PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 13, 1999

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[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon, ladies and gentlemen, and welcome back from the Easter break. Today we're studying the main estimates for 1999-2000, votes 25 and 30 under Finance, Office of the Auditor General, and the report on the receipts and disbursements of the Office of the Auditor General of Canada for the fiscal year ended March 31, 1998.

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As our witnesses today, we have Mr. Denis Desautels, the Auditor General of Canada; Ms. Sheila Fraser, the Deputy Auditor General; and Mr. Michael Mclaughlin, Deputy Auditor General for Corporate Services.

This is the first time Ms. Fraser has had the privilege and the opportunity to be before the committee, so first we'll say welcome.

Ms. Fraser, perhaps you would like to take a couple of minutes to give us a little bit of an introduction and tell us about yourself.

Ms. Sheila Fraser (Deputy Auditor General of Canada): Thank you, Mr. Williams.

[Translation]

I'm very pleased to be here today.

[English]

I'm a chartered accountant and have spent my career to date in public accounting. Most recently, I worked in Quebec City. Actually, my family is still there, so I'm commuting back and forth to this wonderful town. I look forward very much to working with the committee in the future.

The Chairman: Thank you, and welcome.

We also have another new face with us today. Janice Hilchie, our clerk, came to us from Foreign Affairs. I understand she was designated an essential service back there, so she has returned to Foreign Affairs. Therefore, we have now been joined by Mr. Jacques Lahaie, who has come to us from the finance committee. Of course, he had lots of work with the banking issue last year, so he is very well briefed on the issues of money and so on. So welcome, Jacques, and we look forward to a long and happy association.

We will now turn to Mr. Desautels for his opening statement.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman, for this opportunity to discuss with you our 1999-2000 estimates, which are contained in our report on plans and priorities. The report establishes our performance expectations and outlines the general direction the office wants to take in the next three years. It also provides additional details on our funding requirements for the coming year.

As we prepare for the 21st century, our office will continue to place emphasis on our five priority areas. Some draft performance measures for each of those areas are indicated on pages 11 to 14 of the report. We'll use these measures to determine our success in attaining these priorities, and we'll provide the results in our fall 2000 performance report. We've provided you with a handout that shows the chapters we plan to include in upcoming volumes of our 1999 report and, tentatively, in the 2000 report.

One of our current priorities is to look at the accountability and results implications of new collaborative arrangements. Parliamentarians have shown an interest in this subject. Many departments are examining new ways to deliver services to taxpayers more effectively and efficiently, or ways to make existing arrangements work better. In some cases, this means new organizations, and in others it means new agreements with provincial governments or the private sector.

This year we're doing a broad government-wide survey of new arrangements, as well as taking a more detailed look at some specific arrangements in departments such as Environment, Defence, Public Works, HRDC, and Agriculture. As in our previous work on NAV CANADA and Canada Communication Group, our audit objectives with these new arrangements are to make sure Parliament's interest is protected and that expected results are clearly stated. We also want to identify lessons to be learned and pitfalls to be avoided.

A fundamental and continuing objective for the office is improving economy and efficiency in the public service, so this year we're working on four subjects well known to this committee: year 2000 preparedness; major capital projects; contracting; and human resources management in the public service. We'll also be tackling some new aspects of these subjects. As your committee has asked, we will be monitoring the government's year 2000 report on mission critical systems, and we will also be looking at the readiness of contingency plans.

This year's audit of major capital projects will examine those of the Department of Foreign Affairs and International Trade. Our contracting audit will look at the use of advance contract award notices.

Another subject related to the economy and efficiency theme is the Canadian Police Information System. Management of the government's revenues and expenditures is a theme that runs through several of our audits. Our revenue audits this year include the underground economy initiative and GST processing.

In part, because parliamentary committees have shown an interest in cost-recovery programs, we're planning audits of such programs in CIDA and Agriculture and Agri-Food Canada.

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Assessing the quality of financial management in departments is very important, and to do this we've developed the financial management capability model that has recently been published. This year we're starting to use this model to assess the overall quality of financial management, beginning with CIDA and Health Canada.

As you know, the government is introducing its new financial information strategy or FIS. Accounting data, for both the government as a whole and departmental use, will now be produced by new departmental financial systems. In seven departments this year we'll be auditing the implementation of the first phase of FIS.

The environment and sustainable development are getting a lot of audit attention in addition to the nine chapters the commissioner is preparing for our May report. Other reports will have chapters on both east coast and west coast fisheries and a chapter on how well National Defence manages hazardous waste.

Some other program audits could fall under more than one of our priorities. I might mention in particular the two dealing with the health portfolio. The first examines the quality and effectiveness of surveillance information in the Laboratory Centre for Disease Control. The second examines the implementation of the Canada Health Act.

[Translation]

Mr. Chairman, let me take a few minutes to briefly review our financial requirements and some of our new challenges in the year ahead.

The Main Estimates show that we are asking for a total of $53.5 million to do our work in 1999-2000. The audit of the federal government's financial statements will cost $4.5 million. The audits of financial statements of Crown corporations and other entities will cost $11.6 million. Our scheduled special examinations of Crown corporations will cost $4.3 million and our value-for-money audits in departments and agencies will cost $31.7 million, including $3.4 million related to the environment and sustainable development. Finally, planned spending by the Commissioner's Office will be $1.4 million.

We have been named auditors of the new Government of the Territory of Nunavut, established on April 1, 1999. In 1998-99, Treasury Board approved funding for this new work. These Estimates provide for amounts ranging from $700,000 to $1.4 million for the period 1999-2000 to 2002-2003 and beyond as this work increases.

Although we have presented here our best estimate for the 1999-2000 fiscal year, the timing of Estimates preparation, direction from Parliament to undertake new work and changes to government's financial systems will mean that we will be requesting supplementary estimates. I will now highlight the new work that in total, may require an additional $2 million in funding in 1999- 2000.

In 1998-99, for the first time, the Office was required by legislation to carry out a financial audit and provide an assessment of the performance information reported by a new service delivery agency, the Canadian Food Inspection Agency. Beginning in 1999-2000, we will conduct the same type of work for the Canada Parks Agency and the Canada Customs and Revenue Agency. We are seeking various amounts annually for this work—ranging from $580,000 to $960,000 for the period 1999-2000 to 2002-2003 and beyond.

The government's phased implementation of its decentralized Financial Information Strategy will also have an impact on our resource requirements for the audit of the financial statements of the Government of Canada. We are seeking $500,000 in 1999-2000 and $1 million in each of the years 2000-2001 to 2002-2003 and beyond, to cover the additional work this will require.

We have recently been named auditors of the two newly created agencies: the Ridley Terminal Inc. and the Canadian Tourism Commission. We have also been asked to conduct special audit work at the Canadian Wheat Board. We intend to request additional funds in the coming year for our audit work in these agencies.

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On other matters, last year we conducted a survey of parliamentarians to obtain their views on the work of our office. Survey responses indicated that the type and amount of work we are doing is useful and many of our 1999 chapters relate to the priority themes that we asked about in this survey. Survey results also indicated that our office should make more of an effort to inform parliamentarians about the work we do in the areas of environment and sustainable development. We will address this concern.

We consider feedback from parliamentarians to be an important performance measure for our office. We want to thank you, Mr. Chairman, members of your committee and indeed all the MPs and senators who participated. We had hoped for a higher response rate but we are heartened by the fact that all parties responded favourably to the work we are doing. We are considering other measures to learn more from parliamentarians in the coming year.

Finally, in our continuous review of the way we conduct our audit work, I have requested an external audit of our Quality Management System for annual financial audits. Through an open bidding process we have selected the accounting firm of Price Waterhouse Coopers to conduct this important review of our office. Its report will be completed early in 2000.

[English]

Before I ask Michael McLaughlin to review the financial aspects of our estimates, I'd like to bring to your attention a few concerns I have regarding the administration of our office.

One concern is our independence in managing staff. Traditionally, we have adopted the collective agreements negotiated with the public service by the Treasury Board Secretariat. This was done with mutual understanding and concurrence. But in our current round of negotiations for the CR and ST groups, Treasury Board Secretariat will not give us a mandate to negotiate similar settlements.

In addition, in parallel with the government's own efforts to simplify staff classification, as of April 1, 1999 we have created a classification structure unique to our office, making the adoption of TBS-negotiated agreements no longer appropriate. However, there is a cabinet decision requiring that separate employers obtain a negotiating mandate from Treasury Board Secretariat. Section 56 of the Public Service Staff Relations Act further requires that we may enter into collective agreements only with the approval of the governor in council.

The new Canada Customs and Revenue Agency is not bound by that section. Because we do not enjoy the same exemption, our collective agreements must be approved by the governor in council. I believe this reduces the independence from government Parliament sought to give us in the Auditor General Act.

Another concern is the appointment of auditors for various government activities, including alternative delivery arrangements. In the past, members of this committee have questioned me about these appointments and the factors that are concerned in making such appointments. I'm currently preparing a paper that sets out our views and proposes a framework of guidance for the selection of auditors.

Mr. Chairman, with your kind permission now, I would like to ask Mr. McLaughlin to take us through some of the financial numbers for our estimates.

The Chairman: Mr. McLaughlin.

Mr. Michael McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General of Canada): Thank you, Mr. Chairman.

I would like to draw your attention to the blue book that has been submitted to Parliament.

The Chairman: Does everyone have a copy?

Mr. Michael McLaughlin: I was going to walk quickly through some of the tables there, so people could direct questions toward the numbers.

On page 5, we indicate that our business line is legislative auditing, and we highlight there—

The Chairman: Mr. McLaughlin, just before we get into this, can we make sure if there is a difference on the French version—

Mr. Michael McLaughlin: If there is a difference, I will indicate it in French.

The Chairman: Thank you very much.

Mr. Michael McLaughlin: I've already anticipated that.

The Chairman: You're ahead of me.

Mr. Michael McLaughlin: Since page 5 is the start of section 2, there is no difference. But when we start on page 5 there are a number of questions that certainly should be of interest to this committee. These are the kinds of questions we are trying to answer as we do our audit work. I would draw people's attention to those particular questions.

Moving along to page 8, we present our financial spending plan in accordance with Treasury Board Secretariat guidelines. In effect, in 1999-2000 we are asking for $53.5 million for our legislative auditing program, with a net program cost of $58.6 million.

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I'll come back to the net program cost later in the presentation.

These numbers, following the guidelines prepared for us by Treasury Board that we must adhere to, do not include money for any new work we will have to undertake during this year, nor does it include money for increases as a result of collective agreements we may eventually sign with our employees. Our collective agreements expire April 1, 1999, so we have a new set of collective agreements. Until we have signed those agreements, no money is provided to us according to the rules.

The rules also allow us to carry forward from prior years up to 5% of our budget if we've lapsed that money in prior years. We haven't yet compiled what the lapse might be, but it is our intention to avail ourselves of that lapse and provision because we have had some audit products that have been delayed in their delivery for a number of reasons, and we want to be able to continue those audits through. That's exactly the reason that provision is put in place.

Section 3 deals with our plans and priorities and expected results. Exhibits 1 and 2 on pages 9 and 10 develop the key results the office expects to achieve and indicates the components of our business lines of the different types of audits we have that will help achieve these particular objectives.

Again, this is laid out in a tabular format. As an example, one can see in exhibit 2, compliance with authority, that we expect to do work under the financial audits of crown corporations and other entities. In our value-for-money work we look at compliance with authorities. Those are key outputs there.

Pages 11 to 14 elaborate on the priorities. The Auditor General has already mentioned these, so I will skip that particular piece. Exhibit 3 on page 14, page 15 en français, shows the planned cost by audit type. As you can see from this table, the VFM work is expected to cost $31.7 million or almost 60% of our audit effort.

Exhibits 4 to 8 on pages 16 to 19, 16 à 20 en français, and exhibit 10 on page 21 show the cost patterns by product line. In most cases we are achieving a lower-cost product. The one blip that is showing here is in exhibit 4 on page 16, the public accounts audit the Auditor General has already referred to, where it is moving to $4.5 million as a result of additional work due to the implementation of FIS.

In all other cases the numbers are showing a decline. Exhibit 13 on page 24, pages 25 et 26 en français, is a summary of the Office of Sustainable Development strategy. Here we have set specific targets for the upcoming year to deal with our work in sustainable development. In particular, in our audit work we were looking at a baseline in 1997-98 of 15% of our recommendations being targeted toward sustainable development or environment work, and we're now targeting toward 25%. This is in line with the amount of money that has been accorded to the office for environment and sustainable development work.

In addition, in exhibit 13, we show the administrative activities and some human resource activities that again would lead to more emphasis on saving the environment. We take this as a very serious role for our office.

[Translation]

Section IV provides supplementary information. Table 1 shows spending authorities under the 1999-2000 Main Estimates. As you can see, an operating budget of $53.1 million is forecast, along with $.4 million for transfer payments.

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Table 2.2 on page 29 covers planned full-time equivalents under the legislative auditing business line. For 1998-1999, the forecast was for 510 FTEs. Although we projected last year that we would require 520 FTEs, we used only 510 FTEs. However, we have planned for 515 FTEs over the next few years.

[English]

Table 4 shows our summary of standard objects by expenditure. In this particular table, again I'm trying to relate to the plan for 1998-99, which isn't shown in a particular table. At this particular point in time last year, we had planned to spend $51 million, but we increased that in supplementary estimates to bring us to the $54.9 million. So there were $3.9 million in supplementary estimates.

The biggest difference, Mr. Chairman, is in the personnel costs. We had planned to spend $36.4 million, but we have in fact spent $41.3 million. The increases at the end of the period of freeze for all staff amounted to approximately $5 million, and this included back pay, because there was a couple of years' back pay associated with it. It is exaggerated for that one year, because there were back pay provisions involved. In future years, we don't expect the same amount, which is why the number then drops to $39 million. Again, though, I would draw your attention to the fact that the $39 million does not include amounts for collective agreements that haven't been signed, so that could go up again. It gets very complicated. I'm trying to simplify it, but it's difficult to simplify.

On table 6, page 30, our contributions to the CCAF, the Canadian Comprehensive Audit Foundation, are $0.4 million, and they remain flat. In our revenue table, table 7, again on page 30, we are receiving about $0.8 million. That money is for the two international audits we do. One is the International Civil Aviation Organization, and the other is UNESCO. That number declines in the following years because the UNESCO mandate wraps up this year, but we are putting forward to get the UNESCO audit again.

Finally, there's the net program cost. Again, to give an explanation of the net program cost, we take the expenditures at $53.5 million. There are services provided without charge by other government departments, the biggest part of which is accommodation provided by the Department of Public Works, at $4.1 million. That is in the Public Works budget, but we show it here as a cost to our office. The other is the employee insurance programs that are paid for by Treasury Board, for a total of $5.9 million, so we reduce our non-tax revenue for our net program cost of $58.6 million.

With that, Mr. Chairman, I would turn it back to you or to Mr. Desautels.

The Chairman: We'll give it to Mr. Desautels.

Mr. Denis Desautels: In closing, Mr. Chairman, I would simply add that, as Auditor General, I have had the opportunity of working with highly skilled employees, a number of whom are well known to this committee. It's through their dedication that our office has always been able to maintain a high level of excellence and credibility in its work.

So I thank you, Mr. Chairman, and my colleagues and I will be pleased to respond to questions from members of the committee.

The Chairman: Thank you, Mr. Desautels.

Before we turn to Mr. Forseth, I think I can speak on behalf of all the committee in saying how much we appreciate your work and the work of your dedicated staff. As you know, I had the opportunity to meet many of the staff at Saint-Jérôme just last December, and I was very impressed with the high degree of motivation, enthusiasm, and morale that you have in your office. On behalf of all the committee, I extend our compliments to what is indeed a fine office that serves parliamentarians well.

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Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much. It's good to see you again.

In a general sense, I would certainly say that Canadians are really depending upon you. Canadians are really counting on the veracity, independence, survivability, integrity, or whatever else you want to attach to your office, because I'm increasingly coming to the serious conclusion that the Liberal government really is not a wise manager of the public trust, department after department, issue after issue. As an example of that, I would specifically like to zero in on page 15, issue 26:

For the last two years, the Auditor General has had to qualify his opinion on the financial statements of the Government of Canada. For the year ending 31 March 1999, the Office objective is to resolve with the government all outstanding issues on these statements.

I'm wondering if you could give us today somewhat of an update of where we are with that and if you could spend some time trying to put that one to rest.

Mr. Denis Desautels: Mr. Chairman, I think certain things have been in the public domain since the government, and the finance minister in particular, tabled the 1999 budget. What has come through in that, of course, is that what happened in the past has happened and cannot be changed. I think the issues that led to our disagreement—namely, the Canada Foundation for Innovation and, afterwards, the millennium fund—are done, and they cannot be reversed at this point.

In the current budget, there were a number of transactions that are tricky. A lot of judgment is required to handle them. There were discussions between ourselves, representatives of the Department of Finance, and the minister himself. With the major transactions, particularly the $3.5 billion transfer, we were able to agree on the basic principles that needed to be followed if this transaction was going to be considered as a 1998-99 transaction. We think we've worked through the technical issues around that transaction and have resolved them.

Of course, there are a number of other provisions that are reflected in the budget that will be booked in 1998-99, and we will have to audit those one at a time when we carry out the audit of the 1998-99 public accounts. The results of that audit will come through whenever that work is done, usually in the early fall.

So I can assure you that, in keeping with what was said in paragraph 26, we have had what I think are very productive discussions with Finance. In fact, we think we have agreed on what is the most difficult of the issues in the transactions reflected in the last budget.

Mr. Paul Forseth: Concerning the past issues, then, can I correctly characterize it that you've basically agreed to disagree and that's where it stands; that it's up to the public to come down on one side or the other, and that it becomes a political judgment in the public domain?

Mr. Denis Desautels: I said in last year's public accounts report that I regretted having had to disagree with the government on those issues, and I expressed the wish that it would be the last time we would face that situation. As I just said, I believe we've had very productive discussions. Unless there are any other surprises, when we finalize the 1998-99 accounts, we should not have a repeat of that in 1998-99. But the prior years are done and we cannot reverse those.

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Mr. Paul Forseth: I'll turn to another issue that's in your statement on page 3, on something that's in the news for school children. I was at a grade 7 class the other day, and we were talking about the new territory of Nunavut. A grade 7 student simply asked me about how much this is going to cost us, when we know the population of Nunavut is something around 25,000 or less. I believe you're prepared to spend $1.4 million just for auditing purposes.

The Chairman: What page is that in the opening statement?

Mr. Paul Forseth: It's in the opening statement, on page 3, under point 13.

This paragraph gives an inference. If you're spending that much to audit, that's a fairly small percentage of the overall dollars being sent up there. For the average Canadian citizen trying to estimate how much this territory is costing us, he'll simply divide some government numbers by 25,000 people and will wonder if every citizen or every individual shouldn't just receive a cheque for $40,000 or $50,000 each. I'm not just wondering about reporting in general that the departments are spending their money according to their votes and within the rules and all the rest of it. Because this is a new territory and we're venturing into somewhat of a new political venture for the country, I'm wondering if you'll be mindful of the overall costs of the federal outlay per citizen up there.

It may be a Canadian political decision that, yes, we have to spend a certain amount of money to maintain our sovereignty and ownership of that land up there, but the Canadian public must have some guideline for being able to compare how much it's costing every taxpayer in Canada to maintain this new regime, as compared to what it's costing Canadian taxpayers for the Yukon or in the west. Perhaps you could give us a comment on the size of some of the expenditures that are happening in Nunavut and that you're now going to have to audit.

Mr. Denis Desautels: Mr. Chairman, I believe the operating costs of the new Government of Nunavut will run around $600 million a year. There are, of course, some up-front costs that have to be incurred to organize the new government, and also to provide for facilities for the new government as well. I don't have with me the exact figures for that, but the regular operating costs should run about $600 million a year. Of course, the only basis you have to determine whether or not that's reasonable is a comparison to the cost of running the Northwest Territories and the Yukon. I think you'll find that if you do that, the costs generally are on the same level.

At the end of the day, Mr. Chairman—and I guess Mr. Forseth indicated this himself—all of this is being done as a result of a decision of Parliament. An act of Parliament was passed to set up the new territory, and these are the financial consequences of that particular decision. As your auditor, we're not going to question that particular decision. That's a decision for parliamentarians to make.

Since we are the auditors for all three territories, we will be in a position to make comparisons in the future in terms of the better practices to be followed by governments that are spread over remote territories like this. Hopefully, with that and other people's efforts, I think the cost will be contained to as small a figure as possible. But you have to remember that running a government in that part of the country is extremely expensive. Travel costs are expensive. Shelter and food and so on are tremendously expensive. So it will always be, I think, a fairly expensive operation, but I think we all have an obligation to try to maintain those costs at a minimum.

The Chairman: Thank you, Mr. Forseth.

[Translation]

You have eight minutes, Mr. Cardin.

Mr. Serge Cardin (Sherbrooke, BQ): Sir, you talked about an external audit and mentioned that you had retained the services of the accounting firm of Price Waterhouse Coopers to review your Quality Management System for financial audits. Is this standard procedure or are you doing this on your own initiative to demonstrate the transparency and openness of your office?

Mr. Denis Desautels: Mr. Chairman, we are acting on our own initiative. We are not required by law to conduct this kind of audit. The legislation already provides for a financial audit of the AG's Office. We have provided you with a copy of the latest report of the auditor appointed by the government to audit our office's operations. We thought it was a good idea to have our peers review the procedures or quality control mechanisms we employ to conduct our financial audits as well as our value-for-money audits which account for 90 per cent of our work.

Mr. Serge Cardin: I just wanted to point this out because you should get credit for taking this initiative. One might be inclined to believe that an auditor who reviews the government's books might think that he is above scrutiny, but you deserve credit for taking this initiative.

I would like to focus on your spending plans outlined on page 8. We note a decrease in forecast expenditures for 2001 and 2002, even taking into account the fact that, as you indicated in your report, you will be requesting supplementary estimates. You appear to be setting an example for government, implying even that it could also cut expenditures and rationalize spending.

Mr. Denis Desautels: Mr. Chairman, let me put things into perspective. Once we take into account the supplementary estimates that we will be requesting for 1999-2000 and subsequent years, which total approximately $2 million, we will be slightly over the forecasted amount for 1998-1999. I expect this will bring us to approximately $56 million and we hope to remain at this level, unless our workload changes. If that happens, we would come back to the committee and to Treasury Board.

If we review our operating expenditures over the past decade, that is since 1990-1991, we note that we are still below the year in which our expenditures peaked, even if we take into account our request for additional funding. In 1993-1994, we spent $58 million. Since then, we have cut our expenses and staff by approximately 15 to 20 per cent. At one point, our expenditures even fell below the $50 million mark. With the end of the wage freeze, our expenditures have risen, but I hope they can remain steady around $55 million, which would still be below 1993-1994 levels.

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Mr. Serge Cardin: I just wanted to know whether the expenditures listed here included the additional amounts you plan to request. That isn't the case.

Mr. Denis Desautels: No. They would have to be added to the amounts listed.

Mr. Serge Cardin: You mentioned that your expenditures were highest the year the government recorded its largest deficit. At least it was around the same time. That's what I call a coincidence.

We see on page 15 that the audit of the federal government's financial statements will cost $4.5 million. However, the audits of financial statements of Crown corporations and other entities will cost $11.6 million. Are these figures in line with the size of government departments and Crown corporations, or is there some other reason why auditing Crown corporations is a more costly undertaking?

Mr. Denis Desautels: We're projecting that it will cost $4.5 million to audit the federal government's financial statements, and a further $11.6 million to audit the statements of Crown corporations and other entities such as the Employment Insurance Account and the Canada Pension Plan.

It should be noted that $11.6 million represents the cost of auditing approximately 90 financial statements. Some are rather straightforward, while others, like those of the two entities mentioned, are more complex. A total of $12 or $13 billion is spent annually under the EI Account, while the Canada Pension Plan also spends a substantial amount of money. Obviously, we are less cost- effective when we are required to audit a large number of separate entities.

The federal government alone spends virtually as much as all of these Crown corporations and different special accounts combined. However, in relative terms, it's far more costly to audit 90 separate entities than it is to audit one large account like the federal government.

Mr. Serge Cardin: Does the projected cost of value-for-money audits of departments and agencies include the cost of special examinations?

Mr. Denis Desautels: Yes. The $31.7 million listed for our value-for-money audits includes the reports that are presented and discussed here and in other committees.

Mr. Serge Cardin: These assist you indirectly or guide you in conducting your financial audits. Does this work involve some kind of internal control?

Mr. Denis Desautels: Yes. These two tasks are related. The individuals responsible for the various entities and departments conduct both the financial audits and the value-four-money audits.

Mr. Serge Cardin: Thank you.

The Chairman: Thank you very much.

[English]

Before we turn to Mr. Myers, I noticed that Mr. Cardin raised the issue of receipts and disbursements, the second item on our agenda. Do you want to cover that off after we deal with the main estimates, Mr. Desautels, or would you want to combine the two together in case other people have questions on them?

Mr. Denis Desautels: Mr. Chairman, I'd be prepared to answer questions on that.

The Chairman: Okay, the first thing we have, of course, is a copy of the auditor's report. It has been distributed, but copies will also be available from the clerk if anybody wants to get a copy of the report as part of the official record of this particular meeting.

Did you want to make any comment on it before we continue, Mr. Desautels, or should we just open it up for questions?

Mr. Denis Desautels: No, I think we'll just open the document to questions.

The Chairman: Okay, so we have the Auditor General's report as part of the record of the committee.

Mr. Myers, you have eight minutes.

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

Mr. Desautels, I wanted to ask you whether or not there have been any comparative analyses of the costs of running the office of the Auditor General here in Canada with respect to those in other countries. For example, is there any kind of empirical data on a comparative basis? Has that ever been looked at, or have you ever checked into that kind of a comparative analysis?

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Mr. Denis Desautels: Mr. Chairman, there's been some work done in that vein, both within Canada I should say and between national offices like ourselves and those of other countries. Within Canada, for instance, there is an organization called COLA, the Conference of Legislative Auditors of Canada, and we meet fairly regularly and exchange performance information. We have a working group that is trying to develop performance indicators for legislative audit offices so that we can compare ourselves with each other on a really comparative basis and decide where we can improve our respective operations.

That's generally a difficult thing to do because we all have different accounting systems and costs don't get accumulated the same way. It requires a bit of planning before we can do that. Besides that, the other thing we do is make certain, very broad comparisons between ourselves and other national audit offices in other countries, particularly those countries that operate with fairly comparable standards, with fairly comparable mandates. Of course, the offices we can best compare ourselves to would be the General Accounting Office in the States as well as the National Audit Office in the U.K., and Australia, where we've been recently.

These are not always easy comparisons. When we compare ourselves to the U.K., for instance, the U.K. government has all the responsibilities of our federal government, plus since there are no provinces in the U.K., it actually delivers services that are delivered here by provinces and by municipalities. We do those broad comparisons just to assure ourselves that the general level of resources we're using up in Canada compares reasonably well with those other countries.

Mr. Lynn Myers: I was interested in some of the preamble in the report on plans and priorities where you highlighted the fact that you're going to look at a special report to coincide with the end of your term. I wondered if some of these kinds of things might be addressed in that, but further to that I wondered if you could maybe review what you anticipate being part of that so-called special report. It seems to me that makes some sense, that you would look at the whole office. I'd just like you to elaborate a little bit on that.

Mr. Denis Desautels: Well, Mr. Chairman, as you probably know, my mandate is a 10-year mandate, a 10-year term, which will terminate on March 31, 2001. So I was planning to table in Parliament a final report in the spring of 2001, which would be a retrospective on my own 10-year mandate, but not restricted strictly to that. I would even feel free to go back to my predecessor, because there were issues that have been raised by auditors general before myself that are still relevant today.

The idea would be to in fact do a retrospective of the issues we've been raising in my term and in the terms of previous auditors general and basically try to conclude to what extent progress has been made on these various issues. So it would be oriented basically toward that.

We will also be looking at a few key departments where we feel there are some particular challenges in terms of the difficulties of the issues with which they deal. Just to give you one example, we would like to do something like that with Indian Affairs, which is a department that does spend a fair bit of money, but deals with difficult issues. I recognize that, so I would like to try to shed some light on the challenges that departments like that face.

• 1625

This will be the general tone, if you wish, of this last report in the spring of 2001.

Mr. Lynn Myers: As part of that report, or even between now and then, will there be an examination of the whole issue of our work with our provincial partners?

As you know, more and more we're getting into these kinds of joint relationships, and I know it has come up at this committee in terms of that being something on which we felt sort of restrained as a result of not being able to have that kind of information. I wonder if you could maybe speak to that in terms of whether or not there might be some cooperation with the provincial auditors and where we're going in that process, because it seems to me that too is a challenge.

Mr. Denis Desautels: This issue will become more and more relevant as we move towards collaborative arrangements with provinces in particular and other entities that are not necessarily other levels of government. So it's imperative that we work a lot better with our provincial colleagues than we've been able to do in the past.

There has been a fair bit of collaboration in the past, but with these new arrangements I think we'll have to really work together on similar audit projects. We have, in fact, two examples right now where we've worked out a concurrent project between ourselves and our provincial colleagues, and that involves the infrastructure program, on which we'll be reporting back to you in a short while.

We have made arrangements with Nova Scotia and Saskatchewan to actually work with our colleagues of both provinces to do concurrent work, which we'll be reporting to our respective legislatures at the same time. We plan to do something similar with the management of the Pacific fishery with our colleagues in British Columbia.

So I think we are moving quite significantly in that direction, although it's not always easy. There are some sensitivities that basically touch upon each province's sovereignty and jurisdiction, and so on. So we have to tread carefully, but I believe we're making real progress on that front.

Mr. Lynn Myers: Mr. Chairman, I hope I still have a little bit of time.

My ears perked in your preamble or your opening statement with respect to CPIC and the whole issue of economy and efficiency in that very important area. I don't know if you know, but prior to my coming here I was chairman of the Waterloo Regional Police, population 500,000, 700 police officers and such, and I can tell you that we were very interested in that system. When you referenced it, I was most interested and I wondered what exactly you had in mind in terms of what you were going to do, or recommend, or proceed with.

Mr. Denis Desautels: I can't go into too much detail today as such, because this is early days in terms of that particular project, but it's the first part of a series of projects we're doing on the RCMP. We think the CPIC is a fairly old system, but it's a gateway to a number of very important databases. I not sure exactly what we'll do with it, but we will be looking at that particular system and its function and reliability.

Mr. Lynn Myers: May I ask, when do you anticipate a report?

Mr. Denis Desautels: That will be in April 2000.

The Chairman: Thank you, Mr. Myers.

Mr. Forseth, we're into round two, so we're now down to four minutes.

Mr. Paul Forseth: Thank you very much.

Going back to the theme that the public is relying on you in being able to make some global judgments of value, again, looking at your department, you outlined that you have some 500 or more FTEs, full-time equivalent positions. From the public's perspective, they can see what the FTEs are and what your overall global budget is, and they can simply divide the two and say, compare that in your operations to, say, the Department of Justice or the Department of Health, or one of the others.

Do you ever throw up those kinds of charts for some kind of comparative analysis for the broad-brush impression about where you're at with other departments, or other departments with each other, and then, if there are disparities, to provide some explanations about why, if a particular department seems to be rich because it has a high-salaried scientific component or it has a number of FTEs related to low-level employees? Certainly from the public's perspective, that's the best way a consumer can judge, the shop-and-compare analysis, especially on those simple concepts.

• 1630

So I wonder if, in looking at your own operations, you've done that kind of broad-brush comparison to other areas of government operations. It might be comparable to, say, the Department of Justice in cost.

Mr. Denis Desautels: We have not tried to compare with other government departments our own level of FTEs and our total operating costs. It would be possible to do that, but I don't think it would be that useful, frankly, because the nature of what we do is so different. I think what's more meaningful is to compare ourselves with our other colleagues in legislative auditing across Canada, and also those in other countries.

I guess the other thing you could do is see what trends are evident. I think if we're going to compare ourselves to other government departments, it would be certain central agencies that have roles that are not in the direct delivery of service. What could be interesting to see is, are they going up, are they flat, or are they coming down? Are we generally moving in the same direction? Are the trends comparable? I think that would be a better basis of comparison.

Mr. Paul Forseth: Okay, I'll just stop you there.

The public also asks the general question. They'll make statements something like this: Well, we have an Auditor General that continues to make all kinds of recommendations and it costs an awful lot to have an Auditor General, but are the recommendations and policies outlined by the Auditor General ever followed by government? The public asks, what good is the Auditor General? So I wonder about you being able to tell your story in concrete, measurable results, or even anecdotal results about the changes you've made because of your influence.

I look at two items. For example, there's the move to full accrual accounting. How are we doing on that one? That has been an agenda of yours. The other is the problem of sole-source contracting. Have we got anywhere on that item? It's being able to justify in telling your story to the public beyond just the numbers in a statement.

Mr. Denis Desautels: I'm very happy that Mr. Forseth asked that question, and I would draw Mr. Forseth's attention to the performance report we prepare each fall, which is a relatively new document. That's where we try to measure our impact.

I have to answer those questions quite regularly. There's a myth out there that we repeat the same things year after year and nothing ever changes. I beg to differ on that. We keep track of the percentage of recommendations we make that are eventually implemented.

So that's one indicator of the impact we may have, and as we speak, I think it's in the neighbourhood of 60%. It's not entirely satisfactory, but it's something we're trying to move up, and we are actually doing some special work to see what we can do to improve that particular indicator.

But we do keep track of that. It's not 100%, but it's not 0% either. So the majority of our recommendations, more than 50%, are eventually implemented.

Also, we anecdotally indicate areas where our recommendations have resulted in savings, and you'll see some of those in that particular report. I also mention some of those in my chapter that I address each year to the House on matters of special importance. So we give a few examples of that as well.

On both fronts, on the percentage of recommendations implemented and the savings generated, we try to keep track of that to demonstrate that our work in fact really makes a difference.

Mr. Paul Forseth: Thank you.

The Chairman: Thank you, Mr. Forseth.

• 1635

[Translation]

Mr. Perron, you have four minutes.

Mr. Gilles-A. Perron (Rivière-des-Milles-Îles, BQ): Good afternoon. I want to thank you for standing up for taxpayers. I'd like to focus on something my Reform Party colleague alluded to, namely the proliferation of agencies and this government's propensity for creating more and more agencies that are less and less accountable. What role to you play in all of this? What kind of reception do you get from these agencies? Do you manage to do your work in a manner that you consider satisfactory?

Currently, you are conducting an audit of the ADM, the authority that manages Montreal's airports. How is your audit going? Are you satisfied with your progress thus far?

Mr. Denis Desautels: Mr. Chairman, the government is indeed resorting to different ways of delivering services. Departments are no longer directly responsible for delivering all services. Operations have been privatized and service delivery agreements have been concluded with third parties. The government has signed agreements with a range of partners.

In 1999, we will be releasing two chapters that will deal with this subject. The first is scheduled for release next week and focuses on cooperative agreements between the government and other levels of government. This fall, we will be releasing a second chapter which will focus in greater detail on agencies and other organizations used by the government for service delivery. All I can say right now is wait and tune in later to find out more.

You mentioned a number of special agencies, such as the ADM, the Montreal airport authority. We do not have the right as such to review the operations of certain agencies. Based on the legal status they have, they operate somewhat independently of government, which means that we don't necessarily have the right to review their operations. The ADM is one example of this kind of organization.

However, we are responsible for auditing the operations of the Department of Transport. As long as Transport Canada has commitments to an agency, or leases or some other contract with it, we can demand to see Transport Canada's books to ensure that these contracts or leases are being managed properly.

You might say that we have indirect access to these agencies. The fact that we audit departments that have concluded agreements with agencies like this gives us an opportunity to review these agencies' operations at the same time.

Mr. Gilles Perron: What if the agency is unwilling to cooperate? Isn't your authority compromised a little?

Mr. Denis Desautels: Mr. Chairman, that's a very good question, but one has to realize that when the government or Parliament authorizes the creation of separate agencies that are independent of government, what it's really doing is authorizing a department to do business with an agency that has not been established under a federal enactment. In so doing, the government is saying that the activities of these particular agencies are separate from government. This also affects the role that the Auditor General can play. When an agency is set up as a fully independent entity, not only does this mean that it operates independently of government, but also that it is beyond the reach of federal auditors.

As I was saying earlier, there are different types of agreements in place and different kinds of agencies. Some are more independent than others. What I just said doesn't apply across the board. Each case is dealt with separately.

• 1640

The Chairman: Thank you very much, Mr. Perron.

[English]

Mr. Harb, four minutes, please.

Mr. Mac Harb (Ottawa Centre, Lib.): My question is the following. Do departments such as, for example, the finance department or the justice department have auditing of their financial statement that is done on an annual basis?

Mr. Denis Desautels: Mr. Chairman, the answer is no, because at this point in time they do not have their own separate financial statements.

Mr. Mac Harb: In your view, should the Government of Canada consider it mandatory for every department to have a financial statement, like your department? You have a financial statement, and the auditor here came in and said, look, you're doing fine. Do you think the Government of Canada should mandate every department to do the same?

Mr. Denis Desautels: This is a very interesting question, and I believe a certain groundwork has already been laid that might lead to this eventually. The government has carried out, in the recent past, a comptrollership study, talking about comptrollership across government. Part of the thrust of the study was that departments should better be able to control and manage their finances than they have in the past. That implies each having a full set of financial statements as well as performance reports, where you tie together the cost of an activity with the outputs of that activity. So the groundwork is being laid that would lead in the direction you're indicating, and it could go all the way to having departments obligated to produce, on their own each year, their own separate, full set of financial statements, which could be audited either by the Auditor General or by their own independent auditor.

We have different variations of that in different parts of the world. Australia is a good example, where individual departments have to have their own separate financial statements audited by the Auditor General. In the U.K. they have a similar situation, but the financial statements can be audited by an external auditor. So there is precedent for what you're suggesting.

Mr. Mac Harb: Again on this, with your permission, I think what might be helpful is if the Auditor General were to consider, at least from now until such time as it is to be the case, that every time an audit is done on a department, to almost have a virtual bill of how much the audit has cost. This would serve as a reminder to the bureaucracy in whatever department that, look, this audit has cost $2 million or $3 million. It would be another line coming in, in a sense, to show a balance sheet at the end of the year for the Auditor General saying this is how much money we spend on each department.

If each department has paid us back, then we would have had a cost recovery in a sense. It would, in a third line, indicate the cost saving to the taxpayers as a result of the action that was taken by the Auditor General.

I think that will answer my colleague, Mr. Forseth, on the other side, who is saying if there was anybody listening out there.... I think it will force our hand as elected officials to do our job better, and it will make the bureaucracy a lot more transparent and a lot more efficient than it has been.

Mr. Denis Desautels: Mr. Chairman, the performance reports that are tabled in the fall actually do give us most of the information Mr. Harb has been requesting. You see the cost of the financial audit, the cost of the value-for-money audits that are conducted in each of the departments, as well as the cost of the audits of crown corporations and other entities. Although we don't bill these organizations, the notional costs, if you wish, of the work we do in these departments for these projects is calculated and is made public. A good deal of the information you are asking for is, right now, in the public domain.

• 1645

You also refer to the possibility of publishing cost savings. I hesitate to do that and jump into that with both feet, because in fact it could distort some of the emphasis of our work. A lot of the work we do is not carried out with the intent of achieving cost savings. Sometimes it's done—many times—simply with the objective of carrying out the work better, achieving better what Parliament has asked to be carried out. It could be issues of public health, safety, and many other issues that are very important. So we don't want to put the emphasis entirely on cost savings. I think that's an area where we could have an interesting discussion at another point.

The Chairman: Thank you, Mr. Harb.

Mr. Mahoney, four minutes, please.

Mr. Steve Mahoney (Mississauga West, Lib.): Thank you, Mr. Chairman.

I'd like to ask the auditor a follow-up to the point Mr. Perron raised about agencies. It's my view that many of these agencies have been created at the behest, or request, if you will, of local communities. I'm not familiar with the Montreal airport authority, but I'm very familiar with the GTAA in Toronto, which I assume would be a similar type of operation.

The Greater Toronto Airport Authority took over the operation of Pearson under really what amounts to a lease from the federal government and a management contract of sorts. Would that lease include any provision for you to audit the GTAA or any other such agency, or, in the alternative, would it provide for any kind of independent audit that would be reported back to the minister and ultimately to Parliament?

Mr. Denis Desautels: Mr. Chairman, the standard leases that have been signed between Transport Canada and the airport authorities do not contain the kind of clause Mr. Mahoney is describing. So at this stage our own entry into the administration of those leases is simply through the department itself. Transport Canada has an obligation to protect the interests of the crown by administering those leases as called for. So we would audit Transport Canada and see how they're doing their job and ask them if there's information missing or to obtain. They have the right of access under the lease themselves.

Mr. Steve Mahoney: Is that an indirect way for you to access information, and in effect is that a method of still ensuring that the public watchdog still has access to these agencies?

Mr. Denis Desautels: I think Transport Canada knows full well that we will be auditing their particular activity when it comes to lease administration. We've announced we would do that in fact, and we will be doing work in that whole area of the....

Now that we've had a bit more experience with privatization of airports, we're planning to do a chapter—I'm not sure exactly when, but somebody might help me on this—where we'll report not only on that but also on the accountability arrangements that have been put in place. We hear a fair bit of dissatisfaction about the arrangements that were put in place by the first ones. Transport Canada and the minister at the time agreed that future ones would be improved, so we want to go back in the near future and see how that's carried out.

Mr. Steve Mahoney: Good.

Mr. Denis Desautels: Mr. Chairman, we'll be reporting on that in April 2000.

Mr. Steve Mahoney: In your plans and priorities you've identified five areas, and the first three clearly have to do with finances: accountability practices, financial reporting, and government. The last two I'm curious about. One is “contribute to necessary changes in the public service”. The fifth point, the last point, is “help improve performance in protecting the environment and promoting sustainable development”. Those two would seem to me to be more policy issues than necessarily financial or efficacy of operations ones. I wonder if I'm misunderstanding that. Is policy really not an area that an Auditor General would generally stay away from?

Mr. Denis Desautels: Mr. Chairman, Mr. Mahoney is right in the sense that we do not want to get involved in policy in the real sense of the word.

• 1650

When we mentioned that among our priorities we want to contribute to changes and improvements in the management of the public service, what we have in mind there is to do audit work that looks at current systems of management in government and compares current practice in Canada with best practices or good practices elsewhere and, through those audits and the reports we would produce, encourage in the appropriate areas a re-evaluation of how we're doing certain things.

I'll give you one example. We are planning to report later on this year on the whole system for managing human resources in the Government of Canada. There is a high level of frustration in that area, and I believe through our audit work, if we are smart, we could perhaps point to areas that could be managed better. We could point to examples elsewhere where things are done differently and perhaps better and encourage some kind of reflection on how things are being done.

I believe that would be useful, and basically, in a sense, it has very important financial repercussions. I think if you manage your human resources well, it pays for itself, and in fact, it helps you achieve all the other objectives that government departments are meant to achieve.

The same thing would apply to the environmental issue. The environmental priority flows directly from the mandate that our office was given by Parliament three years ago.

The Chairman: Thank you, Mr. Mahoney. I'm sorry, but your time has expired. We'll try to come back to you if we can.

[Translation]

You have four minutes, Mr. Cardin.

Mr. Serge Cardin: I'd like to come back to paragraph 22 on page 5 which focuses on the auditor's most important quality, namely the independence of his office in every respect, including the managing of staff. I totally agree with you on the importance of your office's independent status. That's an extremely important consideration. Were it not for this independence, it would have been difficult for you to express the major reservations that you did in your last financial report. Therefore, it's important that you maintain this status. Do you think that you will soon achieve independence in managing staff? Are talks presently under way with Treasury Board with a view to achieving independence in this area anytime soon?

Mr. Denis Desautels: Generally speaking, Mr. Chairman, our office enjoys considerable independence vis-a-vis government. That's what parliamentarians intended when the Auditor General Act was passed in 1977. Of course, the legislation isn't perfect and some aspects of it could be improved upon. The matter of our independence in managing our staff was raised because if we have no control over our staff, it will be very difficult for us to operate in a manner that is truly independent of government and to do our job as it should be done.

In my opening statement, I mentioned that my office does not have a mandate to negotiate collective agreements with its employees. Permission do to so must be given by Treasury Board. We are currently having some problems getting an acceptable mandate. Therefore, we don't have the kind of independence we would like, as far as this aspect of our operations is concerned.

Mr. Serge Cardin: You mentioned the Canada Customs and Revenue Agency which has achieved independence in this area. Earlier, you stated that you did not have the authority to review the operations of certain agencies. Is the Canada Customs and Revenue Agency considered to be one of your clients and will you be able to conduct an on-site audit of its operations?

• 1655

Mr. Denis Desautels: Yes. We are fully mandated to audit the operations of this new agency.

Mr. Serge Cardin: I would probably have reacted had that not been the case.

Mr. Forseth stated earlier that auditing was a relatively expensive exercise. The question we need to ask ourselves is how much more it would cost us if no auditing was done at all. Year after year, you produce chapters recounting interesting incidents which some would qualify as horror stories. Your reports have prompted government officials to make some adjustments.

You also said that many of your recommendations were implemented. I haven't been around here long, but we have often hinted at the accountability of deputy ministers and of those responsible for managing the public purse. Will your report summarizing your decade of audit work for the federal government contain a major chapter on accountability, in the hope that all of your recommendations will be implemented quickly? Or, will our next auditor maintain, once his term is over, that Mr. Desautels also pointed out the same thing when he retired, but nothing has yet been done about it? Will accountability in government remain a virtual reality or are you planning to make some recommendations so that accountability in fact becomes something concrete?

Mr. Denis Desautels: I'll try to respond quickly to that question. First of all, when you say that auditing is a costly exercise, you have to remember that everything is relative. I believe we spend...

Mr. Serge Cardin: I wasn't the one who said it. I was merely repeating something a colleague said.

Mr. Denis Desautels: ... between $53 and $54 million on our audit work. Overall, I'm confident Canadian taxpayers are getting good value for their money, and I hope parliamentarians share this view.

Now then, on the subject of accountability, I'll be dealing with this issue in my final report. It's one of the major topics I'll be addressing. I'll be looking at the progress we have made in this area over the past decade.

When viewed in perspective, the 1990s will be seen as a decade during which the public administration underwent major changes. For the most part, these changes have been positive. Some bad habits have been eradicated. When we look back on the 1990s, I hope we can say that this was a decade marked by significant progress.

The Chairman: Thank you very much, Mr. Cardin.

[English]

Mr. Finlay.

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

I have two questions, Mr. Auditor General. I'm looking at page 3 of your opening statement to us under item 12, and I'm looking at page 14 under priority 5 with regard to the environment and promoting sustainable development. I think I've worked it out. On exhibit 3, I find the line “environment and sustainable development monitoring activities, $1.4 million”, and that occurs in your report to us as “Finally, planned spending by the Commissioner's office....” I wasn't sure what that was, but that means the Commissioner of the Environment.

Mr. Denis Desautels: Right.

Mr. John Finlay: Now, above that there's one figure of $3.4 million, which doesn't appear in exhibit 3, but it's rolled into the value-for-money audits. I'm very glad to see you're doing that sort of thing, but I wonder whether you'd give me a little idea of what that $3.4 million related to the environment and sustainable development within those audits covers. You talk about accounting for environmental liabilities in the financial statements of all public sector entities in the preparation of sustainable development strategies and other environmental reporting practices, which is something I've been talking about for a long time. So I'm glad to see it's there. I've got those figures correct, I believe.

Mr. Denis Desautels: Mr. Chairman, the $1.4 million relates to the additional cost that Parliament approved to run the Commissioner of the Environment's office in our office. The commissioner produces a number of reports with his own dedicated resources, but in addition to that we factor into other value-for-money audits an environmental component. Again, that was the wish of Parliament when this office was created. We were funded to do that new work, so that the environmental issues be, whenever feasible, whenever applicable, incorporated in the individual value-for-money chapters we would produce.

• 1700

The $3.4 million is an attempt to identify the environmental component that is part of the value-for-money work we carry out. In the handout we have today, we gave you a listing of environmental chapters we will be producing in 1999, for example. You will see that a number of the chapters are part of the commissioner's report in May—for instance, the managing of the risk of toxic substances, making international agreements work on the environmental front, and greening government operations. Those are all examples of environmental work that will be contained in his report.

In addition to that, there are other audits where, for instance, we talk about Fisheries and Oceans managing Atlantic shellfish. There is obviously some environmental sustainable development component to that. If we go down later on in 1999 you will find that there are other chapters we produce. For instance, another is on Fisheries and Oceans managing the Pacific salmon fisheries. Again, that has a sustainable development component. You will also see under National Defence a chapter on managing hazardous waste. We have the pure environmental issues that are contained in the commissioner's report, plus environmental issues that are a component of a larger value-for-money audit, which you can find throughout the rest of the report. That's how the money is being spent.

Mr. John Finlay: Thank you very much.

My other question concerns a number of things on pages 3 and 4 with respect to Nunavut. You say these estimates provide for amounts ranging over $700,000 to $1.4 million for the period 1999-2000 to 2002-2003 and beyond as this work increases. I find this same sort of increase in item 15, where you say we're seeking various amounts annually for this new work on these agencies. It goes from $580,000 to $960,000 for that period. It's the same thing in item 16.

It seems to me that when you repeat the work, or you're doing the work in future years, why shouldn't it cost less and not more? Why does the cost increase?

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

Mr. Michael McLaughlin: Mr. Chairman, in the work we're doing on Nunavut, the territory was set up on April 1, so there will not be financial statements until next year. So the first completed year will be March 31, 2000. For the first year what we're trying to do is get the people in place, look at the systems that are in place, and do some interim work to be able to provide an opinion on the financial statements as they come out. There are a number of crown corporations that are also included in this number that are still being set up as part of the crown corporations for Nunavut. It will take some time before the full government is in place and before the full audit takes place. That's why the subsequent years will show increases in costs there.

A similar situation occurs with Revenue Canada and with the new agencies, which, until they are set up, are not producing financial statements and are not producing the performance reports. Once those performance reports are in place, we'll move our staff work up to be ready to provide opinions as those performance reports are in place, so that the second and third years become the full years of the audit.

Mr. John Finlay: Thank you.

The Chairman: Thank you, Mr. Finlay.

Mr. Myers.

Mr. Lynn Myers: Thank you very much, Mr. Chairman.

• 1705

Mr. Desautels, in terms of the period ending March 31, 1998, I want to ask you for your own self-analysis and critical analysis of whether or not any of your goals, expectations or objectives were not fulfilled, and about what went right and what went wrong. Did you have any of that kind of thinking, or did you even look at those areas?

Mr. Denis Desautels: This is a public confession of sorts.

We would always like to sometimes have either a second chance at doing something or more resources to do something. In terms of the year just ended, and maybe the year before that, I would say there are certain areas in which we haven't gone as far as I would have liked to go. First of all, we had to delay or reduce the number of chapters that I would have liked to produce, because the organization is simply working at its utmost. It's really stretched, and when I ask for more things sometimes, I run the risk of something breaking up.

There are a number of areas that I have in mind in which I would have liked to carry things out, but with a shortage of resources, I've had to actually postpone and make tough choices. Having said that, there are certain questions and areas in which I would have liked to have gone further in the last couple of years. We talked a few moments ago about human resources management. That's a difficult area. I indicated that it's an area of frustration, and I would have liked to have been able to do more work in that area and in trying to advance the resolution of some of the problems people are bringing to our attention.

I would like to do even more work than we've done on following up the implementation of previous recommendations. That is not easy to do because it requires going back and re-auditing work that we've done in the past. Nonetheless, I would like to have been able to do more of that in order to have a more accurate reading on the percentage of recommendations that have been implemented.

I would have liked to do even more work than we've done on the whole area of grants and contributions. I know that's again an area that parliamentarians are worried about. It's an area in which a lot of money gets spent year in and year out, so I would hope to be able to do more work in that area in the future.

One last area that I would mention is the whole area of managing our programs for first nations. We've done a lot of work in that area, but I would have to say that these are tough programs to manage, and there are tough issues to deal with. I would just wish that, through our work in the future, we'd be able to contribute to finding more solutions to those tough problems.

Mr. Lynn Myers: Can you give me a sense of how you arrive at some of these concerns that you're raising? Are things like peer reviews built into your office, or any other of those kinds of things? How do you arrive at what you just said in terms of things that might have been, could have been, but didn't happen?

Mr. Denis Desautels: We do have a fairly sophisticated planning system in place, Mr. Chairman, whereby we analyse our whole universe and try to identify the areas in which there are likely to be problems, areas in which our work might contribute something. Through our troops out in the field, I think we do have a pretty good feel for various government programs and which ones would merit attention. That's all factored and inputted into our own internal planning processes.

In addition to that, my colleagues and I try to seek as much outside input as possible. I think input from members of Parliament is always an important source of information, and we do receive suggestions from members of Parliament, either in committees like this or through correspondence. Sometimes we also receive complaints from citizens, and they alert us to the possibility that certain programs may not be functioning as well as intended. We try to get as much input like that as possible, so that when we make our decisions as to what we audit, it's not just because of our thinking about it alone in our corner. We've gathered as much outside data as possible.

• 1710

Mr. Lynn Myers: Thank you.

The Chairman: Thank you, Mr. Myers.

Mr. Desautels, I have a few questions of my own. Referring to paragraph 22 of your opening statement, in which you talk about your concern about your independence regarding management of your staff, you state that you “believe that this reduces the independence from government that Parliament sought to give us in the Auditor General Act.” My question is whether you feel strongly enough about this issue that you'd want the public accounts committee to set aside a meeting to hear your concerns and then perhaps report to Parliament if the committee felt the concerns were justified.

Mr. Denis Desautels: Mr. Chairman, I feel that's an important issue. I would not have brought it to your attention today if I didn't feel that way. I would hope we would be able to settle fairly quickly with Treasury Board the issue of having a proper mandate to negotiate a collective agreement with our staff, but that will still leave open the question of whether or not we should have more independence for the future than what is in the current system. I believe it's an issue that would be worth exploration by this committee.

The Chairman: Perhaps a subcommittee might want to have some discussions with you and set a meeting aside at a future date to discuss and examine the issue as you see it.

In paragraph 23, you say:

Another concern is the appointment of auditors for various government activities, including alternative delivery arrangements.

You say a little later, “I am currently preparing a paper that sets out my views”. Is that going to come to us via your reports? If not, how is your opinion going to come to us on this issue?

Mr. Denis Desautels: Frankly, Mr. Chairman, I hadn't thought that through. We're working on a paper that would lay out the factors to take into account when making those decisions for different forms of crown corporations or other entities that are more or less related to government. I know there were questions about that even last year. I believe Mr. Myers had questions about the post office last year, about how the auditor for the post office was selected, and what made sense. Since then, there has been a lot of discussion in Parliament, through other pieces of legislation like the legislation on the wheat board, on which a number of members of Parliament had a view. There was legislation brought through on the Canada Pension Plan Investment Board, and members also had concerns about that. We therefore feel it would now be appropriate to maybe lay out our own view, and hopefully that would be helpful as something members of Parliament could keep in mind when future situations like that arise.

The Chairman: On the alternative service delivery arrangements, it's not just the financial audit that we're concerned about, of course. In some cases, you are no longer able to do a value-for-money audit. I'm thinking of NAV CANADA as an example here. It's a non-profit agency that's hived off into never-never land. It's accountable to neither the public service nor the private sector. Do you have concerns about the alternative service delivery arrangements, about the lack of accountability, about accountability being watered down and supervision being reduced?

Mr. Denis Desautels: Yes, Mr. Chairman, that's a genuine concern we have. However, I hasten to say that if those are carried out properly, that need not happen.

The Chairman: If what are not carried out properly?

Mr. Denis Desautels: If the arrangements are not thought through.

The Chairman: Do you mean if the legislation is not appropriate?

Mr. Denis Desautels: Either the legislation or what follows from the legislation. It would mean more specific contracts or arrangements between two levels of government, let's say, or between the federal government and an agency. If those arrangements are negotiated carefully, you could end up having more and better accountability than what we are traditionally accustomed to. On the other hand, if it's not carried out properly, Parliament itself could suffer in terms of the amount of information that is available to it in regard to holding the government of the day accountable.

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The Chairman: I always use NAV CAN as the example because it's a perpetual monopoly, it has no shareholders, and it's not accountable to Parliament, the general public, or the travelling public, whom they can tax to raise the revenues. It seems to be the perfect example of an organization that has no accountability at all, and I wouldn't want to see the government repeat that type of organization in the future.

Talking in the same vein, I'd like to bring up two points on the audit of Nunavut. Is the cost of the Nunavut audit going to be included in the federal government estimates, or is Nunavut going to be reimbursing the federal government for the cost of your audit of their operations?

Mr. Denis Desautels: Mr. Chairman, the cost of the audit of Nunavut is going to be in our own estimates and therefore funded by the federal government. But keep in mind that even if you did it the other way around, I think 90% or 95% of the total Nunavut budget is a transfer from the federal government to it.

The Chairman: I appreciate that, but I want to get the total cost out in the open, rather than hide bits and pieces here and there. For example, you audit the Northwest Territories. Do they reimburse you, or is that part of your cost?

Mr. Denis Desautels: The arrangements for the Northwest Territories and the Yukon are exactly the same as I've just described.

The Chairman: You absorb the cost of the audit. They don't reimburse you for that.

Mr. Denis Desautels: That's correct.

The Chairman: Now, a significant part of the cost of Nunavut—and it's not just Nunavut—comes through the Department of Indian Affairs and Northern Development. It block funds many reserves, bands, and first nations, but they seem to have no accountability beyond the block funding. Do you have a concern about the lack of access by parliamentarians as to how the money is spent and the accountability of the funds once they end up in the first nations' bank accounts?

Mr. Denis Desautels: Mr. Chairman, this is an area that needs to be managed quite carefully by DIAND, the Department of Indian Affairs and Northern Development. In fact, a couple of years ago we reported on the funding arrangements that were being put in place by Indian Affairs and Northern Development with the bands, and we were quite critical in that last report as to how this was being carried out. In this upcoming report, which I'll table next week, we'll be reporting on the follow-up of that particular chapter. So the whole issue of how the funding arrangements with first nations are being managed as well as the related issue of accountability within first nations are at the forefront of all of these concerns, and we're continuing to pursue that particular issue.

The Chairman: Changing subjects, you have given us your work plan for the next couple of years. The government has now started tabling these performance documents in the fall, and I've been quite critical of their method of presentation and the lack of unbiased analysis of the programs they deliver. Have you given any thought to doing perhaps a value-for-money audit on the quality of these performance reports?

Mr. Denis Desautels: Mr. Chairman, this is an issue that's always at the centre of our work, and the issue of results measurement and managing for results will be continuously under our watchful eye. If you look at our work plan, you'll see that toward the end of the year 2000 we're planning to produce for you some government-wide audits and studies that will hopefully shed some light on all of these issues. So you'll see there a chapter entitled “Accountability and Managing for Results” and another one entitled “Results Measurement and Performance Reporting”. We're investing a fair bit of effort and resources in gathering information from a cross-section of departments to see how well they're doing on that front.

I think the whole thrust of performance reporting, as I've said before, is a good thrust that we need to support, but I'm not ready to say that all of the performance reports that have been produced to date are perfect. Some of them have a long way to go, and we have to keep the pressure on departments to further improve.

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The Chairman: One final comment, on the audit of the auditor that you've given to us, I think we have to note that it contains no reservations or qualifications, so we congratulate you on that too.

I think we should be wrapping up the meeting now. We expect that there will be votes and that the bells will start to ring in a few minutes.

Do you have any closing remarks, Mr. Desautels, before we bring the meeting to a close?

Mr. Denis Desautels: Not as such, Mr. Chairman. I appreciate the opportunity to have this discussion with the committee. As I've indicated, I always welcome the committee's suggestions in terms of the work we could carry out that would be of interest to the members of the committee. So to the extent that it was not done totally today, if on other occasions members have concerns they would want to pass on, they would be most appreciated.

The Chairman: We don't have a quorum in order to be able to pass motions today. I think it's appropriate that the public accounts committee report to the House on the estimates of the Auditor General. So assuming that we have a full quorum on Thursday, I will be asking for two motions to be voted on. One is that votes 25 and 30, which are the estimates of the Office of the Auditor General, be approved, and the other is that we report them to the House after they have been adopted by the committee. So that will take place on Thursday.

Mr. Lynn Myers: Mr. Chairman, are we missing one person for quorum?

The Chairman: We are one person short.

Mr. Steve Mahoney: I see him. He's here.

The Chairman: Is he right there?

Mr. Steve Mahoney: Yes. He'll vote.

The Chairman: Okay.

Mr. Lynn Myers: We had Mr. McKay here, but I guess that doesn't count.

An hon. member: He wasn't here at the beginning.

Mr. Mac Harb: We have a quorum.

The Chairman: Unfortunately, we have no substitution seat for Mr. McKay, who wasn't subbed into the meeting. Therefore—

Mr. Mac Harb: What do you mean? The paper is in the mail.

The Chairman: —we don't have a quorum. We'll bring the issue up on Thursday.

The meeting is adjourned.