Findings 'deeply disturbing,' Auditor-General says

By DARREN YOURK
Globe and Mail Update

Auditor-General Sheila Fraser's report into the federal government's
sponsorship program paints a picture of systemic rule breaking that
extended beyond Public Works and Government Services Canada and into five
major Crown corporations and agencies.

"Our findings on the government's sponsorship program from 1997 to
2001 are deeply disturbing," Ms. Fraser said Tuesday. "Most
significant was the widespread non-compliance with contracting rules,
...Rules were broken or ignored at every stage of the process for more than
four years, and there was little evidence of value received for the money
spent."

Ms. Fraser's wide-ranging report looked at everything from the government's
on-line presence to economic development of aboriginal Communities, but the
focus was on the audit of the scandal-plagued sponsorship program. The
sponsorship program was created after the 1995 referendum on sovereignty,
when Ottawa decided to increase its visibility in Quebec. Public Works
placed flags and banners at cultural and sporting events in exchange for
$150-million between 1997 and 2003. The government hired advertising firms
to oversee all of its dealings with the organizers of the events, receiving
$100-million.

"In a small number of very troubling cases, sponsorship funds were
transferred to Crown corporations by highly questionable methods," Ms.
Fraser said. "These methods were apparently designed to pay
commissions to communications agencies while hiding the source of the
funds. And the amounts were significant. The report points to the RCMP,
Canada Post Corporation, the Old Port of Montreal Corporation Inc., the
Business Development Bank of Canada and Via Rail Canada Inc., as Crown
Corporations that benefited from questionable transactions.

In the RCMP case the national police force began planning in 1997 for a
125th anniversary party that was held in 1999. During that time Public
Works gave just over $3-million to three ad agencies -- Lafleur,
Media/I.D.A. Vision and Gosselin -- who were responsible for transferring
the money to the RCMP. Those three agencies collected a combined
$1.3-million in fees and commissions and transferred $1,704,000-million to
the RCMP for its anniversary celebration.

The audit found the RCMP's Quebec division received its payments through a
separate non-government bank account, in violation of the federal Financial
Administration Act. The transactions were recorded manually rather than in
the RCMP's standard accounting system, and some of the supporting documents
were subsequently destroyed. There was little documentation to support the
Sponsorship Program's funding of the RCMP 125th anniversary event.
"There were no business plans, no visibility plans, and no post mortem
report accounting for the value of additional visibility the government
received for the majority of the $3-million spent," the report said.

According to the report, public servants also broke the rules in selecting
communications agencies for government advertising. Ms. Fraser said that in
some cases her department could find no evidence that a selection process
had even been used. The sponsorship program was cancelled the day after Mr.
Martin took office in December, but Ms. Fraser said many questions still
remain."Even though the government has cancelled the sponsorship
program, I am deeply disturbed that such practices were allowed to happen
in the first place," she said. "There has not been an adequate
explanation for the collapse of controls and oversight mechanisms."

Ms. Fraser also took aim at the March, 2002, purchase of two Challenger 604
aircraft for $100-million. She noted that the government bypassed its own
procurement policies and procedures; a process that only took nine days as
the purchase was rushed at the end of the fiscal year. "I do not
believe that the government demonstrated due diligence or due regard for
economy in this purchase," she said.

The decision to buy the aircraft was made before any departments considered
alternatives or looked at requirements. "The government disagreed with
our conclusion that policies and practices were bypassed and considered the
procurement appropriately managed," Ms. Fraser said. "I am
concerned about this view because it leaves the door open for the same
thing to happen again."

The Privy Council Office told the National Defence and Public Works and
Government Services Canada about the decision to make the purchase.
"The system exists to protect the public interest. If rules were
ignored for a $100-million purchase, what kind of message does that send to
the public servant spending $5,000?" Ms. Fraser said.

Other highlights from the report:

Organizations involved in gathering intelligence need a proper form of
independent review, the Auditor-General said. This list includes the
Canadian Security Intelligence Service and also other organizations such as
the RCMP, Customs Canada, the Canadian Forces and Financial Transactions
and Reports Analysts Centre of Canada.

Looking at Employment Insurance, the Auditor-General said the program
varies considerably" by region. "Service in some regions was
significantly and chronically below targets and repeated efforts to improve
services have had little impact," said Ms. Fraser.

The Auditor-General said aspects of the government's cultural heritage
programs have uncovered "serious problems." For example,
two-thirds of Parks Canada's historic sites are in "poor to fair"
condition; more than 90 per cent of the National Library's collection that
do not meet standards for temperature and humidity; National Archives is
having trouble collecting items of historic value.

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