TO: [EMAIL PROTECTED]
RE: the mismanagement of HRDC grants (see news report below)
There's another side to this story that can't be captured by a government
audit of grants awarded by HRDC. Every dollar that was misspent or
unaccounted for was a dollar that didn't go to a more appropriate use. I
had two fully-documented proposals to HRDC for funding turned down, not
because of ineligibility but because -- I was told -- the designated
program budgets had already been fully allocated. It was suggested I could
resubmit at a later date.
I have also had two detailed inquiries about program criteria that simply
went unanswered. And that was not for lack of follow-up. In both cases, an
initial phone inquiry was followed by a detailed letter requesting
information and followed up by several telephone calls. The HRDC officers
involved told me at first that they were too busy to respond until after a
certain date. Then after that date when I called they told me that they
had referred my letter to someone else in the department.
Each of these episodes involved considerable preparation time and after
four trips into the black hole I concluded it wasn't worth my time and
effort to make futile applications for grants. Occasionally HRDC staff
would convey the impression to me that they thought the whole thing was a
mug's game. I even had one local staff member tell me her grievances about
the way the department operated.
My correspondence with two Assistant Deputy Ministers at HRDC has also
left me unimpressed by the standards of integrity in the department. Both
ADMs presented me information about HRDC policy which was factually
correct but selective in such a way as to be fundamentally
misleading. What was extraordinary about those replies was that the
incomplete information was also superfluous to the matters I had raised. A
simple, non-committal acknowledgement of my concerns would have been a
sufficient response.
In her published remarks, Minister Stewart obviously wants to play the
perception card, "If the administration is sloppy, that potentially leads
to questions that you might have . . ." Conveniently, it also potentially
leads to the government being able to avoid answering those questions.
Jane Stewart should be held to the standard that was used by Alice
Nakamura, architect of key elements of the 1996 EI reforms, to justify
cuts in unemployment insurance benefits and eligibility. There was a
widespread perception, Nakamura argued, that claimants were abusing
unemployment insurance. Whether or not that perception was accurate,
denying benefits to a large number of unemployed people would enhance
program credibility.
What Nakamura didn't mention was that restricting EI eligibility could
also generate a surplus in the EI account that could be used to eliminate
the federal deficit and create a political slush fund for the Liberals. Or
is that just my perception?
Bureaucrats mismanaged $3-billion, Ottawa says
Audit reveals mess in grant-giving process
DANIEL LEBLANC
Parliamentary Bureau
Thursday, January 20, 2000
Ottawa -- The federal government has mismanaged programs worth
$3-billion a year, including the controversial Transitional Jobs Fund,
allowing bureaucrats to skirt administrative rules and give money to
groups without the most basic information, an internal federal audit
has found.
The government gave the damning audit a full airing yesterday in a bid
to defuse its impact and to show "openness," but the opposition was
still quick to call the situation intolerable.
The audit would have made perfect fodder for the opposition during
Question Period, but the House of Commons is in the midst of a
seven-week break.
The audit showed shortcomings at every step of the process in the
administrative and financial handling of grants at Human Resources
Development Canada, the biggest cash dispenser among federal
departments. HRDC also handles almost $60-billion in direct transfers
through unemployment insurance, the Canada Pension Plan and disability
benefits.
"These programs have virtually run amok," Reform MP Diane Ablonczy
said.
Bloc Quebecois MP Paul Crete said: "It's like picking eight apples out
of a basket, and seven of them are rotten."
The audit looked at a random sample of 459 projects that received HRDC
money over a two-year period, dealing with issues related to literacy,
employment, youth, native people and disabilities.
The projects studied were worth $1-billion in total, but the results
of the survey can be extrapolated to another $2-billion in similar
grants and contributions.
The audit raised serious enough questions about 37 projects that
additional investigations have been ordered.
For starters, 15 per cent of the audited projects were approved
without the submission of an application form by the recipient.
And the applications on file often lacked basic information such as
cash-flow forecasts, budget proposals, a description of activities to
be funded or the estimated number of participants.
In a majority of cases, there was no analysis from HRDC to justify the
money, and bureaucrats gave approval without any internal or external
consultation.
The amount of money given was changed in one-third of the cases from
the amount originally approved, usually upward and often without any
justification. Overall, the audit found that in the large majority of
cases, there was no evidence of any financial monitoring by HRDC.
In 79 per cent of cases, HRDC included reimbursement of expenses in
grants without asking for any invoices or payroll records. Auditors
documented $150,000 in expenses that were "clearly not allowed" and
another $650,000 for which the recipients could not provide supporting
evidence.
"In several cases, expenses claimed were questionable, but could not
be declared as illegitimate because of the vagueness of the
contribution agreement" between HRDC, sponsors and applicants, the
report added. Questionable expenses included "purchasing of gifts,
bonuses to employees, unnecessary travel and expensive meals."
Among the audited programs was the controversial Transitional Jobs
Fund, which dispensed $300-million over three years for job-creation
projects in ridings with high unemployment levels. The Reform Party
has attacked a number of TJF grants in Mr. Chretien's riding, saying
there was a distinct pattern of rewarding friends of the Prime
Minister.
The audit showed administrative problems in the handling of some of
the grants. A grant for a hotel in Mr. Chretien's riding of
Saint-Maurice, Que., was announced before final approval was obtained.
In another case, two trust funds were set up in violation of internal
HRDC rules.
"This removes any doubt that there is a serious problem here," Ms.
Ablonczy said, asserting that the TJF has been proven to be "rotten to
the core."
HRDC Minister Jane Stewart said the audit shows no hint of political
interference in the approval of grants under the TJF or other
programs, but she admitted that "sloppy" paperwork hindered attempts
to defend the controversial grants.
"If the administration is sloppy, that potentially leads to questions
that you might have, which have to be substantiated by good files,"
she said.
In the past, Ms. Stewart has defended TJF grants by saying they were
"properly managed" and went through the "appropriate approval
process."
In addition to recommending better staff training, the audit suggests
that application forms now be used, requiring a proposed budget and
clear goals.
Ms. Stewart said yesterday that no heads will roll in her department
as a result of the poor management of public funds. She promised,
however, that the situation will improve immediately.
"This isn't a witch hunt. This is about making sure we improve our
administrative practices, that we track, that we train, that we do
spot audits, that I measure my officials in performance reports about
how well they make progress in this regard," she said.
Ms. Stewart did not answer a question on the cost to Canadians of the
mistakes at HRDC, saying she is looking to the future.
"What I want to make sure is that from a go-forward point of view,
that paperwork is there," she said.
Ms. Stewart's job yesterday was made easier by the fact that she was
not responsible for HRDC when the audited projects were approved. Her
predecessor was Pierre Pettigrew, who is now the Minister of
International Trade. The deputy minister at the time of the approvals,
Mel Cappe, now heads the entire civil service as clerk of the privy
council.
HRDC bureaucrats blamed cuts to their budgets in the mid-1990s for the
administrative mess.
"Obviously, we've gone through a period of major restructuring and
downsizing. Staff had focused more on working with partners and being
flexible, focusing on outcomes," explained Eugene Harrigan, the
associate executive head for HRDC's Ontario region.
The audit said early retirement packages have meant that the
department has suffered a "disproportionate loss of those with
experience."
Still, associate deputy minister David Good said programs have often
delivered great results despite the problems. He spoke of a success
rate of more than 80 per cent for HRDC's internship programs for young
Canadians.
A recent story in The Globe and Mail, however, showed that a major
internship program funded by HRDC had delivered only about one-third
of the positions promised to young graduates since 1996. The cost per
internship at Experience Canada was supposed to be $5,500, but it now
stands at about $17,000 over four years.
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Tom Walker
