Proceedings of the Standing Senate Committee on
National Finance
Issue 24 - Evidence
OTTAWA, Tuesday, June 7, 2005
The Standing Senate Committee on National Finance met this day at 9:35 a.m. to examine the Main Estimates laid before Parliament for the fiscal year ending March 31, 2006.
Senator Donald H. Oliver (Chairman) in the chair.
[English]
The Chairman: Honourable senators, I am delighted to call this, our thirty-second meeting of the Standing Senate Committee on National Finance, to order. This committee's field of interest is government spending, either directly through the Main Estimates or indirectly through bills.
[Translation]
On Monday March 7 2005 our committee has been authorized to examine the expenses planned in the Budget and expenses planned for the year ending on March 31, 2006, in order to prepare a report.
[English]
This is our eighth meeting since March 9, 2005 on our mandate to study the Main Estimates. We had been examining government spending in the context of greater accountability and transparency, and in this committee we constantly use those two words — ``accountability'' and ``transparency.''
At the core of Canada's parliamentary system is the constitutional convention and practice of ministerial accountability. Ministers of the Crown are responsible and accountable to Parliament collectively as part of cabinet and individually as ministers in charge of a particular department. This convention arises out of the democratic principle that only elected officials, and not the public servants who assist them, should be held accountable for the functioning of government.
To discuss this and other issues, we are fortunate to have with us today Professor Emeritus C.E.S. Franks. Born in Toronto, Professor Franks attended Upper Canada College and earned his BA and MA from Queen's University (Arts) in 1959, and a doctorate in philosophy from Oxford University. He worked for four years for the Government of Saskatchewan, including a stint as clerk assistant to the Saskatchewan Legislative Assembly. He taught at Queen's University for over 35 years in the department of political studies, where he remains as Professor Emeritus.
In addition to nearly 100 learned articles and chapters in books, Professor Franks has written or edited 13 books, including The Parliament of Canada, The Canoe and White Water and Dissent and The State. His work includes explorations into public administration, government accountability, Aboriginal self-government, relations between governments and Aboriginal peoples, and the public service.
Honourable senators, I am delighted that we have Professor Franks with us. I am looking forward to his presentation.
Following that, Professor Franks, we will have questions for you.
Professor C.E.S. Franks, as an individual: Thank you, Mr. Chairman. I have distributed some materials on the accounting officer concept in England, which, as you know, the House of Commons Standing Committee on Public Accounts has recently proposed in a report.
Today, first I would like to give a brief introduction to the accounting officer concept and, second, explore some of the arguments against it and illustrate where I think committee members are misguided. I will make it clear at the outset that I support this approach and shall continue to, despite strenuous opposition in various quarters.
Auditor General Sheila Fraser commented in her report of November 2003 that parliamentarians have ``an essential role to play'' in the process of defining more clearly the responsibilities and accountabilities of ministers and deputy ministers. The Public Accounts Committee, in its recent report, recommended that ``deputy ministers be designated as accounting officers with responsibilities similar to those held by the accounting officers in the United Kingdom,'' and they went on from there.
I believe that Sheila Fraser's comment is the most important one in relation to what this committee and the House of Commons Standing Committee on Public Accounts is trying to do. Up to this point in Canada the interpretation of the doctrine of ministerial responsibility in terms of the accountability of ministers as opposed to that of public servants and the role of Parliament in accountability processes has been defined by the government. Primarily, it has been defined by the Privy Council Office in its documents, the first one being ``Responsibility in the Constitution,'' which they prepared for the Lambert commission 25 years ago.
It has concerned me that Parliament itself has not expressed its view, because it might not be the same as the view of the Privy Council Office, and Parliament is more important in the process than is the Privy Council Office.
I say this after recently returning from England where Parliament has been actively engaged for many years in the discussion of the responsibilities and accountabilities of ministers and deputy ministers. The discussion has reached the point where academic experts are saying that the doctrine of ministerial responsibility in England is no longer owned by the government; it is owned by Parliament.
I hope that the Parliament of Canada will reclaim ownership of the doctrine of ministerial responsibility. After all, it is Parliament to whom the ministers are responsible and accountable, and other people, for that matter. It is up to Parliament to define the terms of that responsibility and accountability.
This is where the accounting officer concept comes in, and I want to make a few general comments about it. My written submission has these in more detail, but here I would simply like to offer some thoughts.
In 1865, two years before Canada was created, Gladstone introduced, and had passed in the British Parliament, the Exchequer and Audit Act, which created the position of comptroller and auditor general, whose functions are equivalent to those of our Auditor General, as an external auditor reporting to Parliament, on behalf of Parliament, on the accounts of the government.
They soon thereafter also established a public accounts committee. A few years later, the public accounts committee in Britain debated who they wanted to hold responsible and accountable, ministers or what in England they call ``permanent civil servants.'' They decided quickly that they wanted to hold the permanent civil servants accountable rather than ministers. One reason was that ministers move from office to office and change when governments change whereas civil servants lasted. They wanted people who endured in office to be accountable so they could have a continuing dialogue with them. The other reason was that they believed that administration was the responsibility of their growing professional civil service and that ministers were more involved in policy aspects and less in the administration.
That was established in 1872. Since then, they decided that the permanent secretaries, the equivalent of deputy ministers in Canada, would become the accounting officers in terms of parliamentary accountability for financial expenditures and management. For that reason, the accounting officer concept in Britain goes back almost to the time of Confederation and has existed and changed since then.
The first thing the public accounts committee demanded of the accounting officers was that the government account for the funds they had; in other words, that they present proper accounts. This was called an audit of accountability. It took some years. In the nineteenth century, the Government of Britain was not well organized; in fact, it was a mess in some areas of administration.
After they were reasonably satisfied that they were getting good accounts, they asked for an audit of legality, that is, assurance that expenditures had been made only within the law and within the amounts approved by government.
That is similar to what is called the ``attest audit'' in Canada. The attest audit ensures that the accounts accurately represent what was spent and that the money was spent legally for the purposes intended by Parliament. I will pass on relating that to present circumstances.
The third kind of audit, which the British Parliament began late in the 19th century, was what they called propriety. These are old terms. ``Propriety'' meant that the money was spent properly with due regard for economy and efficiency, and not wasted.
That has changed. Today, the rules the treasury established for accounting officers in Britain are, first, that they ensure regularity and propriety. The word ``propriety'' is still used. ``Regularity'' means the audit of accountability and legality. Second, they must observe the principles of economy, efficiency and effectiveness, which is also called ``value for money.'' In my written submission, I have included excerpts from the treasury document in England that define these responsibilities.
The accounting officers in Britain were almost entirely a product of the work of the public accounts committee. They had virtually no statutory recognition until the year 2000, when an act was passed by Parliament that provides that the treasury shall establish an accounting officer for every vote of Parliament. From there on, the treasury board and the public accounts committee, between them, define the duties and responsibilities of the accounting officers.
In 1979, the Lambert commission in Canada recommended that Canada adopt the accounting officer principle. The government vigorously rejected that recommendation at that time and has continued to do so. Some reasons for the rejection, I believe, are based on misunderstandings of the British position. For the remainder of these remarks, I would like to look at three major misunderstandings, although there are others.
The first misunderstanding is that the accounting officer approach makes deputy ministers accountable to parliamentary committees, and that accountability would give parliamentary committees the power to instruct, reward and punish deputy ministers, and perhaps other public servants as well. This misunderstanding was first perpetrated by the Privy Council Office in its document ``Responsibility in the Constitution'' in 1979. It was further forwarded by Gordon Osbaldeston, a former Clerk of the Privy Council, in his book Keeping Deputy Ministers Accountable, and still persists, as evidenced in testimony before the Public Accounts Committee in the other place a few months ago.
The Lambert commission recommended that deputy ministers be accountable before, but not to, the Public Accounts Committee. That is an important distinction. ``Before'' meant that they would speak in their own right as the holders of statutory and other powers rather than speaking on behalf of their ministers. It did not mean that the committee could reward, punish or instruct them. You must understand that very clearly. When deputy ministers, as accounting officers, come before the Public Accounts Committee, they would be talking in terms of responsibilities that they hold in their own right and not on behalf of the minister.
Under the Financial Administration Act, deputy ministers are given far more powers than are accounting officers in Britain.
In fact, in almost every aspect, with a few minor exceptions, the current Financial Administration Act gives deputy ministers the power, authority and responsibility to handle the bulk of financial administration. The way this has been interpreted in Canada is that the accountability of the deputy minister is to his or her minister for this, to the Prime Minister's office, and to a lesser extent to the Treasury Board, but not in any way to Parliament. We can accept the not to Parliament, but it is also not before Parliament.
Even when the deputy ministers have these statutory powers in their own right, the Privy Council Office insists that the deputy ministers are speaking on behalf of the minister and not as the holders of power. This issue is where the Lambert commission differs from the Privy Council Office, where I differ from the Privy Council Office and where the Public Accounts Committee in its recent tenth report differs from the Privy Council Office. If the deputy ministers hold statutory powers in their own right, the powers are granted by Parliament and assigned through an act passed by Parliament. Parliament includes the Senate and the House of Commons, and then it surely means that the House of Commons in particular, but the Senate as well, can say on what terms the people it has given powers to are to come before it.
So far, it has been largely accepted that the deputy ministers coming before parliamentary committees are speaking on behalf of ministers. This is one thing the Public Accounts Committee proposes to change, and this is a change I think is essential. If we are ever going to clarify the responsibilities and accountabilities of ministers and deputy ministers, it will be through ensuring the deputy ministers speak in their own right.
The second misunderstanding is that the accounting officer approach contravenes the principle of ministerial responsibility because the accounting officers are then making the decisions. They are responsible for the decisions, and they are accountable before the Public Accounts Committee in their own right, not just answerable as the Privy Council Office would have it.
There are two points to appreciate in that. First, in Britain the minister retains the right to overrule the accounting officer and can overrule him. This overruling has to be done in writing, according to the Treasury Board regulation. The permanent secretary of the deputy ministers states the reasons why he cannot agree with the path of action proposed. Then the minister, if he does not accept the deputy minister's argument, states he does not agree with the deputy minister, and the minister insists what he wants to do is done.
That correspondence is passed on to the Auditor General and to the British Treasury, and then the Auditor General makes an assessment of the issues. That ensures the deputy ministers do have the responsibility, unless they are formally overruled in writing, in which case the minister has the responsibility, not the accounting officer, and the accounting officer is absolved of all blame.
As a last point, I will quote from a head of the civil service in Britain, Robert Armstrong.
A Permanent Head of Department giving evidence to the Committee of Public Accounts does so by virtue of his duties and responsibilities as an Accounting Officer as defined in the Treasury memorandum on The Responsibilities of an Accounting Officer, but this is without prejudice to the Minister's responsibility and accountability to Parliament in respect of the policies, actions and conduct of his Department.
I emphasize this as it is clear in Britain that the minister bears the ultimate responsibility, and if the ministers fail to overrule an accounting officer then it is the accounting officer's responsibility because he has made the decision and will be held accountable for it.
That is a crucial gloss on the whole thing, except it does not contravene in any sense, in British views, and I think it is correct for Canada, the doctrine of ministerial responsibility. It goes against the Privy Council Office's interpretation of what ministerial responsibility means in practice, and as I emphasized before, it is really Parliament's business to accept that or produce a different interpretation it thinks suits the circumstances.
Misunderstanding three is that the accounting officer approach would lead to innumerable formal objections by deputy ministers and overrulings by ministers, which would be counterproductive.
I have looked into that, and these overrulings by ministers in Britain are called ministerial directions, and they are relatively rare. In the 23 years from 1981 to 2003 inclusive, there were only 37 of them, an average of 1.6 per year. Most of these overrulings dealt with relatively minor matters and were not investigated by the British Public Accounts Committee.
Here is where we get into one of the cruxes of how this system works. Awareness on the part of both minister and accounting officers, if disagreements between them are not resolved, will be reported to, and possibly investigated by, both the Auditor General and Public Accounts Committee, which serves as an encouragement for resolving proposals. The deterrent effect of bad publicity can be one of the most effective forces encouraging good behaviour in politics. The threat of public exposure and criticism encourages serious discussion and an effort to reach a solution acceptable to both minister and public servant. This system works, as is attested to by the small number of ministerial overrulings and the generally high standards of British financial administration.
I add as a comment in the written submission that there would have been far fewer overrulings except in Britain they have hived off about 75 per cent of the civil service to executive agencies. These are quasi-autonomous agencies within the departments, and many of the overrulings in that 23-year period were based on disagreements between the head of these executive agencies and the minister, over the interpretation of who was entitled to benefits under social security programs. These disagreements were sorted out.
There was that profound administrative change that allowed so many to occur. In that entire period, there was only one major issue. That issue was where the ministry wanted to give support to a dam project in Malaysia and the economic studies suggested it would be counterproductive in terms of gross national product.
I shall leave that aside because I have spoken for far too long on this. I had more comments on the distinction between policy and administration.
I will draw your attention, Mr. Chairman and senators, to the last part of the report in my submission where I have pages on what I call, Proposed Fundamental Principles of Responsibility and Accountability for Management and Administration in Canada's Parliamentary System. I wrestled with this section, trying to think what principles you should observe, if you do not want to call what you want to do in Canada an accounting officer, and you do not want to follow a British model absolutely. I made the list there.
I should point out that I do not think that because the accounting officer is British in origin, that is a good argument for rejecting it. Our parliamentary system is British, and the Constitution says that it is to be a system of government like the British. Until 1931 in Canada, the Auditor General made the expenditures and was not a true external auditor. We copied the British in 1931 and went to the model they had used since 1865.
In 1958, Prime Minister John Diefenbaker ensured that the Public Accounts Committee had an opposition member as chairman for the first time. We had not had that in Canada, but they were copying a model that the British had used since 1865.
The one thing we left out from the British model in the accountability at this point is identifying clearly the responsibilities and accountabilities of the deputy ministers as opposed to the ministers. I think they offer some guidance on this. Thank you.
The Chairman: Thank you very much, Professor Franks. Before turning to questions, I would be grateful if you could take us through your proposed fundamental principles and highlight some of the principal ones you wanted us to focus on.
There are 12 in all. Are there two or three you want to make sure that we focus on?
Mr. Franks: I will summarize the first few.
The first ones say that in the system of responsible government Parliament has two functions: One, it assigns powers to the executive through statutes; and, two, it holds government accountable for the exercise of the statutes. Parliament does not administer.
I go on to say that there is a distinction between the public service and the ministry, that the public service is politically neutral, and in it, recruitment and promotion are based on the merit system. I do not want to suggest that politicians arenon-meritorious, but politicians are not politically neutral. They are not necessarily appointed on the merit principle. The public service must be capable, and seen to be capable, of serving equally effectively, different succeeding governments of political persuasion and under continuing principles of neutrality, merit and anonymity.
Point 10 states the following:
In financial and human resources administration, statutory powers which relate to the principles of neutrality, merit, and propriety in administration are delegated to deputy ministers.
I think that is crucial.
The final thing I want to say is, we must create a system in which Parliament, as an entity, ensures that the public service is insulated from political pressures and can be administered on the principles of merit and neutrality, and that we do not get into a system where partisan uses of the government's powers are confused with the public service's duties to laws, regulations, Parliament and the country.
The Chairman: Thank you very much, Professor Franks. I know you have written widely on this subject, and I know you have spoken about this subject over many years.
Have you had the opportunity to examine this concept of ministerial accountability issues in this perspective of other countries, such as Australia, New Zealand, or the United States? Apart from the U.K. accounting model, are there lessons to be gleaned from the experience of other countries? In your view, which countries would be worth studying to help us? Apart from the U.K. model, is there something else out there?
Mr. Franks: New Zealand has gone down the route that the British followed in creating separate executive agencies or having our equivalent of deputy ministers under contract with clearly delegated responsibilities and accountabilities. It is a much smaller country. Things work differently there, but that is an interesting area.
Britain itself, in creating its executive agencies, drew on the Swedish model where the bulk of administration is in separate administrative agencies headed by boards or commissions, primarily. Departments of government are relatively small and policy oriented, for the most part. It is not true for all departments.
The French and the continental countries, in general, are not so useful because the doctrine of ministerial responsibility does not work the same way.
The Chairman: What about Australia?
Mr. Franks: I am not comfortable in answering that. I have not yet been able to disentangle the full lines of accountability and responsibility. They have gone down a route somewhat similar to the British, but how far they are along that, I do not know.
The United States does not offer a useful example, in my opinion, because, first, they do not have the doctrine of ministerial responsibility. Second, the administrative powers are often assigned to specific offices within government rather than to the secretary of state in charge of a ministry.
I have stuck with the British as the most useful example, partly because it shows the clearest distinction of any of the countries between ministerial responsibility and accountability, and deputy ministerial responsibility and accountability.
The Chairman: You have mentioned a few of the Commonwealth countries, such as Australia and New Zealand. Are there any other Commonwealth countries following the Westminster model that have moved along into the accounting officer system, apart from those you have already mentioned?
Mr. Franks: My understanding is that India has, but Indian financial management is not a model that I would want Canada to follow.
Senator Banks: It is an oxymoron.
Mr. Franks: Like military intelligence.
The Chairman: Thank you very much.
Senator Banks: You would agree that if we are going to have a parliamentary system based on the Westminster model, ministerial responsibility is a concept that is fundamentally essential to it. It does not work without ministerial responsibility.
Mr. Franks: Yes, sir.
Senator Banks: I did not clearly understand: In the model you talked about, where the financial officers have direct accountability before, but not to, Parliament, does that absolve the minister of his or her responsibility, unless the minister has overridden the financial officers?
Mr. Franks: Yes. That is correct.
Senator Banks: If something goes wrong, which the minister permitted to happen by not overriding the actions of the financial officer, then the financial officer alone is responsible, and the minister is insulated from that responsibility?
Mr. Franks: That is correct.
Senator Banks: That is by virtue of not having overridden.
Mr. Franks: That is correct.
Senator Banks: Should the minister not continue to be responsible because the minister did not stop something which was improper?
Mr. Franks: There are two aspects to that. The first one is to identify the accounting officer's responsibilities in a relatively narrow area, which I defined earlier: regularity, propriety and value for money in fairly narrow terms. If you have a spectrum with policy on the one side, things that are clearly policy, and on the other side, clearly, administration, there is a grey area in the middle. However, the accounting officer's responsibilities tend largely to be in the fairly clear area of administration and not in policy.
If the government adopts a policy, for example, weapons procurement in the military, which turns out to be inefficient or to have some improprieties that have been alleged, that is ministerial, even though you could argue the procurement program itself is administrative.
In terms of major disputes, there has been only one. We are going back now 25 years. On minor ones there have been quite a few. These would be where a minister says, ``I want a head office located here,'' or, ``Do you not think this chap should get a contract,'' or something like that.
Let me try to explain that slightly differently. If we take the Human Resources Development Canada issue that Parliament was so seriously discussing some years ago, the bulk of the argument was that the money was wasted at the grant level. That issue would have been the responsibility of the accounting officer. Other people have said the whole program was a waste of money because it was not the thing you wanted to spend money on, and it should not have been organized the way the government said it should be. Those were government responsibilities.
The gun control program, which is another one where Parliament was not given the proper information and did not keep control of, the policy was approved by Parliament. That was ministerial, but unless the ministers had overruled the deputy minister responsible, the fact that the expenditures went up to billions when it was predicted to be in the millions should have been a deputy minister responsibility and accountability. The deputy should have alerted the minister to this problem and said, ``We have to resolve it.''
Senator Banks: In general, does what you are talking about here today apply only to financial matters?
Mr. Franks: Yes, although value for money can be reasonably broad. The place where this is important in Canada is in the area of personnel administration where the deputy ministers are given broad-ranging powers exclusively in their own right, with no reference to the minister. However, the convention is that even on those things the deputy minister speaks on behalf of the minister. That convention bothers me because it implies a political capacity to be responsible for human resources management, which raises questions about the decisions being based on neutrality and merit, the way that our system should be.
Senator Banks: This would not in any way abrogate — the best example I can think of when Lord Carrington resigned from the foreign ministry of the UK. He was asked by everyone not to. His point was that he could not rely on saying, ``My deputies have failed in their responsibilities; this all happened on my watch, therefore it is my responsibility. Therefore, I must resign.''
Mr. Franks: Ministerial resignations in Britain, as in Canada, offer conflicting instruction. In Britain, resignations go back to the Crichel Down affair in the 1950s where, for years, the textbooks said Sir Thomas Dugdale, as Minister of Agriculture, resigned because he could not agree with a decision made by civil servants. It turned out, years later, he did agree with the decision. The reason he resigned was the decision that he had supported, the Crichel Down one, was opposed by the land-owning Tory members of Parliament. Thus, it was lack of support in the caucus rather than the errors of the civil servants that led to his resignation.
There are several instances in Britain, and Lord Carrington is one, where ministers have resigned and accepted responsibility. However, on the other hand, there are just as many where they did not. I would hesitate, after looking at the whole range of resignations, to say that ministers invariably resign or must resign when there is a serious fault in the department.
It got to the point in Britain where Robin Butler, a recent head of the public service — now Lord Butler — made a distinction very different from the Canadian Privy Council Office distinction between responsibility and accountability. He said that accountability and answerability mean the same thing; they mean you have a duty to give an answer. He said that responsibility means accepting the blame for things. Then he said that ministers must be accountable to Parliament for their departments in the sense of having to give answers, but they are only responsible in the sense of accepting blame if they personally were involved in the decision. The civil service did not like this, as you can appreciate, and Parliament did not like it either. One of the committees of the British House of Commons has strongly disagreed with that interpretation. It was one that, as I say, was made by a senior civil servant there.
The point is, these are contentious issues. Ministerial resignations are one of the weakest indicators to say what the responsibility of a minister is and is not because the precedents are all over the map.
Senator Banks: Are there precedents in the resignations of financial accounting officers in England?
Mr. Franks: Bad publicity operates there slightly differently. There is a precedent of an accounting officer who committed a serious error being transferred to another department.
Senator Banks: That is not the same thing as a resignation.
Mr. Franks: The British are like the Japanese in some ways in terms of what I call crime and punishment, and face is an extremely important concept. It is a terrible loss of face to be moved from a position of accounting officer because you have done something wrong. That very rarely happens. The other factor that enters into it in Britain is that accounting officers are primarily in their last position before leaving the public service. In other words, they are appointed to be deputy ministers at a more senior position, older than Canadian deputy ministers, by and large. They might retire early. The thing that happens is everyone around knows they have made a mistake. They might not get the knighthood they think they should have.
It is worth pointing out that the accounting officer who objected on the Pergau Dam issue, which became a major political issue, was rewarded with a knighthood for his service — not for that particular one — but for his service, a year later.
There is punishment, but the main point is that the deterrent effect of the threat of bad publicity and of loss of face, standing and status, is important enough that the system works. Whether it would work that way in Canada is a different question.
Senator Banks: I like the answerability part.
The Chairman: One response you gave to Senator Banks was that there are circumstances in which the deputy minister can be responsible and the minister not responsible. In law, we used to have an expression that ignorance of the law is no excuse. What you are really telling us is that in a department a minister can say, ``Well, I am sorry, I did not know about that,'' and that is an excuse; is that correct?
Mr. Franks: Not entirely, senator. Plausible deniability works in Canada as well, as we have seen in the sponsorship program. That is one of those elegant American terms meaning, Do not tell me because then I can say I did not know.
This interpretation that you can only be blamed when you are responsible, and you are only responsible when you have actually made the decision yourself or something you supported was not accepted by Parliament in Britain, and ignorance is no excuse there; the responsibility of the accounting officer is slightly different. If an accounting officer says, ``Mr. Minister, this is how I am going to organize this program, and I am going to make these expenditures, or these are the rules I will follow,'' and the minister does not object, then the accounting officer is responsible. He might be ignorant, as he would be of many of the specific decisions made, and the minister has a responsibility for the general welfare and well-being of the department. He must be satisfied that the very general rules and principles being followed in programs meet his requirements. That is why Robert Armstrong was able to say that the responsibilities to the accounting officers are without prejudice to the responsibility of the minister. It is a relatively narrow area.
I want to draw your attention to the point that, even looking at the sponsorship affair, we are dealing, in terms of government spending, with relatively small amounts for each expenditure, and a relatively small program. It is something like .01 per cent of the expenditure of the Government of Canada. At that level, one would expect the public servants to be making the expenditures. Certainly within the Financial Administration Act, that level of expenditure for those sorts of contracts was the responsibility of the deputy minister. That is a question of administration, not of policy. Confusion between policy and administration in Canada allowed a problem like that to happen.
The Chairman: You have made your point, sir.
Senator Ringuette: I wish to return to a comment you made in regard to policy and administration in HRDC. The practical and current process is that deputy ministers and their staff provide information and analysis of options to ministers and thus to the cabinet. The ministers then have to make a recommendation to cabinet.
The HRDC policy you mentioned was designed by the bureaucracy of the time. Unfortunately, the deputy minister and his staff forgot that they had to provide business training to their staff in the regions to make the program work.
You commented that the policy was wrong. However, the deputy minister gave options to the minister, and when the minister in cabinet approved a certain option suggested by the deputy, the deputy head had not looked at all the staff requirements to make the program work.
The line of difference between policy and administration is not that distinct because the current administration provides all the analysis and all the options so the government will design a policy to fit the option the administration recommends.
Mr. Franks: I do not intend to waffle, and I hope it does not sound that way, but your point is by and large correct, with several qualifications. My understanding is that there were strenuous objections within the department to having it administered the way people wanted it to be administered because they felt the financial controls were not adequate. As you say, training was needed for the people allocating the grants that was not being given.
Senator Ringuette: The bottom line is that they approved a government policy, and administratively did not provide the proper guidance to their staff to implement those programs.
Mr. Franks: At that time, the Government of Canada was enamoured with a doctrine called ``new public management,'' by which you empower people at the lowest level to make decisions, as they did in this program. The real issue that came out was not necessarily that the grants given in that program were bad, but that the documentary evidence supporting them was not there. Under the exuberance of new public management, the program was interpreted at the bottom level to mean, ``We do not need documents.'' Bear in mind that every grant made under that program was supported by a member of Parliament as part of it. That again adds complexity that I do not think has ever been adequately explored.
The question might be: Who is responsible, the minister or the deputy? My answer would be that it took two to tango, but that the deputy minister at the end of the day either agreed or had to resign. He could not say, ``Mr. Minister or Ms. Minister, I disagree,'' and then be overruled. In other words, the responsibility was blurred. Resigning from a position, especially when the reasons, by tradition, would be kept secret, is a terrible burden to impose on a person, to disagree with something that a minister wants.
The other thing that might have happened in that program — I have been told it did, but I do not know the facts in detail — is that people who objected were moved to other departments. That is part of the problem we have to face up to in Canada. We need ground rules for ensuring that proper financial procedures are followed.
The Chairman: An accounting officer would not have resolved that problem, the power of the minister or deputy to transfer people.
Mr. Franks: Senator Oliver, that is one of the big problems, and the report of our Public Accounts Committee alludes to it, but my understanding is that our average deputy minister stays in office for maybe two and a half years, maybe less. The data I have looked at vary, and I have not seen recent data.
The British accounting officers, as far as I can understand, tend to stay in office about five years. In all the work I have done in Britain, I have only received a whisper once of an accounting officer being moved because he was being intransigent against a minister. The accounting officer may well have been at fault there. I cannot say that.
In Canada, the frequent turnover of deputy ministers means, as far as I can see, that most of the time our Public Accounts Committee would look at problems that occurred under the tenure of a previous deputy minister, because it takes two years or so for something, first, to happen, then be examined by the Auditor General, and then be reported to Parliament. That is something the system will have to look at.
Senator Ringuette: My big concern in the concept you seem to have positive feelings for, the British system, is that in the current system there is no clear delineation between what is policy and what is administrative. I will give you an example.
In the Mulroney years, each minister had between 50 to 60 political staff to analyze all kinds of policy proposals coming up the food chain from the bureaucracy in each department. Many of these political staff people were experts and could provide a balanced view to administration and, therefore, to cabinet on whether to adopt a policy and program, and then to make sure, going back to the hierarchy of the bureaucracy, that it was implemented correctly.
Since 1993, with the Liberals wanting to be purer than pure, ministers are only allowed a maximum of 10 political staff, with a staff budget that does not allow the possibility of hiring or contracting any counterbalancing analysis of what is coming from the food chain of a minister's departmental bureaucracy.
Therefore, in Canada right now, there is no delineation between policy and administration because it is all coming from the same place.
Mr. Franks: There are several issues there. Donald Savoie, in his book Governing from the Centre, would have alleged the same place is one place; it is the centre.
Senator Ringuette: That is the Privy Council Office.
Mr. Franks: Yes, I share that concern because in Canada I think we have never satisfactorily resolved the question of what is called, exempt staff of ministers. These are political staff as opposed to public service staff, with reference to their relationship to the public service. It is especially important in the area of policy where the minister needs a different voice.
If I were to take one program that I looked at briefly, the fisheries program, I would offer as a counterbalance to the department's point of view the Senate committee reports on the area, which I consider to be one of the truly useful series of policy documents that I have looked at.
The Chairman: Senator Comeau will be happy to hear that. He is a member of the committee, but he is not here today.
Mr. Franks: I have the greatest respect for Senator Comeau.
I am concerned that our parliamentary committees tend to be excited about small things rather than big things, and that is where I find the Senate extremely useful. However, that is on policy, which is not really what I am talking about. I am trying to respond to your comment.
Senator Ringuette: I think you understand my point. In the current system and the huge power, based on the permanency of deputy heads and assistant deputy heads, there is no delimitation between policy and administration.
Coming from New Brunswick, we currently have a bureaucracy in Ottawa that has been constrained for the last 30 years to hiring practices extending 50 kilometres outside of the Ottawa region. We have a centralist-minded bureaucracy that does not understand the regions of this country, and are providing policy options to ministers that have only this central point of view.
I believe that deputy ministers need to be accountable. I want to stress the fact that the entire food chain of bureaucracy has to be redesigned and realigned for a clear delimitation between policy, administration, and politics.
Mr. Franks: I totally agree with that. You are trying to identify fault lines within the executive. You mentioned one earlier of the centre in the department, and that is a fault line.
The short-term transient deputy ministers who do not have much experience in the department are a fault line. The gap between headquarters and the field is a fault line.
We have to loosen up in our thinking about this. One thing that is surprising to me in Britain, forgive me for giving another British example here, is that about a third of the appointments at very senior levels — assistant deputy minister, associate deputy minister, and deputy minister — are from outside the civil service. The British civil service has open recruitment, they have boards established that the civil service commission is involved with, and they recruit on the basis of merit. That is one way of making upper levels permeable to the people of the regions.
Senator Ringuette: This system you mention that we do not have in Canada is a power grab by the bureaucracy to sustain their power level.
Mr. Franks: You mean within Canada?
Senator Ringuette: Yes.
Mr. Franks: I am offering you a system that has a noticeably different approach at that level.
Senator Day: Mr. Franks, thank you for your comment with respect to the difference in approach between Senate committees and House of Commons committees. We observed that along the way. Your comment is one we have heard from other witnesses as well.
One of the issues this committee struggled with about two years ago was the implementation of Bill C-25. It is a new public administration bill.
Mr. Franks: The Public Service Modernization Act?
Senator Day: Bill C-25.
Mr. Franks: I was a witness before the committee.
Senator Day: You were. One of the issues was giving more authority to the deputy heads in the legislation, deputy ministers, and then expecting more accountability for the authority that was given to them. There were a number of witnesses that supported that concept and a number that did not.
There are two points that I would like you to reflect on. One, we were told that by giving more authority and by monitoring, we would not see in the future every one of the upper level civil servants getting a bonus. Yet, according to the report that came out last week, virtually everyone gets a bonus. We were told that was not going to happen. With the defined authority and responsibility, we could monitor efficiency and effectiveness.
Is it too soon for us to start monitoring the efficiency and effectiveness of that additional authority?
Mr. Franks: I do not think it is too soon. The question that needs to be asked is: Within the system, what ensures that everyone gets a bonus? It sounds to me like the private sector where it does not matter what happens to shareholder value in the company, the chief executive officer and other senior executives seem to get rewarded.
It may be that the bonus system itself is wrong. This is something well worth looking at. Maybe we should assume everyone gets the same rewards. The additional reward, not monetary, is recognition for doing a good job. That is where the British system of knighthoods, for example, serves a purpose. It matters within the public service.
Senator Banks: I move.
Senator Day: Sir Tommy.
Mr. Franks: The French system works in what they call the elevator system, where everyone goes up one stage at a time. They do not have that bonus.
It is something we imported from the private sector. When I look at what has happened to companies, their statements and accounting over the last few years, I question how useful it is there.
Senator Day: I take your point that this may not be the way of determining whether effectiveness and merit is monitored outside the public service.
Are you aware of any other monitoring or any highlights we can look at to determine whether one particular head of a department is doing a better job than another?
Mr. Franks: My suggestion would be that there are two officers of Parliament, or close to it, that would be worth asking. One is the Auditor General and the other is the chair of the Public Service Commission. I am not sure how far their authority and ambit goes but we do have a problem in some of this. A lot is hidden in government that we do not understand how and why it happens. That seems to me to be one of them. We are getting far beyond accounting officers here, I must comment.
Let me try to answer that a slightly different way. The Public Service Commission is in creation of statute and is accountable in theory to Parliament and not to a specific minister. It reports to Parliament through the Minister of Heritage — I think that is correct — and I have often wondered whether it should not be in a more autonomous position reporting directly. I wonder if the position should be more of oversight and commenting on how deputy ministers carry through their responsibilities under the act — these new ones under the Public Service Modernization Act — and less on being a day-to-day operational department.
I made comments along those lines when I was before the committee in the past. However, that is an area that I think is worth looking at and it is certainly within the ambit of this committee's concerns of responsibility, accountability and good management in government.
Senator Day: What I am trying to get at in this line of questioning is the additional authority we have given, through that piece of legislation and through other steps, to heads of departments, deputy ministers. I am wondering if we move in the direction you are advocating, without calling them accounting officers, or does this have to be a more fundamental shift than an incremental giving of authority?
Mr. Franks: That is a good question. Accounting officers in Britain are really accountable in financial terms, not human resources management. I am not absolutely certain how they operate. I will offer two points: One is that with three-quarters of the civil service hived off into these executive agencies, the heads of the executive agencies have the responsibility for human resources management. It varies from agency to agency, the rates of pay, the conditions of work and so on. It is what they now call a ``unified but not uniform'' civil service. It used to be unified and uniform.
There have been many questions, particularly if you hire a chief executive officer from the private sector and you have to pay a lot more than civil service salaries, then the tendency is for salaries underneath to go up. There are some problems in there that have not been resolved.
The other one that interests me more is at the upper levels, where they do have a significant influx from outside the service and where the civil service commission oversees the recruitment process to ensure that they are non-partisan, based on merit and all the principles are recognized — due process and everything else — in the appointments —
Senator Day: Let us talk about the financial administration side. There was a creation a year or so ago of a Comptroller General department and then a person in that department, a comptroller in each of the ministries. That person wears two hats: reports to the deputy minister but also reports to the Comptroller General, so that the Comptroller General sitting in the Treasury Board can keep an overview of what is going on out there. Does that pose any problems from your point of view? Do you see that as being a positive step or otherwise?
Mr. Franks: I will reinterpret the question. One question is, should the comptroller's representative in the department be the accounting officer? My answer is absolutely not; it is the deputy minister who is responsible for the whole broad range of things and the deputy minister ought to have this broad responsibility within that.
We have a problem in Canada in the relationship of financial administration within departments to the Treasury Board. Putting it another way, the Financial Administration Act allows the Treasury Board to assign powers to deputy ministers and it allows the Treasury Board, if necessary, if financial administration is so bad in the department, to take it over. The same is true for the Public Service Commission and human resources management.
My impression, which I think is accurate, is that by and large the Treasury Board has not done much to ensure that financial administration within departments meets the standards of regularity and propriety — if I can call them that, using the British terms; in other words, that they follow the rules — and that the Treasury Board is not deeply concerned with whether they ensure that the government is getting value for money.
I look at this effort by the comptroller in the treasury as one to ensure that there is somebody in the department that will ensure within departments, as far as possible, that the Treasury Board rules and regulations are followed and the principles of good financial management are followed. The comptroller should be prepared to blow the whistle if they are not followed.
I still think, in terms of parliamentary control, that the person should be under the deputy minister, and responsible and accountable to the deputy minister. Then, in turn, the deputy minister is responsible and accountable to Parliament. Otherwise, we get in a terrible position within the Parliament of a conflict between the comptrollers and deputy ministers, which I think is not necessary.
Senator Day: It is probably not desirable. If you want someone accountable, you do not want him or her to say that was someone else's responsibility.
Mr. Franks: The deputy ministers should feel that their responsibility extends to the well-being of the department, the stewardship of it, to ensure that that department is well managed and follows the rules, and is something that the people of Canada can be proud of as their government — not the government of the day's government, but the people of Canada's government. That is not to say that the government of the day is not responsible finally, but the public service and the deputy ministers in particular, with the statutory and other responsibilities they have, have a duty to those rules of Parliament and statutes beyond their responsibilities solely to the government of the day. Ultimately, that is to the people of Canada.
Again, one thing we lost in our system is a sense of ownership of government administration, either by Parliament or the people of Canada. It is them that do it. It is not our government. It is their government. I think that is a terrible loss.
Senator Day: This general area that you were discussing earlier raised an issue that we have observed. I wanted to talk about it, and that is the area of separating responsibility for administration from responsibility for policy.
Some have expressed a concern that because we fail to delineate those two clearly — administration and policy — we are developing an Auditor General's department that is getting extremely broad in looking at issues that are bordering on, if not covering, policy issues. Have you had any comments on that growing department that is now over 500 people?
Mr. Franks: It is smaller than the British.
Senator Day: Is there a British parallel?
Mr. Franks: The British National Audit Office has over 1,000 employees and it is also responsible for value-for- money audits.
I think it is absolutely right to say that, in some points, you cannot make a distinction between policy and administration. For example, what do you call policy for administration? Is that policy or is that administration? That is not a silly one because these are the questions we have been wrestling with today.
I tend not to enter into that argument, because I think that is for Parliament to decide. By and large, the Auditor Generals we have had have been extremely competent and extremely aware of the limitations and strengths of their position. When they venture into policy, it tends to be in something that is non-partisan. Curiously enough, when the Auditor General has ventured into matters that become partisan issues, it is really not the policy that is the issue. The sponsorship scandal is one example. It is clear that it was the administration of the program, not the policy, where the problems came in. I can see the government defending the policy, and it has done so vigorously, but I cannot see the administration being defensible under any standards of good management.
Senator Day: The Auditor General-type department in the UK is over twice as large as Canada's. Does that suggest that if we implemented an accounting officer system in Canada, we can anticipate a much larger overseeing group?
Mr. Franks: I probably led you on a road of red herrings. In Britain, there are accounting officers, and there are 37 or 38 of them for the department. The major accounting officers are appointed by the treasury. Within some departments, there are junior accounting officers appointed by the permanent secretaries. They have a trading fund, as they call it, or something that is identifiable as a separate activity. There are about 30 of them.
Then, there are executive agencies, each of which has an accounting officer. I cannot remember, but I think there are over 100 of them. Then, they have accountable officers. In a unitary state like that, when you get to a national medicare system, there are all these private agencies; the local health agency, hospitals and so on. Each has an accountable officer, and the national audit office audits all of them. The national audit office is pretty busy looking at local government activities, some provincial activities, and the federal activities. Just looking at them demands more people than we have in Canada.
In fact, the public accounts committee from time to time looks at all these accounting and accountable officers. In one interesting instance, the Auditor General reported on an accountable officer, who was the chief executive officer of a hospital, and the report complimented this accountable officer for making a good decision on the use of hospital and hospital space. It is not always a hostile or negative process.
Senator Day: In the Standing Senate Committee on National Security and Defence, and it may be peculiar to the military psyche, but we have found that upper-level civil servants and military personnel within that department often feel that they are not able to tell a parliamentary committee what is on their minds, and answer questions. This is not limited to sensitive policy issues. In my view, they could be described as administrative issues. They say they have their time within the department to sort these things out. When they come to the committee, they are there on behalf of the minister, and they do not want to do or say anything that will embarrass the minister.
I do not think that is exclusive to the Department of National Defence, but it certainly has been highlighted in the National Defence Committee hearings. If we were able to implement a system closer to the UK system of accounting officers here in Canada, would we avoid this particular problem that frustrates the role of the parliamentary committee?
Mr. Franks: The requirement of the new 2000 act in the United Kingdom is that there be an accounting officer for every vote in the estimates. I have not looked at the military estimates, but there must be five or ten votes in the department.
Senator Day: At least.
Mr. Franks: There would be an accounting officer for each. That accounting officer would be responsible and accountable for the regularity, propriety, and value for money within that vote.
Senator Banks: Would he be answerable?
Mr. Franks: Absolutely.
Another factor enters into this. The United Kingdom had a problem with ministers, not lying to Parliament but to quote another head of the civil service there, ``being economical with the truth.'' In other words, they were not providing all the information they should have.
This culminated in the Scott Inquiry in England, which concluded that ministerial responsibility does not mean a minister resigning or standing up and saying, ``I am responsible and I stand by the decision.'' That is not the key. The key is that the minister must ensure that accurate, full information is provided to Parliament. There have been a long series of good reports from the Select Committee on Public Administration at the British House of Commons on pushing that requirement through and ensuring ministers are answerable. Their answers must be comprehensive, accurate, to the point, and include all the relevant information that Parliament ought to know.
We have not yet imposed that discipline on ministers or public servants in Canada.
The Chairman: If Canada were to absorb the UK accounting officer model that you have briefly outlined today, what would be the continuing role of Treasury Board and the Privy Council Office? These central agencies normally would be involved in correcting any inappropriate behaviour of deputy ministers regarding public service guidelines, regulations and policies, which are the three things that the British accounting officer looks after.
With respect to ministerial accountability, what would be the responsibility of the Privy Council Office? What would be the responsibility of Treasury Board Secretariat?
Mr. Franks: The biggest change would be in the Treasury Board, because it would then have a responsibility to Parliament to ensure that rules and regulations are followed, and that recommendations of the Public Accounts Committee are either implemented or responded to.
If I was to be rude about any single central agency in terms of failing to do something, it would be that the Treasury Board has not fulfilled its obligation within government; nor, to be fair to them, has there been any pressure from Parliament or anybody else for them to do it.
The Privy Council Office would have to re-examine its procedures on recommending changes and appointments at the senior levels. That would need to be looked at.
The one you did not mention is the Prime Minister's Office. As far as I can understand about the sponsorship scandal, there were people in the Prime Minister's Office giving instructions directly to public servants in departments. That would have to end. There would have to be a much less porous barrier between the minister's office staff and administration in the lower levels of departments than there now is.
The Chairman: We have come to the end of our time, and the time has gone so quickly. Perhaps we will ask you to come back at a later date. I have many more questions I would like to put to you on this fascinating concept that perhaps should be adopted here in Canada but with a Canadian flavour to it. It would not just be tracking the UK model, because we have adopted a number of things that have come from Westminster. We have Canadianized them, and we perhaps would do that with this concept as well.
Honourable senators, our next meeting is on Wednesday night. At that time, we will look at a draft report that will go to Parliament.
The committee adjourned.