1.10 We did not undertake this study because we believe that ethical standards in Canadian governments are declining or are worse than those in the private sector. The expectations of Canadians for ethical conduct in the public sector are probably greater than for most of the private sector. Canadians also need to appreciate that they have raised their expectations for ethical conduct in government.
1.11 Nor did we undertake this study because we believe that ethical standards in Canadian governments are worse than those of other countries. We believe that Canadian governments compare very favourably with others in their integrity.
1.12 However, we are concerned by Canadians' increasing cynicism about their public institutions. Whether based on fact or perception, this cynicism is troubling. If Canadians do not trust their governments to act ethically, governments will find that their actions have less and less legitimacy and effectiveness. Thus, we believe that it is important to discuss ethics in government and to take action to maintain and promote ethics in government.
1.13 We recognize that the subject of ethics in government is very broad and that this chapter addresses only part of the subject. Our focus is on ethics in decision making in government. Ethics in decision making means that decisions are made impartially and objectively, and in the public interest. There are two basic approaches to promoting ethical behaviour in this area. One is based on "rules" and relies on compliance. The other is based on clear values and on actions that promote honesty. While our discussion emphasizes the latter approach, we recognize that any emphasis on ethics must be tempered by past experiences. These indicate that while the promotion of ethical values is necessary, it is not a substitute for cost-effective financial and management controls.
1.14 For some ethical problems ' blatant conflict of interest, for example ' the answers may be clear. But there are real ethical dilemmas inherent in our political system. Many of these arise when the socio-economic merits of a proposal clash with the political realities of such pragmatic matters as balancing regional interests. The existence of these ambiguities should not discourage discussion, however. Rather, these dilemmas are the very reason why discussion is needed.
1.15 Our specific objectives for the study were:
1.17 Although the focus of our interviews was on public servants in four departments, it clearly would be unfair to place the responsibility for maintaining ethical standards solely on the shoulders of public servants. Leadership by members of Parliament, ministers, and deputy ministers is critical to maintaining ethical standards and performance in government. Maintaining ethics in government also is the responsibility of those who supply goods and services to government or receive benefits from government. It is for these reasons that we propose an ethical framework for government in the third part of this chapter.
1.18 The second part of the chapter summarizes the ethics initiatives of the government and ethics training in nine government departments.
1.19 The third part discusses an ethical framework for government. Our proposed framework recognizes the importance of recent government measures and those previously undertaken, the results of our interviews and consultations with knowledgeable people in the field, a review of the literature and our examination of practices in the public and the private sectors. We propose a number of elements that build upon and help integrate existing government measures into a broader ethical framework for the government.
1.20 Work has already begun on other areas. For example, the 1991 report of The Royal Commission on Electoral Reform and Party Financing reviewed concerns about ethics at the political party level and recommended that "each registered party adopt a code of ethics" and "set up an ethics committee to help ensure adherence to and promotion of the code". In addition, on several occasions since 1988, legislation has been proposed to regulate conflict-of-interest matters for members of the Senate and the House of Commons. In March 1995 a report on proposed amendments to the Lobbyist Registration Act , entitled "Rebuilding Trust", was tabled in the House of Commons by the Sub-committee of the Standing Committee on Industry.
1.22 Public servants are also important because, in our system, Parliament does not direct in detail the activities of ministers and the departments and agencies for which they are responsible. Legislation provides an enabling power to ministers and, by delegation, to public servants to exercise administrative discretion in developing program policies and strategies to implement them. Thus, public servants share in the decision-making process.
1.24 We conducted confidential interviews in 1993 and 1994 in the following four departments: National Defence, the Canadian International Development Agency, Canadian Heritage and Environment Canada. We chose these departments because they are responsible for a number of different policy, regulatory and operational activities. At the time of our study, the total number of employees in the four departments, including members of the Canadian Forces, was about 120,000. We interviewed 329 public servants randomly chosen from each of the four departments, stratified by senior managers and other public servants. In certain instances the departments where we conducted interviews have been restructured, so the results cannot be directly associated with the departments as they currently exist.
1.25 For the purposes of our interviews, the term "public servants" was defined as all federal government employees, including senior managers and members of the Canadian Forces, in the foregoing departments. Our use of this term is broader than the legal definition in the Public Service Staff Relations Act, which defines "public servants" as those persons "for whom Treasury Board represents the government as the employer". We defined "senior managers" to include all public servants appointed to the executive category and equivalent military ranks, for example, assistant deputy ministers and directors general and colonels.
1.26 Generally, we report the results of our analysis for all public servants, including senior managers, in the above departments. We also report separately the results for senior managers when the differences in results between senior managers and all public servants is statistically significant. Public servants below the level of senior manager constitute most of the employees in the departments sampled, and the results for this sub-group and all public servants in the departments are virtually the same.
1.27 The results derived from our sample size afford a level of accuracy, on average, of plus or minus about 6 percentage points for all public servants, as well as the sub-group of senior managers, 95 times out of 100. It is at a 95 percent confidence level that the differences we report between all public servants and senior managers reflect real differences that are not the result of random sampling fluctuation. We have rounded the results to the nearest percent.
1.28 We designed the interviews to obtain information on public servants' awareness of, and concern about, issues of ethics, conflict of interest and fraud in their departments. We use the term "fraud" to include, as well as fraud, other activities that could result in the laying of charges under various sections of the Criminal Code of Canada , the Competition Act or the Financial Administration Act . We sought to determine their knowledge of government policies related to conflict of interest, fraud and other illegal acts. We also asked their views on the appropriateness of certain questionable actions, and what action they would take when faced with suspected fraudulent acts or conflicts of interest.
1.29 However, the reader should not infer from the results of this study that questionable actions would go undetected or that there is a significant level of fraud or other illegal activity in government. Further, our sampling framework applies to the four departments where we conducted interviews; thus the results cannot be generalized statistically to the whole public service.
1.31 However, we found some areas of vulnerability. Examples of these can be found in our detailed findings. We are concerned about them because they could pose a threat to the existing strong base of ethical standards. We also are concerned because even a few infractions, especially if they are widely publicized, can tarnish the reputations of all public servants and undermine public trust in government.
1.34 Most public servants (91 percent) said they would report a significant fraud or illegal activity if they suspected one. Almost all senior managers (98 percent) said they would report a significant fraud. The main reason given for not reporting was fear of reprisal.
1.35 Knowledge of relevant policies and key controls. We asked public servants about their knowledge of government policies on conflict of interest and fraud and other illegal activities, because these policies provide direction on how to deal with sensitive matters. We recognize that lack of knowledge of specific sections of the policies does not mean that people will act improperly, or vice versa. Nonetheless, the policies are important because they provide a common set of values for the public service and allow the government to hold people accountable for acting improperly.
1.36 The government's key policy on dealing with fraud and other illegal acts against the Crown is the policy on Losses of Money and Offences and Other Illegal Acts Against the Crown . The policy requires, for example, that:
1.40 However, the most explicit statements on conflict of interest are the Conflict of Interest and Post-Employment Code for Public Office Holders and the Conflict of Interest and Post-Employment Code for the Public Service . The former applies to "public office holders" ' ministers, secretaries of state, parliamentary secretaries, ministerial political staff and Governor in Council appointees. Its principles in Part I of the Code apply to staff of federal boards, commissions and tribunals, separate employers as defined under the Public Service Staff Relations Act , the Canadian Armed Forces and the Royal Canadian Mounted Police. The latter code applies to public servants for whom Treasury Board represents the government as the employer. The codes have been in place in one form or another since 1985. They do not apply to senators and members of Parliament or to employees of Crown corporations.
1.41 The codes contain a statement of principles and rules on permissible and prohibited types of assets and liabilities, outside activities, gifts and benefits, and post-employment behaviour. They also require disclosure of assets or other circumstances that could constitute a potential conflict of interest.
1.42 The codes contain the principles shown in Exhibit 1.3 .
1.43 The principles of both codes are the same except for the principle of decision making. Treasury Board has informed us that it intends to revise by June 1995 the code for public servants of whom Treasury Board is the employer.
1.44 Findings on conflict of interest. On the whole (84 percent), public servants in the four departments where we conducted interviews were aware that the government has a conflict-of-interest policy. Almost all senior managers (98 percent) were aware of the policy.
1.45 Eighty-one percent of these public servants (95 percent of senior managers) believed that the policy is reasonable and justifiable.
1.46 Only 4 percent of public servants (9 percent of senior managers) indicated that they were aware of other employees who were in a conflict-of-interest situation.
1.47 Although the findings are generally positive, further review of the data suggests that some caution is required. Public servants' compliance with the intent of the government's conflict-of-interest policy may be hampered by a limited knowledge about conflict of interest, reservations about its administration, and concerns about the consequences of reporting conflicts of interest involving others. For example:
1.50 It is important to note that these scenarios present situations that are not allowed by government policies. Thus, our choice of these scenarios should not be interpreted as suggesting that there is a significant level of abuse in government.
1.51 Four scenarios dealt with the appropriateness of receiving benefits, preferentially conferring benefits or improperly using knowledge of a department. On the whole, public servants in the four departments believe it would be inappropriate to receive benefits from suppliers to or recipients of their programs, preferentially confer benefits or improperly use their knowledge of the department.
1.52 For example:
1.54 The level of vulnerability among senior managers is generally smaller than for all public servants. However, we were surprised to find that even 4 percent of senior managers in the departments we sampled believe it would be appropriate to accept the use of a ski chalet from a recipient of their contribution or grant program. Eleven percent of senior managers believe it would be appropriate for an employee to hire a brother-in-law on an untendered contract. And 21 percent of senior managers believe it would be appropriate for a senior manager in a department to use knowledge gained while working to secure a position with a firm wanting to do business with the department.
1.55 Our concern is heightened by our finding that a noteworthy proportion of public servants would not take some type of action to stop or report the activities described in the foregoing set of scenarios. The results are more reassuring for senior managers separately. For each of the first three scenarios, more than 84 percent of senior managers would take some type of action to stop or report the situation. However, only 62 percent of senior managers would take action to stop or report other senior managers who were using knowledge gained while working to secure a position with a firm that wanted to do business with the department.
1.56 Scenarios for impartiality and objectivity. Three other scenarios focussed on making decisions impartially and objectively. The findings for the second set of scenarios were generally similar to those for the first. On the whole, public servants believe that decisions should be made impartially and objectively.
1.57 For example:
1.59 We are also concerned about finding that around one third of public servants would not take some type of action to stop or report the undermining of a competition or the failure to impose fines or penalties impartially, and 59 percent would not take action in the situation involving a questionable sole-source contract.
1.60 The results for senior managers indicate that 23 percent of senior managers would not take some kind of action to stop or report the undermining of a competition for a contract; 17 percent would not act when fines or penalties were not imposed equitably; and 47 percent would not act when the matter involved a questionable sole-source contract apparently requested by a senior manager or the minister.
1.63 Office of the Ethics Counsellor. The Ethics Counsellor, who reports to the Prime Minister, administers the Conflict of Interest and Post-Employment Code for Cabinet ministers, parliamentary secretaries, ministerial staff and full-time Governor in Council appointees. He is available to investigate allegations against public office holders involving conflicts of interest or lobbying.
1.64 Prohibition of contingency fees for obtaining contracts . A clause now in all government contracts prohibits suppliers from hiring lobbyists on a contingency fee basis to help them obtain contracts. Companies must certify that they have not hired a lobbyist whose payment depends on the client winning the contract.
1.65 Proposed amendments to the Lobbyist Registration Act . The Lobbyist Registration Act was introduced in 1989. The government has proposed amendments to the Act. The proposed legislation would require lobbyists to file more specific information on their lobbying campaigns with the Registrar, Lobbyist Registration Branch, Industry Canada. It would also authorize the Ethics Counsellor to develop a lobbyists' code of conduct in consultation with the industry, and to investigate and report publicly on complaints about lobbying activities that run counter to the code.
1.66 Guidelines on polling and advertising contracts. In addition to the measures announced 16 June 1994, the Minister of Public Works and Government Services had established new guidelines in May 1994 on the awarding of contracts for public opinion research and advertising services. Such contracts are now covered by the government's general procurement policies. Those policies direct departments to contract for these services on a fair and competitive basis, in accordance with government regulations and policies.
1.67 Revision of the Code. In June 1994 the Conflict of Interest and Post-Employment Code for Public Office Holders was revised. Two obligations were added to state that public office holders should make decisions "in the public interest and on the merits of each case" and that they should avoid "preferential treatment to persons or groups based on the individuals hired to represent them." Other revisions to the code require ministers, secretaries of state and parliamentary secretaries to file confidential reports on the assets and liabilities of spouses and dependants as well as their own.
1.69 We also obtained information on ethics programs and training in private and public sector organizations in Canada and other countries. These programs use a variety of approaches, including senior management committees on ethics, reports to senior management on ethics in the organization, ethics advisors or ombudsmen, codes of conduct, ethics training programs, periodic surveys to track attitudes, newsletters and articles on ethics in organizational publications. Some organizations also have specific anti-fraud programs, including the development of fraud control plans, anti-fraud training, and the establishment of confidential "hotlines" to report abuses.
1.70 Although there is limited information on the effectiveness of ethics programs in either the public or the private sector, there is some evidence that such programs have a positive impact on the ethics of staff and management, and on their awareness of misconduct and willingness to report it. The literature also indicates that, if the government is to develop and implement such programs, it needs to cover the set of principles common to all parties as well as the unique ethical problems a specific party might encounter.
1.71 Our review of ethics programs and training in nine departments indicates that, in the past, departments approached the issue of ethics by providing some type of training to certain groups of employees. For example, the Department of Justice offers to departments a half-day course focussing on conflict of interest as part of its Legal Awareness Program. Although there has been a noticeable growth in the number of ethics courses offered in the last few years, relatively few public servants in the selected departments have participated. Two departments, National Defence and Public Works and Government Services, are beginning to develop more comprehensive approaches to promoting ethical conduct. However, less than 6 percent of public servants in the nine departments have taken some kind of ethics-related training.
1.72 We are concerned about this gap in training because the results of our interviews indicate that a notable proportion of public servants are not aware of, or do not understand, the existing conflict-of-interest guidelines and other relevant policies. However, rules and guidelines cannot deal with every circumstance; it is equally important that public servants develop the skills to deal with a range of ethical dilemmas that may confront them. We believe it is important to offer training that deals with both conflict of interest and ethical decision making.
1.74 A sound ethical framework makes it clear that certain behaviour is not acceptable in government. It makes it more likely that decisions will be made on the merits of the issue, that explanations for government actions will be acceptable to the public, and that confidence in government will be enhanced.
1.75 Further, adherence to a sound ethical framework allows the government to focus on the substance of a policy instead of having its priorities eclipsed by charges of conflict of interest or political favouritism.
1.76 An ethical framework also makes it clear that appearances surrounding a decision are important. A public official who accepts gifts or hospitality from those who could be perceived as being interested in influencing a decision should not be surprised when the public believes the official's judgment has been influenced. In the end, the perception undermines confidence in the integrity of government as effectively as actual fraud or conflict of interest covered by the criminal law.
1.77 The ethical framework that we propose builds upon and incorporates existing government measures that already seek to ensure that decisions are made in the public interest. Exhibit 1.8 summarizes the elements of the proposed framework.
1.79 These general principles need to be supplemented by a commentary section elaborating on the principles' meaning. For example, public office holders are expected to conform to the principle that decisions should be made in the "public interest" and with regard to the "merits of each case". The meaning of this principle needs to be clarified by examples to illustrate the kinds of situations that may be encountered by public office holders and how they can or should resolve the ethical issues. This would help ensure that the implications of the principles are clear and that there is a common understanding of "public interest" and the "merits of each case".
1.80 As indicated previously, public office holders and public servants cannot be expected solely to shoulder the responsibility for maintaining the viability of these principles. Thus, the government needs to forthrightly communicate its core set of ethical standards to groups and individuals dealing with government with a clear indication that it expects these standards to be respected. This core set of principles also could be a model that could be drawn upon by these groups to create codes of ethics that would apply to their specific situations.
1.81 There are other matters that the government may wish to consider in terms of the scope and application of its ethical standards. For example, the current principles do not explicitly address issues such as privacy, confidentiality and harassment. In addition, they do not apply to such government activities as Crown corporations, and ventures involving partnerships with the private sector or other governments.
1.83 As Michael Starr and Mitchell Sharp noted in their 1984 report, Ethical Conduct in the Public Sector , "A large measure of the responsibility rests with the Prime Minister in relation to matters of ethical conduct in the public (because) the Prime Minister sets the tone for the entire government." The actual and perceived day-to-day behaviour of leaders such as the Prime Minister, Cabinet ministers and senior public servants must be consistent with the government's ethical guidelines. The government's recent initiatives reflect its concern about the importance of leadership.
1.84 Leadership at the intersection of politics and administration is critical. Traditionally, deputy ministers have viewed the Clerk of the Privy Council as their advocate with the Prime Minister when they encounter ethical dilemmas involving their ministers. Public servants have viewed their deputy ministers as their advocate with the minister's office. The role of the Clerk of the Privy Council and deputy ministers as guardians of the integrity of the public service needs to be clearly established. All parties need to have a mutual and clear understanding of their respective roles and responsibilities. This may require that the responsibilities of the Clerk of the Privy Council and deputy ministers for such matters be specifically defined.
1.86 Ethics cannot be left only to ministers and senior officials. We believe that public servants have to be empowered to carry out their duties in the public interest and to resist pressures to do otherwise. It must become normal for employees to state their reservations about actions that they consider to be of questionable ethics. Decision makers at all levels have an obligation to listen. Moreover, although the government has a right to require that public servants maintain confidentiality about government actions, it has a clear reciprocal obligation not to ask employees to act contrary to the conflict-of-interest principles such as those relating to public scrutiny, decision making and preferential treatment.
1.88 In our view, however, an essential complementary principle is needed: that is, ministers must be as open as possible about the reasons for their decisions. Without the greatest possible degree of transparency, there is little basis for others to judge whether public office holders are acting in the public interest and with regard to the merits of each case, and that decisions have been made impartially and objectively.
1.89 In some areas, for example national security, governments may not be able to be as forthcoming as in others. However, in general we believe that if there is a clash between transparency and secrecy, the conflict should be resolved in favour of transparency.
1.90 Of course, attempts to veil political decisions under another guise ' for example, a biased cost-benefit analysis ' are unacceptable. Such attempts violate the principle of honesty in government and undermine the morale and ethics of all involved in the subterfuge. For the same reasons, attempts by lobbyists or other interested parties to influence public policy and decisions should be open to public scrutiny.
1.92 Discussion of ethical issues is a key way to achieve these goals. It is important that all parties, particularly senior managers, be able to recognize the ethical dimensions of their work and of government as a whole. Ethics-related training would provide information on ethical values and formal rules in government. It would provide public servants with the tools to deal with ethically questionable requests from ministers and superiors and it would also provide an opportunity to discuss the ethical dilemmas people have encountered. Training would be offered to all parties and would include workshops attended by people from various levels.
1.96 We believe that ethical standards in government compare very favourably with those in the private sector and with those of governments of other countries. However, Canadians are concerned about integrity in government. If Canadians do not trust their governments to act ethically, governments will find that their actions have less and less legitimacy and effectiveness. Thus, we believe that it is important to discuss ethics in government and to take action to maintain and promote ethics in government.
1.97 To advance the discussion on ethics, we have set out elements of a possible framework for ethics in government, resting on basic principles that would be shared by all stakeholders and would be tailored to address ethical issues and dilemmas that may confront specific parties. Although we have reported the results of interviews with public servants, it would be unfair to place the responsibility for maintaining ethics in government solely on the shoulders of public servants. Leadership by members of Parliament, ministers, and deputy ministers is critical to maintaining ethical standards and performance in government. Maintaining ethics in government also is the responsibility of those who supply goods and services to government or receive benefits from government.
1.98 Public servants, however, play an essential role in preserving a core set of ethical values that act as a brake on internal and external sources of abuse affecting integrity in government.
1.99 Public servants share increasingly in the decision-making process. Decision-making discretion at all levels of the public service is growing as a result of reductions in the size of the public service, government renewal, and changes in financial and management controls. As public servants wield greater discretion, they need to be aware of ethical issues and to have the means to resolve them. Increased discussion of ethics in the making of specific decisions will help all parties to support ethics in government.
1.100 We have presented our findings on ethics and fraud awareness from interviews with over 300 public servants in four departments. The results indicate that we are starting from a strong base of ethical standards among public servants. However, we found some areas of vulnerability. We are concerned about them because they could pose a threat to the existing strong base of ethical standards and because even a relatively few unethical acts can negatively affect the workplace environment and diminish the government's integrity in the eyes of the public.
1.101 To address these vulnerabilities, we have reviewed possible strategies to heighten ethical awareness and minimize the risk of not only fraud but also other unethical behaviour. Clearly, a multifaceted approach as described in our framework for ethics in government is needed to strengthen the ethical climate of government; for example, making ethical considerations a conscious and visible part of day-to-day decision making, clarifying statements of principles, providing training in ethics, and establishing mechanisms for discussing and reporting ethical concerns.
1.102 In summary, enhancing and maintaining ethics in government rests on the principle that public service is a public trust. The objective of our efforts is to help ensure that this principle is the cornerstone of Canadian public administration.
Audit Team
Theresa Duk
Myles Kennedy
Carol McCalla
Jim Murley
Neil Papineau
Gaetan Poitras
Jean-Luc Tétreault
Edith Colton
For further information, please contact Alan Gilmore, the responsible auditor.