PACC Committee Meeting

37th PARLIAMENT, 1st SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Thursday, April 18, 2002

¹

1535

The Chair (Mr. John Williams (St. Albert, Canadian Alliance))

Mr. Michael McLaughlin (Deputy Auditor General, Office of the Auditor General of Canada)

The Chair

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada)

¹

1540

¹

1545

The Chair

Mr. Leon Benoit (Lakeland, Canadian Alliance)

The Chair

Mr. Leon Benoit

Ms. Sheila Fraser

Mr. Leon Benoit

Ms. Sheila Fraser

¹

1550

Mr. Leon Benoit

Ms. Sheila Fraser

Mr. Leon Benoit

Ms. Sheila Fraser

Mr. Leon Benoit

Ms. Sheila Fraser

Mr. Leon Benoit

Ms. Sheila Fraser

Mr. Leon Benoit

The Chair

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

¹

1555

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

º

1600

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Ms. Sheila Fraser

Mr. Shawn Murphy

Ms. Sheila Fraser

Mr. Shawn Murphy

º

1605

Ms. Sheila Fraser

Mr. Shawn Murphy

Ms. Sheila Fraser

Mr. Shawn Murphy

Ms. Sheila Fraser

Mr. Shawn Murphy

Ms. Sheila Fraser

The Chair

º

1610

Mr. John Bryden (Ancaster--Dundas--Flamborough--Aldershot, Lib.)

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

The Chair

Ms. Sheila Fraser

º

1615

The Chair

Mr. John Bryden

The Chair

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

The Chair

Ms. Val Meredith (South Surrey--White Rock--Langley, Canadian Alliance)

Ms. Sheila Fraser

Mr. Michael McLaughlin

The Chair

Ms. Val Meredith

Ms. Sheila Fraser

Ms. Val Meredith

Ms. Sheila Fraser

º

1620

Ms. Val Meredith

The Chair

Ms. Val Meredith

Ms. Sheila Fraser

Ms. Val Meredith

Ms. Sheila Fraser

The Chair

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

º

1625

Ms. Sheila Fraser

Mr. Odina Desrochers

The Chair

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

Ms. Sheila Fraser

º

1630

Ms. Sophia Leung

The Chair

Mr. Alex Shepherd (Durham, Lib.)

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

Mr. Alex Shepherd

Ms. Sheila Fraser

º

1635

The Chair

Ms. Val Meredith

Ms. Sheila Fraser

Ms. Val Meredith

The Chair

Mr. Mac Harb (Ottawa Centre, Lib.)

Ms. Sheila Fraser

Mr. Mac Harb

º

1640

The Chair

Ms. Sheila Fraser

Mr. Mac Harb

Ms. Sheila Fraser

Mr. Mac Harb

The Chair

Mr. Mac Harb

The Chair

Mr. Doug Timmins (Assistant Auditor General, Office of the Auditor General of Canada)

The Chair

º

1645

Ms. Sheila Fraser

Ms. Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada)

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Mr. Doug Timmins

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Mr. John Bryden

º

1650

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. John Bryden

The Chair

Mr. Alex Shepherd

The Chair

Mr. Alex Shepherd

The Chair

Mr. Alex Shepherd

The Chair

Ms. Val Meredith

º

1655

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

---

CANADA

Standing Committee on Public Accounts

---

NUMBER 048

l

1st SESSION

l

37th PARLIAMENT

---

EVIDENCE

Thursday, April 18, 2002

[Recorded by Electronic Apparatus]

¹  (1535)  

[English]

    The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, everybody.

    Today, pursuant to Standing Order 108(3)(e), we consider the April 2002 report of the Auditor General of Canada.

    Our witnesses today are from the Office of the Auditor General, Ms. Sheila Fraser, the Auditor General of Canada, and Mr. Michael McLaughlin, the Deputy Auditor General.

    This committee is scheduled to run until 5 o'clock, at which time we will adjourn. The steering committee will then move in camera to consider, on behalf of the full committee, the report the Auditor General is tabling. We will then decide our priorities.

    However, before I get into the report from the Auditor General, Mr. McLaughlin sent a letter to me on April 10, which I understand the clerk has delivered to all members, asking that he be allowed to make some additional comments regarding the public accounts meeting on February 19 dealing with the recruitment of Canada's future public service, and I ask him if he wants to say something.

    Mr. Michael McLaughlin (Deputy Auditor General, Office of the Auditor General of Canada): Thank you, Mr. Chairman.

    As you said, I sent a letter to you on April 10, 2002, concerning our meeting and the testimony on recruitment for Canada's future public service. I would ask that this letter be appended to the official record of that meeting, if that is possible, sir.

    The Chair: Thank you.

    We have a quorum. I think that's a fairly simple resolution. Moved by Mr. Harb.

    (Motion agreed to)

    The Chair: That is so ordered. The researchers will take the letter into consideration in drafting the committee's report on the meeting that was held.

    Now we'll turn to the Auditor General of Canada to hear her report on her second report. Ms. Fraser.

    Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada): Thank you, Mr. Chair.

    As you mentioned, I am accompanied by Mike McLaughlin, the Deputy Auditor General, as well as Hugh McRoberts, Maria Barrados, and Doug Timmins, Assistant Auditors General.

    We would like to thank you for the opportunity to meet with the committee today to discuss my report, which was tabled this past Tuesday. Like its predecessors, this report is about accountability. We looked at all three links of the accountability chain, Parliament, central agencies, and departments.

    Accountable government requires that members of Parliament be able to approve the government's plans for spending and to scrutinize the results of that spending. Our first chapter, entitled “Placing the Public's Money Beyond Parliament's Reach”, notes that the government has disregarded this essential principle. In many cases new governance arrangements do not meet essential requirements that government departments would have to meet to ensure accountability to Parliament, such as credible reporting of results, effective ministerial oversight, and broad-scope external audit by the Office of the Auditor General.

    In chapter 8 we provide another example of the erosion of Parliament's control over government spending, the Treasury Board Secretariat's administration of the government contingencies vote, also known as vote 5. Parliament has authorized the government to use this vote to supplement other departmental votes and to pay “miscellaneous minor and unforeseen expenses not otherwise provided for”. We recognize that the government needs flexibility to deal with minor unforeseen expenses, but it has used the authority of vote 5 increasingly for new initiatives that would normally require Parliament's approval. In my view, the use of this vote needs to be reviewed to ensure that it reflects Parliament's intent.

[Translation]

    Accountable government also depends on central agencies, such as the Treasury Board Secretariat and the Privy Council Office. They must provide the leadership and guidance needed to ensure that departments meet consistently high standards in approving, monitoring, and controlling expenditures.

    Chapter 7 looks at the government's modern controllership initiative. We have identified key areas that need stronger commitment and support if the initiative is to succeed. And we think parliamentarians need better information on how this important reform is progressing and the consequences should it not succeed.

    Chapter 3 reviews the current status of information technology security, an important government-wide issue for which Treasury Board is responsible. Our examination of four departments showed some weak I.T. security practices that could be symptomatic of weaknesses in other departments. Security standards are out of date, and a plan to update them has not been completed. The government has not assessed the present state of information technology security, an important element in the Government on Line initiative. The revised Security Policy calls for a report on the effectiveness of I.T. security across government in 2004, but we recommend doing it sooner.

    Finally, in carrying out government policies, departments must follow the rules established by the central agencies and use good management practices in general. They must also collect information that will enable them to report fully on the effectiveness of their programs.

    Chapter 8 provides two examples of departments who failed to follow good management practices in buying new technology.

    Health Canada and Public Works and Government Services Canada failed to follow the government's contracting rules in awarding a $25 million contract to establish the Canadian Health Network. Work began without a written contract, equipment that was purchased was underused and its ownership not clearly identified, and expenses were over-claimed.

    In the second case, National Defence purchased a $174 million military satellite communications system, most of which has been in storage, unused, since its delivery. The system was completed and delivered in 1997-98, but by that time the department had found a lower-cost alternative and could not afford to operate the new system.

    We note a third example of not following the rules. The Canada Customs and Revenue Agency did not ensure that all requirements set out in its own policies and procedures were met when it renewed duty free shop licences. We note further that despite its commitment to tender a licence at a certain location, the agency renewed the licence without seeking competitive bids.

¹  (1540)  

[English]

    It is easy to underestimate the importance of managing information well in departments and programs. Without good information, we may be able to tell how much departments have spent, but not whether they got the results they expected. Chapter 2 reports on our review of the system for writing off uncollectible taxes and forgiving interest and penalties. The Canada Customs and Revenue Agency has reasonable systems and practices in place for controlling the write-off of uncollectible taxes of about $1 billion per year, but it does not collect and analyse information about its decisions to forgive interest and penalties. Such information would confirm whether the agency's practices observe the principle of fairness.

    In Chapter 4, on the criminal justice system, we looked for information we could use to assess the impact of key challenges, such as justice issues related to youth and aboriginal people, organized crime, victims' rights, and wrongful convictions. The criminal justice system involves two, and even three levels of government and many organizations, lawmakers, police, courts, and correctional institutions, each with its own objectives and its unique information needs. At the national level information is inadequate to assess the system's effectiveness. Information systems need to be updated significantly to allow for timely exchange of information on criminals and suspects.

    In Chapter 5, which deals with recruitment and retention of military personnel, we note that there are not enough trained personnel in the Canadian Forces to meet current occupational demands. As far back as 1990 this office reported that human resource managers lacked the data they needed to guide recruiting and attrition decisions for military occupations. Today efforts to step up recruitment are themselves short-staffed, and the department lacks employees with experience in human resource policies and practices. Despite its efforts to address the shortage of trained personnel, the results have fallen short of targets. Clearly, the Canadian Forces need to rethink their approach to recruitment and retention.

    Good information is critical to accountability, whether parliamentarians are voting on departments' annual spending, reviewing future years' priorities and plans, or examining past performance. A good departmental performance report tells Parliament what an organization has accomplished and what value Canadians are getting for the public money the department has spent. In Chapter 6 we propose a model for assessing the performance reports the departments submit each year to Parliament. We believe the model can help all departments improve their reporting to Parliament, and thereby improve accountability.

    Establishing proper governance, providing leadership and guidance from the centre, managing programs effectively in departments, managing people well, collecting information and reporting results are all essential ingredients of delivering good public services. As this report demonstrates, the government still has some distance to go before it achieves these objectives and the accountability Canadians want and deserve.

    That, Mr. Chairman, completes my opening statement. We look forward to meeting with the committee to discuss a number of these audits, and we would be pleased to respond to your questions.

    Thank you.

¹  (1545)  

    The Chair: Thank you very much, Ms. Fraser. Again, I would like to compliment you on your report.

    Now we turn to the first round of questions. Mr. Benoit, eight minutes, please.

    Mr. Leon Benoit (Lakeland, Canadian Alliance): Thank you very much, Mr. Chairman.

    Good afternoon, Ms. Fraser, ladies and gentlemen. Thank you very much for being here. And thank you for the great service you provide for our country. It's truly a valuable service, and I appreciate that.

    All my questions will have to do with National Defence, and my first few are on recruitment. National defence, you say in your report--

    The Chair: Mr. Benoit, if I can interrupt before you start, I think we should acknowledge, if you are going to be talking about National Defence, that today, unfortunately, we've had the news that we have lost four servicemen in Afghanistan. This committee, along with the House of Commons, would want to acknowledge our debt of gratitude to these people, who have put their lives at risk and made the ultimate sacrifice on behalf of defending freedom in Canada.

    Thank you.

    Mr. Leon Benoit: Thank you very much, Mr. Chair, for adding that. We've done that, of course, this morning and in the House again this afternoon. I know for some time Canadians will focus on that. I think it's important to do so.

    My first question is on personnel. You say National Defence is short by over 3,300 staff. Since this government was first elected, we've only had about 15,000 new staff come in, about 32,000 leave, more than twice as many--that's since 1994. The problems are only going to get worse, you project. In 2004 there'll be a large exodus of skilled and experienced members. I'm wondering if you took into account in your report the improving economy and the possible further impact that could have on drawing people from the forces and keeping new recruits out.

    Ms. Sheila Fraser: I would like to thank Mr. Benoit for his kind remarks regarding the office and our work.

    As to your question on the possible effects of an improving economy, we did not look at that. We basically looked at the age profile and the service profile of people in the military, and as you'll see, we have a graph to indicate that on pages 12 and 13 of our report. We looked at the profile of the people currently in the military and the expected retirement rate, but we did not look at circumstances other than that.

    Mr. Leon Benoit: All right. So there could be a further negative impact due to the economy. This shortage has been pointed out before on several occasions, in the 1990, 1996, 1998, 2000, and 2001 reports. You say, in fact, it could take up to 30 years to fix the problem, the way things are being handled now. I'm wondering how things could get to this point and go on so long without a government, a department responding in some way to fix the problem.

    Ms. Sheila Fraser: I think there are several factors that brought the military to where it is today. Cutbacks and reductions in forces provide one of the reasons. To be fair, this is not only a problem with the military. I think many departments, and probably even many private sector companies, would face this same kind of issue.

    The difficulty we see with the military is that the traditional approach has been to recruit people at an entry level and train them to move up through the ranks, and there's been very little recruiting at more senior levels. We believe the department has to rethink recruiting and retention strategies and have experienced human resource professionals to help deal with this issue.

¹  (1550)  

    Mr. Leon Benoit: I'll get to that in a minute, but it has occurred to me, and I wonder if you got any sense of this in doing this study, that maybe the recruiting process has been left as it is so that the government can downsize the military beyond the policy statement without having to actually change the policy. That's difficult for you to comment on, but do you get any sense that may be the case?

    Ms. Sheila Fraser: I'm afraid we can't comment on that. We have nothing to that effect.

    Mr. Leon Benoit: To go back to the issue you brought up about recruiting and the need for improvements in the recruiting process, you say in your report that we're short of recruiters and the matter hasn't really been dealt with. Could you just elaborate on that a little?

    Ms. Sheila Fraser: They do ensure that when they send missions, those missions are adequately staffed. The shortages are felt more severely in the administrative activities or the activities back here in Canada. You're correct in noting that even the recruiting offices do not have the staff one would expect or they have determined should be there. They have been putting much more effort into recruiting, but have not got the results they had expected.

    Mr. Leon Benoit: I'm going to go to another issue, the $174 million long-range communication system that was purchased. It was delivered in 1997-1998, and then put in a storage room somewhere and just left there. In fact, the department had in the meantime come up with a less expensive system that worked better. You've said that happened. You've given some explanation, for example, that the department failed to define its requirements adequately, did not take into account changes to defence budgets and priorities, there was a lack of independent management review, and so on. But could you just give us a little more idea how something like this could actually happen? To the general public it must just look absurd, and to me it does, quite frankly.

    Ms. Sheila Fraser: We have to realize that this was a smaller project within a much larger project. There was an overall project that was about $2 billion, and this represented one component of that. I have the feeling that there was not enough management attention paid to this particular project. It was started, needs changed over time, that was perhaps not identified quickly enough, and people let the project continue until very close to the end, when they realized that maybe they didn't need this, but by then the contracts had all been signed, the costs had basically been incurred, so they took delivery of the system. They also realized that it would require them to have about 50 trained people to operate it. They did not have that capability any more, and in the meantime had acquired another system, which was responding to the needs.

    Mr. Leon Benoit: Finally, there's been a lot of talk lately about the Challengers and whether rules were broken in their purchase. I'm wondering if you may take that on as the subject of a report in the very near future.

    Ms. Sheila Fraser: We have not determined all our future audit plans. Capital spending is always an area we look at, so I do not preclude our looking at that, but we have not decided whether we will or not.

    Mr. Leon Benoit: Thank you very much.

[Translation]

    The Chair: That's all, Mr. Benoit? Thank you.

    Mr. Desrochers, eight minutes, please.

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

    I thank Ms. Fraser and the members of her organization who are here today. I would particularly like to congratulate them because the report tabled Tuesday led to media fallout that we haven't seen in a long time. I hope that the population now knows the problems you have set out in the chapters you explained to us Tuesday and that you are going to try to clarify in some aspects here today.

    I'll repeat a bit of what I said Tuesday when we had a look at the report. I'm happy to see that the Canadian Alliance has in hand the data needed to put questions to you. You have the information in hand and you still have the possibility of examining certain departments, but I'm concerned when I look at the Liberals' newest brainwave, the successive creation of all kinds of foundations. You say very clearly that this way of doing things is one way of wresting public funds from Parliament's control. To my knowledge, the elected members of the Canadian Parliament are accountable and answerable for the public funds spent in this country.

    Ms. Fraser, I'd like you to tell us if you have made an evaluation of the amounts of money wrested from the Canadian Parliament's control since the advent of those foundations.

¹  (1555)  

    Ms. Sheila Fraser: Thank you, Mr. Chairman.

    I'd like to thank Mr. Desrochers for his good words about us.

    You mentioned your concerns about certain entities which, in our opinion, are not sufficiently accountable. I'd like to specify that we are not questioning the mechanism of foundations as such, although we think that mechanism should be subject to an evaluation as to whether it is advantageous or not.

    We think there are three elements that deserve examination. First, as for being accountable to Parliament, we suggest that the corporate plans, annual reports and so forth be tabled in the House. We also believe there should be more supervision by the government and departments in order that they might intervene if ever something didn't quite meet expectations. Finally, we believe that not only should there be an audit of the financial statements of those foundations, but that there should be a broader audit in view of the amounts involved.

    We examined nine foundations. Those are the amounts we pointed out when we produced our opinion on the public accounts last fall. Over $7 billion were transferred to those foundations and the greater part of those amounts is still on deposit in the bank accounts of those foundations.

    Mr. Odina Desrochers: And there has been no change since you...

    Ms. Sheila Fraser: We have no more recent information.

    Mr. Odina Desrochers: Exactly...

    Ms. Sheila Fraser: It's quite possible that we'll engage in a follow-up next fall when the new annual reports come out if we can find them on the websites and elsewhere to inform Parliament on how things are evolving.

    Mr. Odina Desrochers: In theory, you have no power to go directly to those foundations to find out what's going on.

    Ms. Sheila Fraser: I have no such powers. I simply have the right to audit the transfers to those foundations. I have no terms of reference concerning those organizations.

    Mr. Odina Desrochers: Those foundations are often sponsored by ministers. Are you telling me that the ministers can't give you any information on how those foundations are working out? Does the Minister of Finance know how those foundations work?

    Ms. Sheila Fraser: Naturally, this varies from one foundation to the other, but in most cases, the government cannot intervene and has no mechanism for obtaining information with the exception of the annual reports published by these foundations.

    Mr. Odina Desrochers: I beg your pardon but I conclude that, as far as the government is concerned, this is a way of using money without any intervention from elected officials. As far as I know, there has never been any notice in the House of Commons that we would be debating any of these foundations.

    It is up to the discretion of the Minister of Finance, and each foundation has its budget. It is big news when the foundations are announced, and the elected officials don't have any say in the matter.

    Ms. Fraser, that scares me, because that is having an impact on something for which I care very deeply, democracy. Do you not get the feeling that democracy is gradually disappearing from this Parliament?

    Ms. Sheila Fraser: I would like to make a clarification. Many of these foundations were established by a piece of legislation adopted by parliamentarians. So most of the foundations were established by legislation and we are recommending that this remain the case. One of these foundations was established under the Canada Business Corporations Act and we believe that this is not the best way to proceed in terms of accountability.

    I would like to make a further clarification. You said that the government could use this money, but that is precisely the issue. The government...

º  (1600)  

    Mr. Odina Desrochers: ...cannot use it.

    Ms. Sheila Fraser: These entities are independent from the government and have boards of directors. The government never appoints the majority of the members to these boards. Naturally, these people may have some knowledge in the field, but they are not accountable to either Parliament or the public.

    Mr. Odina Desrochers: Ms. Fraser, to your knowledge, does this type of system exist in other western countries?

    Ms. Sheila Fraser: Unfortunately, I cannot answer your question. We have not made any inquiries in other countries.

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

[English]

    The Chair: Merci beaucoup, monsieur Desrochers.

    We'll turn to Mr. Murphy for eight minutes.

    Mr. Shawn Murphy (Hillsborough, Lib.): Thank you, Mr. Chairman.

    Like my colleagues, I want to thank you, Ms. Fraser, for the excellent report and the excellent service you provide all parliamentarians and all Canadians.

    I want to start on your chapter 7, dealing with the need for modern and efficient comptrollership and the role of our Treasury Board Secretariat. What, from your analysis, is the problem? Do you think it's a lack of leadership, a lack of resources, resistance from the line departments, resistance from higher up in the bureaucracy? Is there something missing or something that should be done to assist the requirement for more modern and efficient comptrollership?

    Ms. Sheila Fraser: Thank you, Mr. Murphy, as well for your kind remarks.

    As to why the project is not going ahead as fast as we would like, I'm not sure I have all the answers. I think it would be interesting to have a discussion with the Treasury Board Secretariat. I can speculate on some of them. I think the rigour in the management of all this is not as tight as one would want. We go into departments and we don't see plans and deadlines and target dates, and it's hard to move such an important initiative ahead without that kind of more rigorous planning. Even though it isn't in our audit, I would question if the Treasury Board Secretariat has all the resources it needs to move. They have several large initiatives, and we may come back to the committee and talk about others, such as FIS, that we reported on in December.

    I think they may not have all the resources they need to undertake all these important initiatives, and I think this is a major cultural change in government. I am not sure all managers realize that it affects them. I think we can see that many managers are not aware of the project or don't fully understand the project, so there may have to be more awareness built into the system to make sure all managers realize that this is a new way of managing and it's not simply the financial community that's affected by this.

    Mr. Shawn Murphy: To follow up on a point raised by Mr. Desrochers on this issue, is there anything from other countries, Great Britain, Australia, the United States, that would suggest we should change our system?

    Ms. Sheila Fraser: We have looked at several countries. We have information, and we would be glad to bring it forward to a hearing, on where other countries are at. The United Kingdom, Australia, many of them have gone through important reforms of their accounting and the way they present financial statements. I think what we're doing here is not unusual in that regard. Other than that, I'm not sure we can really comment a lot more. It is a major initiative that does require very strong leadership to make it work in such a large organization as the government as a whole.

    Mr. Shawn Murphy: Ms. Fraser, you talked about recruitment in the military, which obviously is a problem, but I don't think it's any worse than most of the line departments, from what I've read and hear in this committee. This is what I consider to be, if not the major, one of the major problems facing this government, the recruitment of our public service, which includes the military. Is there anything in your studies of other countries that would give us some wisdom or guidance as we go forward? Because right now the system is broken, as far as I can see.

º  (1605)  

    Ms. Sheila Fraser: I could refer you to a report we did in December, when we talked about general recruitment and many of the issues that were raised there. I think we have to also keep in mind the very large initiative that's under way headed by Ran Quail to review all that. I would imagine that in his work he has looked at what has gone on in other countries. So when he comes forward with his recommendations, which are expected sometime this year, the committee might want to talk to him about that.

    I would just remind us all that in our report we found that 90 percent of the general recruitment coming into the government was short-term hiring. I think there are several questions that have to be asked about why that is. The Public Service Commission, I would imagine, may have some answers.

    Mr. Shawn Murphy: With your specific instance of the duty-free shop being awarded on a non-competitive bid, was there any persuasive reason given why this was done?

    Ms. Sheila Fraser: The minister actually wrote to us and said it had been decided not to go forward with a tendering process because the current licensee of the shop owns the land on which the shop is located and it was felt it would be a costly exercise, with probably pretty predictable results as to who was going to get the shop licence. I'm paraphrasing what was said. It was felt it would not be in the public interest to go forward with the tendering process. As well, the licensee had met all the requirements under the licence, and the licence was being renewed on that basis.

    Mr. Shawn Murphy: Was the bid comparable to other bids?

    Ms. Sheila Fraser: This shop was the subject of an audit the office did in 1997. The initial audit raised the concern that there was not a tendering process initially in 1997. In response to that audit, there was a commitment made by the agency that it would go through a tendering process when the licence came up for renewal. What we're reporting today is that the commitment was not met.

    Mr. Shawn Murphy: On the issue of fairness, in your report on the CCRA you mention a figure of $1 billion as written off. Can you give us some opinion as to whether that was too much? Because it's meaningless; it could be 3 percent, 2 percent.

    Ms. Sheila Fraser: We didn't actually look at whether the collection procedures were adequate, we looked at whether the controls over the write-offs were satisfactory. For income taxes, the agency manages about $13 billion in receivables at any one time, so there's about $1 billion that's written off for various reasons; there could be bankruptcies, financial difficulties, and one would expect there to be write-offs. We did not specifically examine if the $1 billion was high or not compared to others. The issue we were raising here was not on the management of the write-off of taxes per se, we thought that was satisfactory, but there could be improvements in the way they manage write-offs and what we call waivers of interest and penalties. The amounts are never recorded and then written off, and we thought there should be more rigour in recording the amounts, so that people would know how much was actually not being collected, and the reasons for those waivers, so that the agency would know if there has been consistency in practice across the country.

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

    Now we're going to Mr. Bryden. We're now starting the second round, so this will be four minutes.

º  (1610)  

    Mr. John Bryden (Ancaster--Dundas--Flamborough--Aldershot, Lib.): With respect to the satellite technology, I just have to make the observation for the benefit of the researchers, Mr. Chairman, that I have a certain expertise in chemical and biological warfare--I know that's an odd thing to have. In my view, with the purchase of the long-range communications equipment, because it was a worst case scenario purchase, it's not such a bad thing that it go into storage, because the threat of chemical and biological warfare is now, if anything, elevated. At the time it was purchased, obviously, they moved to a more tactical type of communications technology, but I have no problem with the fact that we have that capability in storage.

    If the Auditor General would like to comment on that, she certainly may.

    Ms. Sheila Fraser: I'm certainly not an expert in the area, so I hate to disagree with you, but I am somewhat skeptical about the use going forward, because the technology now is becoming outdated. As well, the department estimated it would take 50 people to operate that system, and 50 people aren't trained in that system. So should there be an event--and it's in what they call cold storage--before the system is brought out and people are trained, I question very much if there are not other alternatives that would be looked at.

    Mr. John Bryden: I thank the Auditor General, but I have to say that you can't suddenly purchase the equipment when you face a crisis, but you can train the personnel. Certainly, when you're arming yourself for worst case events, obviously, the technology may go out of date before you get to use it, because you hope never to have to use it. So I'll leave that behind.

    Ms. Sheila Fraser: I would be more reassured if I knew they were actually using it for a worst case scenario.

    Mr. John Bryden: We don't want them to use it, Madam Auditor General. That is not a situation I ever want us to be in.

    Ms. Sheila Fraser: But it's supposed to be there for that. I'm not sure that it's there for that.

    Mr. John Bryden: I don't want to use up my time on that, because I have far more serious things to raise with the Auditor General.

    I was appalled by the Auditor General's report on the Canadian Health Network. It would appear to me, and maybe the Auditor General will confirm it, that Health Canada broke just about every conceivable rule in contracting out. Is that not so?

    Ms. Sheila Fraser: Yes, that's correct. They disregarded, I would say, every rule, or close to every rule.

    Mr. John Bryden: Was this just ignorance, in your view, or is there a possibility of genuine impropriety in what is occurring? Because this is truly exceptional.

    Ms. Sheila Fraser: We found no evidence of impropriety. What we looked at were the processes and the management systems, and we did not see evidence of impropriety.

    Mr. John Bryden: Were some of the organizations that received these contracts charities?

    Ms. Sheila Fraser: I think some that received subcontracts may have been charities, but the major contractor was not a charity.

    Mr. John Bryden: Mr. Chairman, in 1994 I did a report examining the relationship between the health promotion branch and the Canadian Council on Smoking and Health, and I found that there was a tremendous laxity in that relationship. It was paying good money for very dubious information. Was the Canadian Council on Smoking and Health one of the organizations you looked at?

    Ms. Sheila Fraser: I'm afraid I can't answer you today, but I will get you that information.

    Mr. John Bryden: Mr. Chairman, I'm very keen to pursue this particular line of questioning. If the Auditor General can provide it, I would like a list of all the organizations that are part of this contracting out problem, and I would like also some identification of the bureaucrats we should call before this committee to get some rationale for their completely ignoring the system.

    The Chair: Mr. Bryden, you've made two requests there. Let me put the first one to the Auditor General. Are you able or prepared to provide a list such as Mr. Bryden has requested to this committee on the contractors and so on?

    Ms. Sheila Fraser: Yes, Mr. Chair. We will give you all the information we have in that regard. I think we have the list of all the contractors and subcontractors, but I'd just like to confirm that with my staff.

º  (1615)  

    The Chair: And Mr. Bryden, on your second point, we normally consult with the Auditor General on the witnesses who will come before the committee, so that if we decide that is going to be part of our examination, we will automatically get that information.

    Mr. John Bryden: Thank you. I realize I'm running down here.

    The Chair: You're past actually, but it's okay.

    Mr. John Bryden: Did you detect any reaction from Health Canada indicating that the employees involved in these very questionable decisions would be somehow disciplined or reprimanded? Was there any action? What I see in your report is that Health Canada indicated it's trying to clean up its act, but it didn't indicate any action on the problem.

    Ms. Sheila Fraser: I have no information to that effect. That might be a question to be asked at a hearing.

    Mr. John Bryden: Well, Mr. Chairman, I intend to pursue this with my accustomed zeal.

    The Chair: We certainly look forward to that too.

    But right now we're going to hear from Ms. Meredith, four minutes.

    Ms. Val Meredith (South Surrey--White Rock--Langley, Canadian Alliance): Thank you, Mr. Chair, and thank you very much for appearing before us, Ms. Fraser. I'm overwhelmed, I guess, by the information you provide and your predecessors have provided.

    I'm going to follow up on Mr. Bryden's line of questioning. You indicate problems with the process. You indicate decisions are being made with the creation of these foundations in such a way that they're not accountable to government or Parliament. At what level of the department are these decisions being made? Does the minister have to sign off on them? When you have contracts that are being given without due process, who signs off on them? At what level is there a breakdown in using the processes that are set in place?

    Ms. Sheila Fraser: There are many different levels of response to that question. I would repeat that many of the foundations were established through acts of Parliament. The transfers of the moneys to them were all approved by Parliament. Our issue is that once the money goes, there's very little accountability on what has been done with the money and the results.

    With contracting, I'm not a specialist in this. We could find out the details in these cases, but there would generally be various levels of signature within a department, depending on the amounts involved.

    Mr. McLaughlin has a point to add about Public Works as well.

    Mr. Michael McLaughlin: In addition to the contracts having been signed within the Department of Health, they must also go through Public Works for signature, and Public Works becomes the primary contracting authority in certain of these contracts. So there are controls in both Health Canada and Public Works that were not properly exercised.

    The Chair: If we decide to investigate that, perhaps in your opening statement you could have an addendum that would answer Ms. Meredith's question in a table format or a format we can understand.

    Ms. Meredith, my apologies.

    Ms. Val Meredith: I want to go back to that. You talk about the Department of Public Works, the Department of Health. Who is ultimately responsible in those departments for making sure their employees, their managers are complying with the regulations that are in place? At what level does that stop? Is it the deputy minister level? Is it the minister level?

    Ms. Sheila Fraser: It is my understanding that in the parliamentary system the ministers are responsible for the activities that are carried out in their departments.

    Ms. Val Meredith: Then my follow up question is, did you find in your audit that there was a constant presence of the minister or the minister's office in trying to get foundations to respond to concerns they may have, to Health Canada issues? Is there evidence that the minister's office has been involved in the decisions to put in cold storage a communications system?

    Ms. Sheila Fraser: As to the foundations, once they are created, the issue we are really raising is that the minister can no longer be accountable for them, because they're outside government. We do not know what is going on in those foundations. So the issue we're raising is that there should actually be more involvement by ministers, or at least the ability to have ministers intervene, should the use of the moneys not be according to plan. In the case of Health Canada and Public Works we saw no evidence of inappropriate ministerial involvement. I would guess it is the same thing in National Defence, that we saw no evidence of inappropriate ministerial involvement.

º  (1620)  

    Ms. Val Meredith: I'm not concerned whether it's inappropriate, what I'm concerned about is whether the minister is aware that these things are happening in the department? Are they part of the flow of information, or are decisions being made and things being done that don't even reach the minister, when he or she is ultimately responsible for the results of spending taxpayers' money?

    The Chair: Isn't your question addressed to the foundations, Ms. Meredith?

    Ms. Val Meredith: No, it's addressed generally, to Public Works, to Health Canada, to Defence.

    Ms. Sheila Fraser: I cannot answer on the specifics of the cases we have raised here, because we did not look at that aspect. I would suspect, though, that the deputy ministers and the ministers were not aware. A $25 million contract in Health Canada is not a significant contract, and I would suspect that the minister was not aware of it. But I cannot confirm that, and that, again, would be a good question for a hearing.

    Ms. Val Meredith: My final question is on the foundations. If the government is giving taxpayers' dollars to foundations and you have found that there's no accountability, did you come up with a method whereby these foundations could report back to Parliament, could report back to the government, so there could be a connection between the government and how that taxpayers' money is actually being used and whether it's used for the purposes?

    Ms. Sheila Fraser: In our report we suggest some recommendations as to how that could be accomplished. It's using the formula, actually, that's used for crown corporations and even departments, developing plans and priorities documents, and then reporting on results. I think it's a fairly simple system of telling parliamentarians what one is going to do with the money, and then reporting on the results of the spending afterwards.

    The Chair: Thank you, Ms. Meredith.

    Now we're going to move back to Mr. Desrochers.

[Translation]

    Mr. Desrochers, you have four minutes.

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

    I would like to make a brief comment. My Liberal colleague, Mr. Bryden, says that he has been shaken by the disturbing revelations made last Tuesday. I hope that this sentiment is shared by the Prime Minister, the ministers and all those who decide on these policies which, sadly, were denounced one day in the Auditor General's report. We are not talking about serious matters: $175 million for storage; $500 million for heating oil allowances; $7.1 billion for which MPs have no say. Mr. Bryden, what a great country your party is in the process of building!

    Mr. Fraser, following this comment, I would like to ask you some questions about the duty free shop. Which riding is it located in? Do you know how much the contract for a duty free shop is worth?

    Ms. Sheila Fraser: The boutique in question is located in Windsor. I do not know what riding it is located in, nor do I know how much business may be done at this location.

    Mr. Odina Desrochers: Is it the shop that is located right next to the American border?

    Ms. Sheila Fraser: Yes,naturally a duty free shop is always located very close to the border.

    Mr. Odina Desrochers: I apologize, Madam Chair. That is not what I meant to say. Since this is the Windsor-Detroit border, is this one of the busiest shops?

    Ms. Sheila Fraser: The bridge in Windsor.

    Mr. Odina Desrochers: That's right. We know that there's a lot of traffic at the Windsor-Detroit border. So, in my opinion, this shop must make a lot of money and be very profitable.

    Ms. Fraser, you have also criticized a 25-million-dollar contract that Health Canada and Public Works awarded without following the rules. Hundreds of millions of dollars were spent in this manner, and it was only when you conducted your audit that you learned that such things are occurring on a more frequent basis within the Canadian government. Doesn't that scare you?

º  (1625)  

    Ms. Sheila Fraser: Thank you, Mr. Chairman.

    I don't know if I could say there are more and more, but our office has been concerned with the matter of contracts for a long time. We conducted a series of audits and we found problems every time. We also pointed out to parliamentarians that there is a difference of opinion between ourselves and Treasury Board Secretariat concerning notice of contract awards. I dare hope things will improve. The policies are clear and well thought out. They only have to be implemented.

    Mr. Odina Desrochers:And especially respected.

    Ms. Sheila Fraser:I can assure the committee that we will continue to audit the awarding of contracts by the federal government.

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

[English]

    The Chair: Thank you, Mr. Desrochers.

    Ms. Leung, please, for four minutes.

    Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair. I also want to thank Ms. Fraser and her colleagues for their good work.

    First, I have a comment. I understand CCRA has a mandate to collect taxes fairly, and I understand also that each day it collects close to $1 billion in taxes. So the $1 billion, right off, is really a very small percentage. That doesn't mean there's a reason to overlook it, but I understand also there are fair grounds on which to excuse the taxes. I think Ms. Fraser also mentioned that.

    I have a question on the foundations, because this is very interesting. I believe the purpose for the government initiative is to provide more help to specific areas, like health, environment, research and development, infrastructure. Each foundation is independent, but is governed by a board, the board members being selected across Canada through a very careful process. They are all very qualified. Each foundation is also ready for any questions from parliamentarians or committees, and I have had several experiences myself. I had a meeting, for instance, with the Foundation for Innovation, and it is very open. I questioned the basis of selection and the budget. It is very open for anyone to examine. Also, the committee on finance had several opportunities, and even had an executive director come.

    I wonder, Ms. Fraser, if you realize that this foundation is not a closed door, and the way it dispenses its money is very carefully assessed. Do you feel there is some area we need to look into more?

    Ms. Sheila Fraser: I would like to thank Mrs. Leung as well for her kind remarks.

    I would like to confirm that when we looked at the procedures for the writing off of taxes, we found those procedures and systems were appropriate.

    As to the foundations, we don't comment, obviously, on the initiatives that are there. Those are policy decisions. Personally, I think many of them are worthwhile causes, and as to the boards, I will take your assertion that these are qualified people. I do become concerned, though, when we count on the goodwill of an independent board to come before parliamentarians, because they are under absolutely no obligation to do so. There is nothing in agreements to say they have to give performance reports. There's an annual reporting to the public. I think it would be foolhardy of any of them not to come, but they are under no obligation to give performance reports to Parliament, to give plans to Parliament. I think that's inappropriate, with the amount of public money that is in these foundations. Some of them have been financed for probably 10 years or more. It's a very large sum of money, so I would like to see more accountability provisions brought right into the agreements with the foundations, that they table plans and priorities and performance reports with Parliament, as do, for instance, crown corporations.

º  (1630)  

    Ms. Sophia Leung: Thank you.

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

    Now Mr. Shepherd, please, four minutes.

    Mr. Alex Shepherd (Durham, Lib.): You keep reporting on these foundations, and the public perception is that it's new every time you do it--oh, another $7 billion dollars. It's the same $7 billion we've been talking about for the last three or four years, isn't it?

    Ms. Sheila Fraser: It's been one year, and we are persistent, I will admit to that.

    Mr. Alex Shepherd: Given your comments about the poor accountability within government, why would you want government to make these foundations their business, their bailiwick, to be accountable for them? Why can't they be off on their own having some separate accountability mechanism?

    Ms. Sheila Fraser: I just think, when there's public money involved, taxpayers look to Parliament to assure them that their tax dollars are being spent wisely and for appropriate purposes. When we are pre-funding foundations to the extent we are, I think there should be more accountability back to Parliament. I have no argument per se with the mechanism of a foundation. I think that needs to be evaluated. I've heard the arguments that the boards are people who were very respected and have good knowledge. I think that's excellent when they're doing grant programs, but we do that through granting councils already. I think there should be accountability. Somebody in Parliament should be accountable for the use of that public money.

    Mr. Alex Shepherd: Okay. But if the reality is that the foundation was approved by Parliament, the money was approved through a budgetary process, it's gone off our books, quite frankly, your orientation seems to be that you're concerned because you're not auditing it.

    Ms. Sheila Fraser: No, I am concerned because Parliament does not know what is happening to $7 billion.

    Mr. Alex Shepherd: But most of these foundations you've talked about have some kind of internal, and indeed, many of them have external, audit requirements.

    Ms. Sheila Fraser: I would say all of them have audited financial statements, that is correct.

    Mr. Alex Shepherd: So that would be in no way different from a corporation that's traded on the Toronto Stock Exchange. They would have the same accountability as a publicly traded corporation.

    Ms. Sheila Fraser: A publicly traded corporation does not manage taxpayers' money.

    Mr. Alex Shepherd: When did the audit trail stop? When did it stop being the government's money and become the money of the foundation?

    Ms. Sheila Fraser: That is a whole other question that we can get into. The way these foundations have been set up, accounting rules allow these transfers to be recorded as an expenditure. My suspicion is that some of the provisions in those agreements were put in to meet accounting rules, for instance, the inability to recover money, should the foundation wind up.

    Mr. Alex Shepherd: I'm assuming that because in most cases you gave us a clear audit opinion, at some point this should be no further concern of yours.

    Ms. Sheila Fraser: I have given no audit opinion on those foundations.

    Mr. Alex Shepherd: No, but I mean the budgets of the federal government where those moneys were expended.

    Ms. Sheila Fraser: It is because, Mr. Shepherd, we are on a cash basis of accounting.

    Mr. Alex Shepherd: I know, but you said it was properly taken care of at the time the money went to these foundations. I'm not even so sure I want the government to be continually in the back pocket of these foundations. Maybe they work a lot better without us.

    Ms. Sheila Fraser: That may be true, but how does Parliament know the money it has voted out to these foundations has been used for the purposes for which it was intended?

º  (1635)  

    The Chair: Thank you, Mr. Shepherd.

    We're back to Ms. Meredith again, four minutes.

    Ms. Val Meredith: Thank you, Mr. Chair.

    It concerns me, quite frankly, that the government members don't see a problem with what you've indicated in your report. It concerns me that an individual would say they don't really want to know what the foundations do with the taxpayers' money.

    I'd like to know, if you can tell me, how we in Parliament can keep some kind of control, or at least have the requirement for them to justify the money they did receive, whether they deserve to get any more, and say what they've accomplished. I would assume that when the federal government is giving money to foundations, it's to accomplish a task, a function in public policy, and yet what I understand you to be saying is that there's no audit as to whether they've accomplished anything. They just get more money the next year. You've said some of these foundations have received money for 10 years, and yet there's been no accounting process to show whether or not they've met any of the requirements or any of the considerations upon which they were given money in the first place.

    How do we in Parliament do that? Let me rephrase that. How does the government do that through Parliament, seeing they're the ones who run the show in Parliament right now? How do they get a function for these foundations to report back and to account for how they're spending taxpayers' money? Is it at the time of the legislation that establishes them? Is it through the budgeting process? Is it through Treasury Board guidelines? How do we do that?

    Ms. Sheila Fraser: In 1999 the office recommended the government seek the views of Parliament and the public on how these new arrangements were operating and how they were affecting the whole accountability to Parliament. Should there be new foundations or new arrangements created, I would hope that parliamentarians will look more closely at the provisions in there for accountability. When there are transfers of money, which are often through existing foundations, there could be changes to existing agreements. I think it's through those kinds of mechanisms, but we would hope government will engage parliamentarians in a review of the use of this form of new governance arrangement and what it is doing to accountability to Parliament.

    Ms. Val Meredith: Thank you.

    The Chair: Thank you, Ms. Meredith.

    Mr. Harb, please.

    Mr. Mac Harb (Ottawa Centre, Lib.): On page 12 and page 13 the Auditor General's report talks about National Defence and the military satellite communications system. This was ordered back in 1991. The government of the day was a Conservative government, not the Liberal government. I'm stating fact here because I have a point to make. It was absolutely terrible that the government at the time decided to purchase $174 million of equipment--I'm an engineer, and that's why I'm saying this--without doing an initial assessment of the proper requirements for the system. Is that the case, Madam Fraser, that they should have done that at the time when they purchased it? That's what you say on page 13.

    Ms. Sheila Fraser: That is correct, Mr. Harb.

    Mr. Mac Harb: So we have a situation here where $174 million of taxpayers' money was wasted by the government of the day, which was a Conservative government, and the Auditor General here is saying that at the time when this project was ordered, there was a terrible mistake in not doing a proper assessment. I don't think it's fair for this government to be wearing the terrible mistakes of a previous government that was in power at the time. I just want to set the record straight.

    Would the Auditor General agree that the government of the day should be wearing this, not this government?

º  (1640)  

    The Chair: She may not want to say who should be wearing the mistake, but she may have a response.

    Ms. Sheila Fraser: Mr. Harb has referred to our page 13. We indicate there that this is part of the reason, not the only reason. The project went on for several years after that and did not receive the management attention it should have. As to what government was in power at what time, I make abstraction of all that.

    Mr. Mac Harb: We all know that when the foundations are so badly cracked, it doesn't matter what you do, the building is going to fall sooner or later. The system they identified back in the nineties was a lot cheaper, more efficient. By the time this terrible system arrived, they found it a little too expensive, too cumbersome, so they didn't use it. That's what I read through this.

    My question is concerning the foundation. I think the Auditor General has made a very important point here. This is a catch-22 we are faced with. On the one hand, we wanted to have transparency, we wanted to create a foundation totally separated from Parliament; the Foundation for Innovation is a case in point, it is working beautifully and is independent. On the other hand, we wanted to see Parliament be in charge of it. I think this is an extremely important point the Auditor General is raising. It's my hope that at 5 o'clock, when we meet to talk about future business, this will be one of the subjects this committee should look at for the future.

    As for the present, my colleagues from Vancouver have told me that they have received lots of compliments about the work of those foundations. I wanted to ask our Auditor General whether she's really suggesting that there was $7 billion missing.

    Ms. Sheila Fraser: No, not at all.

    Mr. Mac Harb: Frankly, when one reads the headlines in the National Post or the Ottawa Citizen that $7 billion is missing, it's misleading and it's not the proper thing to do. I wanted the record to show that those headlines are not reflective of what the Auditor General has clearly stated: there's no money missing, we know where the money is.

    The Chair: I think the Auditor General stated that the money wasn't missing, and I think you have it on the record, Mr. Harb.

    Mr. Mac Harb: I rest my case.

    The Chair: Okay.

    Before we move on and give Mr. Bryden another round, I've got a few questions myself, Ms. Fraser.

    In the section in chapter 7 called “Progress toward modern comptrollership”, in paragraph 27, you talk about departments assessing and rating themselves on seven key areas, which are strategic leadership, motivated people, values and ethics, the ability to develop and use a range of integrated performance information, risk management, stewardship of the resources entrusted to them, and clearly defined accountabilities. Public Works and Health Canada broke every rule in the book. How does this square? Have you any idea how they're assessing themselves based on these criteria, when they're breaking every rule in the book?

    Mr. Doug Timmins (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chair, in exhibit 7.3, which is on the page opposite to the paragraph you referred to, we summarize the results and show the range of ratings and the average ratings of 13 of the 15 departments that were examined as a pilot within the government, how they rated themselves. You can see that some of them have rated themselves as low as 1.5 on stewardship, and motivated people and shared values and ethics are as low as 1. So some departments rated themselves very low and other departments rated themselves very high. I don't have the specifics to answer how those particular departments involved in other contracting are related, but it does show that some of them did rate themselves as needing improvement.

    The Chair: That's very good. I appreciate that, Mr. Timmins, because I do have the information about the performance pay that's given out to DMs and so on, and we'll have to maybe do an analysis to see how the ratings compare to the amount of performance pay that has been paid out.

    Turning to chapter 1 on the foundations and Canada Health Infoway Inc., you say on page 23:

Following a commitment it made at a First Ministers' meeting in September 2000 and the passage of related legislation, the federal government paid $500 million in March 2001 to Canada Health Infoway Inc...

At the time of our audit, CHII was not yet operating and we were not able to assess all of its governance and accountability features.

    So they've had $500 million for a whole year, and they still haven't done anything? Is that what you're saying?

º  (1645)  

    Ms. Sheila Fraser: That is correct. I would ask Dr. Barrados if she has any additional information on that.

    Ms. Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada): Ms. Fraser is correct. They got the amount of money, and at the time of the audit work we were doing they hadn't started operations.

    The Chair: Do you have any idea where that money is? Is it in a bank? Is it invested? Is it in the stock market? Did they buy some property with it? What did they do? You have no information. Okay.

    I'm looking at the green municipal enabling fund and green municipal investment fund, and you say:

Strategies and objectives are posted on the Web site. A public annual report is required; the first one, for 2000-01, committed to reporting results in the future. To make the funds' achievements clear, however, they also need to report performance expectations; we found that they have not.

    Why aren't they reporting their performance expectations?

    Ms. Sheila Fraser: Mr. Chair, we are only able to look at the funding agreements and what is set out in those agreements, and then to look at the reporting that is available publicly. The requirement to report expectations would be, I presume, in those funding agreements, and we would look at the public reports that are on their website to see if there is anything there. Why they are or are not doing this, we are not able to answer.

    The Chair: This is why you're bringing this to parliamentarians' attention. Canada Health Infoway has had $500 million for a year, hasn't started doing anything, according to your audit. The green municipal enabling fund is supposed to report, doesn't report. Parliament is in the dark as to what is going on. I thank you for bringing this to our attention.

    I'm now going to change to the Windsor duty-free store, which is on, I presume, leased land. We own the building, the land must be leased, and the person who leases the land runs the store.

    Ms. Sheila Fraser: I can get the details for the committee if you would like, Mr. Chair. My understanding is that the land is owned by the person who has the duty-free lease on the shop.

    The Chair: So he owns the land. Who owns the store, do you know?

    Mr. Doug Timmins: He only has the licence, as far as I know, Mr. Chairman. I'm not sure about the actual ownership of the facility.

    The Chair: So he owns the property, he's got the licence. Does the Government of Canada lease it from him and lease the business back to him? On what basis are we involved in this?

    Ms. Sheila Fraser: I'm not sure. I think there's only a licence to operate a duty-free shop.

    The Chair: Okay. This licence to operate must go out for bids, you're saying. It's not a standard $25 permit.

    Ms. Sheila Fraser: Standard practice in the agency is to put these licences out for bid, and this is one case where that policy was not adhered to.

    The Chair: And there's no desire or commitment by the government to build it's own building, so that we'll have a competitive bid?

    Ms. Sheila Fraser: Not to the best of my knowledge.

    The Chair: So this will go on ad infinitum until the building falls down and we buy the land from the owner.

    Anyway, we're going to turn back to Mr. Bryden, who wants to carry on his spirited exchange.

    Mr. John Bryden: I'm on page 7 of chapter 8, and I'm very curious about this business of $24 million being contracted out using the advance contract award notices. You note that this time Public Works broke the rules pertaining to Treasury Board contracting policy in all four of these contracts. Did you ask for an explanation from Public Works as to why they broke their own rules with respect to advance contract award notices?

º  (1650)  

    Ms. Sheila Fraser: Unfortunately, I do not have the answer to that question. I would doubt that we did. As you know, ACANs are one area of concern we have raised on many occasions.

    Mr. John Bryden: I was very quick to blame Health Canada, but this seems to be extraordinary, that Public Works let a contract that was due to be completed the next day for $300,000. This seems to be, shall we say, not a responsible way of managing the Public Works portfolio.

    Ms. Sheila Fraser: Public Works is the contracting authority for government. They are to be, if you will, the experts to assist departments in doing contracts. I agree with Mr. Bryden that Public Works has much responsibility in this case. Health Canada at least took actions to deal with the problem once it was brought to their attention. I think Public Works should be asked about this as well.

    Mr. John Bryden: Mr. Chairman, this is very specific, and I think we should probably seek an answer.

    I have one final question on another area, going back to the foundations now. It is a question I raised in the in camera meeting, and I'd like to repeat it now. If the foundations came under the Access to Information Act, would this go at least some way towards making them more transparent and accountable, in your view?

    Ms. Sheila Fraser: Access to information is one of the public values we think should be looked at with all these foundations. There are several other public values, if you will, contracting, official languages, a whole series of them. I am not convinced that public access would resolve all the issues. I think that would be a good discussion to have with the Information Commissioner, but I think it's a decision that has to be made at the level of Parliament.

    Mr. John Bryden: You think that access to information does contribute to transparency, which is what we're talking about here, rather than the other very excellent value about official languages.

    I think that's about as far as I would like to go. I would thank the Auditor General.

    The Chair: Mr. Shepherd.

    Mr. Alex Shepherd: Thank you, Mr. Chair.

    I'd like to touch on the point about the green municipal investment fund. I can tell you that in my riding they actually spent some money on a sanitation plant--this is on the shores of Lake Ontario--to ensure that the new plant they're going to build reduces the effluent and does it in an efficient manner. So it seems to me that it is meeting the objectives of the foundation.

    The Chair: My point, Mr. Shepherd, wasn't that they weren't doing business--

    Mr. Alex Shepherd: You said you didn't know, and I was just giving you an example of where the money went.

    The Chair: I think my point was that with Canada Health Infoway, we don't know about the money, and we don't know about the reporting from the green municipal enabling fund.

    Mr. Alex Shepherd: But I just gave you an example.

    The Chair: You gave us an example, and they did actually receive $125 million, so I hope it was a good project.

    Ms. Meredith, do you have a small question? We have a few more minutes before we wrap this up.

    Ms. Val Meredith: I will maybe clarify on the duty-free. I think what happens is that the bridge authority owns the building, owns the land, and that does pose a dilemma. In duty-free situations the land is owned by an individual, and it would be difficult for a landowner who owns the building and the premises to have it put up for contract or for tender. So maybe the department has to look at their whole policy with duty-frees. I think that's what you pointed out in your report, that the whole process needs to be reviewed as to how the duty-free situation is addressed.

    I want to go back to the foundations and the situation we find ourselves in. Maybe Mr. Shepherd does know that the foundation is spending money wisely, but why isn't it reported back to Parliament? Why aren't the foundations reporting back to Parliament? Again, my concern is that Parliament in itself hasn't the ability to change it, it is the government of the day that has to be committed to making these changes through Parliament, and I hope the members here will take it back that the government needs to be addressing in a very serious way the accountability of where taxpayers' money is going and whether it's meeting the mandate under which it's been given to the foundations to act on behalf of the Canadian taxpayers.

º  (1655)  

    The Chair: Thank you, Ms. Meredith.

    I have one final question, and this is on Health Canada, Public Works and Government Services Canada, and contracting. In your opening presentation you talked about the $25 million spent on the Canadian Health Network, which I understand is a website.

    Ms. Sheila Fraser: That's correct.

    The Chair: Just a website?

    Ms. Sheila Fraser: It's a website, but quite an extensive website, linking into other websites with information for Canadians.

    The Chair: You note that there was no assurance that best value was received from this expenditure. Are you thinking we didn't get value for money?

    Ms. Sheila Fraser: The only real way to know if you get best value is if you have a rigorous process, you go out for tenders, and you manage a project well. I think this project did not meet any of those conditions.

    The Chair: You say assets purchased were underused and overclaims were made. What kind of assets were underused and what kind of overclaims were made?

    Ms. Sheila Fraser: There was computer equipment that was not used. I think we actually even have pictures of it on page 9.

    The Chair: Is that the same as the $174 million satellite thing?

    Ms. Sheila Fraser: No comment.

    An internal audit indicated that expenses had been overclaimed.

    The Chair: Significantly?

    Ms. Sheila Fraser: They identify about 12 percent of the amount, $800,000 of $6.5 million in claims.

    The Chair: That was overclaimed?

    Ms. Sheila Fraser: Yes.

    The Chair: That is a significant amount.

    On that alarming note, I think the time has pretty well expired, and so we will adjourn the meeting until Tuesday, April 23, 2002. I ask those who are on the steering committee to remain, Mr. Bryden, Mr. Harb, Ms. Phinney, Mr. Desrochers, Mr. Martin, Mr. Thompson, and me.

    This meeting is now adjourned.

Letter to Mr. Williams