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[Recorded by Electronic Apparatus]

Tuesday, November 23, 1999

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The Vice-Chair (Mr. John Richardson (Perth—Middlesex, Lib.)): Thank you very much, everyone, for being so much on time.

It's a pleasure again to have the Auditor General with us for almost two successive meetings. It's always a pleasure.

The rationale for this meeting is the consideration of the annual performance report of the Office of the Auditor General of Canada for the period ending March 31, 1999.


Sir, it's a pleasure for me


to welcome you to our committee. It's always a highlight of the year for this committee to have you come. Also, Mr. Michael McLaughlin is from your group as well.

What I would like to do now is to allow the Auditor General some time to make his opening statement, and after we finish with the opening statement, we'll take the questions in the order that people sign on.

So the floor is now yours, sir.

Mr. L. Denis Desautels (Auditor General of Canada): Well, thank you very much, Mr. Chairman, for this opportunity for Mr. McLaughlin and I to discuss with you the information in our 1999 performance report.

The support and interest of parliamentary standing committees, especially your own, Mr. Chairman, is vital in reviewing and recognizing performance information from government organizations. We welcome this initiative, therefore, from your committee.

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Our performance report essentially explains what we did in the past year, what we were trying to achieve, and what we actually achieved with the $51 million that was initially voted to us by Parliament. Our office strongly supports the measurement and reporting of the results produced with public money, which is the focus, of course, of the performance report.

We're still early in the game, and we recognize the challenge and efforts that departments and agencies face in moving from simply reporting on inputs and outputs to reporting on outcomes and achievements. These efforts are paying off, and reports such as the report on plans and priorities and the performance report provide parliamentarians with better tools to review government operations.

In fact, in February 1998, our office published a paper entitled “Parliamentary Committee Review of the Revised Estimates Documents”. The purpose of that paper is to assist parliamentarians in getting the most out of the review process. Parliamentarians and their staff have indicated to us that they find the document useful in achieving this.

Establishing performance expectations and reporting on key achievements is quite challenging for legislative audit offices due to the unique nature of our work. Other legislative audit offices in Canada and around the world are also dealing with this challenge. Because we work together with Parliament and the entities we audit, the credit for the achievements that we may claim is shared with many players in and around government. Simply stated, our work influences change that others are responsible for implementing.


In April 1998, we met with your committee to review our 1998-99 Report on Plans and Priorities. That report established our performance expectations and outlined the Office's general direction for the next three years. The 1999 Performance Report that we are reviewing today discusses how we met those performance expectations.

Exhibit 2 on page 7 provides an overview of our key results commitments. Exhibit 3 on page 8 is an expanded chart of our key results commitments and shows what we expected to achieve with the money we received from Parliament. It provides the main objectives, the indicators of achievement and refers you to the pages where we describe our accomplishments.

We have provided examples of the results that our audit recommendations and our work in general have produced in government operations. Exhibits 10 and 11 on page 17 report on the progress made in response to our recommendations and observations in our value-for-money audit chapters. In summary, over the five-year period from 1993 to 1997, 57 per cent of our recommendations and observations have been either fully implemented or there has been satisfactory progress made. We would like to see a higher implementation rate and would welcome further discussion with you on this subject.

I would like to take a few minutes to point out some examples in our Performance Report that show where we have made a difference and delivered our commitments successfully.

When we conduct value-for-money audits, we want our audits to identify opportunities to reduce costs or to maximize resources. The case study on page 23 demonstrates our achievement in meeting this objective. Following our 1996 audit on materiel management, four departments have reduced their inventory levels by more than $480 million, resulting in potential savings of $100 million a year in the cost of maintaining their inventories.


One of the most important aspects of our work is our audit opinion on the financial statements of the Government of Canada. The fundamental purpose of these financial statements is to inform Parliament on the full nature and extent of the financial affairs and resources for which the government is responsible. Our opinion lends credibility to these statements, and that is very important.

In the 1999 budget, the government responded favourably to some issues that we raised in our observations on the financial statements of 1997-98. It has agreed and is addressing various reporting issues.

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In our environment and sustainable development work, one of our indicators of achievement is the extent to which departments improve their management practices for protecting the environment and promoting sustainable development. As a result of our work in this area, parliamentary committees have focused on ozone protection, climate change, biological diversity, and clean-up of federal contaminated sites. Subsequent to these hearings, departments and agencies have indicated a willingness to address these issues in a more coordinated and determined manner.

Since our primary client is Parliament, we can measure the effects of our work to some extent by the level of parliamentary interest it generates. For example, 63% of our reports were subject to hearings by this and other parliamentary committees this year. We believe that reviews by a parliamentary committee add to the transparency of government operations and we will continue to support these endeavours.

The performance report contains many additional examples of where the office has made a difference, and we hope to improve our performance report as we refine our indicators, our targets, and our measures of the impact of the work we do. We would welcome your suggestions on what you might consider useful information in establishing results commitments and reporting achievements in a legislative audit office.

Mr. Chairman, I'm proud of our office and what we've accomplished. I'm convinced that we are indeed making a difference. I believe that our audit reports are providing Parliament with useful information on government operations, which is of course our main purpose. Committee hearings and reports in turn generate many important changes and improvements in departmental operations. The competence, excellent reputation, and continuous efforts of our employees are recognized in Canada, and, I may say, around the world. Incidentally, our office was recently re-elected as the external auditor of UNESCO in Paris by the 175 member states. During this first six-year mandate, our work was evidently well received by them.

On this note I would like to thank you, Mr. Chairman, and we would be pleased to answer the committee's questions.

The Vice-Chair (Mr. John Richardson): Thank you very much, Mr. Desautels.

The first round will be the eight-minute round, and we'll have a second round at four minutes.

Mr. Mayfield, are you leading off the questioning for the opposition?

I recognize Mr. Mayfield for eight minutes.

Mr. Philip Mayfield (Cariboo—Chilcotin, Ref.): Thank you very much, sir. It's nice to see you again. I'd like to thank the Auditor General and his staff members for showing up here today. I remember a chairman once saying that the witnesses should have perhaps the same experience as a patient going to see a dentist. I'm not sure if that's what your experience would be today, sir.

I am interested in the report that you bring here, and it's obvious as we go through this that this whole area has been an area of growth and development within the Auditor General's department. I was wondering how these expectations are set. Who's the head of this? How do you do it? How do you organize your staff to prepare such a report? Who is included in this, sir? I'd like to know just how this report is put together, what your expectations are for the development of this performance report, and where it's going from here.

Mr. Denis Desautels: Well, Mr. Chairman, that's quite a comprehensive question, and I'd like to answer it as briefly as I can.

We try to obtain input for our ideas and what we intend to do from as many sources as possible. Indeed, we like to consult members of Parliament. We do get a number of suggestions from this committee, we have members of Parliament who make other suggestions outside committee, and we like to hold little meetings with different groups of members of Parliament over time to get their input as to what they expect of our office.

And of course inside the office we have a fairly well-developed planning process where people are expected to plan the work they would suggest in the entities for which they're responsible over a five-year period. So there's a multi-year planning process inside the office.

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We therefore have to take all of this information, plus, I would add, a certain top-down direction coming from the senior managers of the organization—what the priorities are as we would see them over time. All of this information is used in what I think is a fairly sophisticated planning process. Once a year we meet for two full days to agree on what we're going to do in the next few years and to update our planning. I think we invest a lot of time in finding out what people want from us, in terms of digesting that and using it in our planning processes.

At the end of the day, I'd like to think we are at least as much a demand-driven organization as we are a supply-driven organization. In other words, we are given certain resources to do certain things that we cannot change, such as the annual audit of the financial statements of Canada. This we have to do every year. There's no discretion on that. But on the value-for-money side of our work, which I would say represents about 55% of our effort, we have more discretion as to what we do and when. This is where we would use the most input from others and from our own people to decide exactly what we do.

Mr. Philip Mayfield: In your verbal report, sir, you mention that your report is on what you did, what you've accomplished. This is refreshing, considering the number of times we've sat and listened to departments talk about what they're going to do, what they hope to do, and what they wish they had done.

It seems as though there's an increasing focus, perhaps a sharpening of the bit, if you will. As you mentioned, there is perhaps a move from simply reporting to establishing outcomes and achievement. I'm wondering if you could look into the future a little bit, sir, and describe the kind of process you have within your department for sharpening this focus and for perhaps providing more and more useful results for Parliament as a result of that.

Mr. Denis Desautels: Mr. Chairman, as an organization, I think we've been very supportive of the efforts that have been made by the government and by Treasury Board Secretariat in particular to improve the whole estimates process. One of the important elements in improving the estimates process was to change what we used to call part III of the estimates. We replaced that with the two-part estimates document, the report on plans and priorities, followed by the performance report we're discussing today.

As Mr. Mayfield indicated, with this approach—and we're getting better at it each year—I believe we are sharpening the information that comes through. We are forcing all organizations, including our own, to lay out plans ahead of time, as clearly as possible, and to report back against those plans a year or so later, after the end of the year in question.

There is a lot more discipline on everybody's part through this process. We encourage it because the whole of government will be better off in terms of having better management. By doing that, I think members of Parliament will also be better served. Having said that we encourage it for others, it stands to reason that we have to agree it's good for us as well. Of course, that's why we're quite keen on doing this to ourselves and discussing this with the committee.

Mr. Philip Mayfield: If I may, Mr. Chairman, I have one last question.

Obviously, there are some expectations that you judge yourself against in this regard. I would like to ask you, sir, whose expectations these are and who decides if they have been met. Who decides if your goals have been met and by how much, or where your shortcomings are? Is that a departmental thing, or is this something the senior members do? How do you decide whether you've met your expectations, and how fully?

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Mr. Denis Desautels: Mr. Chairman, as the managers of the organization in question, we have to set our priorities and our objectives. When they are set, we have to discuss these with the people to whom we report: the members of Parliament and this committee. Initially, this is why the report on plans and priorities is tabled, is made available, and is available for discussion when our estimates are being discussed. I think the content of that is initiated by us, of course. We try to think through what it is we can do and what we can deliver. We set certain objectives that hopefully are a stretch, and we discuss them with you. Based on your reaction, we can adjust those year after year to better reflect what you may have in mind.

The process we're going through today—reporting back on the actual performance against those objectives—again is something that happens between you and us. Nobody else really gets involved. We are independent of government. That's the way Parliament wants it, and that's the way it should be. Therefore, when we set our priorities, we set them on our own. The only people we answer to for those are the members of Parliament at large and this committee in particular.

Mr. Philip Mayfield: Thank you, Mr. Chairman. We'll talk about the report itself a little later, perhaps.

The Vice-Chair (Mr. John Richardson): Thank you very much, Mr. Mayfield.

Mr. Sauvageau.


Mr. Benoît Sauvageau (Repentigny, BQ): I'll be brief, Mr. Desautels. Thank you again for coming here and congratulations on the UNESCO prize awarded to you and your office. Considering the waste that occurs in the EU, we can take pride in the fact that our money is subject to proper auditing procedures and hopefully well spent.

I have but one question for you and it pertains to your recommendations. Some have been implemented, whereas progress has been rated satisfactory in respect of others, and unsatisfactory in still other cases. I believe you stated that 57 per cent of your recommendations had been implemented. Could we also say then that 43 per cent of them have not been implemented?

Mr. Denis Desautels: Mr. Chairman, the fact of the matter is that 57 per cent of our recommendations have been implemented. In some cases, events may have conspired to make implementation impossible.

Mr. Benoît Sauvageau: I see.

Mr. Denis Desautels: By no means is that the only reason, however. In some cases, the departments disagreed with our recommendations. Other departments, when they did agree with them, were too slow to respond. Therefore, our recommendations may not have been implemented for a variety of reasons: departments were not on side, events conspired to make implementation impossible or departments simply dragged their heels.

Mr. Benoît Sauvageau: Is 40 per cent or higher a satisfactory implementation rate? Your chart on page 19 for the period 1993 to 1997 seems to show an increase in the number of recommendations not being implemented. Is that in fact the case, or are the numbers remaining steady?

Mr. Denis Desautels: Mr. Chairman, the implementation rate has remained steady between 53 per cent and 57 per cent for the past three years. All I can say is that personally, I'm not satisfied with 57 per cent. I'd like the implementation rate to be much higher. During a previous appearance before your committee, I mentioned that I would like to see this figure be closer to the 70 per cent mark. That's fairly ambitious, but it's a target worth aiming for, one that I believe can be reached.

Mr. Benoît Sauvageau: If I were to ask you how you intend to reach that target, would that be a political question?

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Mr. Denis Desautels: I don't think so.

Mr. Benoît Sauvageau: Would you care to answer the question then?

Mr. Denis Desautels: There are steps we can take. We can follow up even more stringently on each recommendation formulated. We have decided to set up a system to identify our recommendations, catalogue them and ensure regular follow up and we hope the departments will cooperate with us. We will be asking departments to draw up progress reports on each of our recommendations, using the information we supply to them.

We have already decided to initiate certain actions immediately. In so doing, I think we can achieve a higher implementation rate.

Mr. Benoît Sauvageau: Do you think the committee can be of some assistance to you in this regard?

Mr. Denis Desautels: Mr. Chairman, I think the committee...

Mr. Benoît Sauvageau: I'm asking because I'm new to this committee.

Mr. Denis Desautels: Well then, the answer is yes. As I've always said, the committee can be of invaluable assistance to us. Each time you call in departmental representatives to discuss a particular chapter in our report and manage to secure some commitments from then, either right then and there or after you've reported to the House of Commons, you're contributing to the process of change and helping to bring about the desired corrective action.

Mr. Benoît Sauvageau: Next week, for instance, representatives of Environment Canada, or should I say National Defence, are scheduled to appear before this committee. Could we possibly have the list of recommendations made to this department, particularly those that have not been implemented, so that we can ask these officials why they haven't acted on them? Could you provide us with that information?

Mr. Denis Desautels: Mr. Chairman, that could pose a problem. We're not talking about anything confidential, because all of our recommendations are contained in published reports. However, when witnesses come before you to discuss a particular subject, they are not necessarily in a position to discuss all of the recommendations targeting their department.

In the case of National Defence, for example, we draw up reports every year. While witnesses may be able to answer questions concerning modern equipment procurement, they may not be able to answer questions about entirely different matters. Therefore, that could present a problem.

Mr. Benoît Sauvageau: In the organization chart we see here, responsibility for communications and for the distribution of documents falls to Mr. McLaughlin. Could we possibly obtain a list, broken down by department, of all of your recommendations? Are these included in your report? I can readily understand departmental representatives giving testimony to you and claiming that a particular matter is not their responsibility and that therefore, they cannot answer the question. However, could we get a list of the particular recommendations that departments have failed to implement?

Mr. Michael McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General of Canada): It would be a simple matter to obtain the list of recommendations broken down by department, but we don't have the full information relating to each specific recommendation. Therefore, we're not in a position to say if in each case, the recommendation was implemented or not. I can check to see if we have any information that could be of use to the committee.

Mr. Benoît Sauvageau: The information would prove useful to all committee members.

Thank you and again, congratulations on your award.


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

Madam Wayne.

Mrs. Elsie Wayne (Saint John, PC): Thank you very much.

Mr. Auditor General, when you're setting performance targets and measuring their attainment, I'm wondering just how this procedure works. I'll give you an example. I noted on page 23 that National Defence consolidated its supply depots in Edmonton, Toronto, Montreal, and Moncton into two depots in Montreal and Edmonton. You talked about the saving that's there, that being a reduction of about $448 million in DND's centrally managed inventory.

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Of course, I think my colleagues would expect me to focus a little bit on defence. I have a major concern about the fact that our boys and girls in Defence are having a difficult time. We have really been cutting everything, all their resources, to the point that what we've been doing is rather an embarrassment across this whole country and around the world. We've been criticized by the United States, we've been criticized by the UN, and so on.

When you are setting performance targets and measuring their attainment, I'm wondering what kind of dialogue takes place between your office and that department so that we're not doing something just for the bottom line on the balance sheet while causing a negative impact within that department.

Mr. Denis Desautels: Mr. Chairman, each organization really sets its own performance targets. In the case of National Defence, we do not set targets for National Defence. They have to set their own targets—

Mrs. Elsie Wayne: I see. They set their own.

Mr. Denis Desautels: —and when we carry out the audits, we of course have something to audit against. If they've set targets, we can determine to what extent they've achieved their targets.

Of course, when we make recommendations to a department like National Defence on a particular issue such as materiel management, it quite often finds its way into their own objectives in a following year.

I think our recommendations and the recommendations of the committee have an influence on the performance setting, on the target setting by the departments, but they set their own at the end of the day.

Mrs. Elsie Wayne: Is there a way to assess the cost of measuring performance against the savings it produces?

Mr. Denis Desautels: When you talk about individual departments, one of the difficulties we are experiencing right now across the system is that the cost information and the accounting information are not very good. It's therefore quite difficult to attribute cost to a specific activity and therefore to determine exactly what you save by changing a procedure from A to B. Of course, this is one of the areas that we've identified or singled out as needing more attention. It's one of our priority areas.

As we plan our work, we plan to spend more and more time looking at how departments are improving their information systems so that they know what different activities cost and they can make trade-offs between one procedure or another. Right now, I think this is a very serious shortcoming in government administration.

Mrs. Elsie Wayne: Thank you very much, Mr. Chairman.

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

I'll recognize Mr. Shepherd for eight minutes.

Mr. Alex Shepherd (Durham, Lib.): Just very quickly, on page 39, you show the planned expenditure of your department as compared to the actual. It seems like there was another $3 million to $3.5 million. The way it reads to me, it looks like an override of 6%. The planned expenditures for your department were $50,960,000 when you in fact spent $53,700,000. Could you explain that?

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Mr. Denis Desautels: Yes, Mr. Chairman. The process is such that we came to you once upon a time at main estimates asking for $50,960,000—$51 million.

Subsequent to that, there were supplementary estimates that came through. Those supplementary estimates dealt with some compensation increases. If you recall, at one point the salaries were unfrozen and therefore there were salary increases that were authorized. There was about $1.6 million in increases through supplementary estimates for salary increases.

There was approximately $150,000 for additional work related to the Nunavut territory, the new territory, over and above what had been approved before.

Finally, there was an amount of about $2.2 million, which consisted of what we call the “carry-forwards” from previous years. If you recall, departments and agencies are authorized to use up to 5% of their annual budget as a carry-forward from previous years; it hasn't been spent in previous years. That was used, in our case, for certain computer equipment, I believe, which we purchased during the course of the year.

Those three items brought the supplementary estimates up by another $3.9 million, about $4 million.

Mr. Alex Shepherd: And you have no carry-forward left?

Mr. Denis Desautels: For instance, in the current fiscal year, if we don't spend all of the money that you've authorized, a certain portion of that amount can be carried forward to the next year. This is meant to encourage all departments and agencies not to go on a spending spree before March 31.

Mr. Alex Shepherd: I'm aware of that, but—

Ms. Denis Desautels: That's the purpose of the carry-forward.

Mr. Alex Shepherd: I don't want to belabour that, but you started off with a cost estimate of $50,960,000 to run your department. You spent $53 million. Are we doing the same thing this year for the estimates we put out? Do we know that they're going to be higher than that?

Mr. Denis Desautels: I'll ask Mr. McLaughlin to answer that in a moment. That's his area of responsibility.

Each year, when the main estimates come out, there are certain things—in any department—that we all know are coming but are not in the main estimates, because the process is such that they're not recognized until a certain stage, until later. I'll ask Mr. McLaughlin to complete the answer.

Mr. Michael McLaughlin: In fact, any of the contract increases or regular increases, economic increases, that are given to our staff are not provided for in the main estimates. We must wait for Treasury Board approval in order to proceed with those kinds of increases. So that would reflect increased salary costs. Also, any new program activities that come our way by way of new crown corporations being established or new entities requiring audit is again something we would have to get funding for through supplementary estimates—and this year in particular on the computer purchase.

We were leasing computers. We did an analysis and found it was better from our point of view, given the types of computers we have, to purchase them. We would get better useful life out of the computers. So when the lease expired we ran a higher cost; we had the money available to do that.

Mr. Alex Shepherd: I understand that.

On pages 44 and 45, you give a listing of where you spent all your money. I was kind of amazed to see that the Cape Breton Development Corporation seemed to have a tremendous amount of attraction. I gather that $304,000 of your total cost was allocated to the Cape Breton Development Corporation. That exceeds all the money that we spent on auditing the Atomic Energy Commission, the Royal Mint, and VIA Rail. Why would we spend so much time and effort on the Cape Breton Development Corporation?

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Mr. Denis Desautels: Mr. Chairman, there have been a number of things going on at the Cape Breton Development Corporation, so just the regular audit work there has required much more effort than would normally be the case for an operation that size. There has been a devaluation of a lot of their assets and a closure of part of their operation, and I believe in one year there was an additional set of financial statements—I'm not sure if it was this particular year. There have been many things happening in the Cape Breton Development Corporation in the last few years, and that has been driving up the cost.

But I don't have all of that information with me, Mr. Chairman. I could provide Mr. Shepherd with a more detailed answer on that particular item.

Mr. Alex Shepherd: Just as a layperson, I look at Atomic Energy of Canada or at the VIA Rail system across Canada and see that they took less expenditure than the Cape Breton Development Corporation. I was fascinated as to why that would be.

On previous interventions...on page 17, once again we talk about this threshold of response to your recommendations and the combination of “entity disagrees with our recommendations”, and “progress not satisfactory”. In regard to those two components, I think we've argued it back and forth, but I think they're like 47% or something.

Do you have some way to compare that to similar functions in other countries? Are we an inordinately high percentage in regard to not taking recommendations from our auditors? What seems to be the problem there?

Mr. Denis Desautels: Mr. Chairman, I don't think we have an easy way to compare that particular percentage with the percentage in other organizations.

First of all, to my knowledge, really no other legislative audit office makes the same calculation. Some of them make a different calculation, more in terms of identifying the cost savings they feel their recommendations represent, and they use that as their benchmark. As far as I know, there is no other organization that does this kind of calculation we provide to you in this report.

I will add as well, though, that we have to be somewhat careful with that percentage and with our desire to increase that percentage. One way to increase the percentage, of course, would be to make easier recommendations. We don't necessarily want that to happen. We have to interpret that particular percentage with that in mind. We feel that the kinds of recommendations we've been making are at about the right level in terms of degree of difficulty, and we don't want to improve that percentage by making the recommendations easier.

The Vice-Chair (Mr. John Richardson): I have to bring it to your attention that I've given you one and a half minutes of leeway there, Mr. Shepherd. We'll cut you off and move to the next person, from the government side.

Ms. Jennings.


Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you very much, Mr. Desautels, for your presentation. I found your report most interesting. I want to focus on something to which my colleague Mr. Sauvageau alluded, namely exhibit 10 on page 17: “Status of Observations and Recommendations”.

It seems to me that if you can produce a chart like this, it means you're aware of the exact number of recommendations you have made to the entity in question. You state that in x percentage of cases, either the entity disagrees with the recommendations, progress is not satisfactory, the recommendations are no longer relevant, progress is satisfactory or the recommendations have been fully implemented. Therefore, I think you should be able to provide us with a complete list of the recommendations made and to rate them as follows: fully implemented, progress satisfactory; progress not satisfactory, or entity disagrees with recommendations. Am I right?

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Mr. Denis Desautels: Yes.

Ms. Marlene Jennings: Then you'll arrange to get that information to us?

Mr. Denis Desautels: Can we get some clarification as to what Ms. Jennings is requesting of our office, Mr. Chairman?

We did in fact collect from each department the information required to produce these tables. Therefore, we do have some figures, broken down by department, that we could pass along to you.

Ms. Marlene Jennings: Good. Could you also give us a rating of some kind, for instance, so many recommendations fully implemented and so forth? Somewhere in some computer system, you should be able to find out that recommendation 105, for example, made to Health Canada has been fully implemented, that in the case of recommendation 50 to Health Canada, progress has been satisfactory, and so on. Otherwise, you wouldn't have been able to make the observations you make in your report.

Mr. Denis Desautels: Ms. Jennings is right again. However, I would remind her that we made hundreds of recommendations.

Ms. Marlene Jennings: The report mentions a total of 984 recommendations.

Mr. Denis Desautels: We could draw up a table summarizing the results by department. I have here with me some figures I could share with you as an example. Naturally, some departments perform better than others. We could provide you with a summary table.

Ms. Marlene Jennings: Maybe I can make things easier for you. I'd like some information, broken down by department, on the recommendations that weren't implemented at all because the entity disagreed with them, as well as those recommendations for which progress has not been satisfactory.

Mr. Denis Desautels: Alright.

Ms. Marlene Jennings: Secondly, a significant percentage increase is noted in exhibit 11 in the observations and recommendations dealing with management systems and practices. The percentages for the period 1990-1994 appear in the left hand column, while the percentages for the period 1993-1997 appear in the right hand column. What possible explanation can there be for the significant percentage increase? Could the reason be the new management philosophies or practices adopted and the failure on the part of government departments and agencies to embrace them, even though these practices may have already been tested and endorsed in other sectors, especially the private sector? Is this the reason for the significant increase in the number of observations and recommendations dealing with management systems and practices?

Mr. Denis Desautels: Mr. Chairman, this percentage increase reflects two things: firstly, it reflects the choices we make in terms of the areas that we want to examine. Some years, we focus on some areas and not on others. For instance, we might focus on such issues as revenues or information technologies. Therefore, this percentage increase is a reflection of the choices we have made in terms of our priorities.

Secondly, it reflects the shortcomings identified in the various entities. Obviously, if we made more recommendations in a particular area, this means that we had more to say about this matter, regardless of the choices we actually made.

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The statistics are a reflection, therefore, of these trends. Admittedly, this isn't easy to explain. To some extent, it may reflect some of the choices departments made when they were forced to make some cuts. Every department had to slash its workforce. While programs were safeguarded as much as possible, some support services may have suffered more.

Without being too specific, I think this was a contributing factor.

Ms. Marlene Jennings: Thank you very much.

I have one last comment. Congratulations on your reappointment as external auditor.

Mr. Denis Desautels: Thank you.


The Vice-Chair (Mr. John Richardson): I'll allow you those kinds of comments.

Mr. Paul Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much.

I'm glad to see you again. I'm glad that you are here. I understand that the idea of the performance report itself is a relatively new entity. Is this the first time the Auditor General's office is actually doing the performance report in this new form? Is this the first time in this style?

Mr. Michael McLaughlin: I think it's the third time.

Mr. Paul Forseth: In any event, you are the auditor that audits others to set the example, so certainly when it's done on yourself you must set the example of style. Certainly yours must be the best if you're doing the same thing you do when you are evaluating others.

First of all, in the planned spending, the $50,960,000, I was wondering just how tight a figure that was. Was that a Cadillac or a Chevrolet? In other words, are there other comparative measures? For instance, we can look at other bureaucratic organizations, say, and globally take a look at the overall number of employees you have, the amount of square footage you rent, and we can look at that cost and try to compare that to, say, some crown corporation or to other benchmarks to see where you are within, say, even comparable Canadian government services. That's the first part.

Then I see that you are 5.5% over in spending. You gave a bit of an answer on that, but I'm wondering, then, if that's acceptable to you, is it acceptable for the other entities you audit and for all government operations to be perhaps 4% or 5% over? For the federal government and its operations to do that would be in the billions, and that would perhaps be unacceptable.

Then you also mentioned a third part about...and I congratulate you on being elected to be an auditor in Europe somewhere. Are there comparable benchmarks in order for you to be able to compare yourself to other auditors general? It's very hard in such a unique organization as yours to provide comparable benchmarks to see where we sit. Is there some international comparison? I think I've asked you that kind of question before—and then I have a supplemental.

So this is a three-part question, first of all around the planned spending and how tight it was, then about the apparent overrun, and then trying to provide comparable benchmarks in order to compare where you're at in regard to other similar organizations.

Mr. Denis Desautels: Mr. Chairman, I'll try to deal with those three questions as directly as I can.

First of all, on the spending targets and how tight they were, I believe there's a lot of pressure on our office to be able to do its work with the resources it has. I think we've had these discussions with this committee before and people have asked me the same question, but more on the other side: do you have enough to do what you have to do?

There are indeed a lot of demands on the office. We have, as you know, increased our mandate in the last few years to incorporate environmental issues and the Commissioner of the Environment within our office, within our budget. We were given new responsibilities such as the new territory of Nunavut. There are certain things going on in government that require us to be more present, such as a new financial information strategy.

• 1625

So there is a lot of pressure on us right now to produce a lot of things, and there is a lot of demand, which I welcome, from committees to look at subjects they're interested in and receive testimony on those subjects. As an organization, I feel we are running a tight ship, and indeed we are quite productive—I would say very productive. I have no difficulty demonstrating that to this committee.

In terms of the overspending, I think we should be careful not to extrapolate from that either across government or assume that is something we are happy to do every year. We would like to have one main estimate and be able to plan our work for the year with that main estimate and live within that. However, as Mr. McLaughlin was saying earlier, there are certain things we know about that are coming, but because they haven't gone by a certain stage in the Treasury Board, we cannot include those in our main estimates. But we know they're there.

That frustrates me as well. I would prefer to have that right there and then in our main estimate so that we have only one estimate and we live with that for the rest of the year.

So I think the question of the overspending on the estimate is a question of timing of things that we knew were there, that were in the making and required more work and more resources but could not be provided for in the estimates for some technical reason.

In terms of other benchmarks with other similar organizations, we do work with other legislative offices in Canada, in particular the provincial offices, to develop performance indicators that we can each develop on our own but then compare with each other. We are not there yet because there are some difficulties. Everybody has their own way of managing their organizations and counting things. I think the next step is to agree on a common method of accumulating our performance information so we can then compare with each other. So there is that kind of effort being exerted.

Also, we have an opportunity to compare ourselves on specific issues with colleagues in other countries. For instance, we do a lot of exchange of technical information with the U.K. and with Australia, which have similar systems to ours. So they're the ones with whom we can compare ourselves more easily. That goes on, but it's not necessarily across the board. It's usually on specific activities on which we can generate comparable information.

Mr. Paul Forseth: I'd like to ask you one supplemental question.

Certainly you do reporting; you don't make a political evaluation. Really, your main tool is what I would call moral suasion. You just lay out the facts and leave it to the public and others to make judgments and interpretations.

Seeing that's the style of how you operate and report to Parliament, how much of a communication plan do you have, and how many resources do you put into actually communicating your results directly, other than just tabling something to parliamentarians? For example, is this performance report now available on the net? What about contacting the average citizen with a little flimsy slip inside every government cheque that goes out from the government, such as EI, child tax benefit, income tax returns, OAS, Canada Pension Plan, and so on? It could be a little slip that says for the latest document, phone here, a 1-800 number, or on the net, or whatever, that says to individuals that this kind of material is available, or even consider direct television advertising about communicating to the public that you exist and what you're there for.

The Vice-Chair (Mr. John Richardson): Mr. Forseth, I have to interrupt at this point. We've gone through eight minutes and 30 seconds. That was a fairly generous portion, so I think we'll have to cut it, and then, if we have more time, I'd appreciate it if we could come back to Mr. Desautels to pick it up in the next round.

We'll now go to Mr. Harb.

• 1630

Mr. Mac Harb (Ottawa Centre, Lib.): I have one really brief question.

First, I wish to thank Mr. Desautels. Frankly, I'm very impressed with the quality of the report. Like my colleague Mr. Shepherd, I was glancing through what the Auditor General charges corporations, and I see quite a bit of consistency, where the rate varies anywhere from $80 to $120 per hour when we work it out.

I think it's quite fair to say it's very difficult sometimes to make an assessment if you have to move your troops and go in. If you do a job of a day or so, probably your charge will be a lot higher than if you take your troops and go to a place and put them in there for a month or so, depending on the circumstances in the areas and everything else. So I'm quite happy with the way you have handled that part of the report.

My question is fairly simple. Who did the auditing last year, and have they come up with an opinion saying you've done a good job, as we normally do with the department? We bring in the department and we bring you here. You're the auditor who does the auditing, and we might come to you and ask you about them and vice-versa. Who did the auditing last year?

Mr. Denis Desautels: There is an auditor appointed by the Treasury Board Secretariat who audits our books. The firm is Welch & Company. They do an audit every year. I have to say this is a financial attest audit, and it looks at how our books are kept and whether all the transactions are within our authority, and so on. They do that every year.

That's reported where, Mike?

Mr. Michael McLaughlin: It's reported in the public accounts documents.

Mr. Mac Harb: So in response to the point my colleague raised, in fact you have complied with the criteria or with Treasury Board guidelines as they relate to your spending of the $52 million or $53 million instead of the $50 million.

Mr. Denis Desautels: That's correct.

Mr. Mac Harb: So there's no problem there.

The second thing is, I think my colleague has raised a very good point. It's important for this to be disseminated, but I hope to God we don't get the Auditor General to go and spend thousands of dollars to buy advertisement on TV in order to let the public know.... Frankly, my colleagues in the Reform and other parties in opposition and everybody in the country knows about the Auditor General and the good work that office is doing.

Has this report already been tabled in Parliament? I think this is the first chance we have had to look at it as a committee. It hasn't come to us before.

The Vice-Chair (Mr. John Richardson): No, but the Auditor General did table this report.

Mr. Mac Harb: I want to let the record show that it's an excellent report, and I hope that will continue.

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


Mr. Benoît Sauvageau: Mr. Desautels, you may have answered the question without my realizing it, but can you give us a breakdown by department, as Ms. Jennings requested, of the recommendations that have not been implemented and of those for which progress has not been satisfactory?

Mr. Denis Desautels: Mr. Chairman, I believe I told Ms. Jennings that my office would provide the committee with a chart listing the recommendations that have and have not been implemented, broken down by department.

Mr. Benoît Sauvageau: Supposing we're told that at Environment Canada, 60 per cent of the recommendations have been implemented, while 40 per cent have not. You must know which particular ones have in fact been implemented. I don't want to know how many recommendations have been implemented overall, but rather which particular ones have been. Can you share that information with us, if at all possible? And can you tell us which particular recommendations have not been implemented?

Mr. Denis Desautels: I hesitate a little to answer you, simply because we don't have complete information on all of our recommendations. In some cases, we have been unable to receive confirmation from the department one way or another. Therefore, we can't be fully certain that the information is completely accurate.

Moreover, as I pointed out to Ms. Jennings, our office made many recommendations, several hundred in fact. I could provide the committee with a table that gives a breakdown by department. In the case of departments experiencing some problems, I could highlight the main recommendations that were made.

• 1635

Mr. Benoît Sauvageau: Excellent.

Mr. Denis Desautels: Otherwise, we'd be dealing with far too many recommendations, and the information you're seeking might get lost.

Mr. Benoît Sauvageau: You have to understand that we can be of assistance to each other.

Mr. Denis Desautels: Yes.

Mr. Benoît Sauvageau: If we had some information, broken down by department, about two or three of the main recommendations that were made, then that would be fine. Thank you.


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

Mr. Mahoney.

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

Mr. Auditor General, I'm just curious. I assume you are the official auditor for the three territories and that they don't have their own internal audit system.

Mr. Denis Desautels: That is correct, sir.

Mr. Steve Mahoney: Is there a charge for that or an accounting of some kind? I notice you audit their colleges, liquor commissions, power corporations, everything.

Mr. Denis Desautels: No, Mr. Chairman. The cost of doing the audits of the three territories is included in our estimates that the department approves for us.

Mr. Steve Mahoney: So it's included in the $53 million total.

Mr. Denis Desautels: That's correct.

Mr. Steve Mahoney: How do you interact with, say, provincial auditors? For example, an audit was done recently of the Province of Ontario, and I think the auditor said the province was being shortchanged. I forget how much it was, something like $60 million in interest because the federal government was slow to transfer funds. The same thing happens with municipalities and school boards, of course, when they don't transfer funds. At least it used to. Do they consult you on that kind of thing? Do they look for some kind of corroborating opinion, or is there any involvement at all with the provincial auditors?

Mr. Denis Desautels: Mr. Chairman, they sometimes consult us, but not always. I don't hesitate to say that on the whole we have very good relations with our provincial colleagues.

We have to rely on each other for certain aspects of our respective work. For instance, the federal government does the tax collection for most of the provincial taxes, and we audit that revenue stream. So they have to rely on our work in terms of expressing an opinion on their own government's financial statements. They visit us and look at what we do, and they sometimes will suggest to us that they'd like to have a greater degree of assurance on certain aspects of certain types of taxation. To a certain extent we can adjust our program to fit their needs. So there is that kind of cooperation.

It goes both ways. For instance, the Province of Quebec collects the federal GST in that province. We have to rely on their work, so we have to work out a protocol for doing that.

On occasion we will work on projects jointly or in a collaborative fashion. For instance, in the reports I will be tabling next week you'll see one on the federal infrastructure program, which is a federal-provincial cooperative arrangement. We've done some work there in conjunction with Saskatchewan and Nova Scotia, so that was entirely cooperative.

But sometimes provincial auditors will raise something in their reports that refers to the federal government without necessarily checking with us, but we cannot control that.

Mr. Steve Mahoney: But do they ask you if you support it or disagree with it? Do you take a look at whether or not it's in line with your accounting procedures?

Mr. Denis Desautels: Mr. Chairman, if they ask us, we will tell them whether or not from our perspective the information is correct. We will do that. I believe we're all working for the same taxpayers. But from that point on the provincial auditor is entirely free to report what he wants from that. I think in the situation you referred to that was the case.

Mr. Steve Mahoney: Members on both sides of the table are working for the same taxpayer, but it's quite often that we tend to disagree with one another. I think it's probably our job more than anything.

• 1640

I'm just wondering, though, if we asked you to look into something along those lines of provincial auditing, is that something that would be in your mandate?

Mr. Denis Desautels: Mr. Chairman, we are the auditors of the federal government, and if members of Parliament want us to look at specific aspects of federal government operations, we would take that under advisement and do that.

We don't have the authority to go outside the federal government in certain instances. For instance, we don't have the authority to audit what a province does with funds received from the federal government. Similarly, we don't have the authority to audit what first nations do with funds received from the federal government. Our authority stops at the point of transfer of these sums from the federal government to either provincial governments, first nations, or other recipients.

Mr. Steve Mahoney: I thought the committee received from you an audit of first nations during the last session of the House. I seem to recall going through a number of sessions where we discussed some of the spending of some of the first nations groups.

Mr. Denis Desautels: Mr. Chairman, we do audit the Department of Indian Affairs and how they handle their work and how they deal with first nations. But beyond that we cannot go into first nations and audit what they do with the money. However, some of the first nations will sometimes voluntarily cooperate with us and supply us with certain information. But our mandate stops at the point of transfer from DIAND to the first nations.

Mr. Steve Mahoney: Thank you.

The Vice-Chair (Mr. John Richardson): I'm going to go back to Mr. Forseth. I offered him the chance to pick up on his questioning when I cut him off. At that time an answer was forthcoming from the Auditor General, and I felt it was worth while to have it followed up.

Mr. Forseth.

Mr. Paul Forseth: I won't repeat the question. I asked about a communications plan, and I see that on page 50 you have identified an individual, Johanne McDuff, as Director of Communications. Perhaps you can refer to how much you've spent and make a comment about the communications plan. Of course, the whole force of what you do has to do with moral suasion, and so communications is very important.

Mr. Denis Desautels: Mr. Chairman, I'm glad to have the opportunity to respond to the question. Mr. McLaughlin is responsible for that particular activity in our office, and I'll ask him to respond.

But before he does, I just want to confirm a point made earlier, which is that we don't have authority to order departments to do things. That's the way it should be, and that should not change. Therefore, our effectiveness depends to a large extent on how clearly we communicate our findings. So we do invest a fair bit of effort in precisely that.

I'll ask Mr. McLaughlin to take it from there.

Mr. Michael McLaughlin: Thank you, Mr. Chairman.

There are a couple of points I'd like to make. One is that we do have an Internet site, so if someone wanted any of our reports or anything dealing with our estimates and our documents, it's all available on the Internet site. It's available immediately upon tabling in the House, so it's quite rapid.

Our communications activity is focused primarily on the work of the office, the actual audit reports. So we do spend a lot of time worrying about how we communicate our information beyond the House to members of the media and the public. Questions do come back to us, so we try to make sure that our communications are as clear as possible and that the message does not get distorted. One of the primary reasons we have media releases is to make sure that the message we intend is the message the media first receives. They can always take something out of the report and make a message out of it that we had not perhaps intended to be a very significant message. So we do spend quite a bit of time on that.

I don't have a full cost of the communications activities. We have five people working in that area. That's both internal and external communications. But each of the audit teams has a responsibility for communications, for preparing communications strategies and for dealing with stakeholders where these reports are important to those particular stakeholders. We haven't really parsed it along that particular line. It would take some time for us to do that.

• 1645

Mr. Paul Forseth: I've just been looking at the schematic chart on page 6. It's quite a nice diagram. When you have those types of diagrams, however, it would be nice if you put a tiny little number in the bottom right-hand corner of each one of those boxes to represent the number of people in that box.

For instance, under the corporate services branch, when we go down the list from strategic planning all the way down to communications, it would be nice to have a little number beside there, whether it be six, seven, eight, or however many employees you have in that section. At the bottom of that page, then, we can see whether you have 300 or 400 or whatever number of employees for the total organization.

We can compare that with dollars spent by, say, the Auditor General of British Columbia, and how many employees they have, or we can look at other comparable benchmarks, such as how many square feet of office space you rent for 300 employees versus what the Province of Ontario does.

It's all part of trying to get to the issue of comparability and transparency. Maybe you can comment on those things in terms of their being part of communicating.

Mr. Michael McLaughlin: We can certainly provide that kind of information within the report. Again, the design of this particular report was to try to put the emphasis more on the actual products we had produced and less on the administrative aspects of the office. But certainly we have information of that type, and we are working on reports that will provide more comparative information in terms of how we do the administration of the office versus the products of the office.

Mr. Paul Forseth: As a concluding comment, the idea is that you're auditing and making suggestions as to how government departments should behave concerning style of reporting and transparency and so on in a way in which anyone can evaluate. Well, the same goes for your own material. You must perhaps push the boundary of transparency, showing the way. I'm offering you a couple of ways to do that.

When I look through a document, or a lay person is trying to contrast and compare where you're at, perhaps you should lead the way in terms of how that type of information should be provided in another department's performance report.

Mr. Denis Desautels: If I may, Mr. Chairman, I can make a final response.

Two documents form part of the estimates. This one is on performance, or what you've basically achieved. That's really the objective here. The other document is the first one that comes along, on plans and priorities, which deals more with the resources you need to implement those plans and priorities. That is, I believe, where most of the debate on people, facilities, equipment, and so on should take place.

I'm quite open to disclosing any information on any of that, but more information along those lines is available in the other report on plans and priorities.

Mr. Paul Forseth: Thank you.

The Vice-Chair (Mr. John Richardson): Mr. Mayfield.

Mr. Philip Mayfield: Thank you very much.

This is just a small item. I don't think anyone would disagree that your department deserves no little credit for pushing, or at least holding up, the need for federal departments to be Y2K ready, to have their computers ready for this. I think at this particular time, at this particular year, a lot of people are grateful for that.

Now, we were talking about computers, about getting into the paperless age, and there's a little comment in here on the quantity of paper you use in your department. I've always been astounded at how easy it is to use paper and how, as a result, so much of it is used.

Is there a note in your regular audits that you perhaps notice how much paper departments use? Is this an economy that you see possible? Is this a foreshadowing of things to come for other departments?

How about the use of paper in the federal government, Mr. Auditor General?

Mr. Denis Desautels: That information isn't in our report because we've chosen to prepare and table in Parliament a sustainable development strategy. All main departments are required, by legislation, to prepare such a strategy. This should cover such things as paper utilization and other issues related to environmental protection.

• 1650

We are required by legislation, through the environment commissioner, to review the sustainable development strategies of individual departments and to see how well they're doing in implementing these strategies.

So, yes, in answer to your question, over time we should be looking at each one of these sustainable development strategies for individual departments, assessing how complete they are. For instance, do they cover such things as the point you've just raised? We assess to what extent they've met the strategic objectives.

The intention is to cover that issue with departments, yes.

Mr. Philip Mayfield: On behalf of all the trees in British Columbia, I thank you, sir.

Voices: Oh, oh!

The Vice-Chair (Mr. John Richardson): Mrs. Wayne, please.

Mrs. Elsie Wayne: Thank you very much.

I want to say—and I know the Auditor General knows this, because I have told him this personally—that I have great respect for the gentleman. I really do. I think he does a superb job. There's no question about it.

In last year's performance report, you noted that the rate of progress in implementing observations and recommendations was lower than in previous years. Observations and recommendations dealing with management systems and practices were the most problematic.

Have any changes taken place, sir, since that report came through?

Mr. Denis Desautels: I did indicate that we are not satisfied with the rate of progress and that we intend to make changes to improve that result. We're pursuing some things that hopefully will bear fruit—for instance, to better catalogue all of our recommendations by department, identify them, and number them carefully, and to solicit the participation of departments in providing up-to-date information as to where each one of those recommendations sits.

So it's a twofold approach—more discipline and better systems in our own office, and soliciting the cooperation of departments in actually tracking those recommendations. If we track better, I think it will provide more incentive to improve the actual implementation.

Mrs. Elsie Wayne: Thank you very much.

Mr. Paul Forseth: I have a question.

The Vice-Chair (Mr. John Richardson): Mr. Forseth.

Mr. Paul Forseth: Thank you.

Again, I too want to give you my compliments, but I also want to refer you to page 26, under “Key Results Commitment—Promoting Honesty in Government”.

Now, apparently you do have a forensic audit section, but you say there:

    The Promoting Integrity in Revenue Canada chapter found that the Department has sound practices in place for dealing with potential misconduct, but does not provide an individual whom employees can consult on a confidential basis on questions of integrity.

Now, you certainly are handling those kinds of files. You talked about how many files are referred, how many are closed, resolved, and are still open. So you're doing this function, which is somewhat like a whistle-blower function, but there is no individual.

Do you have any plans to respond to that—to provide a contact place, perhaps, or a phone number, or an individual to do some ongoing liaison or pre-screening work as a type of front-end process before it actually gets to your forensic audit section?

Often an individual doesn't know that there is a forensic audit section, doesn't know who to go to, doesn't know where to go. It's difficult to get answers. Maybe there is a role to fulfil what was identified here in your report as a contact person in a contact place.

Mr. Denis Desautels: The policy we have followed so far has been twofold. First, as was correctly pointed out, we have a forensic audit group in our office. It's a small group of about six people. We channel to them all complaints of that nature that come to the office, and they're trained to analyze these and sort out those that are valid from others. As our report indicates, they've been kept fairly busy on that front and are doing excellent work.

• 1655

The other part of our approach is to do some work, such as we've done in Revenue Canada, to analyze how good the systems in place in departments really are for their own administration of integrity and ethics issues. But we cannot substitute ourselves for what departments themselves should do. What we've been doing, which I think is the right thing, is encouraging departments to set up their own structures.

Those are big departments. We talked about Revenue Canada. There are over 40,000 people in that organization. So they should have their own structures in place so that when people have an ethics problem, they know who to go to and they can get much faster and much more specialized service than if they came to another neutral organization such as ours.

The model to go with is for each organization to develop its own capability, and that is what we are encouraging.

Mr. Paul Forseth: Okay, but if you're encouraging it, who is doing it? You do have a forensic audit section and you are doing some function, so then there might be a role for this contact person, liaison officer, or whatever to....

I'm thinking even of other provincial bureaucracies such as enforcement of family maintenance as a function. The greatest difficulty is to communicate with the public. It's the same as immigration. I get individuals coming to my constituency office because they cannot interact with that huge organization. They don't have sufficient resources for people to answer telephones and be able to say where their file is or what's going on. Often they just need general information.

So in this identified situation here, of not having a particular individual who has this kind of pre-screening, general information, contact, liaison role with individuals, maybe it could be part of their function just to simply say, “I do know the phone number and the place of the person you should be contacting in Revenue Canada or that section in your province. Please contact them. If you have difficulty and you can't get a hold of them, then come back to me and I'll help you get connected with them.” That's what I'm talking about in this gap that is identified here.

Mr. Denis Desautels: That's a very interesting question. I really don't know what the right answer is. I do know we are providing that service as much as we can. We do get people who've tried many avenues and failed, so they contact us, and we try to be helpful within our mandate and also as a courtesy to people. If we know there's an easy answer to someone's question, even though it's not our job, we will give the information. We are doing that to a certain extent now.

But what you're raising is the necessity to have a function like that across government, which is close to an ombudsman function. In fact some people, when all else fails, think we are the ombudsman, which we're not. We're appointed by Parliament to work for Parliament. We're not there necessarily to solve each citizen's problem. I'd love to do that if that were the wish of Parliament, but that is not the mandate at this point in time.

So we're talking about a different kind of mandate or perhaps a different kind of office, such as an ombudsman's office, that could do a lot of the things that are being mentioned. It is an interesting debate.

As I said, we try to do as much as we can within our mandate to be helpful. We do a fair bit.

The Vice-Chair (Mr. John Richardson): Mr. Clouthier.

Mr. Hec Clouthier (Renfrew—Nipissing—Pembroke, Lib.): Thank you very much, Mr. Chair.

Monsieur Desautels, in looking over the financial audits, I notice under “International Organizations” the costs of the financial audits. They're certainly a lot less whenever you do the audits on the international organizations. I'd just like to know the rationale behind that, if possible.

Also, I know they're OIC requests. Would those be OIC requests from the Privy Council, or from whom?

• 1700

Mr. Denis Desautels: OIC would be orders in council, and those reflect a request by the government through the Privy Council.

I'm just trying to find the information you're referring to.

Mr. Hec Clouthier: Look on page 47 under number 3, “International Organizations”. Look at the money you spent, even on UNICEF, or any one of them really. You have $55,000 and 3,200 hours. Even the total for international organizations, if you want to look at that, is $267,000 and 7,000 hours. So you're down to about $37 an hour, whereas the other ones generally fluctuate between $90 and $100. Is there a reason for that?

Mr. Denis Desautels: I think there may be an accounting quirk in terms of UNESCO. I think there may be a cutoff from one year to the next. That figure is lower than what the average has been over the term.

If you look at the International Civil Aviation Organization, at $290,000, that's about the right level.

Mr. Hec Clouthier: Which one are you looking at?

Mr. Denis Desautels: If you look at ICAO and read across to the total, you'll see $290,000.

Mr. Hec Clouthier: Oh, way over. Okay.

Mr. Denis Desautels: Yes. That is the regular level of effort for ICAO in any year. In a normal year, UNESCO would be about the same, if not a bit higher, because it's a bigger organization and other expenses are incurred.

So I think there's a cutoff problem.

Mr. Hec Clouthier: So they don't go by the same year end?

Mr. Denis Desautels: That's correct.

Mr. McLaughlin has just reminded me of the real answer. In UNESCO, they don't work on single years. They work on a biennium. So you prepare the financial statements once every two years.

Mr. Hec Clouthier: Oh, so it's biennially?

Mr. Denis Desautels: Yes, but on average the level of effort for UNESCO is about the same as it is for ICAO, which is around $300,000 each.

All of that money, by the way, is also recovered. Those are—

Mr. Mac Harb: Payable.

Mr. Denis Desautels: The Government of Canada collects for those fees.

Mr. Hec Clouthier: So would this be a request from that particular organization through to the government, and then the government would do a request to you on a cost-recovery basis?

Mr. Denis Desautels: The way it comes about.... For instance, in the case of UNESCO, the Government of Canada had an interest in improving the overall management of UNESCO and the credibility of UNESCO, and a few years back they asked us if we would offer our candidacy to become the elected auditors of UNESCO. So it was a request from Foreign Affairs to let our name stand to be elected, which we were successful at. From that point on, there has been a contract between us and UNESCO, and UNESCO reimburses the Government of Canada for our costs of carrying out that audit.

Mr. Hec Clouthier: The total for international organizations is $267,000. That's quite a leap. I still have a little bit of difficulty trying to rationalize the total hours at 7,000. Don't go over to the last line; just go to the first two, Mr. Desautels. You have $267,000 and 7,000. Am I reading that correctly? Am I correct in saying that's 7,000 hours of auditing done for $267,000? I don't want you to go to the last line on the right.

Mr. Denis Desautels: I'll have to provide you with a separate answer on that. I can't explain the average cost per hour here correctly. There's no reason it should vary for international work in terms of our cost per hour, because we use, reasonably, the same mix of people.

Mr. Hec Clouthier: But there does seem to be one.

Mr. Denis Desautels: I'll have to get back to the committee with more details on that.

Mr. Hec Clouthier: Okay.

• 1705

The Vice-Chair (Mr. John Richardson): Mr. John Finlay.

Mr. John Finlay (Oxford, Lib.): I have a very small question, Mr. Chairman.

Back on pages 40 and 41, there's a word I've never seen before. On page 40 in table 2, “Comparison of Total Planned Spending with Actual Spending for 1998-99”, under “Other Revenues and Expenditures”, it says “Non-Respendable Revenues”. Then when I look at footnote 2, it says, “These revenues were formerly called `Revenues Credited to the Consolidated Revenue Fund”', which I guess is the big pot, is it?

Mr. Paul Forseth: It's the black hole.

Voices: Oh, oh!

Mr. John Finlay: Yes, and then in table 7 on page 41, it says “Non-Respendable Revenues” again, and it's in millions. It's not a great deal of money or anything, but for legislative auditing.... What's that, $1,000?

A voice: It's $1 million.

Mr. John Finlay: Oh, you have millions; that's right. Sorry.

Does it mean “non-refundable” or “non-expendable”? What's “non-respendable”?

Mr. Michael McLaughlin: Perhaps I can explain.

The revenues we receive for having done the audits of UNESCO and ICAO go directly to the consolidated revenue fund, so we're showing those as the revenues we've received. We cannot respend those revenues. Our authority to go ahead and do those audits comes by order in council, and funding is provided to us at that point in time, so the numbers get out of line. As much as we try to make the case as closely as we can at the time we ask for the money from the Treasury Board, if we in fact spend more money on the audit, we recover more money from the organization, but we don't get it back from the Government of Canada as part of our operations.

Mr. Paul Forseth: Like everyone else.

Mr. Michael McLaughlin: Yes, like everyone else.

Mr. Paul Forseth: [Inaudible—Editor].

Mr. Michael McLaughlin: But that's why it's non-respendable. We get the money, but the government has voted us a certain amount of money to do those audits. Whatever we get back goes in the consolidated revenue fund.

Mr. John Finlay: You don't earn anything on it?

Mr. Michael McLaughlin: No, we don't get to spend it again.

The Vice-Chair (Mr. John Richardson): Mr. Auditor General and assistants, I want to thank you again for coming and giving the answers as honestly as you can to us. Would you like a few minutes to wind up or give an overview of the presentation?

Mr. Denis Desautels: No, Mr. Chair, I don't have anything to add at this point. I'm quite satisfied with the exchange. As for the additional information we said we'd give to the committee, we'll do that very quickly.

The Vice-Chair (Mr. John Richardson): Fine, thank you very much. We'll be seeing you in due course over the year. Thank you.

The meeting is adjourned.