Opening Statement to the Standing Committee on Public Accounts

Chapters 3, 4 and 5 of the November 2003 Report

3 May, 2004

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chair, I am very pleased to appear today before the Committee to discuss further Chapters 3, 4 and 5 of my November 2003 Report. I am accompanied by Assistant Auditor General Ronnie Campbell.

To provide the Committee with further information for its work, I sent a letter on April 28th in which I discussed my Office's professional practices, as well as the audits and reviews by others that corroborate the findings of our audit. My letter also mentioned my concerns about the transfer of funds to Crown corporations and other government agencies, as well as the issue of production fees and commissions and the need for appropriate documentation. It is not my intention here to repeat the contents of the letter, but I would be happy to answer any questions you may have on the points I raised in it.

I want to state again that our findings on the government's Sponsorship Program from 1997 to 2001 are serious. At the end of the day, we still do not have an explanation for why essential controls failed and why there was so little oversight of this program.

As you know, my Office does not comment on the merits of government policy decisions. Therefore, we do not provide an opinion on whether the sponsorship program was a good idea. Nor do we assess whether the program was effective and achieved its objectives. That is the responsibility of the government. Also, as we state in our report, our conclusions do not apply to contractors. We did not audit the records of the private sector contractors; that too is the responsibility of the government.

Mr. Chair, my role is to assess whether the government kept essential records; whether the rules and procedures it followed were sufficient to safeguard and control public funds and ensure that expenditures were made only as authorized and with due regard to economy and efficiency; and whether it had established satisfactory procedures to measure and report on the effectiveness of the program. We assess whether those responsible for programs have complied with Treasury Board policies, applicable regulations, the provisions of the Financial Administration Act and other relevant authorities.

It should be clear to those who have read my Report that in each of these areas, the Sponsorship Program had serious failings—most particularly, the failure to maintain appropriate documentation.

Let me lay out as clearly as I can the key documents that should have been present in each sponsorship file.

• A rationale supporting the decision to sponsor the event including a proposal or a letter from the event organizers. Had the program operated with written guidelines and criteria for funding a project, the supporting documentation could have taken the form of an assessment of the proposal against those criteria.
• An analysis to support the dollar amount spent on each event. The sponsorship amounts in our sample of 53 projects ranged from $5,000 to more than $4 million. The files have no information to tell us why a particular event would be awarded a particular amount.
• A visibility plan describing what visibility the government was to receive in return for the money spent.
• An assessment of the results, comparing the visibility plan with the visibility the event actually provided for the government.
• A contract that clearly specified what goods and services were to be provided.
• And finally, enough information on payments made to demonstrate that they were made in accordance with the terms and conditions of the contracts and the provisions of the Financial Administration Act.

Under section 34 of the Financial Administration Act, before authorizing payments public servants have an obligation to certify that the work has been performed, the goods supplied, or the service rendered as specified in the contract. They need a basis for making this certification.

Mr. Chair, these are reasonable expectations, which were largely not met in the Sponsorship Program. The government took steps to address this. Communication Canada took these issues seriously in its management of sponsorship files from September 2001 to March 2003, as noted in paragraphs 106 to 115 of Chapter 3. We found improvements in the selection and approval of projects, better analysis of the sponsorship levels provided, better enforcement of contract terms and conditions, and improved compliance with relevant authorities. Particularly useful was an analysis sheet Communication Canada developed that considered the Sponsorship Program's objectives and priorities, the clientele for the program, the regional distribution of projects, and the participation of other sponsors.

Communication Canada also kept better documentation in its files, so we were able to follow how decisions had been made. There were visibility plans and final reports, and evidence to show that they had been reviewed.

The lack of documentation was an issue with regard to the whole program particularly for the period 1997 to August 31 2001. There was a need for documented rationale to support the decisions to sponsor events in the first place—as well as analysis to support the individual amounts spent.

In closing, I would like to reiterate that these issues are serious. This was an unusual situation. And troubling questions remain about why the former Communication Co-ordination Services Branch of PWGSC was allowed to operate outside the Department's regular control framework, without oversight and appropriate controls.

Mr. Chair, we need to understand why that happened and what will ensure that this kind of situation does not happen again. We would be pleased to answer questions on any aspect of my report.