PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 1, 1998

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[English]

[Editor's Note: Technical Difficulty]

The Clerk of the Committee: With the new membership lists this morning in the House, the first item of business today is the election of a chair. I'm ready to receive motions to that effect.

Mr. Philip Mayfield (Cariboo—Chilcotin, Ref.): I nominate John Williams.

The Clerk: Mr. Mayfield moves that John Williams be elected chair of this committee.

Are there any comments? Debate?

All those in favour of the motion of Mr. Mayfield, seconded by Mr. Grose, that John Williams be elected chair of this committee, please raise your hands.

It's unanimous.

(Motion agreed to)

The Clerk: I duly declare Mr. John Williams duly elected chairman of this committee.

Some hon. members: Hear, hear.

An hon. member: Dinner's on John tonight.

The Chairman (Mr. John Williams (St. Albert, Ref.)): Thank you.

And thank you, Bernard, but I'll leave the acceptance speech until we're off the record.

We'll now move to the election of the two vice-chairs.

Mr. Harb.

Mr. Mac Harb (Ottawa Centre, Lib.): Mr. Chair, I'd like to move the candidate of the people, Lynn Myers, for vice-chair.

Some hon. members: Oh, oh.

The Chairman: Okay. Are you ready for the question?

(Motion agreed to)

The Chairman: Mr. Myers.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): Mr. Chairman, I move that Ivan Grose be co-vice-chair.

The Chairman: We have a motion that Mr. Grose be co-vice-chair. Are we ready for the question?

(Motion agreed to)

The Chairman: I now invite the Auditor General to come and join us.

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Before I introduce our witnesses this afternoon, let me say that we're going to have a brief steering committee meeting immediately following this meeting. The steering committee consists of the chair, two vice-chairs, one additional government member, and a member from the Bloc, from the NDP and from the Progressive Conservatives. A quorum is four, so I'll need that immediately following this meeting.

This afternoon, pursuant to Standing Order 108(3)(e), we have consideration of the September 1998 report of the Auditor General. And with us today we have: Mr. Denis Desautels, the Auditor General of Canada; Mr. Michael McLaughlin, the deputy auditor general, corporate services; Mr. David Rattray, assistant auditor general; and Mr. Grant Wilson, principal of the audit operations branch.

Good afternoon, gentlemen.

I will now turn the floor over to you, Mr. Desautels, for your opening remarks.

Mr. L. Denis Desautels (Auditor General of Canada, Office of the Auditor General of Canada): Thank you very much, Mr. Chairman. We're pleased to again have the opportunity to meet with the committee to discuss the report we tabled last Tuesday.

As you said, I have with me today Mr. Mike McLaughlin, Mr. David Rattray, and Mr. Grant Wilson, who is our expert on first nations issues.

This report, Mr. Chairman, alerts Parliament not only to the urgency for the government to adjust to certain new realities but also to the necessity to revisit some programs that have been taken for granted for some time.

On Tuesday I gave a brief overview of the entire report to the committee, but today I'd like to concentrate my comments on the chapters that I consider to be higher priority for hearings. I'll speak very briefly on each of the topics suggested in the order that they appear in the report.

Chapter 10 deals with the Canadian Human Rights Commission and the Human Rights Tribunal Panel. These institutions are crucial in defending key values in our society, but over the years they've evolved into what we think is a cumbersome, time-consuming and expensive system.

The audit found that the commission faces major delays in dealing with complaints. On average, it takes about two years for the commission to review complaints. The tribunal hearings are also lengthy. The impact of this on thousands of Canadians who seek redress for alleged causes of discrimination can be devastating. A fundamental review of the roles of the commission and the tribunal is necessary.

[Translation]

Chapter 14 focuses on the role of Indian and Northern Affairs Canada in reaching and implementing comprehensive land claims related to aboriginal title to land and rights that have not been dealt with by treaties or law.

Twelve settlements have been finalized, as of July 1997. They encompass the transfer of a half-million square kilometres of land and $2 billion in capital. There are at least 70 additional claims throughout Canada in various stages of negotiation, involving potentially up to 200 First Nations.

We noted problems in a number of areas that need to be taken into account in the settlement of remaining claims and in the ongoing implementation of previous settlements. Settlements take a long time to conclude and agreements are still accompanied by a great deal of uncertainty.

The audit found a lack of rigour in determining the amounts of cash and the value of the land and other resources to be covered by final settlements. It also identified deficiencies in the implementation of these agreements, such as a lack of implementation plans, incomplete reporting of costs and inadequate monitoring and evaluation.

I am concerned with the department's response to the audit. The department has not responded to the specific recommendations either positively or negatively. For example, with respect to several reported issues of reaching and implementing settlements, the response suggests that the audit observations apply to claims that were settled under policies that have been superseded. That is not the case.

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I believe a hearing by your committee would help clarify what corrective measures the department intends to implement.

Moving to Chapter 16, we noted that the Social Insurance Number has, over the years, become the key to accessing a wide variety of social programs. Its use has spread not only in the federal government but also the provincial and municipal levels of government and even the private sector. Yet it was never intended for such a broad range of purposes.

The audit identified a number of weaknesses in the management of the SIN. The information on individuals, particularly on births and deaths, is not always complete or accurate. Also, valid SINs are held by thousands of individuals who have no legal status in Canada.

The audit found that there are 11.8 million uncertified accounts in the Social Insurance Register. These represent SINs that were issued to individuals without asking them for identification documents and that were never subsequently validated.

Potential repercussions of these weaknesses include SIN errors, abuse and fraud affecting many federal programs, provinces and the private sector. Social programs are particularly vulnerable and the collective impact could be significant.

[English]

As I said, the wide use now made of social insurance numbers concerns me, as it has serious implications for the protection of privacy, to which all Canadians have a right. When the SIN was introduced, Parliament and the government were clear that privacy was of primary concern. To protect public funds and taxpayers, it's crucial that the government determine the role it wants the social insurance number to play. It's essential that Parliament be actively involved in discussing these issues, raising public awareness and seeking a satisfactory solution. Your committee may wish to discuss with the Department of Human Resources Development how it intends to ensure the integrity of the SIN database.

Finally, chapter 18, Mr. Chairman, deals with the government's financial information strategy, the FIS initiative. It's a topic that I personally consider crucial to the health of our finances. There are three key components to FIS: first, a move to full accrual accounting similar to that used in the private sector by business firms; second, implementation of new financial systems across departments; and third, integration of financial information into day-to-day management decision making.

FIS is important because it will provide the financial information the government needs to make informed decisions in the years ahead. More precisely, through this strategy the government is replacing its rather archaic accounting systems and introducing more modern and useful accounting practices.

FIS was approved at least 10 years ago, and until recently the pace of implementation had been much too slow. Further delay is no longer, in my view, an acceptable option. The government needs information that at present it doesn't have in order to properly manage its activities. This committee's review of the progress in implementing FIS could help provide the necessary push to implement FIS on schedule.

So I thank you, Mr. Chairman, and my colleagues and I would be very pleased to answer your questions.

The Chairman: Thank you, Mr. Desautels.

Mr. Mayfield, you have eight minutes.

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

I'd like to begin by asking the Auditor General a brief question and perhaps getting a brief response from him. I understand it's the committee's responsibility to determine what issues it will discuss here. The spotlight is now on your latest report, but I'm wondering, sir, if there are issues from previous reports that have not been dealt with completely or satisfactorily. I notice that when the Speaker receives the reports he says that they are permanently received and that all areas of your reports are still current.

I hope that's not too off-the-wall for you.

Mr. Denis Desautels: Mr. Chairman, I don't have a precise answer for you. In the course of a year, this committee looks at about half, maybe, of the total reports we make. So some of them don't get looked at, but you have put in place other mechanisms for ensuring that departments do respond to the reports and do in fact write back or inform this committee of their progress in doing so.

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I don't have in front of me the latest analysis of the responses received when the committee contacted the departments over the course of the summer. We could go through these responses and come back with that kind of information at a later meeting.

Mr. Philip Mayfield: Perhaps that would give you an opportunity to be better prepared to discuss this. It's one of the things I think about.

Would you be prepared for me to move on now, sir?

Mr. Denis Desautels: Yes.

Mr. Philip Mayfield: Thank you.

I've had an opportunity to begin reading the report on the Canadian Human Rights Commission. In listening to your submission today, I notice that in paragraph 6 you say, “A fundamental review of the roles of the Commission and the Tribunal is necessary.”

I've read enough of the report to realize that there's a big backlog, with 60% to 70% of the cases listed as backlog. They are not able to keep up with the money they have. As I read it, there seem to be some similarities between the problems this commission is having and the problems the citizenship and immigration board is having.

Would you care to expand a little on this statement about “a fundamental review of the roles of the Commission and the Tribunal”? It seems to me that you've raised a fairly fundamental issue there. I'd like to hear whether you think we should go back to square one and begin looking at how to deal with these important issues, because you've emphasized how important this issue is.

Mr. Denis Desautels: Mr. Chairman, I would like to draw your attention to paragraphs 10.122 and 10.123.

In 10.123, for instance, this is really a single recommendation which brings together all the issues that we feel need to be looked at.

For instance, at the first bullet under 10.123, we talk about “periodic reviews by Parliament of the relevance and impact of the grounds of discrimination”. We raise that particular problem in the chapter and recommend that some discussion of that take place.

At the second bullet, we talk about broadening the “choice of ways complainants and respondents could use to resolve human rights complaints”, such as going directly to the Federal Court.

As you can see, we're recommending that certain issues be reconsidered, because in doing our work, we felt that these caused certain problems for the commission and were responsible, in fact, for some of the buildup of the backlog.

However, in addition to that, we also recommend certain operational improvements that the commission can make entirely on its own. About half of the points we raise in 10.123 require some form of parliamentary debate and reconsideration of some of the basic premises under which the commission and the tribunal operate.

I also note, under 10.122, that “the Minister of Justice has stated that a broad review of the Human Rights Act will be undertaken” in the future, so we're not the only ones calling for that kind of review and reconsideration. We feel the minister is also onside.

Mr. Philip Mayfield: I believe that the commission has called for more money. Treasury Board, in essence, said no, that it would not be providing that. In your review, do you think the commission is adequately funded at this time for the task that it's been given?

Mr. Denis Desautels: I'll ask Mr. Rattray to answer that one.

Mr. David Rattray (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chairman, the commission has undergone program review, like many other arms or entities of government, and has had somewhat of a cutback. In order to offset that, the commission has reviewed its process of investigations and has tried to streamline its efforts in order to compensate for any cuts. So the first part of my answer would be that in response to the program review exercise, I think they've taken a lot of action to try to offset it.

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In order to catch up with the backlog, the commission is looking at one-time funding to deal specifically with that issue. That, I would say, has been reviewed by Treasury Board, and Treasury Board, at this point, I think, does not want a repeat of the last one-time funding, which was used more to promote more cases than it was to deal with the backlog.

With respect to the funding level and its appropriateness to deal with the issues, there's a lot of scope within what we recommend to make changes in the current process, which would certainly make major improvements to the reduction of the backlog. And if a backlog is an indicator of underfunding, I think the backlog could be substantially reduced should the commission, for example, introduce a mediation process prior to official complaints being signed.

In that chapter, we say there's a great deal of scope there for the commission to be more efficient with the funds it has. It's a hard question to answer, but I think there's more that can be done to deal with the backlog, with the moneys it currently has.

The commission has done some in terms of the process it currently operates with, but I think if it could move towards more of a mediation process prior to an official investigation being launched, there are more savings there. And then, I think, someone could look at the indicators such as backlog and say, “Is the funding appropriate?”

It's a bit of a longer answer, but it's process and it's a revision of the current process.

Mr. Philip Mayfield: Thank you very much. I'll come back to this later.

The Chairman: Thank you, Mr. Mayfield.

Mr. Cardin.

[Translation]

Mr. Serge Cardin (Sherbrooke, BQ): First of all, since this is my first time here, I'd like to say hello to everyone.

My question is for the Auditor General. It concerns the management of the SIN. You note that the department should determine the role it wants the SIN to play, given the number of cases of fraud that go unreported and the extent of the problem.

In light of this observation, what measures to do you recommend be taken to deal with the potential fraud problem? Would you go so far as to recommend a judicial inquiry?

Mr. Denis Desautels: I personally feel that we already know quite enough about the risk of fraud and about the current cases that have been reported. In my view, we have enough evidence to convince authorities to act and to take the necessary measures to deal with this problem.

In this chapter, we note that there is already enough evidence of fraud involving the use of the SIN to warrant immediate action. We make a number of fairly specific recommendations that could be acted on immediately to ensure tighter control over SINs and minimize the risk of fraud.

It is important to act fairly quickly, without necessarily having to resort to a broader inquiry to come up with more definite numbers. There currently is enough evidence to act on this problem and that's what should be done.

Mr. Serge Cardin: Based on your audit, has the department already taken any measures to investigate and research the problem?

Mr. Denis Desautels: We describe in this chapter exactly how the SIN number is managed, along with some of the control and investigative measures that are used, but we clearly point out that these are inadequate. We believe there is in need for better coordination between the different departments, and that even within Human Resources Development, there is a need for improved coordination between the various departmental programs.

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The measures currently in place are inadequate. However, in the case of certain government programs, such as EI, fairly sophisticated fraud detection measures have been implemented in an effort to identify certain cases of fraud arising in part from SIN abuse.

Perhaps Mr. Rattray would care to add something to this and comment on an experiment that is currently being conducted in New Brunswick.

[English]

Mr. David Rattray: Mr. Chairman, first of all, we are concerned about the gap that now exists in the registry between those who are registered and those who are recorded as alive for Statistics Canada purposes. One way of closing that gap and dealing with the integrity issue is to deal with both birth and death registry information. The ministry is currently working on an experimental pilot project—on vital statistics—with the province of New Brunswick in order to do a matching of databases when one applies for a social insurance card. That is done very much electronically.

In terms of births and deaths and bringing down this gap in the registry, I think a considerable number of lessons will be learned there. If that works as well as it appears to be working, there's a lot of scope for improving the integrity of the registry. The minister stated in the House the other day that it is a priority of his, and the department's beginning to work on it.

[Translation]

Mr. Serge Cardin: Regarding the quality of financial information, you mentioned that the target FIS implementation date was 2001. Do you believe that's realistic? I've had some experience in the past with financial systems in a fairly large municipality. Departments are even larger. Is the year 2001 a realistic target, or can we go beyond this date?

Mr. Denis Desautels: That's an excellent question. We are by no means certain that we will succeed in having all of the systems in place on schedule by the year 2001. I will spare you the details, but on reading this chapter, you will note that the government intends to have certain systems fully in place in some departments before the year 2001, with full implementation elsewhere scheduled for the year 2001.

Many more departments have said that they are prepared to adopt the new system in 2001. It's going to get quite hectic as the target date approaches. We have some concerns about the ability of the government to implement all of the systems, test them and ensure that they are operational before 2001, but it is nevertheless important to do everything possible to meet that target.

Mention was first made of the FIS initiative in 1988. We're talking about 13 years between this time and the scheduled implementation in 2001, a rather long period of time. We must make every effort to ensure that we are on schedule for 2001. If the committee focuses on this matter, this may put some pressure on those involved to deliver the goods in time for 2001.

On a final note, some departments have conflicting priorities when it comes to implementing these new systems and dealing with the Y2K problem. Some want to concentrate first on the Y2K problem and then turn their attention to implementing the Financial Information Strategy. That complicates matters, but I think that it is nevertheless a good thing to talk about this and to see how we can implement the FIS on schedule.

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The Chairman: Thank you, Mr. Cardin.

[English]

Mr. Myers, eight minutes.

Mr. Lynn Myers: Thank you very much, Mr. Chairman, and congratulations on your election.

The Chairman: Thank you, and you too.

Mr. Lynn Myers: Thank you.

I want to thank the Auditor General and his staff for appearing before us today. I have a series of questions, and I want to begin with chapter 14, that chapter dealing with Indian and Northern Affairs.

What exactly is the problem in terms of you not being able to get the kind of response that you think you require there? Is it simply a matter of them using different settlement criteria now versus the way you look at it? What exactly is going on? I think it's very important to get to the bottom of this.

Mr. Denis Desautels: I will ask Mr. Wilson to answer your question. He's the one who negotiated with them.

Mr. Grant Wilson (Principal, Audit Operations Branch, Office of the Auditor General of Canada): Mr. Chairman, I'm not exactly sure what the question is.

Mr. Lynn Myers: Well, there seems to be some problem. In the Auditor General's opening remarks, in paragraphs 10 and 11, we seem to get a flavour for the kind of concern you have in terms of them not responding specifically—

Mr. Grant Wilson: Yes.

Mr. Lynn Myers: —and I wondered exactly what the problem was. Is it as simple as them using a different process in terms of what they thought land settlements were, as compared to the system you looked at? Maybe you could elaborate on that and tell us exactly what's going on.

Mr. Grant Wilson: Thank you, Mr. Chairman. In general, as the Auditor General has indicated, the Indian Affairs department doesn't really address the recommendations directly.

Essentially, the response confirms that the audit issues we have raised are in fact agreed to, but it's not all that clear that each of the recommendations would be what the department would necessarily address.

The department does, for example, indicate that it agrees with the issues we've talked about in terms of settlement implementation and with the comments with respect to the establishment of certainty, but it of course highlights the aspect that from a legal point of view, certainty is created when you have terms and conditions set out in an agreement, and when those legal agreements are as such there must be some certainty.

We're suggesting that isn't the end of the question, that the degree of uncertainty can be increased where you have different interpretations, where you have implementation of land claims agreements that are not understood or known and where you don't have the results of the implementation clearly identified and so on. This will continue to create a climate of uncertainty and will create a problem in the achievement of one of the objectives, which is economic development.

So in that aspect, it's not that the department is necessarily disagreeing, it's that they're coming at it from a slightly different angle.

We see that—

Mr. Lynn Myers: Excuse me. On that point, are there ongoing negotiations, then, in terms of how you are going to look at it or is it simply that you agree to disagree?

Mr. Grant Wilson: This is really part of what I think this committee will seek to obtain if in fact the department is asked to come before the committee: to find out whether there really is a different view.

I don't think there is such a difference of view. It's just that we're looking at the settlement of the land claims beyond the signing of the land claims. To some extent, so is the department, because the minister has indicated that she too believes this is just the beginning.

But what does that really mean? If that was just the beginning, then you would expect to see some activities that would support that beginning.

Mr. Lynn Myers: Thanks very much.

Again to the Auditor General, in regard to the National Energy Board, chapter 13, it strikes me that this is an area of concern in terms of not enough being done with respect to pipeline safety and inspection and all those things. As you know, there are great environmental implications here. I wonder what you think should take place here. What are we doing and what are we unfortunately perhaps doing wrong? And what should we do to correct it?

Mr. Michael McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General): Mr. Chairman, the National Energy Board has set out a series of inspections and audits that it should do of the construction and maintenance of the pipelines. In the construction process, there are environmental concerns that come up, but in fact, what they're doing at the moment is relying on the reports from the pipelines, without any or very few on-site inspections, so we've become concerned about that.

In our report, we are suggesting that a risk analysis be conducted, which would look at the location and age of pipelines and then do an inspection based on that risk analysis.

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We are also suggesting the devotion of resources to in fact undertake those inspections. As is pointed out, the resources that have been available have been less than what they had planned to provide, so the number of inspections that was planned is considerably greater than what was actually accomplished. That increases the risk again, because these inspections aren't taking place.

Mr. Lynn Myers: Thank you. I just want to pursue that a little further. Is the self-reporting, in and of itself, a problem?

Mr. Michael McLaughlin: Self-reporting isn't in and of itself a problem, and this is where a risk analysis is appropriate in order to look at how much reliance is going to be placed on the self-reporting and how much validation is going to take place. It's not necessary to check all of the sites, but spot checks on a risk basis are appropriate in order to validate that self-reporting is appropriate.

Mr. Lynn Myers: Thank you very much.

I wanted, Mr. Auditor General, to go to chapter 16, the social insurance numbers.

I noted 16.7, where you indicated that there are two options: improve the existing system or devise an alternative solution. Do you have a preference at this point? Have you had a chance to weigh that out and to assess it and think about it? Do you think it should be one or the other? And if so, why or why not?

Mr. Denis Desautels: In the chapter, we have not expressed a preference for one or the other, and that's quite clear, but one of the things that is clear, Mr. Chairman, is that the SIN as it exists now is used very widely by the federal government and by a number of programs, starting, of course, with EI and the Canada Pension Plan. And Revenue Canada uses it in a number of its programs like the child tax credit program and so on.

The use is quite widespread. If you analyse to what extent it's used at the provincial level, you'll find a similar answer, I think. Municipalities are using it in some of their programs. And in the private sector, we're asking banks, for instance, to report interest income on T5s by using the SIN, so logically, you say, well, the SIN is widely used now, whether that was intended or not, so in a sense it might make more sense to fix it, as opposed to inventing a new one again, and I don't think that's impossible.

We haven't done a cost-benefit analysis, let's say, of each of the two options, obviously, but that's something that could lead to a good debate.

Mr. Lynn Myers: I think that's very important. I think you are dead-on when you indicate that it really is something that this committee—and Parliament, quite frankly—has to take a look at in terms of where we go from here.

Just on the mechanics of “fixing it”, as you say, I was interested to see that on page 16-19 you give some suggestions in terms of technological innovations for improvement. Have you zeroed in on any really key, vital, fundamental improvement that's necessary? Or are they all important in their own right?

Mr. Denis Desautels: Do you want to try to answer that, David?

Mr. David Rattray: Mr. Chairman, I think it's important to point out that in exhibit 16.6 we said “if” the social insurance card were selected as a common client identifier—and that's a big “if”—subject to Parliamentary debate and direction and legislative change.

This was simply an illustration of what a card—if that's the choice—could include. We worked with advisers and with people in the industry who protect cards, such as credit cards, to just try to illustrate the various types shown here, to maybe help with a parliamentary debate or a committee debate. We haven't specifically picked any one security feature in terms of hologram versus biomedical versus strip. We've simply said that these are a lot of the things used to protect privacy and data and they exist currently in the industry for other cards.

It's meant merely as an illustration. We were very careful in the exhibit description to say that “if” the SIN card were to be selected, this is what might be considered.

Mr. Lynn Myers: Thanks very much.

The Chairman: Mr. Harvey, you have eight minutes.

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[Translation]

Mr. André Harvey (Chicoutimi, PC): I want to be certain that I understood you correctly. You indicated that there are 11.8 million uncertified accounts in the Social Insurance Register. Are you saying that these SINs were issued without the proper identification documents?

Mr. Denis Desautels: These particular SIN numbers were issued prior to a certain date, when current control measures were not yet in place. Even though the control measures in place today are not very stringent and are far from perfect, at one time, they were virtually non-existent. In fact, when the system was first launched, the authenticity of the information supplied by the applicants wasn't really verified.

Mr. André Harvey: How many accounts are we talking about here?

Mr. Denis Desautels: The chapter details the number of cards that have been issued. There are a total of 26 million cards in circulation for individuals aged 20 and over. That gives you some idea of the situation. We are talking about a substantial number of accounts.

Mr. André Harvey: In fact, about 40 per cent. That's a rather significant percentage.

Mr. Denis Desautels: Overall, 33 million SIN numbers have been issued since the program's inception. Of this total, approximately 11 million were issued or approved with very little provided in the way of supporting documents.

Mr. André Harvey: Are you saying that in order to obtain a SIN number, a person need not produce supporting documents?

Mr. Denis Desautels: Things have changed over the years. Today, some supporting documents are required of the applicant. However, as I said earlier, this wasn't always the case.

Mr. André Harvey: With respect to Indian and Northern Affairs, a department was formally established and given a budget. A number of other departments are also involved in support initiatives. Do you have some idea of the overall budget allocated to aboriginal programs, that is the department's main budget as well as that of all other agencies operating within the other departments?

I'd like to make a general observation. The impression we have is that no single government is able to manage this sector adequately. I realize that this community is facing some very serious problems across the country, but I'm only telling you what ordinary citizens are telling us.

When you say that agreements are still accompanied by a great deal of uncertainty, the impression we're left with is that this process is not being managed properly, that budgets are being poorly administered and that when agreements are in fact concluded, they are done so as hastily as possible, strictly as a means of rectifying certain problems.

I regularly hear the same thing from the people I talk to. The process is not controlled and is in fact uncontrollable. I'd be interested in hearing your views on the subject.

Mr. Denis Desautels: There are several comments I'd like to make.

First of all, in response to your initial question, namely the overall federal budgets allocated for native programs, the calculations have been made and I believe this information is reported on a fairly regular basis by the Department of Indian and Northern Affairs. I believe the combined budget of this department and that of other departments that run aboriginal programs is slightly over $6 billion.

Mr. André Harvey: Is that the department's official budget?

Mr. Denis Desautels: No, I didn't say that.

Mr. André Harvey: That's not the total budget?

Mr. Denis Desautels: This figure represents the combined budget of Indian and Northern Affairs and that of other departments that operate aboriginal programs. It represents the total amount spent by the federal government on aboriginal programs. That answers your first question.

Now then, you raised the problem of how all of these programs are managed. Over the years, we have identified many problems. We have to recognize that a number of years ago, the federal government decided to transfer responsibility for administering aboriginal programs to First Nations. Before that, Indian and Northern Affairs employees were responsible for administering all programs on reserves. These funds have now been transferred to the bands who administer these program budgets themselves.

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Some rather drastic changes occurred over a period of several years and this created some problems for certain generations. We audit on a fairly regular basis the operations of the Department of Indian Affairs to see how it is fulfilling its commitments, even with the new system in place.

Mr. André Harvey: Are you authorized to audit operations on the reserves?

Mr. Denis Desautels: No. We are authorized to audit the operations of the Department of Indian and Northern Affairs as well as the reports issued on First Nations. However, we are not authorized to go onto the reserves and check band records. That is up to the department if it feels the need to do so. We are only authorized to audit the department's operations.

Mr. André Harvey: Then you do not even audit some of the management operations conducted on reserves?

Mr. Denis Desautels: We do not go onto the reserves to audit their operations. Occasionally, we meet with First Nations representatives who wish to share with us some information that may assist us in our work. We meet with them fairly regularly, but that's done on a voluntary basis.

Mr. André Harvey: Generally speaking then, your impression is that the process of negotiating and at times concluding agreements is not entirely rational. Would that be a correct assumption?

Mr. Denis Desautels: In our chapter dealing with the land claims issue, we note that these are highly complex matters. We have to recognize that fact. This process isn't easy. Some land claims date back hundreds of years. Therefore, we mustn't be overly simplistic. We are dealing with highly complex issues.

The primary purpose of this chapter was to inform parliamentarians about this area, as it seems to be a subject misunderstood by many. We wanted to impart certain information about land claims settlements, but in so doing, we wanted to identify certain stages of the process that could be improved upon. Perhaps these claims could be settled faster, but how much faster isn't exactly clear. For instance, the James Bay Agreement was settled in two years, while some other claims were only settled after 24 years of negotiations. There are significant variations, but one has to wonder if perhaps the process couldn't be speeded up a little.

Mr. André Harvey: Between the time these two claims were settled, a new Auditor General was appointed. Isn't that right?

Mr. Denis Desautels: Several new AGs, to be precise.

Mr. André Harvey: Thank you, Mr. Chairman.

[English]

The Chairman: Thank you, Mr. Harvey.

Mr. Assad, we're now into the four-minute rounds.

[Translation]

Mr. Mark Assad (Gatineau, Lib.): Is this the first time that the AG has identified problems or shortcomings in the auditing system since the introduction of SIN numbers in 1964?

[English]

Mr. David Rattray: Mr. Chairman, this is the first time we've taken a comprehensive look at the social insurance number and all of those players who are involved with it.

Under other audits, I believe, we have reported concerns about the GST refunds and Revenue Canada, but they've never been the focus of such a large effort in terms of audit. It's been more the reporting of abuse or fraud situations in, say, the GST refunds of Revenue Canada, but it has not been the primary focus.

[Translation]

Mr. Mark Assad: We were somewhat shocked to hear you say that because we tend to believe that in today's society with its advanced technology, there are sophisticated ways of detecting abuse. In 34 years, not many people stopped to think about potential abuses of the system. I find it very difficult to understand that after so many years, no one has ever stopped to consider the system's shortcomings.

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Mr. Denis Desautels: Perhaps there are two explanations for that. First of all, this is an all-too-common occurrence, unfortunately. Several departments are involved in managing the SIN and very often, no one person has overall responsibility. This may explain why no single person took on full responsibility for inquiring as to the health of the program. That's my first point.

Secondly, and no doubt more importantly, the government initially said in 1964 that it didn't want the SIN to become a universal identification number. It wanted the use of the SIN restricted to certain very specific programs. Initially, its position was that this was not a universal identification number and that there was really no need therefore to build in all of the controls that would normally be required in the case of a number used in a universal fashion.

Therefore, in some respects, the government refused to acknowledge reality and over time, the use of the SIN spread. Even though this was not the original intent, the SIN has now become a universal identification number.

Mr. Mark Assad: In other words, the numerous cases of fraud are due to the fact that some people realized that there was inadequate monitoring. Who, I wonder, is responsible for the situation deteriorating to the point where people realized that it was quite easy to defraud the system? We could blame the perpetrators, but it seems to me that we made it easy for them.

In chapter 18, you refer to full accrual accounting. Is that correct?

Mr. Denis Desautels: Yes.

Mr. Mark Assad: Correct me if I'm wrong, but I believe the United States decided several years ago to adopt this accounting method whereby infrastructural investment is not posted as a one- time outlay and not mentioned any further. A decision was made to go with full accrual accounting of capital outlays which can represent hundreds of billions of dollars. This greatly improved their debt-to-GDP ratio.

In your opinion, why couldn't we follow the US's lead here in Canada? After all, this would make our country more attractive to foreign investors who would see Canada as a strong country. What problems do you see preventing us from making the shift to full accrual accounting?

Mr. Denis Desautels: I'm a well aware of the situation here and in United States and I can tell you that for the first time, on September 30, 1997, the US reported certain infrastructural investments in its financial statements. All capital assets were not included of course, only those used in the delivery of services to the public and to the taxpayers. For instance, monuments or lands belonging to the government, what we refer to here as Crown lands, were excluded. Not all government assets were included, only those used in the delivery of services to the public.

We have now decided to follow a similar course here in Canada. The goal of the Financial Information Strategy initiative is to bring in full accrual accounting to reflect the cost of capital assets and capital investments. We have long been encouraging the government to adopt this accounting method and three years ago, the Minister of Finance announced the government's intention of moving in this direction..

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Our current target date for system implementation is 2001. Therefore, a decision has already been made to adopt this accounting method here in Canada as well.

[English]

The Chairman: Thank you, Mr. Assad.

Mr. Grose.

Mr. Ivan Grose (Oshawa, Lib.): Thank you, Mr. Chairman.

First of all, I'd like to apologize. I'm not completely up to date on the Auditor General's latest report as I've been dealing with the health system in the last four weeks on behalf of my wife, and we'll talk about that another day.

I would like to talk about social insurance numbers. I hesitate to call them by the short form, in case we might be confused with some U.S. congressional committee investigation—

Some hon. members: Oh, oh.

Mr. Ivan Grose: —so I'll use the long form.

It seems to me that we, the federal government, started this system with a number for our own purposes and no one else's. It was strictly for our own purposes, for old age pensions, for whatever. Everyone else piggybacked on it and made the thing so attractive for fraud that now we have fraud. And why in the world should the federal government be carrying the can for this? Provincial governments have piggybacked on it. Banks have piggybacked on it. You can't get a $5 bill changed in a bank without a social insurance card. I can't get it changed even with a social insurance card, but—

The Chairman: I don't have a $5 bill.

Some hon. members: Oh, oh.

Mr. Ivan Grose: And that's a problem too.

Everyone, from used car dealers and leasing dealers to even the escort services, God knows, has piggybacked on this thing.

Why should we carry the can? If the thing has to be reformed, we will reform it for our use solely, unless the other people want to pay into it. Otherwise, it's strictly our thing.

I have another problem with it. It seems to me that we flogged this once before—and maybe this is what comes of being too long on a committee!—with respect to this question of births and deaths. The provinces won't tell us. How are we supposed to know when anyone dies? It seems to me that someone told this committee that we reviewed obituaries in newspapers—would you believe it?—in order to find out if someone had died so we could take him or her off the social insurance thing.

But here we are flogging it again. We don't know who is born and we don't know who has died because the provinces won't co-operate. I'm sick and tired of the federal government having to carry the can for this kind of thing. It's about time we told the bloody provinces and everyone else that we'll have our own card, and I don't care what it does or whether it's written in Sanskrit, they can't use it.

I would like your reaction.

The Chairman: Mr. Desautels, your reaction?

Mr. Denis Desautels: Thank you, Mr. Chairman.

First of all, on the question of this being a federal identifier and then that identifier being used by everyone else, I think we have to be realistic. The feds started this with a limited number of programs, which were UI, the Canada Pension Plan and the Quebec Pension Plan. Then it expanded to Revenue Canada and then to other programs. So the feds themselves added a number of programs. Now, they're up to 24 different federal acts, regulations and programs calling for the use of the social insurance number.

The federal government also directly or indirectly forces provinces to use it, because there is a need to communicate information for various programs, like income tax, for instance. You use the same number whether you're collecting taxes for a province or for the federal government. There is a spillover from the feds to the provinces and then also to the municipal level. In addition to that, the feds also asked the private sector to use it, because they ask that the banks put your social insurance number on your T5.

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Whether we like it or not, that's what's happened in the federal government, so the government can't claim it has no responsibility for that. It allowed that to happen, and even encouraged it, in my view. It's everybody's problem, as far as I'm concerned, so I think the solution has to be one that takes that into account. That's the reality we're facing.

The second part of your question was about your frustration with the picking up and recording of births and deaths in the social insurance registry. Again, there, I think, we have no choice but to work with the provinces, because for some pieces of information they're the ones that have that information and we need it. In other words, we have to find a way of working together. Earlier, Mr. Rattray was referring to the experiment being conducted in New Brunswick in order to find a way of doing that smoothly. I think there are answers, and hopefully, if you're on this committee another 10 years—

Some hon. members: Oh, oh.

Mr. Denis Desautels: —we should in the meantime be able to come up with a more satisfactory system.

The Chairman: Do you have any more questions, Mr. Grose?

Mr. Ivan Grose: No, Mr. Chairman.

Thank you, sir. As usual, you answered my question most completely.

The Chairman: Mr. Mayfield, I understand you have more questions.

Mr. Philip Mayfield: It just occurred to me that perhaps Mr. Grose read the newspaper a couple of days ago in which it was said that three-letter word is the name for big government these days.

The questions I want to ask relate to a couple of chapters, one of which is with regard to the inspection of pipelines. I'm trying to remember the name of that report—

Mr. Denis Desautels: National Energy Board.

Mr. Philip Mayfield: Yes, thank you.

In your report, I believe you mentioned that there's one person who travels and inspects and does on-site inspections. Is that correct? There are about 40,000 kilometres of line that he's responsible for. Is that correct?

Mr. Michael McLaughlin: That is correct. He is the inspector. Normally they have a complement of four people, I believe. But due to turnover and other priorities, only one person has been doing the inspections.

Mr. Philip Mayfield: That seems like a man who has a big job to do. But perhaps not, I don't know. I'm not sure how the inspections are carried out. I wonder how much responsibility the companies themselves have. Are they obliged to keep records?

If you have an airplane, you keep records of everybody that touches that airplane. The authorities want to know that it's up to date, and you must have annual airworthiness.

I'm not trying to draw a comparison, but I'm wondering what the responsibility is for companies to maintain, upgrade and provide a means of accounting for this. Is that part of the system?

Mr. Michael McLaughlin: That is part of the system, Mr. Chairman. The companies are to provide reports on the operations of the pipelines, on incidents that have occurred and on what they have done to redress those incidents to ensure that they have been corrected, that the environment has been returned to an appropriate state. Those reports are prepared and submitted to the National Energy Board.

What we were looking for here is having the inspector, on a risk basis, go and look at particular sites to validate what is in the report presented by the pipeline in order to make sure that those reports are complete and do reflect accurate conditions.

Mr. Philip Mayfield: It seems that there is a suggestion in the report that the pipelines are aging and that perhaps more could be done to ensure their safety. Whose responsibility is it to see to this? Is it the inspector's responsibility to enforce it? Or is it the company's responsibility to see that it's done and that it complies with approvals? How is that done?

Mr. Michael McLaughlin: The companies are licensed, so it is their obligation to ensure that the pipeline is safe and does meet the conditions of licensing, which are safety conditions and environmental conditions both.

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It is then up to the National Energy Board to put into into effect a regime to in fact inspect and ensure that those regulations have been complied with.

Mr. Philip Mayfield: I presume you're suggesting that part of the responsibility is a little thin, having gone from four to one and—

Mr. Michael McLaughlin: This is exactly what the report is raising. There are more modern methods of determining where inspections would be the most effective and determining the validations that would be the most effective to ensure compliance with the regulations—in addition to the reports coming from the companies.

Mr. Philip Mayfield: There's one other area. I'd like to go back to the Indian Affairs report on treaties and land claims. I presume that the British Columbia Treaty Commission was a part of your report. Was it included in the whole national picture in this report?

Mr. Denis Desautels: Mr. Chairman, very quickly, the audit looked at treaties signed in the recent past, and none of these were in B.C. But we did look at the B.C. commission, just in order to describe it and make sure people were aware of its existence and what it was meant to do.

Mr. Philip Mayfield: When the British Columbia Treaty Commission was being set up, some criteria had to be met before a tribal group was considered ready to begin negotiations. As I recall, one of those criteria was that overlapping land claims be resolved between the various tribal groups. And I believe that's been changed. Is that correct?

The Chairman: Mr. Wilson.

Mr. Grant Wilson: Mr. Chairman, my understanding was that the BCTC would not enter into any negotiations or facilitate negotiations unless overlapping claims had been settled among the parties first.

My understanding, too, was that the criteria for entering into a claim are essentially the same criteria as we've set out in exhibit 14.5 in the chapter.

We didn't see a significant difference or change in criteria relating to the claims in British Columbia, as had happened elsewhere, but we did not, as Mr. Desautels said, take an in-depth look at the BCTC process. Rather, we took a look at the twelve, as was indicated, to determine any lessons learned, because the greatest number of treaties in negotiation in the future will, of course, be in British Columbia.

Mr. Philip Mayfield: Yes.

I have one other question, Mr. Chairman, and I'll be brief about this. With regard to paying the expenses of this process, because of the time, the expenses are very high, and it occurs to me that the federal government has assumed more responsibility for paying the costs for the other side of the negotiating table. Have you had a chance to look at that increase in costs for the federal government?

Mr. Grant Wilson: We did not look at it other than to determine that in fact you're right: the federal government finances essentially 80% of the cost of negotiation. That's normally done by way of loans to first nations, which are to be repaid upon completion of the settlement.

Mr. Philip Mayfield: Has there been any suggestion that repayment is not necessary?

Mr. Grant Wilson: Not to our knowledge to this point, as no settlements have been “settled”.

Mr. Philip Mayfield: Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Mayfield.

I would again like to compliment the Auditor General for a fine report. I think Canadians are well served by the reports that you bring forth to Parliament, Mr. Desautels, and we appreciate them very much.

The subcommittee will now look at the chapters we wish to discuss, and that will be decided upon by the committee as a whole.

Even though we can't look at all the chapters because time does not permit, we certainly want you to know that Parliament takes all your chapters very seriously and appreciates them very much indeed.

This meeting now stands adjourned.