AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 30, 2000

• 0903

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Members, seeing a quorum, I'll call this meeting to order.

I think I should say off the top that there is a vote scheduled for 10.40 a.m., so I'm hoping we can move with considerable dispatch. Maybe with a little bit of luck we can finish with the witnesses before the vote, but who knows.

There's one other thing, though, before we go to the witnesses. I have to report pursuant to the motion we passed back on March 14. Under that motion, I was given an undertaking to meet with the chair of the Standing Committee on Health and others with the view of perhaps setting up a joint committee between health and agriculture to look at the matter of mandatory labelling of GMO products.

I can tell you that those discussions have not met with success. There are some funny rules around Parliament Hill. Sometimes we do things by democratic majority and sometimes we do things by consensus. Apparently one of the protocols or conventions around the Hill is that when you set up joint committees between two standing committees, it has to be done by consensus. Apparently one of the parties refused the consensus, so as a result we can't set up the joint committee between the two standing committees.

• 0905

We already passed a motion before Christmas, Madam Alarie's motion to study mandatory labelling of GMOs, and that's exactly what we'll do. So I'm sure you'll take that as good news.

Let me tell you—especially Madam Alarie, since it's your motion—I've already instructed my staff to put together a list of witnesses. They're in the process of doing that already. In fact I've seen a preliminary preliminary list. It has many names of individuals and organizations. I've also looked at the schedule as prepared by the clerk. All the slots are booked between now and the Easter break, and that's two meetings a week, so the very first meeting on the study would not be able to happen until after the Easter break. But we're working on it.

The other thing is that I would invite any of you, especially Madam Alarie, since it's her motion, to submit possible names of witnesses, and we'll put them together. We might not be able to invite everybody. I suspect in some cases there will be duplication, that some of the names you submit will already be on our list. But that's fine. We'll work it all out, and we'll start after the Easter break.

I'm hoping there's not going to be a whole lot of discussion, mainly because of the votes and because we have witnesses. But I suppose if there is a comment, I'll hear it.

Madam Alarie first. I really hope it's short, because we have witnesses.

[Translation]

Ms. Hélène Alarie (Louis-Hébert): Mr. Chairman, I'm very happy about the outcome of the situation and I want you to know that I will cooperate with you as best I can. My personal interests take a back seat to those of agriculture. Therefore, you can count on my full cooperation. Thank you.

[English]

The Chair: Thank you for that, Madam Alarie.

Mr. Hilstrom.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chairman.

I'm certainly pleased to hear the agriculture committee will be studying GMOs. I think before you, as a chairman, arbitrarily decide on who the witnesses are going to be, we should hold a steering committee, and we as a committee should decide who the witnesses are going to be. That's going to be my position.

Thank you.

The Chair: I see no trouble with that. I think what we should do is all of us put together our own lists and we'll try to sort it out at a committee meeting.

Mr. Howard Hilstrom: Yes, at a committee meeting we can bring our lists. But I don't want to submit a list and then have someone somewhere making a decision on it without all of us talking about it.

The Chair: Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): Mr. Chairman, I promise to be very quick. Will health also be having a parallel committee struck on GMOs?

The Chair: I haven't got the slightest idea. You ask them.

Mr. Rick Borotsik: Well, Mr. Chairman, I don't like that answer.

The Chair: I can't speak for health. I have no idea, Mr. Borotsik.

Mr. Rick Borotsik: Well, you've been negotiating with health.

The Chair: I didn't negotiate that at all, whatsoever. We didn't discuss anything having to do with an investigation by them.

Mr. Rick Borotsik: Thank you.

The Chair: Okay. Now we'll go to the witnesses, and thank you for your forbearance.

Again, I welcome before this committee Denis Desautels, who's the Auditor General of Canada. He has with him Douglas Timmins and Neil Maxwell. From the Department of Agriculture and Agri-Food we have Andrew Graham; from the Canadian Food Inspection Agency, Jean Chartier; and from the Canadian Grain Commission, Dennis Kennedy.

Welcome to you all. I understand the Auditor General has an opening statement. We'll take it now, and thank you for coming.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman, for this opportunity to discuss our September 1999 report, in particular chapter 11, entitled “Agriculture Portfolio - User Charges”. As you said, I have with me today Doug Timmins and Neil Maxwell, who are both responsible for our work in the agriculture portfolio.

The government's 1997 cost recovery and charging policy, Mr. Chairman, states that user charges should be implemented for “services that provide identifiable recipients with direct benefits beyond those enjoyed by the general public, unless overriding policy objectives would be compromised”. A key underlying principle is that user charges should provide benefits beyond generating revenues, such as making services more responsive to user's needs.

• 0910

To avoid possible confusion, I'd like to explain clearly what our audit did and what it did not do. We did not question whether there should be user charges, which is a matter of government policy. We did not audit the user charges of other federal departments, nor did we include the provinces or municipalities in our examination.

Rather, we looked at whether Agriculture and Agri-Food Canada, the Canadian Grain Commission, and the Canadian Food Inspection Agency do a good job of implementing the policy. We reviewed all aspects of the way these organizations manage user charges, including costing their services, distinguishing private from public benefit, and consulting with users of their services. We also examined the quality of information they report to Parliament on their user charges.

We found that despite the intent of the Treasury Board's policy, the organizations often view user charges primarily as a means of generating revenue, instead of designing them to achieve broader benefits.

[Translation]

Mr. Chairman, the organizations have made some overall progress in the past five years. Consultation on user charges has improved. In some cases, consultation has produced a "win-win" result for both government and industry. For example, federal beef- grading is now done by a private non-profit corporation at a fraction of the former cost. The three organizations use a number of good practices that other departments would do well to consider in managing their own user charges.

In our chapter, we identified the management practices required to implement user charges properly. While the organizations made some progress in certain areas, we found a number of areas that require additional effort. Each organization needs to improve its costing capability in order to improve its management of user charges and enhance public confidence. The organizations also need to improve their assessment of the potential impact of fees, and they need to establish formal appeal processes.

We found that in most cases, the organizations did not properly explain their intentions for user charges, nor the results. Major improvements are needed in the way they report to Parliament, the public, and industry.

[English]

One factor that officials cited as an overriding constraint on their management of user charges was a ministerial moratorium on new or increased fees. In November 1996, your committee was told that there would be no new user fees and no increases to existing fees at the CFIA before the year 2000.

During our audit we found that officials felt constrained from correcting known inconsistencies among fees and that user charges were not being updated as programs changed. As a result, some groups could be paying either more than their fair share or less.

The moratorium has frozen not only fee increases but also potential improvements in the management of user fees. In some cases, officials have all but abandoned the cycle of reviewing and improving their management practices.

Earlier this month, the Minister of Agriculture and Agri-Food announced to the House of Commons that his ministry and the CFIA will freeze changes to mandatory fees until the end of 2002, and the Canadian Grain Commission will freeze changes to mandatory fees until the end of 2003.

As we've stated in our chapter, we believe that the period of the moratorium is an opportunity for organizations to evaluate whether user fees are being applied properly, to develop measures of program efficiency, to develop better management tools for user charges—including costing systems—and to plan for the future. This is also an opportune time for the organizations to improve the information on user charges that is provided to Parliament and to others.

Finally, Mr. Chairman, we have been told that the Treasury Board's planned review of the government's policy is now underway. We have communicated to Treasury Board Secretariat officials that we would be happy to work with them to share the knowledge that we've gained through this latest audit.

Mr. Chairman, this concludes my opening statement. My colleagues and I would be pleased to answer your questions.

The Chair: Thank you very much.

Before we go to Mr. Hilstrom, could I just ask a question on a point of information with regard to the freezing of the mandatory user charges, like the Grain Commission, for example, and the CFIA? I understand that those user fees, which have been frozen to 2002-03, amount to between $100 million and $110 million. Can you confirm that, Mr. Desautels? You don't have to do it this moment.

• 0915

Go ahead.

Mr. Neil Maxwell (Principal, Audit Operations Branch, Office of the Auditor General of Canada): I don't know if our colleagues here would care to elaborate, but the fee amounts, the figures we had, were slightly more than that, although they would be in the order of over $100 million.

The Chair: That's all I need. Thank you.

Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

Certainly, there's been some—

The Chair: Howard, I'm very sorry. I guess Mr. Graham and Mr. Chartier are going to give a presentation first.

Mr. Andrew Graham (Assistant Deputy Minister, Corporate Services Branch, Department of Agriculture and Agri-Food): We're flexible, sir.

Like the Auditor General, I'd like to say we're pleased to be here to discuss this. I'll be speaking on behalf of the Department of Agriculture and Agri-Food Canada and to chapter 11. Mr. Chartier will have a few words to say with respect to the Food Inspection Agency and Mr. Kennedy with respect to the Grain Commission. We felt that it was important that we all speak, in the sense that there are some quite different issues associated with each one of those agencies.

I'd just like to say, with respect to the Auditor General's observations in the report, that Agriculture and Agri-Food Canada is currently developing a management framework on the future application of user fees. That framework has been drafted but is still under serious consideration. We hope to have that out shortly. It's also being governed by the fact that the Treasury Board is undertaking a policy review, which we're trying, in a sense, to move in a parallel track with.

We also accept the value of improving our costing mechanisms and are working towards that. I'd note that the report acknowledges the effective use of activity-based costing in the Net Income Stabilization Account. I would also note that the implementation, in 2001, of accrual accounting by our department as part of the government's financial information strategy, and our recent implementation of the SAP financial product, will enable us to take an important step in improving the costing capabilities of the department, which hitherto have not been that strong.

We also recognize the value in assessing the individual fees. As noted in the Auditor General's report, AAFC was the first department to undertake a cumulative impact study of federal fees, which was, I understand, discussed in this committee almost a year ago. It was also acknowledged that this study significantly advanced the knowledge of the impact of user fees. We're building on the strengths of this methodology when examining the impacts of future fees, should there be any.

We would also recognize a value in establishing appeal processes in the management of user charges, and we are currently looking at a number of options to make improvements in this area, to in fact have a recourse mechanism built into the user fee process.

We continue to consult the Treasury Board Secretariat on ways to increase the responsiveness of the regulatory process and are an active party in the current review that's underway.

We've constantly struggled to balance good management theory and client acceptance of user fees. There's no question that it has been quite a challenge. We've worked hard to strike a balance between close cooperation with and constant feedback from clients—and I can certainly, during discussion, offer some specific examples of that—in the context of the factors that impact our working environment.

Most agricultural programs recognize a significant amount of public good in the government efforts to maintain a strong agricultural industry across the country. It's in this context that the guiding principles have been those of general availability and equity between commodities and regions and, where appropriate, cost sharing rather than cost recovery. The differences in cost recovery and the approaches and levels reflect the very specific nature of the number of programs we offer and sometimes the general legislative authorities at play.

We would certainly like to express our appreciation for the Auditor General's recognition of our successes and innovations in this area of user fees and for the valuable contributions that we're committed to following up on, Mr. Chairman.

• 0920

Before turning it over to Mr. Chartier, I'd like to speak very briefly to the issue of the questions about the user fees you referred to at the beginning, Mr. Chairman.

The statement by the minister on mandatory user fees is an important signal of his desire to ensure that we use these only with the greatest of restraint. As has already been noted, all mandatory fees are frozen and there will be no new fees for present mandatory services until the end of 2002. However, in order to avoid the legitimate criticism that was made in the audit that this tended also to freeze both a review of current structures and good policy development, the minister has made it clear that for any new mandatory fees that may arise from new or modified regulations, there will be a case-by-case review, should the need arise.

I must emphasize that at this point in time there are no new mandatory fees planned by the department. Adopting the recommendations of the Auditor General, we will continue to apply our new frameworks and to assess the impact and the utility of existing fees on a regular basis and on a much more concerted basis to see if they can be in fact reduced, eliminated, or improved. We feel it's important as well to emphasize that we'll continue to consult, should the issue of new regulations arise or should we find through our analysis that we can restructure fees to reduce their negative impact.

Thank you very much, Mr. Chairman. I believe Mr. Chartier has some comments.

The Chair: Thank you.

We'll go to Mr. Chartier.

[Translation]

Mr. Jean Chartier (Vice-President, Public and Regulatory Affairs, Canadian Food Inspection Agency): Thank you very much, Mr. Chairman, and good morning to committee members and everyone. It is a pleasure to be here today representing the CFIA on this important issue.

The CFIA is committed to maintaining a fair and equitable system of user fees that improves the overall effectiveness and efficiency of government programs while generating revenues in support of food safety program objectives. The Canadian Food Inspection Agency (CFIA) agrees with the observations and recommendations contained in the Office of the Auditor General's report and has responded to these in a positive manner.

[English]

The CFIA is proud of its current cost recovery regime and will use the OAG's recommendations to maintain an effective and well-designed cost recovery program.

The CFIA and its predecessors have a long history of cost recovery. Indeed, for many decades, fees have been charged for some inspection and certification programs. As the OAG report notes, the CFIA now manages one of the government's most complex sets of user charges.

As the members will know, the principle that beneficiaries of government services should share in the cost of those services is well entrenched in government policy as well as in the CFIA's business plan and in the Canadian Food Inspection Agency Act. The CFIA will be actively participating as the government reviews its user fee policy, and we will continue to design and implement a cost recovery system that complies with Treasury Board requirements.

Mr. Chair, over the last few years, the CFIA has had to deal with a number of constraints and challenges surrounding the user fee systems. As members may recall, back in November 1996 this committee was told that no new user fees or increases to existing fees would be introduced before the year 2000. As was just mentioned, on last March 15 the minister acted in response to the tough times that farmers in Canada are facing by further extending the freeze on mandated cost recovery fees until at least the end of the year 2002.

In response to those constraints, the agency has refined its cost recovery policies, has established a single accounts receivable service centre to reduce administrative costs and improve client services, and has established an appropriate dispute resolution mechanism that deals, among other things, with industry complaints.

The CFIA provides a wide variety of regulated and non-regulated services to the agrifood industry, services that directly contribute to the industry's ability to operate effectively on the national as well as the international scene.

[Translation]

Mr. Chairman, cost recovery can and does enhance effectiveness. It also promotes the efficient use of resources. As the OAG's report notes, the CFIA has achieved $30 million in cost reduction and cost avoidance initiatives during the period in which it implemented its cost recovery policy. The OAG report even cites the CFIA's livestock grading program as a good example of cost avoidance that resulted in net savings to the government and industry. In this case, because the grading of beef is a function related to quality rather than food safety, the CFIA was able to devolve grading activities to a private not-for-profit organization at a reduced cost to industry.

• 0925

The CFIA has already begun to address client concerns on matters such as improved program costing methodologies, and fee simplification as referred to in the OAG's report. The Agency will also continue to respond positively to clients' requests to correct problems with current fee structures and help ensure that the service fees do achieve the intended objectives.

[English]

The CFIA is committed to maintaining open consultations with clients, particularly in regard to cost recovery policies and practices. We are pleased that the OAG has acknowledged improvements made in the consultative process, but we fully recognize the need to make further refinements that will bring a wider range of opinions to the table, including a greater proportion of those representing the public interest.

As we work towards improving our consultative process, the CFIA is aware that it needs to better document and report to clients how cost recovery has permitted the more efficient and effective use of its resources and also how the agency's many programs provide benefit to the agrifood industry. The CFIA recognizes that measuring the effectiveness of cost-recovered services is also key to maintaining their relevance and their effectiveness. To this end, the CFIA has launched an audit of its revenue collection practices. The information gained from this audit will be used to make further improvements in the design and delivery of the CFIA's cost recovery programs. It should also further help to address some of the OAG's recommendations.

In closing, Mr. Chairman, the CFIA agrees with the recommendations of the Auditor General's report and is committed to working towards improving its user fee system. We welcome any comments members of the committee may offer to help us in this undertaking.

Thank you very much, Mr. Chair.

The Chair: Thank you.

Now we'll hear from Mr. Kennedy.

Mr. Dennis Kennedy (Chief Operating Officer, Canadian Grain Commission): Thank you for the opportunity to appear before this committee. Also, thank you to the Office of the Auditor General for the work they have conducted.

The Auditor General's report contained numerous helpful recommendations and we've begun to work on them. We recognize the value of improving costing mechanisms, assessing the impact of individual fees, improving our measurement of performance, and establishing a formal appeal process when managing user charges. We will undertake to improve performance in these areas when conducting reviews of programs and changes to fees. We expect to continue to work closely with all of our clients as this process evolves in order to meet the objectives set out by the Auditor General.

The Canadian Grain Commission was formed to establish and maintain grain quality standards, to regulate grain handling, and to maintain the rights of grain producers. To meet these objectives, we deliver regulatory, research, and quality assurance programs that take the form of mandatory or optional services, most of which are funded through user charges.

Most of the Grain Commission's revenues come from fees charged for the inspection and weighing of grain as it is loaded onto vessels for export. Therefore the Grain Commission is vulnerable to changes in volume of the grain exported through terminal elevators. In 1998-99, terminal export volumes declined by 31%. For the foreseeable future, these volumes are expected to be 20% lower than they were before 1995. This decline has led to deficits of $11 million last year and a similar one projected for this year.

For many years we have operated in the spirit of the recommendations of the Auditor General. Our approach to cost recovery has always emphasized the following.

We match the service to the needs of the client. For example, in recent years, in collaboration with our clients, we re-engineered our terminal grain-weighing service to reduce the costs by over 50%.

We conduct a fee review annually. In 1997 we conducted a comprehensive review of all of the costs associated with each of our services.

• 0930

We strive for cost-effectiveness through continuous improvement, re-engineering, and technological change. For example, we are operating with 16% fewer staff than in 1991, but we have opened more service centres on the Prairies, and we have expanded services at Vancouver to address the industry and producer needs.

We carry out periodic major reviews, and the report of 1998 was conducted in close collaboration with our clients. I can't emphasize how important it is to involve our clients in these reviews. We provided them with complete financial and operational details, and they responded with invaluable advice and encouragement.

For many years, our cost recovery target has been 90% on a five-year average. With the exception of the last two years, we have been able to meet this target. Now, our anticipated cost recovery performance over the next three to four years will be considerably lower. This is because our mandatory fees, which were last raised in 1991, will remain frozen until the year 2003-04. To prevent a fee increase that would unduly burden grain producers, and to enable us to operate with a balanced budget, the government has increased our appropriation by $83 million, to $113 million over this period. While the freeze is necessary to support farm incomes, it is a constraint on our ability to adjust our mandatory fees to accurately reflect the costs of the service. By 2003, we expect to develop a plan for cost recovery that more closely matches fees to costs. In the meantime, adjustments will be made where possible. For example, fees for optional services will be adjusted to reflect the actual cost of providing the service.

I will conclude by saying that the Grain Commission is committed to working with its grain producer and industry clients to implement the government's cost recovery policy and to provide excellent service for the fees it collects. That said, I think it's important to acknowledge that we must conduct this work within the parameters established by Parliament, by the cabinet, and by the central agencies.

Thank you, Mr. Chairman.

The Chair: Thanks, Mr. Kennedy. Thanks to all of you.

Just for your information, members, as you know, the minister couldn't appear before the committee this week because he was ill. His appearance has been rescheduled and he will be appearing next Tuesday, April 4, on the estimates, and the following day, Wednesday, April 5, on farm income and safety nets.

Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

I think we should clear up a couple of misconceptions right off the bat, the first one being that user fees are just some kind of pure charge for services, when in fact Canadians pay taxes to governments for government services. In fact user fees are simply another tax from which the government brings in revenue, and it targets that tax to specific groups. In fact sometimes this whole issue of user fees and cost recovery goes to the absurd, as in the case of the Firearms Act, under which we're paying for services that are not required by firearms owners whatsoever. So I have a very big suspicion about user fees in all aspects.

Mr. Desautels, is there not a large number of government services and programs that are provided to people but for which no user fees are charged, in your experience, looking across the broad spectrum of government departments? There are many, are there not?

Mr. Denis Desautels: Mr. Chairman, the government is in the business of providing services to citizens, and there is a whole range of services there, of course. Some of them are absolutely free of charge because they are general services available to everybody, but user fees are supposed to be aimed at situations in which there is a specific user group identified and getting what is called a more targeted or private benefit for that service. In my view, Mr. Chairman, I think there's room in the system for both types, but there's valid discussion as to when they should apply or not apply.

Mr. Howard Hilstrom: Okay.

With the Canadian Grain Commission, I believe Mr. Chartier of the CFIA used the example of beef grading. For instance, it had to do with quality, not safety. The Canadian Grain Commission has to do with quality, not safety. Can anybody up at that front table give me any reason why the Canadian Grain Commission should not either be privatized and/or have a private system available to farmers?

• 0935

Mr. Dennis Kennedy: I can only tell you that during our program review, when we consulted with many producer groups, the producers were very strong on having the Canadian Grain Commission continue, as a government agency, delivering what they believe are very valuable quality assurance services that improve the marketing capability for Canadian grains.

Mr. Howard Hilstrom: You had a 20% lower volume and lower...you can't call them sales. You had a 20% lower service provided, whatever, but still the government figured they couldn't squeeze that poor farmer for any more money. They figured, we'll just squeeze the general taxpayer for another $83 million.

On that decision, it sounds to me like there should have been a better rationalization of service by the Canadian Grain Commission to lower their costs down to where they met the service. It sounds like we still have way too many employees. You're mandating additional services, and I question whether or not they're really needed. It's simply the government and you yourselves mandating it.

Was there no room to stay within the budget by matching services to volumes of grain handled, as opposed to another method?

Mr. Dennis Kennedy: A major part of the program review was to take a look at all the services of the Grain Commission and determine whether or not they were required and still relevant to the industry.

We identified some streamlining that could take place without affecting the overall capabilities of the quality assurance system. The program review report included a number of recommendations that would improve our efficiency and lower our costs further. We actually undertook a number of reductions in our expenses and staff during the 1990s, to reflect the decline in volumes.

We got to the point where any further reductions in expenditures would have affected our ability to deliver the services farmers felt were essential.

Mr. Howard Hilstrom: Our problem is that I don't see how there's any way efficiencies can be identified and brought in there, other than just by reviews, hopefully by the Auditor General, who is the only one who could walk in and identify some efficiencies. The marketplace will identify those inefficiencies very quickly, whereas you as a government organization are virtually incapable of identifying them on your own because you're right inside there.

I have one question here for Mr. Graham, I guess. In your report, you acknowledge effective use of activity-based costing by the Net Income Stabilization Account. I think, as a farmer, I pay about $55 to have my NISA done. What is this activity-based accounting? Does that mean our farmer fees will go up for our NISA program?

Mr. Andrew Graham: No, not at all. It's an accounting methodology that enables us to actually cost the service we're getting. It's been a common practice in the private sector, therefore we know how much that costs.

Mr. Howard Hilstrom: If you do that, is there not room for it to go up, then? Would you possibly not charge it higher?

Mr. Andrew Graham: There's no intention of doing so.

Mr. Howard Hilstrom: Okay.

Do I have a few minutes left?

The Chair: You have 1.5 minutes.

Mr. Howard Hilstrom: Mr. Desautels, you looked at the Canadian Grain Commission. Did you examine efficiencies in there, or was it strictly related to the user fees?

Mr. Neil Maxwell: Thank you, Mr. Chairman.

This was restricted to looking at how they've gone about implementing user charges. We didn't do a broader review. We do those kinds of broader value-for-money reviews of government organizations, but this was restricted to user charges.

Mr. Howard Hilstrom: Did you look at where farmers and farm organizations had input into how those user fees were set, and whether they actually wanted the service or not, as Mr. Kennedy has said?

Mr. Neil Maxwell: Yes, we did look at that. A major part of what Treasury Board expects departments to do when they implement user fees is to consult with users, so we had a number of comments in our report about consultation. Our main message there was that consultations by the organizations improved over the last few years.

• 0940

Mr. Howard Hilstrom: Did you see in any of your studies or recommend anywhere that some of those services could be done more efficiently and cheaply by the private sector, as opposed to the bureaucratic sector?

The Chair: That will be the final answer in this round.

Mr. Neil Maxwell: Thank you, Mr. Chair.

We didn't look specifically at whether there were efficiency improvements they could make. We made a related point, though, which we thought was quite important, that the organizations needed to strengthen their ability to demonstrate that they were efficient. Users expect that they won't be paying for inefficiencies, so one of our expectations was that they'd be able to make a good strong case if they were efficient organizations.

Mr. Howard Hilstrom: Thank you.

The Chair: Thank you.

Madam Alarie.

[Translation]

Ms. Hélène Alarie: Good morning. My first question is for Mr. Desautels.

The moratorium in the agricultural sector dates back to 1996 and your report was released in September 1999. As part of your audit, did you request and obtain analyses by producer group, by producer region and by production volume? Did you have access to fairly detailed analyses on the effectiveness of the system in place at Agriculture Canada and at the Canadian Food Inspection Agency? I'm primarily interested in these two organizations.

[English]

Mr. Neil Maxwell: Thank you, Mr. Chairman.

We didn't do an in-depth analysis of the operations of those organizations. This was really about looking at how they had implemented user fees and all those different requirements that were reasonable expectations of those organizations, in terms of what they needed to do to implement the government's policy.

[Translation]

Ms. Hélène Alarie: The moratorium gave you the opportunity to verify, as part of your report, if user fees were charged and to institute program efficiency measures. How can you develop such measures if you don't have the proper information in hand?

I have a secondary question for you. Your report focuses on activities carried out over a three-year period, that is from 1996 to 1999. Some time has elapsed since you made your recommendations. Have you set a deadline for correcting the problems identified in your report?

Mr. Denis Desautels: Mr. Chairman, we follow up on all of the recommendations we make approximately two years after tabling our initial report. Since we tabled our first report in September 1999, we will assess by September of 2001 how well our recommendations have been followed. A two-year time frame gives us ample time to see whether appropriate corrective action has been taken. We will table a new report to the House at that time.

There is a positive side to a moratorium because it gives the department a certain amount of time to examine more basic management issues, to determine whether it not it is operating efficiently and whether it has the information it needs to gauge its efficiency. I expect that by September of 2001, we will be in a position to note significant progress on this front.

Ms. Hélène Alarie: I was very pleased to learn that Agriculture Canada's management practices are relatively sound, particularly in light of what's happening these days over at Human Resources Development Canada. Our committee is reassured by your findings.

I would now like to ask Mr. Chartier a few questions. I won't get into GMOs today because more than likely I'll be seeing you again soon. I'm puzzled by something you said in the second paragraph of your remarks. You note the following:

The CFIA is committed to maintaining a fair and equitable system of user fees that improves the overall effectiveness and efficiency of government programs while generating revenues...

The CFIA and I are often at cross-purposes. However, I'm probably the person most inclined to help you. I don't think the CFIA should always need to prove its effectiveness since its primary aim is to ensure food safety.

I've read your statement carefully and I detected a paradox of sorts at the bottom of page one, where you note that the CFIA has had to deal with constraints and challenges, just as the agricultural sector has dealt with major constraints and challenges.

• 0945

Something mustn't be right here because the CFIA can't continue to charge producers fees at a time when they are facing a crisis situation. The math is simple. Cuts have to be made somewhere. Will services have to be cut? Would you care to comment about this situation?

Mr. Jean Chartier: Thank you for your question which I could answer in several ways. I'll start by pointing out that the creation of the CFIA was an attempt in itself to improve the effectiveness and efficiency of food safety operations in general. That's my first comment.

Secondly, I would have to say that food safety is certainly the CFIA's primary goal. You're wondering how this goal is compatible with cost recovery objectives. As I see it, there is no obvious contradiction because the act of charging fees forces us to be open about our operating costs, that is the costs associated with the use of our services. The CFIA is seeking to keep these costs in check because if the industry feels that these costs are running too high, it can always react to these cost overruns.

Obviously, market outcome is an important consideration. If services were free and available to everyone, the industry would have no incentive to manage demand for government services. Therefore, there is this apparent contradiction between both the industry's and the government's quest for efficiency, given that the government is responsible for regulating this area.

Ms. Hélène Alarie: I agree with what you're saying, but I foresee a second problem, that is a problem with information. I don't imagine that I'm the only member who receives a slew of telephone calls from CFIA inspectors claiming that where once they worked a certain way, now they do fewer inspections and the public is at risk. I must be very popular with the agency if I'm the only one to receive calls of this nature. Whether there is any truth to these statements, one thing is certain: if inspectors, the first people on site, are encountering problems like this, it means that they haven't received the proper information or that they don't clearly understand what is happening, because the focus of your reform initiatives was risk management. I agree with you that some necessary, ineffective analyses were done because the risk level was virtually non existent. Reform did have some benefits, but the perception of people on the front line...

[English]

The Chair: Madam Alarie, you also have a problem with time, so try to make it shorter.

[Translation]

Ms. Hélène Alarie: Fine. I'm done.

[English]

The Chair: Mr. Chartier.

[Translation]

Mr. Jean Chartier: I will try to answer your question as quickly as possible. In fact, I will give you a two-part answer. First of all, the creation of the CFIA led to a number of major structural changes which had an impact on people. Determining the extent to which these changes resulted in adaption problems for some is one thing. Secondly, another factor to consider is changing inspection methods which, as you know, are largely a function of international agreements to which Canada is a party. We have had to adapt our work methods to comply with new, internationally recognized scientific methodologies. Again, these changes proved more difficult for certain groups of employees. However, I don't think we should attach too much importance to these considerations. What we're dealing with here are transitional measures, be they administrative or scientific in nature.

[English]

The Chair: Thank you.

Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair.

I thank you for your presentation and look forward to a few answers here.

• 0950

The report from the Auditor General said:

The Canadian Food Inspection Agency initiated fee increases but has not completed its plan for user charges. Consequently, commodity groups are paying different proportions of the Agency's costs for similar service, which represents inconsistent treatment.

It goes on to say:

Revenues from user charges have increased substantially for the Canadian Food Inspection Agency since 1994-95, while changing less significantly for the other two organizations....

I look at the chart in our Auditor General's booklet here, and from 1994-95,it went from 14.1 to 41.9. Wow, what an increase—300%. On page 11-12 is the graph I'm referring to. It's an excellent book. I found it very good reading. Actually, it was part-time bedtime reading, but it was good. It kept me awake.

While you're looking for that, I can go on a little bit further. You stated here:

“services that provide identifiable recipients with direct benefits beyond those enjoyed by the general public.” This is designed to ensure that the general taxpayer does not pay the full cost of services that provide direct benefits to specific individuals or organizations.

I think what we've lost in this grasp is the primary producer. It seems to have been dumped on their shoulders and not on the consumer, in my opinion.

Are there any answers from the CFIA?

Mr. Jean Chartier: There are quite a few issues you're raising here, some of which are historical in nature, to justify the major differences in the amounts. Maybe I have to remind you of the process that took place back in 1995.

A business initiative program was set up in what used to be the food production inspection branch of the former Department of Agriculture, which eventually became part of CFIA. This plan, in 1995, was an attempt to really look into the overall situation of all the commodity groups that were being regulated.

As part of that initiative, what happened in the meantime was when we got to the application stage of this, which was a three-year plan, the creation of the agency was announced. The Treasury Board policy was also reviewed in 1997. What happened by then was that just on the basis of the fees that needed to be raised for the creation of the agency, as well as paying respect to the Treasury Board policy, the revenues that were generated were eventually increased.

Mrs. Rose-Marie Ur: That was 300%, though?

Mr. Jean Chartier: We have to be careful when we say they were increased. They were not increased on a per-inspection basis. They were increased because of the workload and the extent of the services that were covered. In other words, if the economy goes better or goes well and the numbers of imports and exports increase, the demand for CFIA services will increase, and the fees collected will get higher.

Mrs. Rose-Marie Ur: Would you say all these user fees are part of the problem with our farm crisis in Canada?

Mr. Jean Chartier: I think a study was done on the cumulative impact, and maybe my colleague can speak better to this item than I can. The only comment I would offer at this stage is that if I remember the conclusion of that study well, it appeared that as of last year there was very little impact, although some sectors were hit more than others. Even in the worse cases, they had very limited impact on the overall viability of each of those sectors.

Mrs. Rose-Marie Ur: I have just one quick question to Mr. Desautels. I appreciate your presentation. I always look forward to our meetings.

In your presentation, in items 11, 12 and 13, you say the moratorium has frozen not only fee increases but potential improvements. I'll go to number 13. Maybe I'm reading it wrong—maybe I read too much last night—but it says:

As we stated...we believe that the period of the moratorium is an opportunity for organizations to evaluate...

In number 11 you say you're not going to do anything, so doors are closed. Now in number 13 you say, wonderful, we have a moratorium, we're going to change things. Which way are we going?

• 0955

Mr. Denis Desautels: Very simply put, when we did our audit, the feedback we got from people was, well, if there's a moratorium, we're not making any changes. We're saying, in 13, to take advantage of the moratorium to look at these cost recovery programs and try to fix them where they need fixing.

Mrs. Rose-Marie Ur: Okay. That sounds reasonable.

Do you feel, sir, that with the joining of the four departments into this agency the percentage of administration costs to deliver the service will be a cost factor regarding the agency?

Mr. Denis Desautels: We're not in a position to really answer it quite that way. I have to say, we carried out audits in the past of food inspection prior to the creation of the Food Inspection Agency. Our audits came to the conclusion that there was a need for getting together the various players in the food inspection field. So the cumulative evidence was that there was a need for something like the Food Inspection Agency.

In my view, based on our previous work, it's something that was needed. I think future work will determine whether or not it lived up to the objectives in terms of doing this in a cost-effective way. But as we speak today, I can't reach that conclusion yet.

The Chair: One minute, Rose-Marie.

Mrs. Rose-Marie Ur: I guess I should turn to some positive things as well, looking at your book—“Credible Costing Capability Needed”, and “Failing Grade on Implementing Service Standards”.

But I also note on page 11-28, regarding the NISA program, that you felt it was operating on a stable basis.

Mr. Denis Desautels: Neil, do you want to answer that?

Mr. Neil Maxwell: Yes, thank you.

NISA in several respects impressed us as doing the kinds of things we'd like to see being done elsewhere in the three organizations. We had positive things to say about how they had implemented service standards. They had actually said to users what standards they'd try to reach, and they reported on how well they did against that.

As Mr. Graham mentioned in his opening statement, we had positive comments about their activity-based costing. It was the one area where we found good costing systems.

Mrs. Rose-Marie Ur: That wasn't the same in AIDA, I believe, if I read your book correctly.

Mr. Neil Maxwell: We didn't examine AIDA as part of this.

Mrs. Rose-Marie Ur: There was something about AIDA in it, because I did read it.

Mr. Neil Maxwell: We did talk about AIDA with respect to differences in how they'd approached user fees, but we didn't look at the administration of AIDA as part of this book.

The Chair: Thank you.

Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): I wanted to pick up on a question Mrs. Ur asked with regard to this moratorium. I would ask the three agencies that are here if they are in fact using the moratorium to examine these inequities that have been identified by the Auditor General's department.

Mr. Andrew Graham: The minister deliberately avoided the use of the word “moratorium” in this one to make sure that we did just that. In other words, the concept of a moratorium is that everything is frozen, the regimes are frozen, and it's in stasis. He wanted to make sure that, number one, the question of the fees and the impact on the producers, etc., was well known as a freeze, and they therefore could have some guarantee that their costs wouldn't go up.

At the same time, as he's just done with respect to the Grain Commission, he's done a thorough review, and the government made some policy decisions around how the funding would go. He expects us to put in place the framework. He expects us to undertake the consequences of the research we've done in response to both this and the concerns of this committee.

So it definitely is not a moratorium as it was used in the past; it's a freeze on fees.

Mr. Dick Proctor: Okay, Mr. Graham, but in Mr. Desautels' intervention, he says, in point 11, “officials have all but abandoned the cycle of reviewing and improving their management practices” as a result of this moratorium.

Mr. Andrew Graham: With the greatest of respect—

Mr. Dick Proctor: So it may be that Mr. Vanclief is not using the word moratorium, but officials are interpreting it that way.

Mr. Andrew Graham: —we have not abandoned it. In fact, the minister, when discussing this, was adamant that we not accept any notion of a freeze or a moratorium as a moratorium on improving management practices. I'm getting our department...a framework in place on also reporting out better—all the things that Mr. Desautels wanted.

So the short answer is, yes, we do want to move forward.

• 1000

Mr. Jean Chartier: Just to add a couple of things, the agency certainly wants, very much in line with the auditor's comments, to commit to the notion of improving the standards we're using to fix fees. That's certainly one area in which we want to make strides. Information to the public through our business plan or our annual report is certainly another thing we intend to improve in the coming months, and very much so. We're going to have a business plan in the fall, and we're hopeful that we'll be able to support that notion.

Certainly any other inefficiencies within the royaume of the freeze will be strongly revisited, and our consultation mechanism will be improved. I think we have a good track record on consultations. We're eager to go further down the road, certainly with a view to look also into things like cost reduction and cost avoidance, which are the complementary legs to the cost recovery policy.

Mr. Dick Proctor: Merci. Mr. Kennedy.

Mr. Dennis Kennedy: We'll certainly be proceeding with looking at the issue of fees, the restructuring of our fees, to reflect the Auditor General's recommendations. We'll be taking a look, with our clients, at different forms of charging the fees. We'll be continuing to look at efficiencies in the delivery of our service. We will be doing a better job of publishing our service standards and measuring the performance against those standards for our clients to see.

So, yes, we will be moving in all of these areas.

Mr. Dick Proctor: Thank you for that.

To the Auditor General and his staff, in point 6 you say “some overall progress”, and in point 7, “some progress in certain areas”. This reminds me of report cards I used to get—

An hon. member: All of your report cards.

Mr. Dick Proctor: —when the teacher.... I realize it's not down there with an HRDC audit, but what kind of grade would you give it overall in terms of your study?

Mr. Neil Maxwell: Having never practised as a teacher, I don't know that I would feel comfortable giving an actual grade to that.

We did think the progress was legitimate. We weren't simply saying that to have something good to say. But the progress was just in some limited areas. There are, as we said in the report, quite a number of areas where we saw the need for progress.

I'm encouraged by the comments of the departmental officials here about the areas in which they're going to work. I think they've captured many of the suggestions we have made.

Mr. Dick Proctor: Thank you.

The Chair: I believe that bell indicates the opening of the session for today. I remind you, we'll be running out of time, assuming that the vote takes place on schedule. We don't have the room after 11 a.m., so if the vote comes on time, this meeting will be a bit truncated, unfortunately. Let's try to be as efficient as possible.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you, Mr. Chairman.

First of all, welcome to each and every one of you. I really appreciate it.

I have had some involvement in efficiency audits before, with different departments, and I'm sure each one of the organizations that were audited embraced with open arms the Auditor General and his employees when they came in to give their comments and certainly their views.

Am I correct, Mr. Desautels?

Some hon. members: Oh, oh!

Mr. Rick Borotsik: Oh, not quite like that.

I, unlike others, do not see you as the enemy. I see you as providing a very important, useful service. But that doesn't mean those services can't be more efficient than the way they're being delivered.

I'm sure that's the position the Auditor General and his staff take when they go in.

I'm very concerned about three things I've heard and read over the past little while about these audits.

First of all, take chapter 11. Could you not have made it something else other than that? That's the Bankruptcy Act in the United States, so that would concern me a little bit right off the bat.

My first concern is in terms of what you said, Mr. Desautels, touching on what Mr. Proctor said, that when the management did the moratorium it stopped the officials from reviewing and looking at and changing that system. I heard your answer, but I'm still concerned about that. I think Mr. Graham had dealt with that and said, no, we are still looking at the efficiencies and the review of that.

But just identifying that, Mr. Desautels, scares me a little bit—that if you have a moratorium, there's no movement in the right direction.

The second thing that scares me a little bit, Mr. Desautels, is the fact that it came from your department that there had to be an appeal process put in, in a lot of cases, with the organizations. From a user fee perspective, the user should have an appeal process, and I find it a little disconcerting that the organization didn't have an appeal process there.

The third thing that's a little disconcerting is the costing. It says here that over the past five years all the departments have shown little improvement in the way they have obtained and used cost information. That to me is disconcerting, because you have to know what the costing is to provide the service and to collect the fees on that service.

• 1005

So, Mr. Desautels, I wonder if you could answer those three areas of my concerns, and then maybe we'll go to the agencies and see what they have to say. I won't get into the financials of the Grain Commission and the $83 million. We'll leave that for the Reform Party.

Mr. Desautels.

Mr. Denis Desautels: I'll try to be quick.

First of all, in terms of the moratorium or freeze, our audit and my comments reflect what we saw when we carried out this work in 1999. I'm glad to hear this morning that the extension of the freeze will not result in that being interpreted that way.

Mr. Rick Borotsik: But are you convinced that's the case, Mr. Desautels? That's why I have some concerns.

Mr. Denis Desautels: Well, this would represent a change in what we've seen, but I do accept what I've heard this morning, and I assume that's what will happen. I take that as a commitment on the part of these organizations.

Mr. Rick Borotsik: As do I, and the minutes are in place. As do I.

Mr. Denis Desautels: In terms of the appeal process, although we do mention that, it does not come strictly from us. We were auditing these user fee situations using the Treasury Board policy. The Treasury Board policy does call for, among other things, having a process for people to appeal if there's some dissatisfaction. So this is government policy.

And in terms of the costing issue, of course it's very important to know what the service is costing you in order to ensure the charge the users are paying is a fair charge. In a sense the use of recovery or user fees does drive some of the proper behaviour, some good discipline, in managing public programs, because it forces people to know what the service is costing. It also leads to a healthy discussion between the provider and the user. The level of service—

Mr. Rick Borotsik: But Mr. Desautels, let me remind you, you said it has shown little improvement over the past five years to obtain and use that cost information. I agree with you as to the reason and the rationale. Why was it that over the past five years that costing information wasn't being used on a better basis, with the exception of NISA? Why was that, Mr. Desautels?

Mr. Denis Desautels: I can't give a single answer to that, except to say the government is generally weak in terms of accounting systems that generate proper cost information. It is a general weakness across all of government.

Mr. Rick Borotsik: So it's not just these three organizations?

Mr. Denis Desautels: No. We've had some discussions with other departments involved in cost recovery, and they're struggling with the same issue, and some of the users are arguing with them about the fairness of the charge and wanting a demonstration that those are the real costs.

Mr. Rick Borotsik: Gentlemen, I do have some time, I think. Do you have any comments?

The Chair: You have one minute, yes.

Mr. Jean Chartier: I'll just start out by reacting to part of the question and part of the answer that was provided by the auditor.

I would like to dispute a little bit the notion that during the last years of the moratorium, where the moratorium was in place, nothing happened. If I can speak for the agency, quite a few things were done that were maybe not only directed at improving the cost in the generation of fees but had a lot to do with some efficiencies and improvements.

On the very thing you raised with regard to the alternate dispute resolution mechanism, I have to say more than a year ago we set in place a mechanism that does just that. In fact we have to this day dealt with fifteen external challenges on user fees just through that, in perfect support of the Treasury Board policy. In fact we've estimated approximate savings of $1.7 million in avoiding fees just by that.

Mr. Rick Borotsik: Of the fifteen disputes, how many were in favour of the appellant?

Mr. Jean Chartier: I cannot answer that, but I can say eight were resolved with mutual benefits. In other words, both parties were supported.

The Chair: Mr. McGuire.

Mr. Joe McGuire (Egmont, Lib.): Thank you, Mr. Chairman. I want to ask my annual question.

Voices: Oh, oh!

An hon. member: [Inaudible—Editor].

Mr. Joe McGuire: It's hard to get an answer here.

• 1010

I see on page 12-7 you have a picture of a physically altered Shepody potato, and you're saying if it were under the Plant Breeders' Rights Act, it would now return $5 million to $10 million in plant breeders' fees.

If the seed growers in this country were here today, they would say that might have been true five years ago, but with the situation with seed potatoes in this country right now, you wouldn't get very much use out of a plant breeders' rights patent on Shepody potatoes. They're tracing the demise of the seed potato industry directly to user fees. They have driven people out of the industry into processing potatoes or just growing table potatoes.

You have, I think, a study done by the P.E.I. Potato Board detailing the impact of user fees on that particular part of the horticultural industry. I'm just wondering what your thoughts are on that study. In your mind, are the user fees extravagant in that particular part of the industry?

The Chair: Who do you want to answer?

Mr. Joe McGuire: Anybody who has one.

The Chair: Joe's not particular.

Mr. Andrew Graham: I'm a little unsure about how to approach this, Mr. Chair. Is this referring to the cumulative study that was done several years ago and that Mr. Richardson appeared on about a year ago now?

Mr. Joe McGuire: It was done approximately two years ago. I think I asked the question last year. You didn't have an answer last year, and I thought maybe through further study of that report you might have one this year. It was done by Mr. McSwain, who was an employee of the—

Mr. Andrew Graham: Excuse me, by who?

Mr. Joe McGuire: Mr. McSwain.

Mr. Andrew Graham: I'm really at a loss. I'm sorry. I'd be happy to provide additional information. I know in the cumulative study we deal with in respect to potato producers, it's a minus 2.7% impact on operating income, but I can't personally speak to that issue beyond—

Mr. Joe McGuire: That was potatoes in general.

Mr. Andrew Graham: Yes, exactly.

Mr. Joe McGuire: I'm looking at the seed part.

Mr. Andrew Graham: Yes, and we'd be happy to follow up on the McSwain one. I certainly know that name wasn't associated with the cumulative impact study.

Mr. Joe McGuire: If you could get back to me, I'd appreciate it.

Mr. Andrew Graham: We will, Mr. McGuire.

Mr. Rick Borotsik: It's always about potatoes, isn't it, Joe?

The Chair: We'll go now to Mr. Ritz for five minutes.

Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance): Thank you, Mr. Chairman.

Welcome, gentlemen, and thank you for your presentations today.

Mr. Desautels, you're saying your review is two years down the road, and we're seeing in these reports a lot of things we see year after year. They're promising to do a better job, they're reviewing, they're looking into it. Would your report have more teeth if you were allowed to set out guidelines and specific issues you wanted to see addressed over a specific timeline, getting back to Mr. Proctor's report card? Would that help?

Mr. Denis Desautels: We will be following up this particular chapter within two years, as we do for most of our chapters, and we have provided some recommendations that I believe are at the right level of specificity. We do not want to and we should not be in a position to dictate policy to departments. In our work we're basically trying to get departments to adhere to the policy that was first established for them, in this case the policy on cost recovery.

So I do not want to cross the line and get into the business of dictating to departments exactly what they must do and get into the policy area. I audit against the basic policy that's been approved either by Parliament or by the government of the day or by a minister.

I must say we have fairly good results, particularly when standing committees get interested in some of these recommendations. Normally the departments do take the committees' views quite seriously and will undertake to correct some of the things that have been raised and discussed at the committee. So I'm confident that we should be able to see, when we come back, a definite improvement.

• 1015

Mr. Gerry Ritz: So it's a tag team between your pointing it out and our making sure it happens.

Mr. Denis Desautels: That's correct, yes.

Mr. Gerry Ritz: Good, fair enough.

To the gentleman from the inspection agency, you talk glowingly about how you determine the need for your fees and the amount of the fees and so on by “consulting”. I'm wondering who you consult with, which producer groups or farm organizations, and just exactly what percentage of farmers and producers those groups actually represent.

I know from the meetings we've just finished in western Canada and in Ontario that fewer than 10% of actual producers belong to an organization of any type and about 1% of those are active. When you have these producer groups before you, do they actually carry the weight you are attributing to the numbers that you put down on your sheets of paper then?

Mr. Jean Chartier: Thank you for the question.

I think I'd start out by saying that we have to look at the consultation plan that was in place within the CFIA over the last several years. Certainly back in 1995 up to 1997 more consultation had happened, because groups were much more interested in looking into the situation with regard to cost recovery. There were a lot of discussions, there was a plan discussed and all of that.

When the moratorium kicked in in 1996, obviously what happened is that we still tried very hard to interest the industry in participating in many consultations, and we ended up with limited interest for a number of reasons. Obviously the rules were difficult to change at that point, given that basically we could not change the fees that were in place because of the freeze. But at the same time, we tried to turn their attention to cost avoidance and cost reduction, and as I mentioned in my introductory remarks, we've been able to achieve some important results in this regard.

Obviously when you do consultations with the view that you can't change the fees you're collecting or the basic regulatory regime that supports the fee collection, it makes it less interesting I suppose for the industry to participate more than less. Now, if you double this with the notion that over the last couple of years, obviously, we know that the agrifood industry has suffered more, it makes it all the more difficult for them, and we understand that. But as long as the fees are frozen we are respectful of the Treasury Board policy, and that's the regulatory framework we're working with.

Mr. Gerry Ritz: But there are things you can change other than the fees with regard to your consultation. The appeal process that Mr. Desautels is calling for again still hasn't happened, a lot of different things—

Mr. Jean Chartier: That's in place.

Mr. Gerry Ritz: —administration costs, all that type of thing.

Mr. Jean Chartier: With all due respect, that's already in place, and that's what I just alluded to. I could give you a full series of cost reduction and cost avoidance successes that the agency has come up with during that period. We've not been sitting on our hands here.

The Chair: We're out of time on this round. Thank you.

Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

One of the things Mr. Desautels said in his evaluation is the fact that management of user fees in a number of areas needs to be improved. These are the costing services, accessing the impact of user fees, establishing formal appeal processes, integrating user charges into strategic planning.

The one presentation here from Agriculture Canada says:

As noted in the Auditor General's Report, AAFC was the first department to undertake a cumulative impact study of federal fees which was discussed at this Committee last year on April 22, 1999.

It was also acknowledged that this study significantly advanced the knowledge about the impact of user fees.

And:

We will build on the strengths of the methodology of this study when examining the impacts of future fees.

Obviously you found out where the problems are and everything, so my question is what have you done to correct it?

Mrs. Rose-Marie Ur: One year later.

Mr. Murray Calder: One year later.

Mr. Andrew Graham: The policy branch of the department is continuing to study the development of analytical tools in each one of the specific areas. If you noted as well, the cumulative impact study covered the entire responsibilities of the minister. I think Mr. Chartier has addressed some of the things they have attempted to do as a result of that study in trying to equalize out the impact on various sectors.

• 1020

Similarly, as a whole department we spent last year working very hard with the Grain Commission, which was part of that cumulative study. And the announcements in the budget and the restructuring of the fee structure regime that emerged out of that process, while we can't say it's directly tied to this, was probably the biggest issue that we tried to deal with this year in terms of trying to deal with the impact. It was part of that study as well.

Similarly, there have been consultations with various groups under the FIMCLA regime to try to smooth out the administration of the FIMCLA fees, and there have been some administrative changes, which I'd point out can indeed have a fairly major impact, whether there is a fee or not, in how you administer it.

Similarly, PFRA has undertaken a series of site-by-site consultations as a result of this on the community pastures program and has launched a series of other studies it's funding with respect to an attempt to determine and clarify, because of this kind of study, the public good versus private good elements. The calculation of formulas of public good versus private good is a real issue, and I'll give you a specific example. We're funding some work at the University of Saskatchewan to do some research to better calculate public-private.

So we have undertaken a number of steps to try to improve how we manage it, as a result of this study.

Mr. Murray Calder: We have the perfect opportunity here right now, Mr. Desautels. You've heard the answer. Basically what I've heard is study, study, study, consultation.

What is your remark on what's happening right now? Is it same old, same old, or are we seeing improvements?

Mr. Denis Desautels: I'm generally encouraged by the commitment that seems to have come through this morning in terms of dealing with the issue we've been raising.

If I may, I could also ask Mr. Maxwell to comment on the extent to which, during this so-called moratorium or freeze, there has or has not been movement on some of these issues.

Mr. Neil Maxwell: Yes, thank you.

Just to go back, in terms of the picture we saw when we did the audit, it was one in which there had been progress made but a lot of momentum was being lost, and in a lot of this officials drew a connection with the moratorium. They said the moratorium had left them with a sense of uncertainty about what the future would hold. And, as Mr. Chartier mentioned, it was difficult to get stakeholders to the table to be interested in talking talk about some of the things that the department and the organizations wanted to do.

So that was the picture when we did the audit. As the Auditor General said, I'm quite encouraged by what I've heard today. There is certainly a role for some more study of this. I don't think anyone around this table would be satisfied if all this involved was study by the organizations, but I've heard some fairly firm commitments this morning from the three organizations in terms of dealing with our recommendations.

And the short answer to your concern is that time will tell. As was mentioned before, after two years we do come back to see what actual progress has been made on commitments, and we certainly intend to do that with this audit.

The Chair: Thank you.

The voting bell has begun to ring, but I think we'll have time to complete our list. There are three names on the list: Proctor, Borotsik, and Hilstrom. We'll go to Mr. Proctor.

Mr. Dick Proctor: Thank you very much.

I wanted to come to Mr. Chartier. You were saying that you have not been sitting on your hands during this moratorium period. I'm referring back to a study that was done by Agriculture and Agri-food Canada on the analysis of the direct impact of increasing cost recovery fees under the business alignment plan. This was done in November 1997, or at least released, and it purports to show that there were large fees paid by producer/growers but when it comes to processors they pay virtually nothing. For example, in 1996-97 cost recovery rates on fresh fruit and vegetables, including Mr. McGuire's potatoes, were 21%, but the cost recovery rates on other CFIA programs include 0.1% on processed fruits and vegetables, 0% on retail foods, for example.

In this moratorium period, have there been any changes made in those percentages?

• 1025

Mr. Jean Chartier: Let me start with the fact that the very presence of the moratorium obviously created a difficult situation for us with regard to how we might readjust this. The one other factor that kicked in is that when the agency was created in 1997, the overall plan was to make sure all the commodity groups would be treated equitably, and we were not able to finish this because of the freeze. This was a progressive plan that we had over the years to finalize as equitable a share of the load as possible among all the different commodity groups. And you're right, for some commodity groups there is an element of unfairness, if you want, because we were not able to achieve and finalize the overall scheme, and we have some areas that in fact still, as we speak, do not pay fees at all. We recognize that. But again, in full respect of the decision on the freeze, we had very little room to manoeuvre.

Having recognized this, we certainly realize, though, that in the coming months, if there is any way we can still work within the freeze to see how we can try to accommodate better.... And, again, accommodating better does not necessarily equate only with lowering fees and charging more fees; it could be cost avoidance and cost reduction. We mentioned earlier this morning the example of the beef grading. We also have another example of this with the Canadian Seed Institute, whereby we in fact entered into agreements with the industry so that they can manage themselves in that regard. So that kind of leeway we still have and we are going to push that further.

In terms of the room we have to manoeuvre, it's limited to the regulatory framework and those fees are set in place by law. So that's obviously the limit we have to deal with.

Mr. Dick Proctor: So I take what you're saying, Mr. Chartier, in short is that you're doing what you can do within pretty narrow constraints, but that once the moratorium comes off you'd be looking to make some adjustment, being able to do more. Is that correct?

Mr. Jean Chartier: Not only is it correct, but we also intend to do more preliminary studies in view of that during the moratorium. As my colleague just pointed out, we're certainly committed to going as far as we can not only in consulting with industry, in hearing their constraints, but again within the purview of the freeze, in seeing what kinds of adjustments are possible.

Mr. Dick Proctor: Thanks.

In the interests of time, I'll stop.

The Chair: Thank you.

Mr. Borotsik.

Mr. Rick Borotsik: I'm getting more concerned. I heard Mr. Desautels and Mr. Maxwell both say at this table that while it's nice to see that we have a commitment from the agencies now to implement our recommendations in the audit....

Mr. Desautels, had you not received that commitment from these agencies prior to sitting at this table today? Are the commitments not there that the recommendations put into your audit will be followed and they will attempt to do it? Then I'll get to Mr. Kennedy, because he's made some commitments, but I lack a little confidence in them. Have you not received that commitment from these agencies?

Mr. Denis Desautels: Mr. Chairman, it's a question of degree. When we carry out our audits, by the time we finish our work we try to determine if the department is generally on side with the recommendations that we're making and we try to reflect that in our report. So on these issues, yes, we did get some confirmation from the departments concerned that they basically agreed with our conclusions and our recommendations.

But that's not quite the same as a full commitment to specific actions to correct those. It can be a general agreement, but I feel a lot better when I hear departments make commitments to a standing committee.

Mr. Rick Borotsik: So do I.

Mr. Denis Desautels: I think it just moves the thing a little further down the road.

Mr. Rick Borotsik: I'd like to get to those commitments and then I'd like to go to Mr. Kennedy.

In your written report right now you say: “we're investigating new costing methods and software. We are considering the development of an activity-based costing system” and “we intend to establish a formal appeal process”. That doesn't give me a lot of confidence, those words: “we intend”, “we are considering”, and “we're investigating”. How far along are we in trying to implement some of the suggestions that the Auditor General is giving you?

Mr. Dennis Kennedy: With respect to—

Mr. Rick Borotsik: We already know there has been an appeal process set up in CFIA. Is there an appeal process set up in the Canadian Grain Commission?

Mr. Dennis Kennedy: No, not yet.

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Mr. Rick Borotsik: We're investigating that?

Mr. Dennis Kennedy: That's right.

Mr. Rick Borotsik: That lacks confidence, Mr. Kennedy. When are these going to be put into place?

Mr. Dennis Kennedy: It will be very shortly and it will get widespread publicity of what the appeal process is.

I would like to say that although we didn't have a formal appeal process, we did have a lot of measures in place to enable feedback from our clients. We have a toll-free client feedback line. We have a website where we publish the activities and the fees of the commission and invite comment from producers. We have a number of working committees where farmers or members can bring us concerns about the fees. We also have producer meetings.

Mr. Rick Borotsik: But no legitimate process.

Mr. Dennis Kennedy: We didn't have a formal process. We're going to have one clearly laid out, and farmers will know exactly who to go to.

Mr. Rick Borotsik: I have one last question for the Canadian Grain Commission. It was basically asked a little while ago.

In your presentation you talked about a reduction of 16% of staff since 1991. I look at the projections between 1999 and 2000, where you've in fact had a 31% reduction in terminal export volumes. You're now looking at 20% lower for 1999-2000. I anticipate that there are going to be additional reductions in those volumes, and I'm sure you do. You've done your estimates. We've lost $11 million a year for the last two years.

Are you looking at any efficiencies in the reduction of the administration and operational costs of the Grain Commission itself, above and beyond the 16% reduction in staff?

Mr. Dennis Kennedy: Yes, we have. Part of the program review we completed was looking at efficiencies in operations. That will reduce the cost of the commission. We are proceeding with those.

Mr. Rick Borotsik: We're meeting to look at that, are we?

Mr. Dennis Kennedy: There was a hold on that pending the resolution of the funding situation. Now that the funding situation of the Grain Commission is resolved—

Mr. Rick Borotsik: Oh, now you're going in a different direction. Now that funding has been achieved by the government, does that mean you're not going to look any harder at those efficiencies?

Mr. Dennis Kennedy: No. The Grain Commission feels a very strong obligation to deliver its services as efficiently and effectively as it can, which means at the lowest cost. Farmers told us that they have great support for the Grain Commission, but they don't want to pay any more for us than they absolutely have to. So there's a considerable pressure on us to keep our services at the lowest possible cost.

Mr. Rick Borotsik: Do you agree with that, Mr. Desautels? Mr. Maxwell?

The Chair: Last question.

Mr. Neil Maxwell: As I said earlier in response to another question, we didn't look at all those issues. Are they a very efficient organization? Have they pursued all the efficiency gains they could? That really wasn't the focus of our audit work.

The Chair: Thank you.

Mr. Rick Borotsik: Is that going to be the focus of the Canadian Wheat Board audit?

Mrs. Rose-Marie Ur: No more questions.

Mr. Rick Borotsik: Is that going to be the focus of the Canadian Wheat Board audit as well?

The Chair: Stay tuned. That's your final answer.

Mr. Rick Borotsik: Howard, you ask that question.

The Chair: They never ask questions on the Wheat Board, Rick.

Howard.

Mr. Howard Hilstrom: Mr. Chairman, the Progressive Conservative Party thinks the government is doing a fine job of management, but I'd have to take the opposite view.

Mr. Kennedy, what was the budgetary deficit that the Canadian Grain Commission ran? They ran a deficit one year, did they not?

Mr. Dennis Kennedy: Yes. We had a deficit of $11 million last year, and we're projecting about the same this year.

Mr. Howard Hilstrom: Okay. The reason we don't have much confidence in your ability to correct deficiencies in that, even though the Auditor General's report does, is that you're a creation of the federal government. You're managed by the federal government to a large extent.

In the overall management of the agriculture department under Lyle Vanclief, the minister, and your agencies, we see that the Canadian Grain Commission runs these deficits. You're saying it's two years in a row. The AIDA program has only paid out 26% of the money that was supposed to be paid out under it. The railways are inefficient and dysfunctional to a large extent. That's government regulated. We have the Canadian Wheat Board forcing farmers into selling grain through them when they could better profit otherwise. All this adds up to a big case of mismanagement, and that's why we have no confidence in your departments without any outside indicators of efficiencies, such as private competition or, in the case of beef grading, where in fact it can be done better.

What was the total fee the Canadian Grain Commission charged to user fees last year? I want a dollar price.

Mr. Dennis Kennedy: Last year we collected $36 million in user fees, which is about 20% lower than usual because of the grain volumes.

Mr. Howard Hilstrom: Okay.

The CFIA, how much did you collect?

Mr. Jean Chartier: Last year we collected $47 million, which is 15% of our overall—

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Mr. Howard Hilstrom: Okay.

What was the total that the agriculture department collected in user fees?

Mr. Andrew Graham: The department is around $27 million.

Mr. Howard Hilstrom: That's in addition to the CFIA and the Canadian Grain Commission?

Mr. Andrew Graham: Yes.

Mr. Howard Hilstrom: So pretty significant user fees are a cost to the agriculture industry, then, aren't they? They bear careful watching. We'll expect to watch more closely, maybe, how you perform on these audits.

I have one last question. This gets back to this whole concept of user fees, who's the user and who should actually be paying the cost. You're aware of the cattle tagging system that's coming up under the CFIA, the national ID system. That has to do with some food safety, general safety, or at least it's traced back to that if there's a problem.

While certainly the cattle rancher and farmer rely on being able to have a safe product that they're willing to sell, there are a lot of people up the chain who also rely on a safe beef animal from grass to the final consumer. How many user fees are being charged to the companies and the labour unions in the slaughter plants that also rely on this safe animal coming through their plants? How many user fees are charged at that level?

Mr. Jean Chartier: Unfortunately, I don't have those figures with me.

Mr. Howard Hilstrom: Are there user fees charged at that level on the national ID program, or is it all going to fall on the producer?

Mr. Jean Chartier: I understand from my colleague that we're probably charging something like $20 million all in all.

Mr. Howard Hilstrom: How much to the slaughter plant?

Mr. Jean Chartier: That's for the whole meat—

Mr. Howard Hilstrom: The slaughter plants are going to be paying towards this national ID program, are they?

Mr. Jean Chartier: I can't answer that question.

Mr. Howard Hilstrom: You can't answer that.

Mr. Jean Chartier: We'll get back to you on that, if you want.

Mr. Howard Hilstrom: Okay. Please get back to the whole committee, because user fees are a significant factor in all of this and they have the potential to go much higher. I think this is something that we as parliamentarians are going to have to pay a lot closer attention to in the future. There's a lot of resistance from producers to this cattle tagging program, and a big part of it is cost. We'd like you to look at that a little more closely.

Thank you, Mr. Chairman.

Mr. Jean Chartier: Can I just add one thing? This is more on the policy aspect. Obviously the whole tagging thing has a lot to do.... You were right when you were talking about health and safety, but there's also a marketability issue behind this. What that says is that the difference between the public and private benefit aspect of this is also shared. It's not 100% a safety issue. If the industry is willing—and I understand it is—to go further with this, obviously part of the cost will have to be borne.

Mr. Howard Hilstrom: The idea, Mr. Chairman, is that I would like to see how many of the hard costs that are applied to the national ID program, the hard user fee costs, are applied to the other levels that are also involved in that whole industry.

The Chair: Maybe we could get an undertaking to provide that information.

We have to go for a vote, so thank you very much. We appreciate your coming. We hope to see you again, Mr. Desautels. Thank you again.

This meeting is adjourned.