EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 12, 1996

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[Translation]

The Chairman: Order, please!

The Standing Committee on Public Accounts is meeting today pursuant to Standing Order 108 (3) (d) to consider Chapter 17 of the September 1996 Report of the Auditor General of Canada with respect to the Department of Human Resources Development, and more specifically the Canada Pension Plan - Disability.

This morning we are pleased to welcome officials from the Department of Human Resources Development. The delegation is headed by Mr. Mel Cappe, Deputy Minister. As usual, Mr. Denis Desautels, from the Office of the Auditor General is also with us. Welcome.

We will begin with the Auditor General, Mr. Desautels, and ask him to introduce the person accompanying him today.

Mr. L. Denis Desautels (Auditor General of Canada): I am accompanied today by Mr. Louis Lalonde, Principal, who was responsible for the CPP - Disability Program audit.

Mr. Lalonde and I are here to discuss a number of audit observations contained in Chapter 17 - Canada Pension Plan (CPP): Disability. This audit dealt only with CPP Disability benefits, which account for close to $3 billion or 18 per cent of total Canada Pension Plan payments.

We are concerned with the management practices related to assessing eligibility for disability; we feel that they require substantial improvement. In this chapter, we also deal with matters that relate to harmonization of other programs or plans - matters that, if resolved, could result in savings for all the plans involved. In my reports, I normally deal with the quality of the information on results, and this chapter highlights some major deficiencies in that area.

For discussion purposes, we will refer to Disability as a program. In actual fact, Disability is a component of the CPP. Management of the CPP is integrated with that of Old Age Security. Therefore the CPP component is not managed as a separate program; nor, by extension, is the Disability Program.

Up until last year, Disability operations were centralized in Ottawa. In 1995, the Department began regionalizing operations, and this process should be concluded in 1998. Regionalization represents a major challenge for CPP administration. It is the result of decisions that will have an effect on the Disability situation over the term.

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Responsibility for Disability operations currently lies with the regional branches, which are accountable to the Deputy Minister for all the Department's operations in their respective regions.

[English]

Several observations resulted from this particular audit. We're concerned that new guidelines have been implemented over the past several years without a proper assessment of the projected costs or an actuarial impact analysis. These are required under the act when legislative changes are introduced. We question whether changing the guidelines instead of bringing in legislative amendments is a sound practice for the CPP.

Few beneficiaries are subject to reassessment to determine their continuing eligibility for benefits despite the acceptance of over 150,000 new cases in the past three years. Even if carrying out a higher number of reassessments contributes to an increase in administrative costs over the short term, we're convinced that it is possible to significantly reduce the program costs without adversely affecting the applicants who meet the plan's eligibility criteria.

The information available to management on results is not adequate to efficiently administer eligibility for benefits. The limited nature of the data collected is a serious problem. There is insufficient data on performance measurement, on productivity, on the quality of rulings and on service delivery times. The CPP management has not been able to perform reliable analyses or quantify the impact of the causes for the increase in cost for disability benefits. Furthermore, information on the overall costs related to the administration and disability benefits is not considered before eligibility decisions are made.

If the disability plans were better coordinated, beneficiaries would not have to provide the same information to several plans. Thus, unnecessary duplication of effort and cost would be avoided. Also, better coordination would reduce the risk that some beneficiaries are receiving benefits to which they are not entitled.

Major differences were noted between the CPP and QPP disability programs even though the raison d'être of the two plans is similar. Disability benefits are not similar with respect to causes of disability, access to those benefits, and the amounts paid out. What is even more surprising is that the legislative and administrative factors that are the source of the disparities between the two plans have not been evaluated.

Little information on results of disability is available in the annual report of the CPP. All important information and relevant data on disability should be presented in a single report or at least in a separate chapter. The department could no doubt take inspiration from the examples of other plans to produce financial and results information.

The disability program in our view deserves attention from senior management. This very important program must become a priority and the necessary resources need to be allocated to it. A common vision of a management framework is essential in order to meet the challenges ahead. The tabling of an action plan is an important first step. Indeed, such a plan should include the measures that must be adopted in order to respond to the many recommendations formulated by our office as well as by other experts who have also reviewed disability operations over the past year.

An action plan cannot change the culture of an organization on its own. To successfully implement the changes that are required, management of the department and of CPP must show leadership by setting out the general policy direction they intend to follow with disability. This would require such measures as, first, demonstrating determination and continuity with respect to corrective measures that need to be implemented even in a context of rapid change; second, deciding whether proactive management is required with respect to this very large caseload; third, redoubling efforts to obtain closer cooperation among interested stakeholders; and finally, encouraging staff to be attentive to the better management practices of other plants.

[Translation]

The Department's role is to provide assurance to legislators and contributors that CPP Disability benefits paid to all those, and only to those, who are eligible. When the cost of benefits increases, governments face the difficult task of striking a balance between the needs of those who have contributed to the funding of the CPP - and who are unable to work on account of serious and prolonged mental or physical illness - and the needs of future generations to ensure that they are not asked to take on an excessive burden.

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I am convinced that if additional effort is expended to improve the administration of the CPP:Disability, it is possible to significantly reduce the Program costs without adversely affecting applicants who meet the Plan's eligibility requirements.

In my opinion, several questions still require clarification: What are the priorities? What level of resources is required? How will the Department measure attainment of objectives? What clear commitment has the Department made to ensure that Disability ranks among programs that are well managed?

The members of this Committee sometimes wonder what happens to the recommendations that they have made. Please allow me to say a few words about the key role played by the Public Accounts Committee in relation to Chapter 18 from 1993 - Programs for Seniors. Indeed, the Committee was able to obtain from the Department a commitment to correct the situation and to produce a series of progress reports on the actions taken. To respond to these commitments, the Department undertook a series of initiatives.

The Committee can plan a similar role in monitoring the implementation of the comprehensive action plan that the Department is expected to provide. This is important in the accountability process, which is so vital to the working of the Public Service.

Thank you for your attention. I would be happy to respond to your questions.

The Chairman: Thank you. Mr. Cappe.

Mr. Mel Cappe (Deputy Minister, Department of Human Resources Development): Thank you for the opportunity to discuss our Department's response to the recent Auditor General's Report on the Canada Pension Plan Disability Program.

[English]

Let me begin by introducing my colleagues. I have with me, from the income security programs group of the department,

[Translation]

Mr. Serge Rainville, Assistant Deputy Minister of the Branch,

[English]

Cathy Drummond, the director general of programs, and Barbara Naegele, the senior manager of the special project office regarding disability.

The Auditor General's report suggests that we strengthen certain management practices in the administration of the CPP disability program. In general, the department agrees with all of the recommendations.

[Translation]

I want to point out that our Department generally agrees with the Auditor General's recommendations.

[English]

They're consistent with the directions we had already been following at the time of the audit, either on our own or in collaboration with the Office of the Auditor General.

[Translation]

Most of you are familiar with the CPP and, more specifically, with the Disability Program component, which is an essential component of Canada's social security system. It provides support to many workers who become disabled. Currently, the Program provides more than 50 per cent of the total income of these disabled persons.

As you know, CPP Disability has received considerable public attention in recent years. The latest event was the release of the Auditor General's Report at the end of September 1996. The attention was mainly due to the sharp increase in benefits under this Program in recent years. In that respect, Canada's experience has been true of similar programs in other industrialized countries. However, we realize that we face rising costs and reduced public confidence in the long-term sustainability of the Program.

[English]

Our department has been taking action to address this issue. Since 1994, the growth in the number of new beneficiaries has declined. The number of clients added to the program each month has dropped in recent years. The number of benefits in pay has declined for ten months in a row. Even with our initiatives to date, our department recognizes and accepts the challenge to improve certain aspects of the management of the program.

In fact, we have appointed a senior departmental manager to head a special project - Madame Naegele, who is at the table. It will coordinate and monitor the implementation of the measures already in progress, as well as new initiatives to address the Auditor General's recommendations. You should have already received a copy of the detailed action plan we have developed. Indeed, we've made it available to the clerk in advance of the meeting. It shows the concrete actions we are taking to address the concerns of the Auditor General. In addition, we've established a number of program committees to address and resolve all issues.

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Some of the main concerns in the Auditor General's report relate to ensuring that we only pay disability benefits to individuals who are entitled to them. Our department takes that responsibility very seriously. We've undertaken a number of measures to ensure consistent and fair adjudication of disability benefits.

Since 1993 we've been pursuing a program to reassess beneficiaries who may be able to return to work. More than 7,000 benefits have been terminated as a result of this effort. That represents more than 34% of all reassessed accounts. This has resulted in savings of over $66 million in the CPP account and the identification of over $20 million of overpayments that we can recover.

Our department believes this approach to reassessment is efficient. It concentrates on the clients most likely to have their benefits discontinued as a result of reassessment. To this end, we've implemented a state-of-the-art rules-based system. This allows us to better identify high-risk cases. We have also put additional resources into expanding our reassessment efforts in the future.

[Translation]

Another important initiative in this area is the vocational rehabilitation of disabled persons. Our Department had a successful pilot project to provide beneficiaries with the assistance to regain their capacity to return to work. We estimate that the potential savings from this project are roughly$38 million. We are attempting to integrate this activity into our ongoing operations.

[English]

The Auditor General also recommends that we improve our methodology for estimating mispayment of benefits. Our department has worked on developing the current methodology with the Auditor General's staff. We will continue to do so to improve the current estimates, which indicate disability benefit overpayments of $14 million.

The report also emphasizes the need for better harmonization and information sharing between CPP and other related programs. Our department is in regular contact with social security administrations of many other countries to learn from them. We incorporate their best practices into the management of our disability program.

Within Canada we are working closely with our partners in the private sector, other levels of government, and disability groups to develop joint initiatives aimed at providing better client service in the most effective manner.

We are also reducing duplication of effort, particularly in the areas of rehabilitation and return-to-work efforts. Our department's work to improve these partnerships and negotiate new ones will continue. We expect to increase it in the future.

[Translation]

The Auditor General's Report makes a number of comparisons with the disability component of the Quebec Pension Plan. It suggests that we might do more to examine and evaluate the differences between the two programs.

CPP officials maintain ongoing and mutually beneficial contacts with their counterparts in the QPP, including those responsible for the Disability Program. While we agree with the Auditor General's Report that comparisons between the disability components of the CPP and QPP can be useful, such comparisons nevertheless must be used with caution since major differences exist in the philosophy, structure and administration of the two plans.

[English]

Another major issue in the report is the need to improve the availability and analysis of our management information. Our department has already taken a number of steps to improve management information. For example, we've established a new trend analysis system. This allows for ongoing monitoring of the CPP disability caseload. We intend to identify and address any additional information gaps that may exist.

Let me conclude, Mr. Chairman, by confirming that our department appreciates the Auditor General's efforts to identify areas for improvement in the management of the CPP disability program. We also appreciate that the Auditor General acknowledges the inherent difficulties in managing CPP disability. Our department is fully committed to implementing the action plan to address his recommendations. We look forward to continued cooperation with the Auditor General's staff in the efforts to accomplish this.

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Mr. Chairman, we would be pleased to answer any questions you or members of your committee may have.

Mr. Silye (Calgary Centre): I'd like to move that the two written submissions read earlier today, one by the Auditor General and one by the Deputy Minister for Human Resources Development, be accepted as testimony before we begin questioning. This is seconded Mr. Loney from Edmonton.

[Translation]

The Chairman: We do have a quorum, as Mrs. Gaffney has just joined us. We will therefore move directly to question period. Mr. de Savoye, you have ten minutes.

Mr. de Savoye (Portneuf): Gentlemen, I listened with great interest to your presentations, both the one by the Auditor General and that of the Deputy Minister of Human Resources Development.

Mr. Cappe, the first thing that struck me in your presentation is that you admitted that most of the Auditor General's recommendations are appropriate. Which recommendations do you not agree with?

Mr. Cappe: I stated in my presentation that we generally agree with the recommendations the Auditor General has made. The clarification I provided at the beginning of my presentation is an important one. There is only one recommendation regarding which we might like to discuss the methodology used. But overall, we do agree with the recommendations.

Mr. de Savoye: I'm sure you know that your written presentation will be attached to the Committee's Minutes of Proceedings. So, I appreciate your making that clarification, which will ensure that the minutes accurately reflect your position. However, I would like to ask the Auditor General whether he shares your view in that regard.

Mr. Desautels: The action plan that has been tabled by the Department does in fact address all of our recommendations. However, what I said in my opening statement was that the action plan per se may not be sufficient. In fact, what is really important is that senior management give this Program the attention it deserves.

I should also point out that if one steps back and looks at how the Program has evolved over the last ten years, which is explained in detailed in this chapter, one notes a series of problems or weaknesses in program administration which are at least partly responsible for the rapid growth in program disbursements. One may wonder why the Program has evolved in this way over the past ten years. If I had to answer that question, I would say that the Program may not have received the attention it deserved. I think what is important now is that senior management within the Department, that inherited this Program not so long ago, give it the attention a $3 billion program deserves.

Mr. de Savoye: Thank you, Auditor General.

Mr. Cappe, it is my impression - and please correct me if I'm wrong - that the Department has managed elementary and current Program operations, such as registering new cases, making changes, producing periodic statements and issuing benefit cheques, but that the actual evolution of the Program per se has not been managed, with the result that you do not possess the management information you require to see beyond current operations. Nor do you have the kind of information systems that would allow you to access that information.

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It seems to me that even in the best case scenario, we are looking at another three years before those management systems are operational and allow you to exercise proper control.

There will be delays in development, and implementation measures will have to be planned that will once again be clearly disruptive. But this Program represents substantial costs and, as the Auditor General mentioned just a moment ago, it requires total, priority support from senior management.

Can you tell us what projects are currently underway to modernize your management information systems, what timeframe you are looking at for delivery and implementation of those systems, what budget envelope you believe will be required for development and implementation of those systems, and what support senior management is currently providing in that regard?

Mr. Cappe: Mr. Chairman, I would like to give quite a precise response because I feel the commitments I am prepared to make as Deputy Minister should be clearly stated.

With respect to management information systems, the Department has formed a steering committee and a working group that are responsible for developing and implementing a complete management information framework for the Disability Program. This new information framework will allow us to monitor the Disability Program more closely and ensure that new issues are dealt with promptly. I could elaborate and tell you exactly what this will entail, but I would first like to answer your last question as to whether or not I intend to personally deal with management issues relating to the CPP Disability Program.

The last time the Committee sat, I was unable to be here to provide testimony, but I sent some colleagues to appear on my behalf, as well as a Senior Assistant Deputy Minister who is responsible for service delivery - Mr. Braiter, who is with us here today. Mr. Rainville, Mr. Braiter and myself, as well as the Associate Deputy Minister, Mr. Harrison, have all undertaken to be more involved in the management of this Program.

Mr. de Savoye: Mr. Cappe, in how many years will these systems that will allow you to properly manage the Program actually be operational? Even though you may have the best of intentions this morning, the fact remains that another three years will be required before you can really revamp the system, and doing so will require a lot of money. Have you calculated those amounts? Are you able to give us any indication of what they might be?

Mr. Cappe: I will give you an overview, and then Mr. Rainville can provide more details.

I want to begin by saying that we are in the process of integrating a completely new system for the Canada Pension Plan and that another year's work will probably be required before we are able to fully implement it. However, that new program will be coming on stream in the coming months.

Mr. Serge Rainville (Assistant Deputy Minister, Income Security Programs, Department of Human Resources Development): We have a benefits re-engineering project that began three years ago. Almost half a billion dollars has been invested in that project. It is a major initiative involving re-engineering of Old Age Security and Canada Pension Plan systems. According to our plans, the system should be operational in January of 1998. Naturally, information will be part of this new system.

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The CPP system was put in place in 1966, which explains the problems we are now experiencing. We have had to make do with systems that were extremely inadequate. They were adequate to pay our clients, but not to provide us with the information we required to ensure proper program management.

Mr. de Savoye: Thank you, Mr. Chairman.

[English]

The Chairman: Mr. Silye, ten minutes.

Mr. Silye: Thank you, Mr. Chairman.

First of all, I'd like to thank everybody for attending. I'd like to make a few comments on my assessment of the Auditor General's report so that the department knows where I'm coming from in my line of questioning.

I agree with the Auditor General that the problem with a lot of the government programs is management control, what kind of power you have in your department, and essential control, so that you can evaluate the value for money and whether the program is delivering the services intended to those people it's intended to be providing for.

I agree with the Auditor General that this disability program, based on the evidence and his audit, is undermanaged - not mismanaged, undermanaged - and that long-term disability recipients, which is one of the biggest areas, must be reassessed. There's no program in place to have a formal review process. It's quite clear, based on your own testimony, Mr. Cappe, that through reassessment you've turned up 34% of beneficiaries who no longer qualified.

It seems logical to me that this is as good as any survey you could take, and if you increase the reassessment process, the savings could be in the neighbourhood of anywhere from $600 million or more. You can comment on that later. So even though the administrative cost is a little higher, I think we have to start looking for some form of means tests, results, etc., in making sure that people aren't taking advantage of a system.

I'm concerned that it has tripled in ten years, especially in light of the fact that although CPP came into existence in 1966, pay-outs for disability started around 1970. So in 16 years it grew to 150,000 people, but then from 1986 it grew another 150,000. There's something wrong here; I don't think this many more people in that short a space of time become necessarily disabled.

The other area, which I can get into later, is that there's duplication of services with provincial plans and private insurers. I think some people are paid paying double for the same benefits, if they have their own insurance plan, and that some private insurers are hiding behind the federal government program in the fine print of their policies. I think the department should look at that at some point in time and not allow it to happen any further.

I don't know how long you've been the Deputy Minister of Human Resources, Mr. Cappe. Could you just tell me how many years?

Mr. Cappe: Since July.

Mr. Silye: I can't pick on you, then. Sorry.

Does the government do this on purpose? It's happening in Treasury Board too.

In your testimony, Mr. Desautels, in point number 6, sir, you say that new guidelines have been implemented over the past several years, so as I say, Mr. Cappe is not responsible for them. But without proper assessment of projected cost or an actuarial impact analysis...could you elaborate briefly and tell me what those are?

Mr. Desautels: Yes, I'll ask Mr. Lalonde to answer that question.

Mr. Louis Lalonde (Principal, Audit Operations, Office of the Auditor General of Canada): I'm sorry, could you just repeat the question?

Mr. Silye: On point number 6, what are those new guidelines that have been put into place without proper assessment of the cost or the actuarial impact of the new guidelines, as opposed to legislative changes to the programs?

Mr. Lalonde: In our report you are referring to sections under paragraph 17.60 and following and our guidelines that were introduced, exhibit 17.7.

In October 1988, there were guidelines for persons of 55 years of age and over. They were introduced, but they were appealed subsequently in September 1995. There were also guidelines that referred to socio-economic factors that were considered in the assessment of the eligibility, which were revoked in September 1995.

Mr. Silye: Mr. Desautels says in his eighth point that:

CPP management has not been able to perform reliable analyses or quantify the impact of the causes for the increase in costs for Disability benefits.

Is this true?

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Mr. Cappe: There are interesting developments in the way programs of disability are administered, and this isn't just in the federal or the Quebec Pension Plan.

If you look at Workers' Compensation administered by the provinces and if you look at pension plans administered by other administrations around the world, the evolution that takes place in the assessments is partly the result of the evolution and the thinking in the medical profession as to what constitutes a disability and what is sufficient to prohibit someone from being in the workplace.

Seldom does an edict come from the International Medical Association, if there is such a thing. Rather it's an evolution in the thinking of doctors. Therefore an evolution takes place in the administration of these programs as well.

So it's hard to point to a particular indicator, but is there more lower back pain present in the economy - not in society, but in the economy - now than there was 20 years ago? We certainly seem to notice it more, and the medical profession recognizes it more now as a disability for work in the workplace than it ever did before.

How should the administrators of the pension plan deal with this?

Mr. Silye: They should look at the facts. The fact is the wallets are a lot lighter, so that means for men there's a lot less weight on their backs, because they usually carry their wallet in the back. Therefore there should be fewer disability claims for men with lower back pain.

Some hon. members: Oh, oh!

Mr. Cappe: I would not get into an argument about those criteria. The major issue here is how, as administrators of the pension plan, we take account of those factors, among others, in assessing disability.

I'm just indicating that an evolution does take place and that we have been responsive to the medical profession.

Mr. Silye: The definitions are getting too broad. Somebody has to crack down on definitions.

Diane Francis pointed this out in some article. I'm sort of paraphrasing, and I said this once before. One 35-year-old person qualified for disability and stayed at home because of a mental disorder. Do you know what the mental disorder was? Being tired of going to work: ``I get mental stress from getting up every morning and going to work''. That person qualified.

I'm taking that as one incident. I'm not condemning the whole -

Mr. Cappe: Without wanting to violate privacy, part of me wants to say, ``I want names''.

If indeed someone like that qualified, that person had a doctor's certification saying they would qualify.

Mr. Silye: There's complicity there as well between doctor and patient. The patient goes in and says, ``Look, I need some time off. Help me out here.''

Mr. Cappe: One of the things we have started to do is work with the medical profession to establish, with the medical associations in each of the provinces and the Canadian Medical Association, an approach to try to address these questions. We have to collectively deal with this. It's not something we could unilaterally deal with, because our costs would just go up as we reassessed doctors and tried to second-guess them. We really need the doctors to take responsibility for their certifications.

Mr. Silye: Okay -

Mr. Cappe: And we have to change too.

Mr. Silye: I was going to say you can't just blame it all on the doctors.

Mr. Cappe: Oh, no.

Mr. Silye: So what are you going to do and what is your department going to do?

I got that briefing on how you're going to follow up and be more diligent in the applications for disabled and monitor a little more closely, but what are you going to do to ensure these disability benefits go only to those - only to those - who are eligible, not just those with a doctor's letter? It seems to me it's a lot of paperwork without any follow-up by the department to spot-check some of these people. Would that be of benefit?

What can you do to make it better?

Mr. Cappe: I'll ask Mr. Rainville to provide more detail, but I want to give an indication of a couple of the things we are doing, following the recommendations of the Auditor General.

We've put in place a much more determined and elaborate reassessment process, so we are going back and not just taking the initial application at face value. After someone is in pay, we're still going back and reassessing whether indeed they should be.

Mr. Silye: Do you do a spot-check or do you do it to all? Do you reassess every year or every two years?

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Mr. Cappe: This is what I was referring to as sort of a risk-based reassessment, where we have some criteria that say there will more likely be cases that need to be reassessed. The reason the 34% was so high was that we didn't do it randomly. We targeted some groups that we thought were more likely to be...

Mr. Rainville: First of all, I'll tell you about the kind of collaboration we have with the medical association. The president of the CPP advisory board is the secretary general of the Canadian Medical Association, Dr. Léo-Paul Landry. He knows, and he's really helping us out, spreading that kind of information throughout the country.

I think the Auditor General in his report is saying the new guidelines should have been decided or included in the legislation. We've been saying no, these guidelines are in fact guidelines for the people, for adjudicators to really take the right decision, to make sure they are consistent in making their decision. In fact, it has been quite helpful since we issued these guidelines. There has been a reduction of positive acceptance of cases since we did that.

The other part is the reassessment. The specialist on reassessment is Barbara Naegele. She's been doing it for the last three years. She's been in charge of that program and she can answer that question you asked about why we don't do 100% of reassessment.

Ms Barbara Naegele (Acting Director, CPP/Disability Special Projects, Department of Human Resources Development): In terms of the reassessment area, we've just been expanding that, and right now we're getting our volumes up to where they should be, which is around 20,000 a year.

But before I get to reassessment, I'll go back to your original question on what we do, with the example you gave me from Diane Francis. We will probably find some of those examples, because there are physicians who do that, either because they find it easier to give a quick response or because they're trying to help their patient get some benefits.

We're not only following the rigorous new guidelines; we're also encouraging more medical development. If the information isn't there at face value, then let's send it out and get more medical input from another physician, a specialist in the area of stress disorders. In order to sweeten the pot, we have recently increased the fees we are paying to physicians. We were paying $50 and for $50 we were getting short shrift because that wasn't a good fee.

So we go through more medical development, we pay more, and we get the information up front. Then comes a new reassessment project, where we now have a system and we can finally earmark and say, this client looks like she might be on for two years but then it's time for her to be reassessed. So we can put that into our BF system. That gives you a full package on how we can handle that operationally.

Mr. Silye: I'll be back in five minutes.

The Chairman: I'm sure.

[Translation]

Mr. Paradis, you have ten minutes.

Mr. Paradis (Brome - Missisquoi): My first question relates to Mr. Cappe's presentation.

Mr. Cappe was saying that as part of the reassessment program, 34 per cent of cases had been reassessed since 1993, and that this had resulted in more than 7,000 benefits being terminated. My question relates to something we have already discussed here in the Committee with the Comptroller General of Canada. Do you use direct deposit for benefit payments?

Mr. Cappe: Yes.

Mr. Paradis: So, the money is deposited directly into their bank account?

Mr. Cappe: Yes, for some beneficiaries.

Mr. Paradis: In my view, this raises the whole issue of direct deposit, which we've already discussed, in the context of government programs. In the case of an employee's pay, things are clear because you know that the employee is there. He was there last week, and he'll be there next week, and as long as he hasn't been fired, he has the right to receive his pay. I see no problem with direct deposit for government employees' pay.

However, I have a major problem with direct deposit of benefits, whether we're talking about unemployment insurance - your Department also administers Unemployment Insurance - or any other kind of government program, because anyone receiving money directly into his bank account, without having to endorse or deposit the cheque himself, will have to make a huge effort to let you know that you should stop depositing that money in his bank account.

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Naturally, that is exactly what happens, and it is clear for all to see. Indeed, there is an example of this in the Auditor General's Report: a person is eligible beginning in 1987 or 1988 and receives money regularly until 1995, even though that person is making $35,000 a year elsewhere. You are asking beneficiaries to discipline themselves and to let you know when their circumstances change and when you should stop depositing money in their account.

So, my first question is about direct deposit, a method I feel uncomfortable with in the context of government programs. Do you have any comments on that?

Mr. Cappe: I would first like to indicate that service delivery costs - that is, the cost of issuing cheques and the cost of direct deposit - are completely different. Efficiency is an important consideration.

Mr. Paradis: I realize that you have to pay someone to stick a stamp on an envelope and send the cheque out by mail, which generates additional costs, but I also think one has to weigh that cost - 50 cents for a stamp, 50 cents for the envelope, for a total cost of $1 per item - against the substantial amount that people are receiving. You are asking them to discipline themselves and to let you know whenever their circumstances change, but I doubt that system is working.

Mr. Cappe: The self-discipline required is the same when people receive a cheque. Cheques arrives even when people are not entitled to them.

Mr. Paradis: Yes, but when people receive a cheque, endorse it and deposit it in the bank, it seems to me they're a little bit more conscious of the fact that they may not be entitled to it. They have to actually do something to cash the cheque, whereas with direct deposit, they have absolutely nothing to do. The money is automatically deposited in their account.

I raise this with respect to all of the programs you administer that involve paying money out to beneficiaries. We had this very discussion with the Comptroller General of Canada. I want to say, once again, that this is an excellent system to use for government employees, but I have my doubts about how well it works when money is being received by beneficiaries who are no longer entitled to the money because their circumstances have changed. That is where the problem lies.

My second question, Deputy Minister, relates to page 2 of your statement, where you talk about information sharing between CPP and other related programs as well as other departments. This goes back to what I was saying earlier. It has to do with what might be called cross-checking. Is there any way of knowing, at a given point in time, whether people are receiving double or triple benefits, and so on?

A few years ago in Quebec, some young people were telling me that they were receiving welfare payments in several provinces of Canada simultaneously. They had gone to Vancouver and arranged to go on welfare there, and had then done the same thing in Halifax and Montreal. As a result, they were receiving cheques in several different provinces. That is when you realize that there is a lack of interprovincial or pan-Canadian coordination in that area.

Is an inventory of information kept? Is there any cross-checking? What concrete steps are taken to ensure that people are not receiving both a salary and unemployment insurance benefits or benefits under another program?

Mr. Rainville: In the case of people with income, it is quite a simple matter for us to check that, because they automatically contribute to the Canada Pension Plan. As soon as we learn that someone is contributing to the Pension Plan, we automatically know he or she is working and we immediately verify their administrative situation.

In the case of people receiving unemployment insurance, we have begun to do cross-checking and exchange information, since we are in the same department. Over the last year, we only discovered about 100 cases, but we could well turn up more of them as time goes by. The system is there to allow us to do that kind of checking.

Mr. Paradis: I would like to refer now to Table 17.12 in the Auditor General's Report. It has to do with reassessment activities. The termination rate for third party complaints is 14 per cent, as compared to 4 per cent for other program matching. My personal view is that there are still more cases to be discovered, in addition to what these figures indicate, both through direct deposit and other government program matching.

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Mr. Rainville: We are just starting to conclude agreements with Workmen's Compensation Boards all across the country, in order to have access to information about those groups, as well as with many social services, because in the final analysis, the same information is always used.

If someone is disabled, he or she has to provide a medical certificate. Mrs. Drummond is currently working on developing a single medical certificate that would be acceptable to everyone - private insurers, Workmen's Compensation Boards and the Canada Pension Plan - so that no one has to run around and see a number of different doctors in order to get different information.

We are trying to arrange things so that all these organizations can exchange information and thus provide better service to their clients.

Mr. Paradis: You just mentioned the cooperative arrangements you're making with various departments, other levels of government and the provinces. You have submitted a comprehensive departmental action plan for the Disability Program, with timeframes for completion. What is the timeframe for these interdepartmental, interprovincial and interprogram cooperative measures?

[English]

Ms Cathy Drummond (Director General, Programs Directorate, Income Security Program, Department of Human Resources Development): In terms of information-sharing agreements, we're working quite aggressively. We in fact have them with most social services. Some of them need updating, because our information has been flowing to them but we're not necessarily getting a lot back. We don't have them with all Workers' Compensation boards.

At the moment our legislation is pretty restrictive, so they're quite difficult to work out. There are lawyers on both sides. It takes a little time. But I'm hoping within a year to have signed with all of the major partners.

[Translation]

Mr. Paradis: Mr. Chairman, with your permission, I would like to ask one last question. Would it be possible to obtain a plan of action relating to this table? What organizations, programs, departments and provinces are involved? Also, we are told that this should be completed within a year. As an elected representative, I am interested in knowing what levels of government you have decided to deal with and what timeframe you have established for this activity.

Mr. Cappe: In the action plan we sent to the Committee, we indicated, on page 2, information sharing with corporations. We expect to conclude agreements with the provinces and other organizations. We also indicated that we have developed a program to address the short, medium and long terms, and that we will be sending on a specific timetable to the Committee through the Clerk.

Mr. Paradis: Very good. Thank you, Mr. Chairman.

The Chairman: Along the same lines as Mr. Paradis' last question, I would like to put a question to you myself, Mr. Cappe. I refer now to paragraph 14, page 3, of the Auditor General's presentation, where it states:

14. An action plan cannot change the culture of an organization. To successfully implement the changes that are required, management of the Department and of CPP must show leadership.

I fully support the Auditor General's views in that regard.

I would now like to quote from the response you made, Mr. Cappe, on page 2, top paragraph, of your written presentation:

Even with our initiatives to date, our Department recognizes and accepts the challenge to improve certain aspects of the management of the Program. In fact, we have appointed a senior departmental manager to head a special project.

I just want to be sure I understood correctly what Mrs. Barbara Naegele's responsibilities are going to be. Am I right that her title is "Senior Manager of the Special Project Office"?

Mr. Cappe: Yes, with respect to the Disability Program, and she reports directly to the Assistant Deputy Minister.

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The Chairman: It is clear that you see this as a serious issue if you have decided to free up a senior manager from your Department for that purpose. I would not want Mrs. Naegele take my next comment too personally, but I do wonder whether her level of authority is adequate.

I do not have detailed knowledge of your Department's organization chart, but I'm pretty certain there are 18 levels of authority between you and taxpayers. Is her level of authority adequate to issue directives? Now I don't want to get into a debate about lines and staff, but if this is a serious enough issue to have appointed someone to deal with it, why didn't you make Mr. Rainville, your Assistant Deputy Minister, responsible for implementation? Once again, I would not want the witness to think this complaint is directed at her, because that is certainly not the case. Actually, what is preventing you, Mr. Cappe, from dealing with this yourself?

Mr. Cappe: I think you're right, just as the Auditor General is. But it is not simply a matter of designating someone to take responsibility. It is important that there be a commitment on the part of all senior departmental officials, and even of all the clerks and other officers involved in this file. The leadership the Auditor General referred to is extremely important, and there are different ways of showing that kind of leadership.

I gave extensive testimony here, before your Committee, and I have talked to all departmental managers. Two months ago, we even organized a meeting with all senior managers who report to me - in other words, assistant deputy ministers or regional directors general in the regions of each of the provinces, along with all the other assistant deputy ministers who are responsible for other programs - in order to discuss these issues in relation to the CPP and Old Age Security. So, this is a commitment that concerns everyone working in the Department.

But there must be leadership. I mentioned Mr. Braiter, Senior Assistant Deputy Minister responsible for service delivery, Mr. Rainville, who is responsible for the Program, andMrs. Naegele who reports directly to the Assistant Deputy Minister. But it is not enough to have someone take responsibility. There must be a link with departmental offices that actually provide services.

The Auditor General referred to regionalization of our service delivery, and it is thus important that there be proper links between regional offices and headquarters where the working group dealing with disability is located.

The Chairman: And as a result of all that, we will see leadership in the future?

Mr. Cappe: Yes.

The Chairman: Does that mean that prior to that time, when the Auditor General conducted his audit, there was no leadership?

Mr. Cappe: No, it doesn't mean there wasn't any at all, but I must say that there will be more in future. We will be paying very close attention to this file.

The Chairman: I could keep on talking about this Program all night.

Mr. de Savoye, you have five minutes.

Mr. de Savoye: I want to thank you, Mr. Chairman, for refraining from talking all night.

Mr. Cappe, it has been emphasized that senior management must provide total support for implementation of the various initiatives you have discussed.

Earlier, my colleague, Mr. Paradis, talked about action being taken to control fraud. Now I would like to discuss steps being taken with respect to rehabilitation management. There are obviously cases where it is clear, right from the start, that the medical condition is permanent and that therefore, there is no possibility of rehabilitation.

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However, there are other cases where intervention may reduce the period during which the claimant is entitled to receive benefits. In other words, an attempt will be made to help the person re-enter the labour market.

I see this as an important activity, but it is not something that can be done on the basis of sampling. What are needed are an action plan and appropriate follow-up - an actual method of maximizing the chances of success of rehabilitation.

I would like to get an indication from you of what measures are currently in place in that area, what new initiatives you are considering and when they will be fully operational.

Mr. Cappe: We are working on several different fronts in the area of rehabilitation. First of all, we are devoting more money - that is to say more financial and human resources to rehabilitation. This could affect 10 per cent of clients capable of being rehabilitated over the next three years. So, we are really focussing on this problem.

We are also proceeding with a number of pilot projects that could provide an opportunity to work in partnership with the private sector or the rehabilitation sector per se. That kind of activity should allow us to improve our own work and help our clients regain their capacity to work.

Mr. Rainville: Also, we want to work more closely with our Unemployment Insurance colleagues, because disabled people often go directly to Unemployment Insurance offices and only come to see us subsequently. Unfortunately, by the time we see them it may be too late to rehabilitate them, because it is often necessary to proceed quickly with rehabilitation following an accident - hence the importance of maintaining close contacts with our colleagues in Workmen's Compensation Boards all across Canada. So, we are putting a lot of effort into that particular area.

Last week, Mrs. Drummond and myself met with American Social Security officials who do a great deal of rehabilitation, unfortunately with very little benefit. Their success rate has in fact been only about 2 per cent over three and a half years. After three years, people had not re-entered the labour force. I certainly hope our success rate will be higher than theirs.

Mr. de Savoye: And what about the Quebec Pension Plan?

Mr. Rainville: Well, I really can't say.

A voice: They have no involvement whatsoever in rehabilitation.

The Chairman: Excuse me, Madam. While I admire your enthusiasm, I would ask that you come and sit at the table where you are most welcome. Please identify yourself. The Committee is happy to hear from everyone.

She can respond. In any case, we all noticed that she was speaking.

Mr. Rainville: Yes, she is responsible for CPP including the Disability Program. In Quebec, disability benefits are granted for an extended period. As a result, rehabilitation is extremely rare, indeed practically non-existent in that Program.

Mr. de Savoye: That leads me to my next question. Since there is a real difference between the two plans, just as there is in the cost of the two plans, as we all know, what future do you see for your plan? The difference in cost is more than sizeable, it is substantial. Do you intend to bring your costs more in line with those of the Quebec plan, by cutting it back, or to maintain it at its current level and invest more in rehabilitation control?

Mr. Rainville: I would like to answer that question, because we have had regular contact with QPP officials. I met with the Program Director, Mr. Legault. The management philosophies of the Disability components of the QPP and our Plan are not the same at all. The Quebec Pension Plan also operates in a social, political and legal context which is completely different from our own.

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First of all, the Quebec Pension Plan is the second payer in that province, whereas the Commission de la santé et de la sécurité du travail or the Société de l'assurance automobile is the first payer. As a result, they have an approach that is completely different from our own. In our case, we are the first payer all across Canada.

Mr. de Savoye: But I guess you see the point of my question, do you not? Do you intend to move closer to the Quebec philosophy or maintain your current philosophy? It's a strategic question.

Mr. Cappe: I think it's important to realize that the structures of the two plans are completely different. Thus, the relationship between the Canada Pension Plan and Workmen's Compensation Boards in provinces other than Quebec are such that we pay... In Quebec, the relationship with the Quebec Pension Plan determines how that philosophy will be applied. So, structure is an important part of that question.

Mr. Rainville: Another point that has not been considered in the Auditor General's Report is the matter of appeals. There are several levels of appeal under the Canada Pension Plan. When a person appeals, the original decision can easily be overturned. A number of cases have arisen over the last ten years from which has emerged a body of case law regarding the handling of disability cases. In a number of these cases, the Canada Pension Plan was more generous than the Quebec Pension Plan. But that is mainly due to the approach taken at different levels of appeal.

The Chairman: Thank you, Mr. de Savoye.

[English]

Mr. Silye, five minutes.

Mr. Silye: Thank you, Mr. Chairman.

I'd like to go back to testimony given earlier about how your new program is going to be more accountable.

I didn't hear your last name, Barbara, so I can only refer to you as Barbara. From what I've heard right now, although you seem to be tightening up a few things, I think you're headed in the wrong direction. You say you're going to target 20,000 audits. That's less than the 24,000. The Auditor General says you should be reassessing more long-term disabilities. It seems to me you're going to reassess fewer. It seems to me you're making your job less able to achieve the value-for-money element by reducing it.

Ms Naegele: That's 20,000 this year. We may make 24,000 - all going well - but we're still guessing -

Mr. Silye: That's just in one year.

Ms Naegele: Yes. We are building up.

Mr. Silye: So that 24,000 was over a three-year period. It wasn't explained here.

Ms Naegele: Yes. We're aiming for 20,000 just this year.

Mr. Silye: It's just on long-term disability.

Ms Naegele: Yes.

Mr. Silye: Why just long-term? Why not add another 10,000 for the short, quick audit checks and spot-checks across the board on disabilities so that all engines are kicking properly?

Ms Naegele: We do a spot-check in addition.

Mr. Silye: On first-time...where, you know, they apply, three months later, whatever period -

Ms Naegele: There is a sample taken at a number of levels for spot-checking.

Mr. Silye: Is that included in your 20,000?

Ms Naegele: No. The 20,000 refers only to clients who are specifically taken for reassessment. We do have a series of activities that we refer to as ``quality assurance''. Taken together, all of those activities come in at different points to spot-check our decision.

Mr. Silye: So of the 300,000 people disabled, and increasing, you're auditing or reassessing roughly 10%.

Mr. Cappe: This is going back to the point we had in our exchange before, that these are not always random. We do a 100% review of people overseas who are on CPP disability. So some targeting is going on within that. What we're looking for are, over time, the indicators of where there are ripe fields to harvest.

Mr. Silye: This is more philosophical, but if we're the first payers outside of Quebec, and Quebec's plan is that they're the payers of last resort over and above Workers' Compensation or any other private insurance plan for some of the death benefits, say, or disabled, who has to change that, the politician? Or can you do that under your guidelines?

Mr. Rainville: No. It has to be in agreement with all of the provinces. In fact, the board of administration of CPP is constituted of all the provinces, including Quebec.

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Mr. Silye: This plan is becoming more and more expensive, obviously, and with the amount that's left in CPP right now, which is just under $40 billion, and with this aspect of it growing the fastest, it's certainly something that should be looked at.

Mr. Cappe: Indeed that's why, in the proposals and discussions that have gone on with the provinces in terms of CPP, we have been looking at the disability benefit and its administration in a much more significant way, and that's why I was able to say we agreed with the Auditor General, because it's our sense that we need to put more attention to this and tighten up its administration.

Mr. Silye: Well, let's see if the Auditor General likes what he hears.

Mr. Desautels, do you think the new accountability process and the follow-up process will be sufficient to ensure more honesty in the program by the general public?

Mr. Desautels: Well, I think I'm encouraged by the action plan that's been put forward by the department and by the apparent resolve to carry through with it. I think there is a huge challenge ahead.

I said earlier that I thought this program had been undermanaged for a number of years. The team that's there today inherits a fairly significant challenge. I can tell the committee that we plan to come back. We have in fact plans to follow up on this in 1998 -

Mr. Cappe: And we're looking forward to it.

Some hon. members: Oh, oh!

Mr. Desautels: - and report back to your committee in the fall of 1998. I note that a number of the target dates of the department are sometime in 1997 or early 1998, so I think a follow-up sometime in 1998 would be quite appropriate, and we plan to do that.

Mr. Silye: Have you had time to look at the plan in terms of the controls? Are there enough controls between the regional offices and the main department? Do you have enough power to tell those provinces, for instance, Ms Drummond, that ``If you're not going to give us information back, we're not going to give you money''? Do you have the power to do that?

Ms Drummond: I don't quite understand what you mean by ``If you don't give us information, we actually can't give you money''.

Mr. Silye: The Auditor General says the department, in this aspect of disability payments and reassessment of long-term disability, is undermanaged. Either the manpower...or even with the manpower you have - or women power, or whatever you want to call it - it doesn't have the essential controls. It doesn't have the power with which to make the decision at the point of service, on the spot, to get this thing corrected and to stop those people who are claiming who shouldn't be.

Do you have the controls, and is everybody satisfied that they have those controls? I don't like it when I hear that a province, which is supposed to be sharing information... If you're not getting information back, that means the cheques keep going out, whereas if you got some of that information back from the provincial levels at whatever jurisdiction, maybe that particular cheque would stop.

Ms Drummond: I think you should understand that when we do information-sharing with social assistance, the reason the information was one-way for a long time was because we are first payer. The social assistance would top up, based on how much people were getting from CPP.

We have now discussed with the provinces information they might hold that would help us. But mostly we're looking at some kind of joint management of cases so that we would decide at the same time that somebody we were both paying was ready to go back to work and one jurisdiction wouldn't continue paying after the other. There is information that we need back, to mutually manage, but with the CPP as first payer, it's not -

Mr. Silye: It seems to me that if we're going to have devolution of powers and let provinces look after certain programs, especially social programs, sure, ``closer to the people'' should save us money, and those people who need it should get it, in theory. But if the federal government doesn't remain responsible for national standards for the same set of services, if we're supposed to be able to move from Quebec to Alberta and Alberta to Quebec... Why do we have this difference between provinces? How come in Quebec they are the last payer, whereas in the rest of Canada we're the first payer? Shouldn't that be the same all over?

It seems to me that what Quebec is doing is the right thing, and I bet you the disability payments in Quebec are lower - I don't even know, but my guess is it's lower, per capita, than in the rest of Canada.

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Mr. Rainville: On one side, yes, the disability program under QPP is lower, but their social assistance is higher - 14% higher than anywhere else. So what they don't pay under QPP, they pay under social assistance.

Mr. Cappe: This is why I was referring, Mr. de Savoye, to how the integration or the relationship between the programs is important, because where a beneficiary goes to Workers' Compensation or CPP, in Quebec they'll go in the opposite order, or they will have access to different kinds of benefits.

Mr. Silye: But it costs the federal government less for the Quebec disability portion - that was my point.

Mr. Cappe: That's right.

The Chairman: Thank you.

Mr. Hubbard, five minutes.

Mr. Hubbard (Miramichi): Thanks, Mr. Chairman.

Mr. Chairman, first of all, the Auditor General has brought to our attention a very difficult situation in terms of what might happen with the fund. We're looking also at some of the overall philosophy of it and how you qualify for it. But I think in our discussion and questioning this morning, we are losing sight of some very important facts involved with this issue.

While I agree with Mr. Silye that we have to look at Workers' Compensation and all of the various other types of insurance programs, we can't lose sight of the fact that the average family, whether it be a widow living on her husband's Canada Pension Plan or just an ordinary person with a disability, is trying to live on a very small amount of monthly income. If we think there are people earning $30,000 or $40,000 a year dressed up in white suits suddenly leaving a $50,000-a-year job to qualify for Canada Pension, I think we're facing an illusion.

We also have to look at the fact that in Canada today we have probably in excess of 1.5 million people unemployed. We take a look at disability, we talk about mental and physical disability - and we know, of course, the old axiom that there are two things we're guaranteed in life: death and taxes. You say in terms of this plan ``a prolonged problem leading to death'', which we're all guaranteed. I think, overall, to people out there who have great difficulties in seeking work, that to them is a disability. You go through the whole process of the safety net, and finally you look at how you might get enough money to have your family survive in the years ahead.

I think last time I was here I mentioned that we should look at some of the other factors involved. How many people 30 years of age are on your program, or 40 or 50? I think that should be considered when you go back to your offices to look at how people might be reassessed: age is a big factor. But when you see a 50- or 55-year-old worker coming who's been unemployed for two or three years and who has a severe problem in terms of his thoughts, and probably leading to his back - and probably it's not his pocketbook, Mr. Silye, because his pocketbook has been emptied for a long time - we have to look at these factors.

I hope that today when we leave this meeting we're not going back with a Prussian-type attitude that we're going to reassess a great number of people because they are defrauding the system. When we look at areas of Canada, we find that various areas, including my own province - and your province too, Mr. Silye - have people there who've been long-term unemployed. When we look at that, I think our programs have to be sympathetic.

I know Mr. Desautels, as Auditor General, looks at the mathematics of it, and he looks at some of those points in terms of legislation. But there are many doctors out there, and many workers in your own department and in the social services of other provinces, who are saying, ``We somehow have to provide people with an income so they can keep their families''.

Mr. Cappe, what is the maximum Canada Pension payment for a disabled person, on a monthly basis?

Mr. Cappe: We pay a maximum for a disability payment of $870.92.

Mr. Hubbard: In addition, for dependent children, those would qualify too, to a maximum of $165, is it?

Mr. Cappe: On top of that, $165.

Mr. Hubbard: So really, we're talking about helping people in a very minor way in terms of trying to face the cost of living in this country.

We as legislators, Mr. Chairman, have to look at this problem. We certainly have to look at the mechanics of it, and in terms of costing.

I think as members of Parliament, and sitting in that House over there, we have to realize that the socio-economic conditions of today are major factors in why more and more are applying when we find the rates going up to - what, about 3%? Nearly 3% of the workforce are somehow involved.

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Mr. Chairman, I don't have any questions to ask, but I hope in terms of philosophy that we can look at the problems and we don't get involved in a great search for people who are defrauding the system. I know there are people defrauding the system. In any system there's a small percentage doing that. But in terms of people hurting, we have to remember what's going on in this country.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Hubbard.

Mr. Silye.

Mr. Silye: I wouldn't disagree too much with what Mr. Hubbard said, other than to clarify why my line of questioning was on the abuse of the system. Because of the amount of money, because the size and the nature of the program are such that for those individuals who are truly disabled...I want to help them as well, as we all do. I would even increase the amount of money from the $800 maximum, because if that's all they have, if that's their sole income, as you say, they're not going to have too many suits in their closet. That's not very much money.

You can only increase the amount of money you pay if you trust the system. I don't trust the system. We have a huge bureaucracy. We have too many people running too many departments, too many levels, to try to get the money to those who need it. The system itself, because of the nature of our social programs, lends itself to the whole mentality out there in the public of hey, they're getting it, so I'll get it. I'm not blaming these people here at the table. The mentality is let's take advantage of it.

But if proper, essential controls were in place, where these people could do their job the way we expect them to, the way they'd like to, and they'd get compliments and credit for a job well done, a pat on the back and a bonus every now and then, and a raise in pay for a job well done, perhaps we'd have a better spirit in the whole civil service. We don't have that right now. It's always confrontational and critical.

So if we had the kind of controls that the Auditor General is talking about - in other words, the system were tightened up to such a degree that the cheaters couldn't cheat - then I'd say let's look at a proper amount and let's go forward.

I want to make it quite clear that I'm not on a witch-hunt here just for the cheaters. I do have some compassion, but I don't like to see all this money wasted. We have a lot of money out there, and we spend $9 billion on five different programs for families with children, and yet we have child poverty supposedly in the 20% range. I don't believe that number, but I do know there are some poor people not getting the money. Why is that? Why don't we give the first $1 billion to the poorest of the poor, then work our way up? Those are the kinds of essential controls we don't have, and that's why we're having leakage in the system and we have to tighten it up.

That's enough of my lectures. I have one more question to get back to. In terms of social services, what control or power does the department have to talk to the provinces and see if we could start to reduce the overlapping and duplication of services? What I pay on my pay cheque for Workers' Compensation, what I pay for my life insurance policy... I have an insurance policy and yet if I become disabled...I've had a lot of calls in my office from constituents about why their insurance company won't pay them. The government won't pay them and therefore the insurance won't pay them until they hit the federal government first. The rules are confusing, so we should tighten them up.

Secondly, what can we do? If I'm already paying into an insurance policy and I can afford it, let the insurance company pay for my disability. I've paid a premium for it. I'm supposed to be provided that from them. That relaxes the pressure on the system so that there's more money there for somebody else who can't afford an insurance policy. They can get the money that we as taxpayers pay to look after those people who can't look after themselves. Haven't we got this out of whack here? Can't the department put forward some suggestions?

Mr. Cappe: What we have is the Canada Pension Plan. The disability portion is viewed as a base, a foundation on which people can supplement. So individuals who buy private insurance are essentially supplementing what everyone knows is a right, in effect. You've been paying into the plan while you were working and you have a right to the benefit if you qualify.

You're making some interesting points about how we integrate the federal CPP plan, the private insurance plans and the provincial Workers' Compensation plan.

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As both Mr. Rainville and Ms Drummond have mentioned, we've been working with the provinces to try to do more integration. We haven't succeeded entirely, but in the discussion paper the government put out some time ago on the public consultations that have gone on, there were proposals for more of that kind of integration.

The standards in the provinces for Workers' Compensation are similar, but they're different in each province. So in a sense you have to keep coming back to the CPP as the foundation. It is the platform on which provinces supplement, in effect, and that's the concept.

Mr. Silye: If I have a death benefit through my insurance policy vis-à-vis, say, funeral services, and in my policy - and I'm just making this up - the cost of funeral services is covered up to $5,000...and I know I'm going to die, Mr. Hubbard. I'm preparing for it. I'm going to have as good a time as I can before I do.

Mr. Cappe: I suspect this is a non-partisan issue.

Mr. Silye: Exactly. Anyway, under CPP, there's a death benefit there as well. But in our system, does the CPP pay first so my insurance policy doesn't have to pay?

Mr. Cappe: No. When you're buying that insurance, the insurance company has basically said we know you're going to get $3,540 from CPP. So what you're in fact buying is a supplement to that base.

Mr. Silye: Thank you, Mr. Chairman.

[Translation]

The Chairman: Mr. de Savoye, you have five minutes.

Mr. de Savoye: Earlier, I was talking about the strategic direction of the Disability Program and you were saying there were reasons why things are the way they are. However, the Auditor General has said that he wonders whether amending certain guidelines, rather than the Act, is really a sound practice for the Canada Pension Plan.

Having heard your answer, I must admit I have some doubts about your strategic direction, and I'm wondering if our Committee and the House should not be given more complete information with a view to ratifying or supporting your decision to keep things the way they are, or perhaps launching an in-depth review of the mission of the Canada Pension Plan. Let's not forget that we're facing a situation where program costs have exploded and steps are now being taken to try to contain rising costs. However, it is clear that your interpretation of the CPP's mission is such that costs are going to continue to increase substantially.

So, I'm wondering whether it might not be appropriate for Members of Parliament or Parliament as a whole to consider reviewing the mandate of the Plan, unless you can guarantee us that the long-term sustainability of your mandate will be assured through costs that are affordable for both the government and the public.

Mr. Cappe: You have asked me two questions; the first has to do with the mission or mandate of the Pension Plan, and the second, with the management of disability benefits.

A discussion paper regarding the mission was disseminated to the public approximately a year ago. Public consultations were organized by David Walker, who is a Member of Parliament. So, there were consultations and public hearings on these important issues with respect to the Pension Plan.

I understand that the issue the Committee is currently considering relates to problems identified by the Auditor General with respect to the current plan. Questions are being raised about the CPP's mission, a mission that receives varying levels of support in the discussion process.

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We are now wondering if we can make improvements to program management. I believe we can, and we are prepared to do so, even though that is a different matter altogether.

Mr. de Savoye: Auditor General, you were saying earlier that legislative and administrative factors that are responsible for the differences between the Quebec Pension Plan and the Canada Pension Plan had not been assessed. In paragraph 6 of your written statement, you say that you question whether changing the guidelines, instead of bringing in legislative amendments, is a sound practice. Are you telling us, in a way, that the mission of Canada Pension Plan, as currently defined in the Act, deserves to be closely re-examined? I'm anxious to hear what you think.

Mr. Desautels: We raised two rather important points. First of all, when changes are made to the definition of what is called "eligibility", it is generally preferable to make them by means of legislative amendments, which must be accompanied by actuarial projections so that decision-makers can truly appreciate the impact of the decisions they are being asked to make. Thus, whenever possible, the legislative route is preferable to administrative measures which, as we stated in our chapter, can often have a very significant financial impact.

Also - and here I could repeat what departmental officials said earlier in response to one of your previous questions - it has been noted that there are fairly significant differences between the two plans. These differences have been described as structural.

I think it is partly true that the two plans evolved differently over the years and that we are dealing with de facto structural differences. However, many of the differences between the two plans are differences in practice. I don't think we should conclude that the Canada Pension Plan is set in stone, although I do think valid comparisons can be made between not only the CPP and the QPP, but with other private plans as well. I think we could identify administrative practices that would bring the various plans more into line with one another.

That is a rather long answer to your question, but I do think there is room to manoeuvre and bring the plans more into line with one another.

Mr. de Savoye: Thank you.

[English]

The Chairman: Mr. Silye, you want to come back.

Mr. Silye: There is one final area I want to pursue within the CPP, and it affects the disability portion. From 1986 to 1996 it has almost tripled from some $860 million to close to $3 billion. There's also a requirement under CPP where the amount that's collected every year is supposed to be two times last year's pay-out. If within the plan the pay-out last year for CPP disability was$2 billion, and it's been increasing, why haven't you forced or pushed the Department of Finance to collect more money?

Mr. Rainville: As you know, there have been quite a number of consultations this year that we're finishing fairly soon. The provinces and the federal government didn't come up with an agreement, so the increase of contributions next year will be according to what was decided five years ago. My guess, and I think it's everyone's guess, is that fairly soon after the beginning of the new year these ministers of finance will meet again and come up with an agreement.

Mr. Silye: Is the department responsible for the entire CPP program, even pay-outs of pensions?

Mr. Rainville: Yes.

Mr. Silye: Why is it then that if the one fund like CPP appears to be getting some pressure points...? There is still $40 billion there. There is still some interest accruing, and the deficiency last year was only 1.2 that you drew down on the capital amount that was there. So you think that's safe for a couple of years. They're going to increase it by a quarter of a percent, $52 per family, so it will be a little more money.

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Yet you have another program that you're responsible for, employment insurance. It has a huge surplus based on last year of $5 billion, and it's going to be growing to even more. Why can't the department say these are both for social services, as one is for job training and unemployment insurance and the other is for disability and pension payments? They're combining those funds anyway on the consolidated statements, so why not reduce EI premiums and increase CPP premiums by the offsetting amounts? There are people who need to know psychologically that they'll have something there for their retirement.

We should stop playing with people's minds and using scare tactics, that there's not going to be a pension for them and that their children, who are in their mid-20s, are not going to get it, so they had better start looking after themselves. We're creating the wrong myth. We're sending the wrong message. There are sufficient funds given now in terms of taxes both in EI and CPP to stop that fear. Why can't your department tell Canadians that we have enough money and that all we're going to do is use some of the EI for the CPP, if it ever comes up?

Mr. Cappe: I should defer to the Auditor General on accounting practices, but I will ask him.

Mr. Silye: He just audits what happens. Why don't you tell the minister to reduce EI premiums, increase CPP by the offset amount, and bring security and balance and safety to both programs?

Mr. Cappe: The department has three separate sources of funds for our programming. We have the consolidated revenue fund, the employment insurance fund and the Canada Pension Plan. The first two are actually consolidated in the accounts of Canada, but not the third, so the Canada Pension Plan is a fund apart. For reasons that the Auditor General could explain better than I, it is not consolidated, so we don't even have the option.

The other thing is that even though for the accounts of Canada the EI account and the CRF are consolidated, the fact is that there is a separate fund.

One of my other responsibilities is chairman of the Employment Insurance Commission. I have a responsibility in that capacity to maintain the integrity of the fund. They really are three separate funds.

Mr. Silye: The EI is not a fund. CPP is a fund but EI is not a fund. EI comes out of general revenue.

Mr. Cappe: There is an account in the accounts of Canada that is the employment insurance account.

Mr. Silye: It was $3 billion in deficit three or four years ago.

Mr. Cappe: You're right. What I'm saying is that those moneys are not there to be reallocated for the purposes of delivering the Canada Pension Plan, or vice versa.

Mr. Silye: Are you telling me you have an employment fund that is now at $5 billion? Is that put away for investment, or has that just gone to pay down the deficit?

Mr. Cappe: It appears on the accounts of Canada consolidated on the deficit number.

Mr. Silye: Why do you say it's a fund?

Mr. Cappe: There is an account. The Government of Canada keeps an account that measures its surplus or deficit as it tracks.

Mr. Silye: So it's not treated the same as CPP.

Mr. Cappe: It's not treated the same as CPP.

Mr. Silye: Thank you.

The Chairman: Mr. Grose has a 20-minute round.

Mr. Grose (Oshawa): I surrender. Thank you, Mr. Chairman.

I'd like to in many cases agree with Mr. de Savoye and Mr. Silye. We sometimes have a habit here of beating on the messenger rather than recognizing that they're telling us what they can best do with the legislation that we pass. If this thing is open to fraud or abuse, it's up to us to change it. Let's have a look at it and change it.

I do quarrel a bit with Mr. Silye in his statement that the $5 billion surplus in the EI fund, if this is the number, is used to pay down the deficit. We've got to be careful with these statements. It's not used that way at all.

Mr. Silye: Yes, it is. He just admitted it.

Mr. Grose: No. We're one of the few nations that does this. The deficit is, as it is stated, money borrowed by the government in effect to apply to the deficit. It's still on the books in the EI fund, but it does not affect the final figure of the deficit. It's just that we borrow this money.

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Mr. Silye: There is $40 billion there; you'd have a huge surplus.

Mr. Grose: If we were to put it out at whatever market rate we could get, the government would have to go out to finance the deficit at the same market rate. This then would be just playing with figures, but it does not pay down the deficit. Let's get that on record.

I think really what we're being told is that there are problems with this fund. I know it very well. My favourite little story is the fellow who pulled up in front of my constituency office - fortunately I was there - in his van, with a canoe on top of the van. He'd been cut off, you'll be happy to hear, from his CPP disability benefit, and he was in to complain I was supposed to do something about it. I asked, ``What's your problem?'' He replied he had a bad back. I asked him where he was going and he said he was going fishing with his buddy. I asked who put the canoe on top of his van and he said he did. I said ``Get out of my office; I don't want anything more to do with you''.

This is the kind of thing that does happen, but these are isolated cases. If we have drafted a bill that makes it difficult for these people to avoid this kind of chicanery, then we must redraft the bill, and I'll work with you on doing that.

Thank you, Mr. Chairman.

[Translation]

The Chairman: Mr. de Savoye, do you have any more questions?

Mr. de Savoye: Mr. Grose, you made a statement a few moments ago with respect to which I would like to ask the Auditor General for clarification. One week ago, when our Committee was considering the public accounts, I asked the Auditor General's representative what the status of the Unemployment Insurance Fund was. I clearly saw that under revenues were amounts for unemployment insurance. I also clearly noted the expenditures and disbursements that were indicated there. As I recall, the difference between the two was about $5.444 billion. I went back to look at assets; of course, they are not mentioned. I also looked at liabilities and later at interest-bearing debts, because there were none that did not bear interest, and they were not mentioned.

But if you look at revenues, expenditures and accumulated deficit, and if you look at assets, liabilities and the same deficit, you arrive at the same figure. So, I asked the Auditor General's representative whether there was an unemployment insurance fund or whether these were simply revenues and expenditures in the outstanding amount. Is it true that the difference between revenues and expenditures is strictly and immediately applied to the calculation of the residual deficit? He said it was. This is nothing but another

[English]

tax on the payroll; just another tax on the payroll.

What I mean here, Mr. Grose, is there is obviously a discrepancy between what the representative of the Auditor General told me a week ago and what you are telling us here. I would like the AG to clarify the situation for all of us now.

[Translation]

Mr. Desautels: If, within a given period, there are surplus revenues, compared with unemployment insurance account expenditures, that surplus is in fact used to reduce the government's deficit for that fiscal period. There is no separate fund per se, because all monies collected by the Unemployment Insurance Plan go into the Consolidated Revenue Fund, just as expenditures are paid from the Consolidated Revenue Fund. There is what is called a separate account to establish whether there is a surplus or deficit in the Unemployment Insurance Account. If there is a surplus, the Consolidated Revenue Fund pays interest to the Unemployment Insurance Account, whereas if it is the reverse, interest is charged by one account to the other.

To give you a simple answer to your question, one could say the deficit or surplus in the Unemployment Insurance Account for a given fiscal period has an impact on the government's surplus or deficit for that same period.

Mr. de Savoye: Thank you, Auditor General.

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The Chairman: Mr. Cappe, before we conclude the meeting, because we will soon have to leave for Question Period, can I ask you to undertake to forward to the Clerk your answers to the questions that appear in paragraph 17 of the Auditor General's written submission, since a complete response to those questions was not provided?

I can't say the following questions put by the Auditor General received a response:

"In my opinion, several questions still require clarification: What are the priorities? What level of resources is required? How will the Department measure attainment of objectives? What clear commitment has the Department made to ensure that Disability ranks among programs that are well managed?

You may say the action plan answers those questions, particularly the first two. However, would you undertake to send the Clerk your answers to those questions as soon as possible?

Mr. Cappe: Yes, I will send on to the Clerk our answer to the question raised by Mr. Paradis, as well as answers to each of the questions in paragraph 17.

The Chairman: Perfect. We are now in the holiday season, a time of the year when people make New Year's resolutions. I am not saying that your action plan is full of wishful thinking, but we're all familiar with human nature. I am glad that you've indicated specific target dates, timeframes for completion, leads, and so forth. Perhaps you could undertake to update the Committee on those stages of the action plan that have been completed?

I went through a little exercise of my own through which I was able to establish that a number of activities will be completed in March of 1997. Could you undertake to provide an update to the Committee on those stages of the action plan that have been completed in April 1997, as well as in April of 1998, if we are still all here?

Mr. Cappe: Yes, I undertake to send the Committee an update on completed stages of the action plan.

The Chairman: Perfect. Before we conclude this meeting, would the Auditor General like to make any final comments?

[English]

Mr. Desautels: Mr. Chairman, I don't have much to add, except I may just respond a little bit to what Mr. Hubbard said earlier.

I want to reassure the committee that in carrying out this work we have been trying to be as objective as we can and as value-neutral as we can, but we're seeking to provide parliamentarians assurance that this type of program is achieving the intentions parliamentarians have for this kind of program.

I believe it's possible to improve this program, and I believe if we do, the main benefactors will be those who are receiving benefits from this program, both in terms of maybe less fiscal pressure on the program, but also in terms of easier access and less paperwork to go through to get the benefits.

I see no reason why this should not be one of the better-run federal programs. It has a fairly clear mandate, and I think it should be shown as an example of a well-run program. As I said earlier, we will also do a follow-up of this in 1998 and report back to this committee in the fall of 1998.

[Translation]

The Chairman: Unfortunately, I forgot to make the following comment at the beginning of the meeting. I want to apologize to our witnesses for postponing the meeting scheduled for November 20th. I would also like to commend my fellow members for their flexibility and thank them for allowing us to accommodate you by meeting this Thursday morning. You know that our Committee has set very rigorous standards that I fully intend to abide by. We always hold meetings on Tuesdays and Wednesdays at 3:30 p.m.

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In closing, I would like to extend my best wishes this holiday season to all my colleagues, to our support staff, clerks, researchers, interpreters, and to the staff of the Office of the Auditor General and Human Resources Development Canada. Please be careful, particularly on the roads. Thank you.

The meeting is adjourned.

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