Proceedings of the Standing Senate Committee on
National Finance
Issue 10 - Evidence
OTTAWA, Wednesday, May 13, 1998
The Standing Senate Committee on National Finance met this day at 5:40 p.m. to examine the Main Estimates laid before Parliament for the fiscal year ending March 31, 1998.
Senator Terry Stratton (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we are pleased to have with us today Mr. Denis Desautels, the Auditor General of Canada, who will be discussing the April 1998 Report of the Auditor General of Canada to the House of Commons. In particular, we are interested in understanding what is transpiring within the senior levels of the civil service.
On behalf of the committee, I welcome you, Mr. Desautels. Please proceed with your opening statement.
Mr. Denis Desautels, Auditor General, Office of the Auditor General of Canada: Mr. Chairman, I am happy to be here today, and we are quite prepared to talk about, in particular, chapters 1 and 2 of our recent April report, which focuses on downsizing in the public service.
I have with me today Jacques Goyer, and Ron Wolchuk, both of whom are audit principals involved with these chapters.
The chapters deal with the management of expenditure and work-force reductions, with particular emphasis on reductions during Program Review, which is scheduled to end in March 1999. 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 been in place for a number of years. Some have previously been subject to audits by our office. The early retirement and departure programs, which were put in place to deal with work-force reductions resulting from Program Review decisions, have contributed to reducing personnel costs and the number of public servants. Further, these incentive packages have been quite successful in minimizing lay-offs.
We found that employees who left with departure incentives were generally treated in a humane and sensitive manner, and in many cases were provided with transition support mechanisms. In addition, there were no significant work-force disruptions.
We noted significant improvements since our 1992 audit of work-force adjustments. Instead of using a "one size fits all" approach, departments were allowed to manage incentive programs according to their contextual and operational environment. Many best practices for downsizing were used, such as effective communications, and there was general compliance with Treasury Board policies and guidelines.
[Translation]
Mr. Chairman, even though downsizing has been successful in many respects, it has not been without problems. We noted that the government developed tools and guidelines to help departments manage work force reductions. However, one of the tools, the "payback" formula, a cost-effectiveness measure that compared downsizing costs and savings, was not well understood by departments. In addition, it was communicated after departments had approved incentives for a significant number of employees. This made for a less effective monitoring mechanism.
We also found that departments did not focus enough on the costs of providing incentives for employees to leave or retire, or on finding cost-effective ways to reduce their workforce, such as targeting incentives where they were needed most. Departmental priorities were instead focused more on meeting reduction targets in a timely manner.
The extensive use of voluntarism before identifying surplus positions was certainly a quick and easy way to reduce the workforce. However, it had some drawbacks. In particular, it not only resulted in 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. Rejuvenation and renewal issues facing the public service have been amplified as a result of downsizing. These need to be effectively addressed. We reported that there are some questions as to whether the remaining workforce will be able to cope with the workload and meet program objectives. The management of those who remain must also be examined.
Mr. Chairman, the findings are consistent with previous audit reports where we noted a pressing need for corrective action in maintaining a competent and efficient public service. We noted consensus on the need to adopt a long-term and more strategic approach for human resource management. The need to modernize and simplify human resource systems and to address other issues such as mobility, training and development still remains. Finding ways to return to a more "normal situation" where incentives are used sparingly may help reduce the "entitlement" mentality that has developed over the last 13 years of incentives.
[English]
We also noted, Mr. Chairman, that better strategic management of work-force reductions in critical groups, where surpluses may exist in some departments and shortages in others, would have resulted in a more cost-effective use of incentives.
There is a need to clarify the roles and responsibilities of departments and central agencies for the management of work-force reductions. This is particularly important in the context of the changing roles of central agencies and their relationships with departments. In the case of work-force reduction, we found some ambiguity with respect to the broad direction provided by Treasury Board and the specific responsibilities of the departments in managing the reductions.
Finally, I feel 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 are happy to report that, as we noted 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. We have committed to examining this report when it is published.
Mr. Chairman, many of the issues raised in the chapters are not new, but they have been amplified as a result of work-force reductions. These issues require strong resolve and leadership to address them adequately. Ministers and senior officials played a key role in making sure that departments met their targets for spending cuts. Their strong leadership is one of the key lessons learned from the Program Review. This type of visible and sustained political and management leadership could also be applied in addressing needed reforms in the public service. This is fundamental to ensure that significant change takes place to address long-standing public service management issues, including those flowing from expenditure and work-force reductions.
Although many initiatives have been developed or are being implemented, many have not been as effective in the past, and some scepticism remains about those in place. It is clear that if the current efforts fail, there is a risk that the public service may not be capable of providing high-quality service to Canadians in the future.
Mr. Chairman, this concludes my remarks. My colleagues and I would be very happy to answer the committee's questions.
The Chairman: I have read the two chapters that you referred to. I would like to take the chair's prerogative, if I may. I know that the other senators will have questions, but we are focusing particularly on the future. I think in the past you have done a superb job and have raised questions about the future. In particular, in chapter 1, paragraph 1.71, which is the last paragraph, you state that in the public service:
...there is now a `quiet crisis', the result not just of recent work force reductions but of years of neglect; strong actions are required to ensure that the public service remains a vibrant institution.
I wonder if you could comment on that?
And then in chapter 2, you make specific recommendations. Do you have recommendations as to how to deal with those people who remain in the work force? I know that La Relève is going on, but I am also concerned that while it is going on, we are not comfortable with it as far as what we are finding within the civil service.
That is a large bite, I know, but I would ask you to attempt to answer that, because I think it deals with fundamental issues.
Mr. Desautels: I think my colleagues would quite like to amplify these two particular issues, as well, but before I answer, I might just remind the committee that in 1997 we also published another chapter, chapter 1, on how to maintain an efficient and competent public service. Some of the issues that we raise in paragraph 1.71, that you just referred to, are indeed also covered in that other report prepared last year.
But if I may, I will ask Mr. Goyer to expand on the issues that still need to be addressed, that we consider crucial to maintaining a competent public service.
Mr. Jacques Goyer, Principal Auditor, Office of the Auditor General of Canada: In reference to paragraph 1.71, I would like to perhaps expand on a number of issues that we have touched in the past, and to some extent in this chapter. One is the need to simplify the human resources or the personnel systems in the public service. Three key systems that we have identified need to be revamped, and in some cases, seriously re-thought. One is the classification system, the way public servants are classified or put in occupational groups, because this affects efficiency in terms of the departments' program delivery.
Although Public Service 2000, which almost dates back to a decade ago, identified that, the fact is that reform has not yet been carried out. There is good work in progress, but it has been 10 years. While the Program Review has cut services and programs, our administration is still heavy. The same thing applies to staffing. Our November 1996 audits of Revenue Canada, for example, indicate that staffing jobs in the public service can take months, if not years. In modern days, when we need to react quickly to changing needs, this situation cannot continue.
One of the effects of failing to change the staffing system is that departments are seriously considering opting out of the public service. We feel that another area that requires some change is the collective bargaining system. If we look at the past 20 years, it has not worked very well. It is the only system I know of where, for example, job security is negotiated outside the collective agreement, so there is no trade-off between salary and job security. There is no trade-off. It is negotiated in different forms and different ways.
There are also issues related, for example, to productivity gains. Often, negotiations of collective agreements result in productivity gains, in terms of a more efficient work organization and a more productive work force. We do not see that because it is negotiated basically at the centre, and the real ability to make changes rests with the departments. Again, it is pushing the departments to opt for an agency or some form of special status. These are a few examples.
Senator Bolduc: I have just a subsidiary point.
The Chairman: Go ahead. Are you arguing for a negotiating basis on a departmental basis instead of an occupational basis?
Mr. Goyer: I do not think we went that far, but that question certainly needs to be discussed. As I mentioned, we observed in May 1996 that departments could negotiate with their employees some productivity gains or working arrangements. There are some examples of that. However, at the same time, they could make trade-offs with pay, because there is nothing wrong with having a high level of pay. The issue is relating pay to productivity and other factors. It is very difficult to do that at the centre.
There was one tentative attempt in the early 1990s to offset work-force reduction with productivity gains, but it never worked at the centre because it was too removed from the working of each department.
Senator Bolduc: The difficulty, of course, is that some occupations are all over the place. It is difficult to tell the Ministry of Public Works that you will deal with the engineers, because there are engineers at Transport. It is not easy. I understand that some of the occupations are specific to a ministry. For example, I suppose biologists are mostly in the Fisheries Department. That is what makes the occupational unionization difficult.
Mr. Goyer: Mr. Chairman, I think the senator is right in many ways, but when we did our audit of job evaluation and job classification, we found out that many departments, even though they use clerks, for example, they use them in very different ways and do not necessarily employ the same types of clerks.
In StatsCan, the clerks are part of the statisticians/social scientists in tax. They deal with tax matters. They are not necessarily interchangeable, in terms of their knowledge, skills and even requirements. If departments had the flexibility to organize work, I think you would see a very different organization. But the balance between the horizontal efficiency or economies of scale and effectiveness of program is something to be looked into.
Senator Cools: I am very interested in your work and I have been reviewing your report. I notice that you and your department selected and focused on seven departments in your audit. I wonder if you could share with the committee your rationale for the seven that you selected? Why those seven? Why not another seven? Why did you not include the Department of Justice or the Department of the Solicitor General?
Mr. Desautels: I shall ask Mr. Wolchuk to answer that question, please.
Mr. Ron Wolchuk, Principal Auditor, Office of the Auditor General of Canada: Mr. Chairman, this was a particularly difficult problem for us. There were several departments that we could look at, and we could have looked at them in terms of the rumours we heard about the degree to which they were downsizing, or that perhaps they were doing things that were not kosher.
We decided to try to find seven departments that were representative of the government in terms of size. We have 170,000 employees in these seven departments, so that is a big chunk of the federal public service right there. These organizations will be giving out 30,000 incentive packages.
Some of them were large. We wanted big ones, because when you get into big ones, you get into layers, into decentralized organizations. We chose Human Resources Development, National Defence and NRCan. We wanted smaller ones. We chose CIDA and StatsCan.
We wanted organizations that were considered most affected -- organizations with over 5-per-cent cuts, if you will; and those that were considered least affected: smaller organizations like StatsCan, the RCMP, although the RCMP itself was decentralized.
We tried to get a mosaic here, to get a little more representative sample, if you will. I hope that answers your question.
Senator Cools: It does not totally answer the question. I appreciate that you are trying to be representative. However, I could say to you, that if we were doing so, many other departments would also be representative.
I admire the work. I am just very interested as to why you picked those seven, that is all. I wondered if there were particular problems, or whether you threw all of the departments into a hat and chose them?
Mr. Wolchuk: No, we did not do that, for sure.
Senator Cools: Quite often, these choices are political choices, but it does not matter. I was just curious.
Mr. Desautels: There was a certain subjectivity to the selection, no doubt. It was not a totally random sample; I think it was a judgmental sample.
Mr. Wolchuk: After we made the sample, people came back and asked us why we did not pick this other organization.
Senator Forest: I was interested when you said that there is a need to improve the accountability to Parliament for expenditure and work-force reductions and related cost. I was just wondering in what areas you can improve the accountability, or how you feel that it can be done, because accountability concerns us.
Mr. Desautels: Mr. Chairman, I think there are two dimensions to the accountability question. First of all, I think on a department-by-department, case-by-case, basis, certain guidelines were given in terms of the pay-back that had to be achieved in deciding how many packages to hand out and how to do it. Mechanisms were put in place to monitor what the departments were doing. Most of the mechanisms worked quite well.
We note in our chapters that, in terms of the pay-back, there was some confusion. The method of calculating changed in mid-course after a number of the decisions had already been made. There was some confusion, and for future reference, I think it would be important to make sure that the method of measurement of the pay-back has to be made quite clear at the outset so that people make the right decisions. I shall be quick to add that, despite these problems, it was done better this time than on earlier occasions.
The second dimension of the accountability issue is the need to report back on a broad basis on the whole program. We feel that this has been a major program cutting across government, involving major expenditures, so there is a need for the government to report back to Parliament at the appropriate time on the results of that program: what it cost, what the savings were, how those savings were calculated, and the other benefits or drawbacks.
We have been assured by the Treasury Board Secretariat, as I mentioned in my statement, that they will provide Parliament with such comprehensive accounting after March 1999.
Senator Forest: You refer at some point in the report that in some cases, more incentive packages were taken than was anticipated. We heard last week from some of our witnesses that we are now very short of some key staff members and that it is going to be difficult to attract new people, because of the wage levels and so on. Could you give us your opinion?
In another place, we talked about "a quiet crisis." How severe is this situation? Have you any sense of how difficult it is going to be to not only to recruit and maintain our people, but also to increase the morale of our work force? This is a concern.
Mr. Goyer: There are several elements to the question. I shall try to address all of them. First, too many people left with incentives. This was partly due to the approach that was used, and this is what we call "volunteering." People were asked if they wanted to go. Of course, many more hands than were needed went up. It is difficult for management to make the decision as to who may leave and who may not. Of course, if you approve too many, then you have a shortage.
Is the crisis, in terms of recruitment and hiring, not simply due to downsizing? I shall give you an example. Revenue Canada is in difficulty not because of downsizing or to the packages that were offered, but because of people leaving and their difficulty to attract people.
We have noted in an exhibit in chapter 1, that packages have very little to do with auditors leaving the government. They did not leave because of the incentives they were offered. They just left. We reported in 1996 that even in the Toronto or the southern Ontario regions, large corporations have, in some cases, a 15 to 20 per cent vacancy rate in their audit departments. These shortages are not the results of downsizing. These shortages happen because there is a market.
We have also reported on OSFI. Again, it is difficult for them to recruit, and that is not necessarily due to downsizing. They, too, have offices in Toronto, and again, they are competing with financial institutions.
In relation to downsizing, in some cases, we have perhaps let too many go. An example of this is pilots and National Defence. They had a genuine surplus, and then the economy picked up and the airlines started hiring pilots. The double effect of incentives to leave and competition from airlines has created a shortage. We have the same issue with computer systems people.
Perhaps I can make a link with your first question about accountability. In the case of computer systems, DND and Transport were downsizing. They had surplus computer systems people, but Revenue was hiring. Who was responsible for managing this problem of a surplus in one department and a shortage in another? We made the situation worse by not managing that, in our view.
The Chairman: This ties in with Senator Forest's questions, as well with respect to the problems that you are talking about with individuals.
We keep hearing that up to 70 per cent of the senior and intermediate levels of bureaucracy are eligible to retire in the next seven years. As those folks are retiring, there is no younger cadre coming up behind. That leads to an implied crisis.
Are those issues being addressed? Are youth, in particular, being encouraged? We are concerned that we do not see that happening so far.
Mr. Goyer: Mr. Chairman, there are, again, several aspects to this question. First, I will speak about the recruitment of youth, the ability to attract youth. We have noted, in 1996 again, in our work on scientific personnel, that not only have we let go of some of the most senior scientists, for example, but that also a lot of the younger ones have left. We can certainly confirm that that has happened through downsizing in other departments as well. We have not recruited, and the ones that were let go were term employees. Before you let go a permanent employee, you let go your terms. We have made it very difficult for the public service to attract when in fact it is downsizing 23 per cent of its work force.
We have not audited the current efforts, and obviously there are plans to recruit in some cases. It is a problem for many departments, particularly scientific departments. I have mentioned that because we have covered it in a fair amount of detail. They are also concerned about their senior people having left and the ability to attract funding. If you do not have a top-notch scientist, will the public sector come up with the money? That is an issue. There are lots of these issues in scientific departments. We have audits now where we are reviewing shortages of staff, which may affect program delivery, and we will report on those when the time comes.
The Chairman: You are now monitoring that situation?
Mr. Goyer: In certain instances.
Senator Bolduc: I do not wish to deviate from this debate to some other subject, but I have other concerns.
The Chairman: Senator Lavoie-Roux had a question and then we shall go to you, sir. I beg to leave and I shall pass the Chair to the Deputy Chairman.
Senator Anne C. Cools (Deputy Chairman) in the Chair.
[Translation]
Senator Lavoie-Roux: I have read your observations on how reduction operations were conducted. You express some reservations about the approach taken which, in your opinion, could perhaps result in some problems.
I cannot go over every paragraph, but in No. 15, you state the following:
Although many initiatives have been developed or are being implemented...
Many initiatives have not been as effective in the past and some skepticism remains about those in place.
Could you give us some examples of initiatives which have been less effective and which have generated a certain amount of skepticism on your part?
Mr. Goyer: Taking a look at chapter 1, we see from the first exhibit that over a period of 30 years, governments have made an effort to reform some aspects of human resources management. Royal commissions have been set up, and I am thinking here in particular about the Lambert commission which had a human resources component. The Davignon report looked at merit. Different studies have been conducted. If we look at the results, we note that very little, if any, progress has been made.
The creation of the management category in 1981, a process which took almost 20 years, did not produce all of the expected results. Remuneration and other management-union problems arose. Public Service 2000 has been a successful initiative, but here again, the promised or hoped-for changes have not been forthcoming.
With respect to renewal, our concern is that some of the changes anticipated or even desired by stakeholders, whether unions, management or even senior officials, might not take place at all if parliamentarians and ministers are not prepared to consider legislative amendments. The public service staffing process cannot be radically altered unless the legislation is amended along with the way it is implemented.
Senator Lavoie-Roux: Are the ministers responsible for this matter aware of the need to bring in amendments to the current legislation?
Mr. Goyer: In chapter 1, we note that compared to the program review exercise, the political will to act is clearly less apparent here. I am not certain of the extent to which ministers are involved, but we are concerned that there seems to be less of a consensus on this matter and less will to act.
Mr. Desautels: If I may add something, we must not underestimate the complexity of the problems that need to be resolved. The Program Review was a recent ambitious undertaking that was successful. Why was that? Because a clear will existed to bring this project to fruition. Deputy ministers and ministers were personally involved in making decisions and in carrying them out.
The results of this exercise were fairly positive. What we note in this chapter is that the work that remains to be done is equally important and complex. If we can apply ourselves to the task at hand with the same determination, then we will be successful in the endeavor.
Senator Lavoie-Roux: In paragraph No. 15, you conclude with the following:
... a risk that the public service may not be capable of providing high-quality service to Canadians in the future.
Could you give me an example of one particular area in which we run the risk of not getting high-quality service?
Mr. Goyer: As I mentioned, we are currently experiencing significant problems with some programs because of staff shortages. We are not able to get experienced workers. Almost one-third of the employees in the EX group have left. Some left on their own, while others took advantage of one of the packages being offered. Some of the experienced workers who left have been replaced. We need people with these qualifications. However, few workers have much experience at the inter-departmental level. It is very difficult to staff certain positions, for example, to find someone suitable for the position of Deputy Minister at National Defence. We have found that people now have less experience. Those at the lower levels of the EX group mainly have departmental experience. They have not had much experience working for different departments and today, we seem to want to have ministers with a broader vision who are capable of managing under different circumstances. Training is a requirement. The quality of service could suffer if we are unable to find individuals with this kind of vision, experience and expertise.
Senator Lavoie-Roux: What advice would you give the government? To avoid the risk that you mentioned, what should its main priority be?
Mr. Goyer: That is a very difficult question, one that requires some perspective on my part. Continuity and persistence are the two elements that are lacking. These problems are not about to disappear overnight. Often, efforts are sustained only for brief periods of time and the momentum is lost.
We were discussing the recruitment of employees at the EX level and early retirements. In 1989, we reported that by the year 2000, some problems would arise as a result of the many managers retiring. The commission also raised this matter. However, no one decided to accept responsibility for finding a solution. Now we are in a crisis situation and we have to address the problem. Once the crisis is over, interest levels will fall off. Often, we find yourselves at a crossroads and other priorities and business take up our attention.
[English]
Senator Moore: Mr. Auditor General, in paragraph 1.6 of your report, you state that:
Roles, responsibilities and accountabilities of central agencies and departments in the management of work force reductions also need to be clarified.
I have a couple questions with respect to that comment. Are the Privy Council and Treasury Board the only central agencies involved in this process?
Mr. Desautels: You have three central agencies involved in the process. You have Treasury Board, of course, the Public Service Commission, and the Privy Council Office.
Senator Moore: Could you expand a bit on the need to clarify the roles, responsibilities and accountability of those central agencies?
Mr. Goyer: There are several aspects to this question. The first one I will discuss is what the Auditor General has described as the pay-back. The government has committed to recoup its cost of downsizing by equivalent savings, salaries and wages. Obviously, some departments are doing a better job than others at that. To whom are the ones who are not doing a good job accountable? Are they accountable to Treasury Board ministers? Are they accountable to Parliament for achieving that objective?
Senator Moore: You would only know that with respect to the seven departments that you examined, is that correct?
Mr. Goyer: To a large extent, yes. Although we have had access to information about other departments, our focus is on those seven.
There are departments who manage, for example, who take the guidelines produced by Treasury Board and apply them. Others do not. Again, who are they accountable to? I do not have the answer, unfortunately.
Senator Moore: Do you think that they should be accountable to the Auditor General?
Mr. Goyer: I do not think that is the solution. We have a study under way and we are thinking about that issue. I can only say that we intend to report to Parliament on it, because it is not the first time that this issue of the accountability of central agencies and departments has been raised. It is not the first time that we have seen some departments perform better than others, and there is ambiguity as to who is responsible for managing certain aspects of the public service as a whole, or managing certain dimensions of human resources. I can only promise that we shall report. We are very concerned about this issue, but I do not have the answer today.
Senator Moore: Who implements the program? Is it your department, or the Auditor General's department?
Mr. Desautels: It is clearly not our department. We are a part of the accountability process, of the legislative arm. We are not part of the executive. Departments are responsible for implementation, and central agencies are part of the executive and therefore have some kind of role in the implementation, too. But we are working only on behalf of Parliament.
The Deputy Chairman: Perhaps I could interject for a second. The Auditor General is one of the four officers of Parliament, I think. The Senate has traditionally felt that the Auditor General is an officer of Parliament, but is a servant of the House of Commons, not the Senate. The Auditor General is supposed to hold government accountable to Parliament.
Perhaps, Mr. Desautels, we could have an exchange on this very profound and very narrow point sometime. I think there is enormous confusion in the public mind as to what the Auditor's General's role is. It is to keep the executive accountable to Parliament. This concept is lost in the system, as it is so often.
Some years ago, I do not remember exactly when, but this committee conducted a fairly comprehensive study on the Auditor General itself. I believe the Auditor General at the time was Mr. Dye. Perhaps our researcher could resurrect some of that old information and give it to us.
Senator Moore: If some departments are adhering to the reduction program better than others, is that because of the direction and enforcement they are getting from their ministers? Why are some doing it better than others? Why do some perform better than others?
Mr. Wolchuk: I can answer that pretty simply. First of all, some of the seven departments we examined were already in the change game. They knew what they had to do in terms of re-engineering; they knew the kinds of things they had to look at, and they already had mechanisms in place to examine them. Plus, they had ministers and deputy ministers who were pushing them. By the time the Program Review came along, they were well on their way.
Other organizations did not, or did not have an opportunity to, do that. Human Resources Development Canada only knew about the Program Review for four months before they had to produce a large plan to implement it. As a result, they had to pay the price, which was a lot of confusion, as it emerged.
We also had organizations that did not have to reduce a great deal. It is a lot easier to get into this game if you are dealing with small numbers. However, when you have big cuts to make, you have to make hard decisions about what you do not want to keep anymore.
I think we had those kinds of differences, and those are the things that made our work just that much more interesting, because we could see the mosaic here.
Senator Forest: You obviously have seen the reasons for the more effective implementation of the Program Review, and you have articulated some of those in your report and in answering questions. I think it is very important that those differences are noted, for, as the former chairperson said, we are interested in the future. We are looking back in order to improve the future. So that is helpful.
[Translation]
Senator Bolduc: You make an observation in your report which I find somewhat shocking. Rather, the implications of what you said shock me. You stated the following, and I quote:
It is not possible to measure the precise extent to which incentives have contributed to savings.
Of course, the government had to deal with budget problems. In view of the deficit problem, it had to exercise some restraint. You say that it is impossible for you to measure the extent to which these incentives have contributed to savings. This is a rather serious finding. Would you care to elaborate on that for me?
Mr. Goyer: First of all, we have to knowledge that Treasury Board has made a considerable effort to try and measure, if you will, the impact of the incentives offered to employees. We felt that the way in which the incentives program was implemented posed some problems. Of course, the size of the public service shrank through natural attrition. This makes it more difficult to gauge the impact of the incentives as such. The Auditor General observed that the Treasury Board measure was implemented almost six months after the departures had begun. In other words, departures began in June 1995, while the measure was enacted in December 1995. By this time, many people had already left. Departments did not know how much the incentives cost them because some of the associated costs could be charged to the pension fund.
Senator Bolduc: Because the measure was retroactive?
Mr. Goyer: The incentives programs began in June 1995 and the measure designed to gauge the effectiveness of these programs was implemented six months later, in December. Departments had no idea of the costs, because some things that should not have been included were taken into account, while other factors that should have been costed were not.
Senator Bolduc: Participation in the program was voluntary. Does this mean that all those wishing to leave could do so?
Mr. Goyer: It was not totally voluntary.
Senator Bolduc: That was an important consideration because surely some of the employees in this group were truly essential. I was a deputy minister for many years. Some of these essential employees must have known that they could not leave.
Mr. Goyer: In some cases, the departments made their requirements known before asking for volunteers.
In other cases, and I am thinking about one department in particular, there was not a great deal of time to proceed with workforce reductions. These departments requested volunteers before even considering what their future requirements would be. When you request volunteers and have no specific preferences, that is when you do not know if you are going to need a particular employee in the future, you run the risk of realizing later on that perhaps you should not have let certain employees go.
We see a little bit of everything. In some instances, it is difficult to say no to people after requesting volunteers. If everyone volunteers, then you have to decide who leaves and who stays on and some are going to argue that they have been treated unfairly. An employee who is leaving might say: I have performed well all of my life, while the person staying behind has not. You encounter problems related to equity and working relations and find yourself having to provide explanations.
Senator Bolduc: As a result, the quality of the work performed suffers. If some employees who should not leave do in fact go, then the quality of the work is affected.
[English]
The Deputy Chairman: We have ascertained that the Auditor General is a servant of Parliament. I believe there are four officers of Parliament. I am listening to you, to the discussion about these departments, the downsizing, the reduction of costs and the consequences. I would just like to switch gears a moment and turn to the testimony last week of a particular witness, Mr. Darryl Bean of the Public Service Alliance of Canada.
He raised the issue that the amendment to the Judges Act, Bill C-37, which is currently in the House of Commons and is moving through the chambers, will have the effect of increasing the salaries and benefits of the judiciary by 12 per cent over the next two years.
I would also like to refer to an article in today's Toronto Star, which is headlined, "When it comes to pay, judges just rule the day. It is a review of the highest and the lowest paying jobs. Judges have the top-paid job in this country, according to that article.
First, I am just wondering whether or not you have any thoughts on what seems to be an expansion of remuneration at a time when we are told that costs should be shrinking?
Secondly, if you have looked at all at Bill C-37, I wonder if, as Auditor General, you have any opinion whatsoever of what I view to be an enormous expansion of costs to the Department of Justice by the proposed creation of its Judicial Compensation Commission? It would be quite a large chunk of cash, and it would be another bureaucracy and another set of interests, and so on and so forth. Have you given this matter any thought?
Mr. Desautels: Madam Chair, we are not in a position to comment, and we never do, on legislation in front of the House. Bill C-37 is still before the House, and we would not comment on its merits. That is the prerogative of the members of Parliament, not ours. I prefer not to make any comment at all on Bill C-37.
I think, though, that there is a need for government to react to the general situation of remuneration to the executive in government. I do not want to single out any particular group, but we have been quite concerned ourselves over time with the turnover in senior personnel and with the ability of government to hold on to those people and to attract people from outside. I do not want to make a value judgment on what that should be.
I do not necessarily want to say that I agree with everything the Strong commission recommended, but I support efforts to realign certain remuneration in order to maintain the capacity to attract and keep the people that we need.
The Deputy Chairman: Many would argue that the Justice Department is already bloated, and I was just wondering what your opinions were on the department being bloated a little bit more. Perhaps I should not have couched it in terms of what you think of Bill C-37. I could put it another way: In this era of downsizing, what do you think of ministers and departments that are proposing expansion?
Mr. Desautels: Madam Chair, I come back to my previous answer. I think that there should not be any bloating of any department. I believe that there should be fair remuneration, and that means paying the right levels of remuneration for competent work. I believe there should always be some kind of pay-back calculation in all of these. We just do not give increases for the sake of giving increases. We give increases to people because it make sense and the organization will profit from that in the long run.
There should be not be any couching or any bloating of budgets. I think that there must be a reasonable remuneration policy and it must make sense to the organization.
The Deputy Chairman: Absolutely. I was wondering what the impact of some of these increases and expenditures would have on Parliament's role in the whole matter. That is all. Since you are an officer of Parliament who looks after the way in which the executive spends money, I thought you might have some thoughts. I thank you very much.
Senator Forest: On the other side of that coin, my concern is whether we are doing enough to retain the people we want.We can talk in terms of pay-back with respect to the system, but there is no way, really, of assessing what our losses are in terms of productivity and the running of the country if we do not have the people we require in place. I fear that we may really be losing out if we are not able to retain the kind of people we need.
Certainly in the private sector, we must pay to keep those people from going to the States, from going elsewhere. In this day of global competition, it makes sense to pay people. Taxpayers who talk about these huge increases do not think about the other side of the coin, of what we are losing by not retaining or hiring the people we need. Would you care to comment on that?
Mr. Desautels: Madam Chair, I would be quite happy to comment, and I will link this particular question to the earlier question. Our raison d'être -- at least one of them -- is value for money. When we talk about retention, it has to be viewed with that particular objective in mind.
In terms of the more specific retention issues that you raise, it is a concern to us. Having a competent public service is in the interests of all Canadians, and it is important, therefore, to make sure that whatever we do, we hold on to the good people and that we have continuity in terms of service and advice to government. Looking at remuneration is important. I should make it clear, though, that it is not the only the issue. I think there are many other important factors that will make people want to stay.
I personally think public service work is tremendously interesting work, and very challenging intellectually. I think there are some very positive aspects that government can offer to people who have that vocation. I think we have to make sure that we make it interesting and that the people who work in it are valued, not just monetarily, but in other ways, as well.
Senator Forest: I would quite agree with that.
[Translation]
Senator Bolduc: First off, I would like to congratulate you on your report on the review by a committee of parliamentarians of the revised Estimates. This is indeed a remarkable initiative.
[English]
In it, you will find on page 9 in the French version a very good figure explaining the establishment of priorities in matters of expenditures, the role of Parliament, the role of the Auditor General, the role of the ministries and the role of the central agencies.
You go so far as to suggest to the parliamentarians how the auditor could be useful to them. I think it is a good document and I hope that all my colleagues will look at it. In English, it is the "Parliamentary Canadian Review of the Revised Estimate" documents. As you know, a committee of parliamentarians has helped the central management agencies to prepare a new process of setting priorities. They will then approve and follow up what happens and measure the results. The whole process of governmental expenditures is involved in that. I think that the Auditor General has produced a very good document. It is a fine introduction to the new processes in government, so I would like to congratulate you on that.
Secondly, you had a little battle with the Minister of Finance about accounting practices or application. I see here, for example, in a serious newspaper, that the Auditor General had a running battle with the Minister of Finance over Mr. Martin's practice of accounting for a major spending program as soon as it is announced, rather than waiting until the money is actually spent. Apparently, this is what happened this year with the Millennium Scholarship Fund for two-and-a-half billion dollars, and also the year before for the Innovation Program, and some others.
In light of that debate, I think that the minister treated you a little too lightly. I understand that he is in politics. I do not want to become partisan here, but do you have the impression that the civil servants in the Ministry of Finance are behind their minister, or if they are neutral, or what happened exactly? It is one of the first times that we have had that kind of debate.
I know that the government sometimes does not like your remarks or comments, or some study that you have produced. That is normal. It is part of the game. However, this year, I think that the minister went a little further. Therefore, I wonder if some professional practices of the Institute of Public Accountants should be legislated, or should some of those basic principles be put into the Financial Administration Act, so that the government will behave according to the standard practices, instead of doing what they have done this year?
[Translation]
Mr. Desautels: As you may perhaps already know, the subject raised by Senator Bolduc was discussed in detail in chapter 9 of report that we tabled last April. We discuss the different considerations involved and review the history because in the two previous years, we also encountered problems of this nature.
You asked me if public servants are behind the minister. On reading the chapter in question, you will note that the Deputy Minister of Finance and the Secretary of the Treasury Board do support the government's position. Frankly, this should come as no surprise because it is their job to support the minister and that is exactly what they did under the circumstances. In chapter 9, we report on recent correspondence that we exchanged with deputy ministers asking them to respond to our question.
In the last part of your question, you asked how other professional bodies could be involved and how the government could be made to comply with the standards in place.
Senator Bolduc: In other words, if members of the profession across Canada follow standard, generally accepted accounting principles, how is it that the minister, or the government, can choose to disregard the standards? When it comes to medical matters, the government seems to follow the advice of professionals.
Is there not some way to include in the Financial Administration Act certain fundamental principles which would ensure that Parliament adjudicates debates between the Auditor General and the government? Essentially, the Auditor General is his own boss and operates according to professional standards, which is perfectly appropriate. No doubt the minister's officials could also put forward some very valid arguments for acting the way they did. An adjudicator would certainly be useful at some point, as we cannot continue this way. With the anticipated $3 billion surplus next year, we are going to see the minister decide, either on February 28 or on March 30, to include this in this year's expenditures, even though this money will not be spent until the year 2002.
It seems to me that we need an adjudicator when it comes to settling these fundamental issues. Certain accounting practices may give rise to different possible interpretations, but we are talking about something fundamental here. This year, it was $2.5 billion, last year, it was another $1 billion and the same the year before that. We are talking about two percent of the budget. In terms of program expenditures, this is a considerable amount. Is there not a need for legislation in this area?
A certain number of principles are already set out in the Financial Administration Act. For example, budgets must first be tabled in the House of Commons. This requirement is very clear. In your opinion, should the Financial Administration Act not provide for something similar to deal with this particular problem?
Mr. Desautels: I very sincerely hope that we will not have to debate this subject year after year. Now then, as to whether the government is required to follow the accounting standards developed by an independent body, the Financial Administration Act is not clear on this point. It contains no such requirement.
However, the government could -- and this is what we recommended to the public accounts committee -- undertake to comply in future with the standards published by the Canadian Institute of Chartered Accountants for the public sector.
This would be a sign that the government is indeed ready to follow standards that have been established objectively by a body which has no direct interest in the process of preparing the government's financial statements.
[English]
Senator Moore: Some concern has been expressed that the federal government has rehired some of the employees that accepted the separation benefits offered in the Program Review. Is that a valid concern? What would be the extent of such rehirings? And, of course, if it was substantial, would it not be defeating the purpose of the Program Review?
Mr. Desautels: Mr. Chairman, I can ask Mr. Wolchuk in a second to expand on my answer, but we have in fact covered in our chapter the return of the recipients of departure incentives. We have indicated that a number of them did return, however, it was somewhat fewer than on previous occasions. About 600 people who had received a departure incentive somehow came back, either in their own department or in another department.
Senator Moore: What percentage would be that be, Mr. Desautels?
Mr. Desautels: It is about 600 departures out of approximately 46,500. It is a small percentage. To add further to that, about three-quarters of those are in one department: National Defence.
Senator Bolduc: Are they coming back as civil servants or as contractors?
Mr. Desautels: Let me ask Mr. Wolchuk, who is more familiar with those details, to expand on that answer.
Mr. Wolchuk: They are coming back as both, but we are talking about much smaller numbers than we saw in 1992, when Jacques Goyer did the last audit of cash-outs. The number has come down dramatically. As the Auditor General has stated, there were 600, and it is mostly in National Defence.
I think the important thing is that there are rules when people come back. If you come back within what they call the "window period", that means that period of time in which you receive cash, you have to pay back that cash under the rules that exist today. If you come back after that period, then you do not have to do that.
Only 130 of the 600 actually came back during this window period, during this cooling-off period. Of those 130, 110 were from National Defence. It gives you a pretty good idea of what the situation is, but we are talking about small numbers. We found, in most of these cases, that the rules were generally followed when they came back, whether before or after the window period.
In terms of contracts, we have far less information in that particular case. The ones that we had been able to examine were as a result of an internal audit done by National Defence, in which they looked at approximately 150 people returning over a period of two years, as contractors. They were concerned about whether or not they were returning as third-party contractors -- that means working for an organization -- or whether they were themselves, if you will, the directors of those organizations.
Senator Bolduc: Were these civilian or military --
Mr. Wolchuk: These were military.
[Translation]
Senator Lavoie-Roux: When Mr. Bean appeared before the committee last week, he reported that plans were in the works to add a fourth level of remuneration to the EX group, which includes deputy ministers and senior level officials, which could raise their salaries up to $270,000. Are you aware of these plans? Everyone is conscious of the need to save money. That being the case, does this action seem justified to you?
Mr. Desautels: We are aware of the Strong report recommendations and, if I am not mistaken, the government is committed to implementing them. The Strong report refers to "at risk" remuneration, based on performance. I have some questions about this and I intend to raise them with Mr. Strong and with other government officials in order to get a clear understanding of what these recommendations entail.
Senator Lavoie-Roux: We did ask for someone to explain the "at risk" compensation proposal and merit assessment process more clearly to us. However, we did not get much in the way of an answer. If you plan to look into this matter, then this alleviates some of my concerns.
[English]
The Deputy Chairman: I have one last question before I adjourn. How much did your department cost last year, and what sort of percentage increase was that over the previous year, if any of course?
Mr. Desautels: Madam Chairman, our recent estimates were approved. They went through the system at $50.6 million, which in fact is flat from the year before.
The Deputy Chairman: Very well. I would like to thank the Auditor General and his staff very much for coming before us today. I would also like to thank the committee members. Having said that, I am assured, as always, that if the committee needs these gentlemen to return, I am sure they are always ready, willing and able.
Mr. Desautels: We would be pleased.
The Deputy Chairman: Thank you very much.
The committee adjourned.