L. Denis Desautels, FCA
Auditor General Of Canada

Mr. Chairman, we would like to thank you for inviting us to discuss chapters 1 and 2 of our April Report on downsizing in the public service. I have with me today, Jacques Goyer, one of the audit principals involved with these chapters.

The chapters deal with the management of expenditure and work force reductions. Chapter 1 discusses the reductions from a broad public service perspective while Chapter 2 reviews how these reductions were carried out in a number of selected departments.

First, it should be noted that departure incentive programs have contributed to deficit reduction by helping reduce personnel costs and the number of public servants. Between 1992 and 1997, 46,000 have left with various incentives. Of these, close to 30,000 have left between April 1995 and March 1997, as a result of program review decisions.

Ministers and senior officials have played a key role in making sure departments met their targets for spending cuts. We have also noted significant improvements since our 1992 audit of work force adjustments. Many best practices were used and there was general compliance with Treasury Board policies and guidelines.

Employees who left with departure incentives were generally treated in a humane and sensitive manner, and there were no significant work force disruptions.

However, the reductions have not been without costs. Using its own “payback” formula, the government has estimated that between April 1995 and March 1999, downsizing costs will be some $3.2 billion. The net reduction in salary, wages and benefits at the end of that period is expected to be in the order of $2.5 billion. This means that it will take slightly longer than anticipated for the government to recoup its costs.

We noted that the government developed a framework and tools to help departments manage work force reductions. However, one of the tools, the “payback” formula, was not well understood and was communicated too late, after departments had approved incentives for a significant number of employees. We also found that departments did not focus enough on the costs of providing incentives for employees to leave or retire, or on finding more cost-effective ways to reduce their work force.

In addition, the extensive use of volunteerism before identifying surplus positions, resulted not only in cases of more people leaving than anticipated, but also contributed to increased staff shortages in some areas, and a loss of much needed experience and skills.

There are consequences on human resources and operations resulting from the departure of a significant number of people. These need to be addressed. For instance, there are some questions as to whether the remaining work force will be able to cope with the workload and meet program objectives. Rejuvenation and renewal issues facing the public service have also been amplified.

We also raise questions about the strategic management of work force reductions for critical groups where surpluses may exist in some departments but where shortages may exist in others.

We found that there is a need to clarify the roles and responsibilities of the departments and central agencies for the management of work force reductions.

Finally, I feel that it is important for Parliament to be aware of the significant costs and impacts of work force reductions. As usual, lessons learned can be useful in that they can be applied to future initiatives. We have called for a full accounting of costs and savings and you will note in paragraph 2.121 of Chapter 2, the Treasury Board Secretariat has agreed to report comprehensively at the end of Program Review, scheduled for March 1999.

Mr. Chairman, many of the issues raised in the chapters are not new, but have been amplified as a result of work force reductions. These issues will require strong resolve and leadership to address them adequately.

Mr Chairman, this concludes my remarks and we welcome questions from committee members.