Opening Statement to the Committee on Public Accounts

December 1998 Report

Thank you, Mr. Chairman. We are pleased to have the opportunity to meet again with the Committee to discuss the December Report. I have with me today Deputy Auditors General Raymond Dubois and Michael McLaughlin as well as Shahid Minto, Assistant Auditor General.

Before moving on to our suggested priorities, I would like to draw the Committee’s attention to some of the issues raised in my annual chapter on matters of special importance for Parliament. The chapter suggests several means to help maintain the focus on improving economy and efficiency in government in this new post-deficit environment. These include:

• a budget process that reminds us to take the long term into account;
• internal governance frameworks that promote openness and good performance;
• a public service culture and incentive structures that encourage innovation, creativity and continued attention to the public interest;
• accounting and information management systems that yield sound information for key decisions on the allocation and management of resources;
• effective integration of people management with other public sector functions, to ensure that the work force needed to support planned reforms is available and to accommodate worker concerns about the reforms; and
• an open and meaningful accountability regime that gives Canadians assurance that their views matter and that their tax dollars are used wisely.

Together, these elements would constitute a public management culture that would stand us in good stead generally, and particularly in this post-deficit environment.

With the rapid emergence of new mechanisms to deliver services traditionally offered by the government, I would also like to bring to your attention the importance of maintaining accountability to Parliament.

These alternative service delivery (ASD) mechanisms take many forms, such as special operating agencies within government, partnership arrangements with other levels of government or non-government participants, and commercialization of services. Whatever the form of the agency used to deliver a service, when it involves federal resources and authority, Canadians have a right to expect accountability and transparency through full and fair reporting to Parliament.

Canadians must be assured that the public interest and their tax dollars are protected. To assist Parliament, my Office has proposed a four-point framework for assessing proposals for new delivery arrangements. These four principles - protection of the public interest, achievement of objectives, maintenance of accountability to Parliament and ensuring transparency - are described on page 19 of the chapter on matters of special importance. You may recall that the discussion paper on assessing alternative service delivery arrangements provided to your Committee in June of this year elaborates on these principles.

Alternative service delivery mechanisms offer the promise of more efficient and responsive delivery through arrangements that are more focussed, flexible and client-centred. But they may also entail significant changes in the roles and responsibilities of ministers and in the relationship of service providers with central agencies and Parliament. The Committee may wish to examine the accountability arrangements governing some of these delivery mechanisms.

In the few minutes remaining, I will briefly touch on the suggestions included in the priorities letter. As usual, I will deal with them in the order in which they appear in the Report.

Chapter 20 on Y2K preparedness concludes that despite an accelerated pace of work, many systems supporting important functions of the government continue to be at risk. Mr. Chairman, I believe the Committee’s continued attention to preparedness for the Year 2000 could help to maintain the government’s focus and priority on the Y2K challenge. It will ensure that parliamentarians are kept well aware of progress.

Next, Chapter 24 identifies problems in the management of human resources in the International Tax Directorate of Revenue Canada. In my view, failure to take urgent action on these matters will severely limit Revenue Canada’s ability to manage the inherent risk that international transactions pose to Canada’s tax base. Your Committee may wish to review the chapter to assess the Department's readiness to manage its human resources in light of the proposed new Canada Customs and Revenue Agency. Similar problems were raised in the follow-up report on Enforcing the Income Tax Act for Large Corporations - Chapter 37, 1996 (see pages 28-79 to 28-80).

Chapter 25, dealing with Transport Canada’s investments in highways, revealed many weaknesses in the Department’s performance in managing and administering its highway investments. Over the last 10 years, Transport Canada spent $1.6 billion on provincial/territorial highways. Weaknesses ranged from providing flawed information to decision makers to failure to exercise controls in negotiated agreements with provinces and territories. The Committee’s review of this chapter could help strengthen accountability for these important contribution programs.

Chapter 26 deals with contracting for professional services awarded without calling for competitive bids, as required by the government’s own contracting regulations. The rules for contracting for services are clear. They are designed to give companies and individuals a fair chance to compete for government contracts, and to make sure that the government gets good value for its contracting dollar.

The results of our audit were not encouraging. Managers too often ignore these rules, particularly those related to sole-sourcing. As a result, most of the contracts in our sample, covering the period from late August 95 to early February 98, would not stand the test of public scrutiny.

The Treasury Board Secretariat is responsible for publishing annually a report on government contracting activity. Paragraph 26.26 of the chapter indicates that the most recent government report was for 1995, and Secretariat officials have confirmed that no new reports have been issued since the chapter was completed. During our audit and in the Secretariat’s published response to our report, we were not advised of any recent actions taken to address shortcomings noted in the chapter nor of any "turnaround" of the results. A review of this area of concern by your Committee could help encourage more fairness in the contract award process as well as help ensure that the government gets good value for its contracting dollar.

Turning to Chapter 27 on grants and contributions in selected programs in Industry Canada and the Department of Canadian Heritage, I can’t help but express a certain degree of frustration with the management of grant and contribution programs. Over the past 21 years, we have produced a long series of consistent audit observations. All too often the money was awarded with little regard for the rules governing these expenditures. This report is no exception. Perhaps your Committee’s review of the chapter would help improve the management of these programs.

Our follow-up chapter reports on progress made in implementing the recommendations of 21 previous audits. There are a number of significant areas that remain a concern.

For example, most of the concerns related to federal government preparedness for nuclear emergencies reported in the 1992 audit have not been adequately addressed. Health Canada, which is the designated lead department to deal with these emergencies, is not in a position to effectively co-ordinate and respond to major nuclear accidents affecting Canada. Two previous audits and subsequent follow-ups on the government’s preparedness for major disasters of earthquakes and oil and chemical spills showed similar lack of action from the government.

A related concern is the government’s lack of leadership and of a comprehensive plan to manage the risks and costs associated with more than 5,000 federal contaminated sites. The government is still unable to assure Canadians that it is aware of the potential risks to health, safety and the environment posed by these sites. Further, the government does not have a comprehensive view of the potential liabilities, nor does it have a national plan or timetable to correct the problems at these sites.

Although I have not suggested the review of progress on the Federal Science and Technology Strategy as a priority, I believe that sufficient leadership and ongoing parliamentary oversight would help to ensure that the current Strategy is implemented as the government intended when it was announced in 1996.

To conclude on a more positive note, our audit of Veterans Affairs disability pension programs noted that there has been a significant reduction in the time it takes to reach a pension decision from 18 months to 5 months. However, the Department can improve the consistency and quality of its decisions. It must also address the impact of the growing proportion of younger disability pensioners.

Thank you Mr. Chairman; that completes my opening statement. We would be happy to respond to questions on the December Report.