PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 21, 2000

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[English]

The Vice-Chair (Mr. John Richardson (Perth—Middlesex, Lib.)): Ladies and gentlemen, I see a quorum. We'll open our meeting.

It's a pleasure to see some of the faces before the committee again, particularly that of the Assistant Auditor General, Madam Barrados.

I would ask you if you or the members of your team would like to say a few words. When I come to Dr. Shipley, I'll offer the same to him. Thank you very much.

If you wouldn't mind, then, Dr. Shipley, we'll start with the Auditor General's team and then we'll come to Treasury Board.

We'll ask you if you would like to introduce your members and we'll get on with the orders of the day. Thank you.

Ms. Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada): Thank you, Mr. Chairman. I have with me Mr. Henno Moenting and Mr. John Mayne.

Thank you for this opportunity to make some brief opening comments that follow from our last meeting on February 24.

In chapter 23, “Involving Others in Governing: Accountability at Risk”, we point to the need for an effective governing framework for new governance arrangements. We note that where traditional and legislated governance frameworks are not in place, the government needs to take extra care to ensure that Parliament can maintain its role of scrutinizing federal expenditures and examining the extent to which federal public policy purposes are achieved.

In its recent budget, the government announced increased funding for such existing alternative delivery arrangements as the Canada Foundation for Innovation, the Climate Change Action Fund, and the Great Lakes Action Plan. It also announced funding for new delegated arrangements like Genome Canada and the Green Municipal Investment Fund.

In view of these developments, Mr. Chairman, your committee may wish to further discuss the important issues raised in chapter 23. It may also wish to ask that the government take this opportunity to strengthen existing governance frameworks and ensure that there are frameworks in place for new arrangements that take into account the essential elements we set out in chapter 23.

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The budget also announced that $2.65 billion would be allocated to a new infrastructure program over the next six years. We believe that in implementing this new collaborative arrangement, the government should take into account our specific findings and recommendations on the temporary Canada Infrastructure Works Program, reported last year in chapter 17.

[Translation]

As we noted in that chapter, this is a very popular program with a number of strengths. Among other things, it succeeded in mobilizing and coordinating the efforts and resources of three levels of government and their partners to implement more than 17,000 infrastructure projects across Canada. Nevertheless, Mr. Chairman, we believe it would be wrong to conclude that there were no problems in the management of the program.

In Chapter 23, we indicate that a key element of an effective governing framework for collaborative arrangements is a clearly defined and appropriate audit regime. In our 1996 audit of the Canada Works Infrastructure Program we identified shortcomings in the audit regime. In 1999, Chapter 17 again reported that too few compliance audits of projects had been completed in a timely manner.

There are also financial management problems associated with the program. Our audits in 1996 and 1999, the audits undertaken by some provincial auditors general, and the limited number of compliance audits done by departments and agencies implementing the program have identified several instances of financial mismanagement and inadequate control. Shortcomings range from a widespread lack of evidence in project files to support project approvals to problems in controls over payments—including lack of invoices or other proofs of payment, double payments, payments of ineligible costs and lack of controls over holdbacks.

[English]

Extra care is needed in this type of arrangement to ensure that Parliament has the information it needs, both to scrutinize expenditures and to assess the results achieved. Mr. Chairman, your committee may wish to inquire about the information the government will provide to Parliament about the new program.

Thank you, Mr. Chairman.

The Vice-Chair (Mr. John Richardson): Thank you, Ms. Barrados.

Mr. Shipley will now have an opportunity to introduce his team from the Treasury Board.

Dr. E.L. Shipley (Program Director, Infrastructure Works Canada, Secretariat of the Treasury Board of Canada): Thank you, Mr. Chairman.

I have with me today Michael Rutherford from the national office for infrastructure at the board.

Mr. Toby Fyfe (Director, Alternative Service Delivery, Service and Innovation, Secretariat of the Treasury Board of Canada): My name is Toby Fyfe. I'm with the alternative service delivery division at the Treasury Board, with Tom Fitzpatrick.

The Vice-Chair (Mr. John Richardson): Thank you. It's nice to meet you.

Do you have any comments at all that you would like to make, Dr. Shipley?

Dr. E.L. Shipley: No, we have none at this time, thank you.

The Vice-Chair (Mr. John Richardson): Thank you.

In our tradition of questioning, there will be an eight-minute round, led by Mr. Mayfield of the Reform Party.

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

Thank you very much to the members of the Auditor General's office and of the Treasury Board for being here today to discuss these two reports.

In 1996 the government published an evaluation of the infrastructure program, and then the program was extended into a second phase. Is the Treasury Board conducting an evaluation of the second phase of this program? Will it conduct an evaluation of the entire program? Will the secretary provide this committee with the results of these evaluations?

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I'm a little concerned, I guess, about some of the discrepancies that show up in the numbers that come up from Treasury Board and from the numbers cited by the Auditor General. For example, short-term job creation comes out of Treasury Board at 98%. The numbers that are produced by the Auditor General come out at 3%. There are enormous discrepancies there. I'm wondering how you can justify that and whether these numbers will be clarified in your report if you do produce it.

Dr. E.L. Shipley: With respect to the first part of your question dealing with evaluations, as you noted, an evaluation was carried out towards the end of phase I of the Canada Infrastructure Works Program by Professor Silverman of the University of Toronto. I think that evaluation was generally considered to be a good one and one that was very helpful to all concerned.

Phase II, on the other hand, was put in place with quite short notice and lasted for a shorter period of time and indeed involved considerably less money than phase I. There was no decision to evaluate phase II per se. However, as phase II resembled in many respects phase I of the program, which, as I said, accounted for the bulk of the money, I think the lessons that came out of the principal evaluation can very easily be carried over to phase II.

With respect to the new program, that is only now being designed. Details of the program design are not really known at this time, let alone approved by the government. Having said that, I think the worth of evaluations is well-known and recognized and it would certainly be a wise idea to build in the requirement for evaluations along the way of what will be a five-year program.

Mr. Philip Mayfield: The numbers coming out are that 130,000 jobs were produced out of this. I would very much like to know what the real numbers are. HRDC, in defending itself, has said it only cost them about $53,500 per job, and they quoted $74,000 per job for the Infrastructure Works Program. With the discrepancy in these costs and the fact that we're not even sure how many jobs were created, we're now talking about...

I think Mrs. Barrados mentioned in her statement that we're going to be continuing on with this infrastructure program. Does it not seem like a good idea to nail down the numbers, preferably today with the committee, as closely as you can and then talk about how the benefit of this analysis will go on, not only an analysis from phase II but on into the next phase?

Dr. E.L. Shipley: With respect to the first infrastructure program, or the Canada Infrastructure Works Program, as you have mentioned, the estimate of jobs created is 130,000. It is also true that the creation of jobs was one of the objectives the government announced at the time of its decision to proceed with the Canada Infrastructure Works Program.

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There were a couple of mechanisms tried to accurately estimate the number of jobs created, as you have suggested. The first mechanism, quite frankly, didn't work very well. It depended on the project applicants estimating the number of jobs that would flow from a particular project if it were approved.

The estimate of jobs created is actually a fairly sophisticated portion of economic science. What the Canada Infrastructure Works Program used in its jobs estimation methodology was a model that Statistics Canada developed specifically for this purpose and—

Mr. Philip Mayfield: Sir, I don't... It's not your problem. It's my problem with the chairman. I only have a limited amount of time and I want to get on with my questioning. I don't have time to go through the whole analysis.

I would like to turn to the Auditor General's people. Mrs. Barrados, from your point of view, from the point of view of the Auditor General's office, can you talk about the number of jobs that can be substantiated?

Ms. Maria Barrados: As we said in the audit report, we feel that it's very important that Treasury Board be very clear about the basis it uses for its estimate on the number of jobs.

What is key in a program like this is whether we're talking about jobs created through the expenditure or whether we're talking about new jobs that are created as a result of the expenditure. The difficulty we have comes from any inference about new jobs. That has to do with any effort that's in the program design, how the program makes decisions on what projects are going to be funded, and on the monitoring and then the reporting. We have to be very clear whether we're talking about new jobs that result from this money. This is where there isn't sufficient clarity.

Mr. Philip Mayfield: Are you able to comment specifically on the number of jobs in relation to what has been quoted?

Ms. Maria Barrados: In the audit we did in 1996, we did actually make an effort to try to estimate. We felt the estimate was too high.

Mr. Philip Mayfield: Too high. How high would the estimate be, thinking of new jobs, putting people to work who didn't have jobs?

Ms. Maria Barrados: We felt that only about 60% to 70% of the jobs were actually new jobs. So about one-third of them were not new jobs.

The Vice-Chair (Mr. John Richardson): Mr. Mayfield, you're down to 20 seconds on your time, if there's something special you want to put on the floor here.

Mr. Philip Mayfield: That's the problem, sir. Thank you very much.

Ms. Beth Phinney (Hamilton Mountain, Lib.): You used up the 30 seconds.

The Vice-Chair (Mr. John Richardson): I'm sorry about that. I'll try to give everyone at least a minute.

Mr. Philip Mayfield: I'm sure you will, sir.

The Vice-Chair (Mr. John Richardson): The next speaker is Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): I'd like to give my eight minutes to Mr. Mayfield. No. No.

[English]

Mr. Philip Mayfield: You can have 8 minutes and 20 seconds, okay?

[Translation]

Mr. Benoît Sauvageau: Lady and gentlemen, good afternoon and welcome. My first question is for the people from Treasury Board. In paragraph 8 of Ms. Barrados' statement, we see:

There are also financial management problems associated with the program. Our audits in 1996 and 1999, the audits undertaken by some provincial auditors general, and the limited number of compliance audits done by the departments and agencies implementing the program have identified several instances of financial mismanagement and inadequate control. Shortcomings range from a widespread lack of evidence in project files to support project approvals to problems in control over payments—including lack of invoices or proofs of payment, double payments, payments of ineligible costs and lack of controls over holdbacks.

Could you tell us if the frauds identified in the infrastructure program... I'm sorry, we're not talking about fraud. It's a Freudian slip. I withdraw the expression. But there are several anomalies. It states: "identified several instances of financial mismanagement and inadequate control." Could you tell us if this means 20% of the projects or 50%? Are we talking about five projects? What do you mean by "several instances"?

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Could you tell us if, during the coming negotiations for the new infrastructure program, you intend to take steps so that we will see no further paragraphs like that one? I'd like to hear your comments on paragraph 8 in general as it is perceived by the people from the Auditor General's office.

Mr. E.L. Shipley: As you know, the Canada Works Infrastructure Program was managed by three levels of government; in other words, everyone had certain responsibilities, for example the responsibility of maintaining files. It is true that for some regular projects that there was less documentation contained in the files than for a special project. For example, if it had to do with road repairs, that wasn't something special. However, if you look at the cases where the funds were mismanaged, you find nothing, because finally, all the payments were made. Perhaps there was an overpayment here or an underpayment there every now and then, but there are many mechanisms, between governments, to recover overpayments or adjust payments as needed.

Mr. Benoît Sauvageau: I'm sorry to interrupt you, but if you don't mind, I'll now put my question to the lady. Could you give us one or two examples of financial mismanagement or inadequate control, just to give us a sense of the order of magnitude we are talking about?

[English]

Ms. Maria Barrados: I can refer you specifically to paragraph 26.83 in our 1996 infrastructure chapter where we say:

...in some cases costs of salaries were claimed and paid although they had not been clearly identified as project costs in the approved application. These cases amounted for roughly 10 percent of our sample in two provinces.

There are some other examples. We go on in paragraph 26.88:

...in five municipalities sampled, audits conducted by a provincial internal audit group found payments by federal and provincial governments totalling approximately $1.6 million each, mostly related to holdbacks that had been claimed by the municipalities concerned, but not yet paid by the contractor.

In other words, this is an unallowable amount.

A further audit identified a similar situation in another province. In that case, the amount involved was approximately $785,000.

[Translation]

Mr. Benoît Sauvageau: Agreed. We've heard it in the budget and Treasury Board is also saying it, we're in a negotiation period for the third stage of the new infrastructure program. First of all, have the negotiations begun? That's my first question for the people from Treasury Board.

As for the Auditor General, as this is a tripartite program, are there link-ups with the provincial auditors general? Are the provinces also doing the follow-up of the audit in certain files? My question is for you first. After that, I'd like to hear the answer about the negotiations.

Ms. Maria Barrados: You mean me?

Mr. Benoît Sauvageau: Yes.

[English]

Ms. Maria Barrados: In the case of the provincial audit offices, there have been different types of experiences here. In some instances, provincial auditors general did audits of this program, and that was the case for Quebec, Prince Edward Island, and Nova Scotia. In this last audit we did in 1999, we did audit work jointly with the provincial auditors in Saskatchewan and Nova Scotia. In those cases we did the work together but we reported separately to our respective legislatures.

[Translation]

Mr. Benoît Sauvageau: Thank you. Could you tell me what stage the negotiations are at?

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Mr. E.L. Shipley: Yes, with pleasure. First, I would point out that the situations we've addressed here were subject to payment adjustments; in other words, there were no losses. My colleague also mentioned the audit—13 in total—where we found no indication of any financial mismanagement.

As for the negotiations for the new program, we haven't started them yet, because as I mentioned before, at this stage, the program has to be identified first and then get our minister's and Cabinet's approval.

Mr. Benoît Sauvageau: Thank you very much.

[English]

The Vice-Chair (Mr. John Richardson): I now call on the government side.

Madam Jennings.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you very much for your presentations.

Ms. Barrados, Chapter 23 drew my attention more particularly. Actually, for some time, we've been trying to find ways to offer government services and products more efficaciently and economically.

I was very concerned, not to say upset, by the comments made by the Auditor General's office on the occasion of the audit of the different ways of delivering alternative services that already exist, the management of those ways and shortcomings identified.

I have this question because we've heard a lot, here, at the Public Accounts Committee, about the new financial information system that is to be implemented as of 1 April, 2001. I'm very interested in this system because I think it could provide us—and when I say "us", I mean the government, the ministers, the deputy ministers and the senior officials of all the government departments and agencies—the tools that would allow us to make decisions.

For such services, as a government, would we be better off developing an alternative service delivery mode, in other words giving it to someone else, in whole or in part, or would we be best to continue delivering the services and products ourselves?

I wonder if the Auditor General is of the opinion that this might be a rather powerful tool to allow parliamentarians to decide if, in effect, that is the most effective and economical way of attaining the objectives while respecting the principles of accountability, transparency and protection of the public interest in a case, for example, like that of the Canadian Foundation for Innovation or any other foundation. Would we be better off to continue offering the service or the program ourselves? That's my first question.

Mr. Fadden and Mr. Fyfe, if you have any comments on this matter I'd be happy to hear them.

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[English]

Ms. Maria Barrados: With respect to the implementation of FIS, my office has made several presentations on that before this committee. We are very strongly supportive of that. We believe it will be a very clear improvement in terms of the information that is available to managers in terms of the financial information, and when other performance information gets integrated into that it will provide a better set of tools for managers to make a number of management kinds of decisions.

So, yes, it will help in terms of determining whether a particular service or a particular program is being delivered efficiently and effectively. It will also help in providing a baseline.

But where there are limits in what FIS can do in terms of the new governance arrangements is that many of these arrangements in fact move things outside of the government system. Once you have something outside the government system, it will not necessarily be part of FIS; in fact, it most likely will not be.

In the case of delegated arrangements, it is completely independent. It will have its own financial systems, it will have its own statements, and it will have its own regimes. In the case of collaborative arrangements, there will only be a part that will be part of the federal government system because many of these are with other levels of government or with other types of partners and they would not necessarily be part of the government system in total. But a part of the expenditures would be part of the government system.

[Translation]

Ms. Marlene Jennings: That is why it is important to properly establish a framework for all these alternative delivery modes because if, in effect, they are totally outside of the government system, then as parliamentarians—and I think that all Canadians would agree with this—we would like to have the assurance that these methods are trustworthy and transparent and that the public interest is the source wherefrom flow all decisions made.

Don't you think there should still be a system to account to parliamentarians or the government when you use an alternative delivery mode? If I understand, at this time there is no such framework, or it is being worked on.

[English]

Ms. Maria Barrados: The government made a decision that when these new arrangements were going to be established, they would put in the accountability frameworks surrounding those arrangements on a case-by-case basis. The result of this is that you have a variety of things that are in place.

What we are saying in the chapter—and I believe Treasury Board has agreed with us on this—is that it is important to lay out a framework that identifies the elements that are important points of discussion whenever these things are set up.

Having said that, we recognize that you can't have everything fit the same template because there are going to be different circumstances where things will look different. But it is extremely important, given the large amounts of money that are flowing this way and the amounts of authorities that are now moving out, that those questions are always asked and are always dealt with. Otherwise we'll be in a situation where they will be outside of the reach of Parliament and there will not be the ability to scrutinize and raise the questions.

[Translation]

Ms. Marlene Jennings: Thank you.

Mr. Toby Fyfe: At the present time, we are trying to improve service delivery modes. The first version goes back to 1985 and now, thanks to our partners' help, in other words the departments and other Treasury Board policy services as well as the Auditor General's office, we are evaluating the present modes to answer the questions raised by Ms. Barrados.

It is important to know that there are many dimensions to service delivery: effectiveness of the service delivery and the matter of finances.

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We hope that this new framework will give the managers and ministers the necessary tools to make the decisions concerning the proposals that will be made to them in order to diversify the service delivery methods, whatever they may be.

Ms. Marlene Jennings: I have a little question, Mr. Chairman. In paragraph 23.50, it says that your service is actually setting up a framework. In that paragraph it says this should be ready in early 2000. Do you have a target date?

Mr. Toby Fyfe: We intend to propose this new framework to the Minister before summer, but the decision, of course, isn't ours alone. This will be a Treasury Board decision.

Ms. Marlene Jennings: So you're running a little late.

[English]

The Vice-Chair (Mr. John Richardson): We're getting into double overtime here. I'll have to call it and go to the next round, with Mr. Mayfield leading off with a four-minute round.

Mr. Philip Mayfield: Thank you very much. I too would like to turn to chapter 23. As I was reading this chapter, I got the impression that Treasury Board wasn't very interested in this. Do you have much interest in this alternate delivery arrangement?

Mr. Toby Fyfe: Do I personally?

Mr. Philip Mayfield: Hopefully it goes a little bit beyond that, and you could answer for the department.

Mr. Toby Fyfe: I can say both personally and professionally I have an interest. We thought the report of chapter 23 was in a sense very helpful to us because it did indicate that there were some areas where maybe some more work had to be done. I mentioned—

Mr. Philip Mayfield: Yes. It's fairly fundamental work, like even a list of the alternate service delivery arrangements. That would have seemed fundamental, and when that was not available I wonder if you were even interested in keeping track of what was going on. This is a fairly important initiative, and I appreciate the comments Mrs. Barrados has made about this.

Mr. Toby Fyfe: We certainly appreciate them too, and in fact we also appreciated the Auditor General himself at our last visit when he said he gave us credit for moving forward on this new framework. Part of the new framework will include a database and a practice guide that will allow us to get a sense of best practices out there, and to build more and more on the best practices out there so that we can learn from them. The database itself will grow, obviously, as these arrangements continue to be developed. The process we're going through right now in terms of developing this framework is to work with departments, the Auditor General, and others to ensure that we can come up with a framework that is based on shared values and principles but that will also provide tools such as the database and practice guide I mentioned, which will help both officials and ministers make decisions regarding the kinds of alternate service delivery arrangements they'd like to set up.

Mr. Philip Mayfield: So there is a core of expertise being developed that was not obvious to the Auditor General's people when they were looking at this. Could you say that?

Mr. Toby Fyfe: You could say that we are hoping to enhance our core of expertise, and certainly we are building on a lot of the work done by the other sectors of the Treasury Board's modern comptrollership branch and so on to ensure that we do have the capacity to provide good advice to the government.

Mr. Philip Mayfield: I think some of the comments Ms. Jennings made are appropriate too, particularly concerning transparency and accountability. The Auditor General made comments about accountability to Parliament, or should I say a lack of accountability, being built into this too. I'm wondering what steps you've taken to improve that type of accountability, specifically to Parliament.

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Mr. Toby Fyfe: The framework itself will have many elements. It will include advice on everything from collaboration to results, accountabilities, and so on, to provide guidance to managers.

We're basically going to argue that in setting up an accountability framework, there are really three dimensions to it. The first is based on results. That means the organizations must have a sense of the results they want to achieve. If they are shared arrangements, they must have an agreed-upon sense of the direction they want to go in, an agreed-upon sense of roles and responsibilities.

The second dimension of the accountability framework is based upon performance measurement. It will suggest that organizations will want to ensure that they have short-, medium-, and long-term performance plans based on objectives and so on, plus—

The Vice-Chair (Mr. John Richardson): Time flies, tempus fugit. Over to Mr. Harb, please, for four minutes.

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

Madam Barrados, is it your opinion that the infrastructure program is a good program and a good tool to create jobs in the communities across Canada?

Ms. Maria Barrados: I'm not sure it's my position to make a judgment about the goodness or the badness of a program. We clearly recognize that this is a very popular program; many people like this program. There were some really good things about this program, in terms of how it was designed and that it used different levels of government and different levels of expertise. It's also noteworthy that this program moved quickly, got into place quickly, and had things happening quickly.

Whether this is good or bad is not my decision. Given that this is what the government set out to do, they succeeded in those things. So those are positive things because that is what was set out. What we question, though, is that in the management of this, further attention should be paid to some things. In the area of job creation, if that's one of your objectives, it's important that you clearly measure and report against that. If it's not one of your objectives, we wouldn't raise it.

Mr. Mac Harb: Of course, it's within your jurisdiction to look for value for money spent. In your view, after you have looked at the program, is there enough value for the money the government has spent?

Ms. Maria Barrados: The only way we make the judgments on value—and I'm not trying to be cute here—is against the objectives that are being set. If the primary objective was to get money out and build roads and buildings, that was done successfully. There was a lot of activity in a lot of different places.

The objectives, though, were more far-reaching than that. There was a list of other things the program was trying to accomplish. There was an objective to create jobs, and new jobs were created. There's no question that when we looked at that in detail, there were new jobs created. We said that when we looked at the details of how those numbers were generated, the number of new jobs wasn't as high as was reported, but there definitely were jobs created.

So in those terms, those were things the program set out to do and clearly accomplished.

Mr. Mac Harb: You said only 60% to 70% were new jobs.

Ms. Maria Barrados: Right.

Mr. Mac Harb: Okay. Does that mean the other 30% were old jobs? What do you mean by new jobs? The objective of the infrastructure program, I thought, was to get the economy back on the road and support the two levels of government—municipal as well as provincial. They would put in one-third each, while the federal government would put in one-third. The idea was for those levels of government to come together and embark on in excess of about 17,000 projects across the country, to get the economy back on track and moving.

What do you mean when you say only 60% to 70% are new jobs?

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Ms. Maria Barrados: It becomes a technical argument, and I'll give it a try.

You have other infrastructure-type projects going on that are funded municipally and provincially. The desire was to have those continue and have additional infrastructure expenditure. So you kept the base that was in place, and the federal government money was there to encourage more spending than you had in the base.

What we raised in the audit was there wasn't sufficient care taken to make sure those projects were beyond what was in the base, and what you had wasn't substitution. Money was flowing that was basically funding projects that were already on the books. That's where you get jobs, but you don't necessarily get new jobs.

The Vice-Chair (Mr. John Richardson): Right on time. Thank you very much.

Mr. Sauvageau, for a four-minute round.

[Translation]

Mr. Benoît Sauvageau: Ms. Barrados, would it be possible—maybe this already exists and I don't know about it—to get a list of the foundations and organizations that are not accountable, as mentioned in Chapter 23?

For example, do we know that there are 16 organizations and 17 foundations that are not accountable? Is there a list to that effect that could be given to the committee?

[English]

Ms. Maria Barrados: In the audit, we had much more detail. We actually developed a grid of all the projects—all the specific new arrangements we looked at—and identified areas where there were shortcomings. If the committee wishes, I could provide that.

[Translation]

Mr. Benoît Sauvageau: Could you tell us—maybe you've said this before and I didn't hear you—if the Auditor General's Office, in using this list, is suggesting a way for these organizations that are not accountable today to be accountable in some other way? Do you have a framework?

[English]

Ms. Maria Barrados: In the chapter, we tried to do that. We also raised in the chapter, however, that you have a situation now where you have arrangements in place, and some of those are not easy to open up or change. So when the opportunity presents itself, such as new money being put into something, that provides an opportunity to make changes and ask for the reports to be provided.

That was the point of what we were trying to do—outline that framework. We weren't specific, in terms of saying what should be done in specific cases.

[Translation]

Mr. Benoît Sauvageau: Now, if you don't mind, I have a question on something totally different. I'd like to take the opportunity of your being here today to put it.

Today, in the House, there is a debate on the management of HRDC. If I'm not allowed to put this question, please tell me and I'll withdraw it. The Liberals often tell us, about HRDC and more particularly about the Canada Job Creation Fund, that the Auditor General's Office can, and it is doing so presently, audit this program. First of all, can you do so? And if I have to make a request for that, I'm making it formally. Second, are you presently examining the whole matter of the Canada Job Creation Fund?

[English]

Ms. Maria Barrados: Yes, Mr. Chairman, we are doing an audit of grants and contributions in HRDC. As part of that audit, we are going to be appearing before the standing committee on Thursday to talk about the details of our audit work. It is planned for reporting in October, and we are going to be looking at the corrective actions the department is taking for the entire grants and contributions programs that were in the original audit. We will also be looking specifically at some of the programs, including the Job Transitions Fund.

[Translation]

Mr. Benoît Sauvageau: Thank you. I have no further questions.

[English]

The Vice-Chair (Mr. John Richardson): Mr. Mahoney, four minutes.

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

The issue around the audit of this whole infrastructure program concerns me. First of all, you referred to compliance audits in chapter 17. Who would actually perform those?

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Ms. Maria Barrados: For us, it is not so important who performs them but that they be performed.

Mr. Steve Mahoney: But is it by the municipality, for example? Are we talking about bringing in private auditors who would examine how the municipality has held up their end of the project?

Ms. Maria Barrados: There is a joint management committee that has the responsibility for determining that an internal audit be carried out and—

Mr. Steve Mahoney: Involving who? The provincial and federal...

Ms. Maria Barrados: Federal and provincial. In some cases, the municipalities sit on this, but not in all cases.

Mr. Steve Mahoney: Where I'm going with this... We announce a program that is tripartite, which the provinces and municipalities are getting involved in, and my sense of it—at the time I happened to be in the provincial legislature—was that we were pretty much allowing the municipalities to make the decisions on which projects they wanted to go with. Although I see you say there is an approval mechanism between the province and the feds on it, it struck me that there really wasn't a process to reject or not reject a proposal that was submitted by a municipality. There are a number of examples that were approved to be built where it would probably be a stretch to call them infrastructure in terms of what the project was designed for. It's sort of a double-edged sword. If we're going to allow the municipalities to make these decisions—and in the “son of infrastructure” presumably we're going to do the same thing—are we then going to come back later and micromanage in hindsight through the audit process to say that it wasn't done properly or that we didn't hold up our end of it?

Ms. Maria Barrados: We very much don't want to move to that, so that is not our intention. We did make the observation that it's very important to be more clear as to what we mean by infrastructure, and this is all three parties. They all have to agree and say this is in and this is out.

Mr. Steve Mahoney: You're talking about for the new announced project. I believe the phrase in the budget was that we'll negotiate with our partners, or something to that effect. That's fine as it relates to the new one. Hopefully, there will be an agreement. I know that in some instances the provinces are saying they don't want the municipalities to have anything to say about what projects get approved. That's happening in Ontario right now. The province is saying they want to be the ones to determine it, because they don't like some of the decisions that were made last time. So in the future there's going to be some kind of an agreement.

I'm looking at something that in essence, to me anyway, is hindsight. It's not necessarily to you, because you go in and do an audit. I'm just concerned about the potential for micromanagement from the federal level and whether we're really going to filter these moneys down to the community level and create the jobs and build the projects that need to be built.

Ms. Maria Barrados: We make the observation that the definition isn't clear and who's to do what isn't clear, and we would expect that in the agreement.

We are not in any way suggesting that it must be the federal government. Sometimes some of our comments have been taken that way. We really are trying to be careful about that, because we don't want it to be taken that way. But what is important is that there is a system that does check to see that payments are properly made and that the right things get done. Now, if the municipal government takes the lead and everyone agrees to that, that's fine. I know that in looking at all the provinces, it was very variable in terms of how it was run.

Mr. Steve Mahoney: Do I have time for one more question?

The Vice-Chair (Mr. John Richardson): Your time is up, I'm afraid.

Mr. Steve Mahoney: You have no sense of humour today, do you?

The Vice-Chair (Mr. John Richardson): No.

Mr. Philip Mayfield: Don't complain. It's a lot better than the treatment I got last time.

Mr. Steve Mahoney: Who was in the chair then?

Some hon. members: Oh, oh!

The Vice-Chair (Mr. John Richardson): I'd like to call on Ms. Phinney. Ms. Phinney, you have the floor for four minutes.

Ms. Beth Phinney: I'd like to agree with the deputy auditor general that this was a very popular program. From the point of view of most municipalities, I think it would be considered a very successful program, particularly because it's something that's very close to the constituents. Certainly in the Hamilton area we allowed them to make the decisions. There were very few municipalities that could come up with the money for these projects. Maybe they could have in a few years, or maybe never. It was a very successful program, and I'd like to congratulate you on running this program through the three levels of government and all the problems that were involved.

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The problems in our area were not with the projects that were chosen, but there was maybe some reluctance on some level of government to allow all three levels of government to share the credit. The provincial government didn't always want all of us to share the credit for this.

I have a couple of questions for Mr. Fadden. You were talking about working on the framework for the new projects coming up. Could you tell us when that will be ready, and will we be sure not to start the new projects until that is ready?

The other question I have is about the private sector, which you've mentioned a couple of times. I was not aware that there was very much private sector involvement in the first project. Are you planning on having more private sector involvement in the second level, or the “son of”, as we're calling it?

Ms. Marlene Jennings: Or “daughter of”.

Ms. Beth Phinney: Yes.

Mr. Mac Harb: Or the mother of all programs.

Ms. Beth Phinney: We got a smile out of Mr. Fadden anyway. Why is your name inside out, Mr. Fadden?

Dr. E.L. Shipley: I'm sorry. I'm Eric Shipley. Mr. Fadden wasn't able to come today.

Ms. Beth Phinney: Oh, it's Mr. Shipley. Excuse me. They should have written your name here. I'm very sorry.

Dr. E.L. Shipley: Why don't we call new programs “mother-in-law of”?

Mr. Mac Harb: Or the mother of all programs.

Mr. Steve Mahoney: We want to be happy about them.

Ms. Beth Phinney: Why don't we just find a name for it that's neutral?

Dr. E.L. Shipley: To respond to your questions, first of all, in your introduction you referred to the fact that some infrastructure projects, which are really capital work projects at the local level, were on lists, and we all know that every municipality has a long list of capital projects they'd like to do. In fact, some of those projects happen, whereas they never would have happened. Others got accelerated into the here and now, whereas before the program came along they had been in the “maybe” category.

That goes directly to the discussion, I would suggest, about job creation. I think both the Auditor General and ourselves agree that measurement of job creation is a difficult matter, because you have to make some judgments about what would have happened in the absence of the program and so on.

But to come to your particular questions, the target set, both in the Speech from the Throne and the recent budget for the negotiations with the provinces and territories, to be completed is the end of this calendar year.

As I mentioned in response to an earlier question, the negotiations have not started for the reasons I cited then, but we certainly have our timetable, and of course the provincial and territorial governments have their timetable. Like everything else in the first infrastructure program and now in the new program that is being designed, it is a partnership, and obviously you arrive at an agreement when all partners are satisfied that it's to their advantage to enter into that agreement.

You asked about the role of the private sector. The role of the private sector was really very limited in the Canada Infrastructure Works Program. It was most prevalent in phase II of that program, but even there we were talking about 2% of the federal contributions that were directed to projects that involved private sector—

Ms. Beth Phinney: Excuse me, Mr. Chair. Could I have the consent of everybody to at least have the rest of the answer?

The Vice-Chair (Mr. John Richardson): If you have the consent, you have the floor.

Some hon. members: Agreed.

Ms. Beth Phinney: Thank you.

Dr. E.L. Shipley: It's very short. The government has also indicated in those two pronouncements that they want a larger role for the private sector in the new program. The requirement for new infrastructure and for the renewal and updating of existing infrastructure is very great, and the capital required will be similarly great.

Ms. Beth Phinney: Thank you.

The Vice-Chair (Mr. John Richardson): We'll now go to Mr. Mayfield. You have four minutes, Mr. Mayfield.

Mr. Philip Mayfield: Thank you very much. I have just a couple of short questions. Earlier you were talking about setting up a database. I think out of the audit we learned that you plan to develop a guide on management for the new governance arrangements. Has that been completed? I think there was some suggestion that it was going to be done by early 2000. Have you reached completion of that?

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Mr. Toby Fyfe: Well, I think as I said earlier in response to another question, it is our hope that we will be able to bring the revised framework, of which those are some components, before Treasury Board by the summer.

Mr. Philip Mayfield: But that's not completed yet...

Mr. Toby Fyfe: In essence, there has been slippage. In terms of the practice guide and database, we do have a bigger version that has a lot of the information in it. One of the interesting dimensions to this for us, of course, will be the need to keep it ever green and growing. One can always build databases; where they're useful is when you can continue to add to them and learn from other experiences in order to get good practices.

Mr. Philip Mayfield: In going from one arrangement to another... it seems there's been some of the reinventing the wheel as we go from one project to another. I'm wondering why there hasn't been a consistent approach to establishing governing frameworks as you go from perhaps the experience of one project to a new project. Is there work taking place in this now? Have you reached some expertise so that you're not starting from the beginning at each new project?

Mr. Toby Fyfe: The original framework that was set up in 1995 for ASD certainly gave us some guidance in terms of organizational form and in terms of ways in which we might proceed in the development of these new arrangements. Certainly with the new framework we're moving towards building on lessons learned, which we are starting to acquire over a period of time. We're looking to an approach where, really, we're working with all parties, as I said earlier, to make sure we have the right values and principles in place as well as the tools that will help managers and ministers make decisions on the right kinds of ASD arrangements to set up.

Mr. Philip Mayfield: We were talking about transparency and accountability before, and I put the emphasis on accountability at that time. But with transparency, it seems there may be some difficulty in working out arrangements, like confidentiality, business arrangements, and this kind of stuff. What kind of progress have you made in working out some of the wrinkles in these difficulties so that there can be more transparency, as the Auditor General has called for?

Mr. Toby Fyfe: I think it's a very good point you make, because really what it underscores is that so many of these arrangements are so different and involve so many different players, such as, in some cases, other governments, and in some cases, perhaps the private sector. It's very difficult for us to come up with—and in fact, as Ms. Barrados said, it would not really be appropriate to try—a single, one-size-fits-all template.

Again, as I was saying earlier, we think that if we can come up with the appropriate sorts of values and principles against which individual organizations can determine the appropriate mechanisms they will have to put in place in order to ensure not only proper accountability but also transparency in reporting and so on, we'll achieve our objective and, frankly, be on board with the Auditor General that way.

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

The Vice-Chair (Mr. John Richardson): That is right on four minutes, and I call on Ms. Jennings for the last question.

Ms. Marlene Jennings: My question is to the officials of the Treasury Board. I was reading the Treasury Board Secretariat's overall response to the Auditor General's report on the infrastructure program. I'm a little concerned that you say:

...the auditors have approached their review as if Canada Infrastructure Works was a standard federal contribution program requiring the traditional amount and type of supervision above and beyond meeting the legal requirements. This fails to recognize that each of the three orders of government involved had investments at stake and were competent...

When I read the Auditor General's report—and I read it when it came out in November—I found that it was really good. The reason I found it was really good was that it in fact, I thought, clearly showed that this was a successful project, that there were ways to actually improve it so that we would get an even bigger bang for our buck if we ever undertook a third phase, which we are now going to do.

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So when I look at, for instance, exhibit 17.6, which is on page 17-20, and I look at the audit that was done by a number of provinces on the payment of claims and on the compliance audit of phase II, I say, geez, the way Ontario went at it, they seem to have provided assurance to the federal government on cost eligibility. Why not try to incorporate that for all of the provinces in the third phase?

Then I look at verification of invoices and I see that, gee, Quebec and Nova Scotia verified invoices on all of the projects. So if they can do that, why can't the other provinces? That provides the accountability.

I look at the compliance audit of phase II and I see in Quebec it's ongoing, it's completed prior to the final payment for selected projects, and that provides the information. So gee, why not try to incorporate that and get the other provinces to agree?

It would seem some provinces in certain areas developed what I would call best practices, so why not try to use that experience and generalize it with all of the provinces so that you do get a bigger bang for your buck?

Dr. E.L. Shipley: Certainly we intend in the design and development of the new program to take advantage of the two audits and of the follow-up audit the Auditor General did, and we are paying close attention to the recommendations that resulted. As you have pointed out, there are a number of good practices that we should strive to emulate across the country.

Having said that, though, I would remind members of the committee that the real legal instruments that will make the program a reality will be some thirteen federal-provincial or federal-territorial agreements. Obviously both parties to that agreement, and with local governments in some cases present or at least influencing in each case, have to be satisfied with that agreement.

I know you're not suggesting this, but to remind us all, one size does not fit all in this country from coast to coast to coast. So obviously some variations have to be made to adjust to those.

With respect to some of the management responses in the chapter, part of what was stimulating that was the view that this program was pioneering a new way of delivering government services. We got three orders of government to work together.

Ms. Marlene Jennings: That's a major achievement.

Dr. E.L. Shipley: There are some 3,000 municipalities across this country, there are now thirteen provinces and territories, and one federal government, although we know there are many departments warring in the bosom of one government. We built 17,000 projects. The federal administration costs were less than 1% of the contributions delivered. And there was no financial mismanagement.

Ms. Marlene Jennings: That's fantastic.

Dr. E.L. Shipley: Our view was that chapter 17, whilst incorporating positive suggestions and indeed something that verged on praise, was overall too negative.

Mr. Steve Mahoney: I wonder why they don't ask questions about that in Question Period.

The Vice-Chair (Mr. John Richardson): Thank you very much for standing and responding, and I'd like to thank all the members who—

[Translation]

Mr. Benoît Sauvageau: I think Ms. Barrados wanted to say something.

[English]

The Vice-Chair (Mr. John Richardson): Yes, I'm going to ask Madam Barrados to sum up, please.

Ms. Maria Barrados: I would like to add to the comments that were just made about the infrastructure program. This is a good example of a collaborative arrangement, and it is a good example of many of the points we raise in general in chapter 23 about it being very important to keep in mind as you implement them, and you see that in the infrastructure works program.

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I agree with Mr. Shipley that there are many positive things about this program, but it is an instrument that is delivered through a contribution agreement. You've heard a lot of discussion about contribution agreements. Once the federal government is giving money in a contribution agreement, certain procedures and conditions apply. You are not to be making payments unless you see there's some evidence of performance. That's the arrangement. So as auditors, we come and say, “This is the arrangement. Are you following that arrangement?” That's how we do our work.

We are saying in here that given that arrangement, a number of things were not in place. We don't feel financial management was strong here. We are not as positive as the Treasury Board on the financial management, because of the nature of the arrangements and the things you expect to see in place. These are all things that can be done better, and as Mrs. Jennings says, a number of the provinces have done some things very well here.

Mr. Mac Harb: This is the first day of spring, Mr. Chair.

Ms. Marlene Jennings: It was yesterday. You're a day late.

An hon. member: No, it's the 21st.

An hon. member: But it was a leap year.

The Vice-Chair (Mr. John Richardson.): Well, let's just take the good weather while we get it.

I want to thank the members of both the Auditor General's service and the Treasury Board for coming before us. We appreciate your contribution. Thank you very much.

The meeting is adjourned to the call of the chair.