2018 Spring Reports of the Auditor General of Canada

Opening Statement to the Standing Committee on Public Accounts

2018 Spring Reports of the Auditor General of Canada

31 May 2018

Michael Ferguson, Chartered Professional AccountantCPA, Chartered AccountantCA
Fellow Chartered Professional AccountantFCPA, Fellow Chartered AccountantFCA (New Brunswick)
Auditor General of Canada

Mr. Chair, I am pleased to discuss our audit reports, which were tabled in the House of Commons Tuesday. I am accompanied by Principals Jean Goulet, Philippe Le Goff, Glenn Wheeler, and Carol McCalla.

Before I describe each audit, I want to stress that right now is a critical moment when the federal government needs to reflect on what I call “incomprehensible failures”, and on how government culture stands in the way of achieving successful results for people.

In our audit on the Phoenix pay system, we concluded that that project was an incomprehensible failure of project management and project oversight.

We presented 2 audits that examined programs for Indigenous people. When I put the findings of these 2 audits together with the findings of past audits, I also have to characterize as incomprehensible the failure of federal government programs to help improve the situation of Indigenous people in Canada.

I will now describe what we found in each of our audits.

Report 5—Socio-economic Gaps on First Nations Reserves—Indigenous Services Canada

The first audit assessed Indigenous Services Canada’s progress and reporting on closing socio-economic gaps between on-reserve First Nations people and other Canadians.

For years, governments have committed to closing these gaps. Nevertheless, Indigenous Services Canada did not have a clear picture of the size of the gaps, and it did not know whether progress was being made to close them.

We looked specifically at education, and we calculated that the gap between on-reserve First Nations people with at least a high school diploma and other Canadians widened between 2001 and 2016.

Indigenous Services Canada made poor use of the education data it collected. For example, the Department spent $42 million over 4 years to prepare First Nations students to enter post-secondary education programs. However, only 8% of those enrolled actually completed this preparatory program. Despite these poor results, the Department did not work with First Nations or education institutions to improve the success rate.

Report 6—Employment Training for Indigenous People—Employment and Social Development Canada

The second of our audits on Indigenous programs looked at Employment and Social Development Canada’s efforts to help Indigenous people build the skills they need to find jobs and stay employed.

Despite spending over $300 million a year, we found that Employment and Social Development Canada did not know to what extent its programs helped Indigenous people find and keep jobs. For example, while 16% of Indigenous clients received 5 or more services, the Department could not tell whether these clients made progress in finding and maintaining employment.

Report 7—Consular Services to Canadians Abroad—Global Affairs Canada

Our next audit examined how Global Affairs Canada responded to requests for consular assistance from Canadians abroad.

We found that the Department deployed staff to help Canadians during a crisis in a foreign country.

However, we also found that the Department took too long to assess signs of mistreatment or torture of Canadians detained abroad.

In 2004, Justice Dennis O’Connor said that Global Affairs Canada needed to train its staff to identify signs of torture and mistreatment, and needed to quickly inform the Minister of those cases.

More than a decade later, we found that the Department gave consular staff only general training on how to conduct prison visits and assess whether Canadians had been tortured or mistreated. In one case, we found it took 7 months before the Department informed the Minister.

Report 3—Administration of Justice in the Canadian Armed Forces

Our next audit examined whether the Canadian Armed Forces efficiently administered the military justice system.

We found that the Canadian Armed Forces often took too long to resolve military justice cases, whether they were for minor discipline offences that led to summary trials, or for allegations that were tried before a court martial.

The Canadian Armed Forces had to drop 10 court martial cases because they failed to move them along as quickly as they should have. Delays run counter to the right of an accused person to have a speedy trial, and they leave victims and their families waiting for answers.

The Canadian Armed Forces has known about these problems for at least a decade, but has failed to correct them.

Report 2—Disposing of Government Surplus Goods and Equipment

Our next audit looked at how some federal organizations disposed of their surplus goods and equipment.

We found that in the year ended March 31, 2017, government organizations sold assets for $50 million. However, the estimated value of keeping and reusing those assets was $82 million.

The Canada Revenue Agency implemented a system to reuse its own assets, which allowed it to save $4.5 million over 3 years. This shows that the government can save money through the prudent reuse of its assets.

Report 4—Replacing Montréal’s Champlain Bridge—Infrastructure Canada

Let’s turn now to our audit of the government’s project to replace the Champlain Bridge, in Montreal.

We found that the decision to replace the Champlain Bridge should have been made years earlier. Delays in making this decision cost taxpayers over half a billion dollars.

The audit found that Infrastructure Canada’s analysis of a public-private partnership approach to the project was done after the government had already announced that it would use that approach. We also noted weaknesses in the Department’s analysis. A thorough analysis would have found that there was a high probability that a public-private partnership would be more expensive than a traditional procurement approach.

In our opinion, the new bridge will be more expensive than it would have been if the replacement decision had been made earlier, it will cost more than originally planned, and it is uncertain whether it will be completed by the December 2018 deadline.

Report 1—Building and Implementing the Phoenix Pay System

Our final audit was our second audit of the Phoenix pay system. This time, we looked at whether the decision to implement the pay system was reasonable.

We concluded that the Phoenix project was an incomprehensible failure of project management and project oversight. This meant that the decision to launch Phoenix was wrong.

In order to meet budgets and timelines, Public Services and Procurement Canada decided to remove critical pay functions, curtail testing, and forego a pilot implementation of the system.

Phoenix executives ignored obvious signs that the Miramichi pay centre was not ready to handle the volume of pay transactions, and that Phoenix itself was not ready to correctly pay federal government employees. When the Phoenix executives briefed the Deputy Minister of Public Services and Procurement Canada that Phoenix would launch, they did not mention significant problems that they knew about.

Finally, the decision to launch Phoenix was not documented. In our view, based on the information available at the time, the decision to launch Phoenix was not reasonable. Phoenix does not do what it was supposed to. It has cost hundreds of millions of dollars more than planned, and it has affected tens of thousands of federal government employees and their families.

Special Examination Reports

Let’s turn now to the results of our audit work in Crown corporations. Since the fall, we completed audits of the Canadian Museum for Human Rights, the Great Lakes Pilotage Authority, Ridley Terminals incorporatedInc., and Export Development Canada.

We found significant deficiencies in all of these corporations. In the case of Ridley Terminals Inc., the issues we noted were so widespread that it meant that the Corporation operated outside the prudent practices expected of a Crown Corporation. These issues were further compounded by Transport Canada’s ineffective oversight of the Corporation.

Commentary on the 2016–2018 Performance Audits of Crown Corporations

Our Commentary on the 2016–2018 Performance Audits of Crown Corporations explores important problems we found in the 4 audits I just mentioned and in 9 others that we have completed since 2016. For example, we are very concerned that 8 Crown corporations had a significant number of board members whose term had expired.

Commentary on the 2016–2017 Financial Audits

I also want to mention that you can find on our Web site a commentary and video on our 2016–2017 financial audits of government organizations.

Before I close, I want to once again stress the need for the government and the public service to look at these audits differently, not just as a list of issues we found in different programs, but as symptoms of a much deeper culture issue. Departments can implement our recommendations and deal with the symptoms we’ve raised, and that is important. But the real question for the government to think about is why do we keep finding and reporting serious problems, and why do incomprehensible failures still happen?

Mr. Chair, that concludes my opening statement. We will be happy to answer any questions you may have.