PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 16, 1999

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[English]

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

Today, pursuant to Standing Order 108(3)(e), we will consider chapter 25, Transport Canada, investment in highways, of the December 1998 Report of the Auditor General of Canada.

Our witnesses today are from the Office of the Auditor General of Canada: Mr. Denis Desautels, the Auditor General of Canada; Mr. Shahid Minto, the Assistant Auditor General; and Basia Gadomski-Ruta, the principal of the audit operations branch. From Transport Canada we have Margaret Bloodworth, the deputy minister; Louis Ranger, the assistant deputy minister, policy group; Ralph Jones, director, surface program; and Ronald Sully, assistant deputy minister.

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As usual, we'll start with an opening statement from the Auditor General. Mr. Desautels.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you, Mr. Chairman, for the opportunity to meet with the committee to discuss chapter 25 of our December 1998 report, which focuses on Transport Canada's investment in highways.

As you said, I have with me today Mr. Minto and Mrs. Gadomski-Ruta, respectively Assistant Auditor General and principal responsible for Transport Canada matters.

Chapter 25 focuses on key areas of Transport Canada's management of $1 billion invested in highways over the last five years. These investments were mostly administered through federal-provincial agreements. Overall, we reported that Transport Canada did not properly manage $1 billion of federal investments in highways, in accordance with its responsibilities under the various federal-provincial agreements. We also noted instances in which ministerial or government direction was not followed.

Before we get into some specific observations, I'd like to first put into context the nature of Transport Canada highway investments. First, these investments are cost-sharing investments, structured in such a way as to enable a partnership arrangement with provinces or territories for the management of highway projects. Second, the investments are meant to achieve several specified federal objectives.

Transport Canada has a number of responsibilities specified in those agreements. These obligations were deemed necessary by the government, and were negotiated and incorporated in agreements with the provinces. I should emphasize that our chapter does not recommend or suggest any duplication of the provinces' work. Nor do we expect Transport Canada to set up a parallel department to mirror the work of provinces.

We understand that a multitude of information may come from the provinces, and to the extent that Transport Canada wishes to rely on this information, it needs to communicate clearly its information needs and requirements and review the reliability and relevance of the information. As noted in our chapter, we found the department did not do this frequently or on a systematic basis.

[Translation]

Mr. Chairman, I would like to now take a few minutes to discuss some other key areas where improvements are needed in the management of current highway investment programs and any future initiative of this kind. Our chapter identifies serious weaknesses at three levels, in particular, those involving policy, financing and the administration of federal-provincial agreements.

For example, we noted the following situations.

First, the National Highway Transportation policy is 25 years old and has never been updated. It does not reflect a number of substantive events in highway transportation, such as the introduction of tolls or the concept of the National Highway System, all of which have implications for decision making on federal highway investments.

Second, information supplied to decision makers in support of hundreds of millions of dollars of funding for new programs has not always been accurate or complete. among other examples is the Department's failure to assess potential environmental impacts of proposed highway programs at the strategic decision making level as directed by Cabinet.

Third, federal review to support project approval lacks rigour. Transport Canada does not even have information on dangerous segments of highways when deciding which project to fund.

Fourth, there is poor record keeping and little monitoring and analysis to support highway investments. Information on federally funded highway projects is fragmented across the Department and is incomplete.

Fifth, we found instances in which, contrary to federal statutory requirements, payments were made before the required environmental assessments were completed.

Finally, during the last five years, notwithstanding that the Department's financial management system has many weaknesses, it assigned only nine people to deliver its highway investment programs and to administer 24 federal-provincial highway agreements, involving the review, approval, monitoring and reporting on over 600 projects and many more construction contracts. Our audit found that the Department did not do much of what it was supposed to do under the agreements.

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[English]

Transport Canada has been involved in making federal-provincial highway investments for many years, but has yet to conduct a formal evaluation of its highway investment program. I am disturbed that the department is lacking key information it needs to plan for the future and make informed recommendations to the government, as it considers new highway investment initiatives.

Before closing I would like to say just a few words on the topic of tolls. Despite their emergence almost 10 years ago, until very recently none of the agreements dealt with the issue, nor is there a federal policy on the matter. Moreover, at the time our audit ended, Transport Canada had yet to complete any analysis of the impact of tolls or transfers of highways to the private sector on traditional funding arrangements and other matters, such as the implications for the Trans-Canada Highway and interprovincial and intraprovincial trade.

In view of the increased public interest in the matter, the $1 billion already spent under the programs, and the federal commitment to spend several hundred million dollars more over the next few years under existing federal-provincial agreements, a clear position on this matter is essential.

In closing, I'd like to note that the department has committed itself to a number of positive actions to deal with many concerns raised in the chapter. We are encouraged by the department's response to our audit. The committee may wish to request from the department a status report on actions taken to date, together with target dates to deal with any outstanding matters.

I thank you, Mr. Chairman. That concludes my opening statement. My colleagues and I would be quite happy to answer your questions.

The Chairman: Thank you, Mr. Desautels.

We'll now turn to Ms. Bloodworth, the Deputy Minister of the Department of Transport, for her opening statement. Ms. Bloodworth.

Ms. Margaret Bloodworth (Deputy Minister of Transport): Thank you very much, Mr. Chairman and members of the committee, for this opportunity to discuss the Auditor General's report on Transport Canada's highway investment programs.

I am accompanied today by Mr. Louis Ranger, assistant deputy minister of policy; Mr. Ron Sully, the assistant deputy minister of programs and divestiture; and Mr. Ralph Jones, director of surface programs.

[Translation]

My comments will address the three broad categories under which the Auditor General has organized his recommendations: firstly managing programs and administering agreements; secondly, establishing highway investment initiatives, essentially, the policy framework; and lastly, reporting to Parliament.

[English]

I would like to begin by outlining the various steps the department has taken to address some of the program management recommendations made by the Auditor General.

First, the schedules to the agreements are being amended to describe in greater detail the specific projects covered by the agreement.

Second, the minutes of the management committee meetings will contain more details of discussions and decisions around issues.

Third, the construction standards to be used by the provinces for the highway projects covered by the agreement have been reflected in the minutes of the two management committee meetings held since the Auditor General's report.

Fourth, departmental files will be sub-divided to cover more specific subject areas, and thus make it easier to retrieve documents establishing the paper trail of decisions.

Fifth, departmental officials are working on the development of an evaluation framework, procedures and information requirements for any new highway program.

Sixth, project definition will be further amplified in any new agreements to ensure future auditors will be clear from the paper trail what is meant by a project. However, it is important to note that under the current agreements, provincial and federal program officials have a clear idea of the proposed program on areas at the outset, and how specific projects fit within the framework. But we agree that needs to be clarified in the agreements themselves.

[Translation]

It is important to stress that Transport Canada is not managing the building of highways, but rather administering agreements under which the federal government contributes money to provincial highway construction.

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Highways themselves and their construction fall under provincial jurisdiction. Accordingly, in all improvements we are making, we will continue to ensure that we perform only those functions necessary to protect the federal financial interest. We want to ensure that there is no duplication of effort between ourselves and the provinces.

[English]

And I think Mr. Desautels and ourselves agree on that objective, not to duplicate efforts.

The Auditor General has also noted the need for assessment of potential environmental impacts of proposed highway programs at the strategic decision-making level. Transport Canada officials are working with the Canadian Environmental Assessment Agency to update departmental procedures to ensure that strategic environmental assessments of department policies are conducted.

In general, the administrative framework that is in place for these contribution programs has served both our provincial partners and the federal government well. However, we recognize that there is room for improvement, and we will incorporate many of the Auditor General's suggestions.

[Translation]

Second, let us talk about our policy framework. The Auditor General recommends a series of measures to guide the management of future contribution programs, and the selection and evaluation of specific projects. Mr. Desautels also notes that the Minister has said that the existing national highway policy needs to be updated. Indeed, when he appeared before the Standing Committee on Transportation in November 1997, Mr. Collenette stated if the federal government decided in the future to invest in highways, he would prefer a more integrated national approach guiding these bilateral agreements, in which the policy objectives of both levels of government are specified. However, at this point, no decision on future funding has been made by the government.

[English]

Another policy issue raised by the Auditor General is that the government should clarify its position on the treatment of federal contributions to projects subject to alternative financing arrangements, including tolls. While the most recent agreements concluded do contain provisions requiring agreement by both parties before tolls can be introduced, we agree that a policy on tolls needs to be developed. This matter has been the subject of discussions with provinces and territories as part of the work of the federal-provincial-territorial working group on public-private partnerships. We are working with the provinces and territories to ensure that a policy is ready to be included in future new policy for highway agreements.

[Translation]

The Department agrees the quality of the highway information that is incorporated into the Annual Report on the State of Transportation in Canada can be improved. A working group has been established with provinces and territories which will address this issue.

[English]

In summary, we agree that there are improvements that can be made to the administration of these federal-provincial agreements, particularly in the documentation of decisions and steps taken, and work is under way to institute these improvements.

[Translation]

In all future work, we will continue to ensure that there is no duplication of efforts between ourselves and the provinces. Work is also underway on such policy matters as tolls. However, no decision has been made by the government to commit new funding in this area.

[English]

Thank you very much, Mr. Chair. We certainly would be very happy to answer the committee's questions as well.

The Chairman: Thank you very much indeed.

Now we'll turn for questions to Mr. Morrison. Mr. Morrison, you have eight minutes.

Mr. Lee Morrison (Cypress Hills—Grasslands, Ref.): Thank you.

Ms. Bloodworth, you made reference to the fact that there is an effort to do a revamping of the administration process to get the Department of Transport more into the administrative control of what goes on on these joint programs. I don't quite know how you're going to do that when you have this plethora of programs under, I believe, seven different departments, six of which do not report back to the Ministry of Transport. How on earth are you going to keep track of what's going on out there when you don't have one single overriding agency to look after these things?

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Ms. Margaret Bloodworth: The remarks I made, Mr. Morrison, were directed to our efforts with federal-provincial agreements, which are all within the Department of Transport. But you're quite correct, there are other federal highways. We do not directly manage any highways ourselves. The federal government does have some, although they are a distinct minority in terms of the number of highways in the country. Parks Canada has a few, Public Works I believe has some bridges, and the National Capital Commission also has some roads.

There has not been any decision by the government to amalgamate all those roads, and indeed there would be good reasons not to do that. We have, however, agreed with the Auditor General's remark related to the interdepartmental committee; we are going to reconvene that committee and have it look specifically, in the context of today, at what role interdepartmentally would provide the best value for money for the government. We have agreed to do that and we are in the process of doing it.

Mr. Lee Morrison: But if Transport Canada was the sole federal agency involved in road and bridge construction, it would certainly make things a lot more efficient, and it would certainly make the Auditor General's job a lot easier if he only had to deal with one department instead of seven.

Of course there would have to be something substantive to audit. Right now, Transport Canada, as an entity, contributes very little to the national highway system. Most of the federal contributions that are made are made through other departments. But even with all of these departments involved, as you know, Canada only directs about 4% of its road-related revenues to transportation, which compares to about 31% in the U.S., 50% in Australia, and 100% in Great Britain.

Are there any long-term plans in the works, to your knowledge, to establish any kind of a unified, well-financed, national highway program in this country? And if there were such a program, in my dreams, would this be totally under the control of the Ministry of Transport instead of dribbling it out in bits and pieces to all these disjointed programs?

Ms. Margaret Bloodworth: You've raised several issues in that, Mr. Morrison, so let me try to address them in order. If I miss some, please remind me.

The first question is on the federal contributions to the national highway system, generally. You're quite right that there is not a national highway system program, one program under which there is funding. But all the funding that goes to the provinces is through the Department of Transport. I think I'm correct in that.

Where there are separate highways are where the federal government runs the highway and builds the highway itself, specifically. Parks Canada is an example; they run their highways and build their highways through Parks Canada and their parks. Those ones we don't control; they would control them. But we also don't fund the money through us. The money would go directly to Parks Canada to deal with that.

So any money that is being given to the provinces for highway construction is through the agreements managed by Transport Canada. As to whether it would be more efficient to group them all, it may well be; I haven't looked at enough detail to come to that conclusion. I think there might well be arguments against having, for example, all the National Capital Commission roads under Transport Canada. I think one could make an argument that people in the city of Ottawa would prefer to deal with the National Capital Commission for all. But I accept that there are arguments both ways on that.

On your second issue, about the amount of federal funding, it is just over $200 million this year. But you're quite right, it's on the path downwards, because there has been no new federal money granted for highways in some time. That has to do with the fiscal situation of the government and they made choices in priorities. Indeed, when the provincial premiers met last summer they made it clear that they put health care above transportation. For those of us in transportation, we're heartened by the fact that transportation came second, but it did come second.

Certainly my minister has made it clear that there may well be decisions in the future to do with new funding, but that will have to do with the choice of other priorities.

On a national highway program, we have worked with the provinces on identifying and defining a national highway system and on what any new highway program, assuming there was money, would be. I think it's fair to say there's not complete agreement on that yet, but we've moved a long way down that road, and it would certainly be our hope that we could agree on a more unified program. But that's a bit speculative on my part at this point in time.

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I think I've covered the various issues. If I haven't, please interrupt.

Mr. Lee Morrison: In my part of the world, Mrs. Bloodworth, the only highway money that's being spent federally right now is being spent by the Department of Agriculture and Agri-food under the infrastructure program, and a very small amount by the Department of Public Works. Nothing is being contributed directly by Transport Canada. Are you telling me that those three departments are administered in the highway funding through the Ministry of Transport, that they are not independent of the ministry?

Ms. Margaret Bloodworth: No. You're quite right, that's the only highway money that is being spent out west at the moment.

Ron, did you want to add something?

Mr. Ronald Sully (Assistant Deputy Minister, Programs and Divestiture, Transport Canada): I believe, Mr. Morrison, you're referring to the pay-outs under the Western Grain Stabilization Act wherein Agriculture Canada is expending the money in various ways. One of them is on regional and provincial roads. It happens that they are still spending after our funding through our agreements has expired in that province.

Mr. Lee Morrison: I have one final question. You did touch briefly on the question of tolls, which is a hot-button issue right now. I'm really getting a mixed message here. On the one hand, we have you and the minister saying that this isn't going to be allowed in any future agreements, or that at least the minister doesn't like the idea. But we do know it's going on right now, with provinces and even private entitities collecting tolls on federally funded roads. Is there a proposed form of agreement, a standard form of agreement, for future joint programs in order to guarantee that we won't get into this morass again?

Ms. Margaret Bloodworth: On the tolls, the existing agreements—if I set aside the two that were signed recently, which I'll talk about in a moment.... The existing agreements, which go back some years now—the latest I think is the early 1990s—did not have any provisions about tolls one way or the other. In other words, they didn't prevent provinces charging tolls; they simply didn't address the question. We agree that future agreements should address the question of tolls.

The New Brunswick and Nova Scotia agreements—which were amendments to agreements recently, in the last couple of years—because there was no toll policy agreed with the provinces, have what I would categorize as an interim arrangement where they said there can be no tolls on those particular moneys without agreement of the federal government. But it was recognized between us and the provinces at the time, and it's reflected, because it says no tolls without an agreement or without a new policy.

We have worked with the provinces. There are differences, as you can imagine, between provinces as to their views on tolls. So I don't think I've ever said no tolls ever. In fact I've never heard any criticism of Highway 407, for example. The question is a policy that would cover the country.

The Chairman: Thank you very much.

[Translation]

Mr. Guimond, for eight minutes.

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré— Île-d'Orléans, BQ): Thank you, Mr. Chairman. For me, it is a trip down memory lane as I had the privilege and the honour to chair the Standing Committee on Public Accounts one year before the June 2nd, 1997 election.

You will notice that on this side of the table we have four opposition critics on transportation who are here to hear what the officials of the Department of Transport have to tell us and to look into the Auditor General's report. This shows how eager the members of the Standing Committee on Transport are to get down to work. The Standing Committee on Transport is not able to meet and therefore we must find our gratification where we can. This explains our presence here. The members of Parliament of the four opposition parties are the critics on transportation.

An hon. member: [Editor's note: Inaudible]

Mr. Michel Guimond: Yes, I will go and see. I will behave as usual; I have the reputation of a prickly person.

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My question is for the deputy minister of Transport. We have two types of presentation and one wonders if we are on the same planet. On the one hand, the Auditor General tells us in black and white in paragraph 7 of his statement:

Our chapter identifies serious weaknesses at three levels—in particular, those involving policy, financing and the administration of federal-provincial agreements.

On the other hand, the deputy minister of Transport Canada tells us on page 2 of her opening statement:

However, we recognize there is room for improvement, and so will incorporate many of the Auditor General's suggestions.

Ms. Bloodworth, you are talking about many of the suggestions. I would like to know which suggestions from the Auditor General you do not intend to incorporate, that you do not accept or that you reject. I am convinced that you said on purpose “we will incorporate many of the Auditor General's suggestions”. Which ones of those suggestions do you want to throw into the garbage?

[English]

Ms. Margaret Bloodworth: Let me answer in general, and I'll turn to Mr. Sully for the specifics.

We have agreed that there is need for improvement in the management of this program, and indeed we have made some steps. It's not far enough along in the steps yet for my case. I think there are still some more, but they're under way.

We agreed that if there is new funding for highways, it would be preferable to have a new highway policy. In the end, that's a decision for ministers to make, not for me, but I think my own minister has indicated his preference, so it's pretty safe for me to indicate my preference. But it is a bit hypothetical at this point, because we don't have any new federal funding. We have agreed that there needs to be a toll policy, because there is no toll policy.

In terms of the exact information in general on the agreement, there are two options—and I'll be careful, because I'm not trying to put words into Mr. Desautels' mouth. My understanding is their position would be that we have not followed everything under the agreement that we said we would do. There are two options: we either do them, or amend the agreement if we conclude that in some cases it would be unnecessary for us to do it.

Let me give an example of something we did. Being present at the opening of tender bids by provinces, I'm not convinced personally that the federal government representative adds very much to that. So that's an example where you might choose to take it out as a requirement.

That's the general area where there may be some disagreement. I'm not sure that there is major disagreement between the Auditor General and ourselves, but I'll let him speak to that.

Let me turn to Mr. Sully, if he has any more specifics.

[Translation]

Mr. Michel Guimond: Mr. Chairman, before we hear Mr. Sully's answer, I would like to say that the deputy minister has kept it rather vague and made it sound like wishful thinking; she all but told us she likes apple pie. My question is clear: which are the issues the Department does not agree on?

[English]

The Chairman: Mr. Sully.

Mr. Ronald Sully: I can't give you a full list at this time, but to give you a couple of examples, I think in some cases we're partially agreeing with the Auditor General's recommendations, but not wholly. Sometimes it's a matter of nuance, if you like.

For example, paragraph 25.84 says that Transport Canada should develop up-to-date guidance for the work of the federal officials on the management committees and help to ensure that federal interests in the department's policies are considered fully as their committees fulfil their responsibilities.

We feel that suitable guidance already is provided to members of our management committee. However, we will do what we can to provide greater clarity to that. So it's not a question of rejecting the Auditor General's recommendation; it's a matter of trying to do what we can to improve upon the situation.

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On page 25-28, paragraph 25.116, there's a criticism that we have not fulfilled all our obligations under the Canadian Environmental Assessment Act. With the exception of the lack of a strategic environmental assessment, which we have not yet done and we recognize, we do believe we have fulfilled all our obligations with regard to the application of the Canadian Environmental Assessment Act to specific projects. Unfortunately, the problem in this area is that we did lose a substantial amount of documentation that had to do with the reorganization of the department and the transfer of responsibilities from the regions to headquarters, and some files were lost. So we are unable to demonstrate at this point that in fact we have fully complied.

We believe we have complied. So what we have undertaken here is that we will make sure that in future our documentation is better and complete, and properly filed.

That's just another indication where we don't fully agree with or we don't fully accept the criticism of the Auditor General. That said, we're willing to improve our systems to make sure that in future there's a proper audit trail and that everyone is satisfied that we're getting good value for money here.

The Chairman: Thank you, Mr. Guimond.

Mr. Myers, you have eight minutes, please.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): Thank you, Mr. Chairman.

I want to begin with you, Ms. Bloodworth, if I could, in terms of the toll roads in Nova Scotia and New Brunswick. I want to make sure I understand fully what you said. Was there in fact a contravention of the existing agreements when toll roads were allowed? Was that in fact in contravention of what existed?

Ms. Margaret Bloodworth: No, it was not, Mr. Myers, because there was nothing in the agreement that addressed it one way or the other.

The minister of the day did put some conditions. There was a kind of separate agreement, because it was not addressed. So there was no contravention, but we agree with the Auditor General that it would be better to have a policy. So that would be a case in which I don't think we have any disagreement. We certainly agree that there was nothing in the policy, but that it would be better to have something clearer.

On the specifics of the Nova Scotia and the New Brunswick one, there were discussions with officials, and there were some conditions laid down by the minister of the day. I'll ask Mr. Sully to elaborate on those.

Mr. Ronald Sully: Yes, in fact in 1995 there was an exchange of correspondence between the then Minister of Transport and the two provincial Ministers of Transport in Nova Scotia and New Brunswick. The exchanges were similar in the sense that the provinces were asking questions such as “What if we were to impose tolling arrangements on certain highways? Would the federal government be willing to cooperate?”

The response was “Yes, we would be willing to cooperate as long as the existing terms and conditions of the agreements were respected, and in particular, that the 50-50 cost-sharing between the federal government and the provinces would be respected; and secondly, that all the toll revenues generated would be applied against the particular project.”

As it turned out, when those agreements on the provincial side—the provincial governments were working with their own people and their own developers—were made public, we were satisfied that those conditions that had been laid down by the minister in 1995 had been respected.

Mr. Lynn Myers: Thank you very much.

I want to pursue this business of funding agreements. The Auditor General correctly points out that a number are expiring or are soon to expire. I think we all know that there has been some “ad hocness,” if that's a term, in terms of what's taking place, and perhaps even a lack of consistency.

I wonder if you could address that, and whether in fact we are in keeping with the spirit of what the Auditor General points out and moving toward a more concise, long-term kind of program. I think that would be important for this committee to hear.

Ms. Margaret Bloodworth: There are a couple of components for that. The first one is for the federal government to make a decision to commit further funding, because as you've pointed out on those agreements, while we're still spending about $200 million a year—that's this year—it's on its way down, and if one plays it out, after very few years there would be no money spent. So there is a decision, from the federal government's point of view, of whether this would be a priority area in which to put funds, and that's what I referred to earlier. There are competing pressures, and there have been over the last few years, not just for ourselves but for provinces as well.

The premiers indicated last year that health care was their first priority. They did put, some of them at least, transportation second. We'll see where they are this year.

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On the second question, there's always a question, since highways are built by provinces.... Yes, we would like to have a national highway program, but we have to do this in agreement with provinces. I'm sure if my provincial colleagues were sitting here they would say there's a degree to which it's not appropriate for the federal government to get involved. Any program would have to be discussed with them, as is happening. The minister has had quite a collegial discussion with his colleagues.

Yes, we have done work on what could be some of the possibilities the government might consider if they have new money. We have further work to do, and we have further work to do with our provincial colleagues as well. They will have some views as to what degree criteria and conditions should be laid down at the federal level.

Mr. Lynn Myers: I want to move, if I could, to the environmental impacts and in some cases a lack of assessment that has been noted in the Auditor General's report. I was also interested in something he said in his opening statement. The Auditor General indicated that payments in fact were made in advance of some of those environmental assessments. I wonder if you could respond to that and indicate what the department's going to do about that kind of serious activity.

Mr. Ronald Sully: First of all, let me say we are satisfied that there was a proper or at least a baseline assessment done for every project. There were a couple of instances where it is true that construction actually started before the assessment was completed, but I believe the moneys certainly weren't paid out in advance. We're improving on our financial management system such that there will be a better system of check-off on this. And this will be a computerized system, so we will ensure that the project is not approved for construction until the box for the environmental assessment is ticked off, if I can put it that way.

Ms. Margaret Bloodworth: Our plan is to assist the use of computers to help us in ensuring that there are no lapses in that regard in the future.

Mr. Lynn Myers: Thank you very much.

For my final question I want to take to you paragraph 25.122 in the Auditor General's report with respect to evaluation. In your response, you said:

Transport Canada will prepare an evaluation framework for any new highway program so that its performance can be monitored and data will be available for future policy evaluation.

I think that's important to note. I wondered what your action plan was for that, your timetable, and how you anticipate a report to Parliament, in keeping with what you're saying there.

Ms. Margaret Bloodworth: There are two aspects to what you've talked about: information for Parliament, and our own management evaluation. Let me deal first of all with management evaluation, although I'll turn to my colleagues here for the details on the action plan you've asked for.

We have generally improved our ability to have evaluation frameworks. The Department of Transport in the last four or five years has probably gone through as much change as any organization one could imagine, going from 20,000 to 4,000 employees. One of the things that was not done as much as I certainly would like to have done in the future was evaluation of existing programs. There were some done, but when you're changing.... That was one of the areas that wasn't done as much. It's part of a general reinvigoration of our management evaluation framework for all programs. We're certainly doing that on the highway side.

On the information for Parliament, we don't have as much information on highways as we have on many modes because we don't directly run highways. We have attempted in the last couple of annual reports to provide some information. We agree with the Auditor General; we can improve that. We have in fact set up working groups with the provinces to improve the data we do provide to Parliament on highways.

Louis, I guess you can speak on evaluation.

Mr. Louis Ranger (Assistant Deputy Minister, Policy Group, Transport Canada): Maybe all I could add is that it's now an established practice in the department that whenever we develop a new policy we almost at the same time develop an evaluation framework. In fact, very often when we develop a new policy we set up a special team, and before that team is dismantled and sent to other projects, we make sure they also are involved in developing the evaluation framework so that we capture exactly what the objectives were at the time of inception. So it is a practice, whether it's highways or trucking or passenger rail.

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The Chairman: Thank you very much.

Ms. Desjarlais.

Ms. Bev Desjarlais (Churchill, NDP): Mr. Sully, in response to Mr. Myers you indicated you didn't believe any money was paid out before the assessments were done. Is that correct, or did I mishear that? I thought that's what was said.

Mr. Ronald Sully: Yes, we pay out on the basis of invoices per project. So we would have paid out after that project.

Ms. Bev Desjarlais: After the assessment was done.

Mr. Ronald Sully: Yes.

Ms. Bev Desjarlais: The Auditor General's report, page 25-27, section 25.113, says:

In several cases, we found that Transport Canada had not adhered to the requirement to complete environmental screenings before issuing any payments for individual projects.

So was it one or the other? Did it happen or didn't it?

Mr. Ralph Jones (Director, Surface Program, Transport Canada): We have had discussions with the Auditor General's office, and all the information that's been provided to me to date is they found some minor projects, something less than $1,000, where there could be something. We haven't found out yet what they were, but they weren't projects in the context of highway projects. They were other types of issues.

Ms. Bev Desjarlais: You're saying “some” and this says “several”.

The Chairman: Mr. Minto would like to add something to this.

Ms. Bev Desjarlais: Certainly.

Ms. Basia Gadomski-Ruta (Principal, Audit Operations Branch, Office of the Auditor General of Canada): Maybe I could just walk you through the procedures we had. We had a sample of 96 projects for which we wanted to find the environmental screening that should have been done by the department. Out of the 96 samples, 86 were construction works for which there should have been an environmental screening report.

Out of the 86, the department was not able to find 15 of them, and I think that's what Mr. Sully was referring to. Out of the 71 for which they were able to find an environmental screening report, we wanted to make sure that the first payment went out after the environmental screening was done. Out of the 71 projects, we were only able to locate 43 first-payment dates.

This in part we mention in the chapter, that in some cases it's very difficult for the department to find all the information related to a transaction. As the deputy minister indicated, I think there are steps now to improve on the management trail.

So 43 first-payment dates were missing. Only 28 files of our projects could be tested to ensure that the first payment was not made before the environmental screening was done. Of the 28 projects, we found nine where first payment was done before the environmental assessment was conducted.

I'd just like to say that in terms of the amounts, they were not all insignificant. We have amounts here in the amount of $823,416. We have others where indeed the first amount might have been less than $1,000, but then there was more than one payment going out before the environmental screening was done. So there could have been a series of payments.

So in total, these are in the tens of thousands and sometimes in hundreds of thousands.

Ms. Bev Desjarlais: Thank you.

Also, on page 25-17, section 25.50, when it indicates that an agreement had been signed in a manner in which it shouldn't have been signed, I'm curious as to how.... To me, there was a process in place already that just wasn't followed. So how does one fix a situation where we have the process in place and it's just ignored? What now will take place to ensure that this doesn't happen?

• 1620

Mr. Robert Sully: I believe this section refers to Highway 104 in Nova Scotia and it relates to the exchange of correspondence involving the ministers to which I referred earlier. The minister of the day in his letter set out the terms and conditions he expected to be met if that province wished to proceed with the tolling arrangement. In the letter the minister asked that officials of our department be kept informed, and he also said that the specific terms and conditions of the agreements reached for the tolling arrangement would have to be reviewed.

We did not interpret that as a direction to our departmental officials, except that they should be aware and they should be ready to review whatever arrangement was put in place by Nova Scotia. That in fact is what happened. Nova Scotia proceeded on their own to develop the arrangements for the tolling arrangement with their various departments and their developers and basically presented it to us once that was finished.

The Chairman: Mr. Minto, did you have something to say?

Mr. Ronald Sully: At that time we reviewed those agreements and satisfied ourselves that the two conditions that had been set by the minister in fact had been met. One of them again was the 50-50 sharing on the project, and the other was that all of the toll revenues would be dedicated to the project.

The Chairman: Okay. Mr. Minto.

Mr. Shahid Minto (Assistant Auditor General of Canada): Mr. Chairman, I have just two quick clarifications. Let me just disagree slightly with my colleague from Transport Canada about this not being a direction. The letter was signed by the minister. I don't think there's any dispute on the content of the letter. We both agree on the substance. The minister said that this should not affect the 50-50 cost-sharing basis:

The institutional and legal arrangements for the partnership will have to be examined and agreed upon to ensure that the federal terms and conditions for contributions are met.

Then the letter was sent to the deputy minister's office, all the ADMs, the DG, and, on my copy, by name to the members on the board. The committee may want to clarify this, but when the minister makes a policy decision and sends a copy to senior management, if it's not a direction to implement, I don't know what it is.

The Chairman: Thank you, Mr. Minto.

Ms. Desjarlais.

Ms. Bev Desjarlais: In an area where we do not have a policy on something such as toll highways, something that is very critical to the Canadian people, how can one totally ignore making sure that everything meets the exact process that has been set out and just go ahead and sign it? I see this as being a serious total disregard for all Canadians, for that matter, because really it does have an effect. It was ignoring a process to ensure that there was maybe some discussion or a thorough review of an agreement that was going to change normal practice.

Ms. Margaret Bloodworth: Let me stay away from the semantic argument of whether or not this is a directive. We believe what was asked by the minister was complied with. I think that's what Mr. Sully was saying.

Now, one can argue, should we have put it in an agreement as opposed to a letter? Should we have documented it better and so on? There was no policy in the agreements. We agree on that. The minister of the day was consulted, and he set out his two criteria he was interested in. Our official looked at the agreement with the province in question, in this case, and was satisfied that the minister's criteria were met. Whether or not it was directed to him, he did that.

I agree with you, and I think I agreed at the beginning, that it would be better to have a toll policy agreed upon between us and the provinces, which is what we are working to do, and to put it in an agreement. That is not the case yet, and it certainly was not the case in 1995 that we had such an agreement. But the minister of the day did have a view about tolls, and he set that forth to the province in question.

The Chairman: Mr. Minto, you wanted to add something to this too.

Mr. Shahid Minto: Mr. Chairman, I'm just puzzled here. When we were doing this audit, we discussed this issue with the department. The question I have in my mind is what section of the agreement guarantees or ensures, as the minister said, that all excess tolls or all revenue from the tolls would be dedicated to the project? We have not seen an analysis, and we have not seen a report from the department that shows us that. If somebody has a document that shows that is what the agreement ensures, then I'd be quite happy to talk about it. I have not seen a document or analysis that ensures that any excess or all the revenues from the tolls will be dedicated to this project.

• 1625

The Chairman: Thank you, Mr. Minto.

Now we'll turn to Mr. Casey for eight minutes.

Mr. Bill Casey (Cumberland—Colchester, PC): Thank you very much.

Mr. Minto, just a minute ago you referred to the letter from the Minister of Transport to the provincial government as government policy. In the absence of a policy, do you consider this a policy of the government?

Mr. Shahid Minto: Mr. Chairman, in the conduct of the audit for this particular project, the minister was asked a question and he made a decision, and that was the policy, I think, for this particular project, yes.

Mr. Bill Casey: Just to go one step further, five days later the same minister wrote to the Minister of Transportation for New Brunswick this exact same letter. Would you consider that to be policy?

Mr. Shahid Minto: I'm not sure it was exactly the same letter, but the substance was—

Mr. Bill Casey: It was almost the same. It wasn't—

Mr. Shahid Minto: I would say that for that particular project, that was the direction from the minister to the department.

Mr. Bill Casey: I would like to ask Mr. Sully or Mr. Jones a question. I think Mr. Jones wrote the first letter. Although it was signed by Mr. Young, Mr. Jones' name is on the bottom. I don't care who answers the question, but I would like you to explain this to me. You just said a minute ago that there was no violation or contradiction to the terms of this letter. The letter says “The amount of the federal contribution would still have to be cost-shared with the province on a 50/50 basis”. We now know that the province has recovered 100% of their share. They don't have one red cent in the highway from Moncton to River Glade under the Atlantic freight transition program. How can you say there was no violation or contradiction to that letter, which we now hear is policy?

The Chairman: Is that addressed to Mr. Sully?

Mr. Bill Casey: Yes. He said there was reason—or whoever.

The Chairman: Mr. Sully.

Mr. Ronald Sully: We're switching now to the New Brunswick agreement. In fact we made a contribution on four different segments of the road, and this was prior to the time that the Government of New Brunswick had decided to impose tolling on the entire highway. Our total contribution was $32 million. In the context that this project is over $900 million, including our contribution, and the fact that the total toll revenues will pay for about 20% of it, we are satisfied that there has been no double-counting for the federal government's or the taxpayers' expenditures. In fact the contribution of the federal government has reduced the total cost of the highway and therefore lessened the total requirement for toll revenues and additional funding from the New Brunswick taxpayer.

The point I'm trying to make is that if it were the case that the tolls were recovering 100% of that project, I think you could say yes, something should be done about the federal contribution, but in this case they are nowhere approaching 100% cost recovery from the tolls.

Mr. Bill Casey: With all due respect, you're distorting the whole deal. The deal we're talking about is the Atlantic freight transition program. I challenge you to show me on schedule B where the highway is you're talking about. I'm talking about the highway that's listed on schedule B from Moncton to Petitcodiac and the part of that highway from Moncton to River Glade, which was built under very specific instructions. This letter referred to that and said that the province must maintain their 50% cost ratio. This contract, the Atlantic freight transition program, has nothing to do with the highway from River Glade to Fredericton, and you know it. That's what the New Brunswick government is trying to pass off. This is a very specific agreement with certain highways listed in it, and the highway you're talking about is not in this agreement. Show me in schedule B of the agreement where that highway is.

Mr. Ronald Sully: I might want to ask the Auditor General to comment, because in paragraph 25.37, on the issue of whether or not the federal funding ratios were respected, the Auditor General says:

We found in all the negotiated agreements that the program objectives, funding levels and cost-sharing ratios to be maintained throughout the life of the agreements reflected the government's directives.

The Chairman: I'll just ask the Auditor General to confirm that statement. Ms. Ruta.

• 1630

Ms. Basia Gadomski-Ruta: Mr. Chairman, thank you.

In reference to paragraph 25.37 in the last sentence, what we were doing here was essentially a test to ensure that the government direction in terms of whether it would be 50-50 or 40-60 co-sharing funding—there are different modalities that could be adopted—was reflected in the agreement. This does not mean we then tested to see if this was maintained throughout the agreements; it was just to see if there was a stipulation on 50-50, as directed by the government.

This does not take into account tolls or other elements. As we noted, tolls are not covered under the existing agreements, other than before 1998.

Mr. Bill Casey: Let's ask the Auditor General now.

This audit did not cover this agreement, in all fairness. Those remarks do not reflect the Atlantic freight transition program, if I'm not mistaken. But the agreement says the province will pay for 50% of the highway and the feds will pay for 50% of the highway. The letter says the feds will pay for 50% of the highway and the province will pay for 50% of the highway. But we now know the province has recovered every single share. And as the Minister of Finance for New Brunswick said, in this quote from Hansard in the New Brunswick government, “We had always made it clear that provincial money we invested in these sections would be recovered”. So even when they were signing the agreement to pay 50%, they didn't intend to pay it.

From the Auditor General's point of view, is the letter, which is policy, honoured and is the agreement honoured?

Mr. Shahid Minto: The focus of the audit we did, as Mr. Casey has observed, was not at the project level. The projects are managed, for the most part, by the provinces, with oversight by this management committee with federal-provincial representation.

We have already said in the chapter a number of times this committee did not fulfil its responsibilities according to the agreement. The focus of our chapter was on whether there was a policy on tolls overall and whether this was a new development. The answer was no, it wasn't. We heard today it is being developed.

The second part of our policy was we became aware that the minister had given a direction. We were also made aware that direction could not have been implemented. I'm referring you to paragraph 25.52 for the moment. Our conclusion was that without this the government might not have the leverage to ensure the provinces invested all the proceeds from tolls into the projects. We did not conclude they didn't. We said the government may not have the leverage because we did not order the projects. The projects, the details, the tendering, and the construction are all done at the provincial level. Our mandate is with the federal government.

Mr. Bill Casey: Could I ask your opinion, though, on that? If the agreement says 50-50 and the letter says 50-50 and Parliament says none, does that meet the terms of the agreement, according to your interpretation?

Mr. Shahid Minto: You can ask my opinion, but really that's not my area of expertise. That's a legal question you're asking, sir. It may even be a political question in which you gentlemen and ladies have a lot more expertise than we do.

The Chairman: Thank you, Mr. Casey.

We'll now turn to the second round. Mr. Morrison, you have four minutes in the second round.

Mr. Lee Morrison: Thank you, Mr. Chairman.

Ms. Bloodworth, I'd like to further pursue my question about long-term planning or the lack thereof. According to the Auditor General, Transport Canada doesn't even have an inventory of the substandard or dangerous segments of the national highway system. In other words, they don't know where the money would be required.

If that is true and the minister's comments made about two weeks ago about a highway program being in the works for some time in the future are true, is anything happening within the department to identify projects to perhaps prepare some preliminary budgets, so the next time we meet there will be some idea as to what the minister has in mind for this very serious crisis in the national highway system, as a long-term project?

Ms. Margaret Bloodworth: Let me address that in two ways, Mr. Morrison. First, we have agreed we should have more information, and we're in the process of doing that. We made an attempt in the first two annual reports of the department in the last couple of years to provide some information. That was the first attempt at it. We will continue.

• 1635

We are also ensuring that we don't duplicate the efforts of the provinces. I would argue that we could very easily get into something that was duplicated for the taxpayers if we attempted to have all the information the provinces have. That's not our goal. We still see provinces as primarily the source of detailed information about highways.

We want to have far higher-level information. We are not satisfied with the level we have now. We still have some way to go, but in the end we will always be getting it from the provinces. I think we have to work to be careful we don't step into the provinces' area of jurisdiction. After all, these are their highways and they have primary jurisdiction.

So in any improvement of our information, we want to be careful we don't try to duplicate or step into areas of provincial competence, which has to do with these detailed highway projects.

Mr. Lee Morrison: I couldn't agree more that the source of the basic technical data has to come from the provinces. They have departments of highways; this is what they do.

But we're talking here about the possibility of putting federal money out there. Surely, that being the case, you should be making some preparations as to how you will distribute the funds, if and when the funds appear. Right now, to my knowledge, almost all of the ministry's funding is going to the Atlantic provinces, with nothing anywhere else. I would hope that isn't going to continue indefinitely.

I will ask the question again. Has the ministry undertaken any sort of long-term planning exercise to determine what they will do to develop a national highway system, which we need so badly?

Ms. Margaret Bloodworth: First of all, you're correct. I believe there's a little bit of money in Ontario and Quebec, but the bulk of the money left in existing agreements is in the Atlantic provinces. There wasn't any before the existing agreements.

I'm sorry if I misunderstood your question the first time. We have been working on a national highway system. There was an agreement with the provinces going back to 1988 on what constituted the national highway system—just over 25,000 kilometres. This was an agreement on what were the most important, if I can put it that way, key routes both interprovincially and within provinces and international trade.

Assessment was done in 1988—again largely based on provincial data, because the provinces have the expert data—on what would be required to bring those up to a desirable standard. A desirable standard at that time was that the national highway system should be, at minimum, a two-lane paved road. In some areas of the country they agreed it should go to four lanes, but in 1988 the assessment did not go above that. They said anything above that was excess, if you can put it that way.

The tab, I believe, to bring those 25,000 kilometres up to that level was between $13 billion and $14 billion in 1988. That has been reassessed in the last year. The same highway system has been looked at and it came to a figure of something over $17 billion to bring it up to the standard.

There was an important change in the standard, and by standard I'm talking about what the engineers who looked at this system agreed was a desirable standard for the national highway system. They agreed that in very limited portions of the country they would bring it up to six lanes. But if you can think of areas like southern Ontario, where two lanes would be inadequate, it would probably be in the busiest areas. That was the main difference in the standard used between those two, and the price tag was something over $17 billion.

We have further discussed with the provinces how to go about allocating money. I can assure you provinces certainly are not in agreement with it all going to the Atlantic provinces, except perhaps my Atlantic colleagues, although they have not made that case.

In the end, until the government decides there will be significantly more money, I would expect that as part of that they will decide how they will allocate that money.

The Chairman: Okay, thank you very much.

[Translation]

Mr. Guimond, for four minutes.

Mr. Michel Guimond: Thank you, Mr. Chairman. Your French is really getting good; I am truly impressed.

The Chairman: Thank you very much.

• 1640

Mr. Michel Guimond: Ms. Bloodworth, paragraph 25.66 of the Auditor General's report says that:

25.66 Transport Canada should study its resources and financial management information requirements to support an effective management regime...

The Auditor General claims to be scandalized by the fact that so few human resources are devoted to program management and monitoring within federal-provincial committees. This probably follows the 45,000 job cuts among federal civil servants announced by this government in 1995. I hope that you will not answer me that you do not have enough staff and that it is the reason why you cannot ensure an efficient management system. I am convinced that you will not give me that answer.

The Department responded that it would review the lack of resources and financial management information. Has this been done and, if not, why? If it has not been done yet, when do you intend to start that review? Is there an implementation schedule that you could provide the committee through its clerk?

[English]

Ms. Margaret Bloodworth: I'll turn to Mr. Sully on the details of the improvements we made, but let me just make a comment on the number of employees.

I don't necessarily agree that we need large numbers of employees to do this just because it's a lot of money. I must say that it's not usual that public servants are told we should hire more people. In fact, we will have some more money in the department for staff next year, and the decision has been made that we will use it for safety inspectors, who we spend less money on, although I guess I would argue that we should put more people there first. We should certainly have enough people, but I'm not necessarily convinced that the amount of money is the measure by which we determine the number of people. But there's no question that we agree changes need to be made in management, so let me turn to Mr. Sully to talk about what we've done so far on that.

Mr. Ronald Sully: I think there are a couple of ingredients to this. One is the actual level of staff, the number of staff you have to do the job. The other is the systems the staff have available to them to manage the agreements.

On the second issue, we are working to improve our financial management systems with better computerization, centralization of files, and by making sure that we have proper documentation. For example, if a manager goes to a federal-provincial management agreement, you don't need extra people just to make sure you have proper minutes documented and on file. So we're doing that on the one side of it.

On the other side, with regard to the question of the level of staff, so far we have added one person to the file. It went from four to five. You may not think that's a large number, but it's a 20% improvement. Since the agreements are winding down—the fact is that we have many fewer agreements now than we had a few years ago—we think we ought to stick with that number until we see whether we get a new program up and mounted. Obviously we'll have to reassess what we need if we do have a new program.

The Chairman: Thank you, Mr. Sully.

Mr. Harb, for four minutes.

Mr. Mac Harb (Ottawa Centre, Lib.): Thank you very much.

I have two questions, the first of which is for the Auditor General. I was very pleased to hear the deputy minister and the ADM responding to the recommendation of the Auditor General. They were quite forthcoming, clear, and to the point. I wanted to ask the Auditor General if feels they have responded to the vast majority of the points he has raised in his report.

Mr. Denis Desautels: Mr. Chairman, yes, I'm quite encouraged by the response of the department. I said so in my opening statement. But I do think there are still some fundamental issues that are not easily fixed and will have to be worked on further. I'm referring here in particular to the whole tolls issue and how we deal with that in the future, and also to the issue of the gap we've noted between what the agreements call for and what the department is able to do under those agreements.

As we have noted, the department has told me that it is toying with the idea of modifying the agreements so that they reflect more closely what can reasonably be done under those agreements in the future. But right now there's a gap between what the agreements call for and what the department says it can reasonably do.

• 1645

Mr. Mac Harb: Thank you.

My second and final question is to the deputy minister.

I wasn't really pleased to hear that there's talk about a vision statement when it comes to a national transportation system in a country such as ours. I wanted to find out what, if anything, is being done at the deputy ministers' level across the country. Is there a plan for some sort of working meeting between the different deputy ministers so you can make your cases to the respective ministers at the provincial and national levels? Is there any sharing of information, which was something the Auditor General has raised? Is there some sort of strategic plan being put in place so that the next time the premiers meet—or whoever it is in the decision-making process—they can say that this is a priority for them? Is there any work in there? What is it, if there is any?

Ms. Margaret Bloodworth: I can assure you, Mr. Harb, that at every federal-provincial deputies' meeting that I've been at since I've been with the department, highways have been on the agenda and have occupied a significant portion of the agenda.

A few moments ago, in response to Mr. Morrison's question, I discussed some of the work that's been done. There has also been work done on public-private partnerships. It's not complete yet, but we're hopeful we'll have a report to release in the next month or so that will have looked at the various kinds of public-private partnerships and identified some of the pros and cons of doing that.

I would say that the tone of the discussions, both at the deputies level and the ministers level, by ministers and deputies of transport, is by and large a very collegial one. Because they have had some of the same pressures, they recognize that governments have had to make some tough choices in the last few years. At the federal level, for a lot of good reasons, they have not made a choice to put more money into highways. They also know it's possible that this might happen in the next year or two. If so, they are positioning themselves—and they've worked closely with that—to argue that some of that money should go into highways.

There's obviously a limit to what we can do together, because some of what they will do will amount to lobbying the federal cabinet. We can't do that, but we can certainly work very collegially.

I think what you saw come out from the western premiers last year certainly reflects a lot of the work done by my provincial colleagues out west to heighten the level of awareness of the importance of transportation. And certainly we have tried to do the same within the federal government.

The Chairman: Thank you very much, Ms. Bloodworth.

Ms. Desjarlais, for four minutes.

Ms. Bev Desjarlais: With regard to the engineers, you said they will decide what level the highway system is at, or whether or not it meets a certain standard. This might seem an unimportant question, but there was concern at some point that the standards were overemphasized in terms of what was needed. In other cases, you may be getting the information from the province. I'm curious as to whose engineering reports we're going by. Are they federally funded engineers who are giving an assessment, or are they provincially funded engineers?

Ms. Margaret Bloodworth: As I understand the reference to standards in the Auditor General's report, in some documents and some speeches we used the term “minimum highway standards”—and I stand to be corrected if that's the right term. It's a term that has a technical meaning having to do with engineering standards. Technically, that's not what the national highway system talks about. For example, under those standards there is not a standard for when you move from a two-lane to a four-lane highway. That study did address that, and there are some others, so we have changed our terminology on that.

I can assure you that it's not our highway standard. Indeed, I would argue that it should not be our highway standard. There are federal-provincial organizations of highway engineers who agree on certain standards—and I'm using the term broadly—and that is what it's based upon.

Ms. Bev Desjarlais: Are those standards documented as such?

Ms. Margaret Bloodworth: Yes. The Transportation Association of Canada has an engineers' committee that develops certain—

Ms. Bev Desjarlais: And that documentation is something Transport Canada works by? Is part of the whole process the idea that we're going to view it with regard to the standards that are specifically listed?

Ms. Margaret Bloodworth: We're part of the Transportation Association of Canada, but perhaps Mr. Jones can speak on that some more.

Ms. Bev Desjarlais: So as a Canadian citizen, I could call you up and ask what the standards are for the national highway system, and Transport Canada could give me a booklet that says what they are.

• 1650

Mr. Ralph Jones: No, it's not done that way. It's not set out as the national highway system. Depending upon capacity and many other factors, individual segments have a particular standard. That was what the Auditor General brought up, that we weren't more actively involved; we were using sort of a broad term in our studies of minimum acceptable engineering standards, where in actual fact there are many standards.

Ms. Bev Desjarlais: So for any particular space of highway, an individual would have to ask for that specific area of highway as to what—

Ms. Margaret Bloodworth: For an update of the national highway system.... Mr. Ranger?

Mr. Louis Ranger: For planning purposes, the deputy earlier referred to the fact that we've updated our studies and engineers had to agree on what would be desirable standards. But desirable standards are not very high. We're not talking about the German autobahn here; we're talking about a two-lane highway. It should be paved, it should allow for speeds of 90 kilometres an hour, it should provide a reasonably smooth ride, and it should be all-weather. But it strikes us that these are, in our view, quite minimal, which is why in our day-to-day vocabulary we talk about minimal standards. But strictly speaking, they are desirable standards as established by highway planners.

Ms. Bev Desjarlais: Okay.

The Chairman: Okay, thank you, Ms. Desjarlais.

Mr. Casey, you have four minutes.

Mr. Bill Casey: I have a nice non-legal, non-political question for Mr. Sully.

In schedule B of the Atlantic freight transition program, item 1.9 says “Route 2, Petitcodiac to Moncton, start of construction of the 34 kilometres of new four-lane highway”. That is under the 50-50 federal-provincial program. Did the Province of New Brunswick pay for their 50% share of that section of highway?

Mr. Ronald Sully: We'll ask Mr. Jones to answer the question.

Mr. Ralph Jones: To the best of my ability, yes, they have.

Mr. Bill Casey: Did they recover half of it? Did they recover their contribution?

Mr. Ralph Jones: I'm not sure what term you put onto it. I would put that they remortgaged it. They still own the highway; they own the asset. They went out and borrowed money against that asset.

Mr. Bill Casey: Did they not get a cheque on March 5 in full payment of their share of the highway, or do you know that?

Mr. Ralph Jones: In some of the correspondence we've had with you—I don't know about the date—they did receive some sort of payment. Whether it's specific to that project I don't know, because there were other land deals. It was sort of part of that whole $900-million package.

Mr. Bill Casey: But we're just talking about the highways referred to in section 1.9.

Have you ever asked if that was their share? Under this agreement, they were to pay for 50%. When they got that $102 million, I think it was, from the private corporation, did you ask if that was their share of this highway, in which they were supposed to pay 50%?

Mr. Ralph Jones: We had discussions with New Brunswick around that issue. As far as the department is concerned, when they completed that project we paid them based upon receipt, and that is our legal obligation under the agreement.

The Chairman: Mr. Harb.

Mr. Mac Harb: Mr. Chairman, on a point of order, I want to alert my colleague to something the Assistant Auditor General indicated a little earlier. We are dealing with an issue here that is completely outside the jurisdiction of this committee. It's a provincial matter. Probably my colleague would be better off to fly out a letter to the officials in British Columbia and deal with them rather than put our officials in a little bit of an awkward position before the committee.

Mr. Bill Casey: I may as well, since the province in question is New Brunswick.

The Chairman: As one point, I think Mr. Casey is talking about the east coast, not the west.

We have been talking about transportation policy pretty well all afternoon, as well as the Auditor General's report. The witness does seem to be aware of the issue, so I think Mr. Casey is appropriate in asking his question.

Mr. Mac Harb: I think it's a very fine line, Mr. Chair, between getting the facts and dropping a political white elephant.

The Chairman: The Auditor General has talked about tolls and so on in his report, so I think we'll hear what Mr. Casey has to say.

Mr. Bill Casey: Could I ask Mr. Jones to table the records of all the payments made on that section 1.9 of the Atlantic freight transition program, when the payments were made and how much they were? And could I ask the department to review that transaction to see if the province did recover their share, which they have admitted publicly they have? And does that not break the policy of the 50-50?

Ms. Bloodworth said in the beginning that she wants to act to protect the federal financial interest. This would be a good way to do it.

• 1655

Ms. Margaret Bloodworth: Mr. Chairman, if it's the wish of the committee that we provide details of the payments, of course we will do that.

We have already said repeatedly that we do not believe there was any violation of the provinces' agreement. Having said that, I've also said I agree that it would be better, from a policy point of view, to develop toll policy and to put that in future highway agreements. Not only I have said that, but probably more importantly the minister has said that, so certainly it would be our intent to do that.

We do not believe that either of the provinces concerned or indeed any other province is in breach of their agreement. We do agree that it would be better to improve the agreements, if I can put it that way.

The Chairman: You can ask a very small last question.

Mr. Bill Casey: Everybody here or pretty much in the department knows how I feel about these deals, but regarding the letter to Nova Scotia, the second condition was that if you're going to have tolls, all the funds must be dedicated solely to the project in question. I think I've sent you over a press release from the Province of Nova Scotia that says:

After expenses are paid, this model predicts $151 million in excess cash. If the traffic volumes meet or exceed traffic projections, this excess cash will revert to the province.

So the province has $27.5 million in this, and they're now projecting a profit of $151 million on this highway. So they've set up a profit centre using federal money, and that's not what the federal money was for.

The Chairman: And your question is...?

Mr. Bill Casey: My question is does this not violate the second condition of the letter to the Province of Nova Scotia?

Mr. Lynn Myers: On a point of order, how many times do we have to hear the word “no” before it sinks in? I think we've heard it repeatedly, and—

The Chairman: Let's hear Ms. Bloodworth repeat it once more, and then we'll move on to Mr. Finlay.

Ms. Margaret Bloodworth: As I say, we do not believe that either of the provinces had any violation of the agreement. I'm aware of the press release you're referring to, but we're not relying on press releases when we make that determination; we are relying upon discussions we have had and review of the agreements the provinces have.

If you want further details I'll turn to Mr. Sully, but that's our position.

The Chairman: I think we'll now turn to Mr. Finlay.

Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman.

I'm looking at paragraph 25.88, and I'm seeking a little clarification:

25.88 Transport Canada should ensure that the approval of projects follows a process of prioritization to identify the most cost-effective choices.

I've no problem with making cost-effective choices, but it goes on to say:

The process of prioritizing proposed projects should take into account a number of relevant factors, including but not limited to cost/benefit analysis.

Could I please ask what those other relevant factors would be? It seems to me there could be many of them that might even be far more important than cost-effectiveness. I want to ask the department, and they've sort of answered the Auditor General in their response that “Measures will be taken to ensure that management committee meetings reflect the details of the discussions that evolve around the project selection process”. So could I have the Auditor General's report on this prioritization and what the relevant factors would be, and then could I get the department's view on what the relevant factors are they look at in making project selection choices?

The Chairman: You want a quick answer from the Auditor General as to what the relevant factors are in addition to cost-benefit, and then a question to the department as well.

Mr. John Finlay: Good.

The Chairman: Mr. Minto.

Mr. Shahid Minto: Thank you, Mr. Chairman.

The reason we were talking about cost-benefit is that the government recently directed Transport Canada to subject all projects to cost-benefit analysis, and we support this. That is a good move, sir.

If I can direct your attention to paragraph 25.85, when we looked at the projects we found that most had been approved with little analysis by the federal officials as to the extent to which they would support program objectives. So we were looking at this in this context.

My colleague could comment as well.

Ms. Basia Gadomski-Ruta: Absolutely. The objective of the program is to deal with such things as safety and efficiency enhancement, and when you make the decisions and you're approving projects, what sort of prioritization are you giving, and what's the analysis in order to make the determination to approve projects? This is what we're making reference to.

The Chairman: Thank you.

Now we'll turn to Ms. Bloodworth for the departmental response.

Ms. Margaret Bloodworth: If I could answer your question about other factors, one of the other factors might be geographical allocation. Let me give you an example. If we went solely on cost-effectiveness, I I think one of the concerns some of the smaller provinces might have, and some of those with less busy roads would have, is that they would never compete with Highway 401 in Toronto. I mean, we could always show more cost-effectiveness. So I think geographical allocation may be one.

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I think they have similar concerns about looking at safety in an absolute way. We agree that safety should be a factor, but if you compare safety improvements to some of the major highways in the very busy areas to the safety improvement in a less busy part of the country, on an absolute basis it may be a better investment for safety to put it in the busy area. We would say you shouldn't put all of it in the busy area. That's one factor—geographical fairness, if I can put it that way.

The Chairman: Mr. Finlay.

Mr. John Finlay: I would think that accessibility to population, etc., and lack of other transportation methods.... I had down safety and public health and aesthetics and a lot of other things, so I would think we're dealing with a very broad subject here.

Ms. Margaret Bloodworth: You're quite right. I agree with you.

Mr. John Finlay: Thank you.

The Chairman: Thank you, Mr. Finlay.

When I was reading the report of the Auditor General, Ms. Bloodworth, I thought it was a fairly scathing indictment of the management of the transportation system by the federal government. There was a very, very small department of four people plus five assistants to handle 600-odd contracts plus a host of other things, including committees, in addition to all the work of just managing all these things.

Let me just read what the Auditor General has to say in paragraph 25.64:

Outside the function of the management committees, program delivery responsibilities include preparing submissions to the government for approval of new programs and extensions of existing ones; developing and designing federal-provincial agreements; instituting program financial controls; managing the divestitures of federal infrastructure; and reporting on the overall performance of the programs.

That is in addition to managing 600 contracts plus several hundred other construction contracts—all by four people. I'm aghast to think that they must have been grossly overloaded as far as work is concerned, and that's why we have this damning report, Ms. Bloodworth. Any comment on that?

Ms. Margaret Bloodworth: Yes, I have a couple of comments, Mr. Chairman.

First, it's not true that those four people do all of that. The program has now been split.

The Chairman: When the Auditor General did his report, that's what he found at that time.

Ms. Margaret Bloodworth: No, but even then it was not those four people, for example, who were involved in developing and designing federal-provincial agreements.

The Chairman: Well, let's ask the Auditor General. That's what he stated in his report.

Mr. Minto or Ms. Gadomski-Ruta, are you standing by what you said there?

Mr. Shahid Minto: Mr. Chairman, in paragraph 25.64, you'll notice we say the four plus five.

The Chairman: There are nine people, the four plus the five assistants.

Mr. Shahid Minto: And we stand by it.

The Chairman: You stand by that.

For nine people that's a lot of work. You're still saying—I know you've changed it since then, Ms. Bloodworth—that's how it was back then?

Ms. Margaret Bloodworth: I'm saying the design of the policy framework and the agreements was done by the policy group. That policy group has now been separated. It was true at the time of the audit, we had—

The Chairman: So at that time, there was a good reason why so many things were not getting done.

Ms. Margaret Bloodworth: I don't think I said that, Mr. Chairman.

The Chairman: No, I know you didn't say that. Those were my words, saying, when I read the Auditor General's report, that many things were not getting done because there was no real staffing.

Ms. Margaret Bloodworth: I didn't agree with that, Mr. Chairman.

The Chairman: You don't agree with that, okay.

Mr. Mac Harb: You're putting words in the mouth of the witness.

The Chairman: Editorial comments, fine.

Ms. Margaret Bloodworth: You didn't let me complete my answer.

The Chairman: When we take a look at the report, in paragraph 25.78 the Auditor General talks about the financial management system having weaknesses; it was not integrated; minutes of meetings, project approval analyses, ministerial decisions, environmental results were scattered through the department or missing outright. Why are we finding that the documentation within the department is missing, piecemeal, and all over the place?

Ms. Margaret Bloodworth: And we have agreed with that, Mr. Chairman; there needs to be improvement on that. Part of that was due to a restructuring of the department and moving things from headquarters and regions. But that is not a reason, I agree. It should not have happened, but it did.

The Chairman: The Auditor General in his final remarks said the committee may want to request from your department a status report on actions taken to date on his recommendations together with target dates to deal with any outstanding matters. Can we get that?

Ms. Margaret Bloodworth: Yes, Mr. Chairman.

The Chairman: Okay, when could we expect that? At the end of April?

Ms. Margaret Bloodworth: I think that's reasonable, Mr. Chairman. If it's not, I'll certainly get back to you, but that seems reasonable to me.

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The Chairman: Regarding Mr. Casey's points that he raised and your statements that you feel perfectly justified that the agreements were met totally, in accordance with the documentation that you have, there certainly seems to be a serious difference of opinion as to whether they were or they were not. Can you give us also an explanation of how you feel you honoured the agreement as far as the tolls were concerned, or your rationale why you believe you have met the contract specifications? Would that be possible?

Ms. Margaret Bloodworth: You want one in writing, you mean?

The Chairman: Yes, by the end of April.

Ms. Margaret Bloodworth: Or would you like me to do it now?

The Chairman: By the end of April. At the same time, you can give us a letter explaining why you feel you have met the conditions of the contract regarding tolls and so on. That seems to be an area in dispute.

Ms. Margaret Bloodworth: Certainly, Mr. Chairman; we'd be happy to oblige.

Mr. Mac Harb: Mr. Chairman, they are in the minutes. I mean, they went on elaborately for over 23 minutes with Mr. Casey hammering away—

The Chairman: I think what we had was Mr. Casey—

Mr. Mac Harb: —with all of those political statements. I think there's ample evidence in the minutes.

You just said, Mr. Chair, they are overburdened with a lot of work. Now we want to add to the witnesses more responsibilities to bring in more and more reports. I don't think so, Mr. Chair. I think it's in the minutes. I would use the minutes.

The Chairman: I think they're quite firm in their position, Mr. Harb. I think a letter explaining it to us would be quite in order to satisfy the committee that the agreements have been honoured. While we've had lots of back and forth, we haven't had any specific rationale put on the table today.

Mr. Mac Harb: We are satisfied, Mr. Chair.

The Chairman: Some are.

Mr. Mac Harb: The committee is satisfied with what the witnesses have presented.

The Chairman: I'm concerned about things like the environmental impact assessments that seem to get done after the fact rather than beforehand. Is there any reason why that's the situation?

Ms. Margaret Bloodworth: Mr. Chairman, I think it was discussed earlier that we believe they were done. We have agreed that the documentation was not adequate. On that we agree, and we agree it has to be changed. We also agree that there need to be better checks and balances, if I can put it that way, against that kind of thing happening, which were not there. I'm not sure I can add much more, unless Mr. Sully wants to add something.

Mr. Ronald Sully: We'll concede the point was raised earlier that in fact there have been some problems where the money did flow. I accept the point; mistakes were made. I think one thing we have to do is take a stronger hand with some of the provinces in terms of how they get on with those projects.

The Chairman: When I look at, for example again, your responsibilities in paragraph 25.23, you're talking here about Transport Canada playing a lead role in coordinating information highway investments: “The committee was required to prepare a comprehensive annual report on federal spending, as well as plans for potential future involvement in highway projects.” You discontinued that report in 1990-91, according to yourselves or according to the Auditor General, due to your lack of resources.

Now we're spending $1 billion or $1.6 billion. We're spending a lot of money, and it seems that you have no resources to prepare a report as to what your priorities are, what your philosophies and policies are. You did not develop a policy on tolls other than the minister's letter saying we were prepared to have tolls on highways. You said you were going to do a full study. As far as I'm aware, it still hasn't been completed. It seems very much that the department is flying by the seat of its pants, and when it's required to do reporting it doesn't get done.

Ms. Margaret Bloodworth: Let's be clear about what that report is. That's reporting on information at the federal level. It would not deal with things like tolls, for example. We have agreed to reactivate that committee. The first task of that committee will be, and on this we agree with the Auditor General, to review what would be useful for it to do. We agree that should be done.

The Chairman: Okay.

Ms. Margaret Bloodworth: The first task is to review what would be useful to be done by an interdepartmental committee on highways.

The Chairman: On paragraph 25.28, in your response to the Auditor General's recommendation you said Transport Canada will form and chair an interdepartmental highway committee to coordinate information on federal government highway expenditures. Has this been done?

Ms. Margaret Bloodworth: That's the committee I'm talking about. It has not met yet, but there is such a committee. We will ask them.... They will meet and their task will be to determine what exactly they should do on coordinating and what would be useful. That's my task to them. I would like to know what would be useful for government to have, as opposed to simply having a report because twenty years ago there was a decision to have the report. That being said, I agree with the Auditor General that it is up to us to update what was done twenty years ago.

The Chairman: Okay.

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I have one last question. In paragraph 25.30 you're talking about the strategic capital investment initiative regarding various extensions in the highway improvement program from 1993 to 1998. The Auditor General, as far as I can see, reviewed three cases, and he says in paragraph 25.31: “During the course of our examination we reviewed three cases in which we found some of the information supplied to the decision-makers was inaccurate”. We have people making decisions about hundreds of millions of taxpayers' dollars based on information that is just plain not accurate, according to the Auditor General.

Ms. Margaret Bloodworth: My understanding of one of the inaccuracies is what we discussed earlier, using minimum standards to call a two-lane highway when that wasn't technically minimum standards. That we have corrected. I can't recall the other two inaccuracies. Perhaps my colleagues here can help me. On that one, I would question whether that really had a significant effect on the decision maker. That being said, we have corrected our terminology on the standards issue.

The Chairman: It seems to me that the decision maker who was trying to allocate the money to raise the highways to minimum standards was told that we needed $17 billion to meet minimum standards. But the minimum standards were actually significantly higher than minimum standards, and that $17 billion would have raised them significantly above these minimum standards.

Ms. Margaret Bloodworth: No. My understanding is that the Auditor General has pointed out that there is a technical definition of “minimum highway standards” and that in fact what we called minimum standards included more than those minimum standards. I don't want to put words in the Auditor General's mouth. We have agreed that we should correct the term. Personally, I'm not convinced that had a significant effect on decision-makers. Indeed, there has not been any decision made on the $17 billion.

The Chairman: We'll now turn just briefly to Mr. Morrison, and then we'll have Ms. Phinney.

Mr. Lee Morrison: To the Auditor General, I don't want to put words in your mouth, but I would like to know if I'm getting the right direction here from your report. Is it fair to say that in your opinion the ministry or the federal government has been deficient in its contract enforcement and quality control functions with relation to the provinces, that it has not been minding the store? Is that a fair comment?

Mr. Shahid Minto: Mr. Chairman, the problem we find ourselves in here is that if you look at exhibit 25.6 on page 20, you'll see that the federal and provincial governments negotiated 22 agreements, and each time these duties for the management committee were agreed to.

When we were doing the auditing, and as you heard in testimony today, we found that a lot of these things were not doable. The federal government was relying on the province to do that. So when you ask if they were minding the store, our concern is that perhaps the agreements did not reflect the reality of the day, that the intention of the agreement was not implementable in some people's minds, and there was a forced fit in here. So there were a lot of things that were not done by the federal people, and they relied on the province. Our main issue is that if you're going to rely on the province, then you have to be very clear on what information you need from them and what you're going to rely on them for. When that information comes in, there has to be some validation and analysis, and frequently this was not done.

Mr. Lee Morrison: Do I have time for one more question?

The Chairman: I'll give you time for one more question, then we'll turn to another member.

Mr. Lee Morrison: Following on that, Mr. Jones, you did explain at reasonable length what the standards for the highways would be. What you were talking about seemed like incredibly low standards for the 21st century. The motoring public, as you know, is avoiding the Trans-Canada Highway, and people are dying on the thing, primarily on the two-lane sections.

So what I want to know is, are there any long-term plans on paper to upgrade the highway to the standards of, for example, the American highways that are designated with the letters U.S.? I'm not talking about the Interstate. That's a standard we can't meet in this country because we don't have the bucks. But is there any long-term plan for upgrading our national highway to the standard where we can take a little bit of pride in it, rather than driving down to Michigan to not drive on it?

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Ms. Margaret Bloodworth: Mr. Morrison, perhaps I could answer that, since Mr. Jones is responsible for administering the agreements. What you're referring to is the study of the national highway system that we've done in cooperation with the provinces. In fairness, I think a lot of that is being done by the provinces. They would say they haven't spent enough money and that we haven't spent enough money. To bring it up to the standards I talked about, a minimum two-lane, paved highway across the country, for example, would take $17 billion. It's obviously going to take some time to do that, whether it's us or the provinces or the two of us together. Part of it would be a decision on the part of the federal government on whether or not to spend more money. Some provinces have agreed to spend more money and have put more money into their highway programs, but not all.

The Chairman: Thank you.

Ms. Phinney.

Ms. Beth Phinney (Hamilton Mountain, Lib.): I just have a short question. You mentioned that your staff has gone from 20,000 to 4,000 in four years. I think that seems rather considerable even with privatization, modernization and new equipment, etc. Could you just tell us what the impact of a change like that has been on the department, and how this affects the delivery of programs? And maybe the deputy minister could finish the answer she was giving when she was asked about the nine people doing all that work.

Ms. Margaret Bloodworth: It has had a considerable impact on the department in the sense that it is now a very different department than it was six years ago. A large part of that had to do with devolving functions to airports, NAV CANADA and so on. So I certainly did not mean to suggest that 16,000 people were out on the street. That's not the case. There were some lay-offs, as there were in all departments, but most of those people would have gone to another entity. In terms of the organization that is left, instead of being the large operating department that it was at the time, it is now very much a policy and regulatory department. The nine people are involved in the administration of the highway agreements. As Mr. Sully explained, we did add one other person.

The other thing that was been was to split administration from policy. For example, at one point, we used to have one director general who was in charge of highway policy and highway programs. In the reorganization of the department, that was split. That's why we have two assistant deputy ministers now. We have put the administration of programs in one area, under Mr. Sully, so now we have a director general who is charged solely with the administration of highway programs and bridges. At one point, the director general had to deal with both. So we've added one person, but I would argue that we've also added more senior attention, if you like. Where I'm not personally convinced is whether or not we need more people. As Mr. Sully says, if we have new agreements, we will have to assess that.

The Chairman: I think we have two very quick questions. We'll have a very quick question from Mr. Casey, and a very quick question from Mr. Finlay. We'll get some short answers, and then wrap up with the Auditor General's closing statement.

Mr. Bill Casey: Just in reference to tolls, the minister has said he's going to insert a clause in all future agreements to prevent provinces from doing what the provinces of Nova Scotia and New Brunswick did, which is implement tolls on their own. He said that obligation will be held for thirty years. Will the contracts have a thirty-year term? How will they be accountable for thirty years to ensure that the provinces honour the terms and conditions of the agreement?

Ms. Margaret Bloodworth: That is the clause I referred to earlier in the New Brunswick and Nova Scotia agreements, which are the only ones we've renewed recently. Because we did not have a new toll policy, we put in a provision for thirty years, which was considered to be the life of the highway.

The Chairman: Is that enforceable?

Ms. Margaret Bloodworth: As with any other federal-provincial agreement, we consider it to be enforceable.

The Chairman: Mr. Finlay, you had a very short question.

Mr. John Finlay: I did, Mr. Chairman. For a while I didn't think Mr. Jones was going to be asked anything, so I wanted to ask him something. He's director of the surface program. Does that mean he has nothing to do with bridges, tunnels, and air transport? What does it mean?

The Chairman: Quickly, Mr. Jones, do you have anything to do with bridges and tunnels?

Mr. Ralph Jones: No, I don't.

Some hon. members: Oh, oh!

The Chairman: Mr. Desautels, we'll have your closing remarks.

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

First of all, in terms of the overall response of the department, let me say that I'm generally satisfied with that response. Even though the department has some concerns about a few of our observations, we can work those out with the department through further discussions.

I'm pleased that we had a thorough discussion of the tolls issue. I believe it's an important policy area that needs to be filled, and I think it will make it easier in the future to administer those agreements.

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In response to an earlier question from Mr. Harb, I mentioned that there is a gap at this point in time between what the agreements call for and what Transport Canada can really deliver in terms of administration of those agreements. I believe we have to work on that. We either equip ourselves to play our role completely, or we change what the agreements call for. For future agreements to have any credibility, I think they must only impose on the respective partners responsibilities that are doable, ones that they can fulfil.

Finally, I think it's worth while to try to fix the above issue, and also to improve what I call shared governance and management issues. What we're seeing here is the federal government working with the provinces to implement some important programs. There may be more money spent through that route in the future, if not in Transport Canada, it's also an important issue in other government departments.

I think there's a need to refine the way in which levels of government work with each other, in a way that is realistic and in which each partner's role is well defined, with each partner playing a role that is called for in the agreement. I think this is an important issue that needs to be worked on by the department for its own sake, but also in terms of drawing the right lessons for the rest of government.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Desautels. Thank you to all the witnesses.

The meeting is adjourned.