PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 21, 1998

• 1534

[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon, ladies and gentlemen.

I'd like to bring this meeting to order. I understand that we have a quorum sufficient to hear evidence. Hopefully, by the end of the day, when we're ready to move the motion, we'll have what's sufficient for a quorum. We'll see how that goes.

• 1535

The orders of the day are the main estimates 1998-99, vote 30, under Finance, Office of the Auditor General.

The witnesses today are, from the Office of the Auditor General of Canada, Mr. Denis Desautels, Auditor General of Canada, Mr. Raymond Dubois, Deputy Auditor General, Audit Operations Branch, and Mr. Michael McLaughlin, Deputy Auditor General, Corporate Services Branch.

Therefore, I'll now turn it over to you, Mr. Desautels, for your opening statement.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you, Mr. Chairman, for the opportunity to discuss with your committee our 1998-99 estimates, which is contained in our report on plans and priorities.

This report establishes our performance expectations and outlines the general directions the office wants to take in the next three years. It also provides additional details on our funding requirements for the coming year. We've tried to keep the document relatively short and easy to read, and we hope it provides you with timely and clear information on the business of our office. We're also pleased to participate in this new government-wide effort of improving the presentation of the estimates.

In fall 1997, our office also tabled its first performance report. This report provided a snapshot of our work during the year ending on March 31, 1997, with some comparative informative from past years and a progress report on our main priorities and goals. It described the ways in which we believe we've made a positive difference for Canadians.

In the work we conduct for Parliament, our emphasis over the next three years will continue to be placed on five priority areas: first, improving the government's financial position; second, promoting accountability; third, influencing the quality of financial management; fourth, contributing to public service renewal; and fifth, providing a focus on the environment.

The logical question follows: how will we measure our success in these areas? We've indicated in our report on plans and priorities some performance measures for each of these priority areas. It's relatively easy to count the outputs of our audits, such as the number of reports, public hearings, recommendations, and observations, but it's not so easy to quantify and measure the outcomes. We share these outcomes in fact with many other parties inside and outside government, which complicates the attribution of results to the audits we perform.

Many share a commitment to good government, including those on this committee, and it's often through their cooperation and participation that we effect change. Many of the outcomes of the office cannot be quantified, but this does not make them less important than the ones that can be quantified. For example, the concept of accountability for results is now more firmly established in the federal public service. As you know, we've been promoting this approach to public management for several years now.

The main way we report on performance is by providing examples rather than measures, as indicated on pages 15 to 23 of our performance report. Bearing this in mind, here are some examples of outcomes that we think will be of use to you.

A subset of our first priority is to find savings in government operations through actual monetary savings or future expenditure reductions. To measure this, we expect our audit teams to look for savings opportunities in value-for-money and other types of audits. Observations of waste and recommendations on operational efficiency and effectiveness will be financially quantified and reported.

Measuring the improvement of the effectiveness of revenue programs could be indicated by increased dollars collected due to the implementation of some of our audit recommendations.

Some examples of key achievements by Revenue Canada through our audits are shown on pages 18 and 19 of our performance report. More examples of proposed performances measurements are contained in our report on plans and priorities. I would invite you to review these on pages 10 to 13.

[Translation]

Our Report on Plans and Priorities also provides details of our work plan by component of our business line—Legislative Auditing. The five components include: (1) public accounts audit, (2) Crown corporations and other financial statement audits, (3) value-for-money audits, (4) special examinations, and (5) the Commissioner of the Environment and Sustainable Development.

• 1540

Overall, we are asking for $51 million in 1998-99 to meet our legislative requirements. In the section on "Details by Component of OAG Business Line", we provide a breakdown of where and how this money will be spent in each of our audit components. This can be found on pages 14 to 19.

As a brief overview of where the money will be spent, the audit of the statements of the federal government will cost $4.4 million. The audit of the financial statements of Crown corporations will cost $10.4 million. Our scheduled special examinations will cost $5.5 million and our value-for-money audits will cost $29.3 million. Finally, the planned spending for the Commissioner's Office will be $1.4 million. The amount is in addition to work on environmental issues covered in value-for-money audits.

In 1998, we plan to publish approximately 35 to 37 chapters in four reports on subjects such as accountability and results measurement, environment and sustainable development, financial management and financial controls, human resource management, information technology, revenue collection, cost effectiveness, and the government's stewardship of financial and other resources.

We have provided you with a handout that shows, in summary, the list of chapters we plan to include in upcoming reports in 1998 and tentative reports for 1999. However, new issues may be considered as and when they emerge.

Let me take a few minutes to provide you with a brief review of new challenges in the year ahead and the resource implications for our Office.

New arrangements, often referred to as alternative service delivery (ASD) arrangements are currently being made to conduct the business of government. For example, the new Canadian Food Inspection Agency is an example of such an organization. This is a separate agency that consolidates the food inspection activities of three departments. Over 4,500 employees were transferred to the Agency that operates on an annual budget of approximately $275 million.

In accordance with the legislation that set up this new agency, we are now required to provide an opinion on the agency's financial statements. We will also access the performance information it provides to Parliament. Providing assurance on performance information represents a new type of work for the Office and its implications are being examined. We have not requested additional funds at this time, but as we conduct this work we will assess the agency's ongoing resource implications for our Office.

The government is also in the process of setting up a new Canada Customs and Revenue Agency as well as a Parks Agency. These new organizations may have implications for our office in the near future. Currently, no new funding has been requested in this area but we anticipate increases in our appropriation base in 1999-2000.

We have been named auditors of the new Government of the Territory of Nunavut, which will be established in 1999-2000. We will be requesting increases in our appropriation base to account for this new work. As you know, we already audit the governments, corporations and agencies of the Yukon and North West Territories.

[English]

From time to time we receive requests to conduct special audit work, from this committee, other committees, or by orders in council. In 1997 we conducted additional audit work in the following areas: the household goods removal services of the federal government; the Canada Labour Relations Board; the foreign property reporting requirements; and the World Heritage Fund at UNESCO.

Our office needs to find the right balance and take a look at the resource implications of conducting these special audits while continuing to conduct our planned audit work. Our overall objective is to achieve a positive impact in the most efficient manner possible.

In 1997-98, we requested supplementary estimates of $1 million to cover those special audits, and I wrote to you, Mr. Chairman, on March 13 with respect to these supplementary estimates. In keeping with normal practice, we have not included requests for salary increases in this year's estimates because decisions are not yet final. Later, we will be seeking additional funds of approximately $2 million for 1998-99 to cover salary increases as a result of PSAC union negotiations for groups such as auditors, clerical and administrative staff, as well as management salary increases.

• 1545

Mr. Chairman, at this point, with your permission, I'd like to invite Mr. McLaughlin to take us through a few key tables in our document.

The Chairman: Thank you, Mr. Desautels.

Mr. McLaughlin.

[Translation]

Mr. Michael McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General of Canada): Thank you, Mr. Chairman. Our Report on Plans and Priorities has four sections: Section I, messages; Section II, Overview of the Office; Section III, Plans, Priorities and Strategies; and Section IV, Supplementary Information.

I would like to briefly discuss sections II and IV. On page 8, you have the heading Exhibit 1, the Financial Spending Plan which begins with the forecast for 1997-98, the fiscal year which has just ended. You also have there the planned expenditures for 1998- 99, 1999-2000 and 2000-2001. As Mr. Desautels indicated, the supplementary estimates we had requested are reflected in the 1997- 98 forecast. Under the heading "Legislative Auditing", you can see that the planned expenditures are on the order of 51 million dollars or fiscal 1998-1999 and 1999-2000, whereas they have been reduced by 1 million dollars, to 50 million dollars, for fiscal 2000-2001, because of special examinations and the UNESCO audit.

The cost of services provided by other departments will be less because of a decrease in the size of our office at 240 Sparks Street.

[English]

The Chairman: If I could interject a question, Mr. McLaughlin—and I refer back to Mr. Desautels' statement saying that they expect to come back for additional funds to cover additional salaries—is that expectation of additional cost for extra salaries built into this exhibit 1, or would that be in addition to these numbers?

Mr. Michael McLaughlin: That is in addition to these numbers.

The Chairman: Okay, thank you very much.

Mr. Michael McLaughlin: We now turn to section IV, which is the supplementary information on page 23. Table 1 is the requested spending authority for 1998-99. This is the main estimates information, with the vote wording and comparisons to 1997-98.

As you can see, program expenditures have dropped from $45.1 million to $44.4 million, while the contributions to employee benefit plans are going from $5.4 million to $6.4 million. In effect, our program expenditures have dropped with these estimates.

The employee contributions benefits plans are numbers that are calculated for us by the Treasury Board Secretariat as contributions to those plans.

Table 2 on page 24 gives the office organization. As you can see, we have our executive office; the corporate services branch, which provides the administrative services to the office, as well as other services; the audit operations branch, where all the audits are run from the audit operations branch; and the office of the commissioner of the environment and sustainable development, which reports on the activities related to the environment.

Table 2.1 shows the forecast full-time equivalents. This is the equivalent number of people you would have, based on the number of hours we use during the year. For 1997-98, we are forecasting a utilization of 513 persons. Our budget was 540 persons. However, we are in a rather robust marketplace for auditors in today's environment. Departures have certainly exceeded our anticipated departures, and we knew at the time that our FTE complement for 1998-99 and beyond would be 520 persons. We didn't move as quickly to replace these people because we were in fact looking at a reduced use of FTEs.

• 1550

In effect, what we did was use those salary dollars to engage people in short-term contracts to conduct the audit work that needed to be conducted. So in fact we did get the audit work done.

Table 5, if I can move that quickly, is the only transfer payment the office makes. This is to the CCAF-FCVI Inc., formerly known as the Canadian Comprehensive Auditing Foundation. This contribution has remained stable, since the downsizing activities, at $0.4 million.

Table 6 shows the details of our revenue. This is netted against our program. These are the revenues we receive for doing the international audits we have been commissioned to do for UNESCO and the International Civil Aviation Organisation. As we do those audits we bill them the cost of the audits and they repay the consolidated revenue fund.

So within our estimates is the money to do those audits and then, based on billings, they pay back to the consolidated revenue fund. It doesn't really come back to us.

The Chairman: We show the expenditure but we don't show the offsetting revenues.

Mr. Michael McLaughlin: In terms of the estimates, it's what we're asking for from our estimates. When we look at the net cost of the program, in table 7, which shows our total expenditures for 1998-99 to be $51 million, increased by the cost of services provided without charge by other government departments, of $6.2 million—and that's mostly with respect to accommodation and employee insurance premiums provided by other government departments—less the non-tax revenue, which again, we don't see, the net program cost is calculated to be $56.4 million.

The last table is table 8, which lists the statutory reports we prepare plus our Internet sites. If anyone is looking for our reports they can easily find them. Those reports that can be made public are made public through our Internet site as well as being presented to Parliament.

That concludes my portion.

Mr. Denis Desautels: To conclude, Mr. Chairman, I'd like to add that in keeping with our mission, we'll endeavour to adapt to the audit challenges posed by the government's changing role. We'll continue to provide this committee and Parliament with useful information about government operations.

I'd like to thank both you for your support and this committee for its support. I look forward to working with you in the future.

The Chairman: Thank you, Mr. Desautels.

Mr. Mayfield, eight minutes.

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

I'd like to thank the Auditor General and his colleagues.

By way of comment, sir, I would like to say it's always been a pleasure for me to come and take part in the reading of the reports and the examination and questioning and answering by the departments as they come. We do this very much through your guidance. I appreciate the thoroughness and the professionalism. I appreciate also the firmness your reports present to us.

For example, one of the things I'm concerned about is increasing discretion, it seems to me. As I have reviewed legislation I've been concerned about the increasing discretion that has been built into certain aspects of legislation—the amount of discretion given through Order in Council, the change in language for more bureaucratic discretion in administering the acts as they come out.

I appreciate that you have offered a firmness in pointing out that there are rules we have that must be abided by so that we are able to understand the activities of the government and how it goes about its work. I want to begin by thanking you for that.

With regard to the report you have presented, one aspect of your report that I find encouraging is that you present a plan. You have a focus. You have priorities. They're laid out for us to see.

• 1555

I guess I would also like to see that you're concerned about your own bottom line and keep a responsible and close track of that too.

You have mentioned five priorities from 1996 to 2001, and you're planning to issue a status report on these priorities in 2000, I understand. Would you be able to provide the committee members with some preliminary sense of how well your office is doing in addressing these priorities?

You've also developed some draft performance measures for each of these priorities. When do you think these measures will be finalized? If we could just look a bit into the future, have you begun to measure your performance based on these indicators? What are you finding out? What results have you obtained so far?

Mr. Denis Desautels: I'd like to thank Mr. Mayfield for his kind comments. They're truly appreciated.

I believe his first question was on how well we think we're doing versus the priorities we set out for ourselves. If I may just add a quick comment before answering that, I think our legislation is fairly clear on what is expected of us. However, I felt that within the clarity in that legislation, it was possible to assign ourselves certain more specific priorities to strive for that would motivate us in our work. That's the purpose of the priorities we've identified in our document.

How well are we doing? As far as I'm concerned, I think we're doing reasonably well on most of those. When I talk about improving accountability, for instance, I note there's been real progress made along that front. Government administrators have shown a lot of willingness to change the culture and move to an accountability for results, which many people have been preaching in the last few years. So on some fronts I think we've made reasonably good progress.

I'd like to accomplish more in terms of modernizing or improving the public service per se. I think a lot of people have been frustrated by the difficulty of changing some of the rules in the public service, particularly as they deal with human resources management. That has remained a major challenge for all of us, not just legislative auditors. Some of the deputy ministers and other central agencies have found that to be a huge challenge. There's a lot to be accomplished on that front.

The other area where I feel I'd like to go further faster is in the improvement of financial management across government. There's a real need there that is recognized by most observers. In fact, the government had a special study done on that question within the last year, and a report on comptrollership was produced. It identified the challenges, but we need to move more quickly to fill those gaps.

Those are the two areas among the five priorities, if I go by exception, where I believe we have the most to accomplish.

In terms of how we will measure progress against that, we intend, in the fall performance report we started publishing last year, to track progress as best we can, not only in terms of those five priorities but also in terms of the full package of responsibilities we have in the office.

It may not be possible to quantify progress in all these areas. Some of the reporting of progress may be more in terms of anecdotal or qualitative appreciation, but nevertheless we'll be coming back each year in this fall performance report with some kind of appreciation of the results that we feel have been accomplished.

• 1600

The Chairman: One very small question.

Mr. Philip Mayfield: Oh, all right.

The question I have relates to, I suppose, the process of auditing. As we were looking at the Department of Fisheries and Oceans, I was thinking it's not just looking at this department, because it now cooperates with provincial departments, and I was thinking of the salmon problems on the west coast.

Is there some means that you have or are working on to get a clear picture of how not only the department but the whole aspect of fisheries is being viewed and critiqued? Is there a means whereby you perhaps cooperate with the provincial auditors general so there can be a clear picture of how the partners of the federal departments are impacting, what influence they have, and what the clear picture of the whole situation is in this partnership of government?

The Chairman: That was a short question from Mr. Mayfield, and we'll have a short response.

Mr. Philip Mayfield: Take your time, sir.

Some hon. members: Oh, oh!

Mr. Denis Desautels: Mr. Chairman, I think the general idea, if I understand it, is how do we manage, in some of the work we do, to get a broader view of the issue when in fact the issue crosses departmental lines and crosses jurisdictions? That adds to the challenge of our work.

First of all, let me say that within the federal government sphere, we do carry out on a fairly regular basis what we call sectoral audits, so we'll look at a question but go beyond the boundaries of a single department. If there are two or three departments involved in the particular program, under those sectoral audits, we will in fact bring in all of the departments that have some form of responsibility for the program.

Many of the programs more and more require that we work with other jurisdictions. Fisheries, as you mentioned, is a good example. Environment is another example.

First of all, we expect that the federal departments will in these situations develop working relationships with their provincial counterparts, and we will focus on how well they have done that.

It is possible, but not that easy, to also conduct some examinations on a concurrent basis with other legislative auditors in other jurisdictions. In fact in some issues, such as taxation, there is already a well-established cooperation of that nature. But I believe sincerely that there's more to be done on that front in terms of doing concurrent or parallel audits with other jurisdictions. It always remains quite a sensitive issue, but we very much would like to achieve more success on that front.

Mr. Philip Mayfield: Thank you.

The Chairman: So there we had a short question and a short answer.

Mr. Laurin, eight minutes, please.

Oh, sorry, it's Mr. Desrochers. My apologies.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): Thank you very much.

[English]

The Chairman: No offence, Mr. Laurin.

[Translation]

Mr. Odina Desrochers: The Bloc Québécois is a united party, Mr. Chairman; have no fear.

The Chairman: But of course.

Mr. Odina Desrochers: My first words, Mr. Chairman, will be to express my thanks to Mr. Denis Desautels for his presentation, his expenditure plan and his work forecast for the coming months and years.

We can see that the figures under the heading Legislative Audit are constant. We know that everywhere there are increases, additional personnel and sometimes staff rationalizations. How have you managed to carry out this exercise while maintaining a fairly constant budget?

• 1605

Mr. Denis Desautels: Mr. Chairman, indeed, we had committed ourselves to reducing our operational expenditures. If you look at the history of our budgets you will note that our expenditures were on the order of 58.4 million dollars in 1993-94 whereas they have now declined to some 50 million dollars. It should also be mentioned that those 50 million dollars also include the expenditures of the Commissioner of the Environment and Sustainable Development which are approximately 3.5 million dollars.

We did then manage to reduce our budgets significantly while incorporating the work of the Commissioner of the Environment. We managed to do so through concentration, by choosing more difficult areas for audits and by carrying out shorter audits generally.

If we sacrificed anything it may have been the broader, government-wide audits that are not as frequent as they use to be. We carry out a greater number of shorter, more focussed audits.

We also improved our financial audit techniques. As you saw, we reduced the amounts involved in auditing the Canadian government's public accounts and Crown corporations accounts. Thus, we made efforts on several fronts at the same time which allowed us to achieve the results we have attained.

Mr. Odina Desrochers: But this budget does allow you to do your work adequately nonetheless?

Mr. Denis Desautels: Mr. Chairman, we had committed ourselves to reducing our budgets by these levels. I believe I indicated to the members of your committee and to Parliament that we could continue to do more than adequate work and serve Parliament well within the limits of that budget.

Mr. Odina Desrochers: In section 19 of your introductory remarks, you say that the government is setting up a new Canadian Customs and Revenue Agency as well as a Parks Agency and that these new Agencies will change your work somewhat. Will you be given the mandate of examining the operations of those agencies?

Mr. Denis Desautels: Mr. Chairman, as you know, we were appointed auditors of the Food Inspection Agency and this has now become law. If the Parks bill is passed as such, we shall become the auditors of the new Agency. The bill creating the new Canadian Customs and Revenue Agency has not yet been tabled. We dare hope, as has been suggested, that it will be proposed that we also become the auditors of that new Agency.

Mr. Odina Desrochers: So, whatever the department or agency involved, you will still be able to do your work?

Mr. Denis Desautels: That is correct.

Mr. Odina Desrochers: Thank you.

If I have any time left, Mr. Chairman, I will allow my colleague to use it.

[English]

The Chairman: You have another three minutes.

Mr. Laurin.

[Translation]

Mr. René Laurin (Joliette, BQ): But I won't lose the time that I would be entitled to later?

Mr. Odina Desrochers: No, I'm giving you my time.

[English]

The Chairman: No, absolutely. You still have eight minutes and then you will get your turn for the Bloc.

[Translation]

Mr. René Laurin: Mr. Desautels, on page 25 of the report, we see that the forecast involving salaries and remuneration are decreasing, as they are on the order of 30.6 million dollars in 1997-98 and of 30.4 million dollars for the following years, until fiscal 2000-2001, whereas contributions to employee benefit plans increase. Normally, contributions to fringe benefits would increase as salaries increase, but here we see the opposite. How do you explain that?

Mr. Denis Desautels: Mr. Chairman, that is because the percentage used to calculate contributions to fringe benefit plans in relation to salaries and remuneration has changed. That percentage is set by the Treasury Board Secretariat which tells us to use a given percentage in a given year. The percentage changed from 1997-98 to 1998-99.

• 1610

Mr. René Laurin: Should we conclude that even if we do not increase salaries, there will still be an increase in costs related to employee fringe benefits?

Mr. Michael McLaughlin: No, I don't think so. It is rather due to the fact that the Treasury Board Secretariat, and not ourselves, determined that an increase in the percentage used to calculate contributions to fringe benefit plans as they relate to salaries was needed.

Mr. René Laurin: I don't understand.

Mr. Denis Desautels: I think that Treasury Board redid its calculations and came to the conclusion that those contributions were costing it more than in the past. The fringe benefits have not changed, but Treasury Board established that the percentages used in the past were no longer sufficient to cover costs.

Mr. René Laurin: This means, then, that in 1997-98, when salary forecasts were of 30.6 million dollars, higher contributions to fringe benefit plans than the 5.6 million dollars should have been forecast, since that amount had been improperly assessed. The final result was that an amount greater than the 5.6 million dollars had to be found.

Mr. Denis Desautels: The difference, Mr. Chairman, was absorbed by the Treasury Board Secretariat itself in its results.

Mr. René Laurin: Oh, I see. And does it do the same thing for salaries? Do the forecasts relating to legislative audits represent amounts allotted to salaries? They go from 513 in 1997-98 to 520 for subsequent years.

Mr. Denis Desautels: Those are person years.

Mr. René Laurin: You will have seven additional persons whereas we see a decrease under the heading of salaries and remuneration. Did you replace older employees with younger ones who are paid less?

Mr. Denis Desautels: That isn't quite the case, Mr. Chairman. In 1997-98, the figure of 30.6 million dollars in fact represented more than 513 persons because we had begun the year with a greater number of employees, which had an effect. The savings on salaries was not evident right away in the beginning of the year. The annual calculation is a little bit skewed.

I must also point out, Mr. Chairman, as I was saying earlier in my statement, that later in the year we shall have to add an amount of approximately 2 million dollars to the 30.4 million dollars; the 2 million dollars corresponds approximately to the salary increases that must be granted during the year. The figure has not yet been determined. So, yes, salary and remuneration expenditures will be higher than the 30.4 million dollars.

Mr. René Laurin: But it has been determined: you mentioned a sum of 2 million dollars. Why not add it immediately?

[English]

The Chairman: We can come back to that point. As the Auditor General said, it will be part of the supplementary estimates he's coming through with later on.

Mr. Telegdi, eight minutes, please.

Mr. Andrew Telegdi (Kitchener—Waterloo, Lib.): Mr. Desautels, I was looking over your reports for the future. It was just a short time ago when we had the Office of the Superintendent of Financial Institutions before this committee, and we heard how they were having great problems keeping staff. It would seem that many of the auditors who were working for the department, once they learned their trade, would get snapped up by the financial sector. Of course, the superintendent told us that it was impacting on their ability to do the work and they have a fair number of vacancies.

One of the issues that came up during the discussion was the possibility of looking at a cooling-off period, meaning that if you work for the government and you are auditing certain departments in the private sector, then the expectations are that you're not going to quit the government one day and go and work for the people you audited. The feeling was that it might enable the department to keep their people longer as well as to stop any kind of conflict of interest that might be going on.

• 1615

When I looked at your work plan I didn't see anything in this regard, and I wonder if perhaps you could look at that as well as at situations where we have government employees involved in the procuring of services who one day work for the government and the next day work in the private sector. Of course the worst conflict kinds of situations I'll borrow from the United States, even though we probably have some of our own. It is the situation where somebody who was a major general in the military goes off and works for the defence contractors. It's the kind of cozy relationship that has been going on for a long period of time.

I wonder if in your future work you could look at this issue without having it as a special report, but take a look, because I think you'd be doing a valuable service to the government in a number of ways. I think you would do a fair amount of service to the taxpayers in ensuring that there's more of an ethical standard in the services provided by the people we employ.

Mr. Denis Desautels: First of all, let me say that I recall very well the discussion we had on OSFI and the issue that was raised at that point about a cooling-off period. I think it's a valid concern, and I believe that one way or another it should be pursued.

We haven't put it on our list here, but I believe we can have some discussions, at least with government organizations that may have an interest in this question, and determine that someone will pursue the issue and report back to this committee or to Parliament.

So it's very much an issue that I believe is worthwhile, and I take good note of Mr. Telegdi's suggestion.

I should also say that I welcome very much the kind of suggestion made by Mr. Telegdi. In fact that's one of the reasons we circulated this list of planned chapters. It's to inform, but possibly to trigger some suggestions from members of the committee about areas that might be close to their hearts or their interests, which we could consider in our future plans.

Mr. Andrew Telegdi: Just following up on it, I appreciate that you would be talking to government agencies. The only cautionary note I would have in terms of who does it is that I think it's important that it be done somewhat at arm's length from the government bureaucracy, if you will, because certainly there could be a possibility of a conflict of interest there. While I would expect you to be discussing it with them and talking with them, I would like to see the report come out of your office.

Mr. Denis Desautels: Mr. Chairman, I understand those concerns, but what I was referring to would be more central agencies that do have a role in fact in ensuring the integrity of the employment process in government and the post-employment rules.

My intention was to make sure they were brought into this kind of discussion.

Mr. Andrew Telegdi: Thank you, Mr. Chairman. That's my commentary for the present.

The Chairman: Thank you, Mr. Telegdi.

Mr. Grewal, four minutes.

Mr. Gurmant Grewal (Surrey Central, Ref.): Thank you, Mr. Chairman.

Let me join my colleague in appreciating what I feel in my mind about the Auditor General's work. I have no hesitation in my mind to strongly appreciate the courage and the professionalism of your staff.

I can reaffirm that I, my constituents, and all Canadians are counting on you and your staff to make sure their hard-earned tax dollars are accounted for properly, and you have been doing a good job in putting forward your reports.

• 1620

I had the opportunity to review various reports—Health, Aboriginal, Fisheries and Environment—and their 2000 projections. Having said that, and since my time is only four minutes, I will go for my questions.

Mr. Chairman, based on the trends in various departments, I would be interested in knowing if the Auditor General is satisfied that the trends show your department is convinced that productivity and the quality of accountability have improved during your term.

As my second one, on page 24, I found out there is a committee called the independent advisory committee in the organization's structure. I would like to know the role of the independent advisory committee. Is that the committee that is the source of direction for the department for what needs to be audited?

These are the questions I would like to have answered.

Mr. Denis Desautels: Mr. Chairman, it's difficult to answer Mr. Grewal's question in a broad and complete way. What are the trends in departments in terms of accountability and productivity? I have already indicated today that, for instance, there are some encouraging signs in different areas, particularly on the accountability front.

I referred to the acceptance of the change in culture from an accountability for process to an accountability for results. In the last five or six years, I think it's been quite clear that we've moved quite a bit in that direction not only in the Government of Canada but also in other jurisdictions, particularly in Alberta, for example, and in other Commonwealth countries as well. There has been an acceptance of this necessity, and we're now moving in that direction. I think that's quite encouraging.

I think the federal government is also committed to improving the quality of financial management across government through the comptrollership study that it carried out, and also through its financial information strategy. Those are good signs. If conducted successfully, I think we will be in better condition, in better shape in the future, than we were in the past.

In terms of productivity, that is a very hard question to answer because it's quite hard to measure. I would venture to say, though, that on a general level the reduction in the budgets of various departments has instilled more prudence and wisdom in the spending of public funds. People have had to carry out their programs with fewer resources than before and have therefore had to be smarter about it. I hope that trend does continue.

On a more specific level, I would like to remind the member that in chapter 18 of our 1997 report, we did go back to do a complete follow-up of the previous reports we had produced on Revenue Canada. The picture shown by that chapter is that, yes, things are moving, that people have taken our recommendations and the recommendations of this committee quite seriously. This has resulted in some significant improvements in tax administration in particular in this case.

I hope that helps. I hope it answers the question, but it's not an easy question to answer.

Mr. Gurmant Grewal: I have a second, specific—

The Chairman: I think we'll come back to you, Mr. Grewal. With the four-minute rounds, unfortunately it takes the majority of your time to get them answered when we get into philosophical questions.

We now go back to Monsieur Laurin for four minutes.

• 1625

[Translation]

Mr. René Laurin: Mr. Desautels, in point 5 of your presentation you state that in your report on plans and priorities you present performance assessment mechanisms for each priority and that it is relatively easy to count the audit outputs, whereas it is not so easy to quantify and measure the consequences.

I don't know why you state that, since you use the mechanism allowing you to quantify the situation before being able to identify a problem. After having attempted to solve the problem, the same method you used in the beginning should allow you to see whether the situation has changed or not. Why do you say it is difficult to measure the consequences?

For instance, let's take the audit of a job creation program. At the outset, a mechanism told us that employment was too low. We try to solve the problem and afterwards we count the number of jobs created by using the same mechanism that was used in the beginning. Why is that not possible here?

Mr. Denis Desautels: Mr. Chairman, it is possible on a case-by-case basis to see whether following a recommendation we made, changes or improvements were made. That is possible and those results indicators are very useful.

However, when we look at what our office is attempting to achieve in a more general way results are more difficult to measure. For instance, on page 9 of the report you have the principal results the Office hopes to achieve, among these a fair and honest assessment of the government's stewardship of financial and other resources, and of efficiency and productivity within the public service. It is more difficult to come up with an overall index to measure success at those levels. That is what we were trying to say when we made that comment.

Mr. René Laurin: Because results at that level are less tangible.

Mr. Denis Desautels: Yes.

Mr. René Laurin: I would like to go back to the first question I asked because you did not have time to complete your answer. Since you expect that you will be asking for an additional 2 million dollars at some point during the fiscal year to cover salary increases, why not include those right now in your forecasts?

Mr. Denis Desautels: That is an excellent question. I would like to include it, but Treasury Board asks everyone to follow certain rules when preparing the budgetary appropriations document. Those increases have not yet been improved and are not part of what is known as the Office's base appropriation. They must be requested separately. For this reason, they ask us to not include that sum at this time in the present document. That is one of the constraints related to the procedure adopted by government and Treasury Board.

Mr. René Laurin: But if you indicated...

[English]

The Chairman: Mr. Laurin.

[Translation]

Mr. René Laurin: I have 30 seconds left.

But if you included the amount, would this be comparable to what the Minister of Finance does, when he includes the Millennium Scholarships that will only be granted in the year 2000 in current government accounting? Would that be a fair comparison?

[English]

Some hon. members: Oh, oh!

Mr. Lynn Myers (Waterloo—Wellington, Lib.): No more 30 seconds.

[Translation]

Mr. Denis Desautels: No, I don't think that that comparison can be made in this case.

[English]

The Chairman: No comparisons now. We'll debate the Minister of Finance's position another day.

Mr. Myers, four minutes please.

Mr. Lynn Myers: Thank you, Mr. Chairman. I had three quick questions.

First of all, I was looking at page 25 with respect to your forecast and planned expenditures, and it seems as though it's a constant or a levelling off. In fact, you could argue there's a decrease in the year 2000-2001. Yet you highlight Canada Customs and Revenue, you highlight Parks Canada—new challenges coming forward. I'm wondering how you can explain that in terms of the new challenges you are faced with versus the decrease in expenditures.

• 1630

Then if I might, Mr. Chairman, I'd like to get into perhaps a broader philosophical question. That is, as more of this kind of thing happens, and we see new delivery of service, for example, and new partnerships created and such, is there...? I was interested in something you said in the middle of January. I think you were quoted in the Hill Times with respect to how there might be concern with respect to parliamentary scrutiny and government accountability as a result of this new kind of service delivery. I wonder if you could just expand on that.

Mr. Denis Desautels: Yes. The total budget expenditure as shown by table 3 on page 25 is in fact relatively flat—almost absolutely flat for the next few years. It does not reflect additional needs for new agencies I have indicated or the Nunavut territory, which I also mentioned. We will have to come back, when we know more about what these will represent, with specific requests for an adjustment to the reference base that has been used in this document.

That's why I did mention in my opening statement that when you read those figures you have to keep in mind that we will likely need more for some of these new needs that have been identified but which can't be, at this stage, estimated with as much precision as needed. That's the answer, I believe, to your first question.

With reference to your second question relating to the new types of delivery mechanisms that are being adopted for different services, I did indicate that these have to be planned I think quite carefully, so that in the process the oversight role of Parliament and the accountability of those organizations to Parliament do not suffer.

I would not want to leave the impression that it automatically will mean weaker accountability or less oversight. I think if they are planned properly, though, it can produce fairly effective oversight mechanisms and accountability from these organizations to Parliament.

The same applies as well to what we would call partnerships between the federal government and provinces. Partnerships can, at first glance, appear to blur accountability relationships, but they're also an opportunity to clarify the role of everyone and how we keep the other party informed of what we're doing. To me, it's more an opportunity to clarify accountability than the assurance that there will be less accountability.

Mr. Lynn Myers: Shifting gears for just a minute, on the value-for-money audit, I think I read somewhere where you targeted $750,000 per audit. I wonder if that target had been met and what you're projecting into the near future.

Mr. Denis Desautels: Mr. Chairman, that target, I can say, has been more than met. I think our average now for our value-for-money audits is closer to $700,000. It is less than the $750,000 we had aimed at.

Mr. Lynn Myers: And that's projected, as well?

Mr. Denis Desautels: Well, no, that's pretty.... This is the—

Mr. Lynn Myers: I meant what are you projecting for, let's say, 1999?

Mr. Denis Desautels: We'll maintain that objective for the future.

Mr. Lynn Myers: My final question is, who audits you?

Mr. Denis Desautels: Mr. Chairman, we are audited by a firm of chartered accountants, Welch & Company, who are appointed by the Treasury Board. As we have discussed on other occasions, this is a financial kind of audit. We are also subject to other oversight mechanisms by the Public Service Commission, the Official Languages Commission, and by the provincial chartered accountant institute. I could go into more detail, but—

Mr. Lynn Myers: Do you give good value for money?

Mr. Denis Desautels: Absolutely, Mr. Chairman.

Mr. Lynn Myers: I'm just kidding. That's rhetorical.

The Chairman: A rhetorical question. Yes, of course we get value for money.

Mr. Mahoney, four minutes, please.

Mr. Steve Mahoney (Mississauga West, Lib.): I guess the value-for-money question relates more to Parliament, doesn't it, at times?

Thank you, Mr. Chairman.

A couple of questions first of all about your actual report, just for clarification, Mr. Desautels. Section 4, page 23—when this shows the contributions to the employee benefit plans going down.... Oh, I'm sorry. It says they're going up to $6.4 million, right?

• 1635

Mr. Denis Desautels: Yes.

Mr. Steve Mahoney: Okay.

Then on table 3, it looks as though you're freezing wages. I know some people touched on this, but one of the issues we talked about at our last meeting was the difficulty of government agencies training people who then seek employment in the private sector or are sought after. The issue was raised earlier about a period when they would not be allowed to make that move.

I believe, sir, you said it's a pretty hot market for auditors out there, or words to that effect. I'm concerned about how you see maintaining your qualified staff if you're looking at a freeze in salaries, in this particular instance over the next three or four years.

Mr. Denis Desautels: It's important to remind members of the committee that the figure you see there of $30.4 million for salaries and wages in the three years will have to change. It's been shown as a flat figure because those are the instructions that are given to all departments: to use the current base and not factor in any increases until these increases have actually been negotiated with the unions and so on. We expect, though, that for 1998-99 there will be increases, and based on what we know, it could be in the neighbourhood of about $2 million on that base.

Mr. Steve Mahoney: These are union personnel primarily?

A voice: Management.

Mr. Denis Desautels: Both union and management. Half of our staff, I would say, are members of a union and the other half are not.

Mr. Steve Mahoney: It's interesting. Just for your information, the way I read this, estimates are actually for periods that have not expired yet, which may sound like a ridiculous statement, but in my experience on the public accounts of the Province of Ontario, the estimates were always last year's budget. I could never quite figure that out, but that's the way they operate in Ontario, so it's nice to see that we're at least federally a little more progressive than that.

The Chairman: We're a little more sophisticated here.

Mr. Steve Mahoney: On your work plan—I take it as a work plan—you've identified these reports that are being done in April, and then you go on. How would we, as a committee or as parliamentarians, have any kind of input into the prioritization of any of these, or how would we have input into adding some if indeed we wanted to?

Let me just tell you that the one I particularly would be interested in you have in a tentative schedule in 1999 under Department of National Defence, Civilian Human Resources Management. I'd be interested in an audit of the military personnel and where they stand, because there is a very serious problem in that, and yet I don't see that anywhere in your radar scope on this document.

Mr. Denis Desautels: Mr. Chairman, I must say I genuinely welcome suggestions from this committee of that nature. I've tried very hard since I've been Auditor General to make our organization as demand-driven as possible. We have to maintain of course a certain independence and play our role in a non-partisan way, but if we can sense some genuine concerns by members of Parliament about certain areas of government operation, we very much would take that into account and factor that into our plans.

Certainly the kind of comment made just now by Mr. Mahoney I would take note of, and when we go back after this meeting, we will see if it's something that is already on our radar screen and could be handled differently.

Mr. Steve Mahoney: Could I ask one brief question to put another one on your radar screen? That's Canada Post. I have a response from the minister basically saying that Canada Post, since it does not receive any taxpayers' money, is now audited by a private firm. Yet the private sector would tell you that as a crown corporation Canada Post has somewhat of a special position in being able to compete against private sector companies like UPS and others in the industry. There's some concern it's not being treated as a public body. I believe you no longer audit Canada Post, although recently you did.

• 1640

Do you have a concern or a thought that it should be audited by the public auditor, or would you accept the position of the minister that a private sector firm like Deloitte & Touche Inc. is an acceptable auditor for what amounts to a public operation?

Mr. Denis Desautels: Mr. Mahoney is right. We were auditors of Canada Post up to about four years ago. Because Canada Post is technically no longer dependent on federal government funding, the Financial Administration Act in its legislation doesn't require it to have us as its auditors.

We, of course, have always been quite prepared to continue as auditors of Canada Post, if this were the wish of Parliament. I believe it's still a corporation with a public policy role, and our office, because of its experience in serving Parliament and public policy generally, has gained a lot of expertise and experience in dealing with the kinds of concerns you and other members of Parliament have.

There are different ways of approaching it. At one point we were also co-auditors of Canada Post, and that's a formula that would maybe allow for the best of both worlds and ought to be considered again.

The Chairman: Following up on Mr. Mahoney's question, which I think was a good one, are you still able to do a value-for-money audit on the post office, even though you're not doing the financial audit of the post office? Are you still able to go in there under the Financial Administration Act and do a value-for-money audit?

Mr. Denis Desautels: No, we're not. The corporation always has the possibility of inviting us in to carry out a special examination, for instance. The law would permit that to happen, but it would have to be on its invitation. Otherwise, we have no ability or power on our own to go in and do that kind of audit.

The Chairman: When you say if Parliament were to ask you to go in, are you talking about a recommendation from this committee or from Parliament itself? Would it take the House to ask you to do an audit of Canada Post or would a resolution passed by this committee be sufficient?

Mr. Denis Desautels: No. It would have to be done through an order in council.

The Chairman: Thank you.

Mr. Mayfield for four minutes, please.

Mr. Philip Mayfield: Thank you very much again, Mr. Chairman.

I was asking earlier about accountability or how we might be aware of accountability of government partners like provincial departments, but it strikes me that in the light of how government is changing, this is not the only example. I think of how NAV CANADA has taken over the navigation system from Transport Canada.

I believe you've expressed some concern about parliamentary scrutiny and accountability in the light of these changes. I'm wondering how Parliament can attain a full accounting of program management in results with these new partnerships with the agencies that are taking over other departmental functions. I don't believe you audit NAV CANADA, so I'm asking how Parliament could hold these accountable and have an insight into the results.

• 1645

Mr. Denis Desautels: As long as these agencies remain part of the government structure, I believe in that case, through legislation and other means, the government can require the organization to meet certain accountability standards that would make it possible for Parliament to exercise its overseer role and also for government to know what is happening in those organizations.

But there are organizations or operations that have been taken out of government altogether per se. NAV CANADA is a good example of that. NAV CANADA, for all intents and purposes, is no longer part of the government, and therefore it's not possible or logical to ask an organization that's not part of government to render the same kind of accountability to Parliament as government crown corporations or departments.

Mr. Philip Mayfield: Yet the function NAV CANADA provides is still an important function for flyers and the air transportation industry. I think particularly of safety, not just the dollars and cents that are spent. I would like to know how Parliament can be sure that simply because this function has been hived-off, there's still some sense of accountability to the Canadian people.

Mr. Denis Desautels: My understanding of the NAV CANADA legislation is that NAV CANADA is a private, not-for-profit organization that now operates in the private sector. The government has representation on the board of NAV CANADA and through that representation is able to exercise some kind of oversight. But that's not the same as allowing Parliament that kind of oversight.

The other thing I should note is even under the NAV CANADA legislation, the Minister of Transport remains responsible for the safety of the system. Through the normal mechanisms, the Minister of Transport is accountable to the House for that aspect of his mandate.

Mr. Philip Mayfield: This is certainly beyond the scope of your responsibility. I don't want to push you beyond too much speculation, but a question that's often asked of other departments is, “How are you doing with the year 2000? Are you going to be ready?”

There's another question that parallels this. It's not only a matter of the departments and your department being compatible by the millennium, but the dependence users have upon the telephone companies or the means of communication from one department to another department or another agency. Is there some concern you have that this type of communication will be compatible, as well as having the departments themselves compatible? This is in addition to asking how you're doing and whether you'll be ready.

Mr. Denis Desautels: At this point we are ready. We've gone through all of our systems and made all the changes required to our systems. So in terms of all the systems that are our own, they've been dealt with. They've been analysed and corrected. We invested about $250,000 in doing that.

We are vulnerable to a certain extent to other systems that are not under our control. For instance, the payroll system is part of the government payroll system. The payment of bills of suppliers is done through the government system. So we're relying on them to be ready for that.

In terms of other utilities, as Mr. Mayfield mentioned, we have a continuing interest in making sure the telephone, electricity or others will be functioning properly. We'll be continuing on that front to ask for assurances from those utilities, as well as from those who are supplying these common systems. But our own systems at this stage are ready.

The Chairman: Mr. Pagtakhan, four minutes, please.

• 1650

Mr. Rey D. Pagtakhan (Winnipeg North—St. Paul, Lib.): Thank you, Mr. Chair. I would like to follow up on the question on the post office. What is to be gained by the Auditor General auditing the post office that cannot be done or effected by the private sector?

Mr. Denis Desautels: Mr. Chairman, I think there are two kinds of audits done at the post office. There is what we would call the annual financial audit that attests to the financial statements of Canada Post. Whether we do them or a private sector accounting firm does them is not that different.

The only difference—and I say this in all honesty—is that the Financial Administration Act requires auditors to report not only on the fairness of the financial statements but also on compliance with by-laws and laws and regulations and so on. I think on that front I would say legislative auditors usually have a bit of an edge. They are more used to auditing for that kind of thing than private sector auditors are, and again, I believe I say that in all honesty.

The other type of audit that's carried out is once every five years, a special examination. Again there, I believe this is a process that's more unique to the public sector. I believe our office has developed a particular expertise in that area. We do quite a number of them every five years. I think we're up to about 60 special examinations every five-year period. So I think on that front we probably have a bit more experience.

Finally, in addition to having more experience, again, we work year in and year out with members of Parliament, and I think we're a little more conscious of the interests and concerns of members of Parliament just because we have more contact with members of Parliament. I think that would help us and give us a bit of an edge in carrying out an audit of a crown corporation.

Mr. Rey Pagtakhan: Certainly those are excellent differences.

In terms of costing to do the audit of the financial statements, assuming they are both of equal value, would the cost be less with the private sector than the public sector?

Mr. Denis Desautels: In my experience, I believe there would not be much difference in cost whether it be done by one or the other. Before, I made my whole career in the private sector doing that kind of work, and now I'm doing it on behalf of Parliament. We do our own costing of all of the work we do, a full-fledged costing system. When I compare what it's costing us to do some of those audits and what I used to bill when I was in the private sector, I think the costs are very comparable.

Mr. Rey Pagtakhan: So the only difference in cost would come if the post office would not go through its private auditing for the special examination every five years as a self-imposed discipline, and as well, answering those questions of particular interest to members of Parliament. For the post office not to do that, that would be the only cost saving they will have in terms of auditing, by and large.

Mr. Denis Desautels: Canada Post does have an obligation to have a five-year examination carried out as well.

Mr. Rey Pagtakhan: By whom?

Mr. Denis Desautels: Normally it would be carried out by their appointed external auditor.

Mr. Rey Pagtakhan: And the cost of that five-year special auditing would be more or less of similar magnitude in terms of auditing expense with the public sector?

Mr. Denis Desautels: Yes, I have to assume it would be, because I think the level of effort should be relatively the same, whether it be carried out by a private sector firm or us.

Mr. Rey Pagtakhan: So is it fair to say in terms of auditing cost, for the value that we would like to derive from the process, the cost would be the same, but there is the additional value in terms of results obtained if it were to be done by the public sector, by your office?

The Chairman: Thank you, Mr. Pagtakhan. We'll have a short answer from the Auditor General.

• 1655

Mr. Denis Desautels: I don't think this issue is an issue of cost. I believe that whether we carry out the work or whether it's carried out by a private sector auditing firm, the cost to the crown, to the taxpayer, should be relatively the same. I think it's more a question of the fact that in certain crown corporations, Parliament, for one reason or another, may find it in its interests to have the legislative auditor doing the work, as opposed to a private sector firm. This is based on a number of factors, including the funding that a crown corporation may receive, or the extent of public policy role carried out by the crown corporation. There are factors other than cost factors.

Mr. Chairman, if I may, I'd just like to correct a previous answer that I gave. The number of special examinations that we do is around 35, not 60.

The Chairman: Thank you, Mr. Desautels.

Following up to Mr. Pagtakhan's questions regarding the post office—Mr. Mahoney had a question there, and so did I earlier—is there any way that we can get value-for-money auditing of Canada Post by an external examiner such as you, or anyone else for that matter? We know they have a financial auditor, and we know they'll make a report to Parliament, but that report to Parliament is presumably an internally prepared document.

These value-for-money audits that you have performed in departments and so on are very valuable. As you know, we spend a lot of time looking at value-for-money audits in this committee. Canada Post has been able to remove itself from government scrutiny by virtue of the fact it's making a profit, but a monopoly is given to it and is guaranteed by the legislation. Therefore, we should be looking at the efficiency and productivity, the value for money they are providing to the consumers, the Canadian taxpayer. Is there any way that a value-for-money audit can be done on the post office?

Mr. Denis Desautels: Mr. Chairman, the Financial Administration Act and Canada Post's own legislation do not really provide for that. They provide for what we've talked about here, a special examination once every five years.

The Chairman: What is that special examination? What do you focus on when you do a special examination?

Mr. Denis Desautels: In simple terms, Mr. Chairman, the special examination is very similar to a value-for-money audit. It's what they've chosen to call a value-for-money audit in a crown corporation. However, to make sure the information is complete, the act requires that these special examinations be reported to the boards of those crown corporations.

The Chairman: And to Parliament?

Mr. Denis Desautels: No.

The Chairman: We never see it.

Mr. Denis Desautels: The act requires the auditor or the special examiner to report to the board in special circumstances, and those are up to the judgment of the auditor or the special examiner. He can report beyond the board to the minister; and in special circumstances yet, the examiner could report to Parliament if, in his or her judgment, something really needs to be brought to the attention of Parliament. That's the mechanism that's provided; however, certain crown corporations have chosen to make these reports to the board public in the past. I can think of CBC as an example, and the National Capital Commission has also done that.

The Chairman: Thank you, Mr. Desautels.

Mr. Grewal, four minutes.

Mr. Gurmant Grewal: Thank you, Mr. Chairman.

I thank Mr. Desrochers for donating his time. I'll try not to use all of it.

I had a million-dollar question about $2 million. It was already partially answered, but I would actually like to know why that $2 million that you know you will be asking for was not included in the estimates. It probably would have been easier and the process would have been cut short.

The other question I would like to put forward is to know the role of the independent advisory committee. I didn't get that answer yet. Is that the source that gives direction on what to audit and what not to audit?

And as one other things I would like to know, when you audit a particular organization in the system, do you also specifically focus on certain particular departments if you want to, or do you have to just get the blanket direction? For example, if you want to audit CIDA, would it be possible that you would be focusing on CIDA Inc., for instance? What needs to be there so that you decide that you can audit a particular department?

• 1700

Finally, Mr. Chairman, I would like to know something about the public accounts. I noticed that the Auditor General had very serious comments and concerns and qualifications about the public accounts of the government. I learned through the media that there has been some exchange of letters.

Has the issue been resolved with the Treasury Board or the ministry? Did you reach any compromise? What is the action you plan to take to make sure that public accounts—

The Chairman: If I can just interject, Mr. Grewal, you didn't read about that through the media. The deputy minister of finance and the secretary of the Treasury Board wrote to the Auditor General with copies to the chairman, and I sent a copy to you. The Auditor General also responded to these gentlemen, with a copy to me, which I also distributed to all members of the committee. They both became public documents.

Does the Auditor General wish to carry it beyond that?

Mr. Gurmant Grewal: But I'm not aware of whether or not it was resolved.

The Chairman: That's what the Auditor General is going to tell you.

Mr. Gurmant Grewal: Thanks.

Mr. Denis Desautels: I'd like to answer the last three questions first. Then I'll ask Mr. McLaughlin to answer the first one, on the $2 million.

First of all, the independent advisory committee you have asked about is a committee of senior accounting and auditing practitioners that I've put together to advise me on difficult questions we have to resolve from time to time.

Mr. Gurmant Grewal: Is that an independent board of directors or something like that?

Mr. Denis Desautels: No, these are people who come from the large accounting firms or from academia and who are respected authorities in accounting and auditing issues. They are called together two or three times a year to advise me on particular accounting and auditing questions.

Mr. Gurmant Grewal: Appointed by you or by the government?

Mr. Denis Desautels: They are appointed by me, under contract to the office.

Mr. Gurmant Grewal: Okay.

Mr. Denis Desautels: The third question was on how we choose our audit subjects when we go into a department and so on. We do have a fairly sophisticated planning system, which is managed by my two colleagues here. This is a multi-year planning system that identifies the subjects about five years down the road and the level of effort we want to exert in various areas of government administration.

A quick way to answer your question is to say that we are free to choose our own audit program. The Office of the Auditor General enjoys sufficient independence from government, and we're expected to choose our own subjects ourselves. As I mentioned earlier, we like to listen to the concerns of people, but in the end, we make the call as to what we want to look at.

It does happen from time to time that departments don't welcome us at a particular point in time. Sometimes it's for genuine reasons—they're in the middle of making a huge change, for instance, and they would like us to come back another time—but we do end up carrying out our program as we plan it.

On your last question, regarding our discussions on the presentation of financial results by the government, we have advised the Speaker of the House that we will have a chapter on that issue in the report we will table next week. I hope we can wait for that to come out next Tuesday.

The Chairman: We can wait with anticipation, I'm sure.

Mr. Denis Desautels: Mr. McLaughlin can answer the first question, Mr. Chairman.

Mr. Gurmant Grewal: Excuse me, but how about going about it in a particular department—for example, CIDA Inc. and so on? Is it your call, and then you would pick up the particular department, not the whole organization? Can you do that?

Mr. Denis Desautels: Yes, it's our call. We select which department we want to audit and which program within the department we want to audit.

Mr. Gurmant Grewal: Okay.

• 1705

The Chairman: Mr. McLaughlin.

Mr. Michael McLaughlin: I'll quickly try to describe why the $2 million isn't there in the estimates.

The main reason is it wasn't known at the time whether any increases would be granted to public servants. It was only after the estimates had been prepared that the minister for the Treasury Board announced that in fact we should be providing approximately 2%-per-year increases to contracts. He made this as an announcement of something we could look forward to. In fact some of the agreements that had been signed since the time we prepared the estimates document provided for those kinds of increases, but the CS agreements, the computer science agreements, showed even more than that, and we factored that into what we would need for the $2 million.

It also takes into account what the minister has announced for management category compensation, and again, that's an area where we would be looking at increasing the amount. So that's where the $2 million comes from, but it wasn't announced until after we had prepared the estimates, and Treasury Board Secretariat people had told us we could put in no provision at that time for increases.

The Chairman: Thank you, Mr. McLaughlin.

Mr. Grose.

Mr. Ivan Grose (Oshawa, Lib.): Thank you, Mr. Chairman. As usual, the opposition have stolen my best questions.

Some hon. members: Oh no, not again!

Mr. Ivan Grose: That may be an indication of how my mind works. Maybe I'm in the wrong place.

Some hon. members: Oh, oh!

Mr. Ivan Grose: I get the answer anyway, so it doesn't matter.

As usual, I'm a little confused on something: your number 5 priority, “Implement fully the role of the Commissioner of the Environment and Sustainable Development”. I've read pages 19 and 20 ten times, and maybe it's because the words are too big for me or something, but I'm wondering, inasmuch as you report after the fact, how are you going to implement fully the role of the commissioner? Is that a bad use of words? Maybe you're just going to follow the implementation?

Mr. Denis Desautels: Mr. Chairman, just to clarify things a bit, the Commissioner of the Environment is a part of our own office, so the Commissioner of the Environment is us. This is a new role that you gave to us a couple of years ago, and that new role also included obligations on government departments to prepare sustainable development strategies.

So simply what we have in mind here is to implement fully, as quickly as we can, both the new role you've given us on environment and sustainable development and the preparation of sustainable development strategies by departments themselves. It's simply an important new role that we want to make sure we deliver as quickly as possible.

Mr. Ivan Grose: That answers my question fully. I wasn't aware that the commissioner was a part of your department. Thank you very much.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Grose. Mr. Myers.

Mr. Lynn Myers: Mr. Chairman, I just have a quick question.

I was interested in the planned activities for 1998, the Canadian Food Inspection Agency. As a new entity and as a service agency, does that pose special considerations for you to look at and/or special challenges by virtue of what it is as a new entity? Or is it just similar to all other things that you audit?

Mr. Denis Desautels: Mr. Chairman, this will be a new challenge in a number of respects. The report we're planning to table in 1998 is essentially a study to try to capture the experience of setting up this first major agency, because there will be others following on parks and on revenue. So the purpose of this chapter is just to capture the experiences and the lessons learned in the first one, and presumably provide some recommendations for whether it's possible to improve the way things can be done for future ones.

But I think your question is broader than that. We're working right now quite closely with the agency in developing or helping them develop the kind of performance information that will be required of them, and at the same time the kind of assessment or assurance that we can provide to Parliament on the reliability and the completeness of those performance indicators. So that is something quite new. It's new territory, and we would like to make sure it is a successful venture. If that's well done, I think the public administration generally will be well served.

• 1710

One other difference in that agency from the past regimes is they'll now produce their own financial statements, much like a crown corporation. So we'll have to provide an opinion on those financial statements, which we didn't have to do before, because they were simply part of the greater government structure.

That will be doable, but the main challenge will be to come up with meaningful performance indicators and reliable systems to produce those indicators.

Mr. Lynn Myers: Thank you very much.

The Chairman: Mr. Pagtakhan.

Mr. Rey Pagtakhan: Thank you, Mr. Chairman.

I have two questions for Mr. Desautels. First, for my information, how much have you budgeted for the advisory group in any given year?

Secondly, when the government defines the maximum budget allocated for a salary increase for unionized members and management, does it not in effect sort of tell us the result of the union negotiations, only to influence the difference that will go to management? How then does that influence the decision of management to negotiate?

The amount is absolute, and you know part of it will be for management. Management negotiates with the union members, and the more you give, the less is left for you, for management. How does this reconcile with conflict of interest in terms of bargaining in good faith?

Mr. Denis Desautels: Mr. Chairman, I would like Mr. McLaughlin to answer both questions, if he can.

The Chairman: The eyes of the world are on you.

Mr. Michael McLaughlin: I'm not sure I have off the top of my head the cost for the advisory group. It's not an enormous cost for the independent advisory panel. Certainly I would be thinking about $50,000 for the year would be about the order of the cost of that committee.

The Chairman: How big is the group, by the way?

Mr. Michael McLaughlin: I believe there are eight or ten members.

Mr. Denis Desautels: There are about eight members.

The Chairman: Do they revolve and change, or are they static?

Mr. Denis Desautels: There's a certain amount of turnover.

Mr. Michael McLaughlin: On the second question, in terms of the salary exercise, the negotiator for the salaries is the Treasury Board Secretariat. They are the employer and they are the ones who are negotiating with the unionized people. So it's not the management of the independent departments that are doing any kind of negotiation. The amounts that are set for the management category are fixed by Treasury Board, the minister himself. There's no negotiation that occurs with management at all.

Mr. Rey Pagtakhan: Excellent.

Mr. Michael McLaughlin: That's exactly how it happens.

Mr. Rey Pagtakhan: Thank you.

The Chairman: Mr. Grose, I think you had a question.

Mr. Ivan Grose: Thank you, Mr. Chairman. It's short, as usual.

In a partnership program—supposing we're in partnership with a province on a program—how can we get a full report on exactly what happened? Can we get into their books? Do we trust their auditor? Does he give you an accounting and then therefore we have an accounting of the full program?

Mr. Denis Desautels: I think it's quite doable to achieve a mutually satisfactory accountability arrangement in these partnerships. There is a certain example of that provided by the labour agreements that have been already negotiated by the federal government with the provinces for the transfer of manpower training programs. I think those agreements are quite detailed, and they provide for the kind of reporting done by each party, the kind of audit of the programs carried out either by the provincial auditor or the federal auditor.

• 1715

So I believe these have been worked out satisfactorily. We haven't seen them in operation yet because they're so fresh. We're looking forward to actually having a look at the first report coming out of that. It'll be interesting to see what flows to Parliament from these particular arrangements. I'm confident that it can work quite well.

Mr. Ivan Grose: That was mainly my question, so far are you satisfied?

Mr. Denis Desautels: Yes.

Mr. Ivan Grose: Thank you.

The Chairman: As chairman of public accounts, Mr. Desautels, I'd like to convey to you and your staff the appreciation of the Standing Committee on Public Accounts for the work you and your staff do, the integrity and stamp of approval you put on government. We, as a western democracy, are very well served by our government compared with others in other countries. That, of course, is in some small measure due to the efforts of you and your staff to ensure that integrity is maintained. We appreciate that. I think I speak on behalf of all members of the committee. If you could pass on our appreciation to the staff, we'd be obliged.

Mr. Denis Desautels: Mr. Chairman, I appreciate very much your comments and I will pass on those comments to all of our staff.

The Chairman: Okay, thank you.

I have a couple of questions. As representative of a country that hopefully leads the way around the world as far as integrity and accountability of government are concerned, you participate in some international teams to disseminate the benefits of the knowledge we have here in Canada. Would you like to tell us what involvement you have in international organizations?

Mr. Denis Desautels: I can draw a quick picture, Mr. Chairman, of what we do on the international front.

First, we're a member of the international organization that brings together legislative auditors from all countries in the world that are a part of the United Nations. We're an active member of that and we participate in a number of committees that this international organization has put together.

We participate in the committees on information technology and debt management, as examples, and on accounting standards.

Also, on behalf of this organization, which is called INTOSAI, we run a program of that organization out of our office called IDI, the INTOSAI development initiative. This is a major commitment of time by some of our people. The purpose of this is to help developing nations develop their own capacity in their offices for carrying out the kind of work we carry out here. That's been going on since 1986 and Canada has played a leadership role in the area of knowledge development in developing countries' institutions.

We also run out of our office for CIDA an international fellowship program. Under this program, five representatives from developing countries spend close to a year in Canada in our office learning our way of doing things, particularly value-for-money auditing. This is a program funded by CIDA. Again, there we supply the methodology, the material and the support of our staff to help those people and to transmit knowledge to those people.

Within reason, we also try to respond to some requests on a bilateral basis from developing countries that need information and documentation. We obviously don't have a mandate or funding to do international development work, but within reason, if it's easy to do, we will agree to pass on information or receive these people here if they want to spend a couple of days in our office to learn more about how we do things. That's another dimension of our international activities.

Finally, we are active in UN organizations. We are the auditors of UNESCO in Paris and ICAO, the International Civil Aviation Organization, in Montreal. Those are mandates we carry out essentially in support of Canada's international or external affairs program.

• 1720

So that's really a quick picture of the extent of work that we try to do to accommodate within our budget and with the resources we have.

The Chairman: Thank you, Mr. Desautels.

Mr. Pagtakhan, you have a question.

Mr. Rey Pagtakhan: Yes, I have one quick question about that summary. Of the international fellows who have been to your office over the last decade, say, how many of them have remained in the public sector in those countries? Would you know?

Mr. Denis Desautels: Mr. Chairman, I'm happy about the question, because we do try to keep track. There's a clear follow-up of what happens to these people who come here on a fellowship. The vast majority of them, as far as we know, have remained with their organizations, but beyond that, some of them have done very well. I can tell you that recently one of the people who came here on a fellowship program from Thailand has now become auditor of Thailand. That's an example that shows the program is working. We've had about 140 people on that program since it started.

The Chairman: You obviously train them well.

Mr. Denis Desautels: We try.

Mr. Gurmant Grewal: From how many countries?

The Chairman: How many countries have participated in the program?

Mr. Denis Desautels: Forty-seven countries.

The Chairman: I think that we're now in a position to vote on the estimates that we have been debating this afternoon. Do we have quorum, Mr. Clerk?

The Clerk of the Committee: Yes, we do.

The Chairman: Therefore, there are two motions to put forward to the committee. The estimates of the Auditor General fall under vote 30 of the finance committee.

OFFICE OF THE AUDITOR GENERAL

Auditor General

Vote 30-Program Expenditures*cl$44,400,000

(Vote 30 agreed to)

The Chairman: Shall I report vote 30 to the House?

Some hon. members: Agreed.

The Chairman: Thank you very much.

For Thursday, April 23, we'll be dealing with the draft report on refugees for a period of one hour, after which we will have a delegation from the public accounts committee of the North West Province of South Africa, from 4.30 p.m. to 5.30 p.m. That will be in room 209, West Block.

As the Auditor General has already pointed out, on Tuesday, April 28, he will be tabling his next report. As usual, we will have an in camera preview of his report. That will likely be held in the Reading Room. And for Thursday, April 30, we have a public report by the Auditor General to this committee. At this time we have the Railway Room booked for that meeting, so it should actually be televised. On April 30, in the morning, we will be having a steering committee meeting to set the agenda based on what Mr. Desautels has reported to us, to see us through until the recess in June.

That's what's coming up in the next few weeks.

Mr. Myers.

Mr. Lynn Myers: Mr. Chairman, which date is it, again, that is to be televised?

The Chairman: Thursday, April 30.

Mr. Lynn Myers: Thank you.

The Chairman: The televised meeting will be at 3.30 p.m., the usual time. There will be a steering committee meeting in the morning.

Make-up, please.

Some hon. members: Oh, oh.

Mr. Rey Pagtakhan: The April 28 meeting is in camera?

The Chairman: The April 28 meeting is in camera for all members of Parliament in the Reading Room, as we get a preview of the report before it is tabled in the House of Commons at 2 p.m.

Mr. Mahoney.

Mr. Steve Mahoney: One of the questions that I asked the auditor about...for example, the audit of the situation with our military personnel, how would I get information back? Or the committee? Will the Auditor General come back to us with something on that?

You've said you'd be prepared to consider it.

Mr. Denis Desautels: Mr. Chairman, I can undertake to take Mr. Mahoney's suggestion with me and then go back and look at our plans. I can in fact get back in touch with Mr. Mahoney.

Mr. Steve Mahoney: Or the committee.

Mr. Denis Desautels: I can do that too.

Mr. Steve Mahoney: I'm sure others would share the interest.

The Chairman: You can, as an individual member of Parliament, Mr. Mahoney, write to Mr. Desautels, the Auditor General, raising an issue that you would like him to look at. Or you may actually even bring it to the committee and ask if the committee is prepared to endorse your recommendation to suggest to Mr. Desautels that he investigate a particular area. So you can either do it as an individual member of Parliament or you can ask the public accounts committee to endorse your recommendation.

• 1725

Mr. Steve Mahoney: With five minutes to go, I don't want to start a long debate. I would either serve notice or ask if the committee is interested.

The Chairman: If you wish the public accounts committee to deal with the issue, take it to the steering committee first—

Mr. Steve Mahoney: All right.

The Chairman: —and then we'll bring it back to full committee. We're not going to deal with it right now.

That being all for today, the committee is adjourned.