Proceedings of the Standing Committee on
Rules, Procedures and the Rights of Parliament
Issue 12 - Evidence - April 17, 2018
OTTAWA, Tuesday, April 17, 2018
The Standing Senate Committee on Rules, Procedures and the Rights of Parliament met this day at 9:33 a.m. to continue to develop and propose amendments to the Rules of the Senate to establish the Standing Committee on Audit and Oversight.
Senator Leo Housakos (Chair) in the chair.
[Translation]
The Chair: Good morning and welcome to my colleagues and to the members of the general public who are following today’s proceedings of the Standing Committee on Rules, Procedures and the Rights of Parliament, either here in the room or listening via the web.
We are here as a result of the adoption by the Senate on Tuesday, March 27, 2018, of the twenty-first report of the Standing Committee on Internal Economy, Budgets and Administration.
[English]
Pursuant to the report, our committee is to develop and propose amendments to the Rules of the Senate and to establish a standing committee on audit and oversight.
We have with us today our colleague Senator Wells, a former chair of the Subcommittee on Senate Estimates and a former member of the Internal Economy Committee who has spearheaded the particular initiative. He is before us today to make a presentation and, of course, to answer some questions. We’ll open the floor to debates and comments.
I welcome Senator Marwah, who I understand will be joining this committee permanently as of today.
Senator Wells, you have the floor.
Hon. David M. Wells: Thank you very much, chair, and thank you, colleagues. My opening remarks will be brief.
I am happy to take as many questions as required or as needed, as you like, but it might be instructive to know how we got here.
Back in 2013, the Auditor General was given a reference by the Senate to investigate or to look at Senate expenditures, including the expenses of senators.
The expenses of senators would include our office expenses, travel expenses and living expenses while in Ottawa comprise approximately 12 per cent of the total Senate budget.
The Auditor General was asked to look at Senate expenditures including senators’ expenses. That was in the order of reference. The Auditor General looked only at senators’ expenses. Within that envelope, he looked only at travel and living expenses.
With respect to our office expenses, it is by far the largest expenditure of that category. Whether he looked at it or not, I don’t know; but I know he had no comments or observations within his report.
The total reported on, out of the 100 per cent over the approximate two-year period, was $182 million. The Auditor General looked at 8 per cent. Of that, the final analysis recommended a payback in excess of $300,000. The total expenditure for his work was $27 million. As you can probably note from my tone here and my tone in chamber when I’ve spoken on this a number of times, that’s not acceptable.
What I’d like to do, what I’ve proposed and what we’ve gone through at a number of committees, including the Subcommittee on Senate Estimates which I chaired at the time, is to establish an audit and oversight committee that would essentially fulfil the role full time that the Auditor General was asked to fulfil back in 2013, which he failed to do.
He made a number of recommendations in his report to the Senate two years later, one of which was the establishment of an oversight committee or an oversight mechanism which would be tasked to look at, among other things, senators’ expenses.
What our Subcommittee on Senate Estimates recommended to CIBA, and CIBA further referred it to our chamber, was to look at this in a more fulsome way.
We envisioned at Estimates was that this committee would look at all Senate expenditures or would have the option to look at or the authority to look at all Senate expenditures, not just senators’ expenses.
Many of the things that have been done since the audit report came out have gone over and above what the Auditor General recommended. The chief among these is the full publication of senators’ expense, including our office expenses. We think that transparency and accountability to the Canadian public is the best disinfectant. I think that has been proven out over the last two years since our expenses have been public.
I would propose, for the audit and oversight committee, the establishment of a committee that would look at three categories. What I’ll call the small look at a regular sampling of senators’ expenses, including office, travel and living expenses. That would be done on a regular basis with sampling protocols common in the audit and accounting industry.
A mid-level view and reference would look at aspects of directorates within the Senate. You’ll know that two years ago and three years ago the Subcommittee on Senate Estimates did a zero-based budgeting exercise on all directorates. This would essentially be a continuation of that, but looking at not building it up from zero and establishing a budget but determining if the budget that has been expended was expended based on the authorities given to each directorate by the Senate itself.
It might be, for instance, the HR directorate. We might look at the HR directorate in one of our studies as a whole and do a full audit on that, or we might look at a particular aspect of HR, for instance senior staffing: What are we losing by potentially losing senior staff? Are we hiring senior staff or mid-level staff? Are we promoting from within? Are we using best practices?
It’s not just an audit, but an oversight of the practices and processes that we have now and instituting best practices where we don’t currently have them.
The third is what I would consider high level. I’ll give an example of a high-level investigation. For instance, the Senate expends money on pensions, as senators do as well. The rate of return that we use in the Senate and is used, I believe, by Treasury Board is a 1.8 per cent or 1.9 per cent rate of return. In the public service their pension plan uses 12.8 per cent.
Why is there a difference? That difference costs the Senate. It doesn’t just cost senators; it costs the Senate. I would like to look at why that rate of return is so vastly different from a pretty standard rate of return of 12.8 per cent, currently, on the public service pension.
If we looked at a model like those three categories, I think the Senate and the taxpayers of Canada would be well served.
I don’t have much more to say. It’s all in the report and the recommendations that came through CIBA to the Senate from the Subcommittee on Senate Estimates.
It would be a five-member committee. We would gather evidence in public. Everything would be transparent. We would report, obviously, to the highest authority, which would not be CIBA. It would be the Senate. That was a recommendation. I think that’s part of good practice anyway.
That’s it for my remarks, but I am happy to take questions and further develop this so we can have something that works well for the Senate and works well for the taxpayers of Canada.
[Translation]
The Chair: Thank you, Senator Wells. I would like to point out to you that we have a new permanent member of the committee, Senator Maltais. Welcome to the committee. We will start the first round of questions with Senator Ringuette.
[English]
Senator Ringuette: Thank you, Senator Wells, for your presentation. I think your quick resumé of the circumstances is quite accurate. I am not convinced. You’ll have to convince me, I guess.
First, since 2013, we now have public disclosure of senators’ expenses: office expenses, staff expenses, contracting expenses, living expenses, and all of that. It’s all in the public domain now, whereas when the events of 2013 happened it was not. That’s a new approach.
I would like for you to comment on the issue of public disclosure and the transparency that the Senate now has. Is it necessary to have an additional oversight?
Second, how can the new committee you’re proposing differ with regard to role responsibility in the three different processes you were referring to from a subcommittee of Internal?
Senator Wells: That is an excellent question. I will address the first part first. Yes, of course, the public disclosure goes a really long way to ensuring that our expenses have the rigour.
Any time we’re in public like this committee, we straighten up a bit more because of the transparency, because of the accountability and because everyone is looking at it, not just a subcommittee, not just an auditor or just an administrative staff.
The additional benefit that we would get from this proposed committee on audit and oversight is over and above what we would gain from the public disclosure of senators’ expenses. You’ll recall in my opening remarks what happened.
The Auditor General was asked to look at everything, $182 million over two years of expenses, and he looked at 12 per cent of that. We have that 12 per cent now covered by public disclosure. There’s another 88 per cent, or approximately $150 million of the operation of the Senate over those two years. Currently approximately $90 million have no oversight, none whatsoever. It has no auditor, none whatsoever.
We have no internal auditor. We have an external auditor who says that the way we do our books is in order, but we have no one looking at not just the expenditures of our directorates but at whether we are utilizing best practices. Utilization of best practices can be a saving right there.
We have no mechanism right now that is directed to look at 88 per cent of the expenditures of the Senate. When I was chair of Estimates, in the two years I was there we routinely did the zero-based exercise. That was the only rigour put on how money was budgeted. There’s no rigour other than the management expertise of our excellent Senate administration. There’s no rigour, no oversight and no audit put on how that money is spent. That’s the answer to the first part of your question, and it’s a good question.
The second part was on the three subcommittees that may look at these things now. They don’t look at them. They don’t. They don’t look at them full time. They’re tasked on a part-time basis, sometimes, to look at a particular aspect. Nowhere in our history has the full Senate expenditure been reviewed. No oversight, no internal auditor.
I sat on one of these subcommittees. I know what happens there. Those subcommittees are answerable to a committee. This committee would be answerable to the Senate publicly.
Senator Ringuette: I don’t know when it happened, but we did have an internal auditor that was working with Internal Economy. I don’t know what happened. That position is no longer there. It must have been a decision of Internal. That’s not to say that we cannot again have an internal auditor.
There is another concern. Mind you, Internal has probably the greatest membership of any Senate committee. If it were given an internal audit responsibility for a subcommittee, the numbers of senators on that committee could manage that.
My question is the following: You are proposing five senators. If I remember well, the Auditor General’s recommendation was that there would be members of the public on an audit body of the Senate. Yet that’s not what we’re seeing in this proposal. Could you tell me why that’s not part of the proposal?
Senator Wells: That’s a good question. There are a couple of reasons. We debated this very strongly at our estimates subcommittee meeting, which you’ll recall, and you may recall when I spoke about it in chamber. Our most vigorous discussions and debates within the subcommittee when we were developing the report was on the question of having non-senators on a Senate committee.
We decided that we would fully take evidence and have our meetings. Other than the discussion of draft reports, we would have our meetings fully public. That assuaged the fears of those who were in favour of having non-senators on a Senate committee because we would be discussing in public.
Of all the Canadians who wished to view a Senate committee, we would have those eyes watching us full time. While the public would not be a member of the committee, they would be acting as oversight of the committee by having it fully transparent and in public. There are other issues.
Senator Ringuette: That’s already the case for Internal Economy. They have public meetings.
I am trying to get all the reasons to justify this. That’s why I am asking these questions, because as of yet I am not convinced.
Senator Wells: I welcome your questions. We all have to be convinced of it.
In fact, I would offer the floor to Senator Joyal on this because he speaks better than anyone on the whole idea of parliamentary privilege and the Senate as a self-governing body. There is no higher authority that can govern us.
I think the concept of bringing in non-senators to govern the Senate or to govern a committee of the Senate, which is essentially the Senate, would go against our rules and practices.
Senator Ringuette: I have one more question. I recall that we had KPMG do an audit of all Senate expenses. We also had the other firm Deloitte. Within a period of three years we had two different entities auditing the Senate.
What would happen to these third party entities? Would they still be contracted to audit the Senate? How would it work?
Senator Wells: Currently, we have an external auditor who is hired for a period of three years or five years or for a period of time. There are best practices around that, like not having the same company do the audit many years in a row.
That would continue. Whether that would be under the authority of CIBA or under the authority of the committee on audit and oversight, it almost doesn’t matter because the decision would be confirmed by the Senate or reported to the Senate and challenged by the Senate, if we wished.
Senator Ringuette: There would be a need for an entity to contract that out if it continues.
Senator Wells: Yes. The second part is on an internal auditor which we currently don’t have. We did have one that predated my presence here. That would be, as it was recommended to be, under the authority of the audit and oversight committee.
You would have a governance separation between the committee that approves budgets, CIBA or Internal Economy, and the committee that does oversight of expenditures after the fact, or the committee on audit and oversight, both reporting obviously to the chamber.
Within the internal audit function, it wouldn’t necessarily or specifically be an internal auditor but it would be an internal audit function. For instance, if the committee were doing a deep dive on ISD, the Information Services Directorate, we might hire someone who has particular expertise in IT. We wouldn’t necessarily have an internal audit. It would obviously defer to the committee when and if it is struck, but we wouldn’t necessarily have an internal auditor who is a generalist.
We might want to hire someone with particular expertise in IT or, if we’re doing an audit on the HR directorate, we might want to have someone with particular expertise in HR staffing, headhunting, employee retention or something like that, rather than a generalist.
I don’t know if that answers your question but I hope it answers or addresses your question.
Senator Ringuette: No. First, I still don’t see why the current membership of Internal cannot have a subcommittee on audit.
Second, I still don’t understand because at the end of the day, if this proposal is put in place, we still have senators overlooking senators.
You can broadcast what you want, like a committee and so forth, but there is no public oversight. There are no public members on this committee.
At the end of the day, why create it? We already have Internal. We can rule that Internal create a subcommittee to do specifically what you’re saying. I guess I am on the efficiency side of this issue.
The Chair: Perhaps I can add some context to the question from Senator Ringuette regarding the internal audit processing. You’re absolutely right. The Senate has always had an internal audit process which stopped, I believe it was, in 2012 or 2013 when we called in the Auditor General. There was a determination by the then Internal Economy to cease all other audits and turn over the books to the Auditor General. I think the objective was always to continue the internal audit process, as had been historically the case.
You’re absolutely right. It has been done. Of course, it was put on hold in the last two years as we had the subcommittee reviewing the recommendation regarding oversight and audit.
I have some of the same concerns as Senator Ringuette. First and foremost, we creating more bureaucracy within a bureaucracy. We already have a process in place with Internal Economy. There has always been an audit committee. There has always been a Subcommittee on Senate Estimates, which was relegated with the job of going through line item by line item budgeting.
Now, you’re absolutely right, we’re creating another committee of senators and we’re empowering them to duplicate work that has already been done.
Even when I was chair of Internal Economy, I allowed the various caucuses and senators to drive this debate. I have a question for Senator Wells. I’ve sort of taken a step back. Have we looked at what other national assemblies and other houses of parliament in the Commonwealth do with regard to oversight and audit?
Particularly, I had the opportunity a few years back to be in the United Kingdom. I had meetings with people in the House of Lords. The House of Lords has not only created an independent oversight body. They have a whole independent oversight and audit department. After discussions that I had at the time with the House of Lords Speaker and their committee on budgets and administration, over a period of a decade that became a bit of a bureaucratic boondoggle and a runaway train where they had layer upon layer upon layer of oversight and audit. Maybe you can address that, Senator Wells.
I just want to finish my point in comment. In the modernization and administrative reform over the last five years of the Senate, we had an objective to be transparent and accountable. Again, I agree with Senator Ringuette wholeheartedly that all the platforms we put in place over the last three or four years in terms of public disclosure are second to none. We’ve seen the House of Commons over the last three years running to catch up to us, be it in making public our Board of Internal Economy meetings which we did three years ago. That was never done before. The House of Commons only joined us a few months ago.
In this committee on rules we took a decision a few months ago to make this committee public. Right now in the Board of Internal Economy all budget decisions are made publicly. The only thing that goes in camera are HR issues and legal issues. Everything else is public.
We’re also proud of the fact that every contract with both the Senate administration and senators’ offices is made public. As we know, in other Commonwealth parliamentary bodies it’s over $10,000. Anything under $10,000 is not public. That’s the case in the House of Commons and in most parliaments in Canada. Every contract we issue in the Senate, even if it’s 500 bucks, is made public. Those are my comments.
Senator Wells: You make a good point. I did reach out to the U.K., Principal Clerk Matthew Hamlyn and Marcial Boo, CEO and board member of the Independent Parliamentary Standards Authority. I had long conversations. I also reached out to the former Minister of Finance in Newfoundland and Labrador, which has a similar body.
There is one important aspect that we have to remember. I tried to make the impression in my opening remarks and in the number of times I’ve spoken about it in chamber that the expenditures of the Senate are not just senators’ expenses. That’s what is published. Through that publishing, that’s what gives us oversight.
What’s not published, what doesn’t have oversight and what has no audit whatsoever, is the rest of what the Senate expends. For the current year I think the Senate’s budget is $103 million or $104 million. Yes, we’ll publish senators’ expenses and our office expenses. That’s all well and good and should be done, but that’s only 12 to 15 per cent, or maybe even less now, of our total $104 million budget. The rest of it has no oversight, no audit capability within it or over it. It has no reporting back to the Senate, not in a line item way but in what Treasury Board receives: essentially some subheadings and a total. There is no oversight of that.
It is not just the audit capabilities but it’s the oversight of practices and what should be best practices. That’s what I want to see. We should not lose sight of the bigger picture here. It’s why we have regular maintenance on our automobiles, so they run efficiently and well. It’s why we spend money when sometimes we think we don’t have to.
Senator Sinclair: I want to proceed without reference to what the chair has told us because at this point in time we haven’t had a chance to hear evidence about all of those things that have been mentioned in those comments.
I want to point out that there is probably a need for this committee, before making decisions around changes to rules or not to change the rules, to get some information together as to exactly what’s going on in other jurisdictions.
I appreciate that reference has been made to the House of Lords boondoggle, to use the chair’s words, but I don’t think that’s what we’re really thinking about here when it comes to the question of this audit and oversight committee role.
Audit and oversight committees have a generally limited mandate. I don’t think it’s a question of giving them the power to govern us. In fact, their report is to come to the Senate and the Senate is to make a decision. We will continue to be self-governing. I have no concern about that.
I have no concern about the fact that we should be looking at the question of whether outside committee members should be on that committee for three reasons. Let me put them forward to you so that you can reflect upon them and comment, senator.
We should probably call witnesses to consider these issues. One is that there is a tendency, with internal navel-gazing, for people to start making decisions that accommodate each other’s interests. It’s like a buddy-to-buddy session where we sit down and say I will agree to this if you will agree to that. While that is never explicitly said, it’s often implicit in the discussion. I think having an outside membership will allow that conversation to be kept to a minimum, or at least that tendency.
There is also the question of expertise. I love you all. You’re all a great bunch of people, but I have to say that I am not sure you’re all of auditor quality when it comes to these kinds of decisions. Bringing in someone with that kind of expertise to a committee like this would benefit the committee. It would certainly benefit the Senate, even though we’re still talking about an internal auditor and an external auditor.
There is also the question of when members of this committee are considering how to make their decisions, what to do about their reports and what kinds of recommendations, I think they would benefit from having an outside voice among them talking about what the public really thinks about how the Senate is operating. Those are the benefits I see to having outside membership.
The Auditor General, in his report, may have overstated the importance of having the entire subcommittee on audit and oversight be outside membership, including the chair.
I was reading with interest Senator Marshall’s article that she wrote in 2009, after she was elected as a member of the House of Assembly in Newfoundland and Labrador. She reflected upon her experience with auditing members of that assembly and the events since the judicial inquiry that was held. I am sure you’re quite familiar with this, senator. She pointed out that in Newfoundland and Labrador there is an audit and oversight type committee that was established by legislation. It had outside membership on it. She commented upon the role of that committee, which I think she chaired for a while, and never made one negative comment about having an outside membership on that committee in that article. I think the way the article was written had beneficial effects.
This committee should probably take a look at the question of whether outside members should be on this audit and oversight committee. Without committing in any way as to whether or not it’s a good idea or whether or not you and I agree, I think this committee should look at that question and call some witnesses on it.
Do you want to comment on that?
Senator Wells: I spoke with the former Minister of Finance under whose authority the audit committee was struck in Newfoundland and Labrador. First of all, their meetings weren’t in public. That’s a really important distinction to make. Our meetings will be in public. We will have the scrutiny of Canadians upon us.
In speaking with him, he said that a decision is made to set something up, oftentimes after something that is deemed as disastrous. I think what happened in the Senate prior to his report could be seen as that. Certainly the public saw it as that. A lot of time decisions are made hastily. In this case we have taken the time. That report was delivered in 2015, I believe, and this is now 2018. We have sent this through subcommittees and committees, and we have had debates in chamber. We have taken the time and we have done the research.
The former Minister of Finance said that committees conducting, and he said, “Senate business,” business should be done by the highest governing authority and should be reported to the highest governing authority. I think that’s a tenet that holds firm in our recommendation.
His comment to me was, “Where else does the authority come from?” That’s a good question. One of his final comments was, “You should never transfer authority outside of Parliament.” He said, “In doing that, that’s what you would do.” My comments on that are thus.
To the other points you make, Senator Sinclair, you mentioned decisions to accommodate the interests of our friends. I think that the rolling sampling of senators’ expenses, that small portion of what I am proposing, would take care of anything that goes under friends trying to do something for friends that are outside the rules, outside the systems.
The audit and oversight committee would be establishing in many ways the system, the rigorous system that we have for senators’ expenses, be they office, living or travel. I think that rigour is there now. We would have oversight of that system to ensure that it continues the rigour. It would be an audit of the system, as well as rolling samples of specific expenditures that would be helpful in finding out if there are things that veer outside of the normal rules and if it got through the rigorous system that we currently have in Senate administration.
In my expense reports that go into the Senate they send it back and say, “What do you mean by this?” The first level of rigour is in my office and I sign off on everything. The second level of rigour is the system that we’ve established for assessing senators’ expenses, be they living, travel and office, within our Senate administration. It’s a professional group that do a great job.
This would be the oversight effect because currently there is no oversight of that. It would be an audit of the systems and do they have the necessary rigour.
With respect to the committee itself and the membership, the external audit function and who represents that, as well as the external auditor, would be full-time advisers to the committee. That’s a given and, as I said, that would be fully in public.
I hope that addresses some of your concerns. I am not here to change your mind. I am here to give some enlightenment to what we propose for the committee.
Senator Sinclair: I have not actually made up my mind despite the fact that I speak forcefully about these things, because the question of whether there should be outside membership on the committee is still a question for open debate.
What I am suggesting is that maybe that’s an area where this committee should be calling some expert witnesses to give some thought about or some testimony about so that we can make a determination at this level as to whether it’s in the best interests of the Senate to do that, and whether it’s in the best interests of this committee to suggest some rule changes to accommodate that.
In the absence of our having information from appropriate experts at this committee, I don’t know that we can make a proper determination. Really, all I am suggesting is that there seems to be some merit to looking at it, but we need to have some experts come forward and give us some testimony.
I don’t know that you responded to that point.
Senator Wells: I am open to what the committee wants and what steering wants.
Senator Batters: This is in response to a point that Senator Ringuette. The chair briefly commented on this as well. Yes, the Internal Economy Committee does currently have an audit subcommittee. I am on it. That proposed committee meets right now entirely in camera. This proposed committee would replace that subcommittee, correct?
Senator Wells: That would be the proposal, Senator Batters.
Senator Batters: This proposed audit and oversight committee would meet almost entirely in public for increased transparency in addition to the many, many measures we have taken to increase transparency and accountability for the Canadian public in the last several years.
Also, isn’t the establishing of this oversight body being done in large part to deal with several of the Auditor General’s recommendations with the benefit, as you’ve stated earlier, of considerable reflection and debate since the 2015 report?
Senator Wells: Yes. What the Subcommittee on Estimates recommended to CIBA and CIBA referred to the chamber is in response to many of the Auditor General’s recommendations.
Interestingly enough, many of the things the Senate has done since then would override and have gone beyond what the Auditor General recommended. Publishing our full expenses for the public to see wasn’t part of his recommendations, but it was part of our decision and practice under the stewardship of Senator Housakos at Internal Economy.
Much has been done already, and necessary things. The gap, of course, is the absence of an internal auditor to take a deep dive, the absence of a body whose full-time mandate would include a rigorous deep dive systematically on each directorate, which we don’t do. It hasn’t been done since I’ve been here. In my experience, it wasn’t done prior to that.
Again, Senator Batters, it’s not just the expenditures. Is this practice the best practice? Is this directorate spending money wisely and efficiently? This would be a very large part of the task of the committee.
Senator Batters: In response to a point made by Senator Sinclair a little earlier, aren’t the almost entirely public meetings which would occur under this proposed new committee was supposed to be in part to counteract anything that might be done?
As Senator Sinclair was alluding to earlier, the discussion between friends or that sort of thing, is what the public nature is meant, in part, to deal with, correct?
Senator Wells: Yes, in fact almost entirely that. First of all, full credit to the Senate for having meetings such as this and such as the ones we have at Internal Economy in public.
Some people are interested in that. It’s what keeps us straight. It’s what keeps us organized and what keeps us answerable and accountable to people who pay for this system of governance.
It’s not just the Senate; it is our system. There has to be confidence in that for it to work well. This is just an extension of that.
We should always take evidence publicly, unless it’s a question of national security. We can deliberate privately. We can deliberate with our staff or within our offices, but we should always take evidence publicly. That’s the disinfectant that for a long time wasn’t present in the Senate, and certainly not in the House of Commons perhaps even now.
Senator Woo: Senator Wells. You have been working very hard on this, I know, and it has been a long slog.
It strikes me that we’re talking about three different things here. First are the functions that need to be performed coming out of the Auditor General’s report and our own needs, which we have recognized over a number of years.
Second, based on what we think are the functions that need to be performed, we have to think about the form in which these functions are best delivered. You have proposed a particular form, but they are the forms.
Third, Senator Sinclair has touched on briefly the capabilities and whether or not the form that you propose to perform, the function, has the individuals with the capabilities to do the form and the function.
We’re confusing the three issues a bit in the discussion. Sometimes we’re solving one problem without solving the other two. For example, Senator Sinclair has raised a legitimate point about whether or not a committee which has the form of a structure outside of CIBA, i.e., a new standing subcommittee with members consisting of senators, has the capabilities to do the kind of, as you call it, deep dive on a regular basis that the function requires.
I encourage all of us to think through these three intersecting requirements. I am not sure the best way to satisfy all three is necessarily the function or the form that you have proposed, which is the new standing committee on oversight and audit.
I say that because many of the challenges that you and others have been raised here, such as the need to do an occasional deep dive or the need to have hearings in public, could not be done under a different form, for example, through the Subcommittee on Estimates and CIBA. There could be greater attention being paid to those kinds of transparencies.
Likewise, you have described some of the so-called internal audit functions. When you talk about the hiring of an internal audit function within the Senate, you’re really talking about ad hoc procurement of expertise to deal with very specific organizational challenges that the Senate deems to be important or senators deem to be important.
This year it might ISD. Next year it might be HR, which our colleague Senator Tannas and others led. Another time it might be infrastructure and so on. It’s not really an internal audit in the traditional sense of having an internal audit department within the Senate. It is about hiring management consultants from time to time.
Again, there’s a function which definitely needs to be discharged. I am not sure the right form for discharging that function is a new standing committee. I am just thinking out loud here.
It may well be, when we get to the question of capabilities, that the kind of internal audit structure we need is a professional internal audit team within Senate administration that reports to either a CIBA subcommittee or maybe this committee. It’s this professional team with the expertise, knowledge and experience of internal audit activities that gives senators, generalists, advice from time to time on the kinds of deep dives or organizational review types of activities that need to be done.
Let me get to my question. The preamble is more important than the question in this case. I guess I want to understand a bit more what you mean by oversight. In the Auditor General’s report, and I think it was alluded to in your report as well, the committee’s report, is the sense that this committee will be all powerful in terms of having the ability to interpret SARS.
There are two parts to the question. First, is it correct that the final word, short of the Senate as a whole, in terms of interpreting the financial rules will rest with this committee?
Second, does that work not already rest with CIBA? Whenever there are any questions as to whether or not expenses are eligible, does CIBA not play that function in adjudicating?
Senator Wells: That’s a good question. As it currently stands, you’re right. The Senate is the umbrella that looks at that. In many of the instances, Senator Woo, it would be the steering committee of CIBA, on which I sat for a couple of years. There was never a camera near that subcommittee on CIBA, so there was no refreshing public eye on that. This would change that completely.
It’s not just the individual expenses. Again, I spoke earlier a couple of times about that. That’s a really small piece, but the audit and oversight committee, as well as looking at individual expenditures, would look at the rigour of the system that’s in place.
Right now the only things that move this forward in an organized way are the systems that we have in place. We have to assume our systems are good. Every time a new system is developed or an old system is tweaked into something new, we assume that it is the best there is but, of course, that always changes. It always advances.
One of the jobs of the audit and oversight committee would be to ensure, in our very large organization of 105 senators and their staff, 350 administrative staff and 16 directorates, that there is a system ensuring that best practices are used, that expenditures are responsible, that there is oversight and that there is someone checking on this. Up to now, there has been very little checking of this.
Can that be done? We can talk about the structure. Should it be an audit and oversight committee that reports to the Senate, or it should be a subcommittee of CIBA? We can talk about that structure but right now, to the degree that the recommendations go, this is not being done.
Senator Woo: I have a quick follow-up question. We are in the midst of going through a major HR directorate reorganization from top to bottom. How would you describe that experience in the light of the current structure of CIBA? As you describe it, the system that was developed wasn’t working. Presumably the folk in the HR committee at CIBA realized that and brought in the so-called internal audit management consultants for the top to bottom review, which we’re now in the middle of executing.
Is that not an example of a process that is working?
Senator Wells: It’s a good question. I will back up a bit more, predating your presence here.
We knew in the Senate and in Internal Economy that our communications directorate wasn’t functioning. We didn’t know if money was being well spent. We just knew we weren’t getting the results. Maybe we were getting what we were paying for, but we weren’t getting the result that the Senate deserved.
We collapsed that down and there was a subcommittee struck on communications. Senator Housakos chaired that committee. Senator Batters, Senator Eggleton, Senator Dawson and I were on that committee. It was a five-person team that said, “Here’s what we think is the best path forward. Here’s the new system that we’ll establish.”
We’re going through the same thing now in the latter stages with HR. We knew that the system wasn’t working. We probably weren’t getting value for money. When I say “we”, we the Canadian taxpayers and we the Senate were not getting value for money.
If I were to lead an audit, an oversight inquiry, an investigation, a deep dive or a study of what we did with communications, we would ask, “Is the communications directorate doing what we tried to create and tried to direct it to do? Is the money being well spent? Are we getting value for money?”
That’s the same thing I do with the HR directorate. We created our communications directorate. Before they got up to speed we were planning and hoping they would do well, but we didn’t know that they were going to do well. If I were to do a deep dive on that, it would determine if that money is being used responsibly and if the systems in place are benefiting the Senate.
Is it doing what we wanted it to do? The short answer is yes, without any investigation other than seeing it. Communications are vastly improved. The communications directorate is vastly improved over what we had before.
I would recommend doing the same thing on HR. Give it some time to get its legs under itself. Give it some time to hit the ground and become the professional organization within the Senate that we want it to be. Of course we want all directorates to be that.
In the absence of actually doing it and looking at how we have done it, we won’t know that we’re getting value for money. It’s not just value for money. We won’t know that the practices they employ are best practices. We don’t know if our headhunting exercises are getting the best people. We don’t know if we’re turning our mid-level managers away because they’re not getting advanced within.
We won’t know any of that unless we look back. We can’t, with all due respect to the director of HR, ask the director of HR to look back at their own actions and give an assessment.
Senator Woo: I don’t disagree with any of the points you made in terms of the reform of communications and HR. I am saying that the two major reforms, one of which is still in process, took place under the old system. This begs a question as to whether the old system might suffice for further reviews of this sort. That’s my only point.
Senator Wells: It’s a fair point. My further response is that we should have continuous rigour and review of our practices, of our expenditures and of how we do things to ensure they’re always best practices.
If we continue to ensure that we always have best practices in a systematic way then we will have best practices.
The Chair: Colleagues, if I may, I remind everyone of the reference we have from the Senate on this particular issue. I want to narrow down the debate a bit. It’s not if we are to have this committee.
I remind all colleagues that we had this discussion in the Senate and the Senate has sent us a reference. I don’t think our role, based on the reference we have, is to discuss if we are to have an oversight and audit body.
The question is: What form will it take? From the debates we had in the chamber, my understanding is: Will that body be made up of senators, as is proposed currently, or will there be additional outside members?
Maybe I am simplifying it, but that was my understanding when we got it. I want us to stay focused as much as we can. All the other elements of the debate are relevant, but I think we have to stay focused on that.
Again, I just wanted to add some context because I was the chair of Internal Economy for a number of years. We undertook to have significant cultural changes. The changes we put into place administratively were more cultural than anything else. The structure came later and the review came later.
At the end of the day, to go back five or six years ago, we had a circumstance where Internal Economy and senators who are fully empowered in this institution to drive the administration had been negligent in their responsibilities. That is the reality. The consensus we from all sides came to was that we as senators have to drive the administration and be accountable for this place.
All the changes we made stemmed from that perspective and stemmed from the perspective that we needed to put a microscope on ourselves. That was the whole idea of changing our disclosure platform and making it so wide ranging.
To answer the question and the debate here about having an outside eye on the table of the oversight body, we have outside eyes looking into the Senate right now, line item by line item on a daily basis and on a quarterly basis.
Those of us who have been around a bit longer than others remember a Senate where almost on a monthly basis we would be getting tons of media inquiries about: Why are you spending this? Why is a senator travelling there? How come we didn’t know about this or that?
In the last 3.5 years since we put into place the platform of disclosure on quarterly basis, I can tell you we are getting fewer and fewer inquiries to almost zero now on a quarterly basis about what is deemed potentially inappropriate expenses by the press gallery.
The most rigid audit that we go through on a regular basis is by the press gallery that goes through each and every one of our expenses. We as individual senators have to account for them.
I take the point today from Senator Wells. It’s a legitimate point. On the administrative side, I think his point is that there’s a large percentage of work in that $104 million budget that isn’t under the same microscope. That’s a very valid point.
Another valid point I heard today from Senator Wells goes to the question of Senator Ringuette. I shared that question, but I think I hear an answer to it. For years, we have had the estimates subcommittee deal with the line items. We have had the Audit Committee deal with the internal and external audits historically but they were done behind closed doors. This committee, you’re saying, would be completely public.
The next question I ask again as a former member of Internal Economy. Steering would spend a great deal of time listening to appeals and conflicts between individual senators’ offices and the administration on specific expense claims. If I understand correctly, all those appeals would be going from the administration to your committee, correct?
Senator Wells: That’s correct.
The Chair: We all know that in the last few years we have had an independent arbitrator in the Senate that arbitrates as the last step.
Senators, as we all know, can appeal to steering. Then they can appeal to the Senate of the whole and, of course, they have the option of going before the independent arbitrator. How is that process in your current proposal going to work?
Senator Wells: That is a very good question. Of course, it’s up to the Senate and generally driven by CIBA if there’s a process that might include an independent arbitrator. It’s funny that when I had the discussion in preparation for this committee meeting I thought one of the internal audit functions that might require retention could be someone like Justice Binnie on some of the individual, specific questions of prudence within senators’ expenses. That could be a function that we would employ when the committee is struck. It’s always important.
We had this discussion around Senator Duffy’s expenses when we said, “Will he get a chance to appeal? Will he get a chance to make his case?” That’s a necessary part of the fairness of any system. You have to let both sides make the case.
First of all, you want the system to work. That’s sacrosanct, but if someone is going to make a defence to a claim that has been denied, I would say that defence should be made publicly. We have the right people around the table to make that assessment. I don’t know if that fully answers it, but certainly it would be a modification of the current process or the process that we underwent when Justice Binnie was hearing waves of people who had disputes.
The Chair: So, all appeals on the part of senators to this body would be done publicly, correct?
Senator Wells: That’s right, unless there was some request or some valid reason for it not to be heard publicly. I can’t imagine something that would fall in that category, but I would also leave it to the wisdom of the committee to decide that.
Senator Marwah: I have four points that I’d like to make. The first one is the function of audit itself. I know of no private sector organizations that do not have an audit function. I agree that public sector is not the same as the private sector, but I don’t see a reason why it should not be.
The Chair: Senator Marwah, I think this is important. I hate to cut you off, but we’re neither the private sector nor the public sector. We’re Parliament.
Senator Marwah: I am getting to that. We are a large body that spends a lot of money. I have seen very few large bodies that spend a lot of money that do not have an audit function. You can call it whatever sector you want.
In terms of the scope, I agree with Senator Wells. If we are to establish an audit function, it must cover the whole gamut of expenses. Just doing 12 per cent makes no sense to me. Doing 100 per cent does. I think the scope of doing the whole thing is important.
The third point is membership. Much has been said about internal versus external membership. Frankly, I see very little downside to having external members. In fact, I see a lot more upside than I see downside.
To me, it’s not just the independence of the audit function. It’s the perception of the independence of the audit function. Without having external members on it, I don’t think we will ever get the perception that this is being looked at independently.
I agree the point has been made that this somehow impacts privilege. I again fail to understand fully. Maybe I don’t understand the rules of privilege well enough and I should defer to Senator Joyal for that. The committee still reports to the Senate, so our privilege is maintained through that process. I don’t see how privilege is impacted.
Another one on external membership is the whole issue of expertise. As I said, with all due respect to all of us, I don’t think we have sufficient expertise on matters relating to audit in the Senate.
Then we have the issue of efficiency. I worry about efficiency. I worry about these committees having a life of their own and building a bureaucracy and a set of overheads. Then we have clerks and staff underneath, and suddenly we’ve built ourselves a large bureaucracy in setting it up. I really wish we could keep this in mind as we set it up. We don’t want to end up spending a lot more than what we save.
Efficiency is in hindsight. I see no reason why we couldn’t have strengthened the mandate of the audit committee that was part of CIBA and perhaps have more external members to make that in the public domain, rather than set up a brand new external body. I think the horse has left the barn on that one. We’ve already decided, so that’s fair enough.
I worry about efficiency, and I think we should keep that in the backs of our minds in terms of what we’re trying to achieve.
[Translation]
Senator Maltais: Senator Wells, you have done a very fine job with your committee. Congratulations. The conclusion you reached is similar to mine. You and I lived through the Auditor General’s audit. That was a forensic audit, which is to say that we were all guilty, all crooks, before he announced his results. For those who went through it, it was not very good for the self-esteem. We are all parents, we are all grandparents, we all have families, and to be told by the media and by the auditor during his audit that we were all suspects, was hard on our reputation.
I do not want to go through that ever again. Senator Sinclair, you really want to have people from the outside. If it ever happens according to your wishes, I suggest that you do it cautiously. There are only 105 of us in the Senate and the Auditor General went through $27 million of public funds in order to recover $300,000. That is an extremely costly exercise. I feel that the senators around this table are all persons of good faith. Auditing $103 million is not as big a job as one might think; it is not Canada’s entire budget. The auditor charged $27 million to audit around $12 million. That is expensive. I feel that a committee of senators on a public broadcast will be able to be accountable to Canadians.
The important thing is for Canadians to know that every dollar spent in the Senate is spent correctly. Canadians need to know that senators are called “honourable” because they are. By inviting people from the outside, we lose control. During the time of the Auditor General’s audit, who was under oath, as we all remember, we went through hell on a personal level. You did not go through it and I do not wish it on you. However, no one found 5 cents that was badly spent in our administration’s expenditures. But the public perception was bad. A committee of senators with the title “honourable” can easily do an excellent job and I feel that your committee would be up to the task of doing so. Thank you.
[English]
Senator Gold: I just wanted to add my voice in support of Senator Sinclair’s suggestion that we hear witnesses on the important issue that divided previous discussions of external members. Personally, I would benefit from hearing witnesses on that issue. I think that would help us in making our decision.
The other area where we would be well served to have additional witnesses would be on the issue of the relationship between the standing committee as proposed, CIBA and its subcommittees, and the Senate. We are a system. We want to make sure that we strike the right balance between transparency, accountability and maintenance of our proper responsibilities to oversee our own work and be mindful, of course, that we serve the Canadian public and must earn their ongoing respect and confidence.
For that reason, I think this has been a really good beginning to our study. I do look forward to some witnesses on these central issues.
Senator Batters: I want to make a very brief point because a couple of times earlier people referred to the Senate’s annual budget amount. I checked and the Senate’s 2018-19 budget amount is actually just over $109 million. So it is a bit more expensive.
The Chair: That’s the projected for next year.
Senator Batters: Yes, 2018-19.
The Chair: Thank you for that relevant fact. There are no other questioners on the list, but there is a comment that I have.
I’ve heard all the opinions around the table, and I am really not decided on one side or another in terms of having outside members on that committee or not. I don’t think it will make an enormous difference either way, in my humble opinion, because a great deal of what we’re already doing is very much in the public milieu.
I don’t think this is a make or break issue. We can have witnesses on that issue come forward. It’s a bit difficult because, to go back to the comment of Senator Marwah, the Senate isn’t like any other organization. What witnesses would we bring before us? Would we bring Deloitte? Would we bring KPMG? Would we bring auditors?
The debate here isn’t about expertise in auditing. When we do external or internal audits, we bring in professional auditors to do their work and they take the lead. There is probably no other parliamentary body in the Commonwealth in the last six years that has been audited more often and by more different groups than this institution.
Last time we brought in the king of all kings when it comes to auditing. He spent $27.5 million. We listened to his expertise. We gave him carte blanche. I think we all saw the end result of that. We saw an audit that cost $27.5 million and we recuperated under $300,000.
Senator Sinclair, maybe none of us are auditors but many of us have been in governance and run businesses, and that’s not a very good return on investment.
We have to be cognizant of what expertise we’re looking for. The real question here is: Are we ready to allow for a structure that will invariably infringe to some degree on our parliamentary privilege?
Again I agree with Senator Marwah. I don’t see this as a major infringement. If anything it strengthens our parliamentary privilege, in my humble opinion. I could easily be brought to the point of view that I think it’s a good thing to have external representation on that committee.
One of the elements we didn’t really talk about is the recommendation of five senators on that committee. If we would accept a recommendation for an external representation, what would that mean? Would it mean one person? Would there be a chair? Would it be two people? Would that be three?
An element we didn’t discuss today is what would be the profile of that external representation? Will they be accountants like the people we would be hiring to run a forensic audit? Would they be lawyers in ethics? That’s another important element of what constitutes an appropriate representative? Would it be a journalist from the press gallery? I think these are all important issues.
Senator Wells, your presentation was good. I agree with Senator Gold. This is a good first discussion. If the committee agrees, maybe steering should have a huddle, take all these opinions into consideration and come back with a structure on how we can tackle in follow-up meetings some of these outstanding questions.
Perhaps Senator Sinclair and Senator Joyal would agree or have something to add.
Senator Joyal: One of the things we could do at steering, with the input of all the membership around the table, is to prepare a list of issues we would like to review so our work is organized and that there would be a term to it.
Once we would have canvassed all those issues with the proper witnesses or the proper help that we could seek and get from other sources, we would then be in a position to draw a line. Since we have an order from the chamber, we’re condemned to efficiency. We have to report to the chamber.
I would suggest that we prepare a list of the various issues and determine, with the help of the library, which witnesses would be best selected and invited to attend. We could share that with the other members of the committee, so everyone knows where we are heading with this. That would be helpful, especially with the help of Senator Wells, in order to get his opinion on how we would prepare the future meetings of this committee. That would probably be the best way to tackle this issue, Mr. Chair.
The Chair: I think we have an agreement.
Senator Sinclair: Yes, I tend to support that. I think establishing a list of issues and identifying what’s available for us to look at would be a good approach.
Senator Joyal: Yes, because we’re not just there to discuss. We’re there to come to a determination.
We have to identify very well the issue we want to address on each and every aspect of what we would define as points that we want to come to conclusions on.
The Chair: Before we adjourn, Senator Wells, do you have any final comments?
Senator Wells: No, I continue to seek the wisdom of the committee and take direction thus.
The Chair: Thank you, Senator Wells. Thank you, committee.
(The committee adjourned.)