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37th PARLIAMENT, 3rd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Monday, March 1, 2004

1025

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

The Chair

1030

Mr. Ranald Quail (As Individual)

The Chair

Ms. Janice Cochrane (President, Canadian Centre for Management Development)

1035

The Chair

1040

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, CPC)

The Chair

Mr. Ranald Quail

Mr. Paul Forseth

The Chair

Mr. Ranald Quail

The Chair

Mr. Paul Forseth

Mr. Ranald Quail

1045

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

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

1050

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

1055

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Ms. Janice Cochrane

Mr. Odina Desrochers

Ms. Janice Cochrane

The Chair

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

1100

Mr. Ranald Quail

Mrs. Marlene Jennings

Mr. Ranald Quail

1105

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Joe Comartin (Windsor—St. Clair, NDP)

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

The Chair

Mr. Ranald Quail

The Chair

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

1110

The Chair

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

The Chair

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

1115

The Chair

Mr. Joe Comartin

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Vic Toews (Provencher, CPC)

1120

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

The Chair

Mr. Odina Desrochers

Mr. Ranald Quail

1125

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

The Chair

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

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

1130

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

The Chair

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

Mr. Ranald Quail

Mr. Alan Tonks

Mr. Ranald Quail

Mr. Alan Tonks

Mr. Ranald Quail

Mr. Alan Tonks

Mr. Ranald Quail

1135

Mr. Alan Tonks

Mr. Ranald Quail

Mr. Alan Tonks

Mr. Ranald Quail

Mr. Alan Tonks

Mr. Ranald Quail

Mr. Alan Tonks

The Chair

Mr. Jason Kenney (Calgary Southeast, CPC)

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

1140

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

The Vice-Chair (Mrs. Marlene Jennings)

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

The Vice-Chair (Mrs. Marlene Jennings)

The Chair

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

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

1145

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Ranald Quail

Hon. Joe Jordan

The Chair

Hon. Joe Jordan

The Chair

Mr. Marcel Proulx (Hull—Aylmer)

Mr. Ranald Quail

Mr. Marcel Proulx

Mr. Ranald Quail

Mr. Marcel Proulx

Mr. Ranald Quail

Mr. Marcel Proulx

Mr. Ranald Quail

Mr. Marcel Proulx

Mr. Ranald Quail

Mr. Marcel Proulx

Ms. Janice Cochrane

1150

Mr. Marcel Proulx

Ms. Janice Cochrane

Mr. Marcel Proulx

The Chair

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

1155

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

The Chair

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

1200

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Ranald Quail

The Chair

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Ms. Janice Cochrane

1205

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Ranald Quail

Mr. Joe Comartin

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

1210

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

Hon. Walt Lastewka

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Hon. Walt Lastewka

1215

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

The Chair

Mr. Ranald Quail

The Chair

Hon. Walt Lastewka

The Chair

Mr. Ranald Quail

The Chair

1220

Mr. Vic Toews

The Chair

Mr. Vic Toews

The Chair

Mr. Vic Toews

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

The Chair

Mr. Paul Forseth

1225

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

The Chair

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

The Chair

Hon. Joe Jordan

Mr. Ranald Quail

1230

Hon. Joe Jordan

The Chair

Mr. Ranald Quail

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Hon. Joe Jordan

The Chair

Mr. Ranald Quail

1235

The Chair

Ms. Janice Cochrane

The Chair

Mr. Vic Toews

The Chair

Mr. Vic Toews

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

Mr. Jason Kenney

Mr. Ranald Quail

1240

Mr. Jason Kenney

Mr. Ranald Quail

Hon. Joe Jordan

Mr. Odina Desrochers

The Chair

Mr. Jason Kenney

Mr. Ranald Quail

The Chair

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

1245

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

The Chair

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

1250

Mr. Ranald Quail

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

Mr. Ranald Quail

The Chair

Mr. Joe Comartin

The Chair

Mr. Joe Comartin

The Chair

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

1255

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

Mr. Vic Toews

Mr. Ranald Quail

The Chair

Mr. Vic Toews

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Alan Tonks

1300

Mr. Ranald Quail

Mr. Alan Tonks

Mr. Ranald Quail

Mr. Alan Tonks

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

1305

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Joe Comartin

Ms. Janice Cochrane

Mr. Joe Comartin

Mr. Ranald Quail

Mr. Joe Comartin

The Chair

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mrs. Marlene Jennings

1310

The Chair

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

The Chair

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

1315

Ms. Janice Cochrane

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

Ms. Janice Cochrane

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

Hon. Walt Lastewka

Mr. Ranald Quail

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

1320

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

Mr. Ranald Quail

The Chair

Mr. Ranald Quail

The Chair

Mrs. Marlene Jennings

Mr. Ranald Quail

Mrs. Marlene Jennings

1325

Mr. Ranald Quail

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

The Chair

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

Mr. Ranald Quail

Mr. Odina Desrochers

The Chair

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

Mr. Ranald Quail

Mr. Paul Forseth

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 007

3rd SESSION

37th PARLIAMENT

EVIDENCE

Monday, March 1, 2004

[Recorded by Electronic Apparatus]

À (1025)

[English]

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

First of all, our apologies for the delay. Fire alarms are fire alarms and have to be taken seriously. I understand we have the all-clear, so now we're down to business.

Pursuant to Standing Order 108(3)(g), we are dealing with 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 today are, as an individual, Mr. Ranald Quail from Ottawa, Ontario, and from the Canadian Centre for Management Development, Janice Cochrane, President. They are both here basically because of their former employment as deputy ministers of the Department of Public Works and Government Services.

Before we start, I have a letter from the Business Development Bank. The clerk advises me that it was only received in one language. Can I distribute this letter since it is only in one language?

An hon. member: No.

The Chair: There is no agreement, so the letter must be translated.

Perhaps the clerk can advise the Business Development Bank that when federal crown corporations are communicating to the Parliament of Canada, they should know, without being told, that it must be in two languages, not one. They were informed on Friday evening and we still don't have it.

Perhaps you can impress upon them the need to respect the Parliament of Canada and its rules.

I also have a letter from Public Works and Government Services Canada, which I will read. It is addressed to the clerk:

Dear Mr. Fournier:

This is further to my letter to you dated February 24, 2004 and my undertaking with respect to the production of documents requested by the Committee at its meeting on February 19, 2004.

I am pleased to provide the Committee with forty copies of the contractual documents relating to the specific sponsorship events described by the Auditor General in Chapter 3 of her report. Please note that these documents are in a bilingual format.

You will note that some information on the contractual documents has been specifically identified with a reference to subsection 20(1) to indicate sensitive commercial information. The Department would normally not be permitted to disclose the information because of the Access to Information Act. I ask that the Committee take this into consideration.

We will have to talk about that.

Also included is a table, in both official languages, identifying the key approval stages relating to these contracts along with the names of the officials who provided those authorizations. As requested by the Committee, we have shared these names with the Office of the Auditor General and I have received confirmation that the listing of officials is consistent with their information. I understand this information will be referred initially to the Sub-Committee.

To further assist the Sub-Committee, additional information is provided on the titles, group and level of the officials, whether they are currently PWGS employees as well as information related to their current status.

I trust that this will be satisfactory to the Committee.

It is signed by Mr. David Marshall, the deputy minister.

It does refer to some information here that is not normally made public. I would therefore refer this to the steering committee.

Does anybody have any comments as to what we should do with this documentation? Should we refer it for discussion to the steering committee? Is that agreed?

Some hon. members: Agreed.

The Chair: We cannot make any motions because that is the order of reference for the meetings of today and tomorrow. I will just take that as an advisement that it is referred to the steering committee. We'll discuss that at a later date and ensure that we respect the privacy and the commercial information that is in there.

In addition to that, Mr. Clerk, we have the information of the names and titles, which will be dealt with in the subcommittee.

I have, again, the first report of the Subcommittee on the Protection of Witnesses and Testimony of the Standing Committee on Public Accounts. I will table this. We cannot adopt it by virtue of the orders of the day.

The subcommittee met on Thursday, February 26, 2004. The chair provided the members of the subcommittee numbered copies of the content of the brown envelope, and after discussion the copies were returned to the clerk.

The subcommittee agreed to the following recommendations: That the committee present a report to the House indicating that the committee agrees with the President of the Treasury Board that whistle-blowing legislation be applied retroactively to witnesses appearing before this committee in relation to its study of chapters 3, 4, and 5 of the November 2003 report of the Auditor General of Canada, and that the report indicate that there be no administrative sanction for anyone below the level of director general who broke the Financial Administration Act in regard to the sponsorship program, provided they received no benefit whatsoever; that Joseph Charles Guité and Pierre Tremblay be requested to appear before the committee in March 2004; and that the committee meeting with the Hon. Alphonse Gagliano be held on March 18, 19, or, failing that, March 17 from 9 a.m. to 11 a.m., 11:30 a.m to 1 p.m., and 2:30 p.m. to 4 p.m., with the possibility of continuing with the witness on the next sitting day.

That is respectfully submitted and will be presented for adoption at a meeting next week.

Are we ready to begin now? We will start with our witnesses. We have Mr. Quail and Ms. Cochrane. I understand each have a brief opening statement.

Mr. Quail, the floor is yours.

À (1030)

Mr. Ranald Quail (As Individual): Thank you, Mr. Chairman, and good morning, members of the committee. I have a short statement to make.

I last appeared here before the committee on June 13, 2003, in response to the AG's report on Groupaction. At your invitation, I'm here today to respond to the AG's 2003 report on chapters 3, 4, and 5.

Just to confirm, I was the Deputy Minister of Public Works and Government Services from July 1993, when it was first put together with all of the new entities, until April 1, 2001. I retired from the public service last summer.

Thank you, Mr. Chair.

The Chair: Thank you, Mr. Quail.

Madam Cochrane, you have an opening statement too, I believe.

Ms. Janice Cochrane (President, Canadian Centre for Management Development): Yes, Mr. Chair, I have a brief opening statement that I would like to present to the committee.

I am pleased to have the opportunity to appear before you this morning as part of your examination of the recent Auditor General's report as it pertains to the sponsorship program. I was appointed Deputy Minster of Public Works and Government Services Canada in April 2001. At that time, the sponsorship program was managed by my department.

In the fall of 2000, an internal audit report released by the department revealed serious deficiencies in management practices of the program. As a result of this audit, an action plan was developed to improve the management of the program. The plan was implemented. Corrective measures that were put in place included guidelines, better documentation of files, and post mortem reports. That plan contemplated a follow-up review, and that review was completed on March 6, 2002. It confirmed that corrective measures had been taken, and no recommendations for further action were made.

It is important to note that during that time our auditors confirmed that the audit did not reveal any apparent fraud or criminal action.

In the meantime, the CCSB, the branch responsible for the sponsorship function within PWGSC, and the Canada Information Office were merged to form Communication Canada. As of September, the department was no longer responsible for administration of the program. However, the contracting responsibilities of the program were not transferred, and we considered it important, given the findings of the audit, to segregate program management and contracting responsibilities.

[Translation]

In March of 2002, the former Minister of Public Works asked the Auditor General of Canada to examine three contracts that had been awarded to Groupaction Marketing Inc. The review's findings were duly reported.

Upon receipt of the report, I requested a detailed review of all sponsorship files created between November 1997 and March 2002 to ascertain if there were other instances where the Crown did not receive value for its money. This review was conducted under the direct supervision of the department's Chief Financial Officer by a quick response team of experts in financial statements and program auditing operations.

[English]

This team was called the “quick response team”, or QRT. The QRT and Consulting and Audit Canada reviewed 721 files created during that period and carried out a detailed review of 26 files considered to be of primary interest due to their size, nature, complexity, or profile. The results were posted on the department's website on October 10.

The report recommended the referral of files to the RCMP and the Department of Justice; audits of several companies to assess whether over-billing had occurred; recovery of funds and holdbacks of amounts payable to protect the possibility of set-off; an administrative review to determine whether employees had breached the Financial Administration Act regulations or policies; and an examination of past subcontracting methods. All five recommendations were acted upon.

In addition to the three files referred to the RCMP by the Auditor General, ten others were referred by the department. Of these, the RCMP has indicated that it had not found sufficient evidence to proceed in one case. Charges were laid in September 2003 against Paul Coffin of Coffin Communications, and other investigations continue.

The department attempted to carry out audits at a number of communications firms to verify whether the amount of work billed to us was legitimate. The firms were selected on the basis that on the surface there appeared to be irregularities or discrepancies. The results were inconclusive due to the lack of documentation in the records, or, in some cases, the inability to access records.

Steps were begun to initiate the recovery of funds. Holdbacks were authorized, and a litigation strategy was begun with the Department of Justice.

It is important to note that civil action and administrative action could not begin until the RCMP indicated that to do so would not compromise criminal investigations. Their consent to proceed was given in the fall of 2002, and steps toward financial recovery and discipline were taken immediately.

With respect to the latter, a firm of forensic auditors, Kroll Lindquist Avey, was engaged to conduct a review of 35 files considered to be of highest interest from the 126 files subject to the detailed QRT review.

Work was begun in October 2002, and the first report was submitted early in 2003. That report demonstrated patterns of potential irregularities on the part of ten current or former public servants: non-compliance with section 34 of the FAA, meaning invoices approved outside the contract period, fees paid not in accordance with the contract, invoices approved where deliverables do not appear to have been met, and double-billing; non-compliance with contracting policies and regulations, meaning not having solicited bids or pre-qualified suppliers, contract splitting, and not following rules with respect to publishing notices; and finally, non-compliance with delegated contracting authorities, meaning exceeding delegated limits.

As a result of these findings, the contractor was asked to carry out further work to review the balance of the files, and that work was completed in June of 2003. In the meantime, officials at the department, Treasury Board, and the Department of Justice did considerable work to examine the appropriate disciplinary measures that could be taken against those named individuals who were still in the public service.

À (1035)

[Translation]

During this period, further to the May 2000 report of the Auditor General of Canada, a number of additional steps were taken by Communication Canada to tighten up the Sponsorship Program and increase accountability and transparency.

As committee members are aware, the former minister announced a moratorium between May 25, 2002 and July 3, 2002. The program was subsequently reinstated on an interim basis until the end of the fiscal year, although designated communications firms and the agency in question were not awarded work.

A revamped program for the 2003-2004 fiscal year was announced in December 2002 by the minister responsible for Communication Canada. The program relied on contribution agreements between the government and event organizers. Moreover, accountability and transparency was clearly improved in the case of the new program, which wrapped up on December 13, 2003.

[English]

On June 16, 2003, I left Public Works and Government Services Canada to become president of the Canadian Centre for Management Development. Further steps to get to the bottom of this affair, including concluding on disciplinary measures, thus fell to my successor. I do want to assure members, however, of the strong commitment of all senior officials who have been involved in this issue to continue to ensure that all facts are brought to light and appropriate action is taken.

This issue is complex. It spans many years, thousands of documents, and many changes. It has been long and difficult, and often frustrating, as we try to balance our obligation to be transparent and accountable with the fundamental principles of due process and the privacy of individuals.

This concludes my remarks. I would now be pleased to respond to questions.

The Chair: Thank you, Ms. Cochrane.

Now we'll turn to questions on the first round.

Mr. Forseth, eight minutes, please.

À (1040)

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

Public Works and Government Services Canada previously gave evidence to us, including a diagram of what it calls a typical procurement process. There are a lot of boxes with arrows and various activities that would happen inside each box. But then we see what the procurement process was for the CCSB. It looks as if it were outside the normal control framework, with various Xs through, because obviously things weren't followed properly. The big question has to be why?

I will ask specifically, were you aware of the launch of the sponsorship initiative in 1997, Mr. Quail, and why were normal procedures to create the program, such as submitting a formal proposal to Treasury Board and so on, as described in this document here, not followed? What was going on that this was outside the normal process?

The Chair: Mr. Quail.

Mr. Ranald Quail: I am not sure whether or not I agree with the premise, Mr. Chairman, that it was outside the normal process. The Treasury Board submissions, the cabinet submissions, were made available to the committee, and the Treasury Board documents are clear in terms of the desire to set up spending to support programs like the sponsorship program. That was really the launch, in my view, of the sponsorship program. The Auditor General's report notes on page 3 of chapter 3 the expenditures by year, and while there was a small expenditure of $300,000 in 1996-97, the expenditures did not get started until 1997-98. If you look at the documentation that was presented as a result of the release of the cabinet confidences on November 21, 1996, Treasury Board approved $17 million for each of fiscal years 1996-97 and 1997-98 to support communication priorities, and that was the launch of the program.

I would suggest, Mr. Chairman and Mr. Forseth, that the program was started by way of a cabinet document. There was a Treasury Board submission. The Treasury Board submission, as you know, was signed by our minister and the Prime Minister, and it set out what it was we were going to do. While it may not be exactly the way you do some other things, it nevertheless is the way in which this program got started.

Mr. Paul Forseth: That is the problem. The Auditor General asked the questions and the answer was, “This is the way we do it”, and essentially that's what you've told us. But we already have evidence at the committee that this diagram here is how things are supposed to be done and this diagram from our Public Works and Government Services people says what was not done. I want to know why--

The Chair: As a point of order, do you have this document that was supplied by Mr. Marshall showing the diagram of the normal process? Have you a copy of that diagram?

Mr. Ranald Quail: Yes, I do.

The Chair: That is the copy he is referring to.

Sorry, Mr. Forseth.

Mr. Paul Forseth: What you are saying is in direct contrast, or in opposition, to the evidence we've already heard. You're saying it was a very small program in 1996-97. And maybe it wasn't enough to meet normal requirements, but certainly when the budget ballooned for 1997-98, one would have thought there would have been a typical procurement process it would have followed. The evidence is that it wasn't followed. That is the evidence that has been submitted to the committee. I'm asking why. There were no checks or balances. There wasn't any normal segregation of duties by which different people awarded contracts, approved notices, and so on. Can you explain, under your purview, why this was short-circuited?

Mr. Ranald Quail: Let me put a context around the environment, Mr. Chairman and Mr. Forseth, or the political context in which I was working. Otherwise, what I'm trying to say may not make sense.

Before doing that, however, let me bring to mind for the members that what I am going to talk about is the CCSB program, more particularly the sponsorship program, a program of approximately $40 million a year, which is a lot of money, but it is less than 1% of the expenditure of the department. I mentioned at the time I appeared before that we had controls in place in the department to deal with the way in which matters were to be managed--a strong governance framework, a strong executive operation, a well-developed risk management operation, and an internal audit function. As well, we had developed an ethics program, which began in 1997. The Auditor General did confirm in chapter 3, page 29, paragraphs 3.91, 3.92, and 3.93 that we did have a strong program in place.

À (1045)

Mr. Paul Forseth: You claim that there was a strong program, yet the evidence is that all the rules were bypassed and a lot of money went missing. It looks as if it lined people's pockets. We've heard that approximately $100 million was in tips and gratuities, you might say, or fees, and a lot of it was for no work produced.

Did you ever have any concern about the management of this program and report it to your superiors?

Mr. Ranald Quail: My concern with the management of the program when I initiated the internal audit in 2000 was from the point of view, as I talked about before, that, looking at the horizon and at what had happened in HRDC, it wasn't a grants and contributions program, but it seemed to me to be prudent that we undertake an audit in the department with regard to the sponsorship program. We initiated that program--

Mr. Paul Forseth: I take it there was an audit in 1996.

Mr. Ranald Quail: That's true, and I can talk to the audit in 1996 in a minute, if I could just finish the first part, Mr. Forseth.

Mr. Paul Forseth: All right.

Mr. Ranald Quail: With regard to the 2000 audit, the PCO and the minister were both aware of the fact that I was going to undertake the audit. The minister agreed that we go ahead with the audit. The PCO was satisfied that we undertake the audit. We undertook the audit. As you may recall, Mr. Chairman, the Auditor General in her testimony during her first appearance here, I think, indicated that was a key factor in launching this whole process that subsequently took place.

The 1996 audit is being looked at in the context of all of the information we know after three more audits, which took about three years, and we're being asked to comment about the 1996 audit. I'm prepared to talk about the 1996 audit. The 1996 audit was as a result of a complaint we received from the union on behalf of an employee. We received the complaint, and we took it seriously. We had the internal audit group have a look at it. Their findings--do you want me to slow down?

The Chair: No, I want you to wind up.

Mr. Ranald Quail: We took action. We had the internal audit. We took the one dealing with the results of their having a look at it and we brought in outside auditors. The record from the outside auditors is a matter of fact. There was no indication of personal gain. We then issued new guidelines on advertising. We had an undertaking from the APORS group to take corrective action. That's what took place in the 1996 audit.

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

Mr. Desrochers, for eight minutes.

[Translation]

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Thank you very much, Mr. Chairman.

Mr. Quail, Ms. Cochrane, thank you very much for taking the time to come here and shed some light on events that transpired in connection with this program.

Mr. Quail, you worked for the Department of Public Works from 1993 to 2001. Is that correct?

À (1050)

[English]

Mr. Ranald Quail: Yes.

[Translation]

Mr. Odina Desrochers: You also testified before the committee on June 13, 2002 in connection with the review of the three contracts awarded to Groupaction. Is that also correct?

[English]

Mr. Ranald Quail: Yes.

[Translation]

Mr. Odina Desrochers: When you last testified before the committee, you stated the following in response to a question concerning the reporting relationship within the department:

The reporting relationship did change during the tenure. Before 1997, the reporting responsibility for Mr. Guité was to an ADM of government operational services. In 1997, there was a reorganization of the branch and we formed the communications coordination services branch, the CCSB. It was created within the department in response to some concerns about the effectiveness of our communications. Mr. Guité then reported directly, as the executive director, to the deputy, me.

Why did the reporting relationship change in 1997?

[English]

Mr. Ranald Quail: As I said at the last meeting, Mr. Chairman, there was a reorganization in terms of additional duties being provided and the formation of the communications coordination services branch.

Why were there additional duties? The additional duties were threefold. One, we had sold the Queen's Printer. In the selling of the Queen's Printer, there were some functions associated with this that were left over, that were not part of the sale. So the Canada Communication Group printing and warehousing...some of that went over to the Canada Communication Group, and the Canada Gazette, etc., also went over there.

If you also look at the Treasury Board submissions, you'll note that the first one was such that it provided some additional funding.

[Translation]

Mr. Odina Desrochers: Who made the decision? What transpired exactly? Someone obviously made a decision in order for the ball to get rolling. Did the political will exist in Mr. Gagliano's office to change the way things were done? The decision had to come from someone. You're telling me, Mr. Quail, that changes occurred and that certain things happened. I want to know who is responsible for this decision. Someone in the department ordered these changes. Furthermore, how did Mr. Guité come to have so much authority? That's another question I would like answered.

[English]

Mr. Ranald Quail: The pieces came together from the point of view that as a result of the submissions--which the government wished, and did put forward, and did approve--and as a result of the sale of the Canada--

[Translation]

Mr. Odina Desrochers: Who signed the submissions to which you're referring?

[English]

Mr. Ranald Quail: The submissions signed for the Treasury Board, for the sponsorship program, were signed by ministers--the minister of the day, mainly Mr. Gagliano, and the Prime Minister.

[Translation]

Mr. Odina Desrochers: Could you give me the names of the ministers involved in this restructuring?

[English]

Mr. Ranald Quail: Well, I don't have the exact date on which we sold the Canada Communication Group or the Queen's Printer, but it was sold back in the area of whenever we were consolidating the departments, 1996-97.

The signatures on the sale of the Queen's Printer would probably have been either Minister Marleau or Minister Dingwall. But the signatures on the Treasury Board submissions are--

[Translation]

Mr. Odina Desrochers: Wasn't Mr. Gagliano involved?

[English]

Mr. Ranald Quail: Mr. Gagliano was not involved at the time we moved these responsibilities to Mr. Guité, that's correct.

[Translation]

Mr. Odina Desrochers: Which of the two ministers, Ms. Marleau or Mr. Dingwall, assigned responsibility for the program to Mr. Guité?

[English]

Mr. Ranald Quail: I would say that we got fully engaged in the sponsorship program after the approval of the submission that went forward signed by Minister Marleau and the Prime Minister, which was approved on November 19, 1996. Treasury Board approved $17 million for fiscal years 1996-97 and 1997-98.

À (1055)

[Translation]

Mr. Odina Desrochers: I have the documents pertaining to that matter, Mr. Quail.

Mr. Ranald Quail: Good.

Mr. Odina Desrochers: As Deputy Minister, what was your reaction when you learned that an employee, in this instance Mr. Guité who had been given authority to act, reported directly to the Minister and that you no longer had a say in this particular program? Did you find this somewhat unusual?

[English]

Mr. Ranald Quail: As I started to say earlier, I pointed out to you the way in which we had looked at and managed the program for 99% of the department. To talk about the situation with respect to Canada Communication CCSB, the submissions, as I noted, were signed by the minister and the Prime Minister. It noted the ongoing challenges that the government felt had to be addressed.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Quail. I'll have more questions for you later.

Ms. Cochrane, you state the following on page 5 of your presentation:

...the former minister announced a moratorium between May 27, 2002 to July 3, 2002. The program was subsequently reinstated on an interim basis until the end of the fiscal year, although communications firms and the designated agency were not given work.

Ms. Cochrane, were you made aware of the fact that on July 15, 2002, Minister Denis Coderre contacted the Minister of Public Works in an effort to get a verbal agreement from him to provide funding for a festival in Drummondville? Did you hear anything about that?

[English]

Ms. Janice Cochrane: No, I was not aware of it. At the time, by the summer of 2002, the program was administered by Communications Canada, not by the Department of Public Works and Government Services. I had no personal knowledge of any overtures made by other ministers.

[Translation]

Mr. Odina Desrochers: Was any of this noted in the internal report, that fact that ministers had given verbal authorizations or that some persons, simply by making a telephone call, managed to obtain funding? Were you aware of this, Ms. Cochrane? After all, you were the responsible Deputy Minister between April 2001 and June 2003. What authority did you have over departmental operations? What was the relationship in place at the time? Were Mr. Guité or Mr. Tremblay still responsible for making the decisions, or did you have some say in the matter?

[English]

Ms. Janice Cochrane: Mr. Guité and Mr. Tremblay were not involved. The file review that was carried out by the department following the Auditor General's report that year was simply that—a review of the files. We did not have authority to interview witnesses or to carry out any kind of an inquiry. We were looking into the files to determine whether or not there were instances where value for money may not have been received.

[Translation]

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

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

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman. I'd also like to thank the witnesses for their presentations.

Mr. Quail, you testified before this committee on June 13, 2002, at which time committee members asked you a number of questions in an effort to shed some light on the problems associated with the Sponsorship Program. You stated today that you ordered an internal audit in 2000 and took steps to put in place certain structures and so forth. I find it rather odd that you failed to mention even once during the course of your testimony that an internal audit had been done of the

Á (1100)

[English]

ads, polls, research, APORS, by Ernst & Young in 1996

[Translation]

that uncovered the same problems as the ones identified in the 2000 audit. I'm wondering why you made no reference to the existence of this initial internal audit which predates the 2002 audit.

[English]

Mr. Ranald Quail: There are a couple of points. One, I could have a technical response. The technical response is that it dealt with, as you have already suggested, advertising and public opinion research, APORS, and it was in a different year. Two, it didn't really relate to the results of the action of Groupaction. In addition, I would have to say that it did not occur to me that it was a relevant document. We had dealt with it, we had taken action with it, and we had put it to bed and had moved on. It was as simple as that.

We're talking about the 1996 audit in the context of what we found after three major audits—the internal audit and the two audits of the Auditor General. Those audits didn't take place overnight. They dealt with CCSB, and they were not related, in my mind, at that point, at all to APORS.

Sorry, that's the reason. Did I know at some point that we'd carried out the 1996 audit? Absolutely.

Mrs. Marlene Jennings: Mr. Quail, on numerous occasions during your testimony on June 13, 2002.... You specifically state on page 23:

The question could be asked, then, why did it take so long to have the audit committee find and go to this particular objective? It's a fair question. Again, I would argue that in a large department, whenever the audit committee met--and it met regularly and developed annual plans--you looked at it on the basis of risk management and materiality, and you considered what you were looking for. I'm not denying that $40 million is a huge amount of money. Relative to the rest of the expenditures in the department, you had to look at it in totality. In looking at it in totality, this was not on the radar screen, and it did not pop up as part of our annual review.

I would put it to you, Mr. Quail, that when you have an individual and a group of people who were responsible for the ad and poll and research program, into which is incorporated moneys for sponsorship, which then is moved off to report directly to you, and when in 1996 an internal audit shows that there is one big problem, which is a confounding of the project authority and the contracting authority—there is a complete melting of those two positions—when the sponsorship moneys are flowed into that following cabinet decision, Treasury Board approval, and the same people are there, this should have been on your radar screen from the very beginning.

My question to you is this. Given that there was an internal audit in 1996 that made very clear there were problems, the same problems that were revealed in the 2000 audit, the same people who were running the first program are now running the new so-called program, which, as you know, did not really become a program until 2002, I believe, I would ask you—and I think it's a fair question—how is it that it was not on your radar screen? How is it that this particular program and that group of people were not being audited on an ongoing basis?

Mr. Ranald Quail: It is certainly a fair question. From my point of view, as I pointed out, we had taken the 1996 audit, we dealt with it, we had undertakings from the APORS group as to how they were going to fix it, and it was left there. We did issue additional guidelines for advertising. Also in 1998, when we established the CCSB, I did write to Mr. Guité on the basis that now that he was a branch, he would be subject to the processes of audit and review, contractual quality control, contract settlement, and fraud awareness and prevention, which reside in the audit group. I advised him that he should meet with Norm Steinberg, our director general of audit, and go over the governing Treasury Board and Public Works and Government Services Canada policies and directives, and that is what I expected would be done. It was there. I did not cross-relate the two. We have an audit and review program.

If I were doing it today, with all the things that are on the table, it would jump to the front of my mind immediately, but it did not.

Á (1105)

Mrs. Marlene Jennings: One last question, Mr. Quail. According to the information that was presented to us by Mr. Marshall, the current Deputy Minister of Public Works and Government Services, in 1993 Mr. Guité was classified as EX-1. In January 1995 he was promoted and reclassified as EX-2. In November 1997 he was promoted and reclassified as EX-3. In April 1998 he was promoted and classified as acting EX-4. In August 1998 he was confirmed as EX-4, and in September 1994 Mr. Guité took his retirement.

Given the information you had about the problems, the significant problems, of his management, with the 1996 audit and then the 2000 audit, can you explain to this committee and to Canadians in general how it is you approved his reclassification and promotion several times?

Mr. Ranald Quail: First of all, one point of clarification: the 2000 audit came after the approval of the EX-4.

Mrs. Marlene Jennings: Well, then, explain the promotion to EX-2, and EX-3, and acting EX-4.

Mr. Ranald Quail: Yes, exactly. Fair enough.

The reclassification from EX-1 to EX-2 and from EX-2 to EX-3 came as a result of providing additional duties to the position Mr. Guité occupied. We've already explained that.

He had--

The Chair: Thank you...or do you have more to add?

Mr. Ranald Quail: About the EX-4, that was a Treasury Board submission, signed by the minister, seeking approval to reclassify him to an EX-4 on the basis of his responsibilities.

The Chair: Is that it?

Mr. Ranald Quail: That's it.

The Chair: Thank you very much.

Thank you, Madam Jennings.

Mr. Comartin, please, for eight minutes.

Mr. Joe Comartin (Windsor—St. Clair, NDP): Thank you, Mr. Chair.

Mr. Quail, you've told us today that the 1996 internal audit was triggered by somebody from the public service, part of the collective bargaining grouping. Is that correct?

Mr. Ranald Quail: That's correct.

Mr. Joe Comartin: Who was that person?

Mr. Ranald Quail: I don't know, off the top of my head. I don't have his name, but it's...it can be--

Mr. Joe Comartin: Do you have access to it in your...?

The Chair: Mr. Comartin, if you want to follow that line of questioning, perhaps you can direct it to the department, as Mr. Quail is no longer there.

Mr. Joe Comartin: That was going to be my question, Mr. Chair, whether he had it or whether we had to go to the department.

The Chair: It sounds like we have to go to the department.

Mr. Ranald Quail: Right.

I can remember that he was represented by the union PIPS.

The Chair: Okay.

If you want to follow through, Mr. Comartin, we can write a letter to the department asking for that information.

Mr. Joe Comartin: I would ask for that, Mr. Chair.

The Chair: Okay.

Mr. Joe Comartin: There's a report in the National Post this morning of a Mr. Allan Cutler, who was a procurement manager--

Mr. Ranald Quail: That's the gentleman's name.

Mr. Joe Comartin: Correct.

They're saying he's a procurement manager. Is he part of the Public Service Alliance?

Mr. Ranald Quail: No, he's part of PIPS, the Professional Institute of the Public Service.

Mr. Joe Comartin: Like Mrs. Jennings, I went back through your testimony in 2002--

The Chair: Mr. Comartin, did you say you went through Mrs. Jennings' testimony?

Mr. Joe Comartin: Mrs. Jennings, yes, that's who I meant to say.

Á (1110)

The Chair: But don't you mean...?

Oh, sorry, I see now. You meant “like” Mrs. Jennings. My apologies for interrupting.

Mr. Joe Comartin: You were asked at some point in there if any disciplinary action was taken. You indicated there was not.

Again, the newspaper report this morning in the National Post certainly indicates that disciplinary action was taken against Mr. Cutler, that he was sort of pushed off to the side and lost any chance for promotion, and attempts were made to fire him.

Were you aware of any of those actions?

Mr. Ranald Quail: I'm not aware of any actions taken that were attempts to fire him, absolutely not. On the matter of personnel, you can take that up with the department. That will be a matter of record.

I don't have to repeat that we took steps when we received the material on behalf of Mr. Cutler, represented by PIPS, and we carried out complete investigations. The results of those investigations, and the undertakings given to me by APORS, are just a matter of record.

Mr. Joe Comartin: So what you're telling us today is that if disciplinary action was taken against Mr. Cutler, you were not aware of it at the time.

Mr. Ranald Quail: No. My view is that there was not disciplinary action in the sense of disciplinary action. But that can be verified. You're asking, was the guy fired, was he given days off, or whatever? I don't believe that's the case.

The Chair: Unfortunately, we are dealing with hearsay. We're dealing with newspaper reports. We have not had this verified before the committee as to exactly what did transpire. What's in the media is in the media. That's just to put that in context.

Mr. Comartin.

Mr. Joe Comartin: I don't think I got an answer. What I'm asking you, Mr. Quail, is whether you knew of any action in a negative fashion that was taken against Mr. Cutler. I understand you to tell us that you did not know of any negative action taken against him.

Mr. Ranald Quail: I don't recall any negative action in that sense, no.

Mr. Joe Comartin: In the course of the internal audit, did he present any documents he had copied and taken away from the department?

Mr. Ranald Quail: I can't respond to that. It will be a matter of record on the file as to what came forward from the union, what were the papers we dealt with, and what the people who investigated it found, and the reports from the external auditor are a matter of record. I'm not trying to not answer your question. I'm merely telling you what I know as I dealt with the results of the audit.

Mr. Joe Comartin: I'm not talking about the external audit. I'm talking about the internal audit. You saw the results of that internal audit.

Mr. Ranald Quail: Results, I don't know. Presumably, I would have gotten a summary. Did I see all of the results of the internal audit? I wouldn't have seen the working papers. That's not normal. In actual fact, at that particular time that group did not report directly to me. They reported to another officer in the organization. I would have relied on their due diligence in terms of carrying out the investigation associated with points that were raised by the union on Mr. Cutler's behalf.

Mr. Joe Comartin: Mr. Quail, I'm concerned about the answers you gave Ms. Jennings. I'll characterize it this way. You'll probably disagree with me. There seemed to be a disconnect in your mind between anything that went on in that internal audit and the authority that was being given to Mr. Guité and the way the communications program was going to be run after 1997 in spite of what was in that internal audit. You didn't see the two connected at all. Am I being fair?

Mr. Ranald Quail: If you ask me that with regard to the knowledge I have today, I would say there was a connection. If you had asked me at the time it happened, without all of the subsequent audits, I would have said that I did not see a connection.

Mr. Joe Comartin: Let me challenge you on that, Mr. Quail. You have internal information that says that in the prior advertising program Mr. Guité did not follow the rules for a period of at least two years. He didn't make sure the ads were properly distributed amongst the agencies that were involved. It wasn't proportional. Proper paperwork wasn't done. And the list goes on. There were at least four or five specific points in that internal audit. You didn't see it was going to be a problem if you put the same person in charge of what was going to be a much larger sum of money and a much larger program? I am having trouble understanding how you couldn't have made the connection at that time.

Mr. Ranald Quail: Well, I just didn't. This is a large department. It's a complex department. I understand the focus and the headlights that are on it as a result of the audits. But back at that point in time, a lot of things had to be dealt with. The 99% of the work that's not associated with this is a matter of record. You have to deal with that. Did I cross every t? No matter how hard you work, how many hours you work, and how many days a week you work, you can only do so much. Did I remember every last thing? No. Did anyone draw it to my attention? No. But in retrospect, in terms of looking at the situation today in the blinding lights of the results of the audit, you would have done something different.

Á (1115)

The Chair: Brief question, Mr. Comartin.

Mr. Joe Comartin: Yes, this is a brief question.

Mr. Quail, were you under any political pressure to allow that program in 1997 to go ahead and to allow Mr. Guité to head it up?

Mr. Ranald Quail: I would start....

I'd like to answer that question, Mr. Chair, if I could take more than just one minute.

The Chair: Answer the question, yes.

Mr. Ranald Quail: I pointed out to you earlier the fact of the department and the 99%. We now came to the 1%, and we came to CCSB, and we came to the fact that the decision was taken by government to go forward with Treasury Board submissions to put some additional funding into communications and in particular into sponsorship.

We know, as a matter of record, that the submissions went forward and who they were signed by. And they talked about the reason for it, about the ongoing challenges of unity coupled with the results of the Quebec referendum, etc. There is no doubt in my mind that in order to deal with this, you have to cast your mind back and you have to forget, as I talk, what we know now.

That said, the fact of the matter is that at the government political level, they wanted to move forward. The government wanted to see results with respect to sponsorship, improved communication, and improved visibility of the Government of Canada. They wanted to see it out into the fields, into the regions of the country. That's why they gave rather sparing dollars, in a very tight budget environment, to undertake those sponsorships.

The minister was charged with that. Obviously, in order to move that forward quickly, you needed to have a capability within the bureaucracy, and the decision was taken that we would use CCSB. Hence the reason for the very direct relationship between the minister and the Canada Communication CCSB group, and in particular the executive director.

Obviously, this is a very difficult situation for a deputy in terms of the fact that you're working with the minister. On the one hand, you can say, “Minister, you can't talk to that particular group. You have to come through me every time you want to talk to them.” I did not do that. I did not do that. The minister wanted to have these discussions. He wanted to be involved. He had a responsibility. He had signed the submissions. He had direct approval to proceed and get this done.

I would note, however, that approvals for this submission did say that you were going to follow the rules. Therefore, he wanted to move this forward, and he did. And he worked directly with CCSB. Yes, that was the decision made, that this group would be used for CCSB.

The Chair: Thank you very much, Mr. Comartin. We have now gone 11 minutes and 20 seconds, but I wanted the witness to have an opportunity to respond.

Mr. Toews, please. We're now in round two, so it will be four minutes.

Mr. Vic Toews (Provencher, CPC): Thank you very much.

We've heard from Mr. Marshall, the current Deputy Minister of PWGSC, that there was a complete meltdown of the control framework. I understand that you somewhat disagree with his analysis. I'm not going to get into that today, but we have on record Mr. Marshall's analysis.

I want to go back to your testimony here on the prior occasion of June 2002, when you were specifically asked about Mr. Tremblay and Mr. Guité. You were asked about whether or not they reported to you or whether you were bypassed. You indicated at that time, “They reported to me, but that doesn't mean they didn't have discussions with all kinds of people.” Then you were asked again, “Did they report to the minister and his staff?”, and you said, “No, but they would have had discussions with the minister and his staff.”

Today you're saying they didn't report directly to you, contrary to your very specific statement here saying that they did report to you. Now you're saying they had a very direct relationship with the minister, when in 2002 you said there were some discussions.

What was the nature of those discussions between Mr. Guité, Mr. Tremblay, and the minister and his staff?

Á (1120)

Mr. Ranald Quail: A couple of points. I would not accept that I'm at odds with the comments of Mr. Marshall.

Mr. Vic Toews: All right. Let's get beyond that, then. You're not at odds with that analysis.

But what about those discussions? What was the nature of those discussions?

Mr. Ranald Quail: Since I wasn't at the meetings, I don't know exactly what was the nature of the discussions.

Mr. Vic Toews: Tell us what you know.

Mr. Ranald Quail: For instance, there would have been a great deal of discussion about the background events that were going to be sponsored as to what went into the Treasury Board submission. Those Treasury Board submissions didn't get developed out of thin air. They got developed as a result of some discussions with Guité.

Mr. Vic Toews: How did you become aware of those discussions and the nature of those discussions?

Mr. Ranald Quail: Some of them I would have known about. Some I would know about as a result--

Mr. Vic Toews: How?

Mr. Ranald Quail: One of the ways I would get to understand that there had been discussions would be the request to develop a Treasury Board submission.

Mr. Vic Toews: So there were Treasury Board submissions that were given to you by Mr. Guité or Mr. Tremblay before those discussions took place with the minister.

Mr. Ranald Quail: No, I wouldn't say that.

Mr. Vic Toews: What Treasury Board submissions are you talking about?

Mr. Ranald Quail: I'm talking about the same Treasury Board submissions, but there would have been discussions about what would go into the Treasury Board submissions before they were prepared.

Mr. Vic Toews: You're saying that they reported to you, although they didn't directly report to you. They had discussions with the minister and his staff, but you can't tell us how you know those discussions took place or what was the nature of those discussions. Do you have any documentation that outlines the nature of those discussions and how you know about the nature of those discussions?

Mr. Ranald Quail: I don't have any documents in my possession that would show I knew or how I knew they had meetings. I knew they had meetings because as a result of the meetings there would be the request to prepare the submission. The submission would be prepared, and it would go back up with those documents in it.

Mr. Vic Toews: So the Treasury Board submissions were prepared as a result of discussions with Guité, Tremblay, and the minister. They would come back into the department. The department would then funnel them through you for approval.

Mr. Ranald Quail: No. After the discussions, they would come back in and write the submission, and the submission would go back up, through me on these occasions, to the minister.

Mr. Vic Toews: Through you.

Mr. Ranald Quail: Yes, with the list of events that were proposed to be carried out.

Mr. Vic Toews: But you didn't get into the details of those.

The Chair: Thank you, Mr. Toews. I'm sorry, I have to cut you off there. My apologies, but the clock is the clock.

Mr. Desrochers, please, for four minutes.

[Translation]

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

Mr. Quail, you now seem to be admitting that you knew something was happening, but that you weren't kept informed. However, we've learned that when the internal audit report involving your department was released in August 2000, meetings were held with some of the Prime Minister's associates. We've even learned that 25 highly qualified officials were present at this meeting and that Mr. Pierre Tremblay was in attendance as well.

Mr. Quail, did you attend this particular meeting which was held when your department's internal audit report was released? Did you know of, or were you apprised of the situation at this meeting?

[English]

Mr. Ranald Quail: I was at the meeting. The meeting was called by PCO. There were representatives from the Prime Minister's office, PCO, the department, and our minister's office. The purpose of the meeting was not to modify the audit. The purpose of the meeting was to review the audit and to talk about how we proposed to follow--

Á (1125)

[Translation]

Mr. Odina Desrochers: Was there anything in the audit that didn't seem quite right to you, or was the purpose of the meeting simply to verify the internal audit's findings? We've been told that this meeting was called on short notice and that a sense of urgency prevailed.

[English]

Mr. Ranald Quail: The meeting was held to review the findings of the audit. We had a 37-point action plan to move to fix the items that were found in the audit to be out of whack. We went over and explained to the people at the meeting what we were proposing to do.

[Translation]

Mr. Odina Desrochers: Mr. Quail, did you meet frequently with staff from the PMO? As a rule, the only person with whom you should have been meeting was your minister. Why were you called to a meeting with representatives of the PMO?

[English]

Mr. Ranald Quail: I'd put it the other way around. It's not often that I met with the officials from the Prime Minister's office, but I met regularly with PCO. It was PCO I would be dealing with in terms of making sure they were aware of the results of the audit and how we proposed to fix it.

[Translation]

Mr. Odina Desrochers: Can you recall if any of the 25 officials in attendance were from Finance or Treasury Board? Or was the meeting attended solely by people from your department?

[English]

Mr. Ranald Quail: As far as I can recall, it was PCO, PMO, and our department, the Department of Public Works.

[Translation]

Mr. Odina Desrochers: Were any representatives of advertising firms in attendance? Was Mr. Tremblay present?

[English]

Mr. Ranald Quail: Were representatives from Minister Gagliano's office there? Yes.

[Translation]

Mr. Odina Desrochers: And what about Mr. Tremblay?

[English]

Mr. Ranald Quail: At this point Mr. Tremblay was the executive director of CCSB. Other representatives from the minister's office were there, including Mr. Tremblay's replacement.

[Translation]

Mr. Odina Desrochers: To your knowledge, was Cabinet subsequently apprised of this meeting, or did it remain a strictly departmental matter?

[English]

Mr. Ranald Quail: I don't know.

[Translation]

Mr. Odina Desrochers: Given the specific and serious nature of the facts brought to your attention...Public Works and the Privy Council Office kept mum and to your knowledge, the matter was not discussed by anyone else.

[English]

Mr. Ranald Quail: I have no idea. We dealt with it. Shortly after that, as I recall, we released a report and put it on the web. We didn't try to hide the report.

[Translation]

Mr. Odina Desrochers: Following this meeting, did you receive any instructions from PCO about following up on the report's findings?

[English]

Mr. Ranald Quail: No. My view is that there was an acceptance of the action plan we were putting in place to fix the problems.

[Translation]

The Chair: Thank you, Mr. Desrochers.

[English]

Mr. Lastewka, please, for four minutes.

Hon. Walt Lastewka (St. Catharines, Lib.): Let me get directly to the point. With regard to the mandate of the new sponsorship program, wherever it was designed and whoever designed it, you signed off. Is that correct?

Mr. Ranald Quail: I signed off. I forwarded the Treasury Board submission to the minister.

Hon. Walt Lastewka: So it went to the minister, the Treasury Board, and the cabinet, and it was approved with those signatures. Is that correct?

Mr. Ranald Quail: Yes. But it would also have gone to PCO and PMO because it had two signatures on it. On a parallel basis there would have been discussions inside of the department. People would have seen it. We would have also talked to PCO about it, gone through the--

Hon. Walt Lastewka: Thank you very much. I have only four minutes and I don't want to use it up with explanations.

You advised Mr. Guité that he would be submitting to departmental rules and reviews. You advised him to meet with the internal auditor, Norm Steinberg. Is that correct? Yes or no.

Á (1130)

Mr. Ranald Quail: Yes.

Hon. Walt Lastewka: The sponsorship program started in November 1997.

Mr. Ranald Quail: That's right.

Hon. Walt Lastewka: You asked for an audit in August 2000, I think it was.

Mr. Ranald Quail: It was completed then. I think we asked for it around February.

Hon. Walt Lastewka: Was there any thought in your mind that with this new department and new mandate--you also talked about having to go through shorter ways of making things happen--no internal audit was done during those four years so maybe Guité did not follow your instructions?

Mr. Ranald Quail: First of all, from the point of view of arithmetic, I'm not sure I would accept that it was four years, but I do accept that it was from November 1997 until about February--

Hon. Walt Lastewka: Let's make it three years. Is it normal in Public Works that we start a group or a new department and not have any internal audit for three years?

Mr. Ranald Quail: I didn't have any reason to call up an audit or any thoughts about the need to call up an audit until I did so in February 2000. Is it normal? We carry out 15 to 25 audits per year. That's all we do in the department. That's quite a few. We did that on the basis of a structure we had in place in terms of risk management, etc. We did not have CCSB scheduled before I asked for the audit in 2000.

Hon. Walt Lastewka: My concern is this is a new department, a new group structure with a new mandate, and it did not get audited internally. You knew there was advertising, polling, and there were some concerns from the 1996 audit. The nature of the business of advertising and polling and sponsorship is tenuous at times because there are so many people involved in the system.

You gave direction to Guité. Was there any communication between you and Mr. Guité that he had followed your instructions?

Mr. Ranald Quail: Not that I recall.

Hon. Walt Lastewka: Did you ask him?

Mr. Ranald Quail: Not that I recall.

Hon. Walt Lastewka: Once the mandate was put in place, you mentioned I think to Mr. Forseth that many times Mr. Guité dealt directly with the minister. Before the proposals went forward, did they come back through your office?

Mr. Ranald Quail: Do you mean the proposals--

Hon. Walt Lastewka: Not the mandate. Once there were proposals on events to be sponsored, and so forth, or money to be transferred for one reason or another, before that happened, did the projects come back through you?

Mr. Ranald Quail: Certainly we had discussions--I did with the minister--as to the amount of money that was required, the amount of money that was being asked for in the Treasury Board submissions, and the schedule of events that were attached.

The Chair: Thank you, Mr. Lastewka.

Mr. Tonks, please, four minutes.

Mr. Alan Tonks (York South—Weston, Lib.): Thank you, Mr. Chairman.

Mr. Quail and Ms. Cochrane, good morning, and thank you for being here to recall specific details in retrospect. It must be very difficult.

First of all, I want to ask you, when the internal audit was done in 1996, Mr. Quail, what were the concerns you had that provoked you to ask for that internal audit?

Mr. Ranald Quail: It was the result of the letter that was received in the department from the union representative on behalf of Mr. Cutler.

Mr. Alan Tonks: Just to refresh the committee's memory, were they internal issues that were being raised by that particular individual, internal in terms of processes of approval?

Mr. Ranald Quail: That's my recollection, yes.

Mr. Alan Tonks: Out of that, did you have any suspicion at that time of wrongdoing on the part of particular individuals within the department, or was it a systems kind of situation?

Mr. Ranald Quail: If you look at the general assessment note that we got back from the independent audit, it says “We found no instances where non-compliance might have led to situations of personal gain or benefit.” That was particularly important to me. It was a particular item that I wanted to be sure was correct because this is a matter of trust. If there had been some suggestion, we would have taken some action. It was confirmed by an outside auditor that there were no instances found and I took it as a result of their findings.

Mr. Alan Tonks: You've had an opportunity, Mr. Quail, to see the typical procurement process as compared to the CCSB. From your perspective as deputy minister, could you characterize, in your opinion, in retrospect, if this had been the process that had been followed, would there have been any problems with respect to the administration, the accountability, and the checks and balances?

Mr. Ranald Quail: You're asking for an opinion. I'm not sure you can draw a conclusion from my opinion that we still would not have had trouble with sponsorships, because it could have been done another way. So my answer, from my point of view, is I would hope it would have picked up all of the proper checks and balances if we had followed that particular channel.

Á (1135)

Mr. Alan Tonks: All right. Mr. Quail, we heard about appendix Q. In 1996 you have some problems with the administration of the program from a systemic perspective. You have a pretty good idea of how it probably should have happened. We have a pretty good idea that it was a complete circumvention of either Public Works mechanisms or Treasury Board mechanisms.

When it came forward on September 19 that Treasury Board was waiving the contractual need to have quarterly reports, the whole administration of competitive bids and all of that, in the context of those events, did that not raise a red flag in your mind, that there was some manipulation of the process that seemed to be in place, or at least starting?

Mr. Ranald Quail: No. I wish it had, but it didn't.

Mr. Alan Tonks: It didn't occur to you.

Mr. Ranald Quail: It just didn't.

Mr. Alan Tonks: My final question is, did the creation of the CCSB have Treasury Board approval?

Mr. Ranald Quail: I don't think there is a submission that I can recollect. You have all of the submissions formally creating CCSB. I don't think there is one in that context. The closest you would get is the submission we sent to the Treasury Board talking about reclassification of Mr. Guité's position to an EX-4.

Mr. Alan Tonks: That was to an EX-4. The CCSB never had approval from Treasury Board, and yet it is--

The Chair: Mr. Tonks, I'm sorry, you've had four minutes and 42 seconds, so I'm going to cut you off.

Because of the fire alarm this morning, we didn't get going until 10:20. We were scheduled to go from 10 until 1, a three-hour meeting. Is it agreed that we can go to 1:20 p.m.?

Some hon. members: Agreed.

The Chair: We're going to start the next round with Mr. Kenney for four minutes.

Mr. Jason Kenney (Calgary Southeast, CPC): Mr. Quail, you served in the public service for 43 years. You were deputy minister of this department for a long time. Presumably, you've seen other internal audits and reports similar to the one in 2000. If as a deputy minister you received an audit that indicated contract agencies were double billing and had excessively high labour costs that were not justified based on an internal audit, would that trigger on your part any suspicion that there might be some dishonesty or potential fraud on the part of the contracting agencies?

Mr. Ranald Quail: I'm not sure, Mr. Chairman, which audit we're talking about.

Mr. Jason Kenney: Just generically, sir. If you hear about double billing and practices of the like--

Mr. Ranald Quail: I would have turned it over to the fraud group in our own organization to take the appropriate action with the RCMP.

Mr. Jason Kenney: That would be the appropriate response. I appreciate that. But in your testimony to us in 2002 you said you “did not conclude that there was any dishonesty, fraud, or criminal behaviour or intent” following the 2000 audit, which provided evidence of double billing.

Mr. Ranald Quail: What I quoted the last time was what the audit of 2000 said.

Mr. Jason Kenney: Could you just repeat that?

Á (1140)

Mr. Ranald Quail: The 2000 audit did not find any instances, as I understand it, of fraud, etc. That's not what the 2000 audit said, Mr. Kenney. That's my recollection. I don't have the 2000 audit here.

Mr. Jason Kenney: Well, I do, sir, and I believe you're mistaken.

Mr. Ranald Quail: I don't think I'm mistaken on the internal audit in terms of the--

Mr. Jason Kenney: I'll find the section.

Mr. Chairman, I'd like to ask Mr. Guité--

An hon. member: Mr. Guité isn't here. We'd like to ask him something too.

Mr. Jason Kenney: Excuse me. That doesn't change my statement. I'd like to ask Mr. Guité a lot of questions.

But I'd like to ask Mr. Quail this question. On September 21, 2000, Pierre Tremblay held a retreat in Quebec to which he invited the executives of the various advertising companies concerned, including Jean Brault of Groupaction and Claude Boulay of Groupe Everest, where it was decided that “It is clear that a strategic communications plan regarding sponsorships is required.” Were you aware of that meeting?

Mr. Ranald Quail: Yes. That was part of the follow-up action program and one of the 37 items.

I'd like to go back to your previous question.

Mr. Jason Kenney: Go ahead.

Mr. Ranald Quail: The key findings of the internal audit don't talk about fraud. It was a management audit, and the key findings were.... I can read them.

Mr. Jason Kenney: I have all that, sir. So your view is that the 2000 audit simply pointed out some minor administrative errors that did not provoke you to look any more deeply into the program.

Mr. Ranald Quail: I wouldn't say they were minor administrative errors. I thought they were serious administrative errors and that there was a strong action plan to fix those.

Mr. Jason Kenney: Given the responsibility of Treasury Board to ensure that the rules are being followed in all departments at all times with regard to the spending of public money, would you as a matter of course have furnished Treasury Board officials with the 2000 audit?

Mr. Ranald Quail: Yes.

Mr. Jason Kenney: So they would have received it.

Mr. Ranald Quail: It was a matter of policy at that time that you would transfer all audits and they would go on the Internet.

The Vice-Chair (Mrs. Marlene Jennings): This is your last question, Mr. Kenney.

Mr. Jason Kenney: Would you have sent that to Treasury Board officials or directly to all ministers who were members of the Treasury Board?

Mr. Ranald Quail: I would have sent it to the secretariat.

Mr. Jason Kenney: You don't know how they would have distributed it beyond that.

The Vice-Chair (Mrs. Marlene Jennings): Mr. Kenney, you're over your time. Thank you.

The Chair: Mr. Jordan.

Hon. Joe Jordan (Leeds—Grenville, Lib.): Thank you, Mr. Chair.

I have a couple of quick points. In the submission that went to Treasury Board to set up this department, which eventually undertook the sponsorship program, was that just a framework? Was Mr. Guité mentioned as the executive director or was that a subsequent decision? I'm just trying to see how he morphed from--

Mr. Ranald Quail: If you look at the submission, you'll see that the contact point for questions and answers on the submission was Mr. Guité.

Hon. Joe Jordan: Based on that, it was understood that he would be the executive director.

Mr. Ranald Quail: Yes.

Hon. Joe Jordan: Was that a consequence, or was that put in there directly for that reason?

Mr. Ranald Quail: It was put in there because it was fact.

Hon. Joe Jordan: You mentioned that we sold the Queen's Printer. To whom did we sell it?

Mr. Ranald Quail: It was sold to St. Joseph Corporation.

Hon. Joe Jordan: Are you aware of whether Mr. Guité ever worked for that company?

Mr. Ranald Quail: No.

Hon. Joe Jordan: He never took a leave of absence, or you're not aware of this.

Mr. Ranald Quail: I'm not aware.

Á (1145)

Hon. Joe Jordan: To go back to Mr. Forseth's point, I want to see if we can reconcile this. It was made very clear to us that this particular department, the CCSB, was outside of the normal internal audit mechanisms of Public Works. The term I used with the Auditor General was that it seems to me it was set up to be a SWAT team that could react very quickly. You're suggesting that wasn't the case, that they weren't subject to internal audit simply because their budget wasn't big enough to trigger attention. Would a department of this size, carrying out these functions with this budget, normally report directly to a deputy minister? I'm just trying to get at the how, where, when, and why this thing was set up the way it was.

Mr. Ranald Quail: When we moved to make it that group and Mr. Guité was classified as an EX-4, he would then report to the deputy minister.

Hon. Joe Jordan: So that was as a result of the increased responsibilities he had.

Mr. Ranald Quail: That's right. As I mentioned earlier, in 1998 I did sign a letter that said he did come under it. He was to talk to the head of audit, etc.

Hon. Joe Jordan: But you have no knowledge as to whether that was ever done.

Mr. Ranald Quail: I have no knowledge.

Hon. Joe Jordan: We've requested Mr. Guité's presence.

Ms. Cochrane, in your submission on page 4 you say, “That reportdemonstrated patterns of potential irregularities on the part of 10 current or former publicservants.” Can we get that list? We're in the process of trying to put together our strategy for witnesses.

The Chair: I don't think she can commit the department, but we can write a letter.

Hon. Joe Jordan: Okay.

Thanks, Mr. Chair.

The Chair: Mr. Proulx, please, for four minutes.

[Translation]

Mr. Marcel Proulx (Hull—Aylmer): Thank you, Mr. Chairman.

Welcome, Ms. Cochrane, Mr. Quail.

[English]

Mr. Quail, a little while ago my colleague Mrs. Jennings was asking you about the different promotions for Mr. Guité. After your last answer, she had run out of time. You explained that Mr. Guité was promoted from EX-1 to EX-2 to EX-3 to an Acting EX-4 and then from the acting EX-4 to what we'll call full-time EX-4. That was the result of a Treasury Board submission signed by the minister. When it came to the regular EX-4, it had to be done through a Treasury Board submission, while for the acting EX-4 it did not. Why was that?

Mr. Ranald Quail: If my memory serves me correctly, I don't think he was ever acting EX-4 before the Treasury Board submission was approved. He was an EX-3. It was as a result of the additional responsibilities that were coming from the Treasury Board submissions that he picked up the EX-4 position. The TB approval for the EX-4 was in August 1998. That chart, which I think the department provided, also shows that in March 1998 he was an EX-3. Well, the chart does say acting EX-4, so it could be, Mr. Proulx. I could be wrong.

Anyway, we--

Mr. Marcel Proulx: I have only four minutes. Why does it go through a Treasury Board submission?

Mr. Ranald Quail: Because I don't have the authority, and the minister doesn't have the authority, to reclassify at the EX-4 level.

Mr. Marcel Proulx: Okay. So the public works minister at the time would have signed that submission to Treasury Board.

Mr. Ranald Quail: Correct.

Mr. Marcel Proulx: And the same thing would have applied when Mr. Guité was replaced by Mr. Tremblay, I presume.

Mr. Ranald Quail: No, the position at that point was therefore classified as an EX-4.

Mr. Marcel Proulx: I see. So it wasn't the promotion of Mr. Guité as an individual who was in front of Treasury Board; rather, it was the fact that this particular position, to be filled by whoever, was becoming an EX-4.

Mr. Ranald Quail: That's correct, I guess--if you put it that way.

Mr. Marcel Proulx: Okay, thank you.

Ms. Cochrane, I want to get back to basics. I'm looking at page 4 of your statement, where you're talking about the potential irregularities. You mention non-compliance with section 34 of the Financial Administration Act, invoices being approved outside the contract period, fees not being paid in accordance with the contract, invoices being approved where deliverables do not appear to have been met, and so on.

To me, this appears to be very basic in terms of rules and regulations to be followed in the carrying out of the responsibility of a job. Perhaps you could explain to us how ten current or former public servants at the time could have done all of these irregularities without any red lights coming on or anybody asking, “Wait a minute, what's happening here?”

I mean, on all of these points, anybody could have done this job, whether they be out of kindergarten or whether they be out of university. I don't understand.

Ms. Janice Cochrane: Mr. Chair, it certainly was a pattern that was very unusual. It may have been due to the fact that it was a very flat organization. In fact, most of the individuals who were carrying out these activities reported directly to the executive director, so the normal filters in an organization, the checks and balances, would not have been present.

I can't speculate as to why they did it, whether it was a lack of training or whether they felt that they had been directed by the executive director to behave in this way. However, we did find, by going through all the files, that there were patterns. In most cases, there was more than one instance of these kinds of activities being carried out.

My understanding is that the department has followed up with appropriate disciplinary action since the report was issued last June.

Á (1150)

Mr. Marcel Proulx: So what I'm hearing is that one individual, the guy in charge, could have asked them to do whatever he wanted and they would have done it.

Ms. Janice Cochrane: Quite possibly so.

Mr. Marcel Proulx: Thank you.

[Translation]

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

[English]

Mr. Toews, please, four minutes.

Mr. Vic Toews: Thank you.

In 2002, Mr. Quail, you stated that Guité and Tremblay reported to you. That's your testimony. Today you said they didn't report directly to you. In 2002 you said they didn't report to the minister and staff. Today you said in your testimony that there was a very direct relationship with the minister.

So I am very confused about the nature of this relationship, whether it's direct or indirect. In your testimony today, you said there was a very direct relationship with the minister. Then you said that with respect to the government's concerns--again, this was with respect to the government's concerns--they wanted to get things done, in reference to the problems they wanted to address.

This is obviously more than one minister now. Who is the “they” in government who wanted to get things done with respect to why this sponsorship program was set up?

Mr. Ranald Quail: It's a generic “they”. I dealt with my minister. He represented--

Mr. Vic Toews: So now you're saying it was just your minister.

Mr. Ranald Quail: No, no, no. Look, the submission was signed by the minister. It was signed by the Prime Minister. It was a direction of the government that the government wanted to move this. It was an urgent situation. So when I talk about “they”, I talk about “the government”. I don't have a group of ministers in mind. I just don't.

And I'm not trying to not answer your question.

Mr. Vic Toews: No, I know.

All right. So now we know it was the former Prime Minister, and we know it was your minister directly...the minister that you really didn't have any direct relationship with this particular program, but you sort of heard about it through the back door as the people who reported to you came back and reported on what they said.

Mr. Ranald Quail: I can't accept that characterization.

Mr. Vic Toews: That's your characterization.

Mr. Ranald Quail: Well, I just don't accept that characterization.

The issue here is the relationship, on a program that has some political interest and that the minister wants to see moved forward--

Mr. Vic Toews: How do you know that the minister wanted to see this thing move forward? That's what I asked you earlier, and you weren't able to provide me with any specifics. Somehow you know that the government, that the minister, wanted to move this forward. How do you know this?

Mr. Ranald Quail: You just have to look at the Treasury Board submission. It's not every day that you end up with a Treasury Board submission that talks about the need to improve communications, and you find rare, hard dollars in order to support it, and it is signed by both the minister and PMO.

I mean, that's an important issue. I don't have to be hit on the head.Those submissions are important documents.

Mr. Vic Toews: We'll get a copy of that Treasury Board submission.

Mr. Ranald Quail: You do have one.

Mr. Vic Toews: So we have that.

We know now that it was the Prime Minister, we know it was your minister, and generally, I assume, everyone in cabinet, who knew about this particular issue, and they were moving this file forward.

Mr. Ranald Quail: I can't talk for cabinet, and I can't talk for the Prime Minister except on the facts I have, and the facts are that the submission was signed by both the Prime Minister and the minister. I know that the minister was wanting to move this forward. He wasn't only the minister. He was, at one point in this process, also the cabinet committee chairman for government communications. The individual was charged with responsibilities to deliver--

Á (1155)

Mr. Vic Toews: Then the minister, in that sense, was acting on behalf of this cabinet committee. So it wasn't just the minister. And you don't know whether it was the Prime Minister or not, now, but you know that it was your minister acting as the chair of this cabinet committee in charge of communications.

Mr. Ranald Quail: No, I'm saying that I know that the minister was the minister of the department, that he was the chairman of the cabinet committee in communications, that communications was important to him, and that he wanted to move this file ahead.

Mr. Vic Toews: So now it's “he” wanted to move it forward.

The Chair: Thank you, Mr. Toews.

Madam Jennings, s'il vous plait, quatre minutes.

[Translation]

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

[English]

Mr. Quail, given what we know now, which is that the submission was signed by the Prime Minister and by Minister Gagliano, who at the time was Minister of Public Works and chair of a cabinet committee....

You yourself say that this is very unusual. It would be interesting to know if you ever saw that happen in your years as a deputy minister, prior to retirement, or if this was the first time you ever actually saw that happen. It is also unusual in that money, new money, was actually tied to this approval. It's not unusual to have a new program or something, but you have to use the existing budget. But in this case, new moneys were actually attached.

Given the fact that, according to your testimony, although Mr. Guité, who used to report to an assistant deputy minister and at one point began to report directly to you, had direct discussions and contact with Minister Gagliano's office, and given that, unless I'm wrong, it's quite unusual that an executive director would report directly to a deputy minister and also be in direct contact, on a regular basis, with the minister's office, bypassing that executive director's immediate supervisor, or reporting authority....

I come to the issue of ministerial responsibility. Right now, under the traditional definition, it is the minister who reports to and is accountable to Parliament. Deputy ministers go through their minister. What has been described here is completely out of the box of normal rules, procedures, etc. And this is not withstanding the fact that the submissions and the approval by cabinet clearly state that in terms of the program, those moneys are to be used according to regulations, guidelines, processes, etc. But in fact it is completely outside of the box.

Would you say that this committee should give some thought to amending or modifying the current notion of ministerial responsibility so that deputy ministers would be accountable to, and report directly to, Parliament, not through their minister?

Mr. Ranald Quail: Do I think this committee should have a look at and provide views on the relationship between ministers and deputy ministers? Yes, I would agree with that. I'm just not sure I followed all the rest of what you said.

But listen, absolutely, that's a very important issue. It's a very difficult issue.

Mrs. Marlene Jennings: Yes. Let me stop you for one moment.

You have a deputy minister in place, whether it be you or someone else, who receives information that Treasury Board has just approved, based on a submission by the Prime Minister and by that deputy minister's minister, a new program with new moneys attached to it. If that deputy minister is aware that there were difficulties on where we were going to be parking that money, with the particular branch where that money was going to be parked, under the tutelage of a certain executive director, then that deputy minister normally would be concerned about the proper use and the proper respect of existing rules and regulations, given that an internal audit in 1996 already showed that there were problems.

That deputy minister would be in a difficult position to signal his or her inquiétude--

Â (1200)

[Translation]

The Chair: Please put your question.

[English]

Mrs. Marlene Jennings: I'm asking it.

Would that deputy minister be in a difficult position to signal his or her concerns or preoccupations about the decisions that had been made and who was going to be running it? And who would that deputy minister report back to, unless it's to the Parliament?

The Chair: Mr. Quail.

Mr. Ranald Quail: The options that are open...and it is a difficult situation, that interface between ministers and deputy ministers. In this particular case, you'd give your advice to the minister, and if the minister decided he wished to proceed, you would proceed. That is the particular model. If you felt that there were issues that were outside of you and the minister and the department, I guess you could talk to the clerk, if you wanted to.

But that is the issue--

The Chair: Thank you, Mr. Quail.

Mr. Comartin, please, for four minutes.

Mr. Joe Comartin: Thank you, Mr. Chair.

Mr. Quail, we'll give you a break.

Ms. Cochrane, when you came on as DM in April of 2001, how soon did you become aware of the 2000 internal audit?

Ms. Janice Cochrane: The 2000 audit was the subject of my initial briefings, obviously. It was current in the minds of senior officials in the department. In particular, there had been, as Mr. Quail pointed out, a very ambitious action plan put in place. One of the points of the action plan was that a follow-up review would be carried out beginning in the fall of the year in which I arrived, 2001. We were mindful of the fact that this date was approaching and of the importance of setting up the framework to do that review, and proceeded accordingly.

Mr. Joe Comartin: Unlike Mr. Kenney, I agree with Mr. Quail's assessment of the internal audit showing that there was no criminality, no fraud, found in that audit. I think the more pertinent question is, why wasn't there? In 2002 we had the external audit, and flowing from that, ten files were referred to the RCMP. Why did the internal audit miss it?

Are you able to help us on that?

Ms. Janice Cochrane: The internal audit was set up specifically to examine the management practices and the governing framework under which the program was administered. It was not a value-for-money audit, and it wasn't an audit that was intended to ascertain whether or not fraud had been committed. At that time there were no facts that would have given rise to the creation of such an audit.

I think it's important to remember that when Ms. Fraser did her audit in 2002, she did not determine that fraud had been committed. She determined that there was such an absence of documentation on the files one could not determine or explain whether or not the crown had received what it had paid for. That's why she turned those files over to the RCMP.

Subsequently, when we did our own file review, we similarly found files in which there was a noticeable absence of documentation to explain what was requisitioned and what was received. Those we turned over to the RCMP, again to determine whether or not there may have been fraud committed. But there was not a finding up to that point on whether or not there was an actual fraud.

Mr. Joe Comartin: In the internal audit of 2000, how many files were actually looked at? Can you help us with that?

Mr. Ranald Quail: I think it was around 500.

Mr. Joe Comartin: Mr. Quail is indicating approximately 500. So a good number of those would have been duplicated when the 721 files were looked at by the QRT.

Ms. Janice Cochrane: That's correct.

Â (1205)

Mr. Joe Comartin: Okay.

Do we know if any of those 500 files in the internal audit were the ones that led to recommendations for transfer to the RCMP for review, for criminal charges?

Ms. Janice Cochrane: I can't say with certainty, Mr. Chair, but I would expect that some of them probably would have been covered by the earlier audit. It's just that the team that was looking at the files in the summer of 2000 was looking at them through a different lens. It was actually not looking for irregularities in management practices but at whether in fact there could have been potential criminal action.

Mr. Joe Comartin: Do you find it surprising, given the internal audit from 1996, that they in fact wouldn't have had a broader scope?

Ms. Janice Cochrane: I was not personally aware of the internal audit until just last week.

Mr. Joe Comartin: You didn't get that as part of your briefing?

Ms. Janice Cochrane: No.

Mr. Ranald Quail: I just don't accept that we tried to limit the scope of the audit in 2000. It was a management audit to see if the practices were being followed. It wasn't an intention to limit their opportunity to undertake the audit.

Mr. Joe Comartin: Hey, a really good question.

The Chair: That was a great question--a great answer, too.

Everybody has spoken at least once, and some people have spoken more than once, so I am going to take a little turn myself. We're here for three hours rather than the normal two.

Ms. Cochrane, you're on record as saying that you don't know why, and it was rather strange the way the organizational chart was set up. Of course, you changed it later on.

You didn't feel that it was within your obligation as deputy minister to ask why an unusual situation existed?

Ms. Janice Cochrane: At the time, we were focused on following up on the 2000 internal audit.

The Chair: So there were audit problems and an unusual structure. Did you ask why the unusual structure?

Ms. Janice Cochrane: With respect to the organization itself, our focus during the summer of--

The Chair: No, I'm asking you, did you ask why this unusual structure existed?

Ms. Janice Cochrane: Yes, I did ask why.

The Chair: And what answer did you get?

Ms. Janice Cochrane: Frankly, Mr. Chair, I was never able to receive a satisfactory answer.

The Chair: Mr. Quail, do you know why it was set up that way?

Mr. Ranald Quail: In terms of the CCSB and...?

The Chair: No, the unusual reporting structure that Ms. Cochrane couldn't understand and cancelled later on.

Mr. Ranald Quail: I think it was set up in terms of...maybe as far back as--

The Chair: But do you know why it was set up that way?

Mr. Ranald Quail: I don't know. I can't--

The Chair: I'm going to refer now to the framework, the way things should work and the way things did work, with the CCSB procurement.

How many other programs within the public works department are working the same way as CCSB?

Mr. Ranald Quail: None.

The Chair: You're absolutely--

Mr. Ranald Quail: Well, sorry, I don't know that for a fact. I'm not there. But at the time, none.

The Chair: Under your watch.

Madam Cochrane.

Ms. Janice Cochrane: During the time when I was in the department, no other part of the department operated this way.

The Chair: How do you know?

Ms. Janice Cochrane: I know on the basis of the frameworks that had been put into place to look at risk within the department, and I know--

The Chair: So why did this one escape?

Ms. Janice Cochrane: I have no idea. This was set up many years ago.

The Chair: Mr. Quail, did any other program operate this way under your watch?

Mr. Ranald Quail: No.

The Chair: Why did this one operate this way under your watch?

Mr. Ranald Quail: Mainly because of the fact that the minister wanted CCSB to be the group that was responsible in totality for sponsorship.

The Chair: So did the minister say, “This is my little sponsorship program, I'll run it my way”?

Mr. Ranald Quail: I can't say that he said it that way, Mr. Chairman.

The Chair: Well, how did he say it?

Mr. Ranald Quail: From my point of view, he talked about the fact that we were going to use CCSB as the delivery arm for sponsorship programs.

The Chair: But did you just say, “You run it your way”, or did you, as deputy minister, say, “You have to work within the confines of the rules”?

Mr. Ranald Quail: I said that this really got down to the question of reporting relationships, and that--

The Chair: No, we're talking about breaking the rules.

Mr. Ranald Quail: We didn't talk about breaking the rules. I think it was an understanding that we would not break the rules. He did not think we'd break the rules. In my view, he did not think we'd break the rules. He didn't say, “Let's get on and do this and break all of the rules.”

The Chair: We have the Auditor General's testimony that this was consistent and pervasive. Every rule in the book was broken for four years, and nothing was cut.

Now, why does it take an internal audit to find...and didn't find, such obviously gross incompetence, something so outside the rules? Why did the internal audit not pick it up, and before that, why didn't normal managerial processes pick it up?

Mr. Ranald Quail: I attempted to explain that before, Mr. Chairman, that the group came together in November--

The Chair: I know how the group came together, but surely you have management processes.

You tell me, both of you, that no other program was run this way, but this one did, and you can't tell me why it was allowed to stay, or why it escaped, or whatever terminology you used, outside the rules.

Why did it get outside the rules, stay there, and nobody brought it back in?

Mr. Ranald Quail: All I can say is that, in my management experience, I don't start with a situation by assuming that everything is wrong, that everybody is trying to break the rules. When I ask somebody to carry out the work, and carry it out responsibly, and live by the rules, and be audited by the rules, I expect that they would do it.

When I had an opportunity, and I had a reason to think, “Gee, I should have a look at this”, I asked for the audit in 2000.

Â (1210)

The Chair: I can't believe that the management process in your department, under both of your watches, was so incapable of detecting this, even when there was a full-blown audit, that it still didn't detect that every rule in the book was being broken consistently for four years.

I have one final question. You mentioned that this was a small program, only $40 million, that it wasn't a big deal. There were only 14-odd staff, and it wasn't a big deal. Now, to both of you, the department handles billions of dollars. I'm not sure exactly how much, but it's billions of dollars. How did Mr. Guité get all the way to an EX-4, which is about the same level as a junior deputy minister, to run a nickel-and-dime program of only $40 million? If he qualifies as an EX-4, there must be hundreds of EX-4s in your department.

So how did it happen? Who authorized it?

Mr. Ranald Quail: First of all, Mr. Chairman, $40 million is a lot of money.

The Chair: I know, but within the context of your whole department...and you're on record as saying that it wasn't a big deal.

Mr. Ranald Quail: I understand that, but I just want to make sure it's clear--

The Chair: Yes, I know.

Mr. Ranald Quail: --that I do think $40 million is an enormous--

Mrs. Marlene Jennings: On a point of order, Mr. Speaker, I think you are mis-characterizing the testimony of Mr. Quail. I don't believe at any time he said it was not a big deal.

The Chair: No, he did actually say that it was a significant amount of money for the general public, but within the management of his department, $40 million was a small amount.

Mrs. Marlene Jennings: Yes, but he didn't say--

The Chair: My point was that since it is a small amount within his department, how did the manager of that small amount get to be--

Mrs. Marlene Jennings: I understand that, but you just characterized his statement as saying it wasn't a big deal, and I want to make the point that this was not what his testimony was.

The Chair: Mr. Lastewka, a point of order.

Hon. Walt Lastewka: I would like to hear the dialogue. We have time, so I would like to hear your questioning and the answering without interference. We have time.

The Chair: I know, but I could keep Mr. Quail here for maybe three days, not three hours.

So we'll have the answer to that particular question, Mr. Quail. Within your department, this was a relatively small amount of money compared to the billions that you spend. Why did this one justify an EX-4, and who said he needed that designation based on the responsibilities he had?

Mr. Ranald Quail: The reason why this deserved EX-4 was set out in the Treasury Board submission. So maybe I can just set that aside.

How did we get the Treasury Board submission? How was it initiated that we wanted to go from an EX-3 to an EX-4? Mr. Guité felt that as a result of the continuation of the sponsorship program at the level that was now being approved by Treasury Board on a sequential basis--we never had really a multi-year funding program, but did it by way of sequential Treasury Board submissions--the position deserved to be looked at. He talked to me about that and he also talked to the minister about it. The minister raised it with me and said he would like the matter looked at, at whether or not we could move to have Mr. Guité classified at the EX-4 level.

The Chair: And you agreed with that.

Mr. Ranald Quail: What I agreed with was that we would have a look at it, and then we would prepare a submission, if that's what he wanted to have done, and send it to the board for their consideration.

The Chair: And you agreed with the EX-4 recommendation.

Mr. Ranald Quail: I agreed with preparing the recommendation, for the minister's signature, to send it to the board. I did do that.

You're asking me whether I agreed. I can't tell you whether or not I had a meeting with the minister and said, “You know, I disagree with this submission”, but what I do remember is that I was asked to prepare it. We did prepare it, and it went.

The Chair: Thank you very much.

Mr. Lastewka, four minutes, please.

Hon. Walt Lastewka: Just to add on to the chair's questioning along that line, when you change or reclassify an individual, it's usually done on the responsibilities the individual is filling, not looking at the person but at the office held by that person.

Â (1215)

Mr. Ranald Quail: Agreed.

Hon. Walt Lastewka: When you reviewed the responsibilities of that position, did it fulfill the position being changed? Did you agree with that? Did you have any pressure from anybody to change it? As a deputy minister, was it compared with other positions holding that classification?

Mr. Ranald Quail: I'm sure it was, yes, in the preparation of the document, the document being the Treasury Board submission. Would it have been looked at with other similar EX-4 positions? I'm sure that in the preparation of the documentation this was done.

I would also point out that we're talking about responsibilities that were bigger than just sponsorship. We're talking about 1-800-O-Canada, we're talking about the call centre, we're talking about the website. There were other responsibilities in here.

Was it checked against the responsibilities? Was it drafted against the responsibilities and not the individual? It was. Was it looked at and covered off, presumably, with the Hay system, which the government uses? I'm assuming it was.

I'm not sure I've answered your question, sir.

Hon. Walt Lastewka: No, you haven't, because there are too many “assumes” in there.

Mr. Ranald Quail: Did I personally check that it was covered off by the Hay system? No. Do I--

Hon. Walt Lastewka: Did somebody sign off that they checked it?

Mr. Ranald Quail: It was prepared in the HR department. They were competent people, in my view, to prepare it and to cover off on the proper balances. When the submission went to the board, I am sure the board had a look at it and did a proper check, because they don't like to give out EX-4s very much.

So did it get looked at? Absolutely it got looked at.

Hon. Walt Lastewka: Let me go back to the questioning concerning the direction that you gave Mr. Guité. You advised him that he should make sure that he worked with the internal audit group, specifically Norm Steinberg. I take it from your testimony that you did not check whether that was done. You gave him direction, he had a certain position, and you assumed it would be done.

Is that your testimony?

Mr. Ranald Quail: That's what I recall. I don't recall checking.

Hon. Walt Lastewka: Let me ask you this question about internal audits. Is there a hesitancy to ask for internal audits in the public service because it gets published on the web right away, and things might happen after? Is there a hesitancy to use internal audits rather than have them used as an important management tool?

Mr. Ranald Quail: Hesitancy by me?

Hon. Walt Lastewka: By you or by your organization.

Mr. Ranald Quail: Not by me. By the organization, we had an internal audit committee consisting of me, as the chair, and senior members. We diligently met, reviewed the audit plan, did the things that we talked about earlier, and followed through religiously in terms of follow-up as a result of the findings of the audit and the undertakings that were given.

Hon. Walt Lastewka: Then you being chair of that committee.... On the one hand, you had given direction to Mr. Guité to talk to the internal audit. Was it in your plan to review the sponsorship program?

Mr. Ranald Quail: I don't know.

Hon. Walt Lastewka: You don't know.

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

Mr. Ranald Quail: If I could just make one point, I don't believe it was in the yearly plan, in February of 2000, when I called the special audit. It was not in the plan at that time.

The Chair: Mr. Lastewka.

Hon. Walt Lastewka: Mr. Chair, I have a concern here. There was direction to have internal audits, and Mr. Quail was chairman of the internal audit group. I can't understand why there were no internal audits done on this new group. That's where I'm going here.

The Chair: I'm sure Mr. Quail will be able to fill you in.

Mr. Ranald Quail: I've attempted to fill it in, and I haven't answered the question satisfactorily.

We had an audit plan. In the year 2000 it wasn't on the audit plan. The real question is, why didn't we do it sooner? I worked on the basis of trust. I didn't feel that there was any requirement to have a special audit of this particular group immediately, except when I got around to 2000. And I've explained why I called and initiated the audit in 2000.

The Chair: So there we are, Mr. Lastewka. We're all up to speed.

Â (1220)

Mr. Vic Toews: On a point of order, Mr. Chair, I was having some trouble following the testimony following your questioning of the witness. There was reference made to a specific Treasury Board approval that the witness indicated simply came to him and he moved that forward up the line, I would assume to the minister and his cabinet.

I don't seem to have that document here, and I thought there was some indication that the document was here. I'm just wondering if we could have that produced, Mr. Chair, if our research people have that.

The Chair: I don't know if we have the document. It's not for Mr. Quail, because he's retired now, to say if we have it.

Do we have it? The clerk doesn't know. The researchers don't know. I think we'll just write to the department to ask for it.

That was the issue of the EX-4 for Mr. Guité to be recommended for approval, the document that went forward with Mr. Quail's signature, I believe.

Mr. Vic Toews: That's correct.

Now, what you'll see, of course, is the actual Treasury Board document and the submission that accompanies it. The indication here is that it was neither a yea or a nay by the deputy minister; it just moved up.

The Chair: We can't get into a discussion here. We'll get the document.

Mr. Vic Toews: Both of the documents.

The Chair: Yes, the document and the supporting document.

Mr. Forseth, please, for four minutes....

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: Mr. Williams. Mr. Chuck Guité's name is being mentioned a great deal. Could we have an overview of his career in the public service? For instance, where did he start out?

[English]

The Chair: Is this a point of order?

[Translation]

Mr. Odina Desrochers: Yes. It relates to the subject raised by your colleague.

[English]

The Chair: No, wait, we have completed the issue regarding Mr. Toews. We will get the documents and they will be supplied to the committee. When I receive them, I will table them.

[Translation]

Mr. Odina Desrochers: I have another question concerning this document.

[English]

The Chair: Is this another point of order?

[Translation]

Mr. Odina Desrochers: Much has been said, Mr. Chairman, about the salary paid to Mr. Guité and his rapid rise through the ranks. I'd like to know how long Mr. Guité was in the employ of Public Works, how he came to be hired and what is salary was?

[English]

The Chair: These are not questions that we have.... We may get the salary grid, or the range within he was paid, but I do not think it's appropriate that we get his actual salary. I think that may be going a bit too far into the Privacy Act.

Again, you can ask, during your testimony, to have that information brought forward, but it's not a point of order.

Mr. Forseth, four minutes, please....

Do you have a point of order too, Mr. Comartin?

Mr. Joe Comartin: This has been disturbing me since last week, and it's bothering me now with the information I've just been handed--

The Chair: Just a second. Is this information pertaining to a point of order, or do you just want to put something on the record?

Mr. Joe Comartin: I want to get a ruling from you on whether or not the committee should be doing something about this.

It was reported on the news this morning that Francis Fox, from the Prime Minister's office, is meeting with Ms. Bédard sometime today. It was reported last week that the Prime Minister's office had received a letter from Ms. Bédard on February 13.

The Chair: And how is this committee involved?

Mr. Joe Comartin: Well, is the committee involved, and should the Prime Minister's office be meeting with witnesses before we have any contact with them, given the fact that the Prime Minister's office is certainly part of this investigation?

The Chair: That is not a point of order, because we have a subcommittee on witnesses. Ms. Bédard has not been called as a witness. She is not a witness before the committee. We may call her, but at this point in time she has not been called.

People can have conversations. It's a free country. So that's not a point of order.

Mr. Forseth, for four minutes.

Mr. Paul Forseth: Thank you, Mr. Chair.

On page 3 of chapter 3, the Auditor General says:

From 1997 until 31 March 2003, the Government of Canada spent about $250 million to sponsor 1,987 events.... Over $100 million of that (40 percent of total expenditures) was paid to communications agencies as production fees and commissions.

Much of that, Mr. Quail, took place under your watch.

With regard to this scheme, I want to know who told you to go along to get along. Who let it be known to you not to get too much involved in the CCSB activities? What was really going on there?

Â (1225)

Mr. Ranald Quail: Could you repeat the question?

Mr. Paul Forseth: Who told you to go along to get along and let it be known to you not to get too much involved in the internal workings of CCSB? What was really going on there?

Mr. Ranald Quail: I'm not sure anybody told me not to get involved. I certainly got involved, as I've already put on the record, in the preparation of the submissions, the listing of the events, and the amount of money in total that was required and where we could find it to make it happen. When it came back into the department, the money was delegated to CCSB. I then expected CCSB to carry out their work according to the rules and regulations for sponsoring the events. There were discussions on events between Mr. Guité and the minister's office. I acknowledge that. But I had no reason to believe that they were not following rules and regulations.

Mr. Paul Forseth: The Auditor General says on page 5:

Parliament was not informed of the Sponsorship Program's true objectives. When it created the Sponsorship Program, the federal government did not inform Parliament of the program's real objectives; nor has it ever reported the results.

...it is not clear to us how the decision to create the program was made, and by whom. Nor is it clear why the decision was not communicated in writing.

When I see that, I see the situation of plausible deniability, and that appears to be the plan. You were either in on it or you were the patsy and were bypassed.

The Chair: Be careful of your language, Mr. Forseth.

Mr. Paul Forseth: When it all hit the fan, and most of it was under your watch, you must have had some strong feelings about it. You know what the committee needs to know, and I'm just wanting to know why you won't tell us. They can't take your pension away now. We need to know the nature of this scheme, how it was set up--it certainly wasn't by accident; it was by design--and who is essentially responsible.

Mr. Ranald Quail: I've been attempting to explain that this morning. It was set up by way of the Treasury Board submissions. The cabinet documents are now available to the committee. That's how it got started. It got started on an incremental basis. Each one of the Treasury Board submissions said $17 million for two years. There's a request for supplementary estimates. Then there's a request in a subsequent Treasury Board submission to cover those particular years. So it was done incrementally. That was done. It's a matter of record. Those submissions went forward from the minister and were signed by the Prime Minister. That's a fact. To me, that's how it got set up.

Mr. Paul Forseth: To your knowledge, who came up with this scheme in the first place? Who pitched the plan, and in the beginning, whom was the plan proposed to?

Mr. Ranald Quail: That's an interesting question. I've grappled with that one in terms of trying to get my mind around how to answer it. There are some things you can remember and some things you can't. The people who were involved in developing the Treasury Board submissions and the work behind the Treasury Board submissions would have obviously been in discussions with PMO and the minister's office, and those discussions would have been carried out by Mr. Guité.

The Chair: Thank you very much, Mr. Forseth. Your time is up. I apologize.

Mr. Jordan, please.

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

I'd like to pick up on something Mr. Toews talked about, and that is the level of detail that would have worked its way into the Treasury Board submission. We heard testimony that in some cases these early allotments, as this program was being built.... I think the language was communication activities of the Government of Canada, x amount of money. Were there additional documents that would have gone to Treasury Board to give more of an explanation as to what this was all about?

Mr. Ranald Quail: I don't think so. I think the committee has everything that went to the Treasury Board; I don't think there was anything held back. The Treasury Board submission was fairly clear as to the why. It had a list of events attached to it, you could see what the money was going to be, there was a total, and I think that was all fairly straightforward.

Â (1230)

Hon. Joe Jordan: To go back to my other point, I just want to read a section of the AG's report. This is on page 6 of chapter 3, item 3.22. The subtitle is “Weak control environment”, which probably means I don't even have to read the section, but essentially what it is saying here is this:

This means, among other things,

--they are talking about the responsibilities--

that they must maintain robust internal controls and be vigilant to detect early any conditions that could lead to a control failure.

This is interesting audit language. Essentially, departments and agencies have a responsibility to ensure there are adequate management frameworks in place. It then goes on to say:

The Sponsorship Program operated in a weak control environment: procurement and financial activities were handled within CCSB with little oversight by PWGSC's central services, communications agencies and events to be sponsored were selected by only a few individuals, and the same individuals who approved the projects also approved invoices for payment.

With regard to even basic internal management financial controls, this particular department--this is what a number of people have been trying to get at in their questions--seems to have been set up without those basic processes put in place.

Here is the final question I have before I let you respond. There were two classes of project, I understand. Projects under $25,000 were managed by CCSB. If they were over $25,000, then not only were they contracted out to a communications agency but there was also an agency of record that was to provide financial management services on behalf of CCSB. I've looked through some of these contracts. Are you aware, is it written down anywhere, what those financial management services that were being conducted on behalf of the CCSB and that warranted 3% off the top of each one of these contracts were supposed to do in terms of some financial tracking, in terms of complying with the rules? I don't know if it was value-for-money audits or what.

The Chair: Your question is to either one. We'll start with Mr. Quail briefly and then go to Ms. Cochrane.

Mr. Ranald Quail: I can't respond on what was in the contracts for the agency of record, I'm sorry. I'm assuming it was there, but if it wasn't, well, then that's another oversight.

The Chair: Ms. Cochrane.

Ms. Janice Cochrane: I also have no personal knowledge of what was in the contracts. I understood from the briefings I had in the department that using an agency of record to deal with the financial services around advertising contracts was an industry practice, but as to what those agencies actually did for their percentage, I'm not aware.

The Chair: Do you still believe it's an industry practice, Ms. Cochrane?

Ms. Janice Cochrane: I believe that agencies of record are still used, but I also believe that--

The Chair: But is that an industry practice?

Ms. Janice Cochrane: We're not talking here about whether or not using an agency of record is the right thing to do; it's whether or not value is given for the money they earn. The issue here is that there appears not to have been value received for the commissions they were paid.

The Chair: No, you said you thought agencies of record were an industy standard, an industry norm. Do you still believe that?

Ms. Janice Cochrane: I said that I had been so informed.

The Chair: Are you still of the same opinion?

Ms. Janice Cochrane: I don't know the industry that well.

The Chair: Sorry to interject, Mr. Jordan.

Hon. Joe Jordan: I was just making the point that it seems clear to the committee, because we've heard it from witness after witness, that either by design or by neglect this particular department, even with respect to decision-making combined with the approval of invoices, just violated even basic one-over-one approval. This group seemed to be able to spend this money as if it was their own. There may have been a rationale for setting up a department that could move quickly, but I don't understand what the rationale would have been for removing even the most basic oversight within this group.

One of the issues I keep coming back to is that we can have strong rules. If people don't follow them, that's a separate issue, but if they don't follow them and don't get caught for three years, then it's a whole different kettle of fish here.

The Chair: A brief response, please.

Mr. Ranald Quail: The issue was as to why--I put it slightly differently--procurement was in CCSB. Procurement was in CCSB because for handling the matters, essentially this is the way the minister wanted it.

It would be my expectation that inside that branch they would have separated the duties. You have an executive director, but there's not just one person. You do have people in there. I would have expected, by good business.... And indeed, that was one of the follow-ups that was supposed to have taken place after the 1996 audit; it was one of the undertakings that there would be a separation of these responsibilities, but inside the branch.

Â (1235)

The Chair: Thank you.

Ms. Cochrane, do you have any brief comment to add?

Ms. Janice Cochrane: No, I don't have anything to add.

The Chair: But you did point out that this was the way the minister wanted it, and I come back to Mr. Jordan's point. We know that it ended up this way, that this is what the minister wanted, but we are having a hard time connecting the dots as to what the minister wanted, what the minister got, and how all the rules were broken. We can't seem to find who actually permitted this or authorized it to happen.

We are now going to move on to Mr. Kenney.

Mr. Vic Toews: Mr. Chair, before we move on, I have another point of order. There was mention made of the Treasury Board submission order listing the events. I don't believe I have that in my documentation here.

The Chair: If we don't have it--I'm not saying we don't, but if we don't have it--we will request it.

Mr. Vic Toews: Thank you.

Mr. Jason Kenney: Mr. Quail, you and I had a disagreement about whether the internal audit from 2000 revealed the practice of double billing. I would like to quote paragraph 2.3.2. from that report. It said:

For those invoices which did provide some details on the breakdown of amounts being billed, we concluded the amounts being charged were for products/services more appropriately considered management of the sponsorship (and therefore to be included in the 12% commission fee paid), and not for product/services appropriate to the use of the production budget.

Now, I understand that to be double billing. The Globe and Mail today summarizes that as advertising firms involved in the sponsorship program sometimes getting paid twice for the same services. So if lay people, members of Parliament, and journalists understand it to be double billing, why didn't you?

Mr. Ranald Quail: I don't understand the background behind the thing. I'm sorry, Mr. Kenney.

Mr. Jason Kenney: Knowing this, do you still--

Mr. Ranald Quail: Listen, my reaction and my comments with respect to the internal audit...I worked off the key findings.

Mr. Jason Kenney: I see. You just didn't focus on small findings like ad agencies billing twice for the same services. You just kind of glossed over that.

Mr. Ranald Quail: Well, before I would jump to any conclusions, I'd go back and ask the auditors what they were talking about whenever they wrote these words.

Mr. Jason Kenney: So knowing this, do you still stand by your statement that there was no dishonesty, fraud, criminal behaviour, or intent evident to you?

Mr. Ranald Quail: Well, that's what the audit says.

Mr. Jason Kenney: It says that there were firms that were invoicing twice and getting paid twice for the same professional service, paid once through the commission and other times separately through an invoice.

Mr. Ranald Quail: I'll just go back to my other comment, Mr. Kenney. Before I would start to engage in this kind of discussion, I'd go back and talk to the people who wrote the report and ask them what it was they meant when they wrote it, because I'm still--

Mr. Jason Kenney: Did you do that regarding this allegation?

Mr. Ranald Quail: I don't recall whether I went back specifically on that particular paragraph.

Mr. Jason Kenney: This committee, after hearing your testimony, on March 20, 2003, published a report saying that your “professed lack of knowledge about what was going on in the CCSB reveals a disturbing lack of rigour and attention to key detail that one would normally expect of a deputy minister.” Do you agree with the conclusion of this committee?

Mr. Ranald Quail: I understand what the final report said and that--

Mr. Jason Kenney: Do you agree with it?

Mr. Ranald Quail: I'm not going to incriminate myself. I don't think that's appropriate.

Mr. Jason Kenney: You've had 43 years in the public service. What has been described, as a matter of consensus, as one of the largest scandals involving public funds in several decades in Canada occurred under your administration as deputy minister. This doesn't seem to disturb you; you seem pretty sanguine about it.

Mr. Ranald Quail: I'm not sanguine in the least. I am disturbed about it. I took action. I launched the initiative for the internal audit. Whenever we got the results of the internal audit, we took action immediately. We had a 37-point action plan.

Â (1240)

Mr. Jason Kenney: And the program continued. Treasury Board authorized another $40 million after all of those actions were taken, and the audit was continued. So $40 million more went down the drain.

Mr. Quail, $100 million went missing here. Where do you think it went?

Mr. Ranald Quail: I don't have any idea with regard to the motivation--

Hon. Joe Jordan: I have a point of order. Mr. Chair, I specifically asked the last set of witnesses about this $100 million, and they are going to get back to the committee on that. So saying $100 million went....

You've shown a little leeway in regard to points of order, and if we're going to continue that practice...otherwise, we'll enforce it a little more strictly.

That $100 million went missing is not an accurate statement to be throwing out into the public domain.

Mr. Odina Desrochers: It's a point of debate.

The Chair: Mr. Desrochers, I will speak.

Mr. Jordan is technically correct. The Auditor General has indicated that she can't account for the $100 million.

Mr. Kenney, we must respect that it is a parliamentary committee we are sitting on.

Mr. Jason Kenney: On February 19, CanWest news reported that Mr. Quail attended several lunches hosted by the former minister, Mr. Gagliano, which involved the heads of various crown corporations, including Canada Post, the Port of Montreal, CMHC, etc. Jon Grant, former head of Canada Lands, described them as lavish, European-style lunches with expensive wines and cigars. I'd like to know from Mr. Quail whether the question of the sponsorship program ever came up at any of the lunches he attended.

Mr. Ranald Quail: We certainly had lunches where we had round tables with the heads of the crown corporations. I don't have any recollection of sponsorship per se coming up at any of the luncheons. I just don't have any recollection of that at all.

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

[Translation]

You have four minutes, Mr. Desrochers.

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

The findings of the August 2000 internal audit report appeared to indicate that the problems were merely of a minor administrative nature. Today, we know different.

What explanation do you have, Mr. Quail, for the discrepancies between the findings of the 2002 report and the facts disclosed by the Auditor General? Were you surprised by the Auditor General's findings, or do you now admit that some things happened without your knowledge?

[English]

Mr. Ranald Quail: I was very surprised and taken aback by the results of the internal audit, point number one. My immediate action was to move to put in place an action plan to fix what we found.

[Translation]

Mr. Odina Desrochers: There is quite a discrepancy between the results of the 2000 audit and the findings of the AG's report. Let me put the following question to you: were you genuinely surprised by the Auditor General's findings, given what you learned from the August 2000 internal audit?

[English]

Mr. Ranald Quail: I was shocked.

[Translation]

Mr. Odina Desrochers: Let me ask you once again: did these refer to information already in your possession, or were you surprised, as an observer, by the outrageous disclosures? Was there a link between what you knew and what the AG found?

[English]

Mr. Ranald Quail: I was just shocked at the findings in the Auditor General's report.

[Translation]

Mr. Odina Desrochers: Let me put the question to you again. Given what you knew as Deputy Minister, you were surprised. However, where you in fact concerned, given the internal audit findings you had seen, that this whole matter might in fact come to light one day? Or could it be that is it that you simply overlooked some things?

[English]

Mr. Ranald Quail: No, I didn't think we missed something the first time around. It was the launching point. The Auditor General in fact said that without the internal audit and the initiation of the internal audit, we would not be where we are today.

[Translation]

Mr. Odina Desrochers: Then how do you explain the fact that following the release of the internal audit, you were called to the PMO? It must have been to discuss something other than administrative matters.

I'm having trouble understanding your reaction, Mr. Quail. You claim to be surprised, as a citizen, about the results of the 2000 audit, but nevertheless you were called to a meeting with PMO staff, merely to discuss administrative details.

Is that what you would have me believe?

Â (1245)

[English]

Mr. Ranald Quail: That's not what I'm trying to tell you; it's what I am telling you. We had a report. We had a 37-point action plan. We were going to release the report on the Internet and it was going to become public. We went over there to go over with them what we found, what our plan was, and what the plan was for releasing it. That's what we talked about.

[Translation]

Mr. Odina Desrochers: Are you saying that there was no discussion of any irregularities that may have occurred within this unit that reported to your department?

[English]

Mr. Ranald Quail: We talked about what was in the audit, what we found as a result of the audit, and what we were going to do to fix it.

[Translation]

Mr. Odina Desrochers: I'd like to ask one last question, Mr. Chairman.

Mr. Quail, you were appointed Deputy Minister in 1993. I imagine you were hired when the new government came to power. When Chuck Guité was appointed, did you know where he had worked prior to your 1993 appointment to Public Works? Did you know where he was working at the time of your appointment? Was he already involved with the advertising, sponsorship or public relations sectors, or did he simply take over as your subordinate in 1993?

[English]

Mr. Ranald Quail: I didn't know Chuck Guité before I went. I didn't know much about the Department of Supply and Services in 1993. We put together two departments and a couple of agencies. We had 19,000 people. That was followed by two program reviews. There was a requirement to get the costs under control. As a result, over the next number of years, we took about 40% of the people out of the department.

[Translation]

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

You have four minutes, Ms. Jennings.

Mrs. Marlene Jennings: Thank you.

[English]

Mr. Guité reported to the associate deputy minister,

[Translation]

Departmental Services and to the senior financial officer

[English]

at the time the internal audit conducted by Ernst & Young was done of the

[Translation]

Advertising and Public Opinion Research.

[English]

Am I correct, Mr. Quail? You were the deputy minister at the time. Mr. Guité, as director of publicité et recherche, reported to an associate deputy minister.

Mr. Ranald Quail: An assistant deputy minister. He reported first to the ADM Corporate Services. Then we did away with the ADM Corporate Services position.

Mrs. Marlene Jennings: Under program review?

Mr. Ranald Quail: Yes. We reorganized to get the costs down. Then he reported to the ADM of--whatever it says on the thing.

Mrs. Marlene Jennings: According to this chart, it's ministerial services and the--

Mr. Ranald Quail: He reported actually to the assistant deputy minister of government operational services. That's correct.

Mrs. Marlene Jennings: There's an internal audit of his sector, which was conducted by Ernst & Young. It comes out with some pretty damning conclusions. I'm assuming that mechanisms are then put into place so that there is a separation and a clarity between the project authority and the procurement authority. One of the main points made under this internal audit by Ernst & Young in 1996 was that this particular sector had virtually no experience in procurement and that aspect of it should be returned to incorporate the procurement of advertising and public opinion research within the normal procurement stream of Public Works and Government Services Canada. I'm going to assume that was done.

In 1997 you have a submission by the Prime Minister and the Minister of Public Works that new money should be designated to provide real visibility to federal government programs, services, etc., through sponsorships. At that point, Mr. Guité, rather than reporting to an assistant deputy minister, now begins to report to the deputy minister.

I'm assuming--and I hope you will tell me whether I'm correct or not--that the procurement had in fact been transferred to the normal procurement process stream within Public Works. Therefore, for Mr. Guité, as of 1997, to have acted as both the project authority and the contracting authority...that procurement piece, which was now in the normal stream, was suddenly shifted back to him. Am I correct?

Â (1250)

Mr. Ranald Quail: No.

Mrs. Marlene Jennings: Could you explain to me how I'm not correct?

Mr. Ranald Quail: It never went into the mainstream at all. You had an assumption that it happened. It did not happen.

So the undertaking by--

Mrs. Marlene Jennings: I'm going to stop you there.

Did it not happen...because at the same time that this report by Ernst & Young came out, the committee that then studied the report, according to the documents we have here.... It's dated June 4, 1997, the response, if I'm correct. By that time a decision had already been made on that initial $17 million in new funds. It was going to be Mr. Guité's sector that was going to get that money and pay it out.

Mr. Ranald Quail: The timelines are generally correct. I'm not sure they're that precise.

The undertaking that was in the response by APORS to the 1996 submission talked about the transfer into supply operations as soon as it could be finalized. It was not finalized. It stayed where it was.

That's where, in discussions...and people will say, “Well, have you got a piece of paper? What exactly was said?” But I'm sorry, never in my wildest dreams am I going to be able to be that precise in my answers.

It stayed with CCSB. They wanted it to stay there. The SOS people were not in a hurry--internally, I mean, to my recollection--to have it back.

That debate took place. While that debate took place, the decision was made that CCSB was going to continue. They did pick up additional responsibilities, and they were the main vehicle for delivering the sponsorship program.

The Chair: Merci beaucoup, Madam Jennings.

Mr. Comartin, please, for four minutes.

Mr. Joe Comartin: I thought I was further down the list.

The Chair: My apologies, I jumped ahead of the line here, Mr. Comartin. It was actually Mr. Toews who was supposed to be next, so with your forbearance, we'll go to Mr. Toews.

Mr. Joe Comartin: I'll defer to Mr. Toews.

The Chair: Thank you.

Mr. Vic Toews: Thank you.

With respect to the 37-point action plan, who proposed that plan to you?

Mr. Ranald Quail: The way in which we handled internal audits was that if I were the person who got audited and there were recommendations, I would then be given a chance to respond. After that, I would be asked if I would prepare a response to each of the recommendations.

Initially the response came back from the executive director, who was at that time Mr. Tremblay, on each of the recommendations.

Mr. Vic Toews: So it was Mr. Tremblay, who was in charge of the program, who brought forward these recommendations.

Mr. Ranald Quail: He brought forward recommendations and they were reviewed by a committee we had set up to look at each one of the responses to make sure they were adequate.

Mr. Vic Toews: All right.

In terms of the position, on the Treasury Board submission with regard to the EX-4 level of position it indicates that the Department of Public Works and Government Services sought approval for the creation of this particular position. How is the approval obtained from the department to go forward to Treasury Board? Who approves that?

Mr. Ranald Quail: I'm not sure. Can you read that piece of paper again?

Â (1255)

Mr. Vic Toews: Well, here's a request for approval of this EX-4 position, essentially a junior deputy minister position.

Mr. Ranald Quail: No, an assistant deputy minister position.

Mr. Vic Toews: Okay, so an assistant deputy minister position, a fairly high-level position.

Mr. Ranald Quail: Yes.

Mr. Vic Toews: Who approves that to go to Treasury Board?

Mr. Ranald Quail: In this case, the minister signed the submission.

Mr. Vic Toews: So when the Treasury Board submission says, “This recommendation has been discussed with and agreed to by the department”, that wouldn't include you?

Mr. Ranald Quail: Yes, it would. I mentioned that earlier.

I had agreed with the minister that we would prepare the submission. We did prepare the submission. It was prepared in the human resources branch.

Mr. Vic Toews: Oh, all right, you agreed to prepare the submission.

Mr. Ranald Quail: Right.

Mr. Vic Toews: But it says here that the recommendation was “agreed to by the department”. There's a big difference between agreeing to do the submission and agreeing with the recommendation.

Did you do both?

Mr. Ranald Quail: Yes.

Mr. Vic Toews: So you agreed with the recommendation for the creation of this EX-4 position.

Mr. Ranald Quail: Yes.

Mr. Vic Toews: On what basis did you agree to the creation of this position?

Mr. Ranald Quail: On the basis of a review being done on the responsibilities that were entailed in the position.

Mr. Vic Toews: So a relatively small group in your department spends about $40 million, or maybe less at that time, $17 million, and you have the creation of an assistant deputy minister's position.

Is that correct?

Mr. Ranald Quail: Yes, but the premise...you haven't gone far enough.

If you look at the submission, that submission sets out the responsibilities for the position, and the responsibilities for the position don't cover only sponsorship. You have the document. They cover 1-800-O-Canada, the Canada website, the Canada Gazette, and crown copyright. There are expanded responsibilities that go into this in order to look at the issue about the size and the classification of the position.

Mr. Vic Toews: So this wasn't simply a small position, in that sense. The budget doesn't really disclose the importance of this particular program to the Government of Canada.

Mr. Ranald Quail: I don't know what you mean. What are you asking me? I don't understand.

Mr. Vic Toews: I'm asking you, was this a small department or did it have many added responsibilities that wouldn't be reflected in its budget?

Mr. Ranald Quail: In the $17 million or in the budget for CCSB?

Mr. Vic Toews: In its importance to the government, it had certain responsibilities. Now you're saying that it wasn't simply the communications aspect, it was much broader.

Mr. Ranald Quail: I'm trying to respond to your question about what went into the development of the EX-4 submission. Why do you think you'd want to do it, and were there additional duties...?

Mr. Vic Toews: I'm going to wrap it right up by asking you, who suggested the creation of this particular position?

Mr. Ranald Quail: The creation of the position?

The Chair: The EX-4 position that Mr. Guité ended up in.

Mr. Vic Toews: Who suggested it?

Mr. Ranald Quail: They grew into it.

Voices: Oh, oh!

The Chair: Okay, we got the answer.

Mr. Ranald Quail: Look, it evolved. It evolved, starting back at APORS--

The Chair: Mr. Toews, thank you very much.

Mr. Tonks, please, four minutes.

Mr. Alan Tonks: Thank you, Mr. Chairman.

Mr. Quail, last week Mr. Marshall testified here, and I would take it that as a result of some of the things done under your stewardship the 2000 PWGSC internal audit was done, the Treasury Board had in fact worked with PWGSC to develop the management action plan, and in March of 2002, as a result of ongoing administration improvements, PWGSC requested an audit of three Groupaction contracts.

I assume that was under your direction.

· (1300)

Mr. Ranald Quail: No, I had left by that time.

Mr. Alan Tonks: That was under Ms. Cochrane's direction?

Mr. Ranald Quail: Yes.

Mr. Alan Tonks: Thank you.

Then there were RCMP investigations. It seems like we're now getting closer to actual fraud issues and so on.

On August 7, 2002--and I think these dates are important; all of that was happening in March to May of 2002--Treasury Board then came back in, very strong, and approved the results of the Treasury Board president's review of the management of the sponsorship, advertising, and public opinion research. Then--and this would be at your time too, I think, Ms. Cochrane--Treasury Board approved the elimination of appendix Q--that old appendix Q comes back up--recognizing that it had been eliminated in 1996, which really introduced the period where there were no checks and balances that would be brought in by Treasury Board. They had really shopped it out, if you will.

My question is, why did it take so long for Treasury Board to come back into...? With the secretariat that Mr. Marshall said was so scrupulous and was so close to accepted operating procedures, in your opinion, why did it take so long? Treasury Board approved EX-4s and they approved the budgets from 1996 to 2001. There doesn't appear to be anything that came back through Treasury Board, but all of a sudden in 2002 Treasury Board wants to take ownership of this again. Why did it take so long? There were internal audits; there were audits.

Mr. Quail, during your and Ms. Cochrane's time you were putting Public Works management practices into place, but Treasury Board didn't act until 2002. Why?

Ms. Janice Cochrane: Perhaps I could begin.

Treasury Board was obviously involved in working with the department to put in place the action plan after the internal audit in 2000 and was aware of the operation of the program from that point. As to why they were not proposing program design at that point, I can't say. I do know that they became very actively involved after the audit was done of the Groupaction files because it was apparent then to all of us that there was a very serious problem here that could in fact be indicating that there might be criminal behaviour and other inappropriate behaviour involved. So they became involved with the department at that point in assessing what to do about the sponsorship program--

The Chair: When you say “at that point”, which point was that?

Ms. Janice Cochrane: This was after the audit that was done in March 2000 and released in February 2002.

I have to say at this point, bear in mind that the program was Communication Canada's program, not the Department of Public Works'.

Communication Canada officials worked with the Treasury Board throughout the summer to determine what would be appropriate on an interim basis, given the fact that a number of events--fairs, festivals, and other events that were planned for the summer--had already advanced quite far in their planning. The objective was to try to find a way to have an interim program while the Treasury Board and Communication Canada conducted a more complete review. The interim program was put into place for that summer but without the use of those advertising agencies. Instead, Consulting and Audit Canada carried out the role that would have been performed by the agencies to verify that events had taken place.

After that the board became more involved in the permanent program design, and that led up to the program that was cancelled in December of this past year.

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

Mr. Comartin, please.

Mr. Joe Comartin: Mr. Quail, with respect to your relationship with Mr. Guité, you said you didn't know him before you went to the department in 1993. When would you have first become aware that he was part of your department?

Mr. Ranald Quail: Do you mean a specific date? I don't know. Sometime between...I don't know...I mean--

Mr. Joe Comartin: After the internal audit in 1996, were you aware of him by then?

Mr. Ranald Quail: Yes.

Mr. Joe Comartin: At any time between 1996 and April of 2001, when you left, did you ever object in writing to any of the promotions he got, any of the additional responsibilities he had, or his reporting function?

· (1305)

Mr. Ranald Quail: I didn't object in writing, obviously, to his reclassification, and I was involved in getting the submission--which was signed by the minister--written for his reclassification to go to the board to make him an EX-4.

Mr. Joe Comartin: Did you ever verbally complain to the minister about his conduct at any time from 1996 to 2001?

Mr. Ranald Quail: I don't have a specific recollection; I don't think so, not to my recollection.

Mr. Joe Comartin: With regard to Mr. Tremblay, he was there for a relatively short period of time?

Mr. Ranald Quail: Yes, he was.

Mr. Joe Comartin: Did you object to him being transferred from the minister's office into your department either in writing or verbally?

Mr. Ranald Quail: I did not object. I said in my previous testimony, I believe, that he had a priority right according to the act. That priority right was exercised. We very carefully had his application reviewed, and we had an assessment from the Public Service Commission. We had an interview board, including a representative from the Public Service Commission, to make sure he was fully qualified for the position. On that basis he came out of the minister's office and joined CCSB.

Mr. Joe Comartin: Ms. Cochrane, did you at any time object in writing or verbally to Mr. Tremblay being in the position he was in or in the reporting function he had?

Ms. Janice Cochrane: No. I agree with Mr. Quail; he did have statutory priority. He reported to me only for a very short period of time, about four months, before he moved to Communication Canada, and during that time he was engaged in putting in place the action plan that had been agreed to the previous fall. I had no basis upon which to object.

Mr. Joe Comartin: And no disciplinary action was taken by you with regard to him at any time while he was with the department and you were the deputy minister.

Ms. Janice Cochrane: No, there was no basis upon which to take disciplinary action.

Mr. Joe Comartin: The same, Mr. Quail: there was never any disciplinary action taken against Mr. Guité.

Mr. Ranald Quail: Not to my recollection, no.

Mr. Joe Comartin: Those are all the questions I have, Mr. Chair.

Thank you.

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

Mr. Forseth for four minutes, please.

Mr. Paul Forseth: Thank you.

The Auditor General said “We reviewed PWGSC's performance reports.” That's to Parliament. The Auditor General said:

None of them mentioned the program until 2001, even though sponsorships accounted for more than half of CCSB's annual spending. The 2001 Performance Report discussed the Sponsorship Program but made no reference to its objectives and its emphasis on events in Quebec. It simply stated that 291 events had been sponsored across Canada. Parliament was not informed that the primary focus of the program was on Quebec.

Given the importance of the objectives described to us by officials and the significance of the program's spending...we would have expected the government to provide Parliament with at least a description of the program, its objectives, its expenditures, and the results it achieved.

Now, this was all under your watch, and I ask you why, under your watch, was this approach taken for official documents from the department to Parliament? Were you overruled with respect to truth and transparency? Did you have to ask for letters of direction from the minister because you were pretty worried about certain situations?

Mr. Ranald Quail: No. My recollection of the way we went about this was, as I mentioned earlier in my testimony, that the funding was incremental. You never knew from one year to the next whether or not there was going to be any funding. Therefore, we did report receiving the money, but it was part of the general operating expenditures of the CCSB.

Mr. Paul Forseth: I assert, and I think the Auditor General does also, that Parliament was misled. That was the bottom line.

I'll ask you another question.

By the way, I remind you that you are under oath as an administrative tool here. We know that is the nature of the testimony here, but maybe it's time to reconsider that.

Mrs. Marlene Jennings: I have a point of order. There is no indication whatsoever, no reason to conclude, that this witness or any other witness who has come before us to date has not given testimony to the full ability of their memory. For Mr. Forseth to remind the witness is, I think, to impugn the credibility and the integrity of this witness on no grounds whatsoever.

· (1310)

The Chair: Thank you very much, Ms. Jennings.

I apologize. I had intended to read the Standing Orders at the start of every meeting so there were would be nothing where we would impugn any particular witness's statement, and I apologize that I didn't make that statement at the beginning of the meeting. I will try to get the clerk to remind me, and I will do that in every case from here on in as we conduct this investigation so we don't have to make a statement halfway through to a particular witness to remind them that they're under oath.

Mr. Forseth.

Mr. Paul Forseth: My comment was purely for administrative purposes, and I reject the comment that I impugned anybody's integrity. But I'll ask the question.

During your time as deputy minister, were you made aware of any further information, perhaps even outside the internal 2000 audit, that would have provided you with further examples that the officials responsible for this program did not apply principles of prudence and probity in the management of public funds? Did you have any other sources of information that would have caused you to worry?

Mr. Ranald Quail: No, I had no other sources of information. If I'd had a concern, I'd have called the audit sooner, in my view.

Mr. Paul Forseth: The Auditor General goes on to say that this program operated in a way that its “Roles and responsibilities were not segregated to eliminate, as far as possible, any opportunities for fraud and misstatement or an override of controls by management.” It was the structure. I am asking you, why did you permit this structure to continue? You expected people to be honest and you were surprised that they weren't; that is in essence what you said. But it was designed that way, and I'm asking you, why did you do nothing to change the design so fraud could not happen?

Mr. Ranald Quail: Well, I thought I explained that to some degree in the response to a previous question from Ms. Jennings. The desire was that we would leave CCSB in charge of communications. There was a discussion and that was the desire of the minister. It was there and that's why it stayed there.

As to why within CCSB you didn't have that separation and why it wasn't detected, in my view it was because that was what was undertaken by the executive director, and he didn't fulfill that responsibility.

The Chair: Thank you, Mr. Forseth.

Now we are going to go to Mr. Lastewka, please.

Hon. Walt Lastewka: Ms. Cochrane, I want to go over your items on page 4, and I'm trying to find out when Kroll Lindquist Avey made their report to you.

Ms. Janice Cochrane: Mr. Chair, they did two phases in their review. The first phase only began in the fall of 2002, after the RCMP had given us the green light, essentially, to proceed with doing an administrative review. In that first review they reviewed 35 of what we considered to be perhaps the most sensitive files. It provided that report in February 2003, and based upon what we saw then as a pattern of misconduct, we decided to review the balance of the files, and that work was carried out between February and June of 2003.

Hon. Walt Lastewka: You mentioned a number of items of non-compliance. With those 35 files, what action did you take with the employees at that time, knowing you had 35 files and numerous non-compliance items?

Ms. Janice Cochrane: At that time no disciplinary action was taken because we wanted a complete picture before we decided what was appropriate. It then became a question of degree, whether one was involved in 17 versus 26 versus 40, for example, files or examples of misconduct. It became important to have the whole picture before final decisions on disciplinary action were taken. That was why we asked for the subsequent work to be carried out.

Hon. Walt Lastewka: Were the employees allowed to continue work?

Ms. Janice Cochrane: Of the 10 employees identified at that point, five had already left the public service and the other five continued working until action was taken later on this year.

Hon. Walt Lastewka: So you received the 35 files of information from Kroll Lindquist Avey. Five employees had left, but you allowed five employees to continue on in their usual manner of non-compliance.

Ms. Janice Cochrane: Five employees continued on because the report was not final. It was an interim report, and they continued working for the public service because the report was only an interim report.

Hon. Walt Lastewka: I find that very unusual, that they would be allowed to continue work although you already had the data from the 35 files. Is that normal?

· (1315)

Ms. Janice Cochrane: Well, it's normal to proceed to complete the information before final decisions are taken, yes.

Hon. Walt Lastewka: But isn't it normal that you would suspend the employees, awaiting the outcome of the next phase?

Ms. Janice Cochrane: I think, Mr. Chair, at that point we wanted to find out how egregious the violations were, if you'll permit me, as well as whether or not we were dealing with isolated instances that would have warranted less severe penalties, for example, or whether we were dealing with something that required something more serious. We decided to take the time to complete the work, which was an additional three months.

Hon. Walt Lastewka: When was the second report submitted to you?

Ms. Janice Cochrane: The report was submitted in June of 2003.

Hon. Walt Lastewka: Basically, what happened is that you received the report in June of 2003, and then you were replaced with Mr. Marshall.

Ms. Janice Cochrane: I actually left just about the time the report was submitted, and then there was an additional phase in which individuals who were named in the report were permitted to comment on the findings before measures were taken later on that year.

Hon. Walt Lastewka: Mr. Quail, I want to go back to the timeframe before Ms. Cochrane joined as deputy minister. You had received the internal audit, and you said you had a 37-point action plan. Was there anything as a result of what you learned from the audit whereby you took action with that group? Was there any discipline given out?

Mr. Ranald Quail: No. Mr. Guité had retired and Mr. Tremblay had just joined the group not long before the audit.

Hon. Walt Lastewka: Of the items that were outlined in the Kroll Lindquist Avey report, were any reported in the internal audit?

Mr. Ranald Quail: I don't believe so.

Hon. Walt Lastewka: So the internal audit did not pick up the non-compliance items as listed on page 4 of Ms. Cochrane's report.

Mr. Ranald Quail: Ms. Cochrane's report came after the internal audit.

Hon. Walt Lastewka: No. She outlined exactly a number of non-compliance items. My question is, did the internal audit pick out those same non-compliance items?

Mr. Ranald Quail: I don't have access to the papers, and I don't recall.

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

Madam Cochrane, Mr. Lastewka asked you about the suspension pending the final outcome, and you said you weren't sure how egregious the problem was. But let me quote your opening statement this morning: “non-compliance with section 34 of the FAA”, “invoices approved outside the contract period”, “fees paid not in accordance with the contract”, “invoices approved where deliverables do not appear to have been met”, “double billing”, “non-compliance with contracting policies and regulations”, “not having solicited bids or pre-qualified suppliers”, “contract splitting”, “not following rules with respect to publishing notices”, “non-compliance with delegated contracting authorities”, and “exceeding delegated limits”. How egregious does it have to be before you suspend somebody?

Ms. Janice Cochrane: The offences themselves, the violations, are very serious, but in relation to the individuals who were investigated, not every individual was named as having engaged in these practices. In some cases there were only a couple of instances with one or more of the individuals, and in other cases there was a more deliberate pattern.

The Chair: You didn't ask the question, who?

Ms. Janice Cochrane: Absolutely.

The Chair: You didn't say, my gosh, this is so bad we have to take some decisive action?

Ms. Janice Cochrane: No, because the information--

The Chair: You didn't take decisive action?

Ms. Janice Cochrane: --was incomplete at that point, Mr. Chair.

The Chair: Even though you were familiar with this information, as shown by what I just read, you didn't feel you had to take decisive action?

Ms. Janice Cochrane: It was incomplete until we reviewed all of the files to determine how these individuals were involved, in what respect, and to what degree, which would then inform the decision-makers as to what would be appropriate in terms of disciplinary action.

The Chair: I would have thought that a manager, knowing people were breaking that many rules, would have removed them from further breaking of the rules, pending the final outcome, when you became aware of it.

Mr. Quail, there was the November 1996 audit: not a pretty picture. After that Mr. Guité got promoted and the whistle-blower got demoted, according to the media today. Were you aware that the whistle-blower was demoted?

· (1320)

Mr. Ranald Quail: I don't have the personnel records--

The Chair: No, I said, were you aware?

Mr. Ranald Quail: I don't recall that I was aware of that at all.

The Chair: Who would have authorized the demotion of a whistle-blower?

Mr. Ranald Quail: I don't know. I can't recall how that would have worked inside the department.

The Chair: Once the audit was prepared--with respect to someone who blew the whistle, and rightly so--would you not have been aware as deputy minister in charge of the personnel in your department that a whistle-blower who had done the job properly was being demoted? You didn't know?

Mr. Ranald Quail: I can't say one way or the other, Mr. Chairman. I'm sorry.

The Chair: Ms. Cochrane, you were aware of--if I can use your own terminology--a flat organization at CCSB and this whole sponsorship program. You never asked any questions. You never had any doubt. What kind of faith did both of you have in your audit department when it couldn't come up with what eventually became public knowledge? They just said there were some managerial problems. What faith do we have in the audit department?

Ms. Janice Cochrane: I think it's well known, certainly in the Office of the Auditor General and in other audit circles within audit law, that the audit branch of the Department of Public Works is very strong and has a great deal of professional credibility.

The Chair: How can you say that when they deliver this kind of stuff?

Ms. Janice Cochrane: Mistakes happen. The audit terms of reference in the year 2000 were designed to look at management practices. They were not designed to look at whether or not there were instances of fraud. There was no information at that time that would have led to a forensic audit or a value-for-money audit.

The Chair: You both gave us the assurance that no other program branch within Public Works is acting this way. You said that with full assurance and without any hesitation. Yet this one happened under your watch and you say you didn't know about it.

Ms. Janice Cochrane: That's correct. I believe the Auditor General made the same observation when she appeared before you, Mr. Chair.

Mr. Ranald Quail: If I may just follow up, it is a good, honest audit branch. It did do its work. The Auditor General, when she appeared before you, said:

The proof is that we are here today because this all started with an internal audit in Public Works. Quite frankly, we wouldn't be here today if the internal audit hadn't done that initial audit in the year 2000.

The Chair: Mr. Quail, I think at the beginning of your testimony you said that a letter from the union, PIPS, started the 1996 audit.

Mr. Ranald Quail: Yes.

The Chair: I wanted to verify that. I think we need to have a copy of that letter sent to the subcommittee on witnesses so that we can see what that says.

Does anybody have one burning question? Ms. Jennings, Mr. Desrochers, and Mr. Forseth have a burning question. So we have three burning questions to be asked, and then we'll bring it to a close.

Ms. Jennings.

Mrs. Marlene Jennings: Mr. Quail, I was not able to complete my questions to you concerning the implementation of the recommendation of the Ernst & Young internal audit to ensure that the procurement function that existed within APORS, which was under Director Guité, would be put into the normal procurement stream of Public Works. It appears that at approximately the same time, the government, through cabinet, makes a decision, which is approved by Treasury Board and signed off, that $17 million is going to flow to Public Works for better visibility through sponsorship. It appears to be clear from you that the decision was primarily taken by the minister at the time that the new function should be added into APORS.

Mr. Ranald Quail: What's clear is that it was the decision, that it was the minister who wanted to work with CCSB, the old APORS but bigger. That's the way in which he wished to have that group organized, and he wanted the procurement left alone.

Mrs. Marlene Jennings: The minister wanted the procurement to remain a function of APORS, which became CCSB.

· (1325)

Mr. Ranald Quail: That's correct.

The Chair: So that's your burning question.

Mrs. Marlene Jennings: It's important.

The Chair: I know it's important. I'm not suggesting otherwise.

Mrs. Marlene Jennings: It's darn important.

The Chair: Did we resolve that particular issue? Did we get to the end of it?

Mrs. Marlene Jennings: We have clarity on that particular issue, which I think is a key issue for this committee.

The Chair: Absolutely.

Mr. Desrochers has one question.

[Translation]

Mr. Odina Desrochers: Mr. Quail, you stated that Mr. Guité retired and was replaced, through a competition process, by Mr. Tremblay. What happened during the transition phase? Did Mr. Guité draw up a report detailing how his job worked? Were you aware of any such report having being drafted? Do you know if Mr. Guité and Mr. Tremblay met to discuss the program and how it should continue to be operated in a similar manner?

[English]

Mr. Ranald Quail: I'm not aware of any reports, point number one. Point number two, it seems to me there was an overlap in CCSB.

[Translation]

Mr. Tremblay was there when...

Mr. Odina Desrochers: Under whose supervision? Under your supervision?

[English]

Mr. Ranald Quail: He worked for Mr. Guité. Then Guité left and he took over.

[Translation]

Mr. Odina Desrochers: Mr. Guité therefore left clear instructions for Mr. Tremblay. Were you told about Mr. Guité's instructions to Mr. Tremblay, or did you not have anything to do with this transition, despite the fact that Mr. Guité and Mr. Tremblay reported to you?

[English]

Mr. Ranald Quail: No. I left it for them to have a normal transition from me to you.

[Translation]

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

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

[English]

Mr. Forseth, please, your final question.

Mr. Paul Forseth: Thank you, Mr. Chair.

Mr. Quail, did you ever ask your minister for letters of direction for clarity as to actions you should be taking, perhaps because you were uncomfortable with something or you wanted the direction put in writing and made very clear? Did you ever ask for letters of direction from the minister?

Mr. Ranald Quail: On any subject?

Mr. Paul Forseth: Related to your duties as deputy minister.

Mr. Ranald Quail: No, I had no letters of direction.

Mr. Paul Forseth: You never asked for any.

Mr. Ranald Quail: No.

Mr. Paul Forseth: I just wanted to clarify that point. Often, there are telephone calls or e-mail messages. I would think that sometimes as a result of that you would say, “You put that in writing as a formal direction or a request”. Did you never come back and ask the minister for any of those?

Mr. Ranald Quail: Not to my recollection, Mr. Forseth.

Mr. Paul Forseth: Thank you.

The Chair: Thank you, Mr. Forseth.

Ms. Cochrane, I have a final question. I understand it's being reported that you “demoted” the head of ethics and internal audit by saying he would no longer report to you but to someone who was beneath you. I understand that has been reversed by Mr. Marshall, the current deputy minister. It seems that the people who bear bad news suffer the penalty of being the bearer of bad news. So the internal audit department that comes forth and says things are wrong, the whistle-blower in 1996, suffers a penalty. Yet the people who were perpetuating the inequities and all the problems seem to get promoted. Why is this so? Why did you change the reporting structure for the head of ethics and internal audit?

Ms. Janice Cochrane: First of all, it is not correct to say he was demoted. He was not demoted.

The Chair: I said that in quotations.

Ms. Janice Cochrane: That's an important point, though. There was a change in the reporting relationship at a time when the department was undergoing a general restructuring. It was done as a result of an examination I did of a number of large departments and the way in which the reporting relationships were structured between the head of the audit branch and the head of the corporate services branch in those departments. My view, quite frankly, Mr. Chair, was that it would strengthen the function, not weaken it, because it would allow for more oversight of the audit function in a way that a deputy minister, who has a broad span of control, can't do on a day-to-day basis. This was consistent with models that other departments have used, and it was my view that it was appropriate for the Department of Public Works.

The Chair: I think more supervision of the department and less supervision of the audit department might have been preferable.

Tomorrow this committee will meet at 10 a.m. in room 253D. The witness will be Mr. Peter Harder, the current DM of Foreign Affairs, who was at one point in time the Secretary of the Treasury Board.

This meeting is now adjourned.