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37th PARLIAMENT, 3rd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Thursday, February 26, 2004

0910

The Chair (Mr. John Williams (St. Albert, CPC))

Mr. Gerald Keddy (South Shore, CPC)

The Chair

Mr. Gerald Keddy

The Chair

Mr. Gerald Keddy

Hon. Walt Lastewka (St. Catharines, Lib.)

The Chair

Hon. Walt Lastewka

The Chair

Hon. Joe Jordan (Leeds—Grenville, Lib.)

The Chair

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.)

The Chair

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)

The Chair

Mrs. Marlene Jennings

The Chair

Hon. Shawn Murphy (Hillsborough, Lib.)

The Chair

0915

0920

The Chair

Mr. Jim Judd (Secretary of the Treasury Board and Comptroller General of Canada, Treasury Board of Canada Secretariat)

0925

0930

0935

0940

0945

The Chair

Mr. I. David Marshall (Deputy Minister, Department of Public Works and Government Services)

The Chair

Mr. Odina Desrochers

The Chair

0950

The Chair

Mr. Jason Kenney (Calgary Southeast, CPC)

Mr. Jim Judd

0955

Mr. Jason Kenney

Mr. Jim Judd

Mr. Jason Kenney

Mr. Jim Judd

Mr. Jason Kenney

Mr. Jim Judd

Mr. Jason Kenney

Mr. Jim Judd

Mr. Jason Kenney

The Chair

Mr. Odina Desrochers

Mr. Jim Judd

1000

Mr. Odina Desrochers

Mr. Jim Judd

Mr. Odina Desrochers

Mr. Jim Judd

Mr. Odina Desrochers

Mr. Jim Judd

Mr. Odina Desrochers

1005

Mr. Jim Judd

Mr. Odina Desrochers

Mr. Jim Judd

The Chair

Ms. Beth Phinney (Hamilton Mountain, Lib.)

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

1010

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

Ms. Beth Phinney

Mr. Jim Judd

1015

Ms. Beth Phinney

The Chair

Hon. Shawn Murphy

The Chair

Ms. Beth Phinney

The Chair

Mr. Gerald Keddy

Mr. Jim Judd

Mr. Gerald Keddy

Mr. Jim Judd

Mr. Gerald Keddy

1020

Mr. Jim Judd

Mr. Gerald Keddy

Hon. Walt Lastewka

The Chair

Mr. Gerald Keddy

The Chair

Mr. Jim Judd

The Chair

Mr. Odina Desrochers

Mr. I. David Marshall

Mr. Odina Desrochers

Mr. I. David Marshall

Mr. Odina Desrochers

Mr. I. David Marshall

Mr. Odina Desrochers

Mr. I. David Marshall

Mr. Odina Desrochers

1025

Mr. I. David Marshall

Mr. Odina Desrochers

The Chair

Mrs. Marlene Jennings

Mr. Jim Judd

1030

The Chair

Hon. Shawn Murphy

The Chair

Mr. Jim Judd

1035

Hon. Shawn Murphy

Mr. Jim Judd

The Chair

Hon. Walt Lastewka

Mr. Jim Judd

1040

Mr. I. David Marshall

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Mr. Jim Judd

The Chair

Mr. I. David Marshall

1045

The Chair

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, CPC)

Mr. Jim Judd

Mr. Peter MacKay

Mr. Jim Judd

1050

Mr. Peter MacKay

The Chair

Mr. Jim Judd

The Chair

Hon. Joe Jordan

The Chair

Mr. Jim Judd

Hon. Joe Jordan

Mr. Jim Judd

Mr. I. David Marshall

The Chair

1055

Mr. Alan Tonks (York South—Weston, Lib.)

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

Mr. Alan Tonks

The Chair

1100

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Mr. Peter MacKay

The Chair

Mr. Jim Judd

The Chair

Ms Magali Fournier (Legal Counsel of Mr. Alfonso Gagliano, Fournier associés)

The Chair

Mr. Gary Lunn (Saanich—Gulf Islands, CPC)

1110

The Chair

Mr. Odina Desrochers

Ms Magali Fournier

The Chair

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

1115

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Odina Desrochers

1120

The Chair

Hon. Joe Jordan

The Chair

Mr. Gerald Keddy

The Chair

Mrs. Marlene Jennings

1125

The Chair

Hon. Joe Jordan

The Chair

Mr. Odina Desrochers

The Chair

Ms. Judy Wasylycia-Leis

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 006

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, February 26, 2004

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Chair (Mr. John Williams (St. Albert, CPC)): Good morning, everybody.

We are meeting pursuant to Standing Order 108(3)(g), chapter 3, the sponsorship program, chapter 4, advertising activities, and chapter 5, management of public opinion research of the November 2003 report of the Auditor General of Canada, referred to the committee on February 10, 2004.

Our witnesses from 9 o'clock to 11 o'clock this morning are: from the Treasury Board of Canada Secretariat, Mr. Jim Judd, Secretary of the Treasury Board and Comptroller General of Canada; from the Department of Public Works and Government Services, Mr. David Marshall, Deputy Minister; Madam Yvette Aloisi, Assistant Deputy Minister, Corporate Services, Human Resources and Communications Branch; Mr. George Butts, Director General, Acquisition Program Integrity Secretariat Sector; and Mr. Guy Bédard, Assistant Executive Director, Public Programs and Services Branch at Communications Canada.

At 11 o'clock, Madam Magali Fournier, legal counsel of Mr. Alphonso Gagliano, will be coming forward to make a brief statement.

Now, before we get into the meat of the meeting, I want to declare that for the cabinet documents that were distributed to all committee members on Tuesday, the embargo for everyone else has now been lifted.

However, as we know, that was not much of an embargo, and I have received a complaint from one of the members. Rather than dealing with it now, since we have had the forbearance of Mr. Judd, who is now at this third meeting and we do want to hear from him, we'll deal with that at 11 o'clock.

Mr. Gerald Keddy (South Shore, CPC): I do have a point of order, Mr. Chairman.

The Chair: A point of order, Mr. Keddy?

Mr. Gerald Keddy: Mr. Chairman, with regard to what you're saying about the leaked documents, obviously it's a serious problem, but there's another problem.

We have a situation here where Parliament, and especially this government, has talked a lot about innovation, but you're not going to be able to access the cabinet documents or any of the other relevant documents on the website. Since they're now public documents, I see no reason why they shouldn't be posted on the website so the public at large would be able to access them.

The Chair: Okay. I will refer that to the steering committee later, because that seems a bit complex for my small mind to get it on the website.

Mr. Gerald Keddy: Mr. Chairman, the Hutton inquiry in Britain did exactly that; they posted all the documentation on the website.

Hon. Walt Lastewka (St. Catharines, Lib.): Mr. Chairman, could you tell me what the point of order is?

The Chair: The point of order was that he wanted to discuss the cabinet documents. I said we'll deal with that at 11 o'clock.

Hon. Walt Lastewka: Thank you.

The Chair: The other issue I want to talk about is the testimony of Mr. Guité and Mr. Tremblay that was received in camera about two years ago. As you may recall, that was in camera to the public accounts committee, because it may or may not have prejudiced any police investigations that we thought were ongoing at that time.

The law clerk briefed the steering committee the other day and advised that the testimony in camera was given to the public accounts committee; it wasn't to the individual members of Parliament who were present at the meeting. Therefore, the testimony, while still in camera and still protected, is available to all members of the public accounts committee today. If anyone wants to avail themselves of that information, they may contact the clerk.

Mr. Jordan.

Hon. Joe Jordan (Leeds—Grenville, Lib.): Mr. Chair, further to that point, I did have a conversation last week with our legal counsel. It's my understanding--and I'm not suggesting that this is the time to do it--that we could make the testimony public if, as we're finding out, we may not get any further testimony from Guité without a lot of effort.

I'm simply suggesting that I'm pursuing the legal background on the options of doing that. At some point in the future, we may want to think about that.

The Chair: Madam Jennings.

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): First of all, I'm very pleased that our counsel agreed with the position I put forward on the issue of the in camera testimony being given to the committee and not to individual members. Therefore, it was open to committee members even if they had not been there at the time.

On the issue Mr. Jordan raises, I would propose that the issue be taken up by the steering committee.

The Chair: I appreciate that, and I think that is the appropriate time. If the steering committee felt that we would recommend to bring these gentlemen forward as witnesses, and we're unable to bring them forward for whatever reason, then we would entertain these issues.

Monsieur Desrochers, s'il vous plait.

[Translation]

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): I have something I'd like to say, Mr. Chairman.

You will recall that at the conclusion of the meeting at which the committee heard testimony from Mr. Guité and Mr. Tremblay, a decision was made to wait at least three years before making these documents public or at least until judicial proceedings involving these two individuals had concluded.

I realize that these documents are the property of the committee. Nevertheless, Mr. Chairman, these facts should be verified before these documents are made public.

[English]

The Chair: Thank you very much, Mr. Desrochers. We are familiar with that. As I say, it's a little premature to decide what we're doing, because we haven't even decided if we are going to ask them to come forward.

Madam Jennings, did you have another point?

Mrs. Marlene Jennings: No, I was simply going to make the point you just so judiciously made, Mr. Chair.

The Chair: Thank you.

Mr. Murphy, did you have a point?

Hon. Shawn Murphy (Hillsborough, Lib.): No, I just wanted us to get on to the question.

The Chair: Very good.

Next we are going to table some more documents. After what happened on Tuesday, when I tried to give documents to the committee and withhold them for a couple of days from the rest of the people, when I table documents now at committee they will automatically be released at that time, so that we will not have a repeat of what happened in the past.

I have received this letter from VIA Rail Canada, addressed to the clerk:

Dear Sir:

The Standing Committee has requested the names of individuals within crown corporations who authorized financial transactions described in Chapters 3, 4 and 5 of the Auditor General of Canada's report of November 2003.

VIA Rail is mentioned in Chapter 3 of the report. Three files are cited as follows:

Maurice Richard Series;

VIA Magazine;

Innovation Series.

VIA Rail's participation in the Maurice Richard Series was authorized by the then Chairman of the board of VIA Rail, Mr. Marc LeFrançois, after review by the then Vice-President, Marketing, Ms. Christena Keon Sirsly. Payments by VIA Rail supporting the series were variously authorized by Mr. LeFrançois and Ms. Keon Sirsly.

As regards the magazine project, it was authorized by the Board of Directors at its meeting of February 25, 1997. The project was presented to the board by the then Chief Executive Officer of VIA Rail, Mr. Terry Ivany. Payments for this project were variously approved by Ms. Keon Sirsly, then Vice-President, Marketing and Mr. LeFrançois, then Chairman of the Board.

The Innovation Series project was authorized by Mr. LeFrançois. Mr. Steve Del Bosco, then Vice-President, Marketing authorized the payments.

Yours very truly,

Carole Mackaay,

General Counsel and Corporate Secretary.

That is distributed, tabled, and released.

In addition to that, I have received a communication from the Royal Canadian Mounted Police, again addressed to the clerk:

Dear Mr. Fournier:

I am writing in response to your correspondence of February 20, 2004.

As requested, please find enclosed, in both official languages, a list of current and former Royal Canadian Mounted Police (RCMP) employees who authorized financial transactions in conjunction with the RCMP's 125th Anniversary Celebrations.

Should you require additional information, please do not hesitate to contact Chief Superintendent Bernie Corrigan, Director General, Public Affairs and Information Directorate, at 993-1086. A French version of this letter is also enclosed.

We have here the following list of RCMP employees involved in the approval of transactions related to the RCMP's 125th anniversary. We have Mr. William Beahen, civilian member and force historian, who was chair of the RCMP 125 committee; Mr. Allen Burchill, contractor, retired assistant commissioner, who was a coordinator; Mr. Dawson Hovey, Chief Superintendent, director of public affairs and information. From C Division we have Mr. Marc Beaupré, Superintendent; Mr. Pierre Droz, Superintendent, who was president of the RCMP 125 committee; Mr. Odilon Emond, Assistant Commissioner and Commanding Officer C Division; Stéphane Roussin, public servant, a budget analyst who left the RCMP to join the Canadian Food Inspection Agency; and Mr. Yves Roy, contractor, a retired sergeant who is listed as a coordinator; and, in addition to that, Mr. Roger Daigle, Staff Sergeant; Mr. Richard Dupuis, Inspector; and Mr. Yves Duguay, Inspector.

These documents are now released to the public.

Moving right along, we have the third report of the subcommittee on agenda and procedure of the Standing Committee on Public Accounts.

The subcommittee met on Tuesday, February 24, 2004, and agreed to make the following recommendations: one, that the committee continue with Mr. Jim Judd and the officials from Public Works and Government Services at the meeting of February 26, 2004, from 9 a.m. to 11 a.m.; two, that Mr. Alfonso Gagliano appear before the committee on February 26, 2004, from 11 a.m. to 5 p.m., with a suspension for question period, or next week if he is not available on February 26, 2004; three, that the Subcommittee on the Protection of Witnesses and Testimony meet immediately after the committee meeting of February 26, 2004; and four, that the following persons be tentatively scheduled to appear before the committee: Mr. Ranald Quail and Ms. Janice Cochrane, former deputy ministers of Public Works and Government Services, on Monday, March 1, 2004, from 10 a.m. to 1 p.m.; and Mr. Peter Harder and Mr. Frank Claydon, former secretaries of the Treasury Board, on Tuesday, March 2, 2004, from 10 a.m. to 1 p.m.

¿ (0915)

I'm recommending we adopt that report, even though there are one or two changes we know cannot actually be adopted. For example, number two, Mr. Gagliano cannot be with us this morning.

Mr. Jordan has moved that we adopt the report. Are we in favour?

(Motion agreed to)

¿ (0920)

The Chair: We are now prepared to move on to our witnesses. Mr. Judd, I wish again to offer our apologies for keeping you waiting. We thank you for your forbearance. I think this is the third meeting you have had to come to before you are able to present your report. We thank you for your patience.

Mr. Jim Judd (Secretary of the Treasury Board and Comptroller General of Canada, Treasury Board of Canada Secretariat): Thank you, Mr. Chairman.

In order to explain to members of the committee the role of the Treasury Board and the Treasury Board Secretariat, we've prepared a deck, which I will use to walk members of the committee through about eight years of history in 15 pages, if you will bear with me. This will address the role of the Treasury Board and the Treasury Board Secretariat in the activities related to the sponsorship file.

I will start on page 2 of what I'm referring to as the deck. The purpose of the presentation is to provide an overview of the roles and responsibilities of the Treasury Board and the Treasury Board Secretariat and outline more specifically the role of the Treasury Board and the Treasury Board Secretariat in the evolution of sponsorship activities.

On page 3, just by way of setting a broader context for this discussion, is a reminder to members of the committee that management of the federal public sector is a complex and challenging set of issues. The federal public sector has in it something in the order of 450,000 people and over 100 departments, agencies, crown corporations, and other organizations, including the military, the RCMP, and others. The federal budget for the current fiscal year is set at $180.7 billion. Both the Treasury Board and the Treasury Board Secretariat have differing responsibilities with respect to the various component parts of the federal public sector.

On page 4 we briefly outline for members of the committee the Treasury Board mandate; that is to say, its mandate as a committee of cabinet. Much of that is set out in the Financial Administration Act and relates to the establishment of general administrative policy; aspects relating to the organization of the public service; financial management, including estimates and expenditures; review of annual and longer-term expenditure plans and programs; management and development by departments of certain lands; and aspects of personnel management in the public service.

More recently, as a consequence of transition of government, Treasury Board has also been given responsibility for regulatory issues.

The Treasury Board Secretariat is in effect the department of government that supports the Treasury Board as a cabinet committee. Its job is to support the Treasury Board in promoting good management and oversight in collaboration with departments and agencies of the federal public sector. We work with departments and agencies to ensure that the system's processes and controls are in place and that problems are identified and addressed. Again, as a consequence of the recent transition in government, the secretariat is also now responsible for supporting the new expenditure review committee of cabinet.

Departments, on the other hand, are responsible and accountable for the day-to-day management of their operations consistent with legislation and policies, and for establishing systems, procedures, and controls to deliver on priorities and account for programs and services. When problems occur, departments are responsible for identifying issues and for taking corrective action.

Let me turn now to the process by which Treasury Board submissions are considered. Over the past decade Treasury Board has had before it an average of 1,200 submissions annually. Treasury Board submissions are required when it is so stipulated in legislation, regulation, or policy.

¿ (0925)

The process starts when a department approaches the Treasury Board Secretariat with an issue that requires, or may require, Treasury Board authority. Based on legislative, regulatory, and policy requirements, the secretariat officials will advise on whether a Treasury Board submission is needed or not. If a submission is required, the department is directed to complete a formal Treasury Board submission, and officials of the secretariat will advise on the development of the submission as required.

Formal guidelines for the preparation of Treasury Board submissions run in the order of about 60 pages. They are publicly available on our website, but if the committee wishes, I would be happy to provide copies for members of the committee.

Once a submission is complete, it is presented to the Treasury Board Secretariat. Each submission is signed by the minister responsible for the department requesting Treasury Board approval.

At this point in the process, the submission is reviewed by Treasury Board Secretariat officials and subsequently formally submitted to the Treasury Board for its review, with a recommendation from the secretariat to Treasury Board ministers. Treasury Board ministers would then have the option of approving the submission as it is in its entirety, rejecting the submission, approving the submission but with conditions attached to its approval, or choosing to defer a decision pending clarification of circumstances around the issue at hand.

Once Treasury Board ministers have made a decision, the Treasury Board Secretariat would then inform the department of the Treasury Board decision and any conditions as appropriate. Decisions by the Treasury Board are conveyed to a department in a decision letter that is signed by the responsible senior secretariat official for that file. It is then incumbent on the department to implement the decision and subsequently to report in accordance with any conditions placed on the submission, or other reporting requirements that may exist for that activity.

The process overall is captured graphically on page 7 in the flow chart. It provides a very brief summary of what I've said just now.

On page 8 is a quick word about Treasury Board members. The chair of the committee is the President of the Treasury Board, the vice-chair is traditionally the Minister of Finance, and other ministers are appointed by the Prime Minister. Ministers are appointed as regular members, alternate members, or ex-officio members, as circumstances may dictate.

On page 9, very briefly, I wanted to outline the three main areas where the Treasury Board played a role in the evolution of sponsorship activities. To begin with, Treasury Board has responsibility for setting the general policy framework for contracting and financial management. This includes, of course, policy governing contracting for advertising, public opinion research, and associated delegated authorities issued in 1994.

Secondly, Treasury Board approved incremental funding for the operations of Public Works and Government Services to support incremental communications activities already underway in the department, including, of course, the sponsorship activities that were part of the communications activities of the department at that time.

Thirdly, Treasury Board subsequently approved policy and program changes to address the management failures that became subsequently apparent in the management of sponsorship activities.

On page 10 I start to outline specifically the Treasury Board decisions over the course of approximately eight years as related to the sponsorship file. On September 19, 1996, Treasury Board approved cancellation of appendix Q's reporting requirements to the Treasury Board. Appendix Q is an appendix to the contracting policy of the Treasury Board that covered specifically advertising and polling contracting. We included it here because there's a very tangential mention to sponsorships as an activity covered.

¿ (0930)

Later that same year, on November 21, 1996, Treasury Board approved $17 million for each of fiscal years 1996-97 and 1997-98 to support communications priorities of the Government of Canada. Approximately a year later, on November 20, 1997, Treasury Board approved $18.8 million for fiscal year 1997-98 for communications priorities of the Government of Canada.

Later that same year, on December 11, Treasury Board approved $35 million, which is to say the preceding $17 million and $18.8 million, for fiscal year 1998-99, again to support communication priorities of the Government of Canada.

Less than a year later, on September 24, Treasury Board approved the reclassification of a senior communications coordination position in PWGSC. Later that same year, on December 10, 1998, Treasury Board approved $40 million for one year for communications and sponsorships for fiscal year 1999-2000. A year later, on December 9, 1999, Treasury Board approved $40 million for the next fiscal year, 2000-01. Later that same month, Treasury Board approved an additional $9 million in the supplementary estimates for 1999-2000 for communications activities for Public Works and Government Services.

On February 8, 2001, Treasury Board approved $40 million for sponsorships as an ongoing item beginning in fiscal year 2001-02. On August 28, 2001, Communication Canada was created through an order in council--you may recall this from the testimony of Ms. O'Hara from the Privy Council Office last week. Later that year, on December 6, 2001, Treasury Board approved the transfer of the resources from Public Works and Government Services Canada to the newly created Communication Canada office.

On February 21, 2002, Treasury Board approved $2 million and $1.5 million for Government of Canada sponsorship activities through the fiscal year 2001-02 supplementary estimates B.

On August 7, 2002, Treasury Board approved the results of the Treasury Board president's review of the management of sponsorship, advertising, and public opinion research changes. Later that same year, on December 12, 2002, Treasury Board approved the elimination of appendix Q, and key advertising and public opinion research requirements were strengthened and integrated with the main contracting policy.

On December 12, 2002, Treasury Board approved the terms and conditions of a new sponsorship program for one year, subject to cabinet approval and a determination on the longer-term future of the program.

In 2003 and 2004, sponsorships were tangentially addressed as an issue in the context of considerations about budgetary reductions for fiscal year 2003-04 and ongoing.

If I could turn now to page 13 and move from Treasury Board as a committee of cabinet to the Treasury Board Secretariat, which is to say the officials of the department that supports the Treasury Board, I'd like to address the issue of how the officials of the Treasury Board Secretariat dealt with oversight of policy and program changes relating to the sponsorship activities.

Treasury Board Secretariat officials learned of the breakdowns in controls in sponsorship activities incrementally through successive phases of audit and review, each of which revealed information and questions that prompted more in-depth examination and action. As part of its internal monitoring and control program, Public Works and Government Services Canada launched an initial internal audit of the sponsorship activities in March 2000. The initial audit revealed inadequate administrative controls in the sponsorship activities, and the Treasury Board Secretariat subsequently worked with Public Works and Government Services in developing a management action plan to respond to the results of this internal audit. The work of the secretariat with the department on the implementation of this plan continued through 2000-01.

In March 2002 the then Minister of Public Works and Government Services requested an audit of three Groupaction contracts. The request was made by the then minister to the Auditor General.

¿ (0935)

The three contracts in question, we understand, were not covered by the 2000 audit of Public Works and Government Services. The second review conducted by the Auditor General discovered that the senior public servants responsible for those activities demonstrated disregard for the Financial Administration Act. It was as a consequence of this second review, the review by the Auditor General of the three contracts, that evidence of more serious violations became evident, and an RCMP investigation was requested by the Auditor General.

In response to these findings, a number of additional reviews were launched in May 2002. At the request of the then Prime Minister, the President of the Treasury Board launched a forward-looking review of the management regime for sponsorships, advertising, and polling, which subsequently led to the fundamental redesign of the management of the sponsorship activities, as well as the management of the advertising activities.

The Secretary of the Treasury Board, being me at the time, who had arrived a week after Madam Fraser's audit was tabled in Parliament, wrote to all deputy heads later in May, requesting a review and an attestation as to the adequacy of their control systems in these areas, to the extent that they were involved in any activities in this field.

Separately, Communication Canada completed a review of its management practices and controls, as a consequence of the request from the Treasury Board Secretariat.

Thirdly, Public Works and Government Services Canada launched a backward-looking review—if I can put it that way—of past sponsorship activities, which led to the recovery of some funds from some of the companies involved; disciplinary measures against some of the public servants involved; and the referral by the department of some more sponsorship files to the RCMP.

I turn to page 14 of the deck. In response to the Auditor General's government-wide audit, released February 10, 2004, the President of the Treasury Board has been asked to review three specific areas of activity. One is the aspects of the Financial Administration Act relating particularly to investigatory powers; treatment of malfeasance; and issues around cost recovery and recovery of funds, and so on. The second review the president has been asked to conduct is one on the governance regime for crown corporations, with a view to updating and changing that if required. The third review is, broadly speaking, around the issues of the interface between the political and the public service level.

All three of these reviews are to be completed by September 30 of this year. They will be made public. It is the president's intention to consult widely and broadly in the preparation of the findings of these reviews, including with parliamentarians and various experts in these areas.

Additionally, I might point out that the president has also been asked to do an assessment of the actions of crown corporations cited in the Auditor General's report. This is underway.

On page 15, and more broadly, the government has also abolished the sponsorship program; begun a public inquiry; appointed the special counsel to recover funds; and has undertaken to introduce whistle-blowing legislation before the end of the current fiscal year. These measures are in addition to the work of this committee and the still ongoing investigation by the RCMP.

On page 16 we tried to outline very briefly for members of the committee a series of management policy initiatives that have brought changes to public sector management over the last number of years. Some of them are worth touching on because they have a bearing in respect of how the program and activities in this case would have been evaluated.

¿ (0940)

In 1998 we launched what is called the modern comptrollership initiative, which was initially applied to five large departments, subsequently to 15 departments, and then introduced government-wide in 2001. It was associated with the rationalization of financial information systems; the development of what's called an integrated risk-management framework for departments; and significant efforts to strengthen the recruitment, training, and role of comptrollers in other functional communities, such as auditors, evaluators, and so on, in the public service.

In 2000 the Treasury Board transfer payment policy was revised, putting into place new, stricter guidelines and policies for risk-based audit frameworks and risk-based management frameworks for programs.

In 2001 Treasury Board approved a new internal audit policy, which is of note here because it stipulates now that all government audits must be made public and published on websites. Second, it also stipulates that all audits done anywhere in the government must be provided to the Treasury Board Secretariat on completion. Neither of those provisions existed previously .

In 2001 the Treasury Board passed a policy on internal disclosure and established the public service integrity officer, Dr. Keyserlingk.

Last year, several initiatives were taken, including the establishment of what's called the management accountability framework. Broadly speaking, it's a framework by which we are now assessing departments and agencies on their management capacities based on ten criteria and something in the order of two dozen performance indicators.

In 2003 the Clerk of the Privy Council Office and the Prime Minister issued a formal document on guidance to deputy ministers, and the Treasury Board endorsed and issued a code of values and ethics for the public service.

You may recall as well that Bill C-25, the Public Service Modernization Act, was passed in 2003. It provides for the establishment of the new Canada School of Public Service, which we hope will strengthen learning and development in the public service.

Going back to the role of the Treasury Board and Treasury Board Secretariat, there are a few comments about what has happened in the last three months as a consequence of the transition to the new government. As you may know, the new government has remandated the Treasury Board Secretariat, with the result that a number of operations in the secretariat have now been transferred to the new Public Service Human Resource Management Agency or to Public Works and Government Services. The Treasury Board Secretariat has thus been streamlined and is being restructured to meet a more focused mandate.

Separately, the government also established the Office of the Comptroller General as a distinct office within the Treasury Board Secretariat and directed that departmental comptrollers must sign off on all departmental spending proposals.

A new proactive disclosure policy has also been introduced, applying initially to travel and hospitality expenditures by ministers, deputy ministers, assistant deputy ministers, and so on. That proactive disclosure policy is being extended to other areas, starting yesterday, with reclassification of public service positions.

Finally, on page 18, I just want to make the point that the Treasury Board Secretariat is continuing in its efforts to rationalize both our policies and our reporting requirements. We are also pursuing, with our colleagues in the Public Service Human Resources Management Agency and the Canada School of Public Service, the implementation of a core learning curriculum for the public service. We are continuing in our quest to improve on information management systems and reporting systems, including through voluntary disclosure and proactive disclosure.

That, Mr. Chairman, summarizes the role of both the Treasury Board and the Treasury Board Secretariat to date on this issue.

¿ (0945)

The Chair: Thank you very much, Mr. Judd. We appreciate that very much.

Before we go to questions, Mr. Marshall indicated that he had something he wanted to bring before the committee.

Mr. I. David Marshall (Deputy Minister, Department of Public Works and Government Services): Thank you, Mr. Chairman.

Mr. Chairman, at our last meeting we received a request from your committee to table two internal audit reports, the one from 1996 and the one from 2002, both what was termed as the original version and the version posted on the web. We've done that, Mr. Chairman, and I trust you will find that the two versions are entirely consistent.

In researching the material for the 1996 internal audit, it came to our attention that the audit had been a consequence of a complaint raised by a staff member within Mr. Guité's group raising concerns about how advertising issues were managed. The internal auditor did a review of that complaint and subsequently contracted with the firm of Ernst & Young to do a more complete audit of the group, and that is the internal audit we've tabled.

We would be prepared, Mr. Chairman, if you so wish, to also table the work of the internal audit preceding that official report, if that is of assistance to the committee. I just thought I should bring that to your attention.

As well, Mr. Chairman, we have tabled the names, as we were requested to, of the assistant deputy ministers who Mr. Guité reported to prior to being put in charge of the CCSB group.

That's all I wanted to say, Mr. Chairman.

The Chair: Thank you very much, Mr. Marshall. I have that letter addressed to the clerk, signed by Mr. Marshall, and it reads as follows:

Further to my February 24, 2004 appearance before your committee, I am pleased to provide additional information as requested.

Attached you will find the 1996 Internal Audit of the contracting processes of Advertising and Public Opinion Research Sector. More specifically, the material includes the original audit performed by Ernst and Young which was not translated, as well as the Executive Summary's original version in both official languages and the version released on the Treasury Board web site.

You will also find attached, in both official languages, the 2000 Internal Audit of the Management of Sponsorships at Communications Coordination Services Branch in its original format and the version posted on the web.

Further, the Committee requested the names of two Assistant Deputy Ministers to whom Mr. Guité reported prior to reporting directly to the Deputy Minister beginning in November 1997. These ADMs were: Mr. Richard Neville (ADM - Corporate Services). Mr. Guité reported to Mr. Neville from August 1993 to July 1995. Mr. Jim Stobbe (ADM- Government Operational Service). Mr. Guité reported to Mr. Stobbe from August 1995 to November 1997.

I trust that this information is useful to the Committee.

It is signed by Mr. Marshall.

The clerk understands there is only one copy. However, these are now tabled and will be available for distribution as soon as possible. I will leave it to the clerk to figure out how that's done. That's his job.

There's one thing that was mentioned in there about documents in one language only. Is it agreeable that we have them translated, or do we distribute? What's the wish of the committee? Do you wish them distributed?

Mr. Desrochers, in Mr. Marshall's letter he indicated that the background material was in one language only. Is it the desire of the committee that these documents be distributed or that they be translated prior to distribution?

Is there any comment? No distribution?

[Translation]

Mr. Odina Desrochers: No, I would like them to be in both languages.

[English]

The Chair: Are we agreed that these be distributed without translation?

Some hon. members: Agreed.

¿ (0950)

The Chair: So we have that.

Now we turn to questions.

Mr. Kenney, please, eight minutes.

Mr. Jason Kenney (Calgary Southeast, CPC): Thank you, Mr. Chairman.

Mr. Judd, you testified at page 3 of one iteration of your presentation that:

Treasury Board Secretariat and its officials support Treasury Board in promoting good management and oversight in collaboration with line departments and agencies.

And you write that:

The Secretariat works with Departments to ensure that systems, processes and controls are in place to provide oversight, and that problems are identified and addressed.

You then went on at page 4 of your presentation to report that,

On February 8, 2001, Treasury Board approved $40 million for sponsorships as an ongoing item beginning in fiscal year 2001-2002.

And I can verify that by looking at a memo entitled “Decision of the Treasury Board - Meeting of February 8, 2001”. At page 2 it says “Authority to increase 2001-02 and future years' reference levels by $40M annually for sponsorship related activities.” This is, of course, a memo from the Deputy Minister of Public Works.

But, Mr. Judd, in August of 2000, which would be seven months before the February 8 approval of an additional $40 million, the internal audit of the CCSB was completed, saying there were irregularities in the way contracts were given and that they did not fully comply with the spirit or the letter of Treasury Board rules. The internal audit said:

The management framework for CCSB's sponsorship decision-making process is inadequate and does not ensure that CCSB sponsorship decisions are transparent, compliant with requirements, or appropriate to achieving value-for-money for the Government of Canada.

Further, as an aside, it was revealed that on August 22, then minister Gagliano granted an untendered contract to Lithographie Dickson, a company that had hired his son, Vincenzo, as director of marketing in 1999.

In September 21, 2000, Pierre Tremblay, then chief of staff to former Minister Gagliano, held a retreat at a Quebec golf course with advertising company executives, including Mr. Boulay of Groupe Everest and Mr. Brault of Groupaction, to discuss a strategic communications plan regarding sponsorships because of the internal audit.

In other words, senior people, including the minister and his chief of staff, were clearly aware of the audit, presumably Treasury Board was aware of the internal audit, and yet seven months after the audit Treasury Board approved an additional $40 million for the sponsorship program with no conditions attached, according to the memo I have in front of me.

Could you explain how it is that Treasury Board would approve an additional $40 million for a program that was being severely criticized by the internal audit? How could that happen given what you describe as the mandate of Treasury Board?

Mr. Jim Judd: In this instance, my understanding is that the audit that was conducted by Public Works and Government Services in 2000 led in the summer of 2000 to the development of a management action plan that incorporated 30-odd points of improvement in the management and administration of these activities. This action program that was put together was developed jointly between the Treasury Board Secretariat officials, I understand, and officials of Public Works and Government Services Canada, and it contained in it--my understanding is--a requirement for regular reporting back on implementation of the changes to the management and administration of these activities.

My presumption, therefore, is that based on the premise that the audit had triggered the management action plan to fix the problems identified and that work was underway jointly with Treasury Board Secretariat officials and Public Works and Government Services Canada, the presumption was that the program was being fixed and would therefore be tenable from a management and administrative perspective.

¿ (0955)

Mr. Jason Kenney: You're basically telling us that you believe Treasury Board was aware of the internal audit but believed the problem would be fixed internally without attaching any conditions to their approval in February 2001 of an additional $40 million?

Mr. Jim Judd: I believe the audit of Public Works and Government Services Canada, in the first instance, was made public because of the change in Treasury Board policy earlier that year about the publication of all audits.

Secondly, the management action plan that was developed to fix the problems identified in the audits incorporated, I believe, a requirement for Public Works and Government Services Canada to report back regularly on the implementation of the changes designed to address the problems discovered in the audit. So there were already pre-existing conditions around fixing the program before Treasury Board ministers participated formally.

Mr. Jason Kenney: Mr. Judd, perhaps you could furnish the committee with any documentation about that requirement, because we have here all Treasury Board and cabinet documents related to this February 2001 approval of $40 million. I can find, at least, no condition, no request for further information, nothing of the kind. It looks here in the document like a carte blanche approval, which I find extremely peculiar.

Mr. Judd, let me ask you about membership on the Treasury Board. You specified the membership and that traditionally the Minister of Finance is the vice-chair. Generally speaking, how often does the Treasury Board cabinet committee hold its meetings?

Mr. Jim Judd: In my time at the Treasury Board, which is about the last 20 months as secretary, Treasury Board as a cabinet committee meets normally once a week when the House is sitting. Meetings when the House is not sitting are then scheduled on an ad hoc basis, as business requires.

Mr. Jason Kenney: Is it normal for most members of the committee to attend those meetings?

Mr. Jim Judd: Attendance at the meetings varies from meeting to meeting. As you'll see in the documents that were released, different ministers show up at those meetings.

Mr. Jason Kenney: Perhaps you could help us understand the minutes, because from what we can discern, it appears that Minister Martin attended only one of the thirteen Treasury Board meetings covered in this period that dealt with the public works department or sponsorship. One of thirteen would seem to be an extraordinary low turnout rate for the vice-chairman of the committee.

Is it normal practice for the vice-chair of the committee to appear only at about 5% or 10% of the meetings?

Mr. Jim Judd: My understanding, again, is that traditionally the vice-chair attends, as required, in the absence of a chair. If the chair is there, the vice-chair normally does not attend. And I believe for all the meetings concerned, the chair, that is to say the President of the Treasury Board, was presiding over the committee.

Mr. Jason Kenney: Thank you.

The Chair: Thank you very much, Mr. Kenney.

Monsieur Desrochers, s'il vous plaît, huit minutes.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

Mr. Judd, Mr. Marshall, Mr. Butts, Ms. Aloisi, thank you once again for making yourself so available to the committee in conjunction with this investigation.

Mr. Judd, I've read pages 10, 11 and 12 of your presentation closely. There are frequent references to “ Treasury Board approved...”. I have a slight problem with that. A document has come to light and approval was granted on November 20, 1997, not by Treasury Board, but by the Prime Minister at the time, Mr. Jean Chrétien.

To your knowledge, did the Prime Minister often step in for the President of the Treasury Board and authorize federal expenditures?

[English]

Mr. Jim Judd: I'm relying on my own understanding, not having been there at the time myself. My understanding is the submission for the funding came from the Minister of Public Works and Government Services Canada. The Prime Minister's signature on the submission was an indication of approval for access to funds that had been set aside in the fiscal framework for this activity. It indicated, I understand, his approval of the funds.

À (1000)

[Translation]

Mr. Odina Desrochers: I understand that you weren't there at the time, but I'm asking you the question nevertheless. In your opinion, was it normal for the Prime Minister to step in for Treasury Board and approve important submissions like the ones made in conjunction with this infamous program?

[English]

Mr. Jim Judd: As I tried to explain earlier, the submission for the program was put forward by the Minister of Public Works and Government Services at the time.

My understanding is that the Prime Minister's signature on the submission indicated his concurrence with the use of funding that had been set aside in the fiscal framework to support these activities. Again, that's my understanding.

[Translation]

Mr. Odina Desrochers: As a rule, whose signature should have appeared following that of the Minister, Alfonso Gagliano? That of Paul Martin, or that of the President of the Treasury Board? Why did the Prime Minister sign the submission? Does that happen often?

[English]

Mr. Jim Judd: Submissions to Treasury Board are signed by the minister responsible for the department that is seeking the approval of Treasury Board. If the Minister of National Defence required Treasury Board approval for something, it would be the Minister of National Defence that would sign the submission.

The same is true for any other portfolio or minister. The minister responsible for the department that is requesting the approval of Treasury Board would sign the submission.

[Translation]

Mr. Odina Desrochers: Mr. Judd, you indicated in your slide presentation that as part of its work, Treasury Board is called upon to follow up on a daily basis on the activities of the various departments. The Auditor General maintains that in the case of the Public Works' Sponsorship Program, there apparently was no follow up action taken. Who as a rule at Treasury Board should have been responsible for doing the follow up? I would imagine that someone was responsible. You say that the Minister forwards a submission for approval. I imagine that Treasury Board, which is responsible for managing the overall budget envelope, inquires from time to time as to how the sums allocated are spent. What can you tell me about the relationship between Treasury Board and a particular minister, for instance, the Minister of Public Works?

[English]

Mr. Jim Judd: Let me try to give you a bit of context first.

As I pointed out, outside of the presentation today, the federal public sector has in it over 100 departments, agencies, and organizations, with 450,000 people employed in them. Treasury Board Secretariat staff is fewer than 900.

The Treasury Board Secretariat works with departments and agencies on an ongoing basis. In the case of the Department of Public Works and Government Services, I would refer you back to the Auditor General herself in her report where she said, I think,

To achieve its objectives, PWGSC has established a fairly sophisticated system of internal controls and accountability reporting. ...we have also found that the Department's systems of internal controls are generally reliable.

The degree to which the Treasury Board Secretariat would be actively engaged with a department or an agency under a particular program or activity, and so on, would depend on a risk assessment by the secretariat, and given the nature of the Department of Public Works and Government Services, an organization of 14,000 employees spending billions of dollars annually, with a reputation for good control systems and processes, and also a reputation for an effective internal audit, it would not have been regarded, I suppose, as a high-risk venture in that broader context.

[Translation]

Mr. Odina Desrochers: However, in the documents that have now been released, we see that some ministers were raising questions about the sponsorship program. Clearly, there was some discussion taking place at Treasury Board. Who at Treasury Board was responsible for doing the follow up at Public Works? And who at Public Works was accountable to Treasury Board for the manner in which the funds were spent? You talk about an overall budget, but I'm interested in a more detailed examination of the facts. If you can't answer the question today, I would appreciate an answer at a later time. You say that the Treasury Board Secretariat is a large operation. I can understand that, but I imagine that there are mechanisms in place that allow officials to keep the Treasury Board Secretariat informed of ongoing activities.

During the period of time covered by the Auditor General's audit, who at Treasury Board was responsible for following up on the activities of Public Works and who, at Public Works, was accountable to Treasury Board for the activities taking place within the department?

À (1005)

[English]

Mr. Jim Judd: First of all, my colleague Mr. Marshall has referred to a 1996 audit that was done within the department. Under the existing policy at the time, there was no obligation on the part of Public Works and Government Services, or for that matter any other department or agency of government, to advise the Treasury Board Secretariat of internal audits. That has been changed in the year 2000 with the new internal audit policy.

When the Treasury Board Secretariat became aware of the audit done by Public Works and Government Services in 2000, officials of the secretariat engaged with officials of Public Works and Government Services on a review of the audit and the development of the action plan to fix the problems that had been identified in the audit. That work continued over the course of that year and the subsequent year and then subsequently over time with the results of the Auditor General's initial review.

[Translation]

Mr. Odina Desrochers: I'd like the names of the officials, Mr. Judd.

[English]

Mr. Jim Judd: We can endeavour to uncover that through our archives.

The Chair: You can submit that to the clerk, please, Mr. Judd.

Merci beaucoup, Monsieur Desrochers.

Ms. Phinney, please, eight minutes.

Ms. Beth Phinney (Hamilton Mountain, Lib.): Thank you very much, Mr. Chairman.

My questions are for Mr. Judd. Our role here is to not only find out why these irregularities happened, but to find who is responsible and how we can prevent them from happening again.

My questions come from people in my riding, accountants, business persons, people who are interested and have to use services of accountants, etc.

Who hires the auditors for the ministries, for the different departments? What are their qualifications, particularly for Public Works?

Mr. Jim Judd: Internal auditors, within departments and agencies, are hired by the departments and agencies who hire them. The standards for auditors in evaluations are set out in Treasury Board policies.

I should add as well that in the last several years Treasury Board ministers have approved the expenditure of an additional $60 million to bolster the number and quality of internal auditors in the federal government. The rate at which we are producing internal audits, as a consequence, is going up. As they are produced, they're all being made public.

Ms. Beth Phinney: These appointments, or this hiring, is not approved by Treasury Board.

Mr. Jim Judd: No. It's the responsibility of the deputy minister or the deputy head of the organization to ensure that he or she has auditors and an effective audit program.

Ms. Beth Phinney: I only have a limited amount of time.

Is there any regular communication or training program given by the Treasury Board with the internal auditors in the departments?

Mr. Jim Judd: Yes. The Treasury Board Secretariat is not itself an audit organization, but we do have what's called an office of audit excellence, which does a lot of work with the audit community within the federal government on standards, best practices, recruitment drives in the private sector to hire people, and so on. There is quite a community within the government.

Ms. Beth Phinney: On page 13, when you were talking about the Treasury Board Secretariat oversight policy on programs, you mentioned the 2000 internal audit, and then when your department realized there was a problem there.... Whether it was only with the three agencies, I don't know--whatever the problem was that you found there. But you didn't discover the more serious problem of the whole thing at that time when your people were working with the Public Works internal auditors. The words you used were “you didn't discover”; it was not discovered.

That's hard to imagine. You're paying internal auditors and you have people from Treasury Board working and you didn't discover what was going on until the Auditor General did her inquiry. Why do we have all of these auditors then if it takes the Auditor General to find the problem?

À (1010)

Mr. Jim Judd: The short answer, as I understand it, is that the audit that was done in Public Works and Government Services in 2000 did an assessment of a certain proportion of sponsorship files that were then being administered in Public Works and Government Services.

Ms. Beth Phinney: Wouldn't your auditors think that if these three were a problem, mightn't there be a problem somewhere else?

Mr. Jim Judd: No, no. Sorry. The 2000 audit done by Public Works and Government Services took a cross-section of sponsorship files. The three files in question, the ones that were found to be problem cases by the Auditor General when she did the audit in early 2002 at the request of the Minister of Public Works and Government Services, had apparently not been covered in the sample of files that had been looked at in the year 2000 audit.

Ms. Beth Phinney: I understand that, but I find it surprising that they didn't say, well, if there's a problem somewhere else, there might be a problem here.

Are the auditors in Public Works full-time employees, or do they just come in to do an audit?

Mr. Jim Judd: Normally, in government departments--

Ms. Beth Phinney: I just asked what they do in Public Works.

Mr. Jim Judd: Public Works, I expect, like most departments, would have a staff of full-time internal auditors, but it would also use external companies to bolster their work.

Ms. Beth Phinney: Then it does have some full-time people.

Mr. Jim Judd: Yes.

Ms. Beth Phinney: Now, would these full-time auditors know what money is coming into the department?

Mr. Jim Judd: Yes.

Ms. Beth Phinney: Then you would think that they would be required to keep track of where it was going if they knew it was coming in.

As Ms. Jennings so aptly explained sometime last week, we had the Department of Public Works--make it a little box--and beside it there was the activity that was going on with the sponsorship program sort of outside it, so the auditors didn't seem to know what was going on.

Notwithstanding all the items you mention on page 16 for all the things you've done to strengthen public sector management, what has been put into place by Treasury Board, possibly in the last couple of weeks or maybe in the past year or two, to prevent this from happening again? We have a serious situation here. The internal auditors couldn't find it, Treasury Board didn't see it, and they had to go to the Auditor General. What has been put into place in the last couple of weeks?

Mr. Jim Judd: Actually, I would say that if you go back over the last four years, you'll see the initial problems were discovered in the audit by the department. It was the department or the minister responsible for the department who asked the Auditor General in because of his concerns about the potential problems.

Ms. Beth Phinney: Excuse me, Mr. Judd, but you are talking about how they were discovered afterwards and how you called in people afterwards. How can we prevent this from happening so we don't have to have auditors coming in to find out where all this money has gone because we didn't even know it was happening all these years?

Mr. Jim Judd: That is very interesting and the most germane question at hand here, I would say. It is a subject I've discussed on a number of occasions with the Auditor General herself. She has, I think, described this situation to me and possibly before this committee as an anomaly. One would obviously hope that it's an absolutely unique anomaly.

But you had a department operating with what was regarded by the Auditor General as an effective system of controls and oversight and an effective internal audit in place, and this still happened. As the Auditor General said, I think, it wasn't because of a lack of rules in place. There were rules, there were systems, and there were processes, but they were subverted. In her report she attributed the problems to essentially two factors, as I recall. One was that people circumvented the internal controls and systems, and the other was that the role of Parliament was not respected by those administering the activities.

À (1015)

Ms. Beth Phinney: Maybe, Mr. Chairman, somebody could follow up by asking whether the internal auditors should not be checked once in a while. Maybe the auditor shouldn't be an internal one.

The Chair: I have for many years, Ms. Phinney, suggested strongly to the President of the Treasury Board that the internal audit function be given to the Treasury Board and that these internal auditors be seconded to departments and moved around quite frequently. In the private sector internal audit is quite often fast-tracked to senior management. Here, where you're being asked to critique the boss, it sometimes puts a little bit of constraint on these people. It is something we may want to follow through on as a recommendation coming out of these hearings.

Hon. Shawn Murphy: Mr. Chairman, that was the recommendation for last year.

The Chair: We've done it once before; we may have to do it again, Mr. Murphy.

Ms. Beth Phinney: Petition it.

The Chair: I think it's something that requires serious consideration.

Mr. Keddy, please, for four minutes, because we're now on round two.

Mr. Gerald Keddy: Thank you, Mr. Chairman.

To Mr. Judd, you mentioned the Auditor General's report, and I had no intention of asking a process question, but I just can't help but pick up on Ms. Phinney's comment.

The Auditor General stated very clearly it wasn't because of a lack of rules or understanding of the rules or lack of understanding of the Financial Administration Act on behalf of civil servants. So I would assume without question that the civil service is run, at the end of the day, by the ministers of the department, and if anybody wanted to circumvent the rules there would be a ruling or an order coming down from the minister, the politician responsible for that department.

I don't want to take a lot of time on this.

Mr. Jim Judd: I think the vast majority if not all public servants would not react that way to a direction from the minister.

Mr. Gerald Keddy: I appreciate your answer.

I have a quick question. Have you ever heard of this so-called privileged administrative authority within Treasury Board?

Mr. Jim Judd: No.

Mr. Gerald Keddy: Thank you.

I have a specific question on the involvement of Canada Communications Group in the $1.3 million deal to print documents in 1998 for the Canada Firearms Centre. The government had a self-imposed deadline of October 1 for the registration forms to be printed. They couldn't meet the deadline. They knew they were being squeezed by the NAFTA regulations. It was a fairly large contract, $1.3 million. Basically, seven government officials attended a meeting in July of that year--probably a secret meeting, I would assume--to discuss how to fast-track this project and how to deal with the NAFTA regulations that required the printing of contracts to be processed through the advance contracts awards notification process, giving it some competitive bidding.

The decision was made to split the contract into 15 separate contracts, circumventing NAFTA, and the contracts were now less than $70,700. We've had some discussion on this before. The bidding process could be set aside under government contract regulations in 1997, and the justification for this contract splitting was the privileged administrative arrangement between the Canada Firearms Centre and the Canada Communications Group. But even with the contract split up, there were still two contracts that came in for over $272,000 and another for $153,000.

Do you have any idea when this was made public, what the Treasury Board did to stop the splitting of the printing contracts and to crack down on the Canada Firearms Centre? Was anybody disciplined?

À (1020)

Mr. Jim Judd: I'm afraid you've caught me cold on this one. If I could, I'd like to get more details on it and get back to you--

Mr. Gerald Keddy: If you could get back to us with the specifics on--

Hon. Walt Lastewka: I have a point of order.

I think our agenda item is sponsorship.

The Chair: Our agenda item is sponsorship, but Mr. Keddy is entitled to ask general questions of the Treasury Board at the same time.

Mr. Keddy.

Mr. Gerald Keddy: I think the Canada Communications Group in 1998 was your predecessor, that kind of ancient ancestor of sponsorship, right?

I guess the other issue we should find out, Mr. Judd, is whether Treasury Board was ever lobbied to create or extend this privileged administrative authority.

The Chair: Sorry, I didn't keep an eye. Just answer quickly.

Mr. Jim Judd: I'll get back to you with answers on those.

[Translation]

The Chair: You have four minutes, Mr. Desrochers.

Mr. Odina Desrochers: Thank you, Mr. Chairman.

Mr. Marshall, after you took over as Deputy Minister, the government moved to abolish the Sponsorship Program. That happened in December. To your knowledge, were any contracts awarded to the advertising agencies targeted in the Auditor General's report after Ralph Goodale's appointment? Did you hear of any of the advertising agencies identified in the AG's report that may have received contracts?

[English]

Mr. I. David Marshall: Mr. Chairman, yes, there were contracts given to some agencies mentioned in the Auditor General's report. What we tried to do was ensure that any of the agencies that had been referred to the RCMP because of significant suspicion of wrongdoing were not awarded contracts. However, since the Auditor General's report has come out, we have placed a stop-work order on two agencies, Media IDA Vision and Groupe Everest. We have checked with the Auditor General's office on other agencies that are mentioned in the report, and we've received confirmation that while they may have been at the tail end of the decisions taken, they were not really participants in wrongdoing.

So we have been watching this and trying to make sure we don't continue business with--

[Translation]

Mr. Odina Desrochers: You say that you imposed a moratorium on contracts to Everest and Media/IDA Vision. When was this moratorium imposed? Can you give me a date?

[English]

Mr. I. David Marshall: The stop-work order was imposed, I believe, either late last week or in the middle of last week, some point like that--quite recently, within the last ten days or so.

[Translation]

Mr. Odina Desrochers: In the meantime, were contracts awarded to Everest and Media/IDA Vision, given that the decision not to award any more contracts to these firms was made only last week?

[English]

Mr. I. David Marshall: No, they did receive contracts, Mr. Chairman.

I should point out that Media IDA Vision was very cooperative during all the audits. We found their records to be in excellent condition. When we asked them to return money for interest on funds they had held, they did so immediately. So until the Auditor General's report came out, there was really no substantive reason not to do business with them, but we are checking that out.

You might be aware that the group has now been purchased by an international conglomerate. We're hopeful that the management there will again be strengthened.

[Translation]

Mr. Odina Desrochers: Was Everest treated the same way?

[English]

Mr. I. David Marshall: Yes, because Media IDA Vision and Everest were under the same ownership, so the firms were treated as though they were of the same condition.

[Translation]

Mr. Odina Desrochers: Can you tell us what contracts were awarded to Everest and to Media/IDA Vision before the moratorium was announced?

À (1025)

[English]

Mr. I. David Marshall: Mr. Chairman, those contracts are available on our public website. If it's helpful to the committee we can summarize them and provide them to you.

[Translation]

Mr. Odina Desrochers: Thank you very much.

The Chair: Thank you very much, Mr. Desrochers.

You have the floor for four minutes, Ms. Jennings.

Mrs. Marlene Jennings: Thank you, Mr. Chairman.

Thank you very much for your presentations. I have three very brief questions for you.

Mr. Judd, on page 4 of your presentation, you refer to...

[English]

Treasury Board approvals for sponsorship activities. The very first item says “On September 19, 1996, Treasury Board approved cancellation of Appendix Q, Reporting requirement to the Treasury Board”. I'd like an explanation of what that reporting requirement was and where the decision was made to cancel that reporting requirement.

On page 5, the very first item says “On December 12, 2002, Treasury Board approved the elimination of Appendix Q of the Contracting Policy, and key advertising and public opinion research policy requirements were strengthened and integrated with the main Contracting Policy”.

I'd like to know exactly what that contracting policy was that was found in appendix Q. Why was there a decision, or what were the grounds presented for eliminating appendix Q of the contracting policy?

Comptroller General, in the last three months, according to your statement, that has been created as a distinct office within Treasury Board and it has functional approval over the appointment of comptrollers within different departments. Did that ever exist before? If so, what was the reasoning for removing that function of oversight?

The last question is that the internal audit of CCSB, reported in August 2000, concluded significant problems. Nonetheless, on February 8, 2001, Treasury Board approved $40 million for sponsorships annually as of the fiscal year 2001-02.

I have a difficult time understanding why, when an internal audit shows significant problems, and I'm using the words judiciously, there could be a justification for ongoing or even increasing annual expenditures for that particular program. If an ordinary Canadian is having difficulty properly managing money, and your child gets a $10-a-week allowance and you see that your child the very first day spends it all on candy or whatever, when you realize that, you don't approve--“Well, I'm going to tell you this is how you should be spending it, but I'm going to increase your allowance to $20 a week”. So I'm grappling with how we were able to do that, given the problems.

Thank you.

Mr. Jim Judd: Very quickly, and in order, I hope, appendix Q was an appendix to the general contracting policy of the Treasury Board. The change that was made in 1996 was to eliminate a quarterly reporting requirement on advertising activities of the government. We referred to appendix Q in the documents here just because appendix Q, I think, has part of a sentence that touches on sponsorships; we took a very expansive view in going through our records as to what we would bring forward. That was essentially it.

I can get you a copy of the policy as it then existed, and the rationale for its elimination is actually included in the submission to Treasury Board, which is the document you already have available. It was subsequently eliminated in its entirety in 2002, as a consequence of the review the Treasury Board did of the management of advertising, polling, and sponsorship activities. Pretty much everything was changed about how those things were done in the realm of advertising and sponsorships. Appendix Q literally became almost like a human appendix—no longer necessary because of the broader changes.

On your third question, the Comptroller General's office was established, I think, in the late 1970s, as an independent office reporting to the President of the Treasury Board. In the June 1993 reorganization of government, it was eliminated as a separate office, and the role of Comptroller General was combined with my role. The government that took office in December last year re-created the status quo entity with a separate Comptroller General.

With respect to your fourth question, on the relationship between the August audit of CCSB and the funding subsequently provided by Treasury Board six months later, as I tried to explain earlier, the audit that was done by Public Works and Government Services had, I think, as part of its response a 37- or a 39-point action plan that was intended to fix the problems identified. There was a requirement in that action plan, which was jointly developed by Treasury Board Secretariat officials and Public Works, to report on that progress. My recollection is that the minister responsible at the time, Mr. Gagliano, did report in January of 2001 on the implementation of the action plan, therefore providing some sense of security that the problems were being addressed, as was originally envisaged.

À (1030)

The Chair: Thank you, Mr. Judd.

If you have a number of questions, or are expecting a long response, please keep your preamble fairly short. We have now gone almost six and a half minutes, and some people may not get the opportunity to speak if we keep going overtime.

Mr. Murphy, please, for four minutes.

Hon. Shawn Murphy: Thank you, Mr. Chairman.

I have perhaps one question for Mr. Judd and Mr. Marshall on the whole chain of accountability. As I understand our system of government—and I don't want my question to be interpreted as trying in any way to absolve the political people who should be held to account—we have in our system a professional bureaucracy to deliver the programs the politicians approved for the executive and the House of Commons. But to simplify it, we have here a rogue department that was set up in the Ministry of Public Works outside of normal channels and procedures. It was staffed by people I consider to be somewhat unscrupulous. They in turn did not follow the Financial Administration Act guidelines and policies. What a person would expect to happen did happen—the treasury of the taxpayer was pillaged.

But overseeing that, we have the bureaucracy and the deputy minister. In this case, we have the deputy minister who established that rogue department or rogue cell, or whatever you want to call it; he staffed the people who worked in this department, and he would be responsible for developing the checks and balances, so that this type of behaviour should not have occurred.

I really have three questions, Mr. Judd. Again, I don't want to absolve in any way the political...because there was some very sinister political interface in this operation. But in this case—and I would like a very concise answer—isn't the deputy minister, from a bureaucratic point of view, responsible for this mess?

My second question is, what mechanisms are there in the system to hold the deputy minister to account?

My third question is, was the deputy minister held to account in this case, and what disciplinary measures were enforced?

The Chair: Take a couple of minutes.

Mr. Jim Judd: The deputy minister is responsible for the administration and management of the department.

I believe Mr. Quayle appeared before this committee approximately two years ago to discuss this dossier. I've read his testimony, and I understood that his view was that he felt that he had an appropriate system of controls, systems, information, and so on--as the Auditor General has indeed said about the department--to assure himself of the adequate functioning of the department as a whole. It was he, the deputy minister in question, who was the one who asked for the audit in 2000. So he was doing his requirement.

Deputy ministers are held to account through performance assessments, performance contracts that they have with the Clerk of the Privy Council, who is the head of the public service. More recently, however, to provide greater clarity around all this, as I mentioned in my opening remarks, we have--

À (1035)

Hon. Shawn Murphy: That's not answering my question. How is the deputy held to account? You're getting off the topic, sir.

Mr. Jim Judd: He was brought before this committee. He testified before this committee as to his actions.

From his vantage point, this was--and I think the Auditor General has made the same point--in an organization of 14,000 people, spending billions of dollars annually. As I think Madam Fraser said, I think we have to appreciate that this is a very small group in a very large department. I would suspect that most people's attention was focused on the 14,000 other employees, rather than this small group of people.

So he has accounted for his behaviour and actions on this file in front of this committee. Whether you judge that to be adequate or not is a determination you would have to make.

The Chair: Thank you very much, Mr. Judd.

I'm sorry we ran out of time there, Mr. Murphy. As I said, we will try to ask people to be succinct with their questions and with the answers.

Mr. Lastewka, please, for four minutes.

Hon. Walt Lastewka: Thank you very much, Mr. Chairman.

I want to review the sequence of events and systems in place.

It's my understanding that in November 1996, this program got approval. The Auditor General led me to believe, as Mr. Murphy was saying, that this group was given a mandate. I asked the question, “Who approved the mandate on how this group was to operate?” There was no answer. So that's one of the questions. This group, I guess, was outside the normal Department of Public Works and Government Services total system.

The Auditor General also said that the internal audit system of the Department of Public Works is very efficient, and I thanked her for that. But if this was a new program, starting in 1996, that started off with $17 million, and then $35 million, and then $40 million a year, my question is: When we start a new program or a new group like this, why weren't there internal audits done sooner? Why wasn't the Auditor General in there sooner, and not have to be asked to go in? There seems to be something missing here, that we start this group, we start this program, and four years later there's an internal audit.

Both of you have other experiences. Would you start a group or start an organization like this and not have an internal audit within a year? Why wasn't there an internal audit earlier? Why wasn't this caught earlier?

Mr. Jim Judd: I'll just answer very briefly, sir. My understanding of this group was that it was engaged broadly in communications activities in the Department of Public Works and Government Services, of which sponsorship was only a part. It was one activity of a series of communications-related activities that they were doing.

The request for funding that was approved was to do more of everything in the realm of communications, including sponsorships. If you look at the Auditor General's report, in terms of the spending on sponsorships, I believe in that fiscal year there was only $300,000 spent on sponsorship activity per se.

Secondly, as Mr. Marshall mentioned earlier this morning, there was an audit of this done in 1996. Unfortunately, because of the then-existing policy, Treasury Board Secretariat was not aware, because there was no obligation on the part of departments to share their audits, which has now changed since the year 2000.

I don't know if Mr. Marshall would want to add anything to that.

À (1040)

Mr. I. David Marshall: Thank you, Mr. Judd.

Mr. Chairman, I think if you look back on it in hindsight, a lot more things could have been done.

The only thing I would add to Mr. Judd's answer is that the sense at the time was that this program--again, we're talking now about sponsorship, compared with advertising, which was ongoing--was something of great urgency. It was something that was not normally conducted in terms of the unity debate, and so forth. So there was a sense, as I understand it, at the time of a need to allow this activity a little more leeway and scope to make decisions quickly and to get the program executed quickly.

This is something that happens time and again in organizations when there's a sense of high profile, high urgency. A lot of people step out of the way and don't exercise what you might call “normal controls”. That possibly was what was happening.

The Chair: Thank you very much, Mr. Lastewka. I'm sorry, your four minutes are up.

Ms. Wasylycia-Leis, please, for four minutes.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Just four?

The Chair: Just four.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

I want to begin by addressing Mr. Judd's suggestion that the government officials have taken a very expansive approach in terms of the documents provided to us.

I found the documents completely sanitized. Even titles of programs were eliminated. I found it very hard to make any sense of it with the way in which so much has been blacked out, and very hard for us to get a true picture. So it's just creating more questions than alleviating concerns.

I think the question that everybody is asking today of both of you is how could this have happened? I know you're trying to answer it in different ways, but let me start by saying that no one is suggesting guilt or complicity at this point. We're trying to figure it out. We're trying to suggest that for this kind of thing to have happened, somebody let their guard down. Then, normal protections were bypassed. The steps to rigorously oversee this whole part of government were eliminated or were bypassed.

So the question to you, as heads of the two key components of this whole scandal, is how and why were those kinds of checks and balances ignored?

Marlene's question--

The Chair: I'm going to interrupt.

Ms. Judy Wasylycia-Leis: Let me just give two examples.

In regard to Marlene's question, the reporting requirements back in 1996, I didn't find that a sufficient answer, something about advertising. There is something here about some things being taken away, some regulations being dropped, some standards being ignored. Why? Is there something within government these days that is causing that? Why, as CBC's Newsworld reported the other day--

The Chair: Ms. Wasylycia-Leis, it might be more important if you get the answer, because you've asked the question several times.

Ms. Judy Wasylycia-Leis: True, but we're having a hard time getting those answers.

The Chair: I'm going to give them one minute each to basically respond to that.

Mr. Judd and Mr. Marshall.

Mr. Jim Judd: The documents that have been provided to the committee represent, I think, an unprecedented disclosure of cabinet documents to Parliament. I can't think of another instance, personally, when this has been done.

With respect to the particular question about appendix Q, the reporting requirement that was eliminated was for advertising. We made a reference to it in the documents simply because appendix Q had a tangential reference to sponsorships. At the time that the reporting requirement for advertising was eliminated, as far as I know, there was very little, if any, sponsorship activity taking place in the Department of Public Works or elsewhere.

The Chair: Mr. Marshall.

Mr. I. David Marshall: Mr. Chairman, I guess the most relevant part I could answer of the question is why did the normal controls not pick this up?

Of course I'm now into the realm of speculation, which is very dangerous, but my commercial and administrative experience tells me that when something like this happens and you have a very small group doing something very high profile or of very high importance to an organization, there is a tendency to say “Give them some running room. Let them do what they need. There seems to be a great urgency here. This is very important to people who are responsible at the highest levels.” This has all the hallmarks of that.

If you look at a lot of commercial problems that have occurred.... The Allied Irish Bank lost $600 million because one trader in Chicago was returning a lot of profit and the normal reporting controls were not exercised. There are lots of reasons.

Everything here has the hallmark of people sort of saying “Let this thing run, it seems to be very important,” and normal controls weren't applied.

À (1045)

The Chair: Thank you, Ms. Wasylycia-Leis. I apologize, but four minutes is four minutes.

Mr. MacKay, four minutes.

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, CPC): Thank you, Mr. Chair.

Officials, Canadians are very angry.

Quite frankly, Mr. Marshall, that last question on “just let things run”, we're talking about hundreds of millions of taxpayers' dollars.

I'm looking at this report, and I'm assuming that you all read this report. This report specifically refers--in this instance, November of 2003--as it did in the past, to breaking the rules and Parliament being kept in the dark.

Specifically, Mr. Judd, it talks about your responsibilities at Treasury Board Secretariat, wherein the department must ensure that grants and contributions or other transfer payments are not, and do not become, a substitute for financing a corporation's operating or capital requirements.

It goes on to observe that there was a persuasive lack of documentation in the files--little evidence, in many cases, that the government had received value for its sponsorship, and in some cases no evidence whatsoever. None.

I want to go back to a question, though, posed by my colleague from Calgary. He asked you about meetings in which the Prime Minister, then finance minister, was present, between 1993 and 2002. I believe that in that exchange it was disclosed that Mr. Martin was only in attendance at one of thirteen meetings, approximately 8% of the time, as finance minister and vice-president of the Treasury Board. Those meetings dealt specifically with sponsorship. He was there 8% of the time.

Is that usual, compared to the current practice? Does Mr. Goodale, for example, now attend those meetings regularly? Was there someone there in his stead? Was there someone else acting on his behalf at that time? Were there other meetings that were meant to bring him up to speed as to what happened at the meetings in which he wasn't in attendance?

Mr. Jim Judd: As I tried to explain earlier, my understanding is that the vice-chairman of the Treasury Board is traditionally the Minister of Finance. By tradition and practice, the vice-chairman attends the meeting to preside over the meetings in the absence of the chair, who is the President of the Treasury Board.

That has been generally my experience, which is not that extensive. I've only been Secretary of the Treasury Board since May 2002, but that's my understanding over time.

Mr. Peter MacKay: Well, given the time that you've been in that role, I guess you can't fully answer that question.

The Auditor General's report also speaks, specifically, of the role of crown corporations. She references, in fact, VIA Rail. In some transactions in the sponsorship program, she says “money laundering”. There's a reference to money laundering in that report. Do you care to comment on that?

Mr. Jim Judd: Those issues are in fact under review now by my minister and officials of our secretariat. I might point out that some action has already been taken and announced publicly in this respect.

The Treasury Board's and the Treasury Board Secretariat's view into a crown corporation is by law fairly limited, because they are established as arm's-length agencies from government. Our oversight role principally relates to establishing audit standards and bylaws for the corporation and for approving corporate plans for them, but they're deliberately designed to have an arm's-length status from government.

That being said, sir, I would make reference to the other undertaking that has been assigned to my minister, which is to review the whole regime of governance for crown corporations generally. That is the set of issues we will be reporting on to Parliament and the public at the end of September, in terms of changes that should be applied systemically.

À (1050)

Mr. Peter MacKay: Are you familiar with the term “stacking”? Have you ever heard a reference to the word “stacking” in the context of a sponsorship recommendation?

The Chair: Mr. MacKay, I'm sorry, but your time is up.

Have you got a yes or no to that, Mr. Judd?

Mr. Jim Judd: It's yes, but it's a complicated answer.

The Chair: Perhaps you could write a letter to the committee and explain this complex situation.

Mr. Jordan, please, four minutes.

Hon. Joe Jordan: Thank you, Mr. Chairman.

I just want to point out to the other members of the committee that as we're learning things and have other questions, we have to realize that we can bring any of these witnesses back as we go through. We're not locked into any schedule here. I think we need to understand that.

To Mr. Judd and Mr. Marshall--because essentially the question will end up going to both of you--there are certain internal mechanisms that we would have hoped would have triggered this. There have been questions about why this didn't come to the surface sooner, and there are some structural issues here. We certainly need to have much more discussion about those.

But there would also have been external triggers to this. One of the very strictly enforced regulations in tax law is the 15% management fee. When I first heard some of the details about this, as it came to me through the press, I heard that they took 21%, and 18%. I thought there was no way those companies would have done that, because there's no quicker way to end up in front of somebody from Revenue Canada than if you break that 15% barrier. In fact, companies don't even like to get too close to it.

Then when I started looking at the details of this, in some cases 15% commissions were broken down into 13% and 2%, or 12% and 13%. The companies at the other end of this went to great pains to make sure they didn't get caught up with Revenue Canada. I think all companies do that; I'm not trying to say they did anything wrong. But if somebody had tried to claim a commission above that, it would have triggered that.

That leads to my question. When I asked other witnesses about these fees and commissions that totalled $100 million.... Out in the public domain, certain people refer to this as tens of millions of dollars. At the other end, people talk about $600 million. As Mr. MacKay says, Canadians are angry. We don't know yet, in terms of this $100 million, what was a management fee, in some cases, for simply passing a cheque from A to B, or what was legitimately a fee for service. When I asked about that I was told in some cases it was for producing brochures, and in some cases for producing videotapes.

I'm just wondering if Treasury Board or Public Works are doing, are aware of, or intend to do some kind of forensic audit on that $100 million to find out what actually ended up somewhere, at the end of the day, and what seems to have vanished. Some clarity on that issue would be helpful.

The Chair: Please make a reasonably brief response of about a minute, Mr. Judd.

Mr. Jim Judd: The very short answer is that the Department of Public Works has engaged special counsel on recovery of funds.

Hon. Joe Jordan: Will that be made public?

Mr. Jim Judd: I assume so. But part and parcel of the work involved there will be parsing the funds that were spent as to whether they were for fees, commissions, services, production costs, etc.

Mr. I. David Marshall: As Mr. Judd has said, we have special counsel engaged in recovery, where the counsel will go into the companies' books as well as our own. Our own accounting records, just to put it on record, show that of the $255 million spent on sponsorships, about $83 million is recorded as being for production costs, as compared with fees.

The difficulty, of course, is that the invoices are not clear. A lot of times evidence isn't available on the file. So you cannot say with any confidence that $83 million was really for production. But how much of it was really for production and how much wasn't has yet to be established. Some of it will certainly be for production.

The Chair: Thank you very much, Mr. Jordan.

I have a couple of questions of my own.

Mr. Marshall, you mentioned this morning the 1996 audit that was motivated by a complaint from a member of the particular program. Can you provide to the subcommittee on witnesses the name of that person, whether the person is still working for the Government of Canada, and if not and they left directly from the program, the reason why the person left the government?

Mr. Tonks.

À (1055)

Mr. Alan Tonks (York South—Weston, Lib.): Mr. Chairman, I really have to raise a point of order. I find this very frustrating. We have a committee that is attempting to extract information in a deliberative and accumulative way, with very complex interrelationships. If we accept that this is a non-partisan committee, in the sense that we're trying to bring out the truth, it isn't fair--if I may say with great respect--for the chair to be interjecting right now above the questioners' list.

Each questioner has a sense of where the questioning is going. I have been attempting to get on that questioners' list, and I don't know why some members are asking second questions when members who are on the committee don't even get to ask one question. I find that very unfair. I hope I'm not being unduly critical.

The Chair: I mentioned before, Mr. Tonks, at other meetings, that, first of all, the members are recognized in the order in which they put their names forward to the clerk. For example, Ms. Phinney mentioned it first, and she was the first speaker. That's the order. I don't determine who speaks first, second, third. It is as they indicate to the clerk, not to me.

With regard to the order of concern, or the order of precedence, you may note that I went.... It's always the official opposition, the second party, then the government. Ms. Wasylycia-Leis was not here for the first round, so she did not get eight minutes. You may have noticed that.

Then it goes back to here, to the Bloc. And I normally recognize two, but this morning I recognized three from the Liberals. Ms. Wasylycia-Leis got her four minutes, and then back to Mr. MacKay. I did not recognize the Bloc; I came back to the Liberals.

We're now running out of time, and the chair always takes the last few minutes.

So that's the rationale.

Mr. Alan Tonks: Still on my point of order, Mr. Chairman, could I indulge the chair that even when it comes to adjudicating with respect to who the next person is on the list from the Liberal side or this side, it still should be the person who is on the list--

The Chair: It is the person on the list.

Mr. Alan Tonks: --and you shouldn't make the decision to put another member in front of a member who is on the list.

The Chair: I don't.

Mr. Alan Tonks: Well, you just indicated that you did.

An hon. member: This is not a point of order, Mr. Chair, this is a waste of time.

The Chair: So your point--

Mr. Alan Tonks: Well, it may be a waste of time to you, but other people have been elected to Parliament just the same way you have.

The Chair: Order.

I will discuss this at the steering committee. I take your concern, and I appreciate your concern. I do my best to ensure that everybody speaks. Normally we restrict the opening statement to five minutes, but because of the concern, Mr. Judd had half an hour. If it hadn't been for that, you would have had your....

Mr. Alan Tonks: And I say that, Mr. Chair, with the greatest respect.

The Chair: I appreciate that. Thank you.

I'm going to ask two or three questions.

Mr. Marshall, did you get the first one? I want to know who put the original complaint forward, and I want the name submitted to the subcommittee, not to this committee, because we're not going to make it public. I want to know if that person (a) left the government, and if so, why, or (b) moved to another department, and when.

Two, with regard to the people who have worked in this program, again, I would like the names submitted to the subcommittee. I would like to know if they are still working for the Government of Canada, and if they left the employ of the Government of Canada directly from the sponsorship program, I would like to know the reason why they left the employ of the Government of Canada.

Mr. Judd, I have a question for you. In the report on cabinet documents...and I'm quoting from, it looks like, January 27, 2004, because that's a handwritten comment. It mentions that the report highlights the Auditor General's report, which of course the government had at that time, and says:

Report highlights number of issues: ... role of Crown corporations (especially VIA) in some transactions of sponsorship program--“money laundering”

Now, “money laundering” is not the Auditor General's term. Do you agree that this is Treasury Board's definition?

Á (1100)

Mr. Jim Judd: I'm neither an accountant nor a lawyer, Mr. Chair--

The Chair: It's in your report to cabinet.

Mr. Jim Judd: As reported by....

The Chair: By Treasury Board Secretariat to cabinet.

Your words, or Treasury Board's words, have been added, to read “money laundering”.

I'm quoting right here from a document. I can't tell you exactly where to find it in 30 seconds, but the reference number at the top is 4-2015-0--

Mr. Jim Judd: Okay, I have it with me.

The Chair: Money laundering is not the Auditor General's terminology. Is that your terminology?

Mr. Jim Judd: It's in quotations.

The Chair: I appreciate that.

Mr. Jim Judd: It would have been our language.

The Chair: Okay.

My next question is that two years ago, when the Auditor General said that every rule in the book was broken, what did the Treasury Board do in response to that statement? Did you do anything, or did you just pass it on to the department?

Mr. Jim Judd: I've tried to outline some of the steps that the secretariat and the Treasury Board took. I'd be happy to expand on that in writing, if you wish, Mr. Chairman.

The Chair: Well, okay. I would appreciate that.

Finally, the Prime Minister always explained this as a program of selling Canada to Quebec. We now had the Minister of Environment saying that it has to be a national program, and that he was ensuring that some money was spent on Vancouver Island. Was this a program to sell Canada to Quebec, or was this a national program?

Mr. Jim Judd: I gather it was a national program. Expenditures were made across the country, predominantly in Quebec.

The Chair: Okay.

I think we are actually running out of time, ladies and gentlemen. I do apologize to those who didn't get a chance to speak.

Madam Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: On a point of order, could we just make sure that we state in the minutes that we reserve the right to call the witnesses back?

The Chair: Oh, yes, we always have the right to call the witnesses back.

I'm going to excuse the witnesses....

Mr. MacKay.

Mr. Peter MacKay: Mr. Chair, on a point of order, you had earlier referenced the possibility that Mr. Judd might be given the opportunity to explain the term “stacking.” I think that would be very good for the edification of the committee.

The Chair: Is that to be complex, or a very short statement, or a long letter? Which is it?

Mr. Jim Judd: Mr. Chairman, I can try to do that very quickly.

“Stacking” is a term that was used at the Treasury Board in the redefinition of policies around here. What it means is that we ask departments to ensure that if they are providing money to an organization outside of government, that organization has an obligation to inform the department of any other public funds it may be receiving from elsewhere in the federal government, provincial government, or municipal government, to avoid what we would call “stacking”, which is several departments or several levels of government putting money into the same initiative or program.

The Chair: Thank you, Mr. Judd.

We are going to excuse the witnesses.

We have an order of the committee at 11 o'clock. We intended to go to Mr. Gagliano. I will then call Madame Fournier forward.

The clerk advises me that while his name is Mr. Fournier, there is no conflict and no connection.

Some hon. members: Oh, oh!

Á (1103)

Á (1105)

The Chair: After we deal with that, Ms. Wasylycia-Leis has indicated to me that she has an issue she wishes to raise. We will deal with that after we deal with Madame Fournier.

The Chair: I call the meeting back to order.

We welcome Madame Fournier, who is a lawyer in Montreal with the law firm that is representing Mr. Alfonso Gagliano.

The clerk distributed to all committee members yesterday an e-mail from Mr. Pierre Fournier in both official languages, which I understand all committee members have. I'm not going to read it, but it will be released to the media right away.

Madame Fournier, you wished to make a statement. The floor is yours.

[Translation]

Ms Magali Fournier (Legal Counsel of Mr. Alfonso Gagliano, Fournier associés): Thank you, Mr. Chairman.

Members of the committee, the firm of Fournier Associés represents Mr. Gagliano and I am here today to make several requests.

First, as you may no doubt have guessed, I am asking that a new date be set for Mr. Gagliano's appearance. If we're to believe what we read in the papers, this request for a delay has already been granted. I have brought with me the agendas of Mr. Pierre Fournier and Mr. Gagliano so that we can decide today when to reschedule the former minister's appearance.

There are two reasons in fact for requesting a postponement. As I understand it, committee members have received the e-mail from Pierre Fournier addressed to the Clerk of the committee, Mr. Fournier, outlining our reasons for wanting a new date set for Mr. Gagliano's appearance. I won't revisit these reasons, since you have a copy of this letter. I believe it is self-explanatory, unless you want more details, in which case I'll be happy to answer your questions.

The second request concerns the testimony given in committee with respect to chapters 3, 4 and 5 of the Auditor General's report. We would like to receive a copy of the committee transcripts. I don't know whether they exist, but we would like a verbatim transcript of these committee proceedings so that Mr. Gagliano is aware at all times of the testimony given, obviously as quickly as possible, and so that we are not required to be present at every single meeting to hear all of the witnesses.

These are our two main requests, the first of which has already been granted.

[English]

The Chair: Thank you very much, Madame Fournier.

I consulted with the two vice-chairs of the committee yesterday, and as you are aware, the committee has agreed to defer the appearance of Mr. Gagliano to a later date. We will discuss that with you and Mr. Gagliano, if you can provide that information that you have regarding the availability of counsel and Mr. Gagliano. We will discuss that and set a date in conjunction with you.

With regard to your second request, first of all, you asked for the cabinet documents. We will give you a copy to take back with you. As far as all testimony is concerned, we will provide you with it either in actual written format or the web links to pick it up, including, of course, the testimony by Mr. Quail and Janice Cochrane, deputy ministers a couple of years ago. We cannot give you the testimony regarding Mr. Guité and Mr. Tremblay, because that was given in camera.

So I would like to thank you on behalf of the committee for coming forward today. We do recognize that everyone has a right to have counsel present--not represented by counsel, because we do not allow counsel to speak at these meetings.

Mr. Lunn, you have a question.

Mr. Gary Lunn (Saanich—Gulf Islands, CPC): Thank you, Mr. Chair. I have just a couple of quick points.

Obviously Mr. Gagliano is not going to be here today. Are there any other documents that you would...?

Á (1110)

The Chair: Mr. Lunn, we are not getting into asking the legal counsel without Mr. Alfonso Gagliano being here, whether to require the production of documents, and so on. We're not going to go down that road at this time. You can ask that question of Mr. Gagliano when he appears before the committee.

This is only a request for a deferral, nothing else.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: In the short e-mail I received yesterday, there was some mention of the possibility of discussing with Mr. Fournier a date on which Mr. Gagliano might be available. I haven't heard any date mentioned. I'm curious about something. How long as Mr. Fournier been acting as counsel for Mr. Gagliano?

Ms Magali Fournier: I would sumbit to you that...

[English]

The Chair: No, we're not asking that. It's not for us to ask these kinds of questions, Mr. Desrochers. We have it in the e-mail that the counsel will not be available. He doesn't return until March 13, and I think March 16 is off the calendar as well. The steering committee will decide, in consultation with Mr. Gagliano and counsel, as to when he will appear. It's not for us to ask questions regarding the nature of Mr. Gagliano and his counsel.

Thank you so much. We do appreciate you coming forward.

The next point we're going to deal with before we dismiss is that Ms. Wasylycia-Leis approached me with a complaint regarding the embargo that was breached and what appeared in the Globe and Mail yesterday.

Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

I just wanted to raise a concern, since we had this--

The Chair: If I could interrupt, I know there are quite a number of people contemplating leaving the room, and I have just received a letter in both official languages from the Auditor General. I haven't read it myself, but I understand from the clerk that she wants it tabled right away. I'm going to now read this letter. It's to myself, Mr. Williams, as the chair of the committee:

Dear Mr. Williams:

At the hearing of February 19, 2004, I undertook to provide the Committee with additional information on our findings regarding certain Crown corporations.

The scope of our examination did not include the entire sponsorship, advertising, or contracting operations of any Crown corporation. We examined only the transactions of the Sponsorship Program of Public Works and Government Services Canada that indicated a direct link with a Crown corporation. As I mentioned in my letter to the Committee dated February 18, 2004, based on the documentation available, we identified a small number of such transactions.

In the course of our examination, we identified a few transactions with the National Arts Centre and the National Capital Commission. We found that these transactions were generally supported by better documentation, including signed agreements and post mortems, and the files contained evidence of deliverables. Where commissions were paid, we saw evidence of work performed. Any issues resulting from our audit of these transactions were not judged to have been of significance to Parliament and were therefore not recorded in our Chapter 3--The Sponsorship Program. In determining the significance of transactions to be reported, we considered the following factors: the level of documentation such as contracts and agreements; evidence of a business case; the evaluation of services (i.e. post-mortem reports) and the nature of any commissions paid. Our findings were communicated to the management and audit committees of these organizations.

Regarding the Royal Canadian Mint and the Canada Lands Company Limited/Parc Downsview Park Inc., no Sponsorship Program transactions came to our attention.

I trust that this information will be useful to the Committee. I would be pleased to assist the Committee in its future deliberations.

Yours sincerely,

Sheila Fraser, FCA

A copy was sent to the clerk, and the document is tabled and released.

My apologies for interrupting you, Ms. Wasylycia-Leis. The floor is now yours.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

I just wanted to raise a concern with the committee about the breach of the embargo we agreed to on Tuesday morning. You presented a motion or a recommendation, Mr. Chair, that we accept the confidential cabinet documents, Treasury Board documents, and that we release them to the press gallery on the understanding that they would be embargoed until this morning. I know that at the time Marlene Jennings spoke against that motion and raised concerns about the fact that once they were in the public domain, they would be out. I spoke against that, and I feel troubled that we agreed to the flow of information with the embargo attached and that it was breached. It would appear to have been breached by the article referring to the cabinet documents that was in the Globe and Mail February 25.

I suppose there is a related concern here, and that is how the press gallery could have even begun to copy all the documents in time for each member of the media to obtain the documents. It does raise questions about, perhaps, the leak being from another source, but notwithstanding that, there is a concern here that I think we should address and include in our future deliberations.

Á (1115)

The Chair: Madam Jennings.

Mrs. Marlene Jennings: I'm very pleased that Ms. Wasylycia-Leis has raised this question. Of the members who were here on the day the cabinet documents were presented to this committee, I was the only one who argued that those documents should be available to members of the committee and that the committee, through its steering committee or its subcommittee on witnesses and protection, should determine which, if any, of those documents should be put into the public domain. It was precisely because of my concern that there could be leaks and that the embargo would not be respected and that in fact it's this committee that should determine what should and should not be made public.

Ms. Wasylycia-Leis raises an interesting point, which is that the leak may not have come from the press gallery. It may have come from somewhere else. One thing is certain. Had the members of this committee been in agreement with me, we would have been able at least to exclude the press gallery as the source of a leak. At this point in time we're unable to do so.

So I would suggest that in future, besides those documents we already know are in the public domain or are not sensitive, for any document we consider may be sensitive and may have information that we as a committee, not as individuals, deem is not pertinent to our mandate and the goals of our hearings, we determine whether or not we are going to release them publicly, in the same way the in camera hearings were held with two former public servants, and the committee in its wisdom determined that it would not release that testimony. There's no difference in my mind between documentary evidence and testimonial evidence.

The Chair: Thank you, Ms. Jennings.

Next is Monsieur Desrochers, followed by Mr. Jordan and Mr. Keddy.

[Translation]

Mr. Odina Desrochers: Listen, I don't think we should confuse the term “in camera” with “embargo”. These are two entirely different things. To my knowledge, Ms. Jennings, your Prime Minister has asked that the process be transparent and democratic. Journalists currently attending these proceedings are also intent on uncovering the reasons for the situation that is detailed in the AG's report and that has brought us here today.Therefore, when members receive documents, it's important that journalists receive copies of them as well. We cannot ensure the transparency of this process if one party is kept... That can't happen.

As for the in camera rule, we could debate that at some length, but as far as the documents turned over to the Public Accounts Committee are concerned, I feel that they should be turned over to journalists as well to assist them in their work. Otherwise, it would be very easy for a member to take parts of these documents that are not for publication and to tell you something different. In my view, we're here to get to the bottom of this matter. The government has stated very clearly that it wants the process to be transparent. Therefore, let's be transparent and turn over the documents to members and to the press at the same time. In so doing, we'll avoid the problems we're facing here today.

Á (1120)

[English]

The Chair: Merci, Monsieur Desrochers.

Mr. Jordan, please.

Hon. Joe Jordan: Thank you, Mr. Chair.

I have a tendency to agree with my colleague. Initially we had a problem because the clerk sent out some information, and that was deemed to have been tabled at committee, and it went to press. Then we found out that the faxes weren't all complete. We fixed that by saying we would table all information at committee in the normal way. I think that fixed that problem.

I was confused as to why we needed an embargo of this. I'm not concerned about the press having this information. I'm concerned about a situation where some of them had it and some of them didn't. I think the best solution to that is it's tabled at committee and then it's a public document. I don't think we need to get into an embargo.

I think Ms. Jennings's caution in this case was warranted. There may be cases when for whatever reason, which I can't anticipate here today, we may want to change that. But I think that needs to be the absolute exception. The default position is that it's tabled here and it's public.

The Chair: Mr. Keddy.

Mr. Gerald Keddy: I would concur with Mr. Jordan. I think the issue here is fairly simple. Once it's tabled as a public document, any member of the public can get access to that document through an Access to Information Act request. We're not preventing anybody from seeing anything.

My comment earlier was that all of it should be posted on the website, the same as the Hutton inquiry in Britain. The fact that someone broke the trust of the committee and leaked the documents is a greater issue. You can finger-point on that one all day and not come up with the answer.

It's quite simple, when we have issues that are delicate or personal in manner, we have a process to deal with that, and that's in camera. We have all kinds of processes to deal with the issue.

The Chair: Let me add my two cents, because the chair was involved here.

The rationale is, as you know, as I have said and as Mr. Jordan pointed out, we're not floating documents out into the public domain. They will be tabled here. At that point in time, they will be public.

I thought perhaps it was better to make the exception for the stack of cabinet documents which we didn't have, such as paragraph references like the Auditor General has. They were only a stack of documents of 1,000 or 1,500 pages, or whatever there was.

I really didn't want to see blood on the floor as they were all fighting over the sole copy that we had. I thought that if we distributed it to the 17 members of the committee, I could say “embargoed at the press gallery”.

What I found out later was my definition of “embargo” was not their definition of “embargo”. I thought “embargo” was I'll give a copy to the press gallery, they will then make copies and on Thursday morning--this morning--hand it out. “Embargo” to them means you can look at it, but you can't quote it. We found out from the Globe and Mail yesterday, and perhaps others, that it ends up in the newspaper.

Now I believe, because of the serious complaint that has been made, and because these were cabinet documents and it was the first time they had been released, that if the embargo was broken--because I understand the press gallery had people sign, saying “I understand this is embargoed”--that we should ask the Globe and Mail to come forward here and tell us, did they get it from a source or did they break the embargo?

I don't think we can go beyond that. If they broke the embargo, that's contempt of Parliament. If they say they got it from a source, then I don't think we could even go as far as names. We've heard all kinds of things about that, but I think the point is that we should take this seriously. I think the Globe and Mail should tell us, did they break the embargo or did they not?

Madam Jennings.

Mrs. Marlene Jennings: I want to make a point here, and it's a point that our senior counsel, Mr. Walsh, made very clearly.

The powers, authority, and mandate of this committee come from Parliament, not from the Prime Minister. That the Prime Minister, in this case, has decided to make public cabinet documents that normally remain confidential is unprecedented. It's the first time in history that has been done.

He does so stating, in the views and aims and goals of transparency, etc., that it's not incumbent on the authorities and the decisions of this committee. It is this committee that determines its rules and procedures in its own wisdom.

The point I attempted to make was that precisely because it was unprecedented, I felt this committee should have the opportunity to see those documents before they became public documents. It would have been an exception to the general rule that when a document is tabled with committee, the members get it and so does the public. It would have been an exception.

My support for that exception was based on the fact that it was unprecedented that cabinet documents' confidentiality be lifted. It would not have precluded the documents becoming public at one point, but it would have ensured that at least the members of this committee get our mandate from Parliament and not....

[Translation]

Mr. Desrochers, I don't behave that way when you're speaking. Kindly show a little respect for me. I saw the gesture you made and I'm quite capable of interpreting the meaning behind it. I simply want you to be as courteous and respectful of me as I am of you.

In conclusion, Mr. Chairman, I would say that I'm asking for an exception to the rule. The committee is master of its rules and procedures. It's not the Prime Minister's job to dictate them to us.

Á (1125)

[English]

The Chair: Mr. Jordan, Monsieur Desrochers. And I ask that all members respect the integrity of all members—we are responsible people here.

Mr. Jordan.

Hon. Joe Jordan: Mr. Chair—and I will defer to my colleague from the NDP—given that we tried on the fly to make a call about how this entered the public domain, and given that it was going to enter the public domain in its totality eventually, I don't think we need to drag in anyone from the press here to have that conversation.

I think that in the future, if we go with the rule that tabling here is public.... Also, keep in mind that every time we put something on that table, a rugby game breaks out. I know, Mr. Chair, what you were trying to do. It's the cabinet documents. They're in. We get them in “one-sy, two-sy” now. I think we'll be fine.

But I'll defer to my colleague. It's her point.

The Chair: Monsieur Desrochers, and then we'll have the final point by Madam Wasylycia-Leis.

[Translation]

Mr. Odina Desrochers: An embargo means that the document will not be released for a period of 48 hours. In any event, the documents' contents will have already been made public. That's why I asked that when a document is tabled here in the Public Accounts Committee, it also be turned over at the same time to members of the press.

We shouldn't start putting up roadblocks. Even if we called in representatives from the Globe and Mail or from other media organizations, it wouldn't change anything. Forty-eight hours down the road, the information is released anyway. I have to say that there have been so many leaks coming out of certain parliamentary committees that we would never be done with calling witnesses if we opted for this course of action.

[English]

The Chair: I'll give you the last word, Madam Wasylycia-Leis. Perhaps we could take this up at the steering committee to make a final determination, but let us hear your last comment.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

I'll leave it for the steering committee to make the final decision, but I would recognize and support Mr. Jordan's recommendation that we let it go at this point. Given how difficult this issue is and the new ground we're forging, I would suggest we perhaps leave it.

I just wanted to make sure we talked about it, that we acknowledged that Marlene Jennings had pointed this out initially, and acknowledged that most of the media respected the embargo, that we did have apparently one breach, and that we needed to address it.

The Chair: Thank you very much.

This meeting is now adjourned. It will be followed, after a ten-minute recess, by a subcommittee on witnesses, which is one member from each party. Therefore the meeting is adjourned, and I ask that the room be cleared.