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37th PARLIAMENT, 1st SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Thursday, June 6, 2002

1535

Mr. Greg Thompson (New Brunswick Southwest, PC)

The Chair

Mr. Rob Walsh (Law Clerk and Parliamentary Counsel, House of Commons)

The Chair

1540

Mr. Greg Thompson

The Chair

Ms. Janice Cochrane (Deputy Minister, Department of Public Works and Government Services)

1545

The Chair

Mr. Guy McKenzie (Executive Director, Communication Canada)

1550

The Chair

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

1555

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

Mr. Philip Mayfield

Ms. Janice Cochrane

The Chair

Mr. Harb

The Chair

1600

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Mr. Ghislain Lebel

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

Mr. Ghislain Lebel

Ms. Sheila Fraser

1605

Mr. Ghislain Lebel

Ms. Sheila Fraser

Mr. Ghislain Lebel

Ms. Sheila Fraser

Mr. Ghislain Lebel

Ms. Sheila Fraser

Mr. Ghislain Lebel

Ms. Sheila Fraser

Mr. Ghislain Lebel

Ms. Janice Cochrane

Mr. Ghislain Lebel

Ms. Janice Cochrane

Mr. Guy McKenzie

1610

The Chair

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

Ms. Janice Cochrane

Mr. John Bryden

Ms. Janice Cochrane

Mr. John Bryden

Ms. Janice Cochrane

Mr. John Bryden

Ms. Janice Cochrane

1615

Mr. John Bryden

Ms. Janice Cochrane

Mr. John Bryden

Ms. Janice Cochrane

Mr. Guy McKenzie

Mr. John Bryden

Ms. Janice Cochrane

The Chair

Mr. Pat Martin (Winnipeg Centre, NDP)

1620

The Chair

Mr. Pat Martin

The Chair

Ms. Janice Cochrane

Mr. Pat Martin

Ms. Janice Cochrane

The Chair

Mr. Pat Martin

Mr. Guy McKenzie

Mr. Pat Martin

Mr. Guy McKenzie

Mr. Pat Martin

The Chair

Mr. Pat Martin

Ms. Janice Cochrane

Mr. Pat Martin

Ms. Janice Cochrane

Mr. Pat Martin

Ms. Janice Cochrane

Mr. Pat Martin

Ms. Janice Cochrane

1625

Mr. Pat Martin

The Chair

Mr. Pat Martin

Ms. Janice Cochrane

Mr. Guy McKenzie

The Chair

Ms. Phinney

Ms. Janice Cochrane

Mr. Guy McKenzie

Ms. Beth Phinney

Ms. Janice Cochrane

Mr. Guy McKenzie

Ms. Beth Phinney

Ms. Janice Cochrane

The Chair

Ms. Sheila Fraser

1630

Ms. Beth Phinney

Ms. Janice Cochrane

Ms. Beth Phinney

Ms. Janice Cochrane

Ms. Beth Phinney

Mr. Guy McKenzie

Ms. Beth Phinney

The Chair

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

1635

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Mr. Harb

The Chair

Mr. Greg Thompson

The Chair

Ms. Sheila Fraser

Mr. Greg Thompson

Ms. Sheila Fraser

1640

Mr. Greg Thompson

Ms. Sheila Fraser

Mr. Greg Thompson

Ms. Sheila Fraser

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

Mr. Greg Thompson

Ms. Janice Cochrane

The Chair

Mr. Alex Shepherd (Durham, Lib.)

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

1645

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

1650

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

Mr. Alex Shepherd

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

Ms. Val Meredith

Ms. Janice Cochrane

Ms. Val Meredith

Ms. Janice Cochrane

Ms. Val Meredith

Ms. Janice Cochrane

Ms. Val Meredith

1655

Ms. Janice Cochrane

Ms. Val Meredith

Ms. Janice Cochrane

The Chair

Ms. Sheila Fraser

Ms. Val Meredith

Ms. Janice Cochrane

Ms. Val Meredith

Ms. Janice Cochrane

Ms. Val Meredith

Ms. Janice Cochrane

Mr. Guy McKenzie

Ms. Val Meredith

Ms. Janice Cochrane

1700

The Chair

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

Ms. Janice Cochrane

Ms. Sophia Leung

Ms. Janice Cochrane

Ms. Sophia Leung

Mr. Guy McKenzie

Ms. Sophia Leung

Mr. Guy McKenzie

1705

Ms. Sophia Leung

Mr. Guy McKenzie

Ms. Sophia Leung

Mr. Guy McKenzie

Ms. Sophia Leung

Ms. Janice Cochrane

Ms. Sophia Leung

Mr. John Bryden

The Chair

Mr. John Bryden

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

1710

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

The Chair

Mr. Shawn Murphy

Ms. Sheila Fraser

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

1715

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

Mr. Shawn Murphy

Ms. Janice Cochrane

The Chair

Mr. Mac Harb

Ms. Janice Cochrane

Mr. Mac Harb

Ms. Janice Cochrane

Mr. Mac Harb

Mr. Guy McKenzie

1720

Mr. Harb

Mr. Guy McKenzie

Mr. Harb

Mr. Guy McKenzie

Mr. Harb

Mr. Guy McKenzie

Mr. Mac Harb

Mr. Guy McKenzie

Mr. Mac Harb

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

1725

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

The Chair

Ms. Janice Cochrane

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 059

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, June 6, 2002

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, everybody, and welcome to another meeting of the Standing Committee on Public Accounts. Our order of today is, pursuant to Standing Order 108(3)(e), consideration of the report of the Auditor General of Canada dated May 8, 2002, on Groupaction Communications.

Our witnesses today are, from the Office of the Auditor General, Ms. Sheila Fraser, the Auditor General of Canada, from the Department of Public Works and Government Services, Ms. Janice Cochrane, the Deputy Minister, and from Communication Canada, Mr. Guy Mc Kenzie, the executive director.

I have a couple of things before we start, ladies and gentlemen. As you know, we've had a steering committee and we have been assisted by Mr. Rob Walsh, the law clerk and legal counsel to the House of Commons, who is at the table today to assist the committee if we have any questions of law that we want to direct to him, and they would have to be directed through the chair.

This issue, as you know, is a sensitive one, because there is a criminal investigation under way at this time. It is not before the courts, because no charges have been laid. We don't know who's being investigated and we don't know exactly on what basis that investigation is going forth. All we have is the report of the Auditor General of Canada. Our role as the public accounts committee of the House of Commons is to investigate maladministration in the government. We're not here to conduct a parallel criminal investigation to try to beat the RCMP. The national police and other agencies have statutory responsibility to investigate criminal offences or allegations of criminal wrongdoing. We do not have that mandate. Our mandate is to investigate maladministration in departments. I hope everyone recognizes our responsibility to go down that road and not move into trying to seek criminal activity. If one goes down that way, I think I will rule the questions out of order, because, as our counsel advised the committee on Tuesday, we could very seriously compromise a criminal investigation.

The second point is, because it is a serious issue we're dealing with today, rather than having eight-minute rounds and four-minute rounds, I'm going to have an eight-minute round all the way, so that everybody will have the opportunity to speak for eight minutes. We will start off, in the usual fashion, with the Alliance and the Bloc and the Liberals, but since we want everybody to speak and mix it up a little bit, we'll then go to Mr. Martin from the NDP, to the Liberals, to the Conservatives and Mr. Thompson, to the Liberals, then to Ms. Meredith, and so on. I think by that time we'll have pretty well given everybody an opportunity to speak for eight minutes.

Mr. Thompson.

Mr. Greg Thompson (New Brunswick Southwest, PC): On a point of order, Mr. Chairman, could you go over, for the sake of clarity,our questioning and implications regarding a criminal investigation, because I think you went beyond the recommendations made and the observances made and brought to our attention by Mr. Walsh and his legal brief? It appears to me that you overstepped the recommendations he in fact made to this committee, Mr. Chairman.

The Chair: Then I'll ask Mr. Walsh to summarize briefly his recommendations to the committee about how testimony given to this committee could affect a criminal investigation.

Mr. Rob Walsh (Law Clerk and Parliamentary Counsel, House of Commons): Mr. Chairman, it's my recollection that I didn't make any recommendations to the committee as such. I made some observations about what the implications might be with respect to evidence heard by this committee where that testimony reflects the facts or circumstances pertinent to an investigation by the police that might be under way or might at some future time take place. In particular, I spoke about the concept of derivative evidence, where, in any prosecution of an individual, the crown cannot rely upon testimony or evidence obtained in proceedings that are protected by law, either under the Canada Evidence Act or, in this case, parliamentary privilege. And more to that point, the crown would have to show where the evidence it is presenting is the same as was presented in those protected proceedings, that it obtained its evidence by some independent means other than reliance on the testimony in those protected proceedings, and further, that it came to the appreciation of the significance of the evidence it's relying upon without reliance on the evidence given in those protected proceedings.

So the nature of my observations was to say that where there is a duplication between the testimony given before this committee and testimony or facts or evidence that might be generated in a police investigation for use in any eventual prosecution, that duplication could become problematic for the investigating authorities and for the crown where they wish to present that same evidence in a prosecution. They will have to distinguish it from the evidence as found and presented in the protected proceedings, and in some circumstances, that could be difficult.

The Chair: There you go, Mr. Thompson. That's the summary by the law clerk of the House of Commons saying we do have to be careful that we don't compromise a criminal investigation as we continue to pursue our role, which is to investigate the maladministration within government that has come to light by virtue of the allegations in the House and the investigation by the Auditor General of Canada and her report that is now before us. Is that okay?

¹ (1540)

Mr. Greg Thompson: No. I would say let's proceed, Mr. Chairman, and see where this leads.

The Chair: See where it gets us, okay.

Monsieur Lebel.

[Translation]

Mr. Ghislain Lebel (Chambly, BQ): Yes, Mr. Chairman, I have a question. If our questions must not concern acts of a criminal nature, but rather seek to improve the contract awarding system, that means that we can ask questions other than those concerning the three contracts at issue.

My question is to you, Mr. Chairman.

[English]

The Chair: We're dealing with maladministration within the department. We're not, as I mentioned, conducting a criminal investigation here. That is the guidance I can give to the committee members: be careful in the questions you ask, because the testimony could affect a criminal investigation and, as the law clerk pointed out, could actually make it more difficult for the prosecution to enter evidence in court.

The Auditor General presented her report to the committee the last time she appeared, so she does not have a report to read this afternoon. So we will start with an opening statement from Ms. Janice Cochrane, the Deputy Minister of Public Works and Government Services Canada.

Ms. Janice Cochrane (Deputy Minister, Department of Public Works and Government Services): Thank you, Mr. Chair.

I am pleased to have this opportunity to appear before you this afternoon as part of your examination of the Auditor General's report on the three contracts awarded to Groupaction Marketing. These contracts fall within the scope of the sponsorship program. Although this program was transferred to Communication Canada in September 2001, I would like to provide you with a short summary of events leading up to the transfer and beyond. I should mention that the events that gave rise to the audit took place before my appointment as deputy minister in April 2001, and thus my personal knowledge is limited.

As you know, Public Works and Government Services Canada is a large and very complex organization. It employs 14,000 or so people, and its estimates add up to $2.1 billion annually. Prior to September 2001 the sponsorship program was managed by my department. The program was created in 1997 to inform Canadians about federal government programs and activities across the country. It has an annual budget of roughly $40 million.

[Translation]

Through this program, the government of Canada supports a large variety of sporting, cultural and community activities in all regions of the country.

It is the practice of my department to conduct periodic audits of its programs. In early 2000, a directed audit was initiated by my predecessor, Ran Quail, on the Sponsorship Program. That audit was conducted by the internal audit section of the department. I should point out that this was not an audit of value for money, but rather a management audit exclusively on processes and practices.

[English]

The audit revealed a number of very serious deficiencies in management practices of the sponsorship program, which was managed at the time by the former departmental communication coordination services branch, known as CCSB. As a result of this internal audit, an action plan was developed in April 2001 to improve the management of the sponsorship program. The plan was implemented and corrective measures were put into place, such as new guidelines, better documentation of files, and post-mortem reports, to name a few. On March 6, 2002, a follow-up review to the 2000 internal audit was completed. It confirmed that corrective measures with respect to the documentation of files had been taken, and no recommendations for further action were made.

In the meantime, in September 2001, the CCSB and the Canada Information Office were merged to form Communication Canada, and the sponsorship program was transferred from my department to Communication Canada. The procurement function, however, of the program remains with my department.

On March 19, 2002, my former minister asked the Auditor General of Canada to review three contracts awarded between 1996 and 1999 to Groupaction Marketing. Following receipt of the Auditor General's report, I directed that a detailed review of all sponsorship files from November 1997 to March 31, 2000, be carried out to ascertain whether there were additional cases where the crown might not have received value for money. I can assure all members of my commitment to dig very deeply.

I want to clarify how my colleague Guy Mc Kenzie and I have divided responsibilities for dealing with sponsorship issues. As I indicated earlier, I became deputy minister in April 2001, and in September 2001 responsibility for the program was transferred to Communication Canada. Following the Auditor General's report in May of this year, we agreed that my department would take the lead on the examination of the files from November 1997 to March 31, 2000, since the department was responsible for the program during that period. We have carried out this work with the full cooperation of Communication Canada.

I want to conclude by repeating that the management practices upon which Ms. Fraser commented were completely unacceptable. They do not reflect, even at a minimum, the probity taxpayers have a right to expect.

Thank you.

¹ (1545)

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

Now we'll turn to Mr. Guy McKenzie, the executive director of Communication Canada, for his opening statement.

[Translation]

Mr. Guy McKenzie (Executive Director, Communication Canada): Thank you, Mr. Chairman.

Members of Parliament, it gives me great pleasure to be with you today to talk about Communication Canada, more particularly about our efforts to improve the management of the Sponsorship Program.

Communication Canada was born in September, 2001, out of the merger of two organizations: the former Canada Information Office and the former Communications Coordination Services Branch of Public Works and Government Services Canada.

The roles of the two organizations were complementary but with different programs and services. It was, therefore, logical to regroup their human and financial resources and their expertise within the same organization.

[English]

The one exception, however, as you've heard--and this is an extremely important point--was that the procurement for communications services remained with Public Works. The goal was clear, to improve our ability to provide information to Canadians on the program and services of the Government of Canada. The very first task for me, as the head of the new organization, was to build an effective and innovative organization, while creating synergy between our different programs. Most of the transition was completed by December 2001.

At Communication Canada we provide citizens with direct access to information and services, whether it is by telephone, by Internet, or in person. To characterize it, last year this meant 1.3 million calls to 1-800-O-CANADA, 44 million page requests on the Canada website, and 1.2 million visitors to fairs and exhibits.

[Translation]

It is in this context that one recognizes why the Sponsorship Program is highly valued by the communities and event organizers who use it. It fits in well with our mandate: to promote government programs and services across the country through increased public awareness of the government of Canada. That however does not mean—and we agree entirely—that there have not been problems associated with this program.

[English]

As the minister stated on Tuesday night at the Committee of the Whole, a series of corrective measures have been applied to management of the sponsorship program. My colleague just referred to the internal audit. As she mentioned, an action plan with stricter procedures for terms and conditions of payment, invoicing, and monitoring was also immediately developed. Furthermore, since it came under Communication Canada responsibility last fall, the sponsorship program has undergone additional improvement.

My first decision was to manage the program in a larger accountability structure that I put into place following the creation of Communication Canada. This means clearly the program now benefits from increased staff support and analysis under sustained management direction of an assistant deputy minister, a director general, a director, and an analyst.

Second, in February 2002 Communication Canada elaborated an improved management framework for the sponsorship program, which included, among other things, a focus on promotion of government programs and services, as opposed to merely displaying the word mark; a clearer definition of objectives, priorities, and target clientele, meaning, for example, that advertising is no longer eligible under the program; higher expectations and a closer monitoring of agencies, which includes surprise checks during the events; and detailed analysis of the files and the post-mortems.

In March 2002 the follow-up review of the sponsorship files required in the action plan was completed. The results indicated that almost all files contain the documents required by the sponsorship management process.

¹ (1550)

[Translation]

On Tuesday night, we all heard the minister talk about the range of questions and possibilities he is considering for this program in the future. I can assure you that Communication Canada will be there to offer him the best advice and options possible.

Permit me to add that we will also offer our complete collaboration to the Auditor General, as we did with her audit of the three contracts we are dealing with today.

Thank you, Mr. Chairman. If you have questions, I would be pleased to respond.

[English]

The Chair: Thank you, Mr. Mc Kenzie.

Now we'll turn to the questions. Mr. Mayfield.

Mr. Philip Mayfield (Cariboo—Chilcotin, Canadian Alliance): Thank you.

I want to thank you, Mrs. Fraser, you, Ms. Cochrane, and you, Mr. McKenzie, for coming today. I'm interested in knowing what you have done and the background of what you have done.

Ms. Cochrane, you mentioned in your statement that following receipt of the Auditor General's report, you directed that a detailed review take place. Following your direction, are you personally aware of the details of that review?

Ms. Janice Cochrane: Yes, I am. We have created a dedicated unit within the Department of Public Works that, on a full-time basis, is reviewing and scrutinizing. It is very much a hands-on exercise.

Mr. Philip Mayfield: Okay. Thank you.

There was an announcement saying there were two champions on values and ethics appointed by the clerk of the Privy Council, and you're one of those champions, I believe. In the announcement it says:

Given the horizontal nature of the file, the DM champions play an important role in coordinating public service values and ethics activities across all portfolios, while providing general direction on the management of this issue across the public service.

I believe this was issued in 1999. I was wanting to ask you, Ms. Cochrane, whether you think the actions of the officials in your department were ethical?

Ms. Janice Cochrane: I would say that what we are dealing with is maladministration, very poor administrative and management practices. I wouldn't go so far as to say they were unethical. In fact, the department has a very well developed ethics program that is often cited as an example to other departments. It goes back to 1998 and an initiative that was undertaken by my predecessor. It includes many different elements, such as the statement of ethical values, education development training, mandatory ethics training for departmental employees, communications, and that sort of thing.

Mr. Philip Mayfield: But what occurs to me is that the Auditor General has talked about every rule in the book being broken, and at the conclusion of your statement you seemed to indicate that things were way off the tracks. I don't know that I want to spend the afternoon debating what ethics means, but I would like to ask you, in light of what did happen, as there are certainly more than one or two people involved in this, do you think there's adequate protection for public servants if they're asked to do something unethical in the form of a directive, either departmental or political? Do you think there's protection for these people if they turn out to be disturbed by what is happening?

Ms. Janice Cochrane: I believe there is. I believe the department's ethics framework, coupled with the more recently introduced policy on internal disclosure, provides those kinds of safeguards.

Mr. Philip Mayfield: Why would it not be obvious to managers of the department that something is really, seriously wrong if people are aware of it? Is there a culture of this kind of mismanagement? What would be the reason for it?

Ms. Janice Cochrane: I can't speculate on what the reasons were behind the mismanagement or the poor management practices that occurred during this particular time. I can say with confidence that there is not a culture within the department of such practices, and I think we have a number of measures in place to ensure that those kinds of practices are not extant within the larger Department of Public Works.

¹ (1555)

Mr. Philip Mayfield: Another statement that comes out is:

Deputies and management teams are responsible for setting the tone from the top and for creating an environment that will encourage a culture where the management and the decision-making process are based on values and ethics.

So I would like to ask if you think this was done in your department before you came on the scene?

Ms. Janice Cochrane: I believe the framework was in place under which that could have happened. I can't comment personally on whether or not specific measures were taken pursuant to that program.

Mr. Philip Mayfield: I'd be interested, as you were appointed as a co-champion of ethics, in what influence you may have had in this type of situation. Across all departments, the values of the civil service are higher than what we see displayed in the report of the Auditor General. Could you comment briefly on that, please?

Ms. Janice Cochrane: I would like to clarify the question, to be certain I'm answering the right question. You're asking what the role of the champions would have been in promoting those kinds of ethical practices?

Mr. Philip Mayfield: I was wanting to know, first of all, if this ethical application was applied to your department before you came and what your role was in that?

Ms. Janice Cochrane: It was not the role of the champions to oversee ethical practices within departments, but rather to encourage deputy ministers and senior executives to put the frameworks in place to make that happen. As I indicated earlier, the view is that the ethics program introduced in 1998 in the Department of Public Works is a model for other government departments.

Mr. Philip Mayfield: Another statement says “a communications program that focuses on ethics, management, action, and decision-making has been established.” That was an announcement. Does this program seem like it was effective to you?

Ms. Janice Cochrane: With the activities that took place between 1997 and 2001 in the communications branch in relation to the sponsorship program, no.

Mr. Philip Mayfield: Have the shortcomings of this been pinpointed?

Ms. Janice Cochrane: Absolutely, they've been pinpointed.

Mr. Philip Mayfield: I'm glad to hear that. Could you tell us what these shortcomings were briefly?

Ms. Janice Cochrane: There were a number of shortcomings identified in the internal audit that was carried out in 2000. The internal audit pointed out that the practices did not meet the requirements of Treasury Board policy on government contracts, that decision-making on sponsorships was subjective, that there was no audit trail in the files, that the approval processes were ad hoc, that there was inadequate management framework to ensure value for money. But the review also concluded that there was no evidence in the files to indicate that there was a violation of the Financial Administration Act or any criminal behaviour.

Mr. Philip Mayfield: Part of the ethical program has some statements. I want to read them, I think there are nine of them, and I'll let you respond to them. If you don't remember them, make notes, because the chairman isn't going to give me time.

In doing our jobs we: uphold the public trust; act and negotiate in good faith; work within the law; speak honestly; use processes that are visible to all; act in a fair and considerate manner; deal with people equitably and with civility; seek, consider, and value input; accept the consequences of our actions.

Would you say these statements are fairly represented in what we're discussing today, and if not, why are there such shortcomings?

Ms. Janice Cochrane: I would have to go back and address each one of these individually to be fair.

The Chair: I do understand the constraints the members are under with time, so perhaps if you'd like, you could give a written response to this committee.

Mr. Mac Harb (Ottawa Centre, Lib.): On a point of order, Mr. Chair, since this is televised, I would propose unanimous consent for the deputy minister to answer my colleague's question.

The Chair: Okay, fine.

º (1600)

Ms. Janice Cochrane: I'll try as best as I can. I'm basing my answers only on the information I have as a result of the audit. I do want to point out that the audit did not conclude that there was any dishonesty or malice or criminal behaviour or intent. It was an audit that disclosed very serious deficiencies in management practices.

The Chair: You're talking about the Auditor General's audit?

Ms. Janice Cochrane: I'm talking about the audit that was done in 2000, and I believe the member's questions to me related to the behaviour of officials during the time covered by the audit.

There's no evidence that there was bad faith. There is no evidence that people did not work within the law. There is no evidence that they did not speak honestly. There is no evidence that they didn't treat people equitably and with civility. There is evidence that they did not necessarily seek, consider, and value input; that's a fair observation, I believe. Also, they did not, at least based upon the evidence I have, uphold the public trust, which I would interpret to mean applying principles of prudence and probity in the management of public funds.

The Chair: Thank you very much, and thank you, Mr. Mayfield.

Monsieur Lebel.

[Translation]

Mr. Ghislain Lebel: Thank you.

On what basis, Madam Auditor General...? According to Ms. Cochrane, the internal audit they did of their own business show minor transgressions at most. Yet you have, I don't know why, on the basis of these minor transgressions, referred the affair to the RCMP. What led you to refer this file to the RCMP if the transgressions were not really serious, as the department's own internal audit seems to show?

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

We were led to refer the file to the RCMP for several reasons. First of all, former employees, particularly executive directors, told us in their statements that they did not respect the Financial Administration Act, which requires evidence before authorizing any payments. Therefore, there was a breach of this legislation. There's also the fact that we do not need proof of illegal activities. If we have any doubts or suspicions, under government policy, we must refer the files to the appropriate authorities.

The fact that we were unable to find the reports, the fact that we paid for advice for which there is no documentation and so on led us to refer these files to the RCMP, first of all in order that they be reviewed, and if the RCMP decides it is appropriate, that an investigation be undertaken.

Mr. Ghislain Lebel: I'm very grateful for your answers, but as you know, we have a time limit. Therefore, I would ask you to speed up your answers somewhat.

Madam Auditor, I assume you understand that it would be impossible to begin referring each and every one of our public servants to the RCMP because they forgot to carry out some part of their work: there are thousands of them. Generally speaking, the boss can complain about his or her employee, but from there to referring them to a police inquiry...

You say you had some doubts. Can you tell us what the nature of these doubts was, and if these doubts were serious? Did these doubts involve breaches of the Code of Ethics? Madam says that this does not involve the Code of Ethics, that no one has contravened the Code of Ethics.

Ms. Sheila Fraser: Mr. Chairman, I would like to reiterate that we have only audited three contracts. Therefore, we cannot generalize beyond these three contracts, but in these contracts, the practices that we have seen are not at all the usual ones that we find when we audit government files. The fact that there was very little documentation and the fact that we could not find the reports or anything else meant that we were facing what I felt was a worrisome situation. This is why we decided that some additional review was necessary.

º (1605)

Mr. Ghislain Lebel: Madam Auditor General, I believe this is found under sponsorships, that is in the $40 million Mr. McKenzie referred to, is that correct?

Ms. Sheila Fraser: These three contracts are part of the advertising services; they are not sponsorship contracts.

Mr. Ghislain Lebel: There's where I have some difficulty, but perhaps it's just technical. There are only two parties involved in this matter: the government and Groupaction. There's no third party or sponsor who is a beneficiary. In the end, it is providing a service.

Ms. Sheila Fraser: Yes, that is true.

Mr. Ghislain Lebel: Could we say that that expenditure is for a service or product provided to the government?

Ms. Sheila Fraser: Yes.

Mr. Ghislain Lebel: When the government buys a chair, for example, this won't be found in the sponsorships financial statements. It is found elsewhere in the budgetary items, but not under the $40 million, generally speaking.

Ms. Sheila Fraser: Mr. McKenzie may be better able to explain this than myself, but in this program, there are three components: advertising, sponsorships, and surveys. There are three components that are managed by this organization. The three contracts in question were part of the advertising expenses. It was to provide a service. It was to give advice, to analyze potential sponsorships, etc. Therefore, it was a consultation requested by the government.

Mr. Ghislain Lebel: Does the presence of these expenditures here not bother you? They don't seem to correspond to the three components that you have just identified. They are neither advertising nor sponsorship. It seems to me it is clearly a service provided to the government.

Ms. Sheila Fraser: We are told they are for advertising and related services. Therefore, the analysis of possibilities, the analysis of events for a potential sponsorship is related. Quite honestly, I must say that that is not what concerns me.

Mr. Ghislain Lebel: All right.

I now have a question for Ms. Cochrane. One of these contracts went from $250,000 to $500,000 almost overnight. I'm not imagining this: I have the documents here. How can a 100% increase like this be justified? What supporting argument can there be to justify this?

Ms. Janice Cochrane: That is a very good question, Mr. Chairman, and I will try to answer it.

In fact, there is no good explanation.

[English]

The files do not contain adequate information to justify the sudden increase in the amount.

[Translation]

Mr. Ghislain Lebel: What is the basic criterion for awarding a sponsorship? Why $800,000 in one case, $5,000 in another, a million dollars in another case and $400,000 for the next? What are the criteria for establishing these sponsorships?

Ms. Janice Cochrane: I will ask Mr. McKenzie to answer that question.

Mr. Guy McKenzie: In the present context, Mr. Lebel, I would like to make the following clarification. What we were discussing a moment ago is the subject of a new management framework and would no longer be allowable under sponsorships.

Now, in the assessment process, we require a letter and a written proposal for each project. It is very clear. The proposal has to be made directly by the organizer of the event; no verbal proposal is acceptable. If the proposal is not sent by the event organizer, it is not registered. Therefore, the organization as such sees it. It must include details regarding the organization, where the event will take place, the date and the description of the event, the target audience, elements of visibility, the total budget and the budget request, the number of persons reached, etc. The administration is managed according to the visibility obtained, the number of people reached, the clientele that has been specified and the program objectives that also have been specified.

º (1610)

[English]

The Chair: Merci beaucoup, Monsieur Lebel.

Mr. Bryden.

Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Lib.): Thank you, Mr. Chairman.

Ms. Cochrane, in reply to Mr. Mayfield's question, you said you can't speculate on the reasons for the appalling mismanagement cited in the report. Why not? That's really the reason we've called you before us.

Ms. Janice Cochrane: I believe you called me before you to indicate what facts I had, what evidence there may have been to support the activities that took place during that time. I really am at a loss to explain. I can't speculate as to why that happened.

Mr. John Bryden: Let's try it another way. It would appear some of these appalling mismanagement practices were engaged in by one executive director in particular. That being the case, who did he report to? Was there anyone watching him? How could he possibly have done these things, these failures, shall we say? Was there no oversight? Does no one look in on these people?

Ms. Janice Cochrane: There were two executive directors during the period in question. The first executive director reported to an assistant deputy minister. The second executive director reported to the deputy minister at the time. As to the kinds of control and oversight that may have been extant at the time, again, I'm at a loss to explain what may or may not have happened. The delegations were in place. These individuals had a responsibility to ensure that they were following program guidelines and that they were properly certifying, in accordance with the Financial Administration Act, that goods and services were received in such a way that value for money from the taxpayers could be shown. That did not happen, and our records don't indicate why.

Mr. John Bryden: If I may observe, that's because you don't have documentation, if I understand correctly from the Auditor General. That being the case, is there no mechanism in place to ensure that the documentation is created? I point out to you that even access to information doesn't help if the documents don't exist. Why were there no documents?

Ms. Janice Cochrane: I can't, again, account for why there were no documents during that period of time. I agree with the conclusions of the Auditor General, and even the department's own internal audit, saying that is unacceptable. Those practices no longer exist. We have adequate control measures in place within the department right now to ensure that the kind of oversight and monitoring that is required takes place. We have a rigorous audit and evaluation process. I'm satisfied that the deficiencies that were extant during that period no longer exist within the practices of the department. As to why, during that period of years, the degree of oversight you might have expected to be applied was not applied, I cannot comment on that.

Mr. John Bryden: Are you going to be able to get to the bottom of it ever, because that's absolutely essential to this? A management system broke down. Was it the failure of superiors to observe the actions of people below them? I am not clear where the responsibility is, but it's obviously a failure in not keeping the documents. Have you asked yourself or are you examining who's responsible for maintaining those documents? Do you have the mechanisms in place even now?

Ms. Janice Cochrane: We have the mechanisms in place now. As for the past, as you know, the Auditor General is going to launch a wider review, a value-for-money audit of the sponsorship and advertising and public opinion research activities for a period from the mid-nineties to the present. I'm not certain if she's completed her decision on the scope and period of the review. That review should certainly be able to get to the bottom of some of those issues.

In the meantime we are doing our own detailed file review to try to identify, by putting together and aggregating contracts and payment information, whether or not there are other Groupaction-like issues out there that need to be dealt with. I'm confident that the combination of the two processes will bring to light some of this information that's missing.

I should also tell you, in addition, I will be looking at conducting an administrative review, as is contemplated by the policy, but under the Financial Administration Act, on losses of money, offences, and other illegal acts against the crown in the activities of employees of the former CCSB during that time, to ascertain whether or not the activities amounted to a breach of the Financial Administration Act. Disciplinary measures may then have to be taken.

I think we have a variety of avenues available to us now to try to get to the bottom of what happened, why, and who should be held accountable.

º (1615)

Mr. John Bryden: I accept, for now at any rate, that you can't explain why these appalling management practices occurred, centring around two individuals, I suppose. Are you examining the effect these two individuals have had on the officials around and below them? I observe from my own life experience that when you have a bad apple in the barrel, it usually affects others. Are you examining the negative effect it's had on the officials around them?

Ms. Janice Cochrane: We're not limiting the administrative review to those two individuals.

Mr. John Bryden: Okay, let me try that another way. Usually when things like this occur, it has a hugely negative effect on morale, on ethics, on all the people around, and they get discouraged. They think this is the way it's done and they model themselves on that. This is where the appalling and dreadful problem really arises: it's not just one individual, it's the damage he or she does to the people around him or her. Can we just elaborate a little? Are you looking into this? I'm not just after whether or not they've done wrong, I want to know whether or not their morale has been destroyed and what you are doing about it.

Ms. Janice Cochrane: There was no evidence of a destruction of morale during that time. Mr. McKenzie may be able to comment further, since the staff in that branch report to Communication Canada and have since September of last year.

Mr. Guy McKenzie: The short answer is that the people who were there are no longer there, but are doing something else with choice of work and stuff like that. As to the morale in our shop, we are taking every measure we can to train the people properly with the rules, regulations, Financial Administration Act, and so forth. The training has taken place and keeps going places. We also have internal audits being done. We are a very small place, we have just been created, so we are basically building that capacity, but we have not waited. We hired Consulting and Audit Canada, very capable people, to help us in that domain, and there are ongoing reviews being done of that nature as well. So we are taking very proactive measures, and I think the morale issue relates more to the quantity of work we have right now.

Mr. John Bryden: You've had a chance to review the files on this, so may I just come at it one more time? Can you just give us a sense, without going into the detail, whether we are dealing with an isolated problem or a problem of internal ethics? You've got to give us some idea, as the senior official now, of what you see in the past that you want to make sure is not current.

Ms. Janice Cochrane: I think we were seeing a number of things, and as I indicated in my own opening remarks, they are simply unacceptable management practices. Many of these issues were drawn out in the internal audit conducted in the year 2000, from which an action plan was put into place and corrective measures were taken. I'll repeat some of the points I raised earlier. The decision-making was very subjective. There appears to have been no framework in place for assessing proposals. There was no audit trail. The approval processes were very ad hoc. There were no criteria against which to assess proposals. There was, in effect, no management framework in place at all to ensure value for money.

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

Mr. Martin.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you, Mr. Chair, and thank you, witnesses, for being here.

I'd like to start with Janice Cochrane. In the internal audit of 2000 you mentioned there was no clear evidence of criminal wrongdoing, and I understand that's not your job, and neither is it our job, it's for the RCMP. Was there evidence of political interference? Do you have any knowledge of perhaps senior officers or senior bureaucrats being directed to break these rules in some way?

º (1620)

The Chair: Mr. Martin, I have to say to Ms. Cochrane, before you answer that question, I would again remind you of the advice by our law clerk that if testimony comes at this meeting that indicates what could be a line of investigation by the RCMP, it may make their investigation more difficult. Do you still want to put the question, Mr. Martin?

Mr. Pat Martin: Not to argue with you, Mr. Chair, but I don't believe that line of questioning would have anything to do with the RCMP's investigation, because the issue of political interference is one that won't be dealt with by either the Auditor General and her investigation or the RCMP in theirs.

The Chair: I've just cautioned you, but if you want the question to stand, go ahead.

Ms. Janice Cochrane: I'm not at all uncomfortable with the question. There is no evidence in the internal audit or otherwise that there was political interference. All the evidence points to extraordinarily poor management practices.

Mr. Pat Martin: As a very senior civil servant, what do think would motivate a senior bureaucrat to clearly break all the rules, conduct themselves in such a cavalier fashion, and leave such an embarrassing trail unless someone directed them to do so for some other purpose? In your own mind, can you think of a reason?

Ms. Janice Cochrane: I find it difficult to explain.

The Chair: I think we are dealing with maladministration in the government, Mr. Martin, not with the personal opinions of the witnesses.

Mr. Pat Martin: Fair enough.

Mr. McKenzie, the person who had your job prior to you was a Roger Collet?

Mr. Guy McKenzie: Immediately before me it was Marc Lafrenière, and prior to him it was Mr. Collet, as part of Canada Information Office before the merger.

Mr. Pat Martin: Right. Were you aware that people who worked with Mr. Collet claimed that he often said he was in touch with Jean Pelletier in the PMO on a regular basis?

Mr. Guy McKenzie: Mr. Chair, I'm sorry, this is hearsay. We're talking about facts.

Mr. Pat Martin: I'm just asking him if he has heard that allegation.

The Chair: Mr. Martin, as I said, our focus is the maladministration within the government. This is not--

Mr. Pat Martin: Well, what led to the maladministration, Mr. Chair?

The Chair: Conversations and so on are not necessarily government conducting its business, so I'm going to rule that question out of order.

Mr. Pat Martin: All right.

Let's try this, then. When an invoice for services comes in and a cheque is signed to be released by Public Works, what level of bureaucrat has the sign-off authority?

Ms. Janice Cochrane: There are many levels of sign-off authority within any government department.

Mr. Pat Martin: Let's stick to the three Groupaction contracts. Who would have the authority to pay those $500,000 cheques?

Ms. Janice Cochrane: The organization, at the time it was part of my department, was a very flat organization. The only individual who had, essentially, sign-off authority was the executive director at the time.

Mr. Pat Martin: And who would be ultimately responsible for reviewing the work to see there was value for money, although I realize that's one of the shortcomings you've pointed out in your internal audit? Whose job would it have been to make sure the job was performed in such a way that taxpayers were getting value?

Ms. Janice Cochrane: It is the responsibility of the manager who signs off under section 34 of the Financial Administration Act to know they are getting value for money before the invoices are submitted to the finance branch for payment. It is the individual officer's responsibility. It is a very solemn certification, and it is their responsibility to know what they're doing.

Mr. Pat Martin: Has there been any disciplinary action at all associated with these files? And as a second angle to that, do you know of any cases where that officer has simply said, I won't sign this cheque, because I don't believe the work was done adequately? Did it come up in your internal audit where cheques were being turned away because the officer wasn't satisfied the work was performed adequately?

Ms. Janice Cochrane: That issue did not arise in the internal audit, and I'm not personally aware of any situation where that may have happened.

There have not been any disciplinary measures taken to date. I did indicate, however, that at the appropriate time I do intend to do an administrative review. The Treasury Board policy on losses of money and other illegal acts against the crown requires that when there is an RCMP investigation under way, we consult with the RCMP as to the timing of such an investigation, to make sure it doesn't compromise the criminal investigation. The RCMP have asked us not to proceed at this time, but I do intend to go forward with that review at the appropriate time.

º (1625)

Mr. Pat Martin: I'd be interested in seeing more about the internal audit. Would it be appropriate for the internal audit and the auditor's notes to be tabled at our committee?

The Chair: I think they're available under access to information--Mr. Bryden is our expert on that--and if they are available through access to information, I think, just by asking for them, we can get them.

Mr. Pat Martin: Good.

One of the things the new Minister of Public Works has indicated in the three steps he's taken to try to clean things up is that he may, if you will, repatriate this sponsorship contract work into the public sector and just stop contracting the work out altogether. Your enterprise has 14,000 employees and a budget of over $2 billion. Would you see that as a realistic thing, to simply take over these sponsorship contracts within your department and stop contracting them out altogether?

Ms. Janice Cochrane: The Department of Public Works currently performs the procurement function for Communication Canada on sponsorship programs, and any repatriation back from the agencies would be to Communication Canada, so I'll ask Mr. McKenzie to speak to that.

Mr. Guy McKenzie: We are certainly on the side of speculation here, because the final decision has not been made by the minister, though he referred to that publicly. We are not a big department like Public Works. If we repatriate, obviously, there will need to be some accommodation internally, as the agencies we are monitoring right now perform work some other people will have to perform if we ever go that route.

The Chair: I've given you another 20 seconds because of my intervention, Mr. Martin, so we'll stop there.

Now we'll go to Ms. Phinney.

Ms. Beth Phinney (Hamilton Mountain, Lib.): I'd like to ask a question that I think you've already answered, as I'd like to hear your answer again. Ms. Cochrane and Mr. McKenzie, have you ever received political pressure to approve a particular sponsorship program or to direct a contract towards a specific firm?

Ms. Janice Cochrane: For my part, never.

Mr. Guy McKenzie: It's the same for my part. I've never been subjected to either of the two situations you are describing.

Ms. Beth Phinney: Do you know of anybody in your department, either one of you, that was in this situation?

Ms. Janice Cochrane: I have not been informed by anyone during my time at Public Works that such pressure has been applied.

Mr. Guy McKenzie: Same here. And it would be our responsibility to do something then.

Ms. Beth Phinney: Thank you.

How will you be working with the Auditor General while she is undertaking her current investigations?

Ms. Janice Cochrane: We will cooperate to the fullest with the Auditor General. I believe the file review we are doing now will actually assist the Auditor General when she commences her work, because we are trying to establish a trail by aggregating payment data with data that were already in existence on the files. I hope that will be helpful. We are also reviewing a larger number of files than were reviewed during the internal audit carried out in the year 2000.

The Chair: Ms. Fraser has a comment to make.

Ms. Sheila Fraser: I'd just like to inform the committee that throughout our audit of the three contracts, we received full cooperation from Communication Canada and Public Works. We do many audits on Public Works and have never had any difficulties in doing our audit work there.

º (1630)

Ms. Beth Phinney: Thank you.

Ms. Cochrane and Mr. McKenzie, are your departments reviewing their management practices separately from the Auditor General's investigation?

Ms. Janice Cochrane: In fact, we review our management practices on an ongoing basis to try to continually improve the control mechanisms that are in place. When we went through the review process and the implementation of the action plan that led up to the review process, it did cause us to take a wider look. I think there are a number of activities in the department right now that do allow more senior managers to satisfy themselves that appropriate oversight is taken. We have an account verification framework in place that corresponds with the Treasury Board's account verification policy, ensures that managers understand the responsibilities, monitors how well they're fulfilling their section 34 responsibilities, and reports to senior management regularly on the results of such monitoring. We have also started, last year in fact, a new course, as part of our management orientation program, that deals with financial management, and we are starting to train managers aggressively. I think this is the kind of activity that needs constant retraining and reinforcement, with both training and account verification. There are regular audits done by the finance branch, and as well, we have some 25 audits a year done by our own internal audit branch.

So I think we have a robust framework in place. I have no evidence, and nothing has been brought to my attention, that we have any systemic issues that are problematic.

Ms. Beth Phinney: Those things didn't go through 25 steps before. Do you feel that with what you have there now, this could not happen again?

Ms. Janice Cochrane: I'm confident that under current conditions this could not happen.

Ms. Beth Phinney: Okay.

Mr. McKenzie.

Mr. Guy McKenzie: Your question is extremely interesting. Despite the fact that we are a young organization, I was a former assistant deputy minister at Treasury Board, and modern comptrollership philosophy and so forth was initiated at that time. We made sure that in my young organization those principles are being implemented. Also, as I mentioned in my introductory remarks, I even changed the organizational structure for the sponsorships last fall. I did not wait for anything of what is happening now. I now have a knowledgeable assistant deputy minister, a good DG, I have a director and analysts. Furthermore, as my colleague just said, continuous training is important, so we have ongoing training right now for the Financial Administration Act and other procurement courses.

Also, as part of my challenge last fall in putting the two organizations together, the financial system had to be basically put in play. It is robust and new. Also, an internal audit is going on. As I said, for the time being, since it is fully implemented as a permanent part of my organization—I received financial responsibility only on April 1—I retained the services of Consulting and Audit Canada. I'm sure the files are all properly documented, based on the follow-up review. We do have documentation in the files now.

Ms. Beth Phinney: Thank you very much.

Thank you, Mr. Chairman.

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

Mr. Thompson.

Mr. Greg Thompson: Thank you, Mr. Chairman.

Ms. Cochrane, would it be fair to say that the sponsorship program was set up in the beginning for the greatest political reason, the greater good of the country?

Ms. Janice Cochrane: I would say it was set up for legitimate public policy reasons. Whether it was political or not is difficult to say.

Mr. Greg Thompson: But it was set up following the referendum in Quebec, which would be purely political.

Ms. Janice Cochrane: There were similar activities carried out prior to the referendum, but the desire to have greater visibility across the country began only after 1995.

Mr. Greg Thompson: I don't think we should shy away from the word politics, because there's nothing wrong with politics exercised for the greater good of the country. Would you agree with that?

Ms. Janice Cochrane: Yes, I would agree with that, but I'm not prepared to conclude that the sole motivation behind the creation of the program was political.

º (1635)

Mr. Greg Thompson: In your testimony and answers to previous questions, including those of Mr. Bryden and others on the other side, you pointed out that there's no evidence of a criminal act, malice, dishonesty, bad faith. The public trust was upheld, but there's basically nothing you can use to substantiate that, as there's no documentation, correct?

Ms. Janice Cochrane: That's accurate.

Mr. Greg Thompson: Have you ever suggested or has it been brought to your attention that documents might have been shredded? There are obviously missing documents. Has that been investigated by you and your department?

Ms. Janice Cochrane: There is no evidence that documents were shredded.

Mr. Greg Thompson: Did you do an investigation to find out?

Ms. Janice Cochrane: No, we did not do an investigation to find out if documents were shredded.

Mr. Greg Thompson: You're saying no, but you haven't done the investigation.

Ms. Janice Cochrane: The pattern at the time suggests that the documents did not exist, not that they existed and were shredded.

Mr. Greg Thompson: But you never did an investigation to find out whether they were shredded.

Ms. Janice Cochrane: No. The internal audit dealt with what was in the files and what was not in the files.

Mr. Greg Thompson: Do you think that would be a good place to start, given that there is documentation missing?

Ms. Janice Cochrane: The shredding of documentation is a criminal offence. That is a matter the RCMP would be better equipped than I or anyone in the department to handle. The RCMP will be examining the Groupaction contracts.

Mr. Greg Thompson: Prior to being appointed deputy minister to this department, were you ever in that department?

Ms. Janice Cochrane: No.

Mr. Greg Thompson: So when you say your personal knowledge is limited, it doesn't include--

Ms. Janice Cochrane: That's correct.

Mr. Greg Thompson: The word professional was left out--your professional knowledge of this. Did you use the word personal for a particular reason?

Ms. Janice Cochrane: No. I've used that word to indicate that there are many gaps in what transpired during that period of time, including material that ought to have been in files and was not in files, including why certain activities were or weren't carried out. I can't speculate on why those things happened. I know what we have in the files, I know what the record shows and what we're digging into now, but speculating on why gaps exist or why certain things were or weren't done I think would be unprofessional.

Mr. Greg Thompson: In response to one of Ms. Phinney's questions, you used a curious choice of words. She asked the same question Mr. Martin asked about political interference, and you said not during your time, you didn't said never.

Ms. Janice Cochrane: I'll say never, but I can't account for anything that might have happened under the watch of others.

Mr. Greg Thompson: Do you think it would be a good thing, then, for this committee to bring in the deputy minister who preceded you?

Ms. Janice Cochrane: That would have to be the committee's decision.

Mr. Greg Thompson: In your expert testimony--

Mr. Mac Harb: Mr. Chair, on a point of order, obviously, it's not up to the deputy minister to suggest for this committee who should and should not come.

The Chair: Mr. Harb has said correctly that it's not up to the witness to suggest what other witnesses we have.

Mr. Greg Thompson: I'm ready to move on, Mr. Chairman.

In a prior meeting the Auditor General was here, but I was not at the committee, I was replaced by Mr. Keddy. Mr. Keddy--this question is to Ms. Cochrane, by the way--focused on questions about the officials: were they well trained, were they experienced, did they know what they were doing was wrong? Ms. Fraser, according to what I have here in my notes, answered yes to all those questions. If that is in fact the case, how could something as atrocious as this happen?

I see Ms. Fraser has her hand up, so she may disagree with my notes, Mr. Chairman.

The Chair: Okay, let's hear from the Auditor General first.

Ms. Sheila Fraser: Mr. Chair, what I indicated--and I don't have the exact transcript--was that given the level those people were at in the department, I would have expected them to know the rules. We did not audit their training or their knowledge, so I can't attest to what training these people might or might not have had.

Mr. Greg Thompson: But these were senior members of--

Ms. Sheila Fraser: Senior members of the civil service.

º (1640)

Mr. Greg Thompson: So you would assume they would be well trained. Would that be correct, Ms. Fraser?

Ms. Sheila Fraser: You would have expected them, when they were signing off on payments, to know the rules for that.

Mr. Greg Thompson: At that level of the civil service you would expect them to be well trained and know what they were doing.

Ms. Sheila Fraser: I would expect anyone signing off for payment to know what they were doing.

Mr. Greg Thompson: So I guess I can stand by my statement that they were well trained, experienced, and should have known that maybe what they were doing was wrong. I guess that would be a fair assessment of their actions.

Ms. Sheila Fraser: Well trained, I'm not sure about that.

Mr. Greg Thompson: Okay. So well trained would be questionable.

Going back again to the opening remarks by Ms. Cochrane, I note here in your third paragraph that you're sort of making an excuse for the department. You're saying Public Works is a large department. It has 14,000 people and $2.1 billion spent annually. Is that basically an excuse for sloppy behaviour?

Ms. Janice Cochrane: Absolutely not.

Mr. Greg Thompson: Why was it in there? It was worded in such a way that it looks like you are making an excuse.

Ms. Janice Cochrane: It was in there as a statement of fact.

Mr. Greg Thompson: So it's large and very complex.

Anyway, let's go back down to the question posed by Mr. Lebel on the sudden increase in some of these contracts. Again, is that something you would expect to happen within a department? Given your experience with other government departments, how would that type of tremendous increase in amount or doubling of a contract be justified within a modern government department employing 14,000 people?

Ms. Janice Cochrane: It is troubling, and it doesn't reflect normal practice, except in pressing emergencies, where that sort of thing would be expected to occur.

Mr. Greg Thompson: Would that pressing emergency be a political disaster that happened out of the referendum results of 1995?

Ms. Janice Cochrane: I can't answer that question. In this case I do not know why the sudden increase in the amount awarded under the contract occurred.

Mr. Greg Thompson: Is this an award that comes down from the deputy minister or the minister? How does it happen within the department when that sudden increase is due to an emergency? Who dictates an emergency, the minister or the deputy minister?

Ms. Janice Cochrane: The facts dictate an emergency.

The Chair: Thank you, Mr. Thompson. I'm sorry, but we have run out of time once more.

Mr. Shepherd.

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

With the Auditor General's report, the upping of the $250,000, the second contract, I presume that still remains a mystery, we don't know where it is.

Ms. Janice Cochrane: That's correct.

Mr. Alex Shepherd: So you basically agree with everything the Auditor General said here. She also says you didn't get any value for your money.

Ms Janice Cochrane: We agree with the findings.

Mr. Alex Shepherd: You used in your testimony the word loss. Is that a fair description, that the government has suffered a financial loss here?

Ms. Janice Cochrane: The Auditor General examined the activities of two public servants. The RCMP, in their investigation, will ascertain whether or not there has been a breach of the Financial Administration Act or whether or not there has been criminal behaviour. There is nothing on our records that indicates that value for money was received.

Mr. Alex Shepherd: You know the money went out, but you can't see where you got anything back for it. So most people would think you lost the money.

Ms. Janice Cochrane: That's what the RCMP will ascertain.

Mr. Alex Shepherd: Do you continue to have contracts with Groupaction?

Ms. Janice Cochrane: The minister has suspended contracting activity under the sponsorship program with Groupaction.

Mr. Alex Shepherd: Is there any money owing to them?

Ms. Janice Cochrane: Not that I'm aware of.

Mr. Alex Shepherd: So there's no ability to offset.

Ms. Janice Cochrane: No, not at this time.

Mr. Alex Shepherd: You refer to the fact that you've been in this department for over a year now and you've been digging madly. Surely you have talked to some people who have points of view on what has happened here. In a sense, we're talking about gross negligence, I would think. I'm assuming that gross negligence hasn't been a practice of your department historically.

Ms. Janice Cochrane: Not at all.

Mr. Alex Shepherd: So for a certain period of time there was gross negligence being practised.

Ms. Janice Cochrane: I wouldn't want to characterize it that way until the RCMP completes its review. What we know to date is that there were serious deficiencies in management practices. Whether from a legal perspective--I'm speaking as a lapsed lawyer here--it constitutes gross negligence is a different story. It doesn't excuse what occurred, but the files don't indicate that value for money was received. That is what the RCMP will be looking into.

º (1645)

Mr. Alex Shepherd: These individuals have been in the employ of the Department of Public Works and Government Services for some time, the former directors. Have you gone back farther than simply this audit period of 1996, 1997, 1998? Have you gone back farther to see whether there's similar evidence of what I would call gross negligence during those periods?

Ms. Janice Cochrane: With respect to the executive director, who is still a public servant, he did not have financial signing authority prior to that time. With respect to the retired public servant, no, we did not go back before that. We started with the period of time commencing when the communications branch was established and the sponsorship program was set up.

Mr. Alex Shepherd: Wouldn't it be an interesting exercise to go back and see whether there was some kind of change in behaviour or it is consistent behaviour from day one that this particular individual just avoided the Financial Administration Act?

Ms. Janice Cochrane: That would be an interesting review. The administrative review we're carrying out at the appropriate time will give us a picture of what transpired during that time and whether disciplinary measures may need to be taken. It will also perhaps inform us whether further steps have to be taken, as will the RCMP's investigation.

Mr. Alex Shepherd: To get back to your statement that you're digging madly and so forth, wouldn't it be appropriate to go back? You presumably have the records to go back to that period of time and see where that person's performance was what you would expect, was in compliance with the Financial Administration Act, and all of a sudden, for some reason, changed? Wouldn't that be important information for you to have?

Ms. Janice Cochrane: It's an interesting observation and a matter I think at the appropriate time we would want to look at.

Mr. Alex Shepherd: Do you know if these people received performance bonuses?

Ms. Janice Cochrane: Performance bonuses are a consistent practice at the executive level in the public service. As for the specific individuals, I cannot comment. That is personal information protected by the Privacy Act.

Mr. Alex Shepherd: But you could do it in quantum, you could say everybody in the department received a performance bonus during this time, if they all did, or some did, or who did.

Ms. Janice Cochrane: I'm not aware of what the statistics are for that period of time.

Mr. Alex Shepherd: I see.

Along the same line of questioning, with the fact that you've been there for this long period of time. You're saying you've put some programs in place, presumably as a corrective procedure. The statement was that this can never happen again. However, I suspect that people not doing their job can easily happen at any time.

Ms. Janice Cochrane: Obviously, we assume that people are exercising the duties of their position with due diligence and are complying with the accountability frameworks, laws, guidelines, regulations, and directives that are in place. It is always possible in any system, as no system is perfect, that there are individuals who choose not to respect their responsibilities. What I believe, though, is that we have sufficient management control frameworks in place that any kind of deviation from what would be considered acceptable would be identified early enough on and corrected or dealt with before it becomes systemic.

Mr. Alex Shepherd: Most organizations work--and I think you're intimating this--on a basis of checks and balances within the system, so even though there's an error somewhere, that will be detected somewhere else in the system. It would lead to the conclusion that this kind of malfeasance is larger than just one or two individuals.

Ms. Janice Cochrane: The investigation the RCMP will carry out will ascertain that. At the time the Groupaction contracts were let and during the period covered by the internal audit, as I indicated earlier, the organization was a very flat organization. It did its own contracting and dealt with its own proposals. It was a self-contained organization. After the merger with Communication Canada the procurement responsibilities were retained in Public Works and moved into the general domain of the supply operations branch, where a significant number of controls and checks and balances are in place. So while I can't guarantee that there will never be a case of improper management practices or where an individual fails to live up to his or her responsibilities, I believe the accountability frameworks are in place to identify problems earlier on, so that appropriate corrective measures can be taken.

º (1650)

Mr. Alex Shepherd: So as a minimum, there's a $500,000 contract, and with the second one, we paid $500,000 and didn't get anything for our money.

Ms. Janice Cochrane: That's correct.

Mr. Alex Shepherd: The third contract was $575,000, and again we didn't get any value for our money, correct?

Ms. Janice Cochrane: At this point we have no evidence that we had value for money. That is the reason behind the referral to the RCMP. There is insufficient documentation in our records to enable us to conclude that we received value for money.

Mr. Alex Shepherd: With other contracts outside Groupaction, are there more?

Ms. Janice Cochrane: There have been an additional three referrals to the police.

Mr. Alex Shepherd: On Groupaction or others?

Ms. Janice Cochrane: Other contracts.

The Chair: Thank you, Mr. Shepherd. Unfortunately, we have to move on.

Ms. Meredith.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Thank you, Mr. Chair.

The unfortunate thing about being further down the line is that the questions have been asked, but the good thing is I can ask for clarification. And I'm going to start with your comment, Ms. Cochrane, that the procurement function of the programs remains with your department. So I assume that the procurement function is yours. What's the other function? Is it the administrative function of the program that is with Communication Canada? How do you work the two together to make sure something doesn't fall through the cracks between the two organizations?

Ms. Janice Cochrane: The administration of the sponsorship program is the responsibility of Communication Canada, the consideration of proposals, the assessment of those proposals against criteria, and the evaluation as to whether or not they're appropriate for consideration. At the time the proposals are approved by Communication Canada, they're submitted to the supply operations branch in my department, so that what is called a call-up can be issued against a standing offer, which is essentially the triggering of a contractual process. But the administration of the program itself and the decisions as to what proposals will be supported and what won't be fall within the mandate of Communication Canada.

Ms. Val Meredith: Following that, I understand that there is a preselection process of companies that fall under a certain category to be used. How often is that changed, and how do people become part of that process? I represent a constituency in western Canada, and I often feel that western Canadian companies are not part of the procurement process of government. How do they become part of that if there's a preselection of ten companies or whatever?

Ms. Janice Cochrane: There is a competitive process that was launched in February 2001 to establish a list of qualified communications agencies. This happens periodically. The last one prior to that was in 1997.

Ms. Val Meredith: Every so many years you put it out for tender.

Ms. Janice Cochrane: That's correct.

Ms. Val Meredith: Then you assume that there are so many that are qualified.

Ms. Janice Cochrane: Yes, that is correct.

Ms. Val Meredith: I don't want to go into any more detail than that. I just want to know the regularity of it.

You mentioned in your statements a couple of times a period of time, referring to, I assume, this period of time when Groupaction contracts were let. In your administrative review are you going beyond that time, or are you just going to be dealing with that period of time? And what are you going to do if you find documentation is missing from the files? The Auditor General, for the second contract, stated that the documentation had been provided by Groupaction at the request of Public Works. Are you going to go out and solicit from the companies that were hired the documentation to put in the file, so that when the Auditor General reviews the files, the stuff will be there?

º (1655)

Ms. Janice Cochrane: We are going out to seek additional information. We are preparing the files in such a way that the Auditor General will know what was included in them afterwards to enable us to establish whether or not value for money had actually been received.

Ms. Val Meredith: Documentation in your administrative review indicates that this information was not in the file at the time of the review and had to be solicited by whoever and added to the file, along with the time and date at which it was added to the file.

Ms. Janice Cochrane: Absolutely. It will be segregated.

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

Ms. Sheila Fraser: I don't want to take time from Ms. Meredith, but on her previous question about the qualified suppliers list I just wanted to mention that under the policy there is to be a notice annually, and there is a process by which people can get onto the list every year.

Ms. Val Meredith: It is supposed to happen annually, then.

The question was asked whether the minister has suspended Groupaction, and the response to that was “under the sponsorship program”. Does that mean it's only under the sponsorship program that they're being denied access to government contracts? Are they being considered and gaining contracts in other programs?

Ms. Janice Cochrane: Correct. The minister's position has been that only the contracts in relation to sponsorship will be suspended, or a moratorium on those contracts will be in place. As of today he did indicate that the freeze on further contracting activity with Groupaction will include future project applications or proposals or submissions as well.

Ms. Val Meredith: That was clarification for others than myself.

I want to go back to this period on which the review was done. You acknowledged that there were problems and you kept referring to two executive directors. Are you telling the committee that only those two individuals were responsible for what happened, that there wasn't any delegation of responsibility, that other people weren't sloppy in the performance of their duties? I know they were ultimately responsible, perhaps, for signing the cheques and signing off on the contracts, but were they the only ones who were involved in bad management practice and not following the rules?

Ms. Janice Cochrane: The RCMP's investigation, as well as the administrative review I intend to do, will ascertain who else may have been implicated. As I indicated earlier, that organization was a very flat organization, and virtually all decision-making authority was concentrated in the hands of the executive director, but it will require an administrative review to get to the bottom of those facts.

Ms. Val Meredith: That flat organization, where one person is making all the decisions, has shown, by the results, that it is not a very efficient way and that there are no checks and balances in it. Have you made efforts to change that kind of structure so that no one person has that kind of ability to manipulate the processes?

Ms. Janice Cochrane: We don't have organizations structured that way in the Department of Public Works at all. Mr. McKenzie can speak to the structural changes he's made in the successor to the communications coordination branch at Communication Canada.

Mr. Guy McKenzie: As I mentioned in my opening remarks, that was my first decision last fall when it was time to integrate the two organizations, to organize it in such a way that I strengthened the administration of that particular unit, having not only that situation you are describing right now, but an assistant deputy minister, a DG, a director, an analyst, so that the accountability framework is organized as we know it usually.

Ms. Val Meredith: Thank you.

As a result of what happened, is there a commitment from both Communication Canada and Public Works that there be an ongoing review of contracts? I'm not just talking about sponsorship contracts, I'm talking about contracts for renting buildings or whatever it might be, where there will be a greater degree of review of the contracts on an ongoing basis, rather than letting something slide for three or four years before somebody wakes up and says, we have a problem.

Ms. Janice Cochrane: That's a fair comment. I can confirm that we have a very vigorous audit program within the department. We have an audit and review committee made up of all the assistant deputy ministers, and I chair that committee. Together we look at the audit plan and we monitor the results of the audit findings and the action plans that are put into place to address the recommendations. We have approximately 25 audits, reviews, and evaluations carried out in any given fiscal year, on top of what the Auditor General does in relation to the activities of our department. As she indicated, because the contracting process is so large and government-wide, she does have a fair bit of activity with us. But I'm satisfied that we have the right level of control in regard to the monitoring and audit and review in place to ensure that issues are dealt with before they become systemic.

» (1700)

The Chair: Thank you, Ms. Meredith.

Ms. Leung.

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

Ms. Cochrane, you indicated that in April 2001 your department developed an action plan. Then, on March 6, 2002, a follow-up review was completed. Did you discover any mismanagement then, and what action did you take?

Ms. Janice Cochrane: The follow-up review, I was very pleased to note, made no recommendations for further action. They examined a number of files, approximately 120, I believe, out of a sample of 370-odd files, and they concluded that with very few exceptions, all the documentation that would have been expected in a file to create a proper audit trail and to justify the decisions that were taken were present.

Ms. Sophia Leung: How will your department be working with the Auditor General while she's undertaking her current investigation?

Ms. Janice Cochrane: We will cooperate with the Auditor General in every way we can. We are digging to find files that may not have been easily available in past years to give her a more complete record than she would otherwise have through the file review and the research we're doing now. In other respects, we will provide whatever assistance we can through our supply side, as well as through the dedicated unit we've set up to monitor the files, and also, of course, the audit branch that regularly cooperates and collaborates with the Auditor General when she is undertaking a review that involves us.

Ms. Sophia Leung: Mr. McKenzie, what measures have you taken to remedy the concerns our Auditor General has raised?

Mr. Guy McKenzie: That's a good question. My colleague already answered that partially, and I will go into further detail. When the internal audit took place, some of the lack of documentation and so forth was identified. The action plan allowed Public Works at the time to start a filing system, which was confirmed in the internal audit my colleague just referred to as now in place. We have documentation, such as sponsorship proposals, sponsorship approval letters, visibility plans, event post-mortem reports, formal estimates for production of additional promotional material, if ever necessary, all the contract documentation, whatever it is, with event organizers, the agencies of record. So the filing system is one follow-up of the work my colleague just said took place in the department she's now managing.

Ms. Sophia Leung: As you know, at present there's this freeze on the sponsorship program. How would you expect this to affect your program?

Mr. Guy McKenzie: The decision from the minister was to ascertain, as he said, that he was comfortable with the decision-making process and so forth. Some of the files are being reviewed right now, and the immediate effect will likely be to postpone or even cancel some of the projects we were to follow through this year.

» (1705)

Ms. Sophia Leung: Recently, we learned, CBC received funding for a sponsorship campaign. Is this true?

Mr. Guy McKenzie: Is it the one referring to the Nagano games?

Ms. Sophia Leung: Just today we learned that. If there's a freeze, how could you grant a sponsorship?

Mr. Guy McKenzie: There is no sponsorship being granted right now. It is probably one of the former cases. There is no file being approved right now.

Ms. Sophia Leung: Ms. Cochrane, when you discover there is a lack of information and some mismanagement, does your department not have any authority to make an intervention? You don't question when something is wrong?

Ms. Janice Cochrane: Oh, absolutely. In fact, after the audit took place in the year 2000, the decision was taken to put a proper action plan in place, to monitor the implementation of the action plan to ensure that those practices that existed during the 1997-2000 period were corrected, and to have a follow-up audit to ensure that management at the time did what they were supposed to do, to make sure we had confidence in the decision-making processes and the accountability frameworks for them. So those actions were taken.

Ms. Sophia Leung: Thank you, Mr. Chair, I've finished.

Mr. John Bryden: On a point of order, Mr. Chairman, the Information Commissioner's report was tabled in Parliament today, and I would like to draw the committee's attention to a case summary he has on page 46, in which he says:

In the end, the Commissioner recommended the disclosure of the names of the individuals who had received performance bonuses based on individual or group accomplishments.

I realize the witness may not have been aware of this, but I think, Mr. Chairman, we need to examine this issue raised by my colleague on performance bonuses in the context of the two individuals in the Auditor General's report.

Thank you.

The Chair: You raise that as a point of order, Mr. Bryden. The witness said, before you raised that point of order, she didn't feel she could answer. Therefore, I would ask that you take Mr. Bryden's intervention into consideration and either supply the information to this committee or give reasons you will not supply the information to this committee, and then we'll take that issue forward.

Is that okay, Mr. Bryden?

Mr. John Bryden: Yes, that's fine. They can work it out, the Information Commissioner and the Privacy Commissioner, between them.

The Chair: Very good.

Mr. Murphy.

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

Ms. Cochrane, I want to follow up on the issue of recovery of government moneys, moneys that have been misappropriated or stolen or whatever. In this case I'm at a loss why civil action hasn't been started already. We have an invoice for $550,000 and we don't have any contract. If you're out in the private sector, a long time ago there would have been a civil action started for the recovery of those funds, and that would have nothing to do with the RCMP, absolutely nothing. Why hasn't an action been started?

Ms. Janice Cochrane: That is a very good question. At this point we do not have sufficient evidence to ascertain whether value for money was or was not received, notwithstanding the lack of documentation on the files, and it would be premature to commence a civil action until we have at least an adequate basis for pursuing the company. We will be guided by the results of the investigation, and we are in contact with the Department of Justice to seek their advice on if and when such action would be appropriate.

Mr. Shawn Murphy: Which investigation are you talking about? To my way of thinking, the facts are clear. There's no contract. You're dealing with the balance of probabilities. Why isn't a civil action started? Are you saying you're waiting for the RCMP investigation?

Ms. Janice Cochrane: That's correct.

Mr. Shawn Murphy: Do you, as a former lawyer, agree with me that it would have nothing to do with the civil claim?

Ms. Janice Cochrane: At this point we do not have adequate information to determine whether or not there was value for money received, notwithstanding the absence of a written contract.

» (1710)

Mr. Shawn Murphy: But if you read the Auditor General's report, the evidence is right there. There was a loose arrangement for a contract, there was an invoice, the invoice was paid. There was no contract. If you were in the private sector, there would have been a civil action started the next day.

Ms. Janice Cochrane: The Auditor General didn't draw any conclusion about the actions of Groupaction. She has referred that to the RCMP. When we have the results of their investigation, we will know whether or not the facts support the need for a civil action. At this point we don't have adequate facts.

Mr. Shawn Murphy: But do you agree with me it's in the balance of probabilities?

Ms. Janice Cochrane: At this point we don't have adequate facts. We are being guiding by—

The Chair: Mr. Murphy, I know you have experience in these types of issues, but you can't ask the witness on grounds of probabilities whether she thinks one way or the other. You can ask her to answer the questions, and she's given you an answer.

Mr. Shawn Murphy: Perhaps I'll conclude, Ms. Cochrane. I fail to see how the RCMP investigation would have any bearing whatsoever on your decision whether or not to start a civil action. Could you clarify that? And perhaps I'll ask the Auditor General to expand on that, because I'm missing something here in this evidence.

Ms. Sheila Fraser: I'm not lawyer, and I know there are two lawyers talking here. I would think one of the difficulties is--and you would know better than I--that a senior public servant signed off on a payment, indicating that the payment was to be made. There was, if you will, a signature attesting that there was value received. I presume there are legal consequences if someone has been delegated authority and they authorize that payment. But beyond that, I'm afraid I can't give any more opinion.

Mr. Shawn Murphy: On another line of questioning, Ms. Cochrane, the two former directors are outside the ambit of the civil service. Now they're retired, you can't discipline them as deputy minister, correct?

Ms. Janice Cochrane: One of the former executive directors is a retired public servant. The other is an employee of a separate employer at the Canadian Food Inspection Agency. It is premature at this stage to determine whether or not disciplinary measures will be necessary. I would prefer to await the outcome of the administrative review before we draw that conclusion.

Mr. Shawn Murphy: Do I understand correctly that Groupaction is still involved in a separate contract and they're still getting moneys from the government?

Ms. Janice Cochrane: There has been a total freeze on doing business with Groupaction.

Mr. Shawn Murphy: Are there any checks and balances in the system to assure the taxpayers that the directors and officers of Groupaction don't resurface at another department, let's say Health, in another contract?

Ms. Janice Cochrane: Departments have delegated contracting authority to a certain level. It is not monitored by the Department of Public Works, it's Treasury Board's responsibility to monitor the contracting authority that's carried out by departments with delegated authority from Treasury Board under the government contracts regulations. There is not a prohibition at this time on all departments doing any government business with Groupaction, as far as I understand.

Mr. Shawn Murphy: Are you also, as we were talking about a civil action to recover taxpayers' money, contemplating a civil action against the two former directors?

Ms. Janice Cochrane: It would be premature to make such a conclusion until the administrative review is carried out to ascertain whether or not they were in breach of obligations under the FAA in such as way as to give rise to civil action.

Mr. Shawn Murphy: And when do you expect that administrative review to be completed?

Ms. Janice Cochrane: Again, it depends upon the Royal Canadian Mounted Police, who have asked us not to commence a review at this time, because of their concern that it would jeopardize their investigation. As soon as we receive the green light, we will be proceeding with the administrative review.

Mr. Shawn Murphy: Do you have any indication from the RCMP of when they might conclude their investigation?

Ms. Janice Cochrane: We're told they will require at least a couple more weeks.

Mr. Shawn Murphy: Now let me pursue a different line of questions, Ms. Cochrane. This is regarding the actual responsibility of the deputy himself or herself. We had a situation. At what time does a deputy become responsible for this type of behaviour?

» (1715)

Ms. Janice Cochrane: A deputy is always accountable for anything that occurs in a department under his or her watch and for ensuring that the appropriate control frameworks are in place.

Mr. Shawn Murphy: But is there a disciplinary mechanism set up?

Ms. Janice Cochrane: The disciplinary measure depends upon the kind of breach that may have occurred. I'm looking at regulations under the Financial Administration Act that give me the authority to carry out an administrative review when I become aware of facts that suggest that there may have been loss of money belonging to the crown. As soon as I became aware of those facts, I took measures to draft terms of reference and to prepare for such a review.

Mr. Shawn Murphy: I know you weren't the deputy in this case and it wasn't under your watch, but at what point in time does a deputy get in trouble? What disciplinary measures are there against the deputy?

Ms. Janice Cochrane: I think you would have to address that question to the clerk of the Privy Council or someone other than myself.

The Chair: Mr. Murphy, I'm afraid your time is up.

The time is now just after 5:15. I'm going to conclude the round of questioning. As I said at the beginning, the idea was to give as many people an opportunity to speak as possible. I'm going to give Mr. Harb about five minutes, so I can have some time to wrap up.

Mr. Harb.

Mr. Mac Harb: Thank you, Mr. Chair. I may not even need the five minutes.

I first want to thank Ms. Cochrane and Mr. McKenzie for appearing before the committee, knowing full well the circumstances under which they both are appearing. I want to commend you both for the excellent way in which you have answered, in a frank and direct way. That is the kind of information this committee needs and the public needs. I do know first-hand of the excellent work Public Works is doing across the country. I know the Auditor General, on a number of occasions, and other agencies have mentioned the excellent work you have done. It is my hope that our viewers not take that specific, small, isolated case in Public Works as an indication of other problems. There may be other problems, but not with the majority of the work you do.

I wanted to ask you, compared to the whole of what Public Works does, what percentage are we talking about here?

Ms. Janice Cochrane: The sponsorship program accounts for about $40 million a year out of a total of about $10 billion of contracting activity.

Mr. Mac Harb: The trouble area we're dealing with here with Groupaction, that specific contract, how much are we talking about?

Ms. Janice Cochrane: About $1.5 million.

Mr. Mac Harb: When we sponsor an activity, what do we get out of it? Do we get visibility? Is it only a matter of raising a Canadian flag or putting some form of word mark somewhere? I really need you to tell me, specifically, what we get out of the money we spend on this. Give me an example.

Mr. Guy McKenzie: To be specific, we moved away from the simple word mark, as I said earlier. The mandate of my organization is to promote programs and services of the crown. So you saw vignettes following the September 11 events about security in our airport and so forth. That has nothing to do with sponsorship. I'm just saying the aim and the objective of my department is to promote programs and services. So when we do an event through sponsorship, the presence of the crown is important, but also promoting programs and services. So it could be, for instance 1-800-O-CANADA, it could be the Canada site also, which people are referring to, as I said in my introductory remarks. Also. sometimes it deals with line departments for some of their programs. For instance, sometimes we will associate with Health Canada, or even the RCMP themselves, when it's time to promote the anti-drug campaign or the anti-tobacco campaign. So programs and services are the heart of it more than anything else.

» (1720)

Mr. Mac Harb: So do we get value for money when we do those sponsorships?

Mr. Guy McKenzie: This is why I welcome the work of Madam Fraser with us. We are looking at continually improving the application of the program, but also the value received for the money. The evaluation framework we have prepared as recently as February, as I mentioned in my introductory remarks, addressed some of that, but there is probably some way to go again, and there Madam Fraser will certainly help us.

Mr. Mac Harb: I want to ask you a specific question. Last night I was in the House when the minister made a statement that his department--I suppose that would be your department--is going to be reviewing all the sponsorship files to ensure that they are in order. What specifically is being undertaken in this exercise?

Mr. Guy McKenzie: There are so many audits and evaluations going on right now that I think it's important to make a few distinctions. My colleague already mentioned that the files of a certain period of time are totally reviewed by her staff, and they have put a very capable thing together. In my quarter we are certainly undertaking the same kind of exercise, and this is where I told you we have retained the services of Consulting and Audit Canada to help us. And eventually, the Auditor General will determine for herself the scope of her work, but she has already indicated a few areas that are of interest to her.

Mr. Mac Harb: And you will work with the Auditor General?

Mr. Guy McKenzie: We will, of course.

Mr. Mac Harb: And you will cooperate with her?

Mr. Guy McKenzie: Fully.

Mr. Mac Harb: Okay.

The Chair: Ms. Cochrane, you spoke in your opening statement and subsequently about a flat organization; all this power of signing off was concentrated in the director general. That was your department, that wasn't Communication Canada, am I correct, just to get it clear in my mind?

Ms. Janice Cochrane: It was in the branch, called the communications coordination services branch, that was subsequently transferred to Communication Canada. At the time it was part of Public Works.

The Chair: Does sound management suggest that was an appropriate way of structuring the organization?

Ms. Janice Cochrane: Certainly with the benefit of hindsight, it was not an appropriate way of structuring the organization.

The Chair: Concentrating that amount of authority to spend money in one particular person, does any other branch of your department structure itself this way?

Ms. Janice Cochrane: No.

The Chair: So why was this one allowed to be structured like this?

Ms. Janice Cochrane: I don't know.

The Chair: Who did the DG report to? I'm not asking the name. Did it report to an ADM? What was the structure above that?

Ms. Janice Cochrane: It initially reported to an assistant deputy minister, subsequently directly to the deputy minister.

The Chair: So this person reported directly to the deputy minister, that was the official organizational chart?

Ms. Janice Cochrane: That's correct.

The Chair: Okay.

I want to talk about Mr. Bryden's point of order and performance pay. In 1999-2000—this is information I acquired through access to information—for the entire government, at deputy minister level one 20 out of 21 received performance pay; at deputy minister level two 23 out of 24 received performance pay; at deputy minister level three 12 out of 12 received performance pay. So virtually everyone got it. At the Canada Information Office 100% of people in the executive levels of EX-1, EX-2, and EX-4 received performance pay. And at Public Works 100% of the people in EX-2, EX-3, EX-4, and EX-5 received performance pay, and 99 out of 112 in EX-1 received performance pay. That seems to suggest—and I've been highly critical in the past about the performance pay—that everybody gets it, rather than those who deserve it.

In your opening statement, Madam Cochrane, you talk about the audit started in the spring of 2000. No doubt there were terms of reference for this audit. Is that correct?

» (1725)

Ms. Janice Cochrane: That's correct.

The Chair: The spring of 2000 was also the time when some serious problems were being raised in the House about another department, Human Resources Development Canada, again about missing documentation from the files, authorization without the proper documentation, and so on. This is similar, but just a lot worse. Were the terms of reference of this audit that was started in the year 2000 determined because of the problems at HRDC?

Ms. Janice Cochrane: I have been informed that it was one of the motivating factors for launching this audit, but I can't confirm that. There doesn't appear to be a record within the department that demonstrates the motivation or rationale behind it. It was, however, a directed audit, and it was taken at the request of the deputy minister.

The Chair: So even the terms of reference for the audit aren't documented.

Ms. Janice Cochrane: The terms of reference are what motivated the audit. What prompted it is not part of the audit objectives, scope, and methodology.

The Chair: Wouldn't you think, Ms. Fraser, if the DM or whoever instigated this particular audit wanted to say, it's time we took a look at these things, the documentation leading up to the terms of reference would be in the files?

Ms. Sheila Fraser: To be honest, Mr. Chair, not necessarily. I think it is more common practice to describe the terms of reference in what the audit is directed to look at, rather than all the rationale that may have gone into the identification of that particular program. Internal audits now often go more on different risk factors and analysis of why they're going to look into certain areas. It's often the call of the deputy minister why an audit is done or not.

The Chair: It seems rather strange to me that after the HRDC problems Public Works does an audit and we find out this scandal. And you have talked about Heritage Canada in some of your subsequent reports, about a significant percentage of files that have problems. This seems to be not a government-wide problem in advertising, but just a government-wide problem. Wouldn't you think that, Ms. Fraser?

Ms. Sheila Fraser: There were problems uncovered in the audits of HRDC and Heritage. I cannot conclude that this a problem throughout.

The Chair: We are running three out of three, though.

Ms. Sheila Fraser: We've only done three. We will be back in a year, and I will be able to make a more reasoned assessment at that point.

The Chair: We have many more questions, but we have no more time. Normally, we ask the Auditor General to sum up, but she didn't have an opening statement. Nonetheless, if she does have a couple of words, we'd welcome them.

Ms. Sheila Fraser: I hadn't really thought about a closing statement, I must admit.

We found this very troubling, obviously. I think the committee was made well aware of that when I gave my statement last week. We will be conducting a broader audit throughout government of advertising sponsorship programs. I hope the audit will indicate that problems have been addressed.

The Chair: I would like to compliment all the members on the way they've judiciously asked their questions because of the fact that there is a criminal investigation going on at this time, and perhaps, subsequent to that, there's going to be an administrative investigation as well. I do hope the Department of Public Works and all departments realize that the public accounts committee is concerned about maladministration and does intend to do something about itl.

This meeting is adjourned.