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I now declare this 89th meeting of the Standing Committee on Public Accounts in order.
I first welcome Mr. Van Kesteren and Mr. Shory, who have joined us today. Welcome, gentlemen. I hope you enjoy your time with us.
Colleagues, you will recall that at the last meeting we agreed that if we did a full rotation of questions, there would be time remaining. We've already had a discussion and agreed that we will continue the rotation until the full two hours have expired, at which time we will adjourn. Is there anybody who has a problem with that?
Good. Hearing none, thank you.
We will now turn our attention to the spring 2013 report of the Auditor General of Canada. Colleagues, we'll proceed in the usual fashion. We'll ask the Auditor General to make an opening statement and then I will turn to the usual rotation list for speaking assignments. Again, does anybody have a problem with where we are and where we're about to proceed?
Hearing, none, welcome, Mr. Auditor General. I would now give you the floor and an opportunity to introduce your delegation and present your report and opening remarks.
Sir, you have the floor now.
[Translation]
Mr. Chair, I am pleased to present our spring 2013 report which was tabled in the House of Commons last Tuesday.
[English]
I'm accompanied by the assistant auditors general Neil Maxwell, Nancy Cheng, Jerome Berthelette, and Wendy Loschiuk.
Mr. Chair, we also have other members of staff with us and I may from time to time ask one of them to join us at the table with your approval.
This report reflects the broad range of activities audited by our office. It includes findings from three follow-up audits and seven new audits, as well as a summary of special examination work in crown corporations. Overall, we found many areas where the government should improve on the results it achieves with taxpayers' dollars.
[Translation]
Status reports present our findings from follow-up audits. In these audits, we examine whether government has made satisfactory progress on recommendations we raised in past audits.
Our first follow-up audit focused on how government evaluates program effectiveness. Evaluation is a tool to improve programs and support government policy and spending decisions through evidence-based information.
We found the government has made satisfactory progress in the way it evaluates its programs. However, we also note that despite this progress, program evaluation is still not used to its full potential to support government decision-making.
[English]
We are also reporting satisfactory progress in our follow-up audit that looked at the Canada Revenue Agency's efforts to collect unpaid tax debts. The timely collection of overdue accounts is one of the key components for preserving the integrity of the tax system.
We found that the agency has taken a number of measures to improve the way it collects tax debts. These include new collection tools and revised work flows.
The improvements the Canada Revenue Agency has made have resulted in a significant increase in the amount of tax debt being collected. However, given tax arrears of $29 billion, the agency needs to continue to work to refine and improve its tools, such as the models it uses to determine which accounts to pursue first.
In the last of the three follow-up audits we are reporting on, we found that the government has not made satisfactory progress in addressing the recommendations we made in 2007 on safeguarding government information and assets in contracting. Protecting information and assets entrusted to contractors is critical to the government's ability to prevent misuse and unauthorized access and to achieve its security objectives.
Despite a number of improvements, including a new policy on government security, significant weaknesses remain in this critical area. For example, National Defence does not meet all the requirements of the new policy, and has yet to approve a departmental security plan.
In addition, 85 of the almost 300 contracts we reviewed over five departments were missing security documentation or did not follow control procedures. We observed some files where security requirements were not identified when, based on departmental policy, they should have been.
[Translation]
Departments and agencies—and in particular National Defence—need to improve their practices to ensure that all security requirements are met.
Let's move now to the new audit work included in this report.
In the first of these audits, we looked at the official assistance that Canada provides to developing countries through multilateral organizations. About $3 billion of the official development assistance spent in 2010-11 was channelled through multilateral organizations. We found that responsible departments are doing a good job of working with multilateral organizations and monitoring their performance. However, we also found that reports to Parliament contain limited information on how aid is spent and on the results achieved. I am concerned that the information reported to Parliament is not giving a clear picture of the nature of spending on official development assistance.
We also looked at the government's activities to promote the prevention and control of diabetes. The government has recognized that a joint approach is required to prevent and control diabetes in Canada. The organizations tasked with implementing this approach have to ensure that the resources put at their disposal are maximizing benefits for Canadians.
The Public Health Agency has not defined how it will work with Health Canada and the Canadian Institutes of Health Research to implement and coordinate diabetes activities. The agency has not thought through what it should be trying to accomplish with the federal resources available to fight diabetes. As a result, activities remain largely uncoordinated, and their impact is unknown.
[English]
Our report on creating a historical record of Indian residential schools describes a situation where a lack of cooperation has hindered progress.
Documenting the history of Indian residential schools is an important part of the reconciliation process. At this point, with the mandate of the Truth and Reconciliation Commission running out in some 15 months, the commission and Aboriginal Affairs and Northern Development Canada have yet to agree on the work to be done. We are concerned that the lack of cooperation, delays, and a looming deadline stand in the way of creating the historical record of Indian residential schools as it was intended when this process began.
Our audit of search and rescue activities found that while the Canadian Forces and the Canadian Coast Guard have reacted adequately to search and rescue incidents, significant improvements are needed to ensure that the necessary personnel, equipment, and information system will be available in the future.
The air force and the coast guard's ability to respond to incidents has been a testament to the dedication of search and rescue crews. We are very concerned about the sustainability of search and rescue services in coming years.
In our audit of spending under the public security and anti-terrorism initiative, we found that departments and agencies submitted progress evaluations and annual reports to the Treasury Board Secretariat, but there was no monitoring of government-wide progress toward the initiative's objectives.
Between 2001 and 2009, the Treasury Board allocated about $12.9 billion to 35 departments and agencies to fund measures to enhance the security of Canadians.
We believe the government missed an opportunity to use the information it collected to generate a picture of spending and results under the public security and anti-terrorism initiative across departments.
Our audit on employment insurance overpayments identified some good practices, like using a risk-based approach and various tools to identify overpayments. However, we believe that Human Resources and Skills Development Canada is missing opportunities to recover tens of millions of dollars in overpayments each year. By improving its analysis and understanding of overpayments, Human Resources and Skills Development Canada could potentially identify more overpayments and improve on recoveries.
Our audit on advance funding to PPP Canada notes that the government is exposed to financing risks with the current arrangement of providing money to the corporation years before it is disbursed for infrastructure projects. In our view, there are approaches that would minimize the government's exposure to financing costs. The cost of financing should be considered whenever a crown corporation seeks to receive funding ahead of its disbursement needs.
[Translation]
As we have done for several years, this report also includes the main points from our special examination work in crown corporations.
We did not find any significant deficiencies in the corporations we examined—Farm Credit Canada, Canadian Broadcasting Corporation and Old Port of Montreal Corporation. However, we have raised some concerns about the Old Port of Montreal Corporation.
[English]
Mr. Chair, that concludes my opening statement.
[Translation]
We will be happy to answer any questions you may have.
Given the complexities of preparing aircraft and getting up and going and putting personnel in and training them, with everything that's involved in an emergency mission, as a former emergency response individual myself, I can appreciate the tremendous work they do. When I've seen it firsthand, I'm very, very impressed.
We, of course, in this country have the second largest land mass in the world and have the longest coastline, so it's quite an enormous challenge to work with. My information has led me to believe that we responded to approximately 9,400 incidents. We tasked our military aircraft to over 1,100 cases, and we assisted over 20,000 people. Of course, doing that requires personnel—a significant number of personnel—and the Auditor General's report found that there were occasionally personnel shortages within the realm of the trained SAR personnel.
Can you assure us, though, that this has not led to a reduction or a total inability to respond? Did you find that search and rescue operations are being maintained? And further to that, were you able to ascertain whether or not National Defence has any process in place to deal with these shortages?
Mr. Ferguson, I'm going to look at chapter 2, specifically around page 55, paragraph 2.18. There was a task force created that was supposed to talk about security, to ensure that security of government contracting, whether through Public Works or through Defence contracting—the Department of National Defence's contracting outfit, because there is a separate piece again....
These are actually security measures. I notice that it was determined that there was a group of folks brought together, primarily under the direction of deputy ministers or the equivalent thereof, and a report was written. This was a task force. At the end, the report was actually put together, but not funded.
Am I seeing that correctly, that we could have had a task force giving us a new policy and framework, but then the Treasury Board Secretariat, in this case, didn't fund it? Is that what I'm seeing in this piece?
:
That was my next question, about satisfactory/unsatisfactory, but you've already articulated that, Mr. Auditor General. I appreciate it.
But let me just quickly read into the record the very bottom of paragraph 2.29:
Unlike the previous version of the Policy, the 2009 Policy does not state whether contracted firms with access to protected and classified information are required to hold a security clearance. In our opinion,
—this is the Auditor General's opinion—
this is an important gap that could result in inconsistent application of the Policy and thus introduce additional security risk.
So not only did they not follow through in 2007, but we get to this point in this audit, and lo and behold, we still have the Auditor General saying there's security risk, in paragraph 2.29.
Sir, I'm looking at page 68. There's a chart, exhibit 2.8, and I'll go specifically to National Defence. It shows the “Number of contracts with security requirements” and the “Number of contracts without security requirements”. The total is 48 for the two of them: 25 with and 23 without.
According to your final column, “Number of contracts with incomplete or absent security documentation or improper application of controls”, it's 32 out of 48 for the defence department. This is not the transport department, VIA Rail, or the postal service—no offence to either one of those two crown corporations; they're both brilliant crown corporations, I think—but the defence department. That translates into 66% of these contracts that didn't meet the requirements when it comes to security.
Are my numbers off there, or am I correct?
In chapter 5, “Promoting Diabetes Prevention and Control”, the report notes that activities related to diabetes have not been fully coordinated at the federal health portfolio level.
I want to mention that, as I'm sure you would appreciate, all chronic diseases share many common risk factors, such as, in the case of diabetes, for example, tobacco and harmful alcohol use, raised blood pressure, hypertension, physical inactivity, raised cholesterol, obesity, unhealthy diet, and raised blood glucose. These could all contribute to various diseases, including diabetes. The Public Health Agency and our government have taken an approach to address all of these risk factors as a way to reduce chronic disease, including diabetes.
Given that obesity, for example, is a known risk factor for diabetes, I'm interested to know why you didn't evaluate or take into consideration the government's efforts to promote weight loss and healthy diet. I bring this up because our government has made significant investments—for example, in nutrition education and awareness-raising, Nutrition North, the child fitness tax credit, Participaction, healthy living partnerships with the private sector—all of which support diabetes prevention and should be taken into account when assessing the government's efforts.
I just want to ask whether you would agree with that.
From a little bit different perspective, I will be directing my question to CRA, should they come before committee on this. But perhaps you can give me some clarification, because I'm also going to wear the hat of a person who has 30-some-years' experience in business and actually was, and fairly so, subject to audit, which would be solidly understandable.
When taking a look at the amount of money that's owing, we certainly recognize the need for penalty and interest accumulation and everything that goes along with trying to encourage people to pay the arrears. The challenge, of course, is how, why, when, and where we do this.
I'm not going to get into a collection process with you right now, but what I am concerned about...and I'll give you one quick, little hardship case and then I'll ask my question. A particular constituent owed $1.5 million. They ended up paying $1.6 million. They ended up owing, still, another $800,000. That's pretty onerous.
But of course, that's not the question to you. The question for you is this. When you calculate the receivable that is outstanding—the significant accumulation of interest and penalty versus principal—have you actually separated how much is an actual debt and how much is an accumulation of penalty and interest?