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EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 15, 1997

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[Translation]

The Chairman (Mr. Michel Guimond (Beauport - Montmorency - Orléans, B.Q.)): Good afternoon. The Standing Committee on Public Accounts is meeting today, Tuesday, April 15, to examine the Main Estimates 1997-1998, more specifically Vote 30 concerning the Auditor General under Finance referred to the committee on Thursday, February 20, 1997.

We have with us today from the office of the Auditor General of Canada, Mr. Denis Desautels the Auditor General, Mr. Raymond Dubois, the Deputy Auditor General, and Mr. Michael McLaughlin the Assistant Auditor General.

I was told Mr. Desautels would begin his presentation, that he would then give the floor to Mr. McLaughlin for more specific explanations concerning the vote and that he would then conclude himself.

Mr. Desautels, you have the floor.

Mr. Denis Desautels (Auditor General of Canada): Thank you, Mr. Chairman, for giving me this opportunity to discuss with you our 1997-98 estimates and the work of our office.

This year marks the 20th anniversary of the Auditor General Act that clarified and expanded the Auditor General's responsibilities. This was a milestone in the history of the office and the evolution of legislative auditing across Canada. In addition to looking at the accuracy of financial statements and compliance with authorities, the Auditor General was given a broader mandate to examine how well the government managed its programs by auditing value for money.

The introduction of value-for-money auditing was a major step that helped push the concepts of accountability to new frontiers.

Over the past 20 years, our office has pioneered and developed value-for-money audit methodology. It is now well-established as a crucial element in public sector accountability, in Canada and around the world. Value-for-money or performance auditing has gained wide support and acceptance and has increased Canada's reputation on an international scale.

Looking back, together with the Public Accounts Committee, we have been able to make a difference because of the expanded audit mandate that the Office was given in 1977.

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[English]

Here are a few examples of significant areas our work has influenced over the past twenty years. In 1984 the government amended the Financial Administration Act to improve the framework for the control and accountability of crown corporations. In 1996 the Treasury Board, as you know, established a revised framework for developing and managing large information technology projects to help reduce the risk inherent in such projects. Third, the federal government has significantly improved its cash management in ways such as improved arrangements with financial institutions for banking services and the increasing use of electronic fund transfer, representing combined annual savings of close to $100 million.

The next example is that there has been a greater focus by Revenue Canada on compliance and revenue collection efforts and by Finance on closing tax loopholes.

There have been significant improvements in the quality of information put out on deficits and debt. Both the Bank of Canada and the finance committee have supported the focus on the level of debt as well as deficits.

Faced with the seriousness of the problems raised in our November 1996 Correctional Service chapter, the commissioner of corrections has appointed a task force on reintegration of offenders to review the issues raised, identify solutions, and develop a plan for corrective action.

As a last example, the government has recognized the need for better information on program results to support decisions and to improve the way government works.

Of course there are many other specific examples where this broader form of audit has led to important changes in the administration of individual programs. However, looking at the present, the government has begun a course of action on many fronts in order to regain its fiscal sovereignty, modernize its program delivery, provide alternate service delivery, and establish partnerships with other levels of government and the private sector. This rapid evolution directly affects, in terms of audit scope and methodology, the way we conduct our own business and serve Parliament and hence our planning for the future.

[Translation]

Our Office is evolving rapidly as well. The last few years have seen events that have had a significant impact on the work, the people and the overall organization of the Office.

Recent amendments to the Auditor General Act established the position of the Commissioner of the Environment and Sustainable Development within our Office, while the provision for periodic reporting has enabled us to report three times a year since 1995. Another significant event in 1995-96 was the retirement of 57 people from the Office as part of our downsizing program. In 1996-97, our main estimates fell below $50 million for the first time in eight years and will remain at or near this level for some years to come.

The Commissionner of the Environment and Sustainable Development, Mr. Brian Emmett, officially took up his duties in July 1996. His office is being established and staffed and we expect that it will be fully operational by the end of 1997-98. We tabled our first "Green Report" last month.

In my view, we have managed our downsizing quite well in these changing times while continuing to provide extensive information to Parliament through our periodic reports, the Green Report and more committee hearings.

Periodic reporting has paved the way for improved service to Parliament by providing more timely and relevant information on the results of our work. The key now is to find the right balance between the amount of information we provide to Parliament and the amount that parliamentarians can absorb and deal with.

We are conducting a review of periodic reporting to determine ways to improve the content and format or our reports. Interviews with our stakeholders have shown us that perceptions of our report are generally positive - parliamentarians and government officials see them as useful tools to improve public service management.

[English]

In 1996-97 our office participated in 28 meetings with your committee, covering various chapters from our 1995 and 1996 reports, the public accounts for both 1994-95 and 1995-96, and our 1996-97 part III estimates. In addition, other committees of the House and Senate requested our presence at 16 meetings. This alone, I think, is a reasonable indication of the level of interest by parliamentarians in our work. Responses to our work by members of Parliament have been quite positive.

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Your committee and other parliamentary committees have often been instrumental in prompting government organizations to act. Hearings and committee reports speed up needed change identified through audits by obtaining firm commitments from departments and agencies. Parliamentary scrutiny can make the difference between action and inaction. For example, your committee's continued focus on our National Defence audits has spurred that department to take action on our recommendations, such as reducing the size of its headquarters, exploring ways to reduce base maintenance costs, and achieving cost recoveries in military housing.

Your sixteenth report, on our 1994 chapters on science and technology, has contributed significantly to progress made in relation to the framework for human resources management of the federal science and technology community, and you can have a similar effect in the development and implementation of the science and technology strategy. Your committee has also played an important role in ensuring Revenue Canada undertakes specific initiatives to monitor compliance, improve collections, and combat tax avoidance schemes.

[Translation]

I will now turn to the financing of our office's activities for the coming year. We have consistently and voluntarily operated within the limits of the government's restraint programs. Again this year, except for the resource requirements for the new function of the Commissioner of the Environment and Sustainable Development, we are asking for fewer resources as a result of downsizing, restraint and efficiency gains. We expect our expenditures to be $10 million or approximately 16% less than the amount we spent in 1993-94. In 1997-98 alone, our office's contribution to restraint is $3l. million.

We have undertaken measures to implement more cost effective audit methodology. We are carrying out shorter, more focussed examinations of particular issues at less cost. We are paying close attention to planning and managing the cost, timeliness and results of audits.

Our Part III Estimates have attempted to demonstrate cost target levels that we hope to attain in future years in our audit activities. This is the first time we have published this type of information which can be seen in exhibit 3 on pages 22 and 23. As an example, by better audit management we believe we can lower the average cost of value-for-money audits and do the audits in less time. At the same time, we are continuing our search for further efficiency improvements.

Overall, we are asking for $50.7 millions in 1997-98 to meet our legislative obligations. This year, in our section on details of the Office plan, we provide a breakdown of where and how this money will be spent in each of our audit components. I will cover this area later in my presentation.

As agreed earlier, I would now like to ask Mr. Michael McLaughlin, Assistant Auditor General, professional and administrative services, to give us more details on the document we are examining. Thank you.

Mr. Michael McLaughlin (Assistant Auditor General): Thank you, Mr. Desautels.Mr. Chairman,

[English]

I'll start by talking about the blue book and try to walk you through exhibit by exhibit.

This is a new format for the blue book, the estimates for the Auditor General of Canada. We're following direction from Treasury Board Secretariat on the preparation and general outline so it is comparable. It focuses and makes a clear separation between planning and performance information to try to focus on higher-level and longer-term plans and the performance of the office.

[Translation]

The document is divided into four sections. The first contains the message from the Auditor General who is actually here to deliver that message. The second concerns the Office plan and begins with a summary of the plan setting out the expected key results taking into account the $50.7 million budget the Office has available for 1997-98. There is an enumeration of the objectives and the steps that can be taken to demonstrate our funds were wisely used.

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On page 9, there is an overview of the Office of the Auditor General, its roles and responsibilities. Mention is made of the enabling legislation, the activity of the Office as well as the kinds of auditing carried out. On page 10, we have the objectives and priorities, including the OAG vision and mission statement. Page 12 gives us the five priority issue areas for 1996-2001.

[English]

The first exhibit is on page 14, page 15 in French. It gives the office planned resource levels. This year we are asking for a total of $50,688,000, with a full-time staff equivalent of 540.

I'm sorry. Page 14 was the fist exhibit and the numbers are the same numbers.

Exhibit 2 gives the full-time staff equivalent of 540. You can see that into the future we are planning to have 520 full-time-equivalent staff.

We then go into the details of the office plan and talk about the public accounts audits; the crown corporation financial statement audits, where we give separate opinions on the crown corporations; our plans for value-for-money audits, where we plan to publish approximately forty chapters in three reports in 1997; our plans for special examinations. In 1997-98 we are planning to report on six special examinations - these are value-for-money types of audits within crown corporations - and then the environment and sustainable development plans.

Section 3 reports on the summary of the office performance. Exhibit 3 is on pages 22 and 23, the same pages in English and in French. It describes some of the efficiency indicators of the office. In particular you can see for the annual audit of the financial statements of the Government of Canada we are predicting these costs will go up. The costs are expected to increase as the government introduces accrual accounting for physical assets and tax revenues and as the accounting systems are renewed. We expect those costs to decrease again once these new accounting features have been introduced.

The costs of the annual audits of crown corporations are declining. This is because of changes in methodology that we have introduced in the office.

Our average costs of special examinations are projected to decline, and again, because this is our third cycle, we believe we will learn lessons from the first two cycles and be able to apply them. The average cost of VFM audits is declining for a couple of reasons but quite clearly because of a decision on the part of the office to set scope and dollar limitations on the value-for-money audits. Our audit project time available to net available time is remaining within what we see as the acceptable range of 70% to 80%.

The next exhibit is on page 28, or 29 in French. Exhibit 5 reports on the status of our recommendations and observation. To 1994 on average we have had 69% of our recommendations implemented or well on the way to being implemented by the departments.

Exhibit 6 demonstrates the areas in which we are making recommendations, with by far the majority of recommendations being related to management systems and practices and cost-effectiveness.

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We then proceed to page 36 in English, page 38 in French. This gives an organization chart for the office. It shows that the office is headed by the Auditor General, Mr. Desautels. He has two independent advisory committees that report to him. The independent advisory committee that deals primarily with financial matters and the panel of senior advisers would help us with broader issues related to value for money.

The executive branch contains the legal services, professional practice and review and the international affairs, which Mr. Desautels himself directs. The professional and administrative services branch is headed by Deputy Auditor General Ron Warme. It includes what would normally be seen as the overhead activities of the office.

The audits are conducted from the audit operations branch, headed by Deputy Auditor General Raymond Dubois. Those are then divided into different audit groups.

As well, a new addition to our organization chart is the office of the commissioner of the environment and sustainable development, Mr. Brian Emmett, who for audit purposes reports toMr. Dubois, and for the commissioner's duties reports to Mr. Desautels.

On the next page, page 37 in English and page 39 in French, the resource requirements are explained. We start with our main estimates for 1996-97 of $48,988,000. We have reductions that are continuing as a result of prior-year commitments of $3,102,000. We have increases that are due to the commissioner of the environment and sustainable development, and increases for special examinations in crown corporations as well as a Treasury Board decision to increase employers' matching contributions to the employee benefits plans, for a total of $4,802,000. So our main estimates, as I reported earlier, are asking for $50,688,000.

Appendix 2, on page 38 in English and page 40 in French, breaks down the details in terms of personnel requirements, the full-time equivalents. You can see that in 1994-95 we had 597 full-time equivalents actually used in that period. For 1996-97 we had estimated 535. We will be moving in 1997-98 to 540.

Again, these upward movements are due to the commissioner for the environment and sustainable development activities. In future years we are planning further reductions, to bring us down to 520, where we would hope to remain stable with the same workload.

There are details in section 2.2 that show the breakdown between the executive group, the professional activities and the administrative support.

Appendix 3 shows the net cost of the program when we add in services provided to us without charge by other government departments, such as accommodation from Public Works and Government Services, cheque issue, employment insurance premiums. The total net cost of the program, less the non-tax revenue we receive, is $55,926,000.

On the following page, page 40 in English and page 42 in French, the presentation by standard object shows how it compares with other departments. Again, the largest expenditure line is salaries and wages, at $31,523,000. The next largest line is professional and special services, which is $6,126,000. These are the people who do the audit work, ensuring that we have the appropriate professionals from outside to be able to do the audit work we need to do. The details on our transfer payment are there as well.

When we look at exhibit 3.4, the overview of direct audit and indirect audit activities, we can see that most of the activity is devoted to value for money in federal departments, at 35.6% of the total budget in terms of direct costs. And when we do a fully loaded...that number actually moves closer to 67.5% of our total costs, where the administrative overhead is fully allocated to the products.

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[Translation]

Appendix 3.5 on page 42 is quite interesting and contains a lot of information. I'd like to explain it a bit more. These are the costs for the year 1995-96, the most recent year for which we have all the data. When the document was prepared in the fall of 1995, the year-end figures for 1996-97 were of course not ready. This appendix shows that most of the costs of all of the work we did during that year; some $56 million were used to audit federal government departments and agencies. With Crown corporations, that's approximately 90% of our expenditure. Overall, 67.5% of our costs go to value-for-money auditing.

That was a very general overview, Mr. Chairman. I thank you for having given me this opportunity.

Mr. Desautels: Thank you, Mike.

Mr. Chairman, There is a mandatory audit work that we must conduct every year. First, this work includes audits of the summary financial statements of the federal government and the government of the Yukon and the Northwest Territories. The federal government is planning to improve the usefulness and timeliness of its financial information. The accompanying changes to its systems will necessarily impose some development and conversion costs on our Office. The financial requirements for this component of our work will be approximately $4.5 million in 1997-98.

In addition, we audit the financial statements of federal parent Crown corporations, departmental corporations and other federal entities of which we have been appointed auditor. We also conduct other annual audits as requested by order-in-council. We have recently introduced new methodology for this type of work and we are currently upgrading our technological audit tools in this area as well. The financial requirements for this component will be approximately $10.6 million in 1997-98.

Special examinations of Crown corporations are also required to be carried out at least once every five years. The third round of 34 special examinations is under way and will be largely completed in the next five years. In 1997-98, we plan to report on the first six at an approximate cost of $3.8 million.

[English]

In 1997 we plan to publish up to forty chapters in three reports on subjects such as accountability and result measurement, environment, financial management and financial control, human resource management, information technology, revenue collection, and other government-wide and entity-specific issues. The level of value-for-money effort will be reduced in 1997-98 compared with that of the past two years because of increased work on special examinations.

We've provided you with a handout that shows in summary the list of chapters we plan to include in reports coming in 1997 and tentative reports for 1998. However, new issues may be considered as and when they emerge.

The financial requirements for value-for-money audits in 1997-98 will be approximately $25.4 million. Some of the themes we are concentrating on for our value-for-money audits for the current and future years include the development of a framework for assessing the financial management and financial control requirements of different types of government organizations, the government's preparedness for converting information systems to handle the year 2000 date change, implementation of downsizing initiatives, and whether good accountability frameworks are in place for alternate service delivery arrangements. We truly welcome discussions with you and your comments on the issues we plan to audit.

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The changes in accountability mechanisms spurred by alternate service delivery are of concern to us in our role and our ability to serve Parliament well. With the number of parties involved, accountability can become diffuse, so who is accountable to whom? How can we ensure Parliament still gets the information and the assurance it requires about programs it has funded through these partnership arrangements? As legislative auditors, we need to adjust our thinking to meet these new audit requirements.

As I noted, the commissioner of the environment and sustainable development is a major new responsibility within the office. While the Auditor General Act now charges the Auditor General to ensure funds voted by Parliament are spent with due regard to impact on the environment and sustainable development, it also requires the commissioner to provide an annual green report to Parliament on departmental sustainable development strategies and action plans. The financial requirements for the commissioner's office and for environmental value-for-money audits in 1997-98 will be approximately $6.4 million. This amount includes nine value-for-money audit chapters and four studies which will be reported in our periodic reports or in the commissioner's annual report.

The 1997 green report, tabled last month, presents the commissioner's priorities and his work program for the coming years. I invite you to review that report as well.

To illustrate our office's overall contribution to good government, we provide numerous examples in the 1995-96 performance report section of our part III. While we can't claim credit for all the savings and other benefits realized when the government adopts our recommendations, we're convinced we're having an impact. Our work influences change that others are responsible for implementing.

If we look ahead to the year 2001, our five priority issue areas for the next four years are summarized on page 12 of our part III estimates. We invite you to review these as well.

[Translation]

Many changes have occurred in the Office and in the government over the past few years. I can say that we are much leaner now, while auditing a government that is going through unprecedented, rapid transformation. We really feel that, through our audit efforts, we have been able to make a significant difference and Parliament is receiving good value for money from its auditors. Every year we identify opportunities for cost savings through improved economy, efficiency and effectiveness of government operations. Our priorities and our internal strategic framework have enabled us to improve our workplace and our products while, at the same time, contributing to the government's budgetary effort. Twenty years after the enactment of the Auditor General Act, our Office continues to adapt and respond enthusiastically and with imagination to the challenges of our changing environment.

Thank you for your patience Mr. Chairman. We are now ready to answer all your questions.

The Chairman: Thank you, Mr. Desautels. As you can hear, duty calls us to go and vote in the House.

Mr. Desautels, since I will be unable to chair the meeting after we come back, I will be replaced by my colleague, the member for Brome - Missisquoi and vice-chairman of the committee. I will take this opportunity to tell you that regardless of the result of the next election, I don't think I will be coming back as chairman of the Standing Committee on Public Accounts, even through this committee will still be chaired by a member of the Bloc Québécois and the reaction of members to our work continues to be positive, as pointed out in paragraph 58 of the Budget. I would like to speak on behalf of my colleagues, because I am convinced that we are unanimous in saying that we all greatly appreciated the diligence with which you approach your work.

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Since I'm sure that this represents enormous team work, I would like you to convey to all members of your team the congratulations of the Standing Committee on Public Accounts for their serious and professional approach.

Despite diverging views, like a captain, you were able to navigate and press on toward your goal. I remember the incident of the family trust issue, when the chairman of the Standing Committee on Finance tried to discredit you. That's my personal opinion, and not the opinion of members of the committee, of course. But you navigated through that very well.

On behalf of the Standing Committee on Public Accounts, I would like to thank you for your co-operation and ask you to congratulate members of your team.

The Public Accounts Committee is adjourned until after the vote.

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The Vice-Chairman (Mr. Denis Paradis (Brome - Missisquoi, Lib.)): We willproceed immediately with the first round of questions and comments, and give the first questions to Mr. de Savoye for 10 minutes.

Mr. Pierre de Savoye (Portneuf, B.Q.): I have several questions to ask, but one disturbs me a little more than the others and I would like to start with that.

On page 2 of the notes prepared for us by our researcher, it states:

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But that means that 31% of the recommendations have not been implemented, which represents one recommendation out of three. I would like the Auditor General to tell me if this is so because the departments or Crown corporations have not been willing to follow up on his recommendations, because the recommendations themselves, while well-intentioned, were not feasible, or because members of Parliament, among others those who sit on the committee, were not clear enough in their insistence that they be implemented. Perhaps all these hypotheses are valid simultaneously or perhaps none of them are. Mr. Desautels, could you shed light on this?

Mr. Desautels: Mr. Chairman, allow me to say at the outset that the figure obtained by adding 21% and 48% is 69%, which at first glance may seem relatively satisfactory. It's not 100%, but it's far from zero. If I had one wish, it would be that, on the one hand, we improve this percentage gradually each year to go beyond the 70% mark if possible, and on the other hand that the proportion of what is already corrected and what is being corrected be different. Basically, I would like us to have a percentage above 21% for recommendations fully implemented, which would represent a much higher proportion of the total recommendations that would be completely settled more quickly. Overall, even if 69% is not too bad, I do hope that corrective measures will be implemented more rapidly in the future.

Why is it that 31% of recommendations have still not been implemented? In part, it's because certain departments have not felt it was appropriate to implement some of our recommendations for various reasons; either they're not very enthusiastic or they disagree with our recommendations, or they have other priorities; and in a number of cases, it is clear that the departments are dragging their feet or refusing to take action, for some reason.

Part of this 31% represents recommendations which no longer apply; there have been changes in the organizational structure of a department or its programs, changes that make our recommendations null and void. That represents about 5% of the total. The fact remains that at least 25% of the recommendations have not yet been implemented, in my opinion without valid reason.

Mr. Pierre de Savoye: Mr. Desautels, you understand the point of my question. You do extremely precise and valuable work. As we saw earlier, you have 540 people who work on preparing files, examining them, making recommendations, and providing information to all members of Parliament so that national affairs can be managed properly. Yet, for various reasons, one recommendation in three is not implemented. You've just said so yourself. That's unfortunate, and that figure is too high. In reality, perhaps we should expect one recommendation in four not to be implemented.

Mr. Auditor General, my question is as follows: as an agency, you set high performance standards so as to achieve results. What would you consider appropriate in view of your recommendations? What level of efficiency should be expected? Is it 95%, 90% or 99%? What methods would you suggest in order to achieve those standards?

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Mr. Desautels: It is quite difficult to set an absolute figure because, of course, it is not just the percentage that matters, but also the relative importance of our recommendations. It's possible that only 1% of our recommendations might not be implemented, but they could be very important recommendations. You have to be careful not to focus necessarily on a set percentage.

However, I would say that if we were to get a favourable reaction to 75% of our recommendations, I would be relatively pleased. There are sometimes legitimate reasons why our recommendations are not implemented, despite the fact that they are valid. In some departments, it is a matter of priorities. A department might be required to implement certain priorities before acting on some of our recommendations. I can accept that to some extent.

Mr. Pierre de Savoye: You are 6% short of that threshold of 75%. I can appreciate that you are reluctant to set a figure, but if we were to set a psychological threshold of 75%, you would be 6% short of your target. What would you suggest as a way of achieving that extra 6%? Should the members of this committee be more demanding in what they expect from departments and government agencies? Are there other ways of dealing with this?

Mr. Desautels: Our Office absolutely needs the support of members of Parliament in order to achieve more satisfactory results than those we have been able to present to you. The support of members of Parliament comes primarily through the Standing Committee on Public Accounts and, as I explained in my statement earlier, we have managed to achieve positive results with the support of the committee. We do not appear only before the Standing Committee on Public Accounts; as you know, we appear before a number of other committees, and that helps also.

Therefore all interest shown by members of Parliament in our reports helps to increase the awareness of administrators and public servants and to improve results. I think that the committee has in recent years introduced some good practices and even though it does not manage to call as witnesses all the departments concerned by our report, it does nevertheless ask departments to report on what they have done to implement our recommendations, thereby also helping to improve results.

Therefore, the ongoing pressure exerted by committees is very important. Committees do not manage to study every one of our chapters, but if at least they communicate with the various departments and ask them to report, that will help us enormously.

[English]

The Vice-Chairman (Mr. Denis Paradis): I'll now turn to Jim Silye.

Mr. Jim Silye (Calgary Centre, Ref.): Good afternoon, gentlemen. First, I'd like to touch upon the value-for-money audits. I'd like to make a comment and then ask a question of you.

I think certainly this aspect of the role of the Auditor General is a positive one and a good one. I'm just wondering, though, if you have enough scope when you do this. Do you have enough tools to embarrass a department into listening to your recommendations? What I'm getting at is where the value-for-money audit was combined with a sunset clause on certain programs whereby a department initiates a program and says it will do it for three to five years, and then you come along and audit that program. You give an interim report and recommendations. You're doing a value-for-money audit, and you put out the warning signs if there are any. If there are not, you give it a check mark indicating that it's a good program and you endorse it.

We could make an amendment to the act or some other changes so that when a program expires - each program would have a definite period after which it would end - and the department requests that it be renewed, we would have this value-for-money audit to use as either justification to keep it or renunciation to dismiss it. In my opinion, that would certainly improve the opinion of Canadians when they know that everybody, the departments as well as the Auditor General, is trying to look at ways in which government departments misspent their money.

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Mr. Desautels: Mr. Chairman, I think that on the whole we have the basic tools necessary to do our work. I think the resources Parliament gives us are generally adequate to fulfil the mandate we've been given, and I think the legislation we've been given also gives us enough authority to obtain information and report independently of government directly to the House. So generally, we have, I think, the right tools for a legislative auditor.

People ask us quite often whether or not those tools should also include the authority to mandate or force departments to implement our recommendations. The answer to that is no. I think our clout, so to speak, comes from parliamentarians. We work for Parliament and report to parliamentarians, and we would hope that if they agree with our conclusions, it would be the parliamentarians who would force departments to take action.

When you then suggest, Mr. Silye, that on different programs we might tie together some kind of sunset clause with a report from the Auditor General, I would say that you have to be a little careful in heading in that direction, because you don't want the Auditor General to become part of the political or administrative decisions. I think you have to keep the Auditor General as part of the legislative arm of Parliament and not accidentally get the Auditor General more and more involved with the executive arm of government.

If I may, I'll just add one more thing. I have in the past, I think, made a comment on the usefulness of asking for a thorough program evaluation every few years of even statutory programs, which could be given to parliamentarians, and that could be tied to some kind of sunset clause. But I think what parliamentarians could require from government and departments is a periodic and thorough evaluation of the results of particular programs that can be used in reviewing programs, even statutory programs, on a periodic basis.

Mr. Jim Silye: We have a Department of the Environment and a Minister of the Environment. That department is empowered to of course monitor businesses and everything else that affects the environment. According to 1995 amendments, your department has set up an office of the commissioner of the environment and sustainable development. How much will this cost? How many people are involved, and why would you need this department to monitor the Department of the Environment rather than doing it just through your normal audit operations branches?

Mr. Desautels: Mr. Chairman, the government saw fit and submitted proposed legislation to Parliament to in fact create a commissioner of the environment to oversee the work of different departments, including the Department of the Environment, in much the same way as our office oversees the administration of each government department. I think it's generally very good legislation, and I think it fills a need. In fact, the Department of the Environment has certain responsibilities vis-à-vis the environment, but they're reluctant to accept full responsibility for all environmental issues across government. They stick to what they feel is their legislated mandate.

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So the commissioner of the environment will be reviewing more than just what the Department of the Environment does. He'll be looking at the environmental and sustainable development plans of all government departments, including departments such as Finance, Revenue Canada, those involved in foreign aid, and so on. The role goes much beyond what you might see as the responsibilities of the Department of the Environment.

The budget allocated for that in the current fiscal year, 1997-98, is around $3 million. It's scheduled to go up to $3.5 million in the following year. It's really going up gradually as the legislation itself kicks in over that period.

Mr. Jim Silye: My final topic is employment equity. Your department got involved in that. Apparently in 1994 the objectives that were set out for the public service were for persons with disabilities in the management category, native people in the scientific and professional category, and visible minorities in support services.

First I would like to know this. In your department, of the 540 people you hired, do you have a set number such that x must be male or female, x must be of a certain type or status? Is that how you apply this? Obviously it's not just necessarily the best person for the job, because if you do have some numbers you are trying to follow, then you have to say we have 200 jobs for males and we'll take the best 200 males, we have 100 openings for females so we'll take the best 100 females, etc.

On this other category, the disabilities and visible minorities, have you improved that situation, or are you still going to be subject to criticism from the public service?

Mr. Desautels: We have improved in certain categories and in a couple of others we are at about the same level. But I'll ask Mr. McLaughlin to go through some key figures for you, if I may.

Mr. McLaughlin: On setting specific numbers in our recruitment, we recruit on the basis of merit. Where we have people of equal merit who do apply for jobs in our office we will give priority, or in fact preference, to those people who fit one of the minority or equity groups that have been identified. In our recruitment campaigns we do go out and look for people who would be qualified and who fit the minority or equity groups.

At this point, in 1996 - of course this is based on observations by personnel officers, not on a formal survey, which we are currently undertaking, as all departments are - persons with disability are 2.2% of our population in the office and for the public service as a whole they are 3.2%, so we are slightly lower. As for women, 47.5% of our population are women. That compares with 47.4% of the Public Service.

Mr. Jim Silye: I thought we were at 52% of the population being women.

Mr. McLaughlin: These are the 1996 figures.

About native people, we have 2.2%, and that matches the 2.2% in the public service. In visible minorities we have 7.0%, which is greater than the Public Service Commission's 4.1%.

The Vice-Chairman (Mr. Denis Paradis): Charles Hubbard.

Mr. Charles Hubbard (Miramichi, Lib.): The process is a good process - I'm not trying to say it isn't - but what happens with the people out there who are very critical of civil servants and of governments is that every so many months, at least once a year, this big report goes out, whether it be in New Brunswick with their auditor general or nationally, and there are statements in the press for two or three days that certain departments and certain organizations are not doing very well and literally thousands and even millions of dollars of taxpayers' money are being spent very poorly.

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I know it's something Public Accounts and the Auditor General have to bring forward in our process, but with what is happening with attitudes towards government in the whole western world, you have to compare what might happen even in a large corporation with their business with what is happening in our governments. If the president of General Motors got reports of what is happening in his company like those we seem to be getting as parliamentarians, and they came back year after year, I don't think a corporation could exist.

I know, Auditor General, you worked in the private sector for many years, but it seems to be unfortunate that in the public sector you have to deal with your workers in such a public manner and in such a system of disillusionment, where people have to...

Is there any way or any country in the world such that we could look at some better method of trying to deal from the top down, from Treasury Board and through our departments, to show everyone in this country there is a better way of doing things and that inefficiency isn't part of the system? You have 500-some people who are looking for inefficiency, and every year we do find a lot of it. Is it the best process? Before you leave your position, maybe you could come up with some better way of our dealing with government expenditures, the $150 billion or $160 billion we're trying to put through the system every year. Would that be possible, Mr. Desautels?

Or do you agree with my comments? That might be another point -

Mr. Desautels: I think it's an excellent point. It's something we're struggling with all the time. In our work we have to strike the right balance between reporting to Parliament what they need to know to hold the government accountable... That's why you have a legislative auditor in most jurisdictions: to help parliamentarians fulfil their role. So you have to provide parliamentarians with the necessary information.

You have to do that in a way, though, that does not contribute unnecessarily to a reduction of confidence in our institutions. I think in Canada, for instance, generally we have good institutions. My own objective is to try as much as possible to strengthen our institutions and over time, through our work, increase the confidence of Canadians in their own institutions, because I think we have some of the best institutions in the world.

One of the reasons we do have good institutions today is that we've been open with our public institutions. I think that has contributed to a large extent to their improvement over time and therefore the level of excellence they have reached.

But yes, we struggle with that all the time: what is the right way of reporting to you on the programs that are implemented by government departments? Is there a better way? We're trying to improve all the time and find better ways to do this and be informative. One of the things we've been trying to do - I don't know if you've noticed - is to try to insist more and more on what we would call ``best practices''. In some areas we audit we try to identify, either within the federal government or within other governments in Canada or outside of Canada, what some of the better practices are, so we can compare individual departments against those better practices or best practices and encourage a movement over time towards the best practices.

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I think this is a constructive way of doing things. I believe we've been doing a lot of that. I believe we've been trying to avoid making too much sensation out of individual issues, particularly when they don't have any systemic value. Sometimes examples are useful to understand a problem that is persuasive and can be found in many departments, and therefore we do use specific examples at times. But I think we've been trying to report in a way that is responsible and that over time will improve the confidence Canadians have in their institutions, while being useful to you in your role as parliamentarians.

Mr. Charles Hubbard: We are travelling toward utopia. We are moving toward perfection, then. Someday...

Mr. Jim Silye: In which galaxy is that?

The Vice-Chairman (Mr. Denis Paradis): We'll proceed to the next round. Mr. Williams.

Mr. John Williams (St. Albert, Ref.): Thank you, Mr. Chairman. I didn't have a lot to say, but I did hear a rumour that there might be an election this year, and I just wanted to say, as a member of the public accounts committee, how much we appreciate the work of the Auditor General and his staff and how he has kept many a civil servant on their toes.

As you know, Mr. Desautels, the Minister of Labour asked you to do an audit on the expenses of one of what we in the opposition call patronage appointees, which are actually Order in Council appointees - but that's a difference in terminology only. While you have focused on value-for-money auditing, have you looked around through the whole realm of government to find out if there are areas that really have no accountability and should be looked at by your office? Here I'm thinking, for example, of expense accounts by Order in Council appointees, who seem to have a great deal of latitude and very little accountability in their expenses. One particular segment seems to have no accountability. Are you aware of any other small segments of government that seem to have very little in the way of accountability and should be looked at by your office?

Mr. Desautels: That's an interesting question. First of all, in the not-too-distant past we made recommendations, or had a look, at travel expenditures by public servants in particular, and we made a number of recommendations on such expenditures.

When Mr. Williams says this is an area where there may not be any accountability, I would say I don't quite agree with that. There should be just as much accountability there as in the rest of public expenditures.

Mr. John Williams: I agree there should be, but there doesn't appear to be. I'm wondering if there are small areas that appear to have less requirement for accountability. I use the expense accounts just as an example.

Mr. Desautels: Right. As far as I'm concerned, there should be sufficient levels of accountability for that kind of expenditure as well as other government expenditures.

Are there other areas of government where it's more difficult to get at the use made of public funds? Yes, there are, and in the future there may be even more, depending on how government administration evolves. What I had in mind, for example, is areas where government might be implementing programs through other parties, where government might be implementing programs through grants that might not be accountable back to the government.

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I think we'll have to be quite cautious in the future, as we move to alternate service delivery forms, to make sure the move toward those forms of delivery of government programs does not end up with less accountability than we've had so far. There are already some areas, such as grants and contributions, which are in themselves problematic, but as we move to more joint programs there could be more of that down the road.

Mr. John Williams: That leads me to my second question. I notice in your statement that in 1984 the Financial Administration Act was amended to improve accountability. We've had, for example, NAV CANADA, not for profit, a monopoly, hived off into the quasi-private sector, let's call it, yet because it doesn't fall under the Financial Administration Act it falls out from the terms of reference of your office. I presume that is exactly the type of thing you're speaking of.

I would just hope that through the report that I understand was tabled today by the Subcommittee on Procedure and House Affairs on the business of supply, Parliament is expressing a desire to bring back that accountability in all its facets. As one of the people who worked on that report, I do hope you enjoy reading it and perhaps putting it...it's rather dry, but I'm sure you know, as an accountant, that accountants like reading dry stuff.

Mr. Desautels: We even write some of it.

Mr. John Williams: I hope you will enjoy some of the ideas in there. We hope perhaps in another parliament we're going to be able to implement some of that as parliamentarians, and we certainly look forward to your assistance, your guidance, and your helping us down that narrow path of rectitude and ensuring that taxpayers' money is spent wisely and well.

The Vice-Chairman (Mr. Denis Paradis): Jim Silye.

Mr. Jim Silye: I would like to ask a little about the morale in your department. You're before this committee and you're asking for $50 million-plus and approval for $50 million. As a prudent board, just through courtesy we should probably see how you view your department and your 500-plus employees.

Mr. Desautels: Since I've been here, I've been concerned about civil servants. A lot of them, like politicians, are oftentimes held in lower esteem than people in other professions, and I feel that's a shame. It's a shame the system has come to this.

Sometimes I feel the system prevents not only politicians but also civil servants from doing their best, because where is the incentive? You don't get a raise in pay. They haven't had a raise in three or four years. You don't get to share in the profits of the company. Of course this isn't made to be profitable. This is made to redirect funds in the proper and best way politicians or governments see that Canadians want it.

There was a time when certain civil servants didn't want even to give out their names, say who they were. You would call a department and ask ``May I have your name?'' ``No, I won't give you my name.'' So you don't know who you're talking to. Let's say you telephone the taxation department.

Mr. Silye: In your department, of the people you have, how would you rate the morale of your department on a scale of one to ten, and what is it besides liking what they do, the work there being a challenge, etc., that you would say motivates them if they can't get any raises in pay?

Mr. Desautels: I don't know if I can give an exact score on a one-to-ten scale. I think the morale of our troops, in our own organization, on the whole is quite good. Our people have been working under a lot of pressure, a lot of stress. We've had a few people who have suffered from stress and who have even had to take time off because of that. We try to manage that as best we can. Even though there has been rapid change in our organization, we try to keep good communications with our staff, and on the whole the feedback I get is that things are quite good. People's morale is -

Mr. Jim Silye: What is the turnover? How many people have you lost in the last two years?

Mr. Desautels: As you know, we've lost a number of people through early retirement incentives. That's about 57 people. But in addition to that, I think we have lost about 40 people who left for different reasons. That was quite a bit more than what we had anticipated.

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I think the major reason there is financial. I think a number of our people got better-paying jobs in the private sector where wages have been going up, whereas the salaries of our people have been frozen.

One important point I'd like to make is that I think our people are very motivated. They're motivated because they believe in what they are doing. I think they have the impression they are contributing something to Canadian society and to Canada's parliamentary work. That is an extremely strong motivator. I'm quite lucky that our people are motivated by that. I think that has kept us going at the pace at which we're working.

I would also tell you that in order to have a clearer answer, we plan to conduct a little survey of our staff later on this year, just to get a better handle on these issues and to identify any problems we may have within our ranks so that we can solve them and keep going.

Mr. Jim Silye: Is the pay scale in your department the same for women and men for work of equal classification or equal value?

Mr. Desautels: Yes, absolutely.

Mr. Jim Silye: So you pay the women in your department the same as you pay men?

Mr. Desautels: Yes.

Mr. Jim Silye: A top senior female executive would get the same as a top senior male executive.

Mr. Desautels: There's absolutely no difference in pay scales related to sex.

Mr. Jim Silye: Okay. Since you've been the Auditor General, have you had a pay raise?

Mr. Desautels: No. I came in in 1991. My salary is tied to a judge's salary. That is supposed to go up on April 1 of this year, so that will be my first pay raise since 1991.

Mr. Jim Silye: But nobody else in your department has received a pay raise.

Mr. Desautels: Not quite. There are two things. As you know, the legislation has been relaxed, and some increments within the pay scales have been allowed. There's a technical term for that. In addition to that, the government reintroduced performance pay as of last year, so some amounts were paid out last fall in accordance with what was announced by government.

Mr. Jim Silye: That's all, Mr. Chairman.

[Translation]

The Vice-Chairman (Mr. Denis Paradis): Are there any comments or questions?

[English]

Are there any other comments?

[Translation]

Thank you very much.

[English]

We will go ahead with la mise aux voix.

FINANCE

Vote 30 - Program expenditures $45,154,000

Vote 30 agreed to

[Translation]

The Vice-Chairman (Mr. Denis Paradis): Second question: Shall I report Vote 30 under Finance to the House of Commons?

Carried

[English]

The Vice-Chairman (Mr. Denis Paradis): We are adjourned to the call of the chair.

[Translation]

Thank you very much to each and every one of you.

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