PACC Committee Meeting

37th PARLIAMENT, 1st SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Tuesday, April 30, 2002

¹

1530

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

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

¹

1535

¹

1540

The Chair

Mr. Richard Neville (Deputy Comptroller General, Treasury Board of Canada Secretariat)

¹

1545

The Chair

Mr. Philip Mayfield (Cariboo--Chilcotin, Canadian Alliance)

Ms. Sheila Fraser

Mr. Philip Mayfield

¹

1550

Mr. Richard Neville

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Mr. Richard Neville

¹

1555

Mr. Philip Mayfield

Mr. Richard Neville

The Chair

Mr. Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

º

1600

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

Mr. Odina Desrochers

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

º

1605

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

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

Mr. Richard Neville

Mr. John Bryden

Mr. Richard Neville

Mr. John Bryden

Mr. Richard Neville

Mr. John Bryden

Mr. Richard Neville

Mr. John Bryden

Mr. Richard Neville

Mr. John Bryden

º

1610

Ms. Sheila Fraser

Mr. John Bryden

Ms. Sheila Fraser

Mr. Richard Neville

º

1615

The Chair

Mr. John Bryden

The Chair

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

Mr. Philip Mayfield

Mr. Richard Neville

The Chair

Mr. John Finlay (Oxford, Lib.)

º

1620

Ms. Sheila Fraser

Mr. John Finlay

Ms. Sheila Fraser

Mr. John Finlay

The Chair

Mr. John Finlay

The Chair

Ms. Sheila Fraser

The Chair

Mr. Alex Shepherd (Durham, Lib.)

º

1625

The Chair

Mr. Richard Neville

Mr. Alex Shepherd

The Chair

Ms. Sheila Fraser

Mr. Alex Shepherd

Mr. Richard Neville

º

1630

The Chair

Mr. Alex Shepherd

The Chair

Mr. Bertrand

Mr. Richard Neville

Mr. Robert Bertrand

Mr. Richard Neville

Mr. Robert Bertrand

Mr. Richard Neville

Ms. Sheila Fraser

Mr. Robert Bertrand

Ms. Sheila Fraser

Mr. Robert Bertrand

Ms. Sheila Fraser

Mr. Robert Bertrand

The Chair

º

1635

Mr. Philip Mayfield

Ms. Sheila Fraser

The Chair

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Ms. Sheila Fraser

Mr. Philip Mayfield

Mr. Richard Neville

º

1640

Mr. Philip Mayfield

Mr. Richard Neville

The Chair

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

Mr. Richard Neville

Mr. John Morgan (Executive Director, Financial Management and Accounting Policy Directorate, Treasury Board of Canada Secretariat)

Mr. Richard Neville

Ms. Sophia Leung

Ms. Sheila Fraser

º

1645

Ms. Sophia Leung

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

º

1650

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

º

1655

The Chair

Mr. John Bryden

Mr. Richard Neville

Mr. John Bryden

Mr. Richard Neville

Mr. John Bryden

The Chair

Mr. John Bryden

The Chair

»

1700

Mr. Richard Neville

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Mr. Richard Neville

The Chair

Mr. John Bryden

The Chair

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CANADA

Standing Committee on Public Accounts

---

NUMBER 051

l

1st SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, April 30, 2002

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

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

    The orders of the day, pursuant to Standing Order 108(3)(e), are consideration of chapter 4, “Voted Grants and Contributions: Government-wide Management”, and chapter 5, “Voted Grants and Contributions: Program Management”, of the December 2001 report of the Auditor General of Canada.

    Our witnesses today, from the Office of the Auditor General, are Ms. Sheila Fraser, the Auditor General of Canada, and Mr. Peter Simeoni, principal. From the Treasury Board of Canada Secretariat, we have Mr. Richard Neville, Deputy Comptroller General. Welcome back, Richard; you're a common witness here. We also have, from the financial management and accounting policy directorate, Mr. John Morgan, executive director--welcome back, John--and Mr. Bruce Hirst, senior director. So there we are.

    Ms. Fraser, your opening statement.

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

    We would like to thank you and the committee for this opportunity to present the results of our audit of the management of grants and contributions across the federal government. In particular, we would like to discuss with you our government-wide observations and recommendations, which are presented in chapter 4 of our December 2001 report.

    With me today is Peter Simeoni, who is the principal responsible for this work.

     I would also like to take this opportunity to introduce some of my staff, who also worked on the individual audits: Sue Morgan, Yvon Roy, Amipal Manchanda, Rafid Warsalee, and Jean-Pierre Plouffe.

    The Chair: Welcome, everybody.

    Ms. Sheila Fraser: Voted grants and contributions represent one of the largest forms of government spending, a planned $16.3 billion in 2001-02. Most departments and agencies manage grants and contributions programs, which may well be the most common vehicle the government chooses to meet its policy goals.

[Translation]

    In 1999, this Committee tabled its Twenty-Fourth Report, following its hearings on our 1998 audit of grant and contribution programs in Industry Canada and Canadian Heritage. The Committee recommended that my Office undertake a comprehensive audit of the management of grant and contribution programs. The work we are here to discuss today was done in response to that recommendation.

    We examined the management of our 12 programs in nine departments and agencies. In addition, we followed up on previous audits in HRDC, the Industry Portfolio, and the Department of Canadian Heritage. We audited programs in Health Canada and the Atlantic Canada Opportunities Agency, which we reported in separate chapters last December. We also looked at the central role of the Treasury Board and the Secretariat in setting policy across government, approving grant and contribution programs, and checking up on departmental performance.

    Based on our work, I concluded that the government still has a lot to do to fix chronic problems in the way grants and contributions are managed. Let me elaborate. Departments have the principal responsibility for managing grant and contribution programs well. While our audit findings varied to some extent, all of the 12 programs we audited had problems in one or more areas.

    The following are our principal conclusions.

    The design of most programs needed attention.

    Risk management strategies were needed.

    Where audits and evaluations had been carried out, their scope was still limited.

    Information that Parliament was receiving on program performance was still limited.

    Funding decisions were often based on partial or perfunctory assessments of project merits and of a project's need for government support.

    Financial control was generally satisfactory in most programs.

    Project monitoring practices ranged from satisfactory in some programs to poor in others.

    In contrast, our follow-up work found that departments had generally made satisfactory progress in fixing the problems we had reported in the past-which indicates that good management is achievable. In particular, we were pleased to report that HRDC was fixing its systems for managing grants and contributions.

¹  (1535)  

[English]

    In our view, there are a number of reasons that the problems we cited persist. Training and work practices of departments, for instance, cause some concern. We surveyed program officers and managers in nine of the programs we audited, and a significant portion said they did not feel adequately trained to do their jobs. Many believed they lacked the time to assess projects properly before recommending funding and the time to monitor projects once funding was approved.

    We are concerned about program design. Good management of grants and contributions is founded on a clear description of expected results and good assessment of associated risks. Unfortunately, we found only the beginnings of these practices in the programs we audited.

    Until recently, the policies governing grants and contributions were deficient. In 2000, however, the Treasury Board provided departments with a comprehensive and clear policy framework. Still, it will take several years to bring all the programs up to the higher management standards the framework sets out.

    While the Treasury Board and its secretariat are on the right track, the monitoring of departmental operations is still a problem. At the end of our audit, the secretariat still had little information on departments' performance and their control systems for granting contribution programs, and on progress and implementing the new policy framework.

    Mr. Chair, it seems clear to us that government-wide problems require government-wide solutions. A sound policy foundation is the first step, but now the government should put theory into practice by showing Parliament that each grant and contribution program meets the government's own standards of good management.

    The first order of business is to make the system work the way it is supposed to. The committee may wish to ask the secretariat officials for an action plan on the following matters: adopting a risk management approach; compiling information on program performance; assessing whether the new policy framework is meeting its objectives; providing guidance to departments; ensuring that results and risks have been thought out thoroughly for new and renewed programs; and ensuring that departments report meaningfully on each grant and contribution program.

    The government has committed itself to evaluating all its grant and contribution programs and approving new terms and conditions before March 31, 2005. The next three years therefore represent a unique opportunity to determine whether each program is achieving value for money and is worth continuing. However, the secretariat may not be prepared for the workload this will create. The committee may also wish to consider asking the Treasury Board Secretariat officials how the results of these reviews, program by program, will be reported to Parliament.

    That concludes my opening statement, Mr. Chair. We would be pleased to answer any questions the committee may have.

¹  (1540)  

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

    Now we'll turn to Mr. Neville for his opening statement.

    Mr. Richard Neville (Deputy Comptroller General, Treasury Board of Canada Secretariat): Thank you, Mr. Chairman.

    I'm very pleased to be here today to discuss with you and the members of this committee the government-wide management of grants and contributions, and specifically chapter 4 of the Auditor General's 2001 report.

    With me today are Mr. John Morgan, the executive director responsible for financial management and accounting policy, and Mr. Bruce Hirst, senior director of financial management policy.

    I'd like to begin by providing you with a brief Treasury Board Secretariat perspective on the Auditor General's observations and recommendations. I will then follow this up with an overview of our progress to address these recommendations.

    I'm very pleased that the Auditor General has acknowledged “that in revising the policy on transfer payments and other related policies, the secretariat has made significant progress toward improving the management of grants and contributions”. The Auditor General also noted that “The revised policy is a significant improvement over the old one and is reasonably clear and comprehensive”.

    Despite having developed a sound policy framework within which transfer payments are authorized and managed, we acknowledge that chapter 4 brought to light areas that require continuing focus. As you know, the Treasury Board Secretariat agreed with all the chapter 4 recommendations. Mr. Chairman, I want to assure you and the committee that the Treasury Board Secretariat is taking the recommendations very seriously and that it is our intention to promptly and fully address all of these.

[Translation]

    As noted in the report, complete and comprehensive improvements to the management of grants and contributions will take some time to fully realize. The report clearly indicates that to do this will require focus on the part of both the Treasury Board Secretariat and departments.

    In the context of grants and contributions, the role of the Treasury Board Secretariat is to develop and refine the policy framework on behalf of Treasury Board, to monitor policy compliance and to review all program terms and conditions for Treasury Board approval. As the Auditor General stated, departments and agencies have the principal responsibility for ensuring that each grant and contribution program is managed well. Achieving the final objective, therefore, will require a collaborative approach.

    Given that a solid policy framework is now presently in place, departments must continue to internalize policy requirements and work towards their full implementation. The Treasury Board Secretariat will keep a pulse on the progress of departments and their respective compliance with the policy and thereby be in a position to determine the state of controls across the government. In addition, the Treasury Board Secretariat will focus, as required, on individual departments or problem areas where more in-depth policy support is warranted. We will use the results of our monitoring to improve the policy framework over time.

[English]

    Mr. Chairman, I would now like to outline some of the progress we are making in addressing the Auditor General's recommendations.

    Firstly, we are continuing to provide ongoing support for departments. Some of the key measures in this area include the following. As noted in our response to the Auditor General, a comprehensive guide on transfer payments was issued to all departments and agencies in December 2001. The guide supplements the policy on transfer payments issued in June 2000. It provides substantive support and guidance for program managers and has been very well received.

    We continue to seek advice from the transfer payment advisory committee, which is comprised of 13 departments. This committee provides feedback to our policy centres, identifies common transfer payment issues, and provides a forum to discuss and resolve the issues.

    A training sub-group is in the process of being organized by the advisory committee. This sub-group will address issues related to better transfer payment training, sharing training material across departments, and generally maximizing the return on investments spent on training. Finally, in the last few months, several government-wide transfer payment training forums have been delivered. In addition, many more department-specific training sessions have also taken place.

¹  (1545)  

[Translation]

    Secondly, with respect to monitoring policy compliance, Treasury Board Secretariat has flagged the management of Grants and Contributions as one of the highest priorities under the new Policy on Active Monitoring;

    We have begun to compile departmental plans for transfer payment program renewal so as to be prepared for the policy requirement that all programs be renewed by March 31, 2005.

    Analysis has begun to support the development of a risk management framework for monitoring transfer payments on a government-wide basis. To support the development of the framework, some initial departmental meetings have taken place.

    A number of Treasury Board Secretariat Teams, organized on a departmental portfolio basis and comprised of staff from both program and policy areas, are fully functional and prepared for comprehensive active monitoring.

[English]

    Thirdly, we are undertaking a number of actions to strengthen our policy framework. An assessment on whether the policy and transfer payments are meeting the objectives will be conducted in 2002-2003. Treasury Board Secretariat policy analysts continue to provide transfer payment policy advice to departments and agencies. Given that the policy on transfer payments will undergo a major review by 2005, all potentially relevant observations that may be considered in the policy review are gathered on an ongoing basis.

    The last item I would like to address is our need to continue to focus on results. The Treasury Board Secretariat continues to work with departments to improve accountability and financial control. We have undertaken to strengthen and streamline program accountability and project monitoring through updating the results-based management and accountability framework and the risk-based audit framework. Departments will continue to report to Parliament on the results of the significant transfer payment programs through their annual departmental performance reports.

[Translation]

    In closing, I would like to re-emphasize the Treasury Board Secretariat's commitment to substantive and recognizable improvements to the government-wide management of grants and contributions. We intend to ensure that the Auditor General's recommendations are directly addressed over the short to medium term and to continue to make improvements in this critical area on a constant and continuing basis.

[English]

    Mr. Chairman, thank you for the opportunity to provide our views and plans on this important area of government financial management.

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

    We'll now turn to Mr. Mayfield for eight minutes, please.

    Mr. Philip Mayfield (Cariboo--Chilcotin, Canadian Alliance): Thank you very much, Mr. Chairman.

    If I may, I'd like to turn to the Auditor General and ask if I'm correct in my understanding that we've been working on this little project with the Treasury Board for about four years now in the auditing and concern for grants and contributions. Is that correct?

    Ms. Sheila Fraser: The audit of grants and contributions has been a longstanding area of the office. This particular audit came up after an audit of grants and contributions that was done in 1998. Then there was another audit of HRDC with the grants program, and after that, because of the concerns that were raised there, this committee recommended that there be a government-wide audit done. This audit is a result of that.

    Normally...I don't think we've done a government-wide audit for some time for grants and contributions. We would generally pick a department or an area and look at grants specifically in that area, but this is a very broad look across government.

    Mr. Philip Mayfield: If I'm not mistaken, Mr. Neville mentioned that we'll be taking a good hard look at this, finally, in 2005. Is that correct, Mr. Neville?

¹  (1550)  

    Mr. Richard Neville: Yes, that is correct. We are looking at it, though, as we speak, doing an assessment in 2002-2003 to determine if changes are required. But we'll be doing a formal evaluation in 2005, and that is part of the new policy, which is different from the previous policy. So there is, in fact, a requirement to do this.

    Mr. Philip Mayfield: It concerns me that over such a long period of time Treasury Board does not seem to be able to gain control over the spending of the departments for which it has statutory authority. Ms. Fraser, concerning the management of grants and contributions, what is the area that most needs strengthening, in your opinion?

    Ms. Sheila Fraser: There are several. I would say there are two in particular, if we look at the role of the Treasury Board. One is the active monitoring policy that has come into effect. That has to be carried out rigorously. The Treasury Board Secretariat must have a way of getting the information to ensure that the departments are conducting themselves as expected.

    The other one I also mention is the risk management policy, that there be a way to determine and to analyse the risks and where the risks are likely to occur. The Treasury Board Secretariat can then focus its efforts on the areas deemed to be of highest risk.

    The Treasury Board has introduced several new policies in the last year or two. New policies on internal audit, active monitoring, risk management, and the new policy on grants and contributions give a good framework for the management of these programs. What's important now is that we get on with doing the job and that the policies be respected and implemented. I think this is where the challenge is; and, as we have indicated, it will take some time to bring to bear.

    Mr. Philip Mayfield: Mr. Neville, when I read the Auditor General's report I see things like the departmental operations are not monitored adequately; departments often fail minimum controls; grant and contribution programs tend to be under-managed because departments don't pay enough attention to their design, delivery, and performance and to training staff who manage them. Frankly, at this stage, I find this really discouraging and not really acceptable.

    Perhaps it's because I don't understand the role of Treasury Board in the monitoring, but so often we come back and hear what the department is doing or going to be doing: it's going to be focusing, keeping the pulse. I don't even know what these terms mean. And I don't know if when you come back again we're going to be talking about this stuff all over again or not. I find this very discouraging to keep coming back and finding the Auditor General raising these matters of serious concern. It's only $16 billion, but if my province had $600 million over 10 years we would have the tools to deal with an epidemic of mountain pine beetle. That's $60 million a year, which in these terms doesn't seem like a lot of money that's wasted.

    I find it very discouraging, particularly when so many people need so much. Our standard of living is declining, and I find the waste and the inattention unacceptable.

    Mr. John Bryden: Ask the question, please.

    Mr. Philip Mayfield: I'll ask the questions, thank you very much.

    I would like to know, sir, when are we going to hear from you that the problem is fixed?

    Mr. Richard Neville: Mr. Chairman, I'd like to try to encourage and reassure the member that Treasury Board Secretariat is in a very positive mode in terms of dealing with this issue and has put in place an active monitoring policy, in June 2001, which we did not have previously. So we've actually addressed the concern raised by the Office of the Auditor General, and more specifically, the Auditor General's recommendations. And it's fair to say that this policy defines a regime to actively monitor the state of management controls throughout government in every department and every agency.

    I would even go so far as to say that in working through the implementation of this policy we have identified grants and contributions as being the number one priority for the 2002-2003 fiscal year, the fiscal year that we're in. What we have done, which is a first for the Treasury Board Secretariat, is we have put in play a mechanism that has required us to look at our organization across the department and to identify ten portfolio teams, which corresponds to the makeup of departments in government. So each portfolio team has a number of departments assigned to it with a lead, and that portfolio team meets on a regular basis. It's made up of individuals from the program sectors, from my branch as well as other branches that are involved in doing the active monitoring, with a view to determining what the problems are vis-à-vis, in this case, grants and contributions--

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    Mr. Philip Mayfield: Sir, if I may interrupt--

    Mr. Richard Neville: Could I close first?

    So the idea is that we will be monitoring the programs within each department. And it is now a requirement that for every new program that involves grants and contributions we have a sign-off within our own branch and others prior to it going to Treasury Board. In that context, we're putting much more time and effort into the due diligence process relating to grants and contributions and into each new program that's coming up in terms of renewing their terms and conditions. So if you have something that has been in existence for three or four years but it's due to be renewed, we are also required to sign off on the terms and conditions of that new program before it goes to Treasury Board ministers for approval.

    The Chair: After that long response, Mr. Mayfield, we'll have to come back to you in the next round.

    Mr. Desrochers, s'il vous plait, huit minutes.

[Translation]

    Mr. Odina Desrochers (Lotbinière--L'Érable, BQ): Thank you. I am very happy to see you appear before the Public Accounts Committee, Mr. Neville, but upon reading your submission, I get the impression that there is a lack of leadership somewhere. I quote:

As noted in the report, complete and comprehensive improvements to the management of grants and contributions will take some time to fully realize.

    This is highly bureaucratic language. You go on to state:

The report clearly indicates that to do this will require focus on the part of both the Treasury Board Secretariat and departments.

    It's still bureaucratic language; with good intentions, no doubt. Each time, however there are problems with follow-up.

    Do you really have the power, within Treasury Board Secretariat, to exert the necessary pressure on departments to do their homework? Upon reading your report, you show some leadership, clearly, but we also hear that some departments have to be pressured. Regardless of your efforts in implementing policies, standards, etc., we feel that the bureaucracy has difficulty in marching in step, and implementing the necessary approach to improve its functioning. Is this observation correct, Mr. Neville?

    Mr. Richard Neville: I think that we have already taken very specific steps. I have already referred to these, but I will be more precise to ensure that we understand each other. The Portfolio teams are very important. The approach is new for us, and shows that we have the required leadership and will to conduct departmental reviews within the respective portfolios. Within this framework, we will have a better understanding of what is taking place within departments.

    As I mentioned earlier, the priority for this year, 2002-2003, is grants and contributions. I think that within a year we will have a very good appreciation of what progress has been made by departments. If no progress is noted, we will of course be able to take corrective action, if necessary, to ensure that departments are adhering to the new policy.

    Mr. Odina Desrochers: Currently, to the best of your knowledge, how many departments are really collaborating with your process.

    Mr. Richard Neville: The process is still quite new, but I haven't heard of any departments that do not agree with our approach. The departments themselves requested that we provide leadership, and show them how to implement best practices found in other departments. We are offering departments this service through the interdepartmental committee, which is comprised of 13 departments. On a continual basis, this committee provides us with recommendations to improve leadership, as well as best practices, within the departments.

º  (1600)  

    Mr. Odina Desrochers: At what specific moment did you start implementing your process? You state that it is quite recent and that you have not had the time to measure...

    Mr. Richard Neville: The portfolio teams have been working now for six to eight months. We have already noted significant benefits. I would say that we are really seeing a change since the new policies on evaluation, and on internal audit, have been implemented.

    Mr. Odina Desrochers: When will you be able to give us a more accurate picture of the situation, on whether or not there has been improvement?

    Mr. Richard Neville: That is a good question. Obviously, we are continually evolving, and we hope to see successful implementation and change within departments soon. I cannot give you a specific date, but we are optimistic; we believe it will be sooner rather than later.

    Mr. Odina Desrochers: Which is unfortunate. We hear about many things that are being implemented, but when we try to find out about deadlines, specific dates, these are always difficult to obtain. When you come back at a later date, you haven't had time to finish, and as Mr. Mayfield mentioned, we come back and all these things seem to be difficult to assess. Can we get deadlines? It's not complicated. You need three columns: dates; departments that are compliant; those that are not. We would at least get a good idea of how things are going.

    Mr. Richard Neville: I don't disagree, and in fact, we require an action plan from each department. We have to remember that we are talking about 479 programs, within all of government, that are receiving contributions and grants of more than 5 million dollars. So we're not only looking at a few programs, the 7,8, 10, 15 or 20 programs that we deal with. We are talking about 479 programs, half of which we have already assessed terms and conditions. We have already approved and signed off on changes that have been made. By the end of March, 2005, we still have 159 programs to review. We have already made significant progress. Obviously, we wish to finalize the review to be able to state that we have terminated everything on March 31, 2005. We are making progress.

    Mr. Odina Desrochers: Four-hundred and seventy-nine today, and how many tomorrow? If any programs are added, are you going to be able to ensure follow-up? I guess that in addition to the 479 that you are referring to, certainly, more will be added.

    Mr. Richard Neville: Yes, I agree, but there may be some...

    Mr. Odina Desrochers: Will future programs take into account the comments made by...

    Mr. Richard Neville: Yes. We must remember that under the new policy, it is compulsory that each new program be closely followed by a certain number of Treasury Board Secretariat officials, including our Branch, and they must approve the latest terms and conditions before the program can even be presented to the President of the Treasury Board. In fact, a more in-depth analysis is performed than previously, and the fact that we are proceeding in this manner shows how carefully we are assessing each request made by a department regarding terms and conditions.

[English]

    The Chair: Ms. Fraser, do you have a comment?

[Translation]

    Ms. Sheila Fraser: I know that I do not usually ask questions here, but provide answers. Nevertheless, during our audit, we found that the Secretariat did not know how many programs had to be evaluated by 2005. Mr. Neville seems to imply that there are 479, and that only 150 remain to be evaluated. According to my calculations that would mean that 329 have been evaluated since December. I find that to be quite surprising.

º  (1605)  

[English]

    The Chair: [Editor's Note: Inaudible]...by Mr. Desrochers.

[Translation]

    Mr. Richard Neville: No. There are 123...

[English]

    The Chair: We have a dialogue at the end of the table here.

[Translation]

    Mr. Richard Neville: I'm sorry, Mr. Chairman. I would like to state that 123 have been reviewed to date, and that the others have to be reviewed by March 31, 2005. But we have signed off on 123 since we started several months ago.

    We have to remember, however, that the audit just referred to by the Auditor General was conducted, if I understood correctly, between August 2000 and August 2001, approximately, and that since that time, the recommendations and comments concerning us have been taken into account. For the past eight or nine months, however, we have been working more closely on this matter.

[English]

    The Chair: Thank you very much.

    Just as a quick point of clarification, that's 479 programs, 123 already signed off. Are those the exact numbers? Yes. Okay.

    Mr. Bryden, please, for eight minutes.

    Mr. John Bryden (Ancaster--Dundas--Flamborough--Aldershot, Lib.): Firstly, I acknowledge Mr. Mayfield's frustration. However, I've had a lot of experience with this, going back eight years, and I can certainly attest to the fact that we've made enormous progress compared to what we were doing with grants and contributions, as I knew them, in 1995. So obviously it's an ongoing thing.

    One of the things I've never been able to understand, though, about the role of the Treasury Board Secretariat is, if I understand correctly, it sets policies and issues guidelines on grants and contributions. Why don't you issue directives? Why don't you tell them what you expect, rather than advise them of what you like?

    Mr. Richard Neville: For us, a policy is in fact a directive. It has words like “will” and “shall”. A guideline would have words like “should.”

    Mr. John Bryden: Then it would appear to me that a lot of what you are doing is guidelines. I saw here that you have a guide on transfers. Now, does that have the force of a policy, or is it a “should”--that is, we hope that you will do this, or is it you had better do it or else?

    Mr. Richard Neville: In all fairness, it's a bit of both.

    As you know, we're trying to work collaboratively with our colleagues in departments and agencies, and in so doing we'd like to work in an environment where it's collegial. Words like “should” obviously don't have the same force as “will”. We expect the departments will be doing that, and if they don't, they have to have a reason why they will not be doing that.

    Mr. John Bryden: If I may make a suggestion, perhaps in another context, in the industry or for-profit context, there would be less of a collegial atmosphere. Perhaps when you fully mature the policy you're working on, we can hope there will be fewer guidelines and more policy.

    Mr. Richard Neville: Point taken.

    Mr. John Bryden: Turning to an entirely different thing, have any of you examined or evaluated the quality of results you get when grants and contributions are going out to various types of NGOs and the for-profit sector? I take it grants and contributions can be issued to for-profit organizations. Have you ever attempted to measure the quality of performance you get, the quality of results, as to grants and contributions among a non-profit organization, a charity, and a for-profit organization? Have you ever examined that issue?

    Mr. Richard Neville: I don't recall personally having been involved in that kind of assessment. We're looking at it from the financial management perspective: how are payments made, and do they meet the criteria of the terms and conditions that have already been approved by Treasury Board ministers? There may very well be evaluations that have been carried out with that kind of scope, but I'm not familiar with that personally.

    Mr. John Bryden: I assume that the Treasury Board Secretariat is interested in results as well as method. I would be extremely interested in examining whether or not we're getting value back, depending on the type of organization we're dealing with. Do we even know, proportionately, how much in grants and contributions is going to these three categories: non-profit organizations, charities, and for-profit organizations?

    Mr. Richard Neville: Maybe I could add one more comment on your previous question that has come to mind since the question was asked.

    There is a requirement now, as part of a new policy, to require that each program be evaluated prior to being approved for continuation. In that context there will be a program evaluation in the true sense of the word, so we do have evaluations, and I want to reassure you that they take place. Again, I'm just not sure if the kinds of evaluations are specific to your request.

    That being said, we have a new chart of accounts, which we've put in as a result of FIS, financial information strategy, if you recall. We've talked about that around this table a number of times. There is a chart of accounts that is broader than we had previously. We will be able, as a result of the new chart of accounts, to collect the information on not-for-profit organizations as well as industry-type entities.

    So the answer to your question is we will be able to do that. We'll be putting that in play because we would like that information for other reasons, but we don't have that available today.

    Mr. John Bryden: I would make the observation, for the benefit of the Auditor General as well, that increasingly governments at all levels are relying on the not-for-profit sector to provide services. With grants and contributions that's exactly where they're going, and that's exactly the reason they're going in that direction.

    I also observe that this sector is one of the most opaque in Canadian society. Charities, as you know, are not required by any law that's really enforceable to be as transparent as we would expect of the government or as we would expect of the for-profit sector when there are shareholders. Non-profit organizations are even worse, because we can't get any information on them, including their financial information return.

    Perhaps I could put it to the Auditor General. Perhaps this is an area she'd like to consider.

º  (1610)  

    Ms. Sheila Fraser: Just to add in the grant programs we looked at, there were some NGOs providing the services. In those cases they were contribution agreements, which means they had to produce certain results in order to get the payments. So for the program under question, we would expect the department to have the information as to what results had been achieved with that money.

    Now, as to what else is going on in that organization, obviously the department wouldn't have this. This also raises the whole question of grants versus contributions. Grants are sort of an outright gift, if you will, with few conditions, whereas with a contribution there is either cost-sharing or the need to produce certain results to receive payment. There's generally more rigour and accountability in a contribution agreement than in a grant agreement.

    Mr. John Bryden: Well, that again brings up the point of how the Treasury Board Secretariat monitors the effectiveness of grants, say, to NGOs. How do you know that the people in the departments who are designating these organizations to provide the services we need are indeed getting the services that are promised? And the corollary to that is how do you know that the money being spent through that grant or contribution is cost-effective? Is it the best way of getting the service?

    Ms. Sheila Fraser: That would be through the evaluation of the program. It should be part of that evaluation.

    Mr. Richard Neville: I was going to make the same comment, Mr. Chairman. As I said earlier, we are now requiring an evaluation at the end of each program if the wish is that it be extended. In so doing, we would expect that the evaluation will take into consideration the points you've raised.

    When that proposal comes in to the Treasury Board Secretariat for review before going to Treasury Board ministers for approval, we have a number of individuals in the program sectors who would look at the evaluations from a program perspective. We are looking at it from a financial management perspective. Others are looking at it from another perspective, official languages or whatever.

    There are a number of individuals now who are signing off on these proposals with a specific requirement to meet the needs of their specific areas. This was not done previously.

    Answering your question on program evaluation, I would expect the program analyst to be looking at it from a social perspective, from an economic perspective, from a government operation perspective, and determining if in fact there is value for money in terms of what has been paid out.

º  (1615)  

    The Chair: Mr. Bryden.

    Mr. John Bryden: I was just going to make one final comment.

    The Chair: Yes.

    Mr. John Bryden: I would hope then that perhaps you will look at this issue globally in the way I suggested in my remarks, and compare the three categories of service providers.

    The Chair: Thank you, Mr. Bryden.

    Mr. Mayfield, now we're into round two. You have four minutes.

    Mr. Philip Mayfield: Thank you, Mr. Chairman.

    I'd like a little help with some of the words you use in your statement, Mr. Neville. For example, you use the phrase “requiring focus” a couple of times, and you also mention “keeping the pulse”. Would that be comparable to the Auditor General's language of assessing whether a new policy framework is meeting its objectives? Is that what you mean by those terms?

    Mr. Richard Neville: Yes, that's a fair statement. For us, “focus” is a term we use often. It's in our vocabulary, and maybe it's bureaucratic, although I would have thought they use that term as well in the private sector. For us, focus means--

    Mr. Philip Mayfield: I do know what the word “focus” means, but I don't know what it means in this context.

    Mr. Richard Neville: Okay. What it means for us is that you are paying special attention. In terms of the active monitoring policy, we have determined that for 2002-2003, the main focus will be on grants and contributions. The portfolio teams have as their mandate looking at this more specific event, as for example capital plans, or official language plans, or GOL, government online issues.

    Mr. Philip Mayfield: Okay, I have the picture there. But what concerns me is that, you know, I may sit down at a bench and focus a microscope. Even to focus it very finely takes a little while, but not too long, because the project will decay if you take too long just to get the microscope on project. I'm concerned that we keep coming back here over long periods of time talking about proposals, focusing, keeping the pulse today, when I'm not sure what the benefit of all this focus is.

    Now, the Auditor General has suggested we ask you about providing guidance to departments. Are you in a position to provide guidance?

    Mr. Richard Neville: Yes, I think we are. It's our role. It's our mandate.

    Mr. Philip Mayfield: Okay. Does anyone respond to the guidance you provide?

    Mr. Richard Neville: Yes, I think departments have responded to the guidance we've been providing.

    Mr. Philip Mayfield: Why is the Auditor General coming back and saying essentially the same thing again?

    Mr. Richard Neville: I'd like to state, again, I think we made a lot of progress. If we were to do an audit, if the Office of the Auditor General said carry out an audit today, I think she would find significant progress in terms of what we have been doing.

    Mr. Philip Mayfield: Could you provide a few specific examples of the guidance you provide?

    Mr. Richard Neville: Yes. Since the policy has been issued, we have provided a guide on grants and contributions. I stress the word “guide” on grants and contributions. It was issued to departments in December 2001. It provides extensive guidance and support for program managers with respect to transfer payments.

    In collaboration with the Financial Management Institute of Canada, we have provided a number of briefings and sessions that have been extremely well attended. As a matter of fact, individuals had to be turned back because of lack of room.

    Mr. Philip Mayfield: Okay. They have been well attended. Have they ensured the results the Auditor General is looking for? What have been the results of the efforts to provide guidance?

    Mr. Richard Neville: I think we're back to active monitoring. What is active monitoring all about? You determine what's happening in the departments.

    We're starting to work through an active monitoring framework that allows us to do the active monitoring. Some of it has already taken place with the internal audit reports now coming in for the first time. There are evaluations taking place. We're working through the interdepartmental advisory committee, again, with best practices.

    I think we're making a lot of progress in the area.

    Mr. Philip Mayfield: Would you say the reports coming back are meaningful to you in the kind of progress you're seeking in the departments?

    Mr. Richard Neville: I think it's early days to make a categorical comment about whether they're all there.

    Mr. Philip Mayfield: If they're not, what do you do about it?

    Mr. Richard Neville: The initial reports we are receiving are favourable.

    The Chair: Thank you, Mr. Mayfield.

    Mr. Finlay, you have four minutes, please.

    Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chair. I haven't got any great dissertation. I want to ask a couple of questions of the Auditor General.

    On page two, Auditor, you say you had problems in one or more areas in the programs. The second-last one is “funding decisions were often based on partial or perfunctory assessments of project merits and of a project's need for government support”. Can you give me an example or tell me how you make the judgment?

º  (1620)  

    Ms. Sheila Fraser: I will at least try to find you a specific example.

    For instance, in the official languages communities, in 33% of the audits we did and the projects we looked at, there was little or no assessment of the need for funding, the amount of funding given, and the basic why. It's one example. Another one is in western economic diversification. There's a lack of documentation, again, on the rationale for funding that has been given to projects. Another one would be first nations policing. For about 10%, $3 million out of $35 million, we could not find the support for the funding decision.

    There are at least three. I could perhaps give you more.

    Mr. John Finlay: Thank you. There wasn't enough evidence and enough thought given.

    Ms. Sheila Fraser: In many of the projects, the rationale for giving the funding is there is a need to have government funding for the project. One would expect there would be some documentation involved to explain why government funding was needed. It was not present in the cases I mentioned.

    Mr. John Finlay: The next question concerns page four. I know we use this a lot. We've used it a lot this afternoon and we've used it a lot in the past.

    For adopting a risk management approach, I think I know what a risk is. Something may go wrong, or something won't work out in the way it is suggested. Until you've done it, you may not know. Give me a little lesson on what adopting a risk management approach means. Do you look at all the negatives? Do you look at the positives and negatives?

    The Chair: Are you asking Ms. Fraser or Mr. Neville?

    Mr. John Finlay: Well, this is in the Auditor General's....

    The Chair: Okay, so Ms. Fraser.

    Ms. Sheila Fraser: Thank you, Mr. Chair. Actually, I'm pleased to talk about this.

    We do not expect the Treasury Board Secretariat to look at every single program and every dollar that is being spent by government. That is not realistic. It has limited resources, and to make the best use of its resources it has to focus on the areas that it thinks present the greatest risk.

    Risk can be evaluated using many criteria. Some of them, I would think, would be the nature of the programs, past experience, internal audit reports.... I could go on and on, but the Treasury Board Secretariat should have some rationale or criteria to evaluate risks of programs. And they can say there are certain programs that, because of past audits that have been done, the type of program, and the controls that they know are in place, they think are probably being managed fairly well. On others, they can say no, there's far more discretion in the program; past internal audits have shown that there have been problems there, and various other reasons, and they can say they want to focus their attention on those programs and make sure that the corrective action is taken. So it's really evaluating where you're going to spend your energy.

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

    Now we'll go to Mr. Shepherd, please.

    Mr. Alex Shepherd (Durham, Lib.): Thank you very much.

    Some of this is a rendition of when I used to practise as an accountant. I used to tell my private sector clients that if it had anything to do with government, stay away from it.

    The ultimate risk aversion is to do nothing. I have here a letter from an organization that was operating in my riding. They worked with HRDC. They provided employment training for people who wanted to set up their own business--the fallout from the unemployment insurance system, if you were on unemployment insurance but wanted to go into self-employment. They have been providing the service with HRDC for something like 10 years, and they report that they have trained about 1,500 clients. Of the ones they trained, 757 are still operating in a business providing employment in Durham. That's a 71 percent success rate. They have in the past charged a fee of $36.50 per client for a 45-week period, and so on.

    This is what they're saying about the new rules you're talking about that have come down through the system. They're trying to make sense of a payment structure that allows, for organizations like this one, no profit margin, no opportunity to receive fair market value for what is being provided. “HRDC representatives have trouble understanding the rules and defining them for us”. It seems to be that they're measuring how many photocopies went through their machines, and how the salaries paid to the owners providing this service compares with the salaries of HRDC employees. As a consequence, we will no longer be offering the service.

    So that is the flip side of the coin. It could be that the Auditor General, four or five years from now, is going to say we have strangled the local managers.

    We spent a lot of time about letting the managers manage. If we want to assess problems in grants and contributions, shouldn't we allocate it to a manager, rather than trying to micro-manage everything they do?

º  (1625)  

    The Chair: Mr. Neville, and then Ms. Fraser has a comment too.

    Mr. Richard Neville: The first observation is that it's unfortunate in this particular instance that the organization is actually walking away from delivering what would appear to have been some excellent services in the past. The reason for that, though, in part, anyway.... I don't know all the wherewithal, but I'm not surprised to hear that specifically HRDC has put in place a review system that is much more comprehensive than was there previously. We all know what has happened to HRDC over the last few years. As a result, because of the new policy, because of their own internal procedures, the requirements are just more stringent in terms of what gets through and what doesn't get approved. Therefore, what you've just expressed is probably the downside of the additional review requirements assessment analysis.

    But having said that, I am still of the view that HRDC is still issuing a lot of cheques and completing a lot of agreements with third-party entities. So I take it that those who are willing to go through the additional scrutiny feel that it's appropriate, it's worthwhile, in order to deliver the services they wish to do.

    In that context, I have to say that we have imposed on them a more rigorous regime, and they're responding. In part, we've done that because of the problems we had previously and the observations raised by the Auditor General.

    Mr. Alex Shepherd: I understand what you're saying, and I understand the reason.

    The Chair: Mr. Shepherd, we're going to have a comment from Ms. Fraser, and then I'm afraid your time is up.

    Ms. Sheila Fraser: I'd just like to make a comment.

    I agree fully with the issue Mr. Shepherd has raised. In fact if you look at our chapter 5, paragraphs 5.383 to 5.389, we have a whole section called “Balancing control and service”. I'd just like to quote:

    “...we believe that the use of comprehensive risk management frameworks is critical to reducing undue paper burden and improving the quality of services to Canadians while maintaining sound financial control. Management”--of HRDC--“informed us that the Department recently started to develop such frameworks in collaboration with the Treasury Board Secretariat, with a view to managing grant and contribution projects more efficiently and effectively. We encourage the Department to sustain those efforts.”

    So we recognize in this audit that there was probably an overreaction and that they needed to move back from the control.

    Mr. Alex Shepherd: Well, this letter was written April 9, so it's very current. We're saying basically that the delivery system isn't.... I'm not defending these people 100%. I really don't know all the intricacies as you do. But if he's identifying some.... I am familiar with the company, because they have trained a lot of people; I've dealt with them. He's saying the paranoia that exists within HRDC is preventing them from delivering the programs.

    Mr. Richard Neville: You know, I have no qualms that the new regime we have imposed on departments, including HRDC, is much more onerous than was there before. That's a given, based on the facts we've been talking about this afternoon, based on the policies we've put in place, based on the requirements that are now expected of them.

    In that context, I just can't see us walking away from the due diligence that is now required that may not have been there in the past.

º  (1630)  

    The Chair: Thank you.

    Mr. Shepherd, you don't have to, but do you want to table that letter with the committee?

    Mr. Alex Shepherd: I don't mind.

    The Chair: Okay. Are we all agreed? It's only in one language; we can have it translated into another language as well. If you want to deposit it with the clerk, that will be fine.

    Monsieur Bertrand, s'il vous plaît.

[Translation]

    Mr. Robert Bertrand (Pontiac--Gatineau--Labelle, Lib.): Thank you, Mr. Chairman. I don't necessarily have any questions, but I would like to have some clarifications.

    Mr. Neville, when you talked about the number of programs that received grants, you mentioned 479 programs, and that 123 programs have been reviewed to date. Perhaps I misunderstood, but you mentioned something regarding programs greater than 5 million dollars.

    Mr. Richard Neville: In other words, we have evaluated all government expenses for all of government and determined that if we take into account only programs greater than 5 million dollars, there are 479 programs falling within this class of grants and contributions. It is possible that there are programs of only 1 or 2 million dollars, but in our program review evaluation, there were 479 programs greater than 5 million dollars. We have no idea of how many are less than 5 million dollars. There can be others, of course.

    Mr. Robert Bertrand: A federal program of less than 5 million dollars must be a rare thing.

    Mr. Richard Neville: It is possible. There are small programs that last six or nine months. They could be seasonal or for a very specific region. It can be for a specific village. So yes, I think that it is very possible that there are programs of less than 5 million dollars within the government. Obviously, these are not included within the 479.

    Mr. Robert Bertrand: Thank you very much.

    In her presentation, the Auditor General stated, and I quote: “government spending-a planned $16.3 billion.”

    Is this for all programs greater than 5 million dollars.

    Mr. Richard Neville: This is a figure that the Auditor General included in her report, so I will let her answer that question.

    Ms. Sheila Fraser: These are the amounts that were spent on all grants and contributions, not only for those greater than 5 million dollars. It covers all programs, including those less than 5 million dollars.

    Mr. Robert Bertrand: What are the three or four largest departments benefiting from this?

    Ms. Sheila Fraser: It's in our report, in table 4.2 There is an amount of 4.3 billions dollars for the Department of Indian Affairs; 1.5 billion dollars for Veterans Affairs; 1.5 billion dollars for CIDA; 1 billion for HRDC; 950 million dollars for Health Canada; and 800 million dollars for the Department of Agriculture, which amounts to 10 billions out of the 16 billion dollars.

    Of course, this does not include, as we have shown on the other page, statutory contributions. These are votes, programs such as...

    Mr. Robert Bertrand: You or Mr. Neville talked about transfer payments. When you mention transfer payments, I immediately think about funds that are being transferred to the provinces.

    Ms. Sheila Fraser: This is absolutely not included.

    Mr. Robert Bertrand: Absolutely not included. Canada-Quebec programs. infrastructure programs or all those programs are absolutely not included here.

    Ms. Sheila Fraser: No.

    Mr. Robert Bertrand: Thank you very much, Mr. Chairman.

[English]

    The Chair: Thank you, Mr. Bertrand.

    Mr. Mayfield, please.

º  (1635)  

    Mr. Philip Mayfield: Thank you very much, Mr. Chairman.

    I'm looking at the item the Auditor General has in her statement today, “ensuring that results and risks have been thought out thoroughly...”.

    We have been sitting here listening to departments talk about big mistakes they've made. The health department comes to mind, where they spent some millions of dollars to replace a whole water system when a $25,000 pump would have done. Again, the health department was going to develop a computer program that would solve the problems of prescription drugs, and that didn't work. The answer was that they were going to do the computer program again.

    Ms. Fraser, in light of the last few meetings in which we've talked about things not being thought out very carefully, do you have any comments or suggestions to make about what thinking things out really means? I think I know what it is, but I'm a little cranky today, and I'm getting tired of it. Perhaps you could help me by explaining what you think “thinking things out” means.

    Ms. Sheila Fraser: Thank you. I'll try.

    The Chair: Some of the members are a little cranky today, Ms. Fraser.

    Mr. Philip Mayfield: I won't bite you, I promise.

    Ms. Sheila Fraser: I think we all have to recognize--and this may come back to haunt me--that mistakes are going to happen and bad decisions are going to be made. I think that is part of life.

    What we look for, though, is before a decision is made, have people done an analysis, have people thought it through, have they followed the kind of basic management practice that you would expect?

    Mr. Philip Mayfield: Do you think that's what's happened, for both of you to make this statement?

    Ms. Sheila Fraser: What we see in many of these cases is that documentation isn't there, and there are gaps in the kinds of basic management practices you would expect to see in the management of these programs. Why is that occurring? There could be various reasons.

    In the chapter on training, I think we point to a survey of people who felt that maybe the training...they're not sure what they're supposed to do. The capacity may not be there; they maybe lacked the time. There are many conflicting priorities, and sometimes service and getting the cheques out is viewed as more important than maybe putting the files together.

    So I think there are various things. The managers should be able to look at that program and ask, is it being managed properly? So you need a strong internal audit. You need the act of monitoring and somebody has to check to make sure it's being done properly, not just left to manage inadequately.

    Mr. Philip Mayfield: Mr. Neville, there's one thing Ms. Fraser has not mentioned, and that is whether people care to do a first-class job. I've been a client. I've gone into a government office seeking service, and frankly the attitude of the office once in a while is pretty disappointing. “Whether you get the service or not doesn't really matter much to me” seems to be the attitude coming from the other side of the counter.

    Do you find that the attitude of caring has much influence upon whether these kinds of mistakes are made? Ms. Fraser, I agree entirely, mistakes are made, even by those who are doing their very best. But fewer mistakes are made by people who really care. Do you find a level of concern and caring about a first-class job being done that you would expect? If so--I'm not laying it on your shoulders, because you don't hire everybody and supervise them--what can be done about that? It needs to be done.

    Mr. Richard Neville: Mr. Chairman, first of all, maybe I'll regret this at some point in time as well, but I agree with what the Auditor General has said in the last few minutes. Just to be on record with it, I concur 100 percent with what she's stated.

    To answer the specific question asked, my experience--and I've been in government for several years now--has been that the attitude of public servants is a positive one overall. You are going to have instances when they may have a bad day; they may be grumpy that day.

    A voice: I think “cranky” is the word.

    Mr. Richard Neville: But my experience has been that public servants, on average, are very proud to be doing the work they're doing. They come to work with good dispositions and they serve Canadians well. If you wish to match our public service with any other public service in the world, I think you'll find it in the top three to five.

º  (1640)  

    Mr. Philip Mayfield: Well I'm not in a position to do that, but I can say that I have known public servants on a personal basis who have worked very hard and have not been rewarded, but in fact have been punished for doing what they were told to do in a very efficient, effective way. I find some cross-purposes in some of the departments where people have done their best, but either it wasn't what was expected or someone changed their mind, and they don't care very much after that. Do you find much of this?

    Mr. Richard Neville: In my experience I haven't found much of that, Mr. Chairman.

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

    Now we will hear from Ms. Leung, please, four minutes.

    Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair.

    Mr. Neville, you will actually get some positive expression from me. You are managing this massive department and it's a huge job. Don't be discouraged. You are probably trying to do your best.

    But in the meantime, I have a question on this. Mrs. Fraser made a comment about your staff lacking the training and work practice to carry out their responsibilities. What have you done in that area? Have you made any improvement or redesigned things?

    Mr. Richard Neville: Yes, I'm pleased you asked that question.

    We have been spending a lot of time lately on training. We have been working with what is called TDC, Training and Development Canada, developing courses that would help officers in the field as well as managers across departments.

    As I mentioned earlier, we have issued a guide, which has a number of best practices. A guide is by definition helpful to others in terms of getting their work done.

    We've been working with associations, trying to ensure that in the curriculum at their conferences they've been able to focus on grants and contributions specifically.

    We've also, through the interdepartmental transfer payments advisory committee, which consists of 13 departments, been making known the concerns we have and trying to resolve them, as well bringing into play the best practices that have been developed.

    So I think we've done a lot toward helping departments and agencies, but I would ask my colleagues if there is something more they would like to add.

     Mr. John Morgan (Executive Director, Financial Management and Accounting Policy Directorate, Treasury Board of Canada Secretariat): If I may, Mr. Chair, add to what Mr. Neville said, the interdepartmental committee looking at transfer payments is comprised of 13 other departments and we're chairing it. It has been of immense help in developing the guide on transfer payments, helping us to identify the issues and some of the how-tos in delivering the programs.

    We're moving into the next phase with this committee where we've established a sub-group to look at training requirements and identify some of the training best practices in other departments and share those with others. We hope to move forward on this initiative now.

    Mr. Richard Neville: Mr. Chairman, if I may, Mr. Bruce Hirst, who is with us today at the table, is the chair of that interdepartmental transfer payment advisory committee.

    Ms. Sophia Leung: Okay, thank you.

    Also, I commented on how your job's not simple. Today I've been handed the summer career placement, and every summer each MP goes through that. I think it was a very carefully written document--that's the HRDC one. I think all of us know it, and it's a very good example. Any time you are questioned you could raise that.

    Mrs. Fraser, I have a quick question. You have commented that you're actually giving them three years. That's a lot of time. They should use it to improve whatever is necessary. You did say you wished they were providing guidance to departments. It's a very loose term. Would you like to be more specific as to what you mean by guidance?

    Ms. Sheila Fraser: As to the date of 2005, that's in the policy, so that is not our determination. Actually, I think three years is probably not too long to introduce a lot of these changes, if they want them.

    On the question of guidance, I think Mr. Neville may have responded to some of it. Some of it was on the training, a clearer direction to departments, because in our survey many people indicated they weren't comfortable with all of the roles they were being asked to fill. As well, we suggested that there might be a sharing of best practices in departments so that people were able to pick up new and better ways of doing things.

º  (1645)  

    Ms. Sophia Leung: Thank you.

    Mr. Richard Neville: Mr. Chairman, perhaps I could just reassure the member that we are committed to carrying out a formal analysis in the present fiscal year 2002-03, to assess the policy effectiveness and to ensure that the policy objectives are being met. So we will do a full evaluation in 2005, as per the requirements of the policy, but we are doing a formal analysis this fiscal year to see if the effectiveness is in fact there.

    The Chair: Thank you, Mr. Neville.

    The 479 different programs are an awful lot of different programs. I'm surprised there are that many different subjects and issues in the country that need the government's assistance. Why the 479 programs? And you indicate there are even more, because the small ones don't even count in there.

    Mr. Richard Neville: The short answer, Mr. Chairman, is that Canadians have asked for those programs.

    The Chair: Okay. And then the government gives. Right? Obviously? Am I correct?

    You mentioned program evaluation, and I had the impression that you were talking about real program evaluation.

    Mr. Richard Neville: Correct.

    The Chair: Can you tell us a little about your program evaluation? I have a private member's bill that's been languishing around for a number of years. It basically says program evaluation should be based on four criteria: (1) What is the public policy this program was designed to do? (2) Once you have the public policy articulated you can then say: “Is it meeting that objective? (3) Is it doing it efficiently and productively? (4) In this rapidly changing world that we live in, can you achieve the same or better results a different way?

    Mr. Richard Neville: First of all, it's based on our program evaluation policy, which is a new policy.

    The Chair: Do you articulate the public policy of that program?

    Mr. Richard Neville: We do, but we do a little something more than what you've enunciated, and that is, we have made it mandatory at the beginning of the development of the program to put in place the criteria that will be used for the evaluation at the end of the program.

    So everything you've stated is there. I would add that we have ensured that when you think through a new program and how you're setting it up that you factor in the results that you expect of that program and how you're going to be evaluating that program at the end of the exercise. And you don't just arrive at the end of the program and then think through what the criteria will be for that evaluation. So we're putting in place the criteria, the check marks that we are looking for at the end of the program.

    The Chair: And I compliment you on that, because I didn't go that far, but that's absolutely necessary. The people who are managing the program need to know on what basis it will be evaluated when it is evaluated down the road.

    A number of years ago I asked all departments for all the grants and contributions, and every department but one provided me with a significant stack of documents. I think it was the Department of Agriculture and Agri-Food that said they needed $8,000 to be able to extract this information, at which point in time I wondered what the chief financial officer of the department was doing if he needed $8,000 to find out where he was spending his money. Every other department was able to provide it free of charge.

    Mr. Neville, what about the CFO of the Department of Agriculture and Agri-Food? Is that an appropriate thing, or should he really be on top of the information?

    Mr. Richard Neville: Well, my take on it is that the senior financial officer of any department should have the wherewithal to know what programs are in that department and they should be in a position to provide that kind of information to you.

    The Chair: We've had quite a lot of talk this afternoon about guides versus instructions versus directives versus management that gets the job done.

    I've always been critical of the Treasury Board. “Critical” might be a tough word, but, yes, I've been critical of the Treasury Board for issuing guidelines by the thousand, but you don't police them. And am I now finding that you are going to be policing your own directives and guidelines, so that when you issue a directive saying “you shall do this” and “you will do that”, there will be some follow-up by the Treasury Board to find out if they have actually achieved what you said they have to achieve?

º  (1650)  

    Mr. Richard Neville: You heard me correctly, Mr. Chair. We have put in place an active monitoring policy, which requires us to monitor our policies against what departments are in fact doing and vice versa. This allows us to determine whether in fact departments are carrying out what we expect of them and to evaluate our own policies and make changes as required. That was not there previously, Mr. Chair. It is a new policy. It is in place, and that is basically what the ten portfolio teams are using.

    Having said that, Mr. Chair, there are three components to the policy. The first component is departmental responsibility. Departments will implement the act of monitoring in their own areas of responsibility. So departments also have a requirement to carry out active monitoring. The second component is for the Treasury Board Secretariat to work with departments to make sure that is in fact occurring. That's what the ten portfolio teams are all about. The third component is the policy centres. We have a number of policy centres in the comptrollership branch, but so does the human resources branch. The chief information officer also has a number of policy components. The policy components monitor their own policies to make sure they're being followed. With the three of them, I think we're pretty well covering off the overall government expenditure patterns.

    Supplementing that is our internal audit capability. We have a centre of expertise in internal audit and a centre of expertise in evaluation. Those are also part of the active monitoring policy in terms of ensuring we have a process that is functioning well.

    The Chair: You keep using the word “monitor”. It may be that through monitoring you become aware of unsatisfactory results versus satisfactory results. When you find unsatisfactory results through your monitoring, what are you going to do about it?

    Mr. Richard Neville: It depends on the seriousness of the problem. We have a grid that shows low risk to high risk, and depending on where you are in that grid vis-à-vis that particular issue, the required action is specified.

    The Chair: I congratulate you on this active monitoring, which I hope also includes policing, if I can use that definition of the word.

    As you know, I've also talked about the notion of the internal audit people in departments being in essence Treasury Board employees who have been seconded to the departments. It's very difficult for an internal auditor to criticize the deputy minister and the performance of programs under his direction if they are directly responsible to him on a line basis. Have you given any more thought to having the internal audit personnel in departments in essence seconded by the Treasury Board and to having them moved around so that they don't get embedded in a department and become comfortable with it?

    Mr. Richard Neville: As you're aware, Mr. Chair, internal audit personnel in a department usually report directly to the deputy minister--

    The Chair: That's my problem.

    Mr. Richard Neville: --or to a senior financial officer or a senior executive in that department. But there is a dotted line to my office in terms of any problems that may arise, and from time to time that option is exercised.

    The Chair: I would like to see the dotted line going to the deputy minister and the solid line to you, Mr. Neville.

    Some voices: Oh, oh!

    The Chair: Do you have comments on this, Ms. Fraser?

    Ms. Sheila Fraser: Mr. Chair, in our statement I indicated that departments have the principal responsibility for managing grant and contribution programs. To be somewhat less critical of the Treasury Board Secretariat, I don't think that many of those departments know what good management practice is.

    The Chair: I know, but I'm talking about--

    Ms. Sheila Fraser: They shouldn't have to have controls and policing. They should know what to do. To the deputy minister an internal audit is a valuable management tool so that the deputy minister knows what is going on, especially in the very large departments.

    My preference--and I don't know that we've taken a position in the office--would be that the internal auditor report to the deputy minister or a very senior person in the department, and that reports go to the Treasury Board Secretariat.

º  (1655)  

    The Chair: I take the position that the internal auditor in the private sector is usually removed...the reporting lines for the internal audit are different from the normal line of the organization. I would seriously ask that you give some consideration to that.

    Mr. Bryden.

    Mr. John Bryden: Mr. Neville, is there anything to be gained by reviewing how the Access to Information Act impacts on the program management of grants and contributions, whereby we can possibly make the operation of that program, regardless of the department, more transparent for all Canadians, but also for senior levels of management?

    My sense is that we could advance good management enormously if we enabled better transparency on the grants and contributions program, so individuals, including management, could see the operation of the program. Instead of having a hierarchical policing or management of the program, you could have a lateral management of the program. Then you could not only dip into what was happening in the various departments, but the colleagues of people operating the various programs could look over the shoulders of their other colleagues, always bearing in mind that certain things had to be kept confidential for the short term.

    Has Treasury Board Secretariat considered that type of option? Is that something that can be done?

    Mr. Richard Neville: As we speak, the Treasury Board Secretariat is responsible for reviewing the Access to Information Act and preparing a report that will be made available, in due course. I haven't been privy to all of the recommendations in the report, so I'm not really at liberty to disclose what's in it, but I understand it is broad-based and considers a number of components.

    Mr. John Bryden: I appreciate you don't want to anticipate what's in the report, but my question is really a question of principle directed at you, as a senior manager. Do you see some benefit in this type of approach to program management from the top? Rather than only hierarchical, can we not make it more lateral?

    Mr. Richard Neville: We have been expressing the view that we want to be more horizontal in our management. In that context, if horizontality will give you better results, as a question of principle, I'm certainly in favour of it.

    We have certainly spoken about horizontality more and more over the last few years. It's one thing to speak; it's another thing to show tangible results. I think we're still on the cusp of developing techniques that will give us the horizontal management approach we're looking for.

    Mr. John Bryden: I have one final comment. Mr. Neville has introduced me to a word I've never heard before. Was it horizontality?

    Mr. Richard Neville: Yes.

    The Chair: We'll have to bring that over here, Mr. Bryden.

    Mr. John Bryden: I have to tell you, Mr. Neville, you're probably pioneering an English usage, and I look forward to seeing how the translators manage that one.

    Thank you, Mr. Chairman.

    The Chair: Thank you, Mr. Bryden.

    We were just commenting that if we have horizontality, what do we have for the....

    Mr. John Finlay: It means keeping it on an even keel, Mr. Chairman.

    The Chairman: Thank you, Mr. Finlay.

    Just to wrap up, I'm certainly glad to hear the management style seems to be changing and the supervision and the control mechanisms are being reviewed.

    I have to compliment the President of the Treasury Board. Last May she introduced the division of supervision into audit and program evaluation. Please convey my appreciation to her. I believe that program is a significant advancement in the supervision and in ensuring the programs continue and are well managed from here on in.

    I look at 4.33 of the Auditor General's report. There are a number of items where there's a fairly serious failure problem. It showed that one in five was not confident or only somewhat confident that funding recipients needed the federal money to carry out their projects. That gets back to your 479 programs requested by Canadians that the government gives. But some people were not sure it was actually legitimate giving; one in five did not believe they were properly trained; one in four were not confident they understood their responsibilities under the financial administration; one in four were not confident they understood the Treasury Board policy, and so on. It's all there.

    These issues are going to be addressed, I presume, Mr. Neville.

»  (1700)  

    Mr. Richard Neville: Yes, Mr. Chairman, they will be addressed. I believe they're already being addressed.

    The Chair: That's good.

    It looks like everybody wants to get out of here. This is only Tuesday. It's not Thursday, you know. If there are no further comments, we will turn to our Auditor General for the closing comments.

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

    I'd just like to return to a question Mr. Bertrand asked about the transfer payments. Transfer payments to governments are not included. I would like to check if the transfer payment on the infrastructure program is in there because it is not a transfer to a government, but rather to projects. We will come back to the committee with the specifics.

    The Chair: I meant to raise that with Mr. Bryden, who talked about the three--non-profit, charitable, and for profit. There may be a fourth one as well, which is government transfers.

    Ms. Sheila Fraser: Yes, the specifics of the infrastructure. We'll come back on that question.

    I'd just like to say I'm pleased with the response we received from the Treasury Board Secretariat on this audit. They would appear to be addressing our concerns. I would hope that when we do a follow-up, we will be able to issue a very positive report on grants and contributions, at some point in the future. I could perhaps just suggest that the committee might like to receive updates on the action plan and on the results of the reviews as they are conducted by the secretariat.

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

    Perhaps you could take that comment under advisement, Mr. Neville, to keep the committee informed. Feel free to write to us any time.

    Mr. Richard Neville: It's not in every chapter that we agree with every recommendation of the Auditor General--

    Ms. Sheila Fraser: Oh. Just about all of them, right?

    Mr. Richard Neville: --but in chapter 4 we did agree in every case. We will take the recommendation under advisement. Thank you, Mr. Chairman.

    The Chair: Therefore, we do look forward to a very positive report. We have been talking grants and contributions for many years. The Auditor General has been on this issue for about ten years. I'm glad to see that progress is being made.

    Mr. John Bryden: We are making progress, Mr. Chair. I'd certainly say the contrary if we weren't, I'll tell you.

    The Chair: Progress is being made. There's no question about it.

    We shall call this meeting adjourned.