[Recorded by Electronic Apparatus]
Tuesday, May 30, 1995
.0905 
[English]
The Vice-Chairman (Mr. Volpe): Order.
I see we have members of all parties present. Colleagues, as per the notices you have before you, we have before us today witnesses from the Office of the Auditor General of Canada, two individuals who are not unfamiliar to members of this committee: Mr. Richard Fadden, who is the Assistant Auditor General; and Mr. Vinod Sahgal, who is the principal responsible for Foreign Affairs. We have others around the table who are observers interested in what Mr. Fadden, in particular, might have to say with respect to the Auditor General's audit of the Department of Foreign Affairs and International Trade and their plans for ongoing evaluation of the fiscal plan of those departments.
I hope I haven't misrepresented what you're going to say, Mr. Fadden. If I have, then you have ample time to correct it.
Mr. Richard B. Fadden (Assistant Auditor General, Office of the Auditor General of Canada): It's a pleasure for us to appear again before the committee. It's been only three months since we last appeared.
At that time we tried to provide a description of the recent work of the office concerning Foreign Affairs and International Trade and CIDA. We pointed out the need to monitor continuously the costs associated with the implementation of Canada's foreign policy around the world, and the management practices employed to optimize value for money has been and will remain a matter of continuing importance to our office.
As your committee is aware, the government has stated that it will adjust the allocation of available resources in accordance with evolving priorities and will focus on its three central foreign policy objectives as set out in Canada in the World. In this regard we have a common interest. We are happy to share our experience and views on matters relating to the management and delivery of Canadian foreign policy. The context for us is value for money and prudent use of the diminishing financial resources available in the circumstances of today.
I want to stress that it is not for the office to comment on policy. Indeed, our interest in policy is limited to ensuring that costs and consequences of policy choices are known. We appreciate that your committee's interests are broader, particularly in the area of policy, whereas our concerns are mainly in the management of the programs and in their effective delivery overseas. However, we believe our plans to examine the management of the entities in the portfolio complement your interest in reviewing Canada's foreign policy and its implications.
When we last met, we listed certain matters of some urgency for your committee's attention, keeping in mind the need to adjust to evolving policy priorities and the reality of the highly decentralized environment in which the foreign service and development assistance programs operate. These matters included stronger controllership, appropriate devolution of authority, better information for decision-making, increased cost awareness, more results orientation, and action-oriented sustainable improvement across the waterfront.
The importance of sound financial control and results-based management have been recurring themes of our audit work in this portfolio. In this regard we are pleased to note that the minister has recently stated before your committee that the key objectives of his departments include: responsibility, cost reduction, and better financial control.
.0910
The Auditor General finds this most reassuring. It appears there is considerable scope for our future audit work to be highly supportive of the minister's desire to strengthen accountability and control in its portfolio.
[Translation]
The next step in financial management is to link the cost of operations with objectives and results. How the department proposes to address this vital area of control may be an area for the three of us to work on together in future. We have offered the department to share our knowledge and experience in this area.
Let me give you committee two specific examples that clearly illustrate the importance of such issues.
First, international organizations. How the government proposes to periodically assess the quality and cost of its participation in international organizations is an area of concern. We reported on this matter in our 1991 and 1992 reports.
Current fiscal realities are calling for hard choices. Major decisions on membership are mainly taken at the political level. We pointed out in 1991 that there is a need to become more businesslike in the management of our participation in multilateral organizations. In this regard, we encouraged the department to strengthen its analytical capacity to monitor the performance of the various international organizations it funds. We also pointed out that there is a need for innovation in the manner in which Canada pursues the goal of reform at the UN.
Your committeee has recently looked at Canada's role in the international financial institutions. The important issue of transparency has been raised. Your committee, at some time in the near future, may wish to similarly look at Canada's participation in various UN organizations from the perspective of value for money and transparency.
[English]
With respect to managing CIDA programs for results, the question of accounting for the results achieved by the Canadian International Development Agency and the International Development Research Centre has been a challenge for some time. Our audit reports have continually urged the government to strengthen information provided to Parliament on results expected from the money spent. It is vital for management, for ministers and for parliamentarians to know more about the extent to which development projects funded by taxpayers are meeting their objectives.
Notwithstanding the real difficulties involved, a measurement and reporting system that makes visible on some periodic basis the results of development projects is overdue. We are pleased to learn that CIDA and IDRC, in collaboration with our office, have agreed to hold a small international seminar next spring in Ottawa on this very topic. Best practices in the area of results measurement and reporting will be reviewed and at the same time we at the OAG hope to discuss audit of development results.
Your committee may wish to consider the aforementioned kinds of issues in the course of its review and scrutiny of the departmental outlook documents.
[Translation]
Now, let me point to the two main handouts provided to you by the Clerk. We provide one for each of the two main entities that this audit team covers - the Department of Foreign Affairs and International Trade and CIDA.
I should also mention that expenditures included in the international assistance envelop include those incurred by other entities such as the Department of Finance and Export Development Corporation. These entities are not included in today's presentation; they are audited by other groups and in our office. We could of course make arrangement for your committee to receive additional information, as necessary. You can appreciate that other committees may be involved with portions of the envelope as with the activities associated with other government departments that are colocated at Canadian missions abroad. For example, the delivery of the immigration program abroad is a clear example of the interrelatedness involved at the operating end at Canadian missions.
.0915
The two handouts provided to you each have three sections. The first section deals with the key issues we have raised in prior years; the second section addresses our plans for the future, particularly the next three years; and the third section is a list of chapters included in reports issued by the office since 1989. You will note that many significant aspects of operations have been covered but not every major program area has been auditted. For example, we have not examined the political and economic relations side of the Department of Foreign Affairs nor the promotion of Canadian culture and values by the department. Nor have we examined for some time CIDA's voluntary contributions to various international organizations. These are examples of areas that impinge on important matters of foreign policy.
[English]
With particular respect to the Department of Foreign Affairs and International Trade, our current audit work is in the area of UN peacekeeping, which I gather is of considerable interest to the House these days. We are looking at: first, the clarity of Canadian policy objectives; secondly, the overall cost of our involvement and how the related benefits are evaluated by the department; thirdly, the appropriateness of the scale of assessments that drive our share of UN costs; and fourth, the government's reporting mechanisms on the value associated with this item of rising expenditure. We plan to report to the House no later than the fall of 1996. I should perhaps mention that a parallel audit at the Department of National Defence on the military operations aspect is also being conducted.
We are also planning an audit of the trade programs, given the increasing importance of trade in Canada's economy. This audit is a complex undertaking for our office in that criteria for auditing this area will need to be developed and tested. In addition, audit work in other government departments would likely be involved.
The specific scope of this audit has not been fully developed at the current time. However, it is our intention to look at the delivery mechanisms used for promoting trade and investment with other nations such as the emerging economies of Latin America and Asia. We also plan to examine the use and the impact of rapidly advancing information technology to assess how the department's rather substantive investment in information technology in recent years is working to improve the delivery of Canada's trade-related programs abroad. We plan to report in these areas in 1997.
Another important aspect of our future work at the Department of Foreign Affairs is the follow-up of our previous audits. In this regard, there are two audits of particular interest to us over the course of the next couple of years.
First, there is a need to monitor progress toward a stronger controllership function. The call is for better information for decision making and heightened individual awareness of cost. This issue was the central theme of chapter 22 in our 1994 report on financial management and control. We plan to look at the manner in which the department is responding to the need for strong leadership in this area, and the acceptance of financial management throughout the department world-wide.
For the second audit, we will follow up on the impact of initiatives taken by the department toward a more results-oriented project management system for the program Technical Assistance Contributions to Central and Eastern Europe, which, you may recall, the minister has transferred to CIDA. Certain initiatives were identified in chapter 21 of our 1994 report.
[Translation]
Regarding CIDA, accounting for the results of development projects and foreign use of funds have been long-standing issues of concern to the office and the Public Accounts Committee. In our 1993 report, we dealt with the bilateral economic and social development program. How CIDA responds to the central objectives - fighting poverty and promoting self-reliant development - was examined in depth. Certain constraints that impact on the agency's effectiveness were highlighted because of their relationship to the difficulties encountered in meeting the objectives set by the government for the agency.
.0920
In addition to the above, we have encouraged CIDA to seek independent assurance that funds are spent by its contractors and partners for the purposes intended by Parliament and accounted for fully. In this regard, we have suggested that CIDA explore the possibility of engaging the services of the national audit offices in developing countries, were appropriate, as a way to strengthen the accountability of its partners.
[English]
We intend to follow through on the progress CIDA has made through the implementation of its comprehensive plan for renewal. We plan to report to Parliament on CIDA in a three-phase manner over three years. This approach is rather unique for us. It calls for cooperation between CIDA and the office with a view to exploring ways to strengthen management effectiveness in this regard. The three-phases approach has been agreed upon with the agency as a pragmatic way to pursue the key management concerns raised in our 1993 report.
In phase one, in November 1995, we will bring to the attention of the House the results of a self-assessment that CIDA has recently conducted on its progress in addressing the main concerns raised in our 1993 report. We also plan to provide to Parliament our office's comments on the quality of CIDA's response. In this manner, we expect to complement your committee's ongoing review of CIDA's operations and the constraints to its overall effectiveness.
In phase two, in the fall of 1996, we plan to report specifically on CIDA's efforts to measure and report on the results of its country programs and development projects. CIDA is developing methodology for accounting for the results of its efforts to promote self-sustainable economic and social development. We are encouraging CIDA to develop a reporting system that provides information up the line on the cost and rate of success achieved at the project or activity level, as well as on how it takes note of the lessons learned on the ground during the implementation stages of the projects it has funded.
The long-standing issue of performance measurement and reporting on the results of CIDA's activities will likely be a central theme of our 1996 report.
For the 1997 annual report, we plan to audit a selected sample of country programs and projects to report in detail the agency's accountability and management effectiveness. This audit will be a comprehensive audit of the bilateral program. We expect to conduct this examination in Ottawa and in selected locations in the field. We plan to work in conjunction with the national audit offices of developing countries, where appropriate, in our efforts to enhance the quality of our audit and at the same time minimize its cost.
Based on the three phases of our work, this chapter will conclude with the overall progress CIDA has made since our 1993 report on the question of accounting for the results of development projects and for the use of funds appropriated by Parliament.
Finally, in 1998, we plan to audit CIDA's accountability for expenditures incurred through non-governmental organizations.
[Translation]
In closing, Mr. Chairman, we welcome comments that highlight areas of our plans of particular interest to the committee. We also welcome the committee's overalll appreciation today and in the near future of the plans presented at this time.
We will certainly try to accomodate your committee's interests and address its concerns to the extent we can now and when we conduct our audits and prepare our reports to the House. We do have some flexibility in our plans at this time but there are obvious limitations to that we can cover. Resources are getting tighter everywhere. You will therefore appreciate than any major modifications to our audit plans will need to be discussed and endorsed by the Auditor General.
[English]
Thank you, Mr. Chairman. I'll be happy to answer any questions you may have.
[Translation]
The Vice-Chairman (Mr. Volpe): Is Mr. Sahgal going to make a statement?
Mr. Fadden: He will answer questions.
The Vice-Chairman (Mr. Volpe): He will only answer questions.
Mr. Fadden, thank you for your presentation. Are there any questions from members? Mr. Paré? I thought you did not want to say anything today.
Mr. Paré (Louis-Hébert): No. I'd like to begin by asking a question.
But first, I'd like to make a comment. In the brief we were given and which you read, you often refer to former audits carried out by the Office of the Auditor General. But in your conclusions today, and in previous conclusions, it seems you have a hard time telling us exactly what you think about any real change government agencies should or could have made.
.0925
In the brief, you often refer to former conclusions, and say that you are planning to re-examine the issue. I have the impression that we're going from one study to the next and that parliamentarians are always waiting for the results of the next study. I don't know if this is founded or not, but I'd like you to tell me if that's the case.
However, in item 11 of your brief, under the heading ``Managing CIDA Programs'', you present an opinion which reads as follows:
- Not withstanding the difficulties involved, a measurement and reporting system that makes
visible, on some periodic basis, the results of the development projects is overdue.
Here's my question. At the start of your brief, in item 4, you say:
- Those matters included, amongst others, increased cost awareness. Immediately following, in
section 5, you say that ``we are pleased to note that the minister has recently stated before your
committee that the key objectives of his department's employees include ``responsibility, cost
reduction and financial control.''''
Mr. Fadden: If you don't mind, I'd like to respond to the first part of your comment. You are partly right, when you say that we occasionally follow up on a study we did. That partly reflects administrative realities. There are extremely complex programs in government, and sometimes it is impossible to change them overnight. So we try to take into account the administrative reality departments must operate in.
I think I understand why you feel a little frustrated, but on the other hand, it doesn't always help when someone makes a cut and dry judgement on certain parts of program, be it the department, the agency, or an issue the agency and the minister don't agree on.
The Auditor General's approach, Mr. Desautels's approach is to try to work with departments and agencies and to carry an audit over several years. That's the approach we took when we reached an agreement with CIDA on the three-year program. In your mind, it might seem like a long time, but on the other hand, CIDA works in an extremely complex environment.
To use an english expression, if you don't mind, it's sometimes easier to catch this with honey than with vinegar. We work with the agency, and we are trying to encourage it to work with other international development agencies. It might take some time before that happens, but based on the Office's experience, it's better to take a soft rather than a hard approach. It might not be the perfect solution, but I'm trying to make you understand what our philosophy is.
You also asked whether a statement by the minister was enough to convince us that, suddenly, everyone within the department became very cost-conscious. No. I don't know the minister, but I would be surprised if he said that. It takes more than that. You have to put in place systems, operations and training.
Over the years, we tried to measure the concrete initiatives the department took to make people more cost-conscious. For instance, a lot more training was given to employees over the past few years in that regard. Half a dozen years ago, people never talked about cost management; or if they did, it was very rare. But now, it happens all the time. When heads of missions, in particular, are sent abroad, their training emphasizes these kinds of issues.
The deputy minister has focused a lot more on these matters over the last few years. The Auditor General was asked if he could send a senior official from the Office of the Auditor General to the department to try and encourage people to become more cost-conscious.
.0930
Mr. Desautels agreed. So one of our officers was dispatched to the department for two years in order to work on this sort of thing.
In next year's follow up, we will try to develop more criteria than those I have just mentioned so that we will be in a position to tell you in 1996 whether or not progress has been made.
Mr. Paré: There is a statement in item 2 that surprises me somewhat. I may perhaps be taking the sentence out of context, but you say:
- The context is value for money and prudent use of diminishing financial resources...
Mr. Fadden: That's an interesting question. First, I think we have to consider the money available to the Department and the Agency today as compared to what they had a few years ago. The amount of appropriations is shrinking each year.
The other important consideration is that new programs tend to be added each year. For example, peacekeeping expenditures have increased significantly in recent years. Often appropriations available to the Department and the Agency are not increased. Something is added and the remaining responsibilities of the Department have to deal with it. That being said, administration is at times cumbersome, and I think that the Department and the Agency are continuing their efforts to reduce this sort of thing.
The other important consideration, which the joint Standing Committee on Foreign Policy has dealt with to some extent, is the worldwide scope of Canadian foreign policy. It is very expensive, and the government has made the political decision to maintain a Canadian presence just about everywhere there is one at the moment. Costs outside the country are rising very rapidly. When we put it all together, we can say that resources are diminishing.
The Vice-Chairman (Mr. Volpe): Mrs. Beaumier has the floor.
[English]
She's not ready.
Mr. Penson.
Mr. Penson (Peace River): Gentlemen, welcome to the committee this morning. We're glad to have you here.
Every time the Auditor General's department has been here since I've been involved in the last year and a half, it seems we've had a continuing discussion about the need for stronger management and more responsiveness in the agencies involved in this committee.
I see that in point 5, you've stated that the minister has recently stated before our committee that he wants to include cost reduction and better financial control. You've stated that there is considerable scope for the three of us to work together in this area.
I have three questions, which I'll outline first.
My first question is, how might you see that working in terms of a process?
The second one deals with item 16, in regard to Export Development Corporation. You said the audit there is conducted by a different group in your department. Being that the minister responsible is the Minister for International Trade, would it not be appropriate to have that come to our committee? I would certainly like to have the information regarding any audit taking place there.
The third question is about your discussion on item 21, the need for acceptance of financial management, as well as ethical behaviour as priorities throughout the department world-wide. That comes on the heels of your report dealing with the irregularities that took place with travel arrangements in the past and the need for continued improvement in that area.
It's a real concern for me that we would have people in the department who would feel that is an acceptable practice. What more could be done there? I would have liked to have seen criminal charges pursued, because that's really what it was. I think we have to send a message to the department that it is not acceptable to engage in this kind of behaviour.
.0935
So I am wondering what more you might see we could do to make sure there is a proper mood established in that department.
Mr. Fadden: With respect to the first question of how can we work together to complement or supplement the minister's interest in greater responsibility, cost reduction and better financial control, in our particular case we are going to continue to audit this sort of thing. We're hoping if the committee thinks this is important, you will tell us that, if not today, then later. That is one of the main objectives of this meeting, to see whether you want us to pursue this as opposed to something else.
The other way of doing this, and we would certainly encourage the committee therein, is to hold a hearing on it. It is amazing how parliamentary hearings focus the minds of people who have to appear before the committees.
I think it's fair to say, having said all of this, that the department really is making a conscious effort to improve in this way. The deputy minister is well aware of the need for improvement in this area.
I think the best way for all of us working together on this is continuing to focus people's minds on the importance of the subject and perhaps by putting a little bit of the spotlight on it every now and then. We'll do that in any way we can, and if the committee wishes to have hearings on this, we're more than happy to organize some additional supporting work for you if that would be useful.
With respect to EDC, again, as I said in my remarks, we are more than happy to organize ourselves to make available to the committee any of our work relating to EDC if it is of interest to this committee.
We try to follow in our portfolio organization the structures of committees of the House. As you know, your colleagues in - I think it is Finance that do EDC -
Mr. Vinod Sahgal (Principal, Foreign Affairs, Office of the Auditor General of Canada): No, EDC is the Minister of International Trade.
Mr. Fadden: Sorry about that. I'm wrong there. It's our internal structure.
At any rate, if you're interested, we are quite happy to organize a briefing on that.
With respect to financial management and ethical considerations, you put me in a bit of a dilemma because one of the Auditor General's conclusions, when he approved the chapter on travel under the FSDs, was to say that he was of the view that a page should be turned. He concluded that the department had been looked at under a magnifying glass for quite some time, by the RCMP, by Justice, by the Ontario crown attorney and by ourselves. He believes they are entitled to a little bit of time to demonstrate that in fact they have changed.
Whether that is effectively the case or not is very hard for anybody, including an auditor, to conclude on. We would have to go in and assume that there are still ethical problems and try to find them. That's not something we would like to do.
What we are going to try to do in trying to deal with this issue is to look at the systems and practices the department puts into place to try to deal with potential ethical problems. So it's everything from the controls they put into place to insist that advances are accounted for quickly and things of that nature.
That's perhaps an inadequate answer, and I apologize, but I'm trying to reflect my boss's view that the department went through a rough period on this. There were some people who were fined quite extensively. People were ordered off the premises and were told they had to work without pay. The Ontario crown attorney decided charges were not to be laid, so that's outside our purview.
The department's senior management, I think, has tried to emphasize very forcefully the need for proper ethical behaviour, and the Auditor General has come to the conclusion that we should give them a chance to get on with it and to move on to demonstrate that this is no longer a significant problem.
Mr. Penson: Just to follow that up, in spite of that and the optimistic view you have of it, one of the things you've said in your report is that disciplinary measures may reduce risk but the effects may not last. I'm just trying to find out what kind of recommendations could be made from our committee and yourselves that would really limit this.
.0940
One of the problems I have is that I believe if there were criminal charges - You talk about focusing the mind. In my view, that was really an act that would warrant criminal charges. It would seem to me it would set the tone over there that this is not to be tolerated.
Maybe we can't go back, but maybe we can say that in the future, if any of this happens again, there will be criminal charges. Would you go so far as to agree with that?
Mr. Fadden: Well, Mr. Chairman, we're caught here, because the laying of criminal charges in matters such as this is a matter for the provincial authorities. The Department of Justice and the RCMP compiled what we thought was an extremely detailed and well-prepared file, and the Crown acknowledged it as such. In the exercise of their prosecutorial discretion, they decided not to pursue the charges.
As a lawyer, which is what I am when I'm not auditing, I find it difficult, as does my boss, to criticize the Ontario crown's exercise of his discretion. It really is not within the federal jurisdiction.
The Vice-Chairman (Mr. Volpe): If I might use my chair's prerogative, this is really a question for the Ontario crown attorney, who we might call before the committee to answer Mr. Penson's question.
Mr. Penson: I can understand the dilemma you're in, but I'm not satisfied with the process. This is a foreign service of the Canadian government, and I don't think it being restricted by the Ontario crown attorney is a good precedent, a good example.
Mr. Fadden: I might just add, Mr. Chairman, that I'm not about to try to explain in any great detail how the Foreign Service got itself into the position that the Ontario crown attorney had to consider this sort of matter, but I would comment that a good number of Foreign Service officers honestly believe what they were doing was not a violation of the criminal law.
Now, there's an element here of what you're intending to do or not. I tend not to take that view, but foreign services operates in a different kind of environment. The foreign service directives are rather difficult to interpret sometimes. In fact, one of the things the Department of Foreign Affairs, the Treasury Board, and we, in a somewhat less systematic fashion, are trying to do is to go for a fundamental review of the foreign service directives. It's one of the suggestions we made in both our 1992 report and in the report dealing with travel.
We think they're way too complex. They are susceptible to multiple interpretations, which led us to the kind of problem you are raising. It's something the Auditor General has been pressing the department to do for about ten years now, I think. When you have a situation where the foreign service directives total more than 500 pages, it's not surprising that people get into difficult situations.
The Vice-Chairman (Mr. Volpe): Mr. Fadden, I wonder if we could continue on that theme for a moment. Could the ordinary layman be excused for not understanding the intensity of the investigation in one particular department when the general outcome is measured in losses that are measured in thousands rather than millions of dollars, and the political climate is involved in a debate where we're talking about waste, sometimes of a deliberate nature, that's measured in the tens of millions of dollars? Is there an imbalance of -
Mr. Penson: If it's wrong, it's wrong.
The Vice-Chairman (Mr. Volpe): I guess the question is if it's wrong, and we devote so many resources to something that appears to be quite small in the large scheme of things, are those energies perhaps better directed to the large scheme of things?
Mr. Fadden: That's a very good question, Mr. Chairman. I think the Auditor General's office, this committee, and any number of other departments in town try to focus on the broader systems and practices that result in the waste of money. On the other hand, when there is a clear potential for wrongdoing, people tend to focus on it a great deal.
From the perspective of the layman, which is the perspective you raised in your opening remarks, I think there's a great deal of interest in this kind of thing, because it's something people can understand. Allegedly taking somebody some money that's not yours is understandable. Working through the complex criteria to evaluate development projects or the management of embassies abroad is something most people don't think about that much.
.0945
The other thing I would mention in passing, though, is that while our report focused on the Department of Foreign Affairs, it did involve employees from a number of other departments. So in that sense, I think the department and the government was entirely proper in its decision to inquire in depth as to what happened. If it had been an isolated incident in one part of the world or one department, you perhaps could have dismissed it entirely and just dealt with the cases. But it did involve other departments over a large geographical area.
The Vice-Chairman (Mr. Volpe): Thank you.
Ms Beaumier (Brampton): Did you say the Auditor General's office does do a type of sustainability assessment on EDC funding as well?
Mr. Fadden: Among other things, yes.
Ms Beaumier: We're talking about sustainability in the country that's receiving the assistance - and I'm not all too clear on EDC. Does or would the Auditor General consider doing an assessment on EDC moneys if it's believed to be having a negative effect on Canadians?
If you're going to invest in, say, Mexico, you're opening a business and you're employing Mexicans, as a Canadian company, that's fine. But if you're going to be getting government money to establish a business in Mexico at the expense of laying off Canadian workers, I'm not really sure that's being terribly accountable to the Canadian public.
Mr. Fadden: Mr. Chairman, I can't answer in detail as to whether or not we've done that.
The other comment I would make is that our audit mandate with respect to EDC is rather special. It operates under part 10 of the FAA, which is a special examination. It's somewhat different.
Having said that, I think what you've illustrated is an excellent example of interprogrammatic conflict. You have a program that is trying to encourage the development of a foreign country, but conflicts with a whole raft of other programs that try to develop employment, for example, in Canada. What we have tried to do when we have found that kind of interprogrammatic conflict is not to say that one is good or one is bad, but to point it out and to suggest that it's the responsibility of the government to be aware of this and to consciously make those policy choices. But if this is -
Ms Beaumier: But the government being whom? Because of the Privacy Act, it's very difficult to get any kind of information from EDC on programs that may affect us in our ridings and affect a large number of people. It's very difficult: it's privacy, and they are a banking institution. Well, I understand that, but you're a banking institution with my constituents' money, and somewhere along the line I think we have to look at what EDC is actually financing, if it's counter-productive to Canadians, and if so, then perhaps there should be another mechanism.
Mr. Fadden: Mr. Chairman, what I would undertake to do is to take the member's comments back to my colleagues who are responsible for EDC.
We, on the other hand, are responsible for an audit of trade, which will include looking at some elements of EDC. I will undertake to put that into the hopper and try to come up with some answers for you.
I'm sorry I can't be more specific.
Ms Beaumier: That's okay. I didn't want to be specific either. Thank you.
The Vice-Chairman (Mr. Volpe): Mr. Flis, would you like to take the last part of that first round?
Mr. Flis (Parkdale - High Park): Yes. My question will be very short.
I'd like some further information on processes as far as when you'll be auditing the technical assistance contributions to central and eastern Europe.
As an example, when Estonia got its independence, one of the requirements to be an Estonian citizen or to obtain an Estonian passport was to learn the Estonian language. About 40% of people living in Estonia spoke only Russian and had to learn Estonian to become citizens.
Canada has given financial assistance in language training. How are you going to measure the effectiveness of such programs? Are you actually going to go into the internal affairs of another country? We're getting into jurisdictional audit areas here, so just some assistance for the committee in the process.
.0950
Mr. Fadden: Could I ask Mr. Sahgal to comment.
Mr. Sahgal: There are really two basic questions we raise when we look at contributions of this nature. The first question is whether the moneys have been spent for the purposes intended. In this regard it's very important for us to understand clearly the objectives of the program, what kinds of results were anticipated, and what kind of mechanism has been developed to deliver the program, and then to ensure that there is some assurance that the moneys are in fact spent by the third parties that are involved, the implementing agencies, for the purposes intended by the government. So that is the first question we address.
The second question we address is what result is achieved. In this regard our approach is really twofold. First, we ask the department how it evaluates the results of its programs. Our primary focus is on the evaluation capacity within the department, to look at results and how it reports up the line to its senior management on how the projects are faring in terms of success or needs for changes, what lessons have been learned.
In situations where we see that the results are not being measured or the accounting for the results is not adequate, we urge the department, and we do some testing of the sustainability of those projects, to develop its own evaluation capacity.
Mr. Flis: How are you going to measure? Are you going to measure the number of additional citizenships that were issued in Estonia, or are you going to measure their fluency in speaking Estonian?
Mr. Sahgal: This will depend on what objectives were set for that particular project. Our question really will be to try to understand what the objectives were and what results were anticipated, and then we would measure accordingly.
To answer your question fully, I would first have to ask the department what specific objective was in mind when that particular contribution was funded.
The Vice-Chairman (Mr. Volpe): Do you mean you'd also measure whether the amount of money disbursed for those kinds of objectives was standard for market measurements here in Canada?
Mr. Sahgal: In situations where moneys are being spent in development projects overseas, we try our best to understand the context in the country and to ensure that the policy objectives Canada has are being pursued and implemented. We don't necessarily question the policy objectives themselves.
The Vice-Chairman (Mr. Volpe): In Mr. Flis's example - and this harks back to something Mr. Penson alluded to earlier - he gave you specifically an example of language training. Would you then measure the outcome on the strength of the costs for language training in Estonia, or would you measure those costs and the results in the background of what they might be in Canada?
Mr. Sahgal: If the objective was to bring about more language training facilities and more effective delivery of program in that area, then I think we would look at the Estonian situation as being the most appropriate.
The Vice-Chairman (Mr. Volpe): I suppose you would change that if the personnel were Canadian.
Mr. Fadden: I would like to add a thought. One of the things we try to do when we audit development results abroad is to do so in the context in which the particular program takes place. So if we're using Canadians to teach Estonians, then we'd factor that in. If the conditions of the grant or the contributions required that other Estonians do it, then we would take into account, for example, the costs of their doing the training.
It is in fact one of the complicating issues of auditing development results that you have to do it on an ad hoc basis. Just about every country is different.
In the case of Estonia, if the money was given to a Canadian contracting agency to deliver the service, and if they were free to do it in one way or the other, then we'd have to find out exactly how they did it, look at their costs, and then make a comparison. So we'd have to work our way through a decision tree to find out exactly how it was done, form a view as to whether that process was reasonable in the first place, and then do a bit of comparative work to decide if the cost was reasonable.
The Vice-Chairman (Mr. Volpe): As you no doubt know, we have many more of these examples. In particular, we're utilizing some Canadian expertise in the Ukraine. Some of those programs can be viewed as being rather expensive, but we're talking about taking Canadian expertise, transferring it overseas and then factoring in opportunity costs for the Canadians who are essentially adding a volunteer component to the development.
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Are those all factors that come into play in your audit?
Mr. Fadden: All I can say is that we certainly hope so. We do try to factor all these in. It is, I think, one of the reasons why the cost of auditing development projects is relatively high. There are so many variables.
For example, utilizing Canadian teachers to teach Estonian may at first glance appear to be utterly irrational for a whole variety of reasons, one of which is the cost, which will be very high. But on the other hand, the agency or the department may have a policy objective to try to spread knowledge of Canada, raise Canada's profile and a whole raft of other things that justify the expenditure of having Canadians go there.
What we try to do is understand, as Mr. Sahgal said, exactly what they're intending to do and why, and then audit against that. As we said in our chapter on the eastern European development program, those objectives were not always as clear as we would have thought might be the case.
Mr. Penson: Just to follow that up for a moment, I gather from what you're saying - I just want it to be absolutely clear - isn't that part of the whole process, to make sure we try to direct a department to be clear in their objectives so that there's something to measure it against? That's really what you are saying here, I gather. Is that right?
Mr. Fadden: Very much so.
Mr. Penson: Therefore we can do a better job, or the department may be able to do a better job, in setting those objectives to start with.
I was going to ask about the CIDA three-year, three-phase audit. Will you be offering advice to them in that process on how to proceed in developing a better organizational structure as well as on the follow-up audit? How would that proceed?
Mr. Fadden: Mr. Chairman, as you know, the president of CIDA has put into place a fairly broad-based management renewal process and we feel issues such as organizational structure are so directly linked to the management function that we've tried to stay a little bit away from that.
They've been kind enough in a couple of instances to ask for our thoughts on matters on which we have some expertise - for example, the organization of the audit and evaluation function and that type of thing.
But on things like organization, we have tried to keep our distance - if I can put it that way.
In respect of other matters relating to managing for results and the development of criteria, that's exactly what the three-year process is meant to do: to enable and encourage CIDA to work towards these themselves, and to consult with us, since we have some views.
We have developed the view with CIDA and IDRC that it would be useful to bring together some people from other development agencies, other aid agencies and perhaps the Third World to talk about these things, the objective being that by the time we hit 1997 we will have criteria that will be agreed to. So when we conduct the audit we won't get into a major debate on what is fair and what is not fair, which was perhaps what characterized the prelude to our 1992 audit with CIDA. There was a great deal of disagreement on what was a reasonable estimate of development results.
Mr. Penson: Would that be coming to our committee? Would you be making a report on a yearly basis measuring progress?
Mr. Fadden: Yes. We're bringing the first one in this fall. Again, it's a rather novel approach. CIDA is doing a self-assessment of its management renewal process. They've given this to us, and we are now going to audit that, if I can put it that way. We will provide the House with both CIDA's self-assessment and our evaluation of that self-assessment process.
Mr. Penson: I would think that should go a long way to helping out with some of the problems that have been in place over there for some time.
Mr. Fadden: We hope so.
Mr. Sahgal: Mr. Chairman, if I could just add to what Mr. Fadden has just said, the focus of our work on CIDA's self-assessment of its renewal plan is on those areas that address the concerns raised by the Auditor General in the 1993 report.
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Mr. Lastewka (St. Catharines): I want to just go back to the earlier dialogue. I would hope we're not getting into a situation where the Auditor General's department is now going to do prosecutions and so forth in departments, but rather reviewing the mandate, the system, the report cards and the improvement areas in that the labour-management requirements would be done in the department as a result of the audit.
I think that's what you were saying. Am I correct in that?
Mr. Fadden: That's so, Mr. Chairman. We just find that in a number of discrete areas, it sometimes moves what we think is our file and your file if we work more closely than in other areas, but overall we certainly do keep an arm's-length relationship to do what you were suggesting.
Mr. Lastewka: I think it's very important that we continue to use the advantages of the Auditor General's reporting schemes, such as what is going to be set up, where there are joint projects for improvement.
There is an area I have not been able to get satisfaction on. Each of the departments, whether it was Foreign Affairs or the other departments, has its own self-audit and audit systems. I'd like you to comment on your review of those audit systems, and on whether they are sufficient. It seems to me, the more things that you find are not happening, the more the internal audit systems aren't working and need to be improved.
Could you comment on that?
Mr. Fadden: I'll say a couple of things and perhaps Mr. Sahgal would like to add something.
In respect to the Department of Foreign Affairs, to start there first, they had a number of problems your colleague opposite was commenting on earlier. So they made a conscious decision a couple of years ago that they were going to audit, against a fairly precise template, every mission in the world once a year. They systematically did that, as a conscious effort, to indicate that management wanted real improvements on financial management and financial control.
As they did this, their ability to audit headquarters and broader systemic problems dropped. We suggested to them, and they agreed, that they could not continuously audit every mission every year and they had to have a broader audit plan that would deal with headquarters' issues and broad systemic problems. I understand they're now slowly moving towards that.
Part of the difficulty, of course, in dealing with audit and evaluation and a whole raft of staff functions today is that with the cuts being imposed by the government, it's very easy for departments to take staff functions and to reduce them and to try and get as much money as they can on the line functions.
So I suspect both CIDA and Foreign Affairs would argue that they don't have enough resources in those areas.
With respect to Foreign Affairs, we think they're now heading in the right direction. They've made a decision that all their audit reports are now going to be made public automatically, which was not the case until a couple of years ago. There was so much interest in the audits while they were doing the cyclical approach, they decided it would be easier to do that.
With respect to CIDA, the renewal of the audit and evaluation function was an important part of Madam Labelle's overall management renewal process, and it resulted in the appointment of a new director general, the establishment of new divisions, and a further division of responsibility between what the branches would evaluate themselves and what would be done centrally. There's also a further division between what the agency will evaluate or audit itself and what they will contract out to Andersen or Ernst and Young and whatnot.
We think this is heading in the right direction. The difficulty with CIDA's internal evaluation and audit of its development projects is the same as we have auditing them. It is not intuitively obvious even to professionals in the field how this is to be done. The development of criteria is not easy.
I am not saying this to try to excuse either CIDA or ourselves. We've done a bit of a world-wide search on this. The World Bank is having the same problem. Other audit offices are having the same problem, but they are moving in the right direction.
The Vice-Chairman (Mr. Volpe): Would you like to add anything?
Mr. Sahgal: I will try to respond in one other way to Mr. Lastewka's question. The question of looking at the internal audit and evaluation function is a central part of a comprehensive audit we conduct. So in each of the major chapters we do - For instance, in the 1993 report of the Auditor General on the Canadian International Development Agency, there is a whole section that deals with our view of what further improvements can take place to strengthen the internal audit and evaluation capacity.
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Mr. English (Kitchener): I think the work of the Auditor General is excellent. I am very interested in the reports. I think the reports we see in the future will be extremely important.
I recognize the difficulty regarding criteria in the case of international development projects. I know other organizations are having the same kind of difficulty because there's the question of how you evaluate international development assistance. Perhaps criteria change, and contributions and economic growth are no longer so important.
Having said that, about a year ago John Stackhouse of The Globe and Mail toured the globe and evaluated Canadian development assistance programs. It was a remarkably good article, from my point of view. I thought it was a good assessment of what was weak and what was strong.
I have a simple question. Why is that impossible for CIDA itself to do?
The Vice-Chairman (Mr. Volpe): That's a good question, Mr. Fadden.
Mr. Fadden: Mr. Chairman, perhaps I can try to answer through the use of this specific example. If my memory serves me correctly, CIDA is funding a project in Bangladesh that provides rural women with some work in building roads that on an annual basis are washed out entirely. The roads are useful during part of the year because it promotes transportation and development, but every year the roads get washed out.
We've thought about this, and on one side of the coin you can say this is an utter and complete waste of Canadian money because there is no sustainable development taking place. The roads keep being washed out. On the other hand, you can argue that in a slow and indirect fashion we're promoting social development and the betterment of the condition of women in Bangladesh by giving them this kind of employment. That's a fairly easy example.
But depending on where you stand on that spectrum, where you either want to help individual human beings have more food on their plates, or where you want to have sustainable development over time, you think that the project is either very good or an utter and complete waste of money.
If you take that kind of reasoning, if you buy into it and you apply it to a much more complex or a larger project, the development philosophy you bring to bear makes it very difficult to develop a consensus if the people with whom you are dealing have a different development philosophy.
This is why, in some ways, the office has tried to argue that it is unreasonable at one level to hold CIDA accountable for the exact and precise results they bring about, because they don't control everything over there. Rather, they should be accountable for the management of the results and for, in other words, every decision that leads up to it. But if in the end, for example, there's a war and all their development results are washed out the window, it's not their fault.
On the other hand, if there's a war and they have taken every wrong decision leading up to that washed-out project they are still accountable for it.
It's sort of a roundabout answer, but I am trying to explain why we think it's a difficult issue. On the other hand, we firmly believe it is doable.
Mr. English: Just to follow up on that, I read with great interest here the report on technical assistance contributions to central and eastern Europe.
You evaluated and said, if I recall correctly, that some initial difficulties have been worked out. You then have a paragraph where you say that you really are not in a position to know the results of it, and you imply the department wasn't either.
If I may be anecdotal, I talked to someone in the department about this, and they said they were very happy with your report. Coming to it cold, my reading of it was that it was a report that raised very large questions.
What is the proper reading of that? Was it the department's comment or was it my own initial response on reading the document?
Mr. Fadden: Mr. Chairman, what we were trying to do in that particular audit was to review the process the Department of Foreign Affairs and International Trade put into place to deal with this new program which the government - and I can understand - decided upon in a fairly short timeframe. We consciously decided it was important enough to audit in the short term and we had to decide what to scope in and what to scope out. So what we focused on was really the process the department went through, largely in Ottawa, in order to get the money spent in the field.
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We undertook two short field visits to get a sense of what was going on in the field, but what we were trying to say in our report was that after a shaky start they got the process on a fairly decent track, but that neither we nor the department were in a position to know if they were getting real results across the board for the money they spent.
As we were completing this relatively small audit, we told the department that when we did the follow-up we would do that in the field and the focus would be on results.
Mr. English: I should clarify that of course it wasn't CIDA; it was in the department.
To move to CIDA, do you think that's likely to be more effective because CIDA has more experience in delivery than the department itself has?
Mr. Fadden: It's hard to say. A lot of people in CIDA argue that it's not really ODA.
It's different, and materially different in that sense.
On the other hand, I think it's fair to recognize that the department did bring in on secondment a fair number of CIDA officers to manage the program itself.
So I guess I'll hide behind the auditor's shield of saying that it was a policy decision, and we will be looking at it in CIDA the next time.
The Vice-Chairman (Mr. Volpe): So you're a good candidate for the diplomatic corps.
[Translation]
Mr. Paré: During one of her appearances, Ms Labelle told us that there were 700 officials in Ottawa or Hull compared with 125 in the field for the bilateral program. I will not ask you to comment on the proportion, because this is not what my question is about.
When a CIDA official is in the field, I wonder how well his cost may be evaluated on an annual basis? I suppose it amounts to several hundred thousand dollars. Do you know the cost of an official in the field? And, on the other hand, what is the cost of an NGO cooperant in the field?
Mr. Fadden: Quite honestly, I think we know the cost of an official abroad, but I do not remember.
[English]
Do you remember?
[Translation]
I don't think we know what it is for the cooperants.
[English]
Mr. Sahgal: An estimate that has been made by the Department of Foreign Affairs on what it costs on average to post a Canadian official overseas is between $250,000 and $300,000. But that includes all costs, including the costs of the establishment of the embassy, etc.
If you were to look at the incremental cost to CIDA of posting an official abroad, then you would look at the salary cost plus the FSD - that is, the foreign service directives - cost, and I think that would range around $175,000 per annum.
[Translation]
Mr. Paré: If you are planning to examine NGO activities in 1998, we may, at this point, be able to find out the amount, but I suppose the figure is substantially lower.
Mr. Fadden: I think so, Mr. Chairman. If it interests you, I would be happy to try and find out the figures and send them to the clerk. Is that okay?
Mr. Paré: I would like to ask a second question on another matter. Earlier, in response to one of my questions, you referred a bit to the peacekeeping missions. I know that you are planning to examine them in 1996 as well. I would nevertheless like to ask you the following question. In the context of our peacekeepers' mission with the UN, can you comment on the equipment they have available to them or would you be able to do that later? Do they have the equipment they need ideally? A whole lot of rumours and jokes are going around. They say that sometimes they have to change - I suppose this involves a bit of folklore, but are you able to comment on the equipment available to them?
Mr. Fadden: We are not, but are colleagues on the National Defense team were planning to investigate this. We will probably be able to give you this sort of an answer.
The audit done by our colleagues on the National Defense team has two main trusts: the training given people to prepare them for peacekeeping missions and the equipment made available to them.
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I think you'll be getting your answers.
The Vice-Chairman (Mr. Volpe): Thank you.
Mr. Lastewka, you had a supplementary?
[English]
Mr. Lastewka: I want to ask our witnesses to elaborate a little more on what they said about the innovation needed for the UN. You made a one-sentence statement there. What were you really getting at with item 9: ``We also pointed out that there is a need for innovation in the manner in which Canada pursues the goal of reform - '' Could you be a little more specific on that item?
Mr. Sahgal: Mr. Chairman, perhaps I could refer to the 1991 report of the Auditor General on membership payments to international organizations. That particular audit did focus on the United Nations type of organization as opposed to the security organizations such as NATO.
In paragraph 12.62 we made a specific recommendation, as the member has asked for a specific suggestion here. Our recommendation was that the department should:
- set priorities for further efforts to improve the administration of international organizations;
- That was the context. We suggested that the department should:
- focus on organizations and programs that are most significant to Canada;
- Third, we suggested that the department should:
- more actively pursue co-operation with groups that include developing as well as developed
countries to effect changes in international organizations.
Mr. Lastewka: The other item I'm a little concerned about is that you mentioned in your report that you have not for some time examined CIDA's voluntary contributions to various international organizations and there isn't a report forthcoming on that item.
I just wonder, could it be a mistake that we're going to do audits on various other items, and that one, I think, might be playing a significant role? What was your thought behind not doing that one?
Mr. Fadden: It was really a question of trying to deal with the big money items first and working our way through them. I'm not suggesting that the moneys being spent through NGOs are not substantial, but we wanted to give some emphasis to the bilateral program over the course of the next three years.
However, we come to the committee this morning quite honestly seeking your views on whether our priorities are correct. So if the committee is of the view that doing NGOs sooner is a real priority, then we'll take this back to the Auditor General and see what we can do. But the fundamental basis for it all was to try to focus on the big items, which were in the bilateral program, and then work our way through.
Mr. Lastewka: I can appreciate that. I guess my concern has been, even through the joint committee hearings, the fact that CIDA works with so many NGOs. We talked yesterday about whether CIDA was going to do more umbrella work under lead organizations and so forth. I didn't get a satisfactory answer yesterday, so I'm still really concerned from this standpoint that CIDA has not taken a lead role in getting umbrella organizations and being accountable through the organizations.
I'll leave that one open.
The Vice-Chairman (Mr. Volpe): Do you care to answer that, or do you just want to take it as registered?
Mr. Fadden: We'll note it, if we may.
The Vice-Chairman (Mr. Volpe): Okay. Then you'll note as well that the committee heard your request as to whether we prefer to have immediate action on your auditing of CIDA and the NGOs. I'll relay that in a meeting tomorrow with our chairman and the subcommittee on agenda and procedure. We'll get back to you on that.
Mr. Fadden: Thank you.
The Vice-Chairman (Mr. Volpe): I wonder if we can close with maybe a quick reaction to a couple of items. One of them relates to item 29 in your presentation and your 1997 annual report.
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Since you indicate your plan to audit a selected sample of country programs and projects to report in detail, and throughout your presentation you give an indication that you were looking for cooperation and collaboration, or co-working, with this committee, I wonder whether you had a specific plan in mind that involved this committee's doing a selection and you doing another, or whether you expected this committee to work in a particular area first, and you subsequently, or whether you were looking at the committee commenting on your findings.
Mr. Fadden: Mr. Chairman, we're open. I think one example would be that if the committee was of the view that we should focus on humanitarian aid in Africa, we'd spend a bit more effort in Africa. If we're talking about more traditional social and economic development aid in Asia, we'd do a bit more of that.
We're hoping you could give us in due course a general indication of your broad interests, and we'll try to accommodate those to the greatest extent possible. Of course we hope that once we do publish our report, you would find it worthwhile to call the report and to hold hearings on it.
The Vice-Chairman (Mr. Volpe): Okay.
I guess in the same vein, when the minister was last before the committee he encouraged the committee to get involved in the pre-budget meetings. I think Mr. Sahgal was present in the audience at the time, and he may correct me, but I think our chairman at the time gave him an indication that the committee would be quite prepared to do it and that he was either going to get in touch with or had already been in touch with the Auditor General's office to give an indication that the committee would be prepared to work with the Auditor General's office on precisely this approach.
I don't know whether that has already been registered. If it hasn't, we're registering it now. If it has, have you given some thought to how this committee might be more proactive in those pre-budget consultations?
Mr. Fadden: To be honest, I wasn't aware of that, Mr. Chairman, so I can't answer. I don't know if Mr. Sahgal can.
Mr. Sahgal: There was a reference - I recollect that very well - the last time we were here that the chairman was very interested in knowing whether we could work toward this fall, when this committee would be involved with the outlook documents of the department and the Canadian International Development Agency.
The Vice-Chairman (Mr. Volpe): Perhaps, then, we could ask you to reflect on the items. We're supposed to get back to you and you're going to get back to us, and maybe through our clerk we can arrive at a fairly methodical plan for the purposes of the committee.
Mr. Fadden: Perhaps I am reading your members improperly, but when I go on about the difficulty of developing criteria for development results, I sense a bit of skepticism. I've been trying to think of an example that could illustrate what we're talking about. I wonder if you would indulge me for just two minutes.
The Vice-Chairman (Mr. Volpe): Go ahead.
Mr. Fadden: As I understand it, the clerk of your committee and your research officers are accountable both to the committee through you, and to the Clerk of the House and to the parliamentary librarian. So even here in Ottawa it's far from being clear who does what for whom and who assesses whom.
Let us imagine, for example, that the committee decides to go to Zaire to study CIDA's possible grant to WHO to control the Ebola crisis. You then charge the clerk and your researcher with organizing the committee's work in Zaire where you have to deal with another sovereign government, you have to deal with an environment where basically nothing functions, and you have to deal with an environment where the cultural values and the work ethic is utterly and completely different than it is in Canada.
It would be almost impossible for you to come back, I submit, and say to the clerk or to the researcher that they fouled up or did beautifully, because essentially just about everything they would have done would have been beyond their control.
When we go on about the difficulties of development results, we're not trying to suggest that CIDA should be forgiven for not having attained results, but we believe the focus should be on how they have managed the process to get to those results, taking into account the kind of environment I'm trying to suggest to you.
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Again, maybe I'm getting defensive in my old age, but we've thought a lot about this and we do think the different environment abroad has to be taken into account. It's not quite the same as asking Mr. Noreau of Human Resources Development whether he gets out a certain number of UI warrants.
Thank you for indulging me in that.
The Vice-Chairman (Mr. Volpe): Thank you, Mr. Fadden and Mr. Sahgal, for your presentation and your willingness to address some of the questions that are a little touchy sometimes. It makes our work a little bit easier and more productive, I think.
Thank you very much again, and we look forward to both your responses and meeting you once again.
Mr. Fadden: Thank you.
The Vice-Chairman (Mr. Volpe): I'm going to ask members to just remain behind for an informal meeting.
I now adjourn the committee's official hearings.