We're very pleased to be here today to present our 2009 status report, which was tabled in the House of Commons on March 31. As you mentioned, I am accompanied by assistant auditors general Hugh McRoberts and Richard Flageole and by Scott Vaughan, the Commissioner of the Environment and Sustainable Development. Our report revisits seven issues that have been discussed in my recent reports or those of the commissioner.
[Translation]
Status Reports are particularly important because they show what the departments and agencies have done to address recommendations from a selection of our past audits. In determining whether progress is satisfactory or unsatisfactory, we take into account the complexity and significance of the issues and the amount of time that has passed since the original audit.
[English]
I am pleased to say that of the seven topics revisited this year, the commissioner and I found satisfactory progress in five. Let me begin with the three from my report.
[Translation]
First, Passport Services. In 2007, with the first phase of the United States Western Hemisphere Travel Initiative, Passport Canada found itself unprepared for the overwhelming number of passport applications from Canadians wanting to fly to the United States.
Our follow-up audit focused on Passport Canada's progress in preparing for a rise in the volume of passport applications leading up to June 2009, when Canadians will need a passport to enter the United States by land or sea.
[English]
We are pleased at the extensive action Passport Canada has taken to fix the problems it had with the last surge in demand and to be better prepared for the next one. It conducted “lessons learned” exercises to identify the causes of the problem, built and equipped a new processing and printing centre for mail-in applications, took steps to streamline the processing of walk-in applications, and hired more staff.
[Translation]
It also opened passport clinics in selected communities, revamped its website, and launched a major communication campaign encouraging Canadians to apply for passports well ahead of the June 2009 deadline.
Passport Canada has put a lot of effort into correcting the problems it had with a sudden increase in demand for passports. Time will tell whether Canadians heed its advice to act early.
[English]
I'll turn now to the issue of national security. In 2004, we reported that intelligence management across the government was deficient in many areas, from setting priorities to coordinating and sharing information between departments and agencies. This time we found satisfactory progress in managing security intelligence. For example, the government has taken measures to improve the reliability of watch lists of individuals considered of interest to intelligence organizations. It reduced its fingerprint backlog and is progressing in its development of a computerized system to analyze digitized fingerprints.
[Translation]
We also found progress in the organization and coordination of priorities among federal departments and agencies involved in security. For example, the government made progress on developing an integrated secure system that allows the sharing of intelligence information among federal organizations.
We recognize the efforts made so far to resolve the problems we found in previous audits, but there are still important areas where concrete action and leadership are needed.
[English]
Transport Canada and the RCMP are still not sharing criminal intelligence information effectively. In granting security clearances to individuals working at airports, Transport Canada does not check all criminal intelligence data banks. It could still be granting clearances to high-risk individuals for access to restricted areas at airports. Furthermore, a number of departments and agencies have cited legal barriers to sharing information with each other.
In the world of security intelligence, information sharing is critical. And where there are legal constraints, the government needs to find a way of resolving them.
[Translation]
Also in this report, we looked at whether Indian and Northern Affairs Canada made progress since our 2005 audit in converting lands to reserves for first nations in Manitoba and Saskatchewan. Conversions of land are part of fulfilling Canada's century-old obligations to provide land owed to first nations under treaties.
First Nations in Manitoba and Saskatchewan are among the most impoverished in Canada, and acquiring land could serve as a means of improving their standard of living. In the last three years, the department has converted more than 315,000 acres of land to reserves in those provinces: a 42% increase since our audit in 2005. It also increased its efforts to coordinate environmental assessments and surveys of selected land.
[English]
Meeting Canada's obligations to provide lands owed to first nations will require a significant ongoing effort. The department will need to resolve the management weaknesses we identified in order to sustain the progress of the last three years and meet a 2006 government commitment.
Now let me turn to the areas where we found unsatisfactory progress in implementing recommendations from previous reports. In these two areas, the problems are long-standing.
The first is the process for making GIC, or Governor in Council, appointments to federal organizations. A GIC appointment is made by the cabinet and formally signed by the Governor General following the recommendation of the minister responsible for the organization. The Privy Council Office oversees the administration of the GIC appointment process.
We found that there are still long delays in making GIC appointments to crown corporations, small federal entities, and the Immigration and Refugee Board. The high number of continuing vacancies on the Immigration and Refugee Board has contributed significantly to the backlog of refugee claims waiting to be heard. Delays in making appointments can compromise an organization's ability to function effectively. And I am especially concerned about the consequences for the Immigration and Refugee Board, given the high financial, social, and human costs resulting from the board's backlog of unresolved claims.
We also found serious communication problems about appointments and reappointments. Some chairs and CEOs learned of their appointments through the media, and in some cases directors learned at a board meeting that they had been replaced days earlier.
[Translation]
Poor communication shows a lack of respect for the individuals involved. These are important positions, and the problems we identified could discourage qualified people from accepting them.
The second area of unsatisfactory progress concerns the way the Canada Revenue Agency deals with the risk that some small and medium enterprises might not comply with tax laws.
[English]
Businesses that don't report all their income deprive the government of revenues to fund programs for all Canadians. CRA has an important role of ensuring fairness by identifying those with unreported income.
We found that CRA needs to do a better job at targeting businesses to audit for unreported income. For example, the agency audited a far higher proportion of low-risk tax returns than those rated as high risk by its computerized risk assessment system, and about half of its underground economy audits over the past five years did not detect any unreported income.
[Translation]
On a more positive note, though, the CRA conducted a major review to identify all threats to the tax base, and it has increased its outreach activities to promote compliance and taxpayer awareness of what the underground economy costs society. The Canada Revenue Agency has taken some important steps forward, but it needs to resolve the long-standing weaknesses we point out in our report.
[English]
In conclusion, you will note two areas in which the government has disagreed with us. The Canada Revenue Agency does not agree with our overall conclusion. The Privy Council Office believes that our audit report on GIC appointments goes beyond the Auditor General's mandate. I am confident that our position is sound on both counts.
Audits, by their nature, focus on areas that need improvement, and I am very pleased that the government has made progress in most of the areas we revisited this year.
Before answering the committee's questions, I would propose that the commissioner present the findings from his two audits.
:
Thank you, Mr. Chairman.
The two environmental issues that we cover in this report are fundamental to life: the safety of the water we drink and the quality of the air we breathe.
In the area of drinking water, federal guidelines established the maximum acceptable concentration of contaminants in tap water in order to protect human health. Developing guidelines for the safety of the water we drink is an important federal activity.
[English]
In 2005 we reported that Health Canada was slow to develop and to review its guidelines. At that time there was a backlog of about 50 that needed to be reviewed and, if necessary, to be updated to reflect current science. Since then the department has largely cleared the backlog. I am pleased that Health Canada has also set up a process to update the guidelines regularly on the basis of scientific information and to produce new ones as needed.
[Translation]
Health Canada has also made progress toward verifying that drinking water on airplanes is safe. However, it still needs to close some gaps before it can assure Canadians that drinking water is safe on all common carriers under federal responsibility.
[English]
I turn now to the air quality health index. The AQHI, as it is commonly known, is a snapshot of air quality at a given location. It combines three key pollutants that affect human health and need to be monitored across Canada. Like the UV index, the AQHI will help individual Canadians make informed decisions about outdoor activity.
[Translation]
We found that Environment Canada and Health Canada have made satisfactory progress in developing the AQHI, a commitment that was cited in their responses to petitions submitted by the public in 2002 and 2003. At the time of our audit, the Index had been piloted at several locations across Canada.
[English]
Our audit found that Health Canada and Environment Canada consulted widely with stakeholders at every stage of the initiative. In fact, the government's approach to consultation in this case is a good example for other programs.
In conclusion, the elements of success that we identified in the areas of drinking water safety and the development of an air quality health index include public consultation and a strong scientific foundation.
Mr. Chair, we'll be happy to answer your questions.
I want to say welcome to the Office of the Auditor General. Auditor General, it's always a pleasure to see you. I want to thank you again for the thoroughness and diligence with which you do your job.
I'm going to focus my questioning on two of the chapters, and I think my colleague will probably look at some of the others. I'm going to focus first on chapter 3, on small and medium enterprises; then, when the clerk gives me the signal, I'll move over to chapter 2, on Governor in Council appointments.
On the first one, I have a real concern that previous recommendations are not being followed and that there's a large potential for unreported revenue. We see that in previous unsatisfactory reports progress has not been made in some of the key areas aimed at improving how the agency assesses the risk of non-compliance, and also with targeted files for audit of unreported income, and also that the core audits are not addressed.
We see that 50% of the audits over the five past years are still not detecting unreported income and that the amount of unreported income has continued to be constant at about $500 million. Staff are still looking at low-risk files: 56% of the files that are audited are still only returning about 39% of the tax revenue. Staff are not using the agency's computerized risk assessment system. They have failed to strengthen the core audits. And they're not targeting audits—and we know that targeted audits are four times more effective.
I would like to ask you for some of the reasons why the staff are still proportionately auditing the low-risk files that probably don't generate as much as some of the higher-risk files do. We know that 56% of the files return only 39% of the tax recoveries.
Also, in dollar figures, what do you think is being missed by going after the low-hanging fruit of these low-risk files while some of the high-risk non-compliants are relatively untouched? How much unreported revenue do you think we're leaving on the table?
I think there are two elements of response. The first is the whole question of the sharing of information. We note in the report that many of the departments and agencies raise concerns about sharing of information, citing either legal restraints—there might actually be in certain acts clauses that do not allow them to share information—or in other cases privacy concerns. The Department of Justice has been apprised of this for quite some time, has been working on it, has been categorizing the different concerns. It certainly indicates in its report that it will identify these obstacles and try to propose solutions. We believe it is really critical that this be done as quickly as possible, because the sharing of information is really critical to security intelligence.
I believe that for the privacy question, many of these issues can be resolved by working with the commissioner of privacy, but the departments need to work more closely with her to have clarity around it. I think it's sometimes too easy to invoke privacy without, perhaps, having done all the research and background work that is necessary.
The second issue I would bring up is the question of oversight of agencies and departments that have security operations. We have noted in the report, as we had noted in our first report, that there is a varying degree of oversight to these agencies, some of which in fact have no oversight. We have recommended in the past to the government that this be reviewed and that oversight be commensurate with the powers of intrusion of these organizations.
Government has done a fair bit of work on this, has certainly studied various options, and is, I believe, waiting for the results of certain inquiries to be made known before completing all that analysis and then perhaps bringing something forward. That is also a very important issue to give confidence to Canadians that the balance between security and privacy is being managed appropriately.
:
Thank you, Chair, and welcome to all. It's sort of the good news, bad news.
I sat on this same committee after your 2004 report, and I'm going to refer in particular to the national security intelligence information sharing. It was just nothing short of an unmitigated disaster, almost a complete, total breakdown in communication. There was literally no information sharing for a wide variety of reasons, whether it was systems, institutional, just unwillingness, departmental priorities, or interdepartmental jealousies. Who knows? It was horrendous. This committee made very, very, very strong recommendations based on your findings. I'm very, very pleased to see there's progress.
Now, it's certainly not perfection yet, but there's significant progress. In your statement you mentioned that “Audits by nature focus on areas that need improvement”. It couldn't be better stated. You're pleased the government has made progress in most of the areas you visited. Well, this is classically one.
I see you've mentioned a number of problems that still exist where we need improvement, so I really think we should just start to buckle up and focus on some of these again. One in particular is that you mentioned the RCMP and Transport Canada have made unsatisfactory progress in sharing criminal intelligence information. Yet, of course, I've been informed that both Transport Canada and the RCMP are working on a memorandum of understanding to address this issue. Could you tell me if you have any information on that? Once it is signed, will it affect the security clearances that are involved in this?
Welcome. It's nice to see you again, and thank you for coming.
Regarding the Passport Canada audit, I note from the other areas of concern in the 2007 report that the agency's progress had been satisfactory and you were pleased with progress made in processing delays and contingency plans, but you had concerns with gaps.
We all bring different experiences to this committee. I used to work at Bell Canada, and we had service standards for answering telephones. Sometimes they were higher and sometimes they were lower and we had wait times on telephones and we had wait times to greet customers, etc.
The plans they have implemented here are fairly impressive. They brought in 76 new agents. They opened a new processing plant for mailing, which is a big part of their business. They expanded their regional offices. They broadened access to passport services. So these were all good things. And this is one that would be close to my heart, which is that they streamlined processes for walk-in applications, because nobody likes waiting in line, whether it's at a government agency or a bank or anywhere else.
Something that I thought was particularly interesting was a communications plan, because communication plans can be very powerful. Instead of waiting for everybody to come in at the last minute saying they have to get their passport--the Americans want to see one if they fly into the States, or if they arrive by land or sea--they reached out to the public and told them this was coming. They wrote to a lot of people, especially in border cities, and told them this was coming, so if they thought they were going to be travelling, they should get a passport. It could save a tonne of money on the operational side, because Passport Canada doesn't have the overtime hours and they don't have to rent new space and all that kind of thing. So the lineups and the delays in the turnaround times are in much, much better shape.
With regard to the gaps you wanted to identify, you said they had not established at what level of applications the actions should kick in, that there was no estimate on how much each contingency plan would increase capacity, and that it wasn't clear who should initiate the plans. My business experience is that when you're in an environment like that, there are some decisions you want to make on the front line, on the day, or within the week, etc., and they would normally go to the vice-president or the president. But you asked them to have something in writing. That makes sense, and the agency agreed with your recommendations.
But it struck me that by the time you did this audit, they had done all the heavy lifting. They'd made all the changes they needed, or most of the changes they needed to improve the service, and you were identifying things that, if you sat down at a senior management meeting, you could probably make those decisions based on the productivity analysis you already had.
Does that make sense to you?
:
Thank you, Mr. Chairman.
Ms. Fraser, it's nice to see you again. It's been a while, given my responsibilities.
On the issue of the Olympics, we had the defence department before us to talk about preparation. We know that since 2001 the goal has been to eliminate many of the barriers and walls in terms of information sharing. We know the importance. We saw the report on public safety, the interoperability issues, a way forward. You commented in this report on some of those issues--conceptual strategy--but how far has it gone?
Through you, Mr. Chairman, on the Olympics, we keep hearing from National Defence, for example, that the RCMP is the lead. Well, what kind of information are we sharing here? Well, we're not really at that stage yet. We have this information. What about Passport Canada in terms of watch lists dealing with Canada border security and things of that nature?
My question is this. How confident are you with regard to the present situation in terms of the government's commitment on the issue of interoperability, particularly in light of security concerns with the Olympics? Where should we be in terms of moving this file forward to ensure Canadians that when the Olympics come we will be the best prepared, not only in the sharing of information domestically, but also, in particular, with our cousins south of the border, who obviously are also playing a role?
:
The concern I have, through you, Mr. Chairman, is that there needs to be a clear, designated lead, because again, although you didn't look at the Olympics per se, the issue is that everyone is pointing the finger at somebody else to say, “Well, no, we think they're taking care of it.” They will share information if they think it is appropriate, and I'm not sure always what “appropriate” means.
My understanding is how they lead in terms of security, and yet the defence department has to be clearly involved, and obviously public security agencies, etc. Again, interoperability has been clearly designated as a key since 2001. We live in silos around this place. If we could blow them all up, we would be much better off, because people don't want to share; they're all worried about their own little turf. When it comes down to it, then, they blame someone else and we were getting, “In the event that something happens, you really have to talk to them.” We want to know certainly as policy-makers that we have the right tools in place.
In my view, this isn't a partisan issue. This is in terms of security, to make sure who's coming into this country...that this is dealt with effectively, and now we have about less than a year to go.
I appreciate your comment with regard to the Department of Justice. They have to move on that, and that should be signalled as a major priority so that we can move the yardsticks. If not, we will again have the same issues we've been plagued with before.
:
Thank you very much, Mr. Fast.
I'd like to explore one issue a little more deeply, Ms. Fraser, and that is your status report on the audit of small and medium-size enterprises. You talked about the underground economy. I know that your department did an audit in 1999 and you went back indirectly in 2004.
In my opinion, this is a very important issue because it means that the revenues of the government are less, plus it creates an unlevel playing field, because most people pay their taxes, as you know. There was a request for specific guidelines. Your audit indicates that there's work to be done.
I have a little bit of sympathy for the department, or perhaps they're not handling it right, but I sense out there that for certain areas--construction or child care--there's a certain level of acceptance for this type of behaviour. Until we make it socially unacceptable, it's going to be hard to deal with this issue.
We don't really know how much revenue the country is missing, but I know you did an audit. Do you have any thoughts as to how the country can really address this problem? As a country, I think we rank very high on international scales. We're not second to any other country, but I still think there's a lot of tax revenue that people aren't paying. After this audit, do you have any comments on that issue?