PACC Committee Report

Pursuant to Standing Order 108(3)(e), the Standing Committee on Public Accounts has the honour to present its

TWENTIETH REPORT

The Standing Committee on Public Accounts has considered Chapter 10 of the December 2001 Report of the Auditor General of Canada (National Defence: In-Service Equipment) and has agreed to report the following:

INTRODUCTION

The Department of National Defence (the Department) spends a significant portion of its annual budget on in-service military equipment. Approximately $1.5 billion is spent each year on the purchase of spare parts for, and maintenance and repairs of, this equipment. The salaries of approximately 15,000 personnel who manage and support in‑service equipment cost about $900 million. Together, these expenditures represent about 20 percent of the Department’s entire annual budget.

Canadian Forces may be called upon to respond to a variety of situations, sometimes with very little advance warning. If it is to meet these challenges, the Canadian Forces must have, among other things, the right equipment capable of functioning as intended when it is needed. The current international environment, with its volatility and unpredictability, produces reduced response times; equipment readiness has now assumed even greater importance.

Over the years, the Committee has reviewed a series of audits on various aspects of the Department of National Defence. As a consequence, the Committee has developed a strong interest in the Department and the men and women who serve in Canada’s armed forces. Because of this interest and because of the substantial sums of money involved, the Committee decided to examine the results of an audit of the Department’s in-service equipment found in Chapter 10 of the Auditor General’s December 2001 Report. Accordingly, the Committee met with witnesses on 21 February 2002 to further explore the subject. Ms. Sheila Fraser (Auditor General of Canada) and Mr. Peter Kasurak (Principal, Audit Operations) appeared on behalf of the Office of the Auditor General of Canada. Mr. Jim Judd, (Deputy Minister), General Ray Henault (Chief of Defence Staff), Mr. Alan Williams (Assistant Deputy Minister, Materiel), and Lieutenant-General George Macdonald (Vice-Chief of the Defence Staff), represented the Department of National Defence.

OBSERVATIONS AND RECOMMENDATIONS

At the close of testimony, the Auditor General stated that the audit was all about information. As she had indicated at the outset, “good information is the essential first step in good management and without it managing risk is not possible.” It was thus disconcerting to learn that the information needed by the Department to manage the ships, vehicles, and aircraft most important to military operations is “often unavailable,” or “often inadequate, incomplete and inaccurate.”

The Department is acting to correct these deficiencies. It is putting in place a system for materiel acquisition and support functions (Materiel Acquisition and Support Information System, or MASIS). According to the Department’s Assistant Deputy Minister, Materiel, MASIS will look after maintenance and engineering standards for all equipment. The Navy will start using MASIS this year and full implementation is due by 2004. A second project (Canadian Forces Supply System Upgrade, CFSSU), begun in the early 1980s, is intended to provide better management of the Canadian Forces’ approximately $10 billion inventory and is slated for completion this summer.

In light of the Auditor General’s observation that the Department’s “most significant problem is that its information management systems are not up to the job” of supporting equipment management, the development of these new systems is a welcome step. However, these measures represent only a partial solution to the difficulties highlighted by the audit. This is so for two principal reasons.

The best systems available are of little help if they are not used, if inaccurate or partial data is fed into them, or if there is little analysis of, or follow up on, the results. They are, furthermore, of reduced utility if they function in the absence of clear standards and goals against which performance can be measured, reported, and assessed.

The audit found many instances in which existing information management systems were poorly used. The Navy, for example, had not compiled statistics on the availability of its key systems. Lack of data meant that auditors could not determine the maintenance effort required by the Navy to maintain equipment activity rates. The Air Force had stopped producing reports on operational availability in 1999 because of Y2K problems with information systems used to manage data. Auditors were unable to obtain 59% of the post-exercise reports required across the Canadian Forces for 1998-99 and 1999-2000 and reported that:

Departmental officials were unable to confirm whether the missing reports had not been produced or could not be found. Those that were provided … were not specific about the effects of equipment deficiencies on exercises.

Problems in the Navy’s Consolidated Maintenance Information System (CMIS) need to be overcome before useful information can be obtained from it. The Navy’s data on corrective and preventative maintenance hours obtained from CMIS contained “significant errors.” Some maintenance action forms were entered into the system more than two years after they were created and the figures were only estimates. Some data were lost because of bad disks and server crashes. Army brigades do not always prepare monthly reports and those that are prepared are not done on a consistent basis and contain some key differences as a result. The Air Force did not have complete, accurate information on aircraft availability beyond April 1999 because of Y2K problems. The Department’s personnel information management system, implemented in 1997, could not provide accurate information on the percentage of personnel that had completed speciality courses and at what qualification level because the data were either not entered or were not accurate. The auditors had to compile this data manually themselves.

As a consequence of their findings, the auditors came to the conclusion that the Department’s data are “too inaccurate to indicate how ready major equipment is and to determine cost trends,” and that it needs to “improve its information systems and audit the quality of the data they produce.” The Committee agrees and recommends:

RECOMMENDATION 1

That the Department of National Defence develop and implement an action plan to close gaps in its existing information management systems and to ensure that those systems are used consistently and correctly by military personnel. This plan must be submitted to the Committee no later than 31 December 2002.

While the implementation of the Material Acquisition and Support Information System is promising, it will not be fully complete until 2004. In the meantime, the need to improve the management of in-service equipment is pressing and immediate. Although the Auditor General has recommended that the Department take interim steps to improve its ability to manage in this area, the Department has responded only that it “will continue to enhance interim steps.” The Committee believes that greater specificity is required and therefore recommends:

RECOMMENDATION 2

That, in its action plan, the Department of National Defence devote particular attention to the interim steps it will take to improve the information management systems used to support its most important equipment.

The Government of Canada’s new Policy on Internal Audit came into effect on 1 April 2001. The Policy, endorsed by this Committee (7th Report, tabled 5 November 2001) repositioned internal audit as a provider of assurance services for senior departmental management, defining assurance services as:

The Committee believes that there is an important role for the Department’s internal audit function to play in providing assurance that both new and existing systems are properly designed and that the information they provide is reliable for purposes of managing in-service equipment. The Committee therefore recommends:

RECOMMENDATION 3

That the Department of National Defence require its internal audit function to provide senior departmental management with ongoing assurance that existing and new information management systems, such as the Materiel Acquisition and Support Information System, are capable of supporting the management of Canadian Forces equipment.

RECOMMENDATION 4

That, in keeping with the Government of Canada’s Policy on Internal Audit, the Department of National Defence make all internal audit reports on the adequacy of departmental information systems that support equipment management available to Parliament on a timely basis.

RECOMMENDATION 5

That the Department of National Defence include a summary of the results of all internal audits of its management information systems in its annual performance reports, beginning with its Performance Report for the period ending 31 March 2003.

As noted above, the usefulness of even the best designed and operated information management systems can be significantly reduced by the absence of standards and goals against which performance can be assessed. Both the Parliament and the Department need to have a basis upon which to determine whether equipment readiness and the efforts to achieve it are meeting expectations. The Committee thus recommends:

RECOMMENDATION 6

That the Department of National Defence set readiness and maintenance standards for its most important equipment and report performance against those standards in its annual performance report to the House of Commons. This reporting must begin with the Performance Report for the period ending 31 March 2003 and must include a discussion of steps taken in response to performance that has failed to meet expectations.

Lastly, the Committee welcomes the Department’s positive response to the Auditor General’s report and recommendations. Nevertheless, this response was general in nature and tended to cite initiatives already underway at the time of the audit. Little mention has been made of actions taken by the Department in response to individual recommendations. The Committee therefore recommends:

RECOMMENDATION 7

That the Department of National Defence submit a detailed action plan to the Committee that responds to the audit results contained in Chapter 10 of the December 2001 Report of the Auditor General of Canada. This action plan must make specific reference to each of the Auditor General’s recommendations, include target implementation and completion dates for each action, and be submitted to the Committee no later than 31 December 2002.

Because it is important that Parliament be kept informed of the progress achieved by each of these undertakings, the Committee also recommends:

RECOMMENDATION 8

That the Department of National Defence measure, assess, and report the outcomes of its efforts to improve the management of its in-service equipment to the House of Commons in its annual performance reports. This reporting must make specific reference to each of the actions undertaken for this purpose and must commence with its Performance Report for the Period ending 31 March 2003.

CONCLUSION

In his “capstone” report summing up his ten-year tenure, the previous Auditor General told Parliament that

Now, Mr. Desautel’s successor is telling Parliament that:

Without good information on the state of major weapons systems, it is hard to determine how ready the Canadian Forces are for major operations. It is difficult to verify the Department’s repeated assurance that the Canadian Forces are more combat-capable than they were 10 years ago.

The Department did not have sound readiness information ten years ago; with regard to status of its major equipment, it does not have it today. This makes it difficult for the Government and Parliament of Canada, and indeed for the Department itself, to make informed decisions to commit Canadian Forces to major military engagements.

This situation might be minimally tolerable during times of relative international calm — no other organization may have a reputation for resistance to change equivalent to that of a peacetime army. But the situation has altered dramatically. Canadian servicemen and women are being asked to serve in situations of much greater risk. They should only be asked to do so with the best support that can be provided them. The Committee therefore expects the Department of Defence to take corrective action on an urgent basis.

Pursuant to Standing Order 109, the Committee requests that the government table a comprehensive response to this report.

A copy of the relevant Minutes of Proceedings (Meetings Nos. 41 and 53) is tabled.

Respectfully submitted,

JOHN WILLIAMS, M.P.

Chair