracting that was designated in those firms in terms of production had to have three bids? Is that what you're saying—in every instance?

Mr. Steve McLaughlin: Not in every instance, no. I would say in the majority of instances. But you're absolutely correct that it comes down to an individual contract and what specific clauses were in the contracts, what they were obligated to do.

Mr. Dennis Mills: So when you give us the 126 files that you reviewed, could you identify the ones in that clouded group, shall we say, where the subcontract had the designated guideline that they had to have three subcontract bids?

Mr. Steve McLaughlin: That could be done. I'm not so sure we have that instantly available. For most of the other questions you've asked, we probably already have the information right at hand, but you'd probably have some work in reviewing the specific contracts.

Mr. Dennis Mills: I have another short question here.

Mr. Guité said the other day that it's not possible to get a cheque out of the Government of Canada without having an invoice and a certificate attached to that invoice as to what the project was for. Now, you're all financial officers of the Government of Canada. You all work under the Financial Administration Act. Would you say that Mr. Guité's statement was accurate?

The Chair: Mr. Mills, I was otherwise engaged. You are well over the time.

Mr. Dennis Mills: Well, just answer the question.

The Chair: He will answer the question, and we'll wrap it up then.

Mr. Rodney Monette: Mr. Chair, Mr. Mills, you would normally require a section 34 attestation under the Financial Administration Act. Under section 33 that would be required.

Mr. Dennis Mills: So you can't get a cheque without proper documentation?

Mr. Rodney Monette: You can't get it without some basic documentation.

The Chair: Which is not proper, but basic.

Okay, thank you very much. We're going to wrap up there. There are votes this evening.

With regard to the request by Mr. MacKay for information regarding the management consulting group, there have been some concerns raised to me. If you feel that is not within the sponsorship programs in chapters 3, 4, and 5, you can raise the issue with the law clerk and make representations to him if you feel it's not appropriate to provide that information. If in your discussions with the law clerk he says it is, then we would expect the information to be forthcoming.

We're going to thank our witnesses for coming forth this afternoon. We do appreciate it.

Mr. Dennis Mills: On the timing of responses, because I know Mr. Monette said he had a complete binder there, I was just wondering, without sounding aggressive here, how fast could you respond from your files to all of our questions here today?

Mr. Rodney Monette: Mr. Chair, Mr. Mills, I should clarify that I'm no longer with Public Works and Government Services Canada; I'm with National Defence. So Mr. Marshall, who is the deputy minister, will ultimately make that determination. Some of the information is readily available; some of it is going to be a bit harder.

The Chair: Well, let's say we'd impress upon you to deliver it as quickly as you can.

We thank you very much for coming forward this afternoon. We appreciate the forthrightness you have given us in trying to explain what you're doing to try to bring this issue under control. I'm still quite concerned about how it happened in the first place, and I would look forward to some documentation from you as to who authorized, back in 1993, 1994, whenever it was, that this self-contained unit be created, and why, when the auditor Ernst & Young said shut it down and management's response was yes, it didn't happen. We're looking for documentation there.

We thank you again for coming forward. You are excused.

We have some motions. I have a motion for which notice was given two days ago--

» (1715)

Hon. Robert Thibault: Mr. Chair, just before you get there, on the point you raised on the documentation, I think we have to go to before that time, because if you remember from Mr. Guité's testimony, he said that even before that, he was responding directly to Senator Lowell Murray rather than to the minister responsible for the department.

The Chair: Okay, they'll go back to when it happened, when this self-contained unit was set up outside the normal guidelines, be it 1989 or the Trudeau years, whenever. I would like us to find out how it happened, who authorized it, and so on.

Okay, first of all, there was a notice of motion given by Mr. Toews on April 22, 2004. We'll deal with that first. Then we have a notice of motion by Marlene Jennings, which she can read into the record, and that would therefore come up on Thursday.

Mr. Toews, please.

Mr. Vic Toews (Provencher, CPC): My concern is it seems that some notices of motion have been brought forward by some committee members to deal with witnesses in a particular order. My preference is to deal with witnesses in the order established by KPMG. Rather than moving any motion in that respect, I have decided to defer to the expertise that KPMG has been providing us.

They have gone through the lists of witnesses and the evidence in order to determine exactly how best the evidence should unfold. We've hired them to do this job, and I think the better course of action would be to let them do the job the taxpayers have paid them to do, in conjunction with the clerk, of course.

I'm just curious what witnesses have been arranged for next week by KPMG. That will give us some indication where we're going. I think that will put an end to the need for any motions by me to contradict what the experts have already decided.

The Chair: KPMG has asked that the clerk speak to that. There have been some changes. The list has always been fluid, because of motions and so on that we've had.

What do the clerks have for us?

The Clerk of the Committee (Mr. Jeremy LeBlanc): The witnesses we have been speaking to in anticipation of next week's hearings are Jean Carle for Monday, who worked at BDC and also in the PMO; and Guy McKenzie for Tuesday, who worked for the successor to CCSB. Immediately after Mr. Tremblay he sort of took over that file. Wednesday is fluid. There have been some changes, so we don't have someone confirmed for next Wednesday at this point. Next Thursday we have Jean-Marc Bard, who was an assistant to Mr. Gagliano when he was Minister of Public Works.

Mr. Vic Toews: Thank you very much.

Do you and KPMG have a preference for the date that is in flux? Are you contacting someone who fits in with the unfolding of the events in an appropriate scenario?

The Clerk: We're still working on it. We don't have a name to provide at this point, but we're looking at the list that has been established to see if we can move some people around to fill that space.

[Translation]

The Chair: Go ahead, Mr. Desrochers.

Mr. Odina Desrochers: Mr. Chairman, continuing on in the same vein as my Conservative colleague, we asked a firm to draw up a list. The notice of motion tabled last week disrupted our proceedings, so much so that I have no idea of the tenure of Thursday's agenda.

I'd like us to respect the list that's been drawn up and not disrupt our proceedings with notices of motion tabled at the last minute. All that does is disrupt our work schedule. When notices of motion are tabled and go against this firm's recommendations, we end up, as we did last week, with a situation where we didn't hear from any of the three scheduled witnesses. As a result, we didn't accomplish as much work.

I'm not sure how we should proceed, but once the firm has recommended a series of witnesses in connection with our investigation of chapters 3, 4 and 5, we shouldn't be confronted with last minute notices of motion that disrupt our schedule. At this rate, we'll be dealing with an endless stream of such notices and our work will be delayed.

Therefore, when the firm comes up with a list, it should contain names of persons who have something to say about chapters 3, 4 and 5 and I'd like us to stick to our guns and ensure that these persons are called to testify.

» (1720)

[English]

The Chair: Are you telling me, Mr. Toews, that you're going to withdraw your motion?

Mr. Vic Toews: Yes. In deference to the work of KPMG and the taxpayers' money we're spending on KPMG—money well spent, but money that has been spent—I will defer my—

The Chair: Thank you, Mr. Toews.

We're not discussing Mr. Toews' motion; we're discussing the philosophy of following the clerks. We agreed several weeks ago it would be best to get them moving out ahead.

Ms. Jennings has a notice of motion.

[Translation]

Mrs. Marlene Jennings: Effectivement.

My motion is that, notwithstanding the motion adopted on Friday, April 23, 2004 and pursuant to Standing Order 108(3)(g), Chapter 3, the Sponsorship Program, Chapter 4, Advertising Activities and Chapter 5, Management of Public Opinion Research of the November 2003 Report of the Auditor General of Canada referred to the Standing Committee on Public Accounts on February 10, 2004, this Committee invite the following witnesses to appear: Monday, May 3, 2004, 3:30 p.m. to 5:30 p.m., Clerk of the Privy Council; Tuesday, May 4, 2004, 11 a.m. to 1 p.m., KPMG, in camera, and from 3:30 p.m. to 5:30 p.m., one representative of industry professionals; Wednesday, May 5, 2004, from 3:30 p.m. to 5:30 p.m., Mr. Ranald Quail; Thursday, May 6, 2004, from 9 a.m. to 1 p.m., four experts from list, including C.E.S. Franks, and from 3:30 p.m. to 5:30 p.m., the Auditor General.

Mr. Chairman, I'd like to...

Mr. Odina Desrochers: It's all bull— Mr. Chairman.

[English]

The Chair: There is a point of order here. Come on. We will have some decorum here, Mr. Desrochers. Mr. Desrochers, you are out of order. You will absolutely withdraw that comment.

Will you withdraw that comment?

[Translation]

Mr. Odina Desrochers: I wasn't speaking into my microphone, so there's nothing to withdraw.

[English]

The Chair: No, everybody heard it, Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: I withdraw whatever was recorded. I do not withdraw anything else I might have said. You can be sure about that.

[English]

The Chair: It has been recorded in the same way as in the House. When people speak across the floor, it is recorded and withdrawn.

[Translation]

Mr. Odina Desrochers: I want to listen to the recording to see if the comment was overheard.

[English]

The Chair: I want you to withdraw that, Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: Was the comment recorded, yes or no?

[English]

The Chair: Yes, it has.

[Translation]

Mr. Odina Desrochers: Prove to me that it was.

[English]

The Chair: I ask you to withdraw it, Mr. Desrochers.

Mrs. Marlene Jennings: Mr. Chair, Mr. Desrochers has obviously shown his mean-spiritedness and his general lack of courtesy. So just drop it. I'm fine, and I don't need an apology from Mr. Desrochers.

[Translation]

I was about to say that in light of the comments made and Mr. Toews' decision to withdraw his motion, and the reasons that compelled him to do so, I will take this under advisement. I'll let you know on Thursday, when the motion would normally be debated and voted on, whether this constitutes sufficient reason to withdraw my own motion.

[English]

The Chair: I have one question, Madam Jennings. I thought I heard you say on the translation, Monday, May 3, from 3:30 to 7:30, or is it 3:30 to 5:30?

Mrs. Marlene Jennings: No, in French it is 17 h 30, but in English it is 5:30.

The Chair: Okay, fine. We have the notice of motion.

The meeting is adjourned.