AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 18, 1999

• 0903

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Good morning, members. I see a quorum and we shall start this meeting. Today we welcome our esteemed Auditor General, who gets more publicity around town than politicians, which of course we resent.

We would like you to take a more modest role if that's possible, Mr. Auditor General. I jest. Anyway, thank you for coming. It's nice to have you, because it seems that whether you're before this committee or elsewhere you always have something substantive to say, and I think it behoves all of us to listen closely to what you say. We don't have to agree with everything—there's more than one Paul Martin around here.

As you know, members, we've had the Canadian Food Inspection Agency around for a little while now, not very long. It is a product of the merger, if I can call it that, of three previous divisions of departments. The Auditor General and his staff were good enough in the recent past to take a look at that transition and they're here today to give us some benefit of their insights into how that transition has occurred and how the CFIA is serving Canadians.

• 0905

I think I'll ask Mr. Desautels to introduce his colleagues. So with those few opening remarks, welcome, Mr. Desautels.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman. Thank you for your welcoming words.

For me personally, it's indeed a welcome opportunity to be here this morning because it marks our first meeting with your committee during this Parliament. One of our priorities has been to find ways to serve Parliament better, and this includes assisting parliamentary committees by bringing to their attention our audit findings in the areas of particular interest to them.

I have with me today John Mayne, the principal responsible in our office for accountability issues; and he was responsible for our study on the creation of the Canadian Food Inspection Agency. Also here is Neil Maxwell, the principal responsible for our ongoing audit work in the agency, including the follow-up of the 1996 audit of the animal and plant health programs.

The Chairman: We should introduce our colleagues from CFIA as well. They are Mr. Gravel and Mr. Brackenridge.

Mr. Denis Desautels: Because this is our first meeting, Mr. Chairman, I intend in these opening remarks to touch on the variety of audit work we conduct in the agency. Let me start first by saying a few words about our study on the creation of the agency.

The establishment of a single agency followed a long history of discussions about the benefits of consolidating the federal food inspection system, which had involved Health Canada, Fisheries and Oceans, and Agriculture and Agri-Food Canada. Our office welcomed the concept of integrating the inspection system, as our 1994 audit had pointed to duplication and a number of gaps that existed. When the agency opened its doors on April 1, 1997, a total of about $330 million and 4,500 full-time equivalents had been transferred to it from the three departments.

There were many challenges in creating the agency, including transferring program and corporate assets to it, developing a strong accountability framework, and putting in place a new human resource framework suited to the new agency's status as a separate employer and outside the Public Service Employment Act since April 1, 1998. A number of specific lessons learned in this change process were identified in our 1998 chapter.

The creation of the agency holds important lessons to be shared with others pursuing new service delivery models, including the National Parks Agency and the Canada Customs and Revenue Agency. And the objective of our study was to document these lessons.

We were particularly interested in the design of the agency and its management and operational flexibilities. The agency was granted these flexibilities, such as separate employer status, in order to meet its overall objectives of providing Canadians with more cost-effective and science-based federal inspection services supporting a safe food supply, enhanced access to international markets, and a basis for a national food inspection system.

At the time of our study, the agency had not made full use of the flexibilities it had been given. For example, it still had much to do to establish its human resource regime as a separate employer; and secondly, it was not yet reporting its financial results using generally accepted accounting principles, although this is planned for 1999-2000.

The agency had also been slow in its first year in developing its performance reporting systems, an essential component of its new accountability regime.

So in light of the flexibilities it had been granted, your committee may wish to ask the agency how well it's meeting its overall objectives and for an update on its human resource regime.

[Translation]

Mr. Chairman, granting the Agency new flexibilities created the need for a correspondingly strong accountability regime. A key part of this regime is the requirement that the agency report annually on its performance. The accountability framework is also innovative in that the Auditor General is required by law to assess the fairness and reliability of the Agency's performance information.

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The Agency's first annual report, including a report on its performance and our assessment of that performance information, was tabled in October. We also submitted a report to the Minister of Agriculture. This was a learning experience for the Agency and for us.

The Agency's accountability regime depends on its ability to provide Parliament with fair and reliable information. We are encouraged by the Agency's efforts in reporting on its performance in its first annual report, particularly given the demands it faced in the first year of operation. But, as the Agency acknowledges, much remains to be done.

In our assessment of its performance information, we pointed to several elements that are needed to help readers of its annual report understand how well the Agency is achieving its objectives. For example, in the area of animal health, the information on import inspection gives the numbers of animals that were imported and notes that the CFIA rejected less than one per cent. A better indication of its performance would include some measure of the accuracy or reliability of its inspections to tell the reader of the extent to which the Agency was identifying non-compliance.

It will take several years of strong and visible commitment by senior management before the Agency develops results-based management and information systems and is able to provide sound information to Parliament on its accomplishments. It will also be important to report on the achievements of the overall objectives that led to the creation of the Agency, which I referred to earlier in my remarks.

You may wish to ask the Agency for an update on its progress in preparing its second annual report and discuss with it how you would like to see its annual report improved. The support and involvement of Parliament and its committees is essential to successful performance reporting.

We would also appreciate hearing from the committee how our Office could improve our assessment of performance information, which is intended to assist the readers of the Agency's annual report.

Let me turn now to our audit of the Agency's animal and plant health program. The audit was reported in 1996 and at that time, the program was still the responsibility of Agriculture and Agri- Food Canada. Our standard practice is to conduct a follow-up after two years to assess the status of corrective action taken by the organization. Our follow-up of the 1996 audit was reported in December 1998.

The adequacy of risk management was the key focus of our 1996 audit. We said the program was an international leader in risk assessment, but had applied it mainly to imports, not other parts of the program, and so had not set priorities and allocated resources program-wide based on relative risk. We recommended several improvements to the risk assessment process.

We also commented on the lack of performance reporting, the need to re-examine the efficiency of operations, and cost recovery.

[English]

In our December 1998 follow-up, Mr. Chairman, we were generally satisfied with the degree of progress, but we found that work remained, which was not unexpected given that our recommendations required long-term action. The initiatives that have been launched are interesting and ambitious attempts to reorient activities across all of the CFIA, such as agency-wide risk-based resourcing projects and the integrated inspection system, which is developing a common approach to inspections by all the agency's inspection programs. You may therefore wish to ask the agency for an update on its progress in these areas. We also believe that the agency should use vehicles such as its annual report to report regularly on progress.

A further challenge for the agency, one that was discussed in our April 1998 chapter on our audit of the new federal labs for human and animal health in Winnipeg, is to rationalize its system of laboratories. We noted that the agency was studying the level of laboratory and quarantine support services it will require in the future, and we commented on the need to include the Winnipeg lab in that study. The committee may be interested in the status of these efforts.

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Last, I'd like to turn to the audit work we have underway at the present time. In addition to our annual audit of the agency's financial statements and our annual assessments of its performance information, we are in the late stages of an audit of user charges in the agriculture portfolio. The audit includes the Canadian Grain Commission, Agriculture and Agri-Food Canada, and the Canadian Food Inspection Agency.

Because I've yet to table this report, Mr. Chairman, and indeed the audit has not yet been completed, I am not in a position to disclose our findings. But I would welcome the opportunity to hear about any concern members of the committee may have about user charges. Indeed, and I'll close on this point, I would welcome hearing from the committee members about any issue that they think we should examine in future audits of the Canadian Food Inspection Agency.

Thank you, Mr. Chairman.

The Chairman: Thank you, sir. I think that's a good start. We'll begin our first round of questioning with Mr. Hilstrom, for seven minutes.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chairman.

Welcome. I guess we have never met in person, and that's my fault, not yours. I should have made a point of getting around to see probably one of the most important people in the government, from what I've seen in my short political career.

I certainly agree that one of the largest issues we're facing—and I'm speaking about the agriculture area and actually all areas of business in Canada—is this question of user fees. In the studies you've done to date, how do you go about assessing the level of user fees that are being applied and also how much input the people who actually pay those user fees have in the department that is applying the user fees?

Mr. Denis Desautels: Mr. Chairman, in preparing for some specific audits, such as the one I referred to a moment ago, we have tried ourselves to set out some principles under which user fees should be managed. We've in fact done a fair bit of research internally and we even consulted with members of Parliament on the question.

There are a number of issues that really have to be sorted out whenever governments resort to user fees. There are things such as what is a public service and what is a service that's more of a private nature that should be borne by a certain group of taxpayers? That's already an important question. Then you have to have systems in place that can properly determine the real cost of those services, and generally in government right now they don't have very good cost systems or accounting systems. They have much difficulty at times to even demonstrate what it's costing them to provide a particular service. There are other issues, such as different appeal mechanisms that have to be thought about when you introduce user fees. If people are dissatisfied with the level of user fees, what appeal mechanisms should be in place?

These are three examples of issues that we feel need to be thought through so that you have a system in the end that is seen as capable of being managed and seems to be fair to most people. Those are the kinds of criteria we are now going to be using for the work we've just talked about.

Mr. Howard Hilstrom: I would like to see when you go and look at the user fees at.... All these departments go around and say, we held meetings with the users, the people who are using our services, and they give us all this feedback. And I wonder how much of that feedback actually gets into their decision-making or whether it's just that they can come to a committee like ours and say they've done all this, and not necessarily use it. So I'd like to see that assessed.

What formal written criterion or definition is there of how to make the decision as to what is a public good and what is specific to a particular user? Is there anything written down that not only you but the rest of us can look at and say, as a user—and we all are—I'm being treated fairly? Is there such a thing?

Mr. Denis Desautels: Yes, there is something, and I'll ask Mr. Maxwell to describe it for you.

Mr. Neil Maxwell (Principal, Audit Operations Branch, Office of the Auditor General of Canada): Yes, thank you, Mr. Chairman.

In terms of assessing whether user fees have been put in place well or not, there are several things around. The Treasury Board itself most recently in 1997 has done some work to set out a new policy. There's been some work done internationally in this area. The OECD has done some very interesting work to set out what are the kinds of things that organizations need to put in place to be managing user fees properly. As the Auditor General mentioned in his opening remarks, we're now in fact looking at using those kinds of guidelines and looking at fees in the agency, in the department itself, and in the Grain Commission.

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The other aspect that you mentioned earlier, which we too think is awfully important, is the question of how good is the consultation with users. That too is something we're looking at in the work we're doing at the moment.

Mr. Howard Hilstrom: As suggestions maybe for when you go to the Canadian Grain Commission, I'd note that there are private companies that have the capabilities of doing certainly the Canadian grain inspection, the weighing and inspection of grain. It's my understanding that one of these companies, I believe its initials are SGS, have offices overseas, for instance in China, whereas our Canadian Grain Commission doesn't. In customer satisfaction in the trade world, is there any advantage to that? I would want to know if the Canadian Grain Commission is actually the best and most efficient organization to be delivering these services.

I'm not asking for a comment, I'm asking for you to look at that and see if our customers in the trade world are in fact being fully and adequately served by our Canadian Grain Commission. It's fine for us to sit in Canada here and do a fine job of grain inspection and that, but are our customers actually satisfied and happy overseas?

With the Canadian Food Inspection Agency, did you look at the impact of interprovincial-type trade issues? Were there any issues that came up on the Canadian Food Inspection Agency—I think of slaughterhouses for meat, livestock, meat products—where the agency set down very strict standards? In fact, it's international export standards, I believe, that are applied internally. Was that issue looked at?

Mr. John Mayne (Principal, Audit Operations Branch, Office of the Auditor General of Canada): No. At the time we did the study, I think they were just beginning to think about the issue of dealing with provinces and setting up arrangements. I don't know what's happened since, but it was not an issue we looked at.

Mr. Howard Hilstrom: To consider interprovincial trade issues is something else I'd ask you do when you're looking at these departments, because we seem to be hearing more that there are restrictions not unlike some of the international restrictions we have. So here again I feel uncomfortable giving you guys suggestions on this, but you asked for it. So I think that's what I'd like to see.

That's the end of my questions, Mr. Chair.

Mr. Denis Desautels: Mr. Chairman, I take good note of both of these comments. We had not looked at the Canadian Grain Commission yet from that perspective. But when we look at it from the perspective of cost recovery, we may have a chance to pursue that issue further.

The Chairman: Thank you.

Madame Alarie, seven minutes.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): I'm very happy to see you here this morning. I've so many questions for you that I don't know where to begin.

I'll start by addressing the issue of the Agency's accountability. Basically, I'd like to know who in fact is accountable. When a problem arises, we are directed to the Minister of Agriculture and then onto the head of the agency, who isn't around. We are led around every which way and ultimately, no one accepts any responsibility.

You indicated in your opening statement that when it comes to accountability issues, a key issue is the reporting of information. Here again, the experiences we have had over this past year show that obtaining information is no easy feat. Therefore, my first question for you is as follows. How were you able to assess the Agency's level of accountability and its ability to report on its performance?

Mr. Denis Desautels: Mr. Chairman, I will provide a partial answer to Ms. Alarie's question and perhaps Agency representatives can fill in any blanks.

We observed that it was important for there to be a fairly clear memorandum of understanding between the Minister of Agriculture and the Minister of Health, both of whom have a role to play vis-à-vis the agency. Since the agency officially reports to the Minister of Agriculture, the lines of responsibility are relatively clear, as far as that goes. However, Health Canada also has a role to play in some situations. When we conducted our audit, we noted that no clear protocol existed to allow both departments to play an adequate role should a crisis arise. We noted in our report that continued efforts should be made to improve coordination of activities between the two departments concerned.

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As far as everything else goes, that is the normal operation of the agency, the accountability structure seemed fairly clear to us.

Ms. Hélène Alarie: Health Canada only learned this summer that it also has responsibility for the agency. It hadn't been aware of that.

Mr. André Gravel (Vice-President, Programs, Canadian Food Inspection Agency): Mr. Chairman, allow me to clarify for you some accountability issues.

It's clear that Health Canada and the Agency share responsibility for food inspection. Health Canada, through its minister, is responsible for establishing health standards, whereas the agency is responsible for delivering inspection programs in accordance with these standards.

When the agency was created, in some respects the resources assigned to inspection programs were grouped together. As we say, a system of checks and balances was put in place. Health Canada sets standards, whereas the agency oversees inspection tasks.

You wanted us to clarify who does what and how we coordinate our activities. We have established memorandums of understanding with the Health Canada which define our area of activity. Mr. Desautels mentioned emergency situations. We ordered several food product recalls last year. Among other things, this enabled us to draw up a protocol spelling out clearly who is responsible for what when recalls are ordered. We also work closely with Health Canada to set up permanent committees at various levels to ensure that our efforts continue to be properly coordinated and that the accountability framework is clearly understood.

Ms. Hélène Alarie: I understand. We are keenly interested in what goes on at the agency precisely because we are concerned about the safety of our food products and about the reputation Canada has acquired on the international scene over the years.

Increasingly, your agency is focusing on risk management. This is a key component of agency policy. Since nothing is perfect, mistakes do happen sometimes. Has any provision been made for an insurance fund in the event agency inspectors make a mistake or fail somehow in their duty, endangering in the process the livelihood of a producer or pushing him to the brink of bankruptcy? For example, if an inspection is supposed to be done every three years, but one is not done for five years, and a certificate is nevertheless issued, someone has not done their job. However, when the error is acknowledged, no further action is taken.

In considering accountability issues, no provision appears to have been made for any kind of mechanism to ensure that when an error occurs, some kind of insurance fund kicks in. A farmer who has lost everything should not have to pay for someone else's mistake. He places his trust in an organization called the Canadian Food Inspection Agency, he brings in veterinarians and obtains all the necessary papers, but ultimately, he has to contend with the fact that a mistake has been made. There are not a lot of cases like this, but I know of one in particular involving wapitis.

Shouldn't there be some mechanism in place, a reserve fund or some such thing, to guard against this type of thing happening? Do you really think the poor farmer facing bankruptcy can really do anything more to defend himself? I think this is all part of accountability. Has any thought been given to this?

• 0930

Mr. Denis Desautels: Mr. Chairman, this is in some respects a policy issue, one that the agency or the minister responsible may want to take into account. In the process of conducting our audits, we discussed risk management. As far as this issue is concerned, an organization obviously cannot guarantee that there will never be any problems or mistakes. However, if risk is well-managed, problems and errors will clearly be minimized. As we have already indicated in our audits and reports, we believe the agency must continue to work toward fully implementing its risk management system.

We need to put in place a proper risk management system. At the same time, perhaps the agency could adopt a policy acknowledging its responsibility in certain areas. However, my concern is that we could easily get tied up in legal issues. An organization must protect itself and acknowledge its accountability in certain situations. In this particular instance, the logical approach would be for the agency to adopt a policy to cover situations like this that may arise.

[English]

The Chairman: I know you have more questions, Hélène, but we're out of time. We'll come back to you.

Denis Coderre, seven minutes.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): Good morning, Mr. Desautels, gentlemen.

I would like to focus for a moment on the issue of accountability. I think Mr. Gravel can anticipate what I'm about to say. He knows I'm about to refer to a specific problem. Basically, as an auditor, your role is to examine the way in which a policy is applied to a specific problem, the way in which risk is managed, how procedures are followed, how human resources are utilized and how money is spent. It must be proven that operations are not only efficient, but cost-effective as well.

Quebec experienced a major problem with sheep scrapie. You're not here to talk politics, because that's my job, but one thing is certain. I look forward to the day when all of the problems surrounding policy and program implementation have been ironed out because we are encountering some serious dilemmas.

I've been in politics for a good many years, but I'm a newly elected MP and I'd like to understand your role as auditor. Is your interest confined to accounting issues? Fundamentally, you engage in politics on one level and we all know that you are a frank person. Are you in a position to formulate recommendations calling for policies that don't work to be changed or to say: "Listen, you're way off base and perhaps you should get back on track"?

Mr. Denis Desautels: Mr. Chairman, the mandate of our office extends clearly beyond accounting or financial issues. It includes an obligation to report on instances where public funds have not been managed in a cost-effective, efficient manner. Our role clearly goes beyond financial considerations.

It is not our job to get involved in policy issues. If a government policy has the clear approval of Parliament, we use it as a start-off point. We do not call policies into question. On occasion, some situations may arise where issues are not clear, where it's not certain whether we're dealing with a strictly administrative policy or with a government policy in the narrow sense of the word. If it's a matter of a purely administrative policy that doesn't appear to be working, we have no problem with stating this fact in our reports.

Mr. Denis Coderre: An administrative policy can, however, have an impact.

Although I'm a member of the government party, I do have some problems with the creation of agencies and with the notion of accountability. We seem to be creating more and more agencies. This particular agency is responsible for ensuring food safety. However, we are also talking about human resources management. That is something very concrete because there is a direct link between the government, the agency and the producers.

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On the sheep scrapie issue, we came to the realization that the agency projected a certain image, namely an image of holding a monopoly in certain situations. We hear it argued that the agency reports to the minister, meaning that when we look for information and ways of better protecting the producer—because we are accountable, we must side with the public from time to time—we realize that the agency does exist for accounting purposes. At some point, we no longer know who to look to. However, the creation of this agency has had some negative effects in terms of accountability. There is the sense that this program has alienated the people and the political powers that be.

As part of your audit and review process, it's important that you consider notions such as transparency, effectiveness and efficiency, because we're dealing with much more than a communication problem. We're dealing with a management philosophy problem and we need assurances that ultimately, the ordinary MP or the poor producer is not left to fend for himself.

I found Hélène's question about a reserve or risk fund quite interesting, because at some point, the producer is left to fend for himself and is told that the agency will handle things. How would you feel about a mechanism whereby the agency would be required to report to the Agriculture Committee which would serve as a kind of watchdog? It's beyond comprehension. A minister cannot be responsible. Although there may be some accountability between the agency and the minister, it's important that a watchdog mechanism be put in place to ensure efficiency of operations, regardless of the policies pursued.

Mr. Denis Desautels: Mr. Chairman, this is something that interests me a great deal. I have already commented on the creation of agencies in my reports to Parliament. Personally, I'm not opposed to the creation of these agencies. I simply pointed to the possible risks associated with such action to emphasize the importance of having an acceptable accountability regime in place.

Ultimately, the government decides how an agency will be structured and the kind of ties it will have with Parliament. At some point, members such as yourselves make a policy decision. At the outset, the newly created agencies appear to have fairly clear accountability ties with Parliament, that is the minister is accountable to Parliament for the running of the agency. I haven't observed any major deficiencies in the way in which these agencies are structured.

Mr. Denis Coderre: My concern is with the way in which these policies are applied on a daily basis. We need a mechanism to ensure that ordinary citizens are protected. I'm not disputing the aims and goodwill of the agency, but at some point, its size becomes too unwieldy and its monopoly status has an adverse effect. Gray areas emerge and we are not able to adequately protect citizens.

Regarding the sheep scrapie outbreak, we experienced communication and inspection problems. The inspectors involved had obvious problems communicating with clients. This committee did not focus its attention on this issue. I'm not saying that the minister and the agency were not concerned about the situation, but if there's no one to give a second opinion or to act as a watchdog, people are left to fend for themselves.

Even though there is some accountability as far as the minister is concerned, we still need some kind of mechanism to better protect people when it comes to the day-to-day application of administrative policies and programs.

[English]

The Chairman: We're out of time, but I'll give you a short reply, Mr. Desautels.

Mr. Denis Desautels: Mr. Chairman, I don't have much of an answer to the comment made. I agree that there is a concern about having good communications between the agency and the various stakeholders around the system, and I see no reason, with the current structure, why that should not happen. I think the agency has an obligation to serve a certain world, a certain constituency, and I think it has to give itself the means to relate to its constituency. The agency itself may have something to say about it, but I don't think the structure would prevent that from happening. This is my appreciation at this point in time.

• 0940

The Chairman: We'll go to Mr. Borotsik for five minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chair.

Once again I'd like to extend my thanks to you for being here, Mr. Desautels. It's indeed a pleasure to see you. As I echo some of the comments of my colleagues, we consider you to be one of the most frank individuals there are right now, and we appreciate that.

In your study, Mr. Desautels, it says quite emphatically that the study did not include an assessment of the agency's performance. I appreciate that. It's difficult to have any assessment of performance unless you have other years in which to have some comparables. In future auditor reports with respect to the agency, do you intend to in fact assess the agency's performance based on previous years, or in your own opinion, would you assess the agency's performance based on your accounting experience in past years?

Mr. Denis Desautels: Mr. Chairman, the answer to that is yes. Let me just try to sum up a little bit what was done.

The study was tabled in September 1998, and at that point in time there was no history or track record to assess the performance of the agency. Since then, what's kicked in is the requirement for the agency itself to report annually on its performance and for us to give you some kind of assurance that this information is reliable and meets other tests. That has happened since the time of this study, so there was therefore a first annual report of the agency tabled, including our own assessment of the reliability of that information.

So we'll continue to do that. The mechanism is a little different from that of the traditional government department in that there's a legal obligation for the agency to report on its performance and for us to reply.

But I would just add one last little thing. That doesn't prevent us from stopping there. We can also carry out any value-for-money audit of the agency that we see fit. So we still have the full mandate of the Auditor General that applies to the agency in addition to these specific requirements.

Mr. Rick Borotsik: And we depend on you and your department to do that.

You had also mentioned in your remarks in the report that the agency was not, in your opinion, following the generally accepted accounting principles. As Auditor General, it's obviously important to you that the agency do that. Do you see them now following more the general accounting principles that are acceptable by business in our country as well as the Auditor General?

Mr. Denis Desautels: Mr. Chairman, I think this is a really important question, and it's important not just to make accountants happy. This is important to basically respect the status that the agency has been given to operate more like a corporation and therefore be able to demonstrate really what its costs are.

Mr. Rick Borotsik: I agree with you, it's a very important question. But my question is do you see now that the agency is following those general accounting procedures, or are they simply still going back into their previous accounting mode?

Mr. Denis Desautels: The agency is supposed to start implementing full accrual and commercial accounting standards as of April 1, 1999, so that their fiscal year 1999-2000 should be carried out—

Mr. Rick Borotsik: Are they in a position to do that? Are you comfortable that in fact they're going to follow that general accounting procedure?

Mr. Denis Desautels: Well, I can't answer that today—maybe the agency representatives can—because I have to go back and find out if in fact they're delivering on that particular commitment.

Mr. Rick Borotsik: At the year end of 1999-2000, I'm sure we'll find out if in fact they have.

Mr. Chairman, I have another question based on that accounting procedure. I know it doesn't have to do with the Canadian Food Inspection Agency, but in this past federal budget there was $600 million shown in the current fiscal year for agricultural programs, the AIDA program; $600 million was reflected in this budget year. Those funds will not flow, in my opinion and estimation—I'm sure my colleagues will agree—until the following budget year, the 1999-2000. Is it, in your opinion, correct accounting procedure to show a $600-million expenditure in this fiscal year when in fact it will not be expended until the next fiscal year?

• 0945

Mr. Denis Desautels: Mr. Chairman, this is a fairly technical accounting issue. Each year end for the last several years, we've had to have discussions with Finance, in particular, to decide in which year a particular expenditure falls. I saw, like you, this particular item in the budget, and we'll have to look at it very closely when we come around this summer to do the audit for 1998-99. So we haven't settled on that particular issue.

Mr. Rick Borotsik: As I said at the outset, you're a very frank individual and I do appreciate the positions you've taken before.

An hon. member: [Editor's Note: Inaudible]

Mr. Rick Borotsik: No, that's not the issue at all. It's the reflection of the proper accounting here, not necessarily that farmers shouldn't get the $600 million.

Mr. Dick Proctor (Palliser, NDP): We're not jumping up and down, Murray, let me assure you.

Mr. Rick Borotsik: In a simple answer, if you were responsible for the reflection of those dollars that are going to be expended in the next budget year, would you as an accountant have shown it in the 1999-2000 budget year?

Mr. Denis Desautels: Mr. Chairman, I have to be quite objective here. It can go either way. We've had situations where we've argued very hard with Finance and we've disagreed with Finance. There are other situations where we've agreed that there was a liability at a point in time.

The program I have in mind that deals with agriculture was the abolition of the Crow rate. There was a commitment at a point in time by the government to pay out a certain amount, and the recipients were known, and this was booked in that particular budget year.

So I'm going to look at the facts in an objective fashion. On some issues we've disagreed at times, and on other issues we've agreed. So we'll look at this one exactly the same way.

The Chairman: Thank you.

I just want to take you back to cost recovery for a moment. It must be a hell of a job to draw a line between private interests and public interest. Are there a number of cost recovery models out there—let's say one for grain, one for red wheat and so on—or is there one model that fits all?

Mr. Denis Desautels: Mr. Chairman, I don't think there's one model that fits all. As Mr. Maxwell explained earlier, the Treasury Board has now issued some guidelines on how departments should go about establishing their own policy.

The Chairman: The guidelines would apply to all the departments, would they not?

Mr. Denis Desautels: They would apply to all departments. They have to be used with a certain amount of judgment. It doesn't answer every single question that a department has to answer, particularly in terms of deciding what's public good and what's private good. The guideline helps, but in the end each department has to draw the line on that particular issue.

The Chairman: When guidelines are used, say, in the red meat industry, I'm wondering whether that might be found somewhat grating on the grains people. Have you ever heard the argument that you shouldn't use those guidelines, that they may work fine over here in red meat, but they just don't work when it comes to, say, the Canadian Grain Commission? Or is that not a concern? I just think the industries are so different; you might be able to come up with a common set of guidelines, but life is not very simple.

Mr. Denis Desautels: I agree with what you're saying. A set of guidelines is useful as a starting point, but it does not necessarily answer automatically the questions for each area or sector.

The Chairman: Do they have enough flexibility?

Mr. Denis Desautels: The guidelines provide for a lot of flexibility, as we understand them at this point in time. They provide help to people who have to make those decisions, but they don't provide direct answers in every case.

The situation can be very, very different. You're talking about agriculture today. I could be talking to people about coast guard services, about ice services, about test fishing in Fisheries and Oceans and so on. There are all kinds of situations, and each one is different from the other. We're looking at these now, Mr. Chairman, one program at a time, and we'll be reporting very soon on a similar issue. Hopefully that will help generate some good discussion on exactly that question.

The Chairman: Mr. Steckle, you have a five-minute question period.

Mr. Paul Steckle (Huron—Bruce, Lib.): Good morning, Mr. Desautels. It's always a pleasure to have you come before the committee.

This morning I want to have you just for a moment reflect on what has happened in the process of amalgamation. This is always difficult when you bring departments together. Has there been full cooperation? Has there been an amiable sharing of knowledge, information, cooperation between these departments so that there hasn't been a deterioration of the standards we require? Have you noticed this to be a smooth transition, or has it been a difficult one?

• 0950

Mr. Denis Desautels: I'll ask my colleague Mr. Mayne to answer that one, please.

Mr. John Mayne: I think overall it's been a smooth one. We found there was cooperation among the three departments that were handing over part of their programs. There was a fairly senior acceptance of this by the senior officials in the government and in those three departments. The way the transition was done, of setting up a separate implementation team and keeping that separate from the ongoing operations, was precisely because of the nature of the business they were in, so that the operations would not be disrupted while they sorted out the organization of human resources and other kinds of issues. And we thought that was a good aspect.

There were problems, of course, in such a massive undertaking. By and large, the answer is that it went fairly smoothly. It was deliberately set up so that the ongoing operations were not affected until the agency had its act together on how they were going to organize and get set up. That was a good lesson that we pointed out in the chapter.

Mr. Paul Steckle: I'm not sure whether this is within your purview or not, but I would appreciate it if you could comment perhaps on the rBST question. This was a decision made by Health, ultimately, and this was also discussed and debated for many years in other departments. In the final analysis, did the CFIA have any comments before that decision was taken by Health?

Mr. John Mayne: I really have no knowledge of that. You'd have to ask the agency.

Dr. André Gravel: Mr. Chairman, the decision on the approval of rBST is a good example of the split mandate I was talking about earlier, where Health Canada is responsible for making decisions on health standards. So clearly the approval of rBST is a Health Canada decision.

As an example, if it had been approved then, it would have been the agency's responsibility to ensure that it was used according to the guidelines set for its usage. The decision for approval or non-approval is clearly Health Canada's decision.

Mr. Paul Steckle: Let's go to the PMRA for a moment. When we do these kinds of consolidations and look at economies of scale, we generally think of the fact that we can do this more economically and that there should be benefits achieved by going this route. We have some questions in the rural communities, particularly the farming communities, on whether the PMRA is really working, whether it's doing what we want it to do, whether there are economies of scale there that are really being achieved.

What is your view of that agency? That's a very easy question.

Mr. Neil Maxwell: I would start by saying we haven't done any detailed recent work on PMRA. We did debate at some length, in the work we're doing now on user charges, whether it would include PMRA. Because it is now a Health Canada responsibility, we decided that in this work we're doing now we would stick to the organizations within the agriculture portfolio itself. PMRA, as you know, is part of Health Canada at the moment.

Mr. Paul Steckle: I'm going to bring us back to this whole question of fairness when we talk about cost recovery. Since food is a consumer good for the benefit of all, do you find areas in our cost recovery program where there should be a clear delineation between what should be recovered from the producer and what should be expended more broadly to the common base of consumers or to the consumer base through taxes? Rather than passing some of these charges on to the primary producer, who in reality has no ability, has no mechanism from which he can recover those added costs....

• 0955

Mr. Denis Desautels: Mr. Chairman, I hope we can shed some light on that kind of question with the audit that's presently underway. It is a very valid question. We're quite conscious of this whole debate and we know food inspection serves many purposes. It means the protection of consumers. It also ensures the quality of the Canadian food products. It also has an impact on exports. It serves a number of stakeholders. So there is a split that is supposed to be made between what should be borne out of the tax base, if it's for the general good, and what really has to be borne by certain specific stakeholders.

I am not in a position to tell you how fair the current system is. We're going to try to shed some light on how those decisions have been made by those who are recovering the costs. Hopefully we can bring some information forward in our next report that will help to answer that more specific question. We are very conscious of it.

The Chairman: Thank you.

Mr. Hoeppner, you have five minutes.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

Welcome, gentlemen. It's a pleasure seeing you here again. The first time I had an experience with the Auditor General was in 1995 during the estimates, when we were locked up. I was very impressed.

As you know, the Reform Party's policy is for a smaller, more effective, accountable government. When I held some of my first townhall meetings, my constituents felt that now I was on the Hill I should know everything, how to do these things. I made a suggestion that went over very well. I would like you to think about it a bit. I made the recommendation that the government should be dissolved for one term, the Auditor General should run the government, and we would have a much smaller government and probably a more accountable one.

Could you set up a model of really effective accountable government in four years if you had the levers and the powers to do it?

Mr. Denis Desautels: Mr. Chairman, I don't know if you want—

The Chairman: You don't have to answer that question right away.

Mr. Denis Desautels: We try to do our best to encourage a good, responsible and accountable government in our work. That's the role we were asked to play. We're trying to play it as best we can.

Mr. Jake Hoeppner: I appreciate that answer.

I was asking that question as a lead-in. If you remember, when you did an audit on the backtracking issue we were dealing with in agriculture in 1995, you had waited for six months to get some figures from the CTA and they weren't forthcoming. Is that a general problem, or did you finally get those figures? I never saw what the outcome was.

Mr. Denis Desautels: Mr. Chairman, by and large that's not a problem. Our own legislation enables us to obtain from any department any information we want. Sometimes it takes a little longer than we would like, but the legislation is on our side and Parliament has given us that authority. There haven't been in the recent past any problems where we did not have access eventually to any information we asked for.

Mr. Jake Hoeppner: That's good news, because at that time I was a little concerned as a new MP that it took six months or so and you still didn't have the figures. They may have come in later, I don't know. To me at that time, this was a little beyond reason for the CTA not to provide those figures.

Mr. Denis Desautels: Mr. Chairman, sometimes we ask for financial information and other types of information that should exist, but it is either not up to date or it hasn't been put together. It actually requires the department to put the information together in order that we can get it. That in itself, of course, will take some time. We're quite persistent. We don't give up easily. We eventually get it.

Mr. Jake Hoeppner: Good show.

I've been asked the following question a number of times within the last couple of weeks because of the delinquent payments of the Soviet Union to the Canadian Wheat Board. It's becoming quite a hot issue again on the prairies. Are you considering getting more information on those deferred debts—how they are coming in, what the cost is to taxpayers on those delinquent accounts?

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Mr. Denis Desautels: Mr. Chairman, we have to report on the accounts of the Government of Canada, and the guarantee the Government of Canada gives to the Wheat Board for its receivables obviously has an impact on the determination of the results of the operations of the Government of Canada itself.

So every year when we do the audit of the Government of Canada, we have to look at what that guarantee might involve in terms of future payments. In discussions with the Comptroller General, we arrive at a reasonable estimate and that is set up as a provision on the statements of the Government of Canada. So we do that automatically every year when we audit the public accounts.

Mr. Jake Hoeppner: But it's an estimate. Is it more or less how much it's costing the taxpayer or maybe even the wheat producer? We're not quite sure on that, are we?

Mr. Denis Desautels: Mr. Chairman, it has to be an estimate, because you cannot only record what you had to pay out, but you have to make an estimate of what you might have to pay out in the coming years.

Mr. Jake Hoeppner: As you know, I've had two private member's bills trying to get you to audit the Canadian Wheat Board, and my good friends on the other side have always torpedoed those private member's bills. Maybe I should try again. Maybe you could help me soften them up a little bit and bring some accountability into that system.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): I have a point of order, Mr. Chairman. I'm sure even the Auditor General would recognize that perhaps there are other legitimate auditing firms in this country, one of which might be a firm that would audit the Wheat Board. So it isn't as if the Wheat Board is not being audited. Otherwise, my comments....

An hon. member: That's not a point of order, Mr. Chairman.

The Chairman: I don't think it's a point of order.

Do you want to say something to that, Mr. Auditor General?

Mr. Denis Desautels: Yes, Mr. Chairman. I think I might be able to clarify the situation.

The Wheat Board legislation was changed in the last year, and when those changes went through there was an amendment made to that bill that allowed the Auditor General to start an audit of the Wheat Board within a certain timeframe. So the legislation now does provide for us to do a one-time audit of the Wheat Board if we choose to do so, and we're now in the process of planning such an audit, which would be carried out within the next year. So the legislation now allows for that, and we will proceed.

The Chairman: Thank you.

Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

I'd like to go back to this business of user fees again, because this is something that agriculture is getting hit with from all sides.

Now, I noticed that in your report you didn't really include an assessment of performance of user fees, and I think you partially answered that question in saying it hasn't been running long enough. But the other thing I did notice is that you didn't comment on the practice of user fees. So I would be interested in what your views of user fees are, for one thing.

The other thing with these agencies as they're put through—and Mr. Steckle brought up PMRA—is the issue of transparency. The only way we know what they're operating on right now through their budgeting is by using the practice of vote-netting out of treasury to check what their budget is. What I would have a bit of a concern with—I'll give you a bit of a scenario here and you can comment on that—is user fees being used at a high level in one sector of the industry and at a low level in another sector.

If Mr. Easter were here, he would probably use the example of seed potatoes, for instance. There would be a high user fee on the development of seed potatoes and a low user fee on the development of value-added products, whereby you could probably redirect the seed potato industry someplace else in the country, other than where it currently is—for instance, out to Alberta, or maybe to Manitoba, or what not.

I'd like your comments.

Mr. Denis Desautels: Mr. Chairman, I appreciate the input on this whole issue from the members of the committee, because that would be useful.

To answer Mr. Calder's specific question, we have never disagreed with the principle of user fees. This is a policy decision, and we feel it makes sense in certain circumstances, so we cannot say we have a fundamental disagreement with the notion of user fees. However, we have over the years raised a number of concerns about how that was being used. These could range from, for instance, the inability of government to demonstrate what the real costs are, because if your user fees are more than what your real costs are, it becomes a form of taxation and therefore that becomes illegal.

• 1005

So you can agree with the principle, but then in application there are a number of concerns you have to watch out for. We've raised a number of those in the past, and in terms of the agency we're talking about today, I think there's a need to work on certain aspects of the application of user fees.

For instance, we said the agency does not yet have in place an accounting system that is on a full accrual and GAAP basis, and one way to really determine what your fees are is to have a proper accounting system on that basis. Until such time as that is all put in place, it would be very difficult to prove that your costs are at a certain level or don't exceed what you're actually recovering.

Mr. Murray Calder: What you're talking about, then, is putting in a cost-benefit analysis of user fees, and you had mentioned mechanisms before. Maybe you could expand a little bit about what type of mechanisms you would want to see in place to do that.

Mr. Denis Desautels: Well, there's quite a range of mechanisms, Mr. Chairman. As I said, there has to be a proper information system in place to be able to determine what the actual costs are that should be recovered.

You mentioned the issue of transparency. There again, the financial information put out by the agency or any other agency should be quite clear as to what is being recovered—how much and from whom. There should be sufficient information to the stakeholders so they can see what actually is going on.

You talked about fairness and the logic of the recovery. Again, there the policy should be generally quite clear and obvious. I mentioned earlier the necessity to have some kind of appeal mechanism so that if people are dissatisfied or feel they're being treated unfairly, they know who they address themselves to and what process is in place to basically take their concerns into account sufficiently.

So I think each organization that is in the cost recovery business should have a full framework for administering that particular activity that meets all of the tests that we're talking about.

Mr. Murray Calder: Could that be a universal framework?

Mr. Denis Desautels: As I was trying to explain earlier, you can start with a more general framework such as Treasury Board has put out, which I think is a good start, but each organization has to take that and craft its own policy and its own framework.

The Chairman: I just want to follow up on this because I think Mr. Steckle referred to it as well, and I guess it really has to do with fairness or the appearance of fairness.

You know, it's possible that the guidelines might be fair, proper and correct, and that the work by officials might be fair and correct and proper, but in some cases, in the final analysis, the entity that is required to come up with the cash for cost recovery simply respectfully disagrees.

I guess the question I'm getting to is this, Mr. Desautels. A lot of people would have to concede that in adjudicating these matters of drawing the line between private good and public good, the government itself has a lot at stake. Naturally, the more you can carve out that is a private interest, the less onerous it is for the taxpayer, and I'm quite sure those who are paying those cost recovery fees will recognize that.

So I guess I really have two questions under the current model or models. Is there really an appeal procedure beyond just the political process, or should we have a kind of system that really provides for a third party to decide where the line is going to be drawn, so that the government itself, which has a stake in this, really doesn't make the final decision?

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Do you get what I'm getting at?

Mr. Denis Desautels: Yes. Mr. Chairman, I think it's a very good point.

Of course, at times the government could have an interest in maximizing recovery. I think there was a lot of pressure put on individual government departments a few years back, when we went through program review and we were cutting back the amount of financing or the appropriations to the various departments. So there was a really significant pressure for them to maximize cost recovery, and you can end up in a situation where there's no mechanism for dealing objectively with people who feel they've been badly treated.

The Chairman: Or you could have it the other way. You could be hypothetical and say you have a government that's in, say, the pocket of a particular industry and provide that industry with very low cost recovery fees. It can work both ways.

Mr. Denis Desautels: That's correct, it could go both ways, and it could be as a result of the amount of pressure that's being put by an industry on the government. In public in the last while, we've seen some real battles on that. For instance, the shipowners argued very hard that they didn't want to pay the cost recovery that was being imposed on them. There was a question of, again, arguing about fairness. They weren't all being treated on the same basis. From what I could see, it was a very public debate.

But I agree, I think there has to be some mechanism in place for dealing with appeals in an objective way.

The Chairman: Why not just maybe a third party in the first instance, or is that just another layer of bureaucracy?

Mr. Denis Desautels: Mr. Chairman, I don't think that would be very costly or very difficult to do. If there's going to be cost recovery across the whole of government, I could very well see some kind of appeal mechanism that would apply to all of government, not just one department having its own structure. There could be some more objective tribunal of sorts that would arbitrate those situations for all of government whenever there's a problem with cost recovery. I don't think that needs to be a very expensive structure.

The Chairman: Well, it's an interesting thought.

Madame Alarie.

[Translation]

Ms. Hélène Alarie: I have three more questions. Denis Coderre has highlighted some very important problems that Quebec experienced with respect to sheep scrapie back in 1997. You make no mention of these problems in your report on accountability issues. Why is that?

Mr. Denis Desautels: Are you referring to our 1998 report?

Ms. Hélène Alarie: Yes.

Mr. Denis Desautels: Mr. Chairman, the chapter in the 1998 report focused on the creation of the new agency, on the reasons why it was set up and on its operations. I'm well aware that a variety of problems were experienced across the country. The purpose of our audit or review was not to focus on the agency's handling of each particular problem. I'm familiar with the scrapie issue and with the wapiti problem mentioned earlier, but that was not the purpose of the review we conducted in 1998.

Ms. Hélène Alarie: I see.

My second question indirectly concerns user fees and the cost- benefit analysis, but what I'd like to know is: has an analysis been done of the volume of samples taken since the user fee system was put in place? Let me explain. Before 1997, producers voluntarily supplied samples and many more laboratories were in operation. When the number of laboratories was reduced, producers were no longer willing to make the effort to bring in their carcasses, supply samples and so forth, particularly since they now had to pay. As a result of this, has the number of samples supplied to laboratories decreased? Are fewer analyses being done? If that's the case, then efficiency has suffered. The problem may be due to cost and to the smaller number of laboratories.

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[English]

Mr. Neil Maxwell: I suspect the agency might be in a better position to address the specifics.

I think two things have been happening in the inspection system over that time. One was the creation of the agency and changes in the laboratory system. The other one has been some major changes in the inspection systems themselves. So changes in sampling could be the result of either of those. Perhaps the agency might know.

[Translation]

Mr. André Gravel: Regarding the number of laboratory analyses being conducted, Mr. Maxwell has raised a very important point. In recent years, our inspection programs have undergone many changes and these have resulted in adjustments to the testing process.

As for our regular programs where we evaluate food safety and test for the presence or absence of pesticides, heavy metals and traces of antibiotics, we maintain a statistically valid base which doesn't vary a great deal.

For example, our targeted action, particularly as regards residues of sulphonamide in hogs, is in line with the number of cases of non-compliance identified during our analysis of the carcasses. In recent years, our analyses have shown a higher level of compliance, for example, in the case of sulphonamide residues.

As for the number of laboratories, when the agency was created, there were approximately 20 in operation, in addition to two sites in other facilities. I don't believe the number of overall sites has decreased. As Mr. Desautels mentioned, we were recently on hand in Winnipeg for the opening of an ultra-modern laboratory which we share with Health Canada. It is the only facility in Canada that handles samples up to biosafety level 4, the highest level. The agency is well equipped to provide support services for its activities and for its clients.

Ms. Hélène Alarie: Do I still have a minute left?

[English]

The Chairman: I'm a nice guy today. Go ahead.

[Translation]

Ms. Hélène Alarie: It's my last question. I returned recently from a trip to Japan with Mr. Borotsik and the minister. The Japanese are always asking questions about labelling, the inspection of genetically modified organisms and organic products. They purchase products once these concerns have been addressed. Given the agency's human and financial resources, is a possible to conduct all of these tests to ensure that we don't lose out on this growing market?

Mr. Denis Desautels: I think I will let someone from the agency answer that question.

Mr. André Gravel: This question ties in a little with your previous one.

Ms. Hélène Alarie: At least we're consistent.

Mr. André Gravel: Indeed, you are.

On the subject of organic farming, the agency has worked along with the sector to establish organic standards to ensure access to foreign markets. In the opinion of the agency, organic farming as such and organic certification are not necessarily health and safety issues in the same way that the matter of residues is.

However, given the strong demand on foreign markets for organic certification, the agency initiated consultations along with this sector which led to the drafting of standards that Canada will adopt for organic certification. We will be well positioned to meet the demands of the Japanese or of other markets for these products.

• 1020

On the subject of genetically engineered organisms, here again, the agency has an important role to play. For instance, with respect to seed grain, the agency is in the process of doing a comprehensive analysis of the impact these new products have on the environment and on animal health.

With respect to their impact on human health, Health Canada is doing that analysis. All genetically engineered products on the Canadian market have been reviewed by the agency and by Health Canada to ensure their safety.

Canada is perceived as a model by foreign countries because of the regulatory framework in place which allows for the marketing of genetically engineered products.

[English]

The Chairman: Thank you.

Mrs. Ur, you have five minutes.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I too welcome you, Mr. Desautels. It's always nice to have you at a meeting. Your openness really is quite welcome.

In your report, you spent a great deal of time on the effectiveness of the agency and not quite as much on the efficiency, but perhaps that will be forthcoming when your review is done. But with that not being completed yet, I'd like you to comment on that in respect of whether you know at this point, regarding, say, the cost of administration of the inspection agency versus the cost recovery, what kind of balances are there, and did we actually save any money going this route?

Mr. Denis Desautels: The report that the agency is supposed to prepare every year on its performance is supposed to be a comprehensive report and therefore should cover aspects of efficiency and effectiveness. It should, over time, be able to demonstrate that it compares favourably with other organizations to which it can compare itself. At this point in time, if we look at the first performance report of the organization, it doesn't do that all that well. It doesn't demonstrate that all that well—

Mrs. Rose-Marie Ur: I agree.

Mr. Denis Desautels: —because there isn't a good enough base, and the financial information system isn't yet sufficiently operational to permit that to come through.

We've basically put our finger on that particular issue, and we would hope that in future reports, over time, that particular aspect could come out a lot better, so that you would be able to tell, I would hope, that the organization is operating very efficiently and at a minimum cost, and we should therefore be able to track performance over time. For our part, if the agency doesn't do it, we will try to find some comparables to make sure that the performance of the organization on a cost basis is acceptable.

Mrs. Rose-Marie Ur: To what would you be comparing it? You said compared to other agencies. What would be a comparison, for instance?

Mr. Denis Desautels: We'll have to look for some. There are still some provincial organizations that do certain of these activities, but we can also go outside the country, which we do for other activities of government. If there's not a comparable in Canada, we look for it outside of Canada.

Mrs. Rose-Marie Ur: Over time...can you quantify that in years?

Mr. Denis Desautels: I think that can happen within a relatively short time. I would hope within three years or so we should be able to have both a track record and the ability or the information base to demonstrate that.

Mrs. Rose-Marie Ur: I don't want to sound impatient, but when I was reading some of the material I saw it took 30 years to come to this. I hope it doesn't take 30 years to develop an efficient agency. I'm not quite that patient, and I want to be here to see it.

The Chairman: We're not that young.

Mrs. Rose-Marie Ur: Speak for yourself, Mr. Chairman.

Mr. Denis Desautels: I'm not either. I hope it is in fact a question of just a few short years. Maybe Dr. Gravel can give us assurance on that.

Dr. André Gravel: It makes me feel older, but that's okay.

I have a few comments about the issue of efficiency of delivery of our system.

• 1025

We agree that we need to compare ourselves to something, but it's very hard to find suitable comparisons in terms of what the agency does to measure our efficiency. What we've done this year is put on the table a benchmark report. We've mentioned that the agency is the child, if I can use that term, of four departments; I said three, but Industry Canada also is involved in this. What we did was amalgamate the delivery of 26 different programs. This year, we have benchmarked these programs in terms of what it is that we do, how many inspections we do, and, as much as we could, what the level of resources is that we deploy in these programs.

Our business plan that we are mandating at the table—it's another accountability that the Auditor General knows about—clearly delineates where we're going with our inspection program. The agency was created to improve efficiency and effectiveness of inspection programs. By benchmarking where we are now, we're going to be in a position to determine the efficiency gains that we've made as we implement the business plan.

The other tool we've developed is a resource management system. It was at the point of being implemented when the Auditor General did his review. It's a sort of accounting informatics system that measures the degree of intervention of the agency. As an example, for each export certificate issued, the inspector enters that information in the database, and there are standards that are developed to measure how many person-hours this represents. That way, we're in a better position on cost recovery discussion, as an example, to determine the extent of usage of our FTEs.

Mrs. Rose-Marie Ur: I think Madame Alarie alluded to biotech and genetically modified organisms. Do you feel you're best prepared to meet this challenge? Will you be needing additional people working on this? Will this be another change within your agency? How are you going to meet the challenge on that? It certainly is a hot topic. We were in Washington not too long ago, and they're labelling it is a hot issue there as well.

Dr. André Gravel: Mr. Chairman, very clearly the issue of biotechnology and approval of novel products is definitely an increased workload for the agency. As I mentioned, we have to review these new products individually as they get on the market, and there is a significant investment in research for new products. That investment has to be reflected in added capacity for regulatory intervention. The success of the biotechnology file depends a great deal on consumer confidence, and that consumer confidence can only be arrived at with a reliable regulatory system.

The Chairman: Thank you, Mrs. Ur. You're out of time.

Mr. Breitkreuz.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you very much, Mr. Chairman. Hopefully you'll be in a good mood as I'm asking my questions as well.

Thank you very much for coming before the committee, I appreciate it very much.

I had ten questions, but some of them have already been answered in part. I'm just going to run through the questions, because they all tie together to some extent. Maybe you'll be able to pick and choose the ones you have time to answer today, and maybe you can address some of the other ones at some future time.

Do you evaluate whether the service could be provided better by a private agency or by the government when you're doing your various analyses of the various services that are provided by government? You've already partly dealt with the aspect of evaluating whether the right people are paying user fees and so on.

My second question ties in a bit with what Mr. Coderre was saying earlier in regard to the Quebec concerns: the transparency, the efficiency, the effectiveness, the accountability of agencies. He mentioned that a monopoly can create a vacuum and may not be delivering services to clients and stakeholders in an efficient manner. In regard to that, do you evaluate the various agencies of government in that respect?

Tying in with that, producers in my province of Saskatchewan really are concerned with the level of taxation that is built right into the input costs that they incur. By and large, this money leaves their communities and does not come back. For example, they will cite EI premiums being used as a form of taxation, or CPP premiums that could be built right into the price of the product. The companies that manufacture the various things do not really pay these premiums. Instead, they are passed on.

• 1030

Of course, farmers cannot pass those costs on, because they're caught in the international marketplace. They have property taxes, two-thirds of which may go to education in my province. There are also various user fees and corporate taxes that may be passed on. They cite all of these things as being built into the cost of the product.

Do you do any studies in regard to what level of taxation would be built right into the particular input costs that may be incurred by grain producers or any other producers in the farming sector?

The Chairman: Garry, I just want to note that you've already used half your time and you've only gotten two questions in.

Mr. Garry Breitkreuz: That was my third one, Mr. Chairman.

The fourth question is whether you do any studies on the level of taxes paid by producers as compared to our main trading partners.

In regard to the AIDA package, the government announced a $900-million compensation package over two years. Do you do an evaluation of the effectiveness of that program? The program was put in place because of the harm that producers are experiencing because of foreign subsidies. When they receive that compensation, farmers are already telling us the program is not working. It would have been much more effective if it was acreage-based. Do you do any comparisons in that respect in terms of how effective the program really is in addressing the concerns that the farmers have?

My sixth question is in regard to transportation and handling costs. Studies have been done on the prairies that show that there may be up to $500 million lost by producers because of inefficiencies in the system due to government regulation and so on. Do you ever do any work in that respect?

Also, there is duplication of services between the federal government and the provincial government. I was thinking one of my Bloc colleagues here would have asked you a question on that, but there's really a concern that the size of the bureaucracy and the benefits accrued to producers may not be all that great. Can you just touch on the areas that you do work on in all of these?

I'll end my questioning there.

The Chairman: Unfortunately, you've left the Auditor General with only a minute. I'll give him an extra few seconds, but I'm not going to be a nice guy on this, Garry.

You can judge accordingly, Mr. Desautels, but I'm not going to extend this double time.

Mr. Denis Desautels: Mr. Chairman, these are difficult questions to answer. Of course, a lot of them really are policy issues, which we don't normally get into. Others are right up our alley. When you talk about accountability issues, of course we would very much see that as an area of interest—accountability mostly to members of Parliament, but also to other stakeholders indirectly. When you talk about the effectiveness of various aid packages, issues around the effectiveness of government programs are areas of concern for our office, of course.

Mr. Chairman, if you wish, I could provide more detailed answers to the committee on those questions, separately and in writing. For the moment, though, I would say that we would be interested in some of those, but others are outside the scope of our mandate.

The Chairman: That's fair.

Garry, if you want to get back on the list—

Mr. Garry Breitkreuz: I just wondered which ones were within the Auditor General's scope, which ones he would evaluate, and which ones he wouldn't, because I had quite a list there.

Mr. Denis Desautels: I would have to look at the list in more detail in order to answer that.

Mr. Garry Breitkreuz: Yes, you can look at the transcripts.

The Chairman: Now we're going to hear from Mr. McCormick.

Mr. Larry McCormick: Thank you very much, Mr. Chair, and thank you to each of our witnesses for being here.

Certainly the views of the Auditor General's department on cost recovery will have a major effect on the application of any fees in the future. We talk about cost recovery and user fees, the people's good and the private good. Through all the studies up to this short date in history, it probably looks like things are being done fairly. My main concern, however, is always the small business, which in this case is often the producer. The large producers have built-in mechanisms whereby they may have some protection, be it from vertical integration in their industries, or whether it's just the size of their operations. But I'm thinking of the family farm, which we've never been able to define. I guess I'm just still one of those people who is looking through the optimist's glasses while thinking there are family farms, because my neighbours have family farms.

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Mr. Chair, Treasury Board may not always recognize the cost burden to our producers. In the food processing industry and the food distribution industry, we already have monopolies in this country, on this continent, and around the world, and there's much good to come of all of this. It makes me think about the bank mergers and the promise that the banks can reduce service fees following the mergers. I don't doubt that they could, and I don't doubt that they would. A lot of good will come out of bank mergers in the future, but there's no hurry about that.

In this case, cost recovery is hurting our producers now. We need a long-term vision that perhaps only this department and other offices can provide. It has to include not just the year that we're looking at, but the future and the fallout. If we lose all our small producers in agri-food products, it's just going to cost everyone dearly in the future.

I just wonder if I could have any comments from both groups here today on that, Mr. Chair.

Mr. Denis Desautels: Mr. Chairman, I'll make more of a general observation, if I may. When they put in programs and policies, I believe all government departments have an obligation to sit back and evaluate the results of their policies or their programs from time to time. If they don't have regular information on this, good managers generally need to sit back and evaluate the impact of their programs periodically—and this is basically a requirement of the federal government. If you're talking about cost recovery in a particular sector, and if there are a lot of concerns about it, I think it goes without arguing too much that maybe the department should sit back and do a proper evaluation of the impact of that particular policy on different groups. If there's enough concern about it in particular, I think it's a thing the departments should consider doing.

Mr. Larry McCormick: I appreciate that, and we certainly do ask our departments and our ministers to do that. Again, from our point of view, it's not my opinion only. It's the opinion of many others that when it comes to our small producers, the time it takes to study all this and to react to some of these fees is going to put people out of business. I just want to make the CFIA aware of my views on our small producers.

Dr. André Gravel: Mr. Chairman, that's a good question, so let me make a few comments about the cost recovery.

As you all know, the agency has a moratorium on new cost recovery measures until the end of 2000, so we're not embarking on any new initiatives. We're also certainly anxious to get the views of the Auditor General in terms of the way cost recovery is being applied. The agency, however, has other tools at its disposal to change the way in which we do business. Looking at our business plan, it's clear that we're also in the cost avoidance and cost reduction business as well, so cost recovery is not the only mechanism by which we can implement changes. But the impact on producers and small operators is definitely something the agency is looking at whenever we implement new cost recovery mechanisms.

The Chairman: We now move on to Mr. Proctor.

Mr. Dick Proctor: Thanks very much, Mr. Chair.

I apologize for arriving late and after your presentation this morning, gentlemen. I did want to say to you, Mr. Desautels and Mr. Maxwell, that I appreciated very much the opportunity to meet with you last fall. That was extremely useful.

You may feel you've answered this question in your response to Mr. McCormick in terms of monitoring the effectiveness of progress, but let me try something on agriculture and agri-food. From what I've read in your briefing note, you're just in the late stages of the audit on those.

We have heard in this committee that the domestic support cuts to agriculture and to Canadian farmers have been far greater over the last number of years than those of our competitors in Europe, or in the United States primarily. Coupled with high user fees, that has caused us to become less and less competitive. That's how the argument goes.

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So when you're completing the audit, is this something you would take into account or feel free to comment on, or is it for a third party to sit back and analyse how much impact those cuts have had on our Canadian agricultural industry?

Mr. Denis Desautels: Mr. Chairman, I feel that both the level of cost recovery and the level of other types of costs producers have to absorb in Canada, let's say, versus other countries is very much a political decision that's tied in with a whole other series of trade policies and strategies. So in our work we would tend not to question the basic policy as to the level of costs, either through cost recovery or taxation built into the inputs. We would accept those normally as reflecting government policy that has been approved by Parliament, and we would see how well afterwards that is being particularly implemented. Cost recovery on its own carries a number of other specific issues, which we've talked about today, and we're going to be looking into that. But the general decision of the level, to me, is a policy decision that belongs to elected officials.

Mr. Dick Proctor: I have one other question that kind of follows up on that. For the AIDA program, the government announcement said up to $900 million over two years. There's some feeling now that they'll end up spending a lot less than that out of the federal treasury. Would the OAG simply look at that and say if they only spent $500 million or $600 million, that's good, they didn't spend up to, or do you look at value for money spent?

Mr. Denis Desautels: Mr. Chairman, we would not be looking at this thing only from one dimension or one angle. We would want to go back to the details of that particular program, such as who it's aimed at, under what conditions it should be paid, and whether it was carried out properly that way.

That's similar to what we did with the other program—I forget the name all the time—

A witness: It's the western grain transition payments program.

Mr. Denis Desautels: Yes, the western grain transition payments program. We had a look at how Agriculture Canada really carried out that particular program, and we made sure anybody who was entitled to something got it and that those who got it were entitled.

So we look at it from both angles, obviously, but the intent is to give you assurance that the intent of Parliament was properly carried out. It's not an issue of making sure they minimized the payouts. It's to ensure that everybody who was entitled to it got his or her fair share.

The Chairman: According to the rules.

Mr. Denis Desautels: Yes.

The Chairman: Mr. McGuire.

Mr. Joe McGuire (Egmont, Lib.): Thank you, Mr. Chairman.

When the CFIA was originally set up to avoid duplication on the federal side, I think there was an expectation that there'd be some benefits to the provinces also in that we wouldn't be duplicating what the provinces were doing. Has there been a demonstrable effect on the provincial side as far as efficiency is concerned, financial and otherwise?

Dr. André Gravel: I'd like to ask Mr. Brackenridge to answer that question, Mr. Chair.

Mr. Peter Brackenridge (Executive Director, Plant Products Directorate, Canadian Food Inspection Agency): Thank you, Mr. McGuire.

Yes, I think we can adequately demonstrate that we've made very good progress on the federal-provincial scene. We have two thrusts we follow on this. The first is a series of bilateral arrangements. We have an agreement in principle with Alberta, which is progressing. We have identified staff to work exclusively on finding ways to achieve efficiencies with our colleagues in the Alberta government in both the agriculture and health portfolios. We have an umbrella agreement with the Province of Ontario, which is progressing well. We have a very well-defined agreement with the Province of Quebec, which was signed this fall, and that will clearly delineate the responsibilities between the provincial government and the federal government in food inspection. We have a recently signed agreement with the Northwest Territories, which will help as we do activities in northern Canada. We have some very serious developments going on with both British Columbia and Saskatchewan, and as well with Nova Scotia, I should add. So I think on the bilateral front we are making very good inroads.

• 1045

On a multilateral basis, we continue to be the co-chairs and strong advocates of the Canadian food inspection system, which is a group of more than 30 organizations around the table. Thankfully, I can say that at the federal level we're now streamlined and that Health Canada and ourselves are the two federal reps, but each of the provinces then sends the appropriate representatives from their agricultural and health portfolios, and municipalities are represented as well. So we're working on a whole variety of projects there.

Mr. Joe McGuire: So there's a lot of work in progress on the provincial side.

Mr. Peter Brackenridge: Yes.

Mr. Joe McGuire: In most of Canada you would have health and agriculture inspections. Is it more difficult when you add fish to it, when the same inspectors are doing agriculture, health, and fish inspections out of the same office, that sort of thing?

Mr. Peter Brackenridge: Do you mean from a federal perspective?

Mr. Joe McGuire: Yes.

Mr. Peter Brackenridge: I'd say no. In fact, it's probably the opposite. We certainly have our same contacts at the provincial fish departments, and they're now within the CFIA. I think what we found is that we now have a professional group of food inspectors that includes fish. We've been able to use people from other commodity sectors to bolster the fish sector when it's needed and vice-versa if it happens in the agriculture sector. I haven't personally heard any complaints in that regard. Now that we have almost completed year two, I think people are now used to their contacts and are finding that the streamlined single federal contact and delivery aspect is actually helpful to them.

Mr. Joe McGuire: So when you didn't mention New Brunswick, Newfoundland, or P.E.I. and you just threw in Nova Scotia at the end, the fact that they are inshore fishing provinces—

Mr. Peter Brackenridge: It was not intended as a slight. No, not at all. We are doing work with all of those provinces. It's simply that we don't have signed agreements with them yet. But we have extremely close working relationships with our provincial colleagues in all of those provinces.

The Chairman: We're running out of time. We'll have one short question from four of you: Hoeppner, Calder, Ur, and McCormick, and I mean short.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I'd like to ask Mr. Desautels if they have any handle on how much provincial-federal duplication there still is in agriculture, such as with food inspection, where provinces have set some guidelines and there are also federal inspections. Is there any way you can gauge that? Do we still have quite a bit of leeway to become more efficient?

Mr. Denis Desautels: Mr. Chairman, we have not honestly addressed that particular issue, because it would mean really going into the provinces and basically determining exactly what they're doing that may be seen as duplication with the federal organizations. We said in my opening statement that the agency was created with that as one of the objectives. I think that once the agency has had a few years of operation under its belt, it would be fair to ask for some kind of assessment as to what extent the new agency has been meeting the objectives for which it was created. So I would think it—

An hon. member: It's early yet.

Mr. Denis Desautels: I think it's a little too early, but I don't think we should lose sight of that. I think that within a couple of years we should ask for that.

The Chairman: Mr. Calder.

Mr. Murray Calder: Thank you very much.

In your report here you're talking about the agency, and I'll just read very quickly this one paragraph:

While the Agency's expected outcomes listed in the plan are results oriented, they are not sufficiently concrete or precise to provide a good indication of what is to be achieved.

Then the next paragraph, which starts right underneath that, is with regard to balancing expectations and capacities. There are the expectations on one side and the capability on the other side of being able to deliver what's expected of the agency. I wonder if you could elaborate on that.

Mr. Denis Desautels: I'll ask Mr. Mayne to do that, please.

Mr. John Mayne: Thank you, Mr. Chairman.

The issue we were pointing to there was that we felt there was not sufficient clarity as to what exactly they're going to be accomplishing over the next several years within the mandate that has been approved for them. Hence, when they report performance against that, it's hard to know whether or not they've done what they expected to do. We have pushed and continue to push them for more clarity as to what they're planning to accomplish with the general objectives they have stated.

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Mr. Murray Calder: So you're basically looking for a more concise business plan.

Mr. John Mayne: Yes, we're looking for a business plan with more detail in there that would give you and others an idea of what exactly they're going to be accomplishing during the next fiscal year or during the next two fiscal years, and then expecting to see reporting against that.

The Chairman: Is there a short question from Rose-Marie? No.

Larry, a short question.

Mr. Larry McCormick: Again, on any views that the Auditor General's department can put on this cost recovery, whether this is the right time or not, I certainly hope you will be reviewing the effects, the cost recovery and how fair it is, within the PMRA, which is separate. I would like to request that, however I should do that—probably more formally—for the sake of our producers.

Thank you, Mr. Chair.

Mr. Denis Desautels: I will take note of that, both the issue of the cost recovery and the PMRA.

The Chairman: Before we go to Madam Alarie because she has one suggestion for our consideration, I want to ask one question and make one comment.

Dr. Gravel, since I'm from Winnipeg, I'd like to know from you, if you can, with a short answer, to what extent is the new Winnipeg lab up and running?

Dr. André Gravel: The Winnipeg lab has two sides to it, as I mentioned. There's a Health Canada component and an agency component.

The agency component is up and running. We've transferred the last of the activities we had in Hull, in the virus lab, to Winnipeg, so it's fully operational.

The Chairman: Do you have a full complement of workers?

Dr. André Gravel: I think we're getting close to having a full complement of workers. On the Health Canada side, they're still gearing up. They have some operations there, but they're still in the process of—

The Chairman: Mr. Desautels, my comment to you would be something like this. First of all, I'm sure it doesn't come as any great surprise to you that the members around here are concerned about cost recovery. It's a relatively new phenomenon in government and of course, understandably, is being implemented with some difficulty and some controversy.

My suggestion to you, if not an appeal, would be that as you look at cost recovery, I would hope you would perhaps consider revising the system so as to wring as much politics out of the process as possible.

I say that because I think most of these issues are very technical and are really beyond the scope and the resources of most MPs. If you're an MP from a dairy district and the dairy industry comes thundering down on you, it's pretty difficult to say, even if you feel it, “Perhaps you don't have a case, Mr. Dairy Farmer, or Dairy Farmers. We think perhaps the government has done a good job.” It's very difficult for members of Parliament to take that kind of position.

So I would suggest to you that if you can revise the system somewhat to wring as much politics out of it as possible.... I'm not naive enough to think you can take politics out of public business—and you shouldn't. Public business is politics and vice versa. But I think all of us would benefit from whatever we can do to keep this system, this process, as rational as possible and take as much politics and emotion out of it as possible.

That would be my comment. If you have anything to say to that, fine.

Then we'll go to Madame Alarie for a moment.

Mr. Denis Desautels: Mr. Chairman, I note your comment and I thank you for it. It will be useful in our work.

The Chairman: Okay, thank you.

Madame Alarie, I think I know what you're going to tell me, and I think it's fine. Go ahead and explain to the committee.

[Translation]

Ms. Hélène Alarie: May I? Given the interest generated by this morning's meeting, I would like to make a request, Mr. Chairman, with my colleagues' consent, which is becoming increasingly easy to obtain. Would it be possible to come back at a later meeting and make some recommendations, either to the Auditor General or to the minister, so as to follow up on what we have heard this morning about the agency's achievements?

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[English]

The Chairman: You want more than just a summary of this meeting for the benefit of the minister.

[Translation]

Ms. Hélène Alarie: Yes.

[English]

The Chairman: You want us to reconvene a meeting on the subject matter before us today and give some consideration as to what we might want to recommend to the minister over and beyond what we heard from the Auditor General. Is that what you're suggesting?

[Translation]

Ms. Hélène Alarie: I don't think that would take up an entire meeting. Most probably, one hour would be enough. Given what we have heard, we know that we want to make some requests and some recommendations. These would have to be properly worded by our research assistants so that the matter is not relegated to the sidelines and our concerns ignored.

[English]

The Chairman: Members, if I don't hear an objection, I would simply suggest that Madame Alarie's suggestion be taken up by the steering committee. I think perhaps that's the best way to approach it. Is that fair?

An hon. member: I think that's fair.

The Chairman: Okay.

Thank you very much, Mr. Auditor General, Mr. Maxwell, Mr. Mayne, Dr. Gravel, and Mr. Brackenridge. I think it was considerably enlightening, and we always appreciate your candour.

The meeting is adjourned.