The Liberal government has placed Transport Canada under special oversight for repeatedly missing internal financial targets, The Globe and Mail has learned – a highly unusual move targeting a federal department.
A special envoy has been sent by Treasury Board, the central agency that reviews and approves government spending, to oversee the department's budget decisions.
The move comes in the wake of concerns that Transport Canada officials have regularly overshot spending during the current fiscal year, which began April 1, 2015, largely due to a significant spike in hiring at the start of the year.
A recent shuffle of the department's senior leadership means it will have had three different deputy ministers over the course of a year.
Executives in the department were called to a special meeting last week where managers were told that spending will be scaled back in order to manage salary costs.
As The Globe reported Tuesday, outgoing-deputy minister Jean-François Tremblay sent a note to staff Friday informing them that the "budget situation is going to continue to be difficult for the year ahead."
The department has been under intense public scrutiny in recent years, largely because of the 2013 Lac-Mégantic disaster that saw a parked train carrying crude oil roll down a hill and explode in the centre of the small Quebec town, killing 47 people.
The deadly explosion coincided with a dramatic increase in the volume of crude oil travelling the country by rail because of a pipeline capacity shortage.
A spokesperson for Transport Canada confirmed the department is under external oversight.
"In its efforts to internally realign its resources, Transport Canada is working closely with central agencies. Transport Canada and the Treasury Board Secretariat agreed to assign a former chief financial officer with extensive experience to work as adviser to the department," said the official, who did not identify the Treasury Board official.
Sources say the decision to appoint an outside envoy was approved by Treasury Board President Scott Brison and Transport Minister Marc Garneau in January.
A 2013 Auditor-General's report found "significant weaknesses" in the department's approach to rail safety, including a failure to assess whether it had the right number of inspectors with the right skills to provide proper oversight of federal railways.
Internal frustration at the slow pace of hiring new inspectors in the wake of that report appears to have inspired the 2015 hiring spree that ultimately raised the alarms of financial managers.
The department's then-deputy minister, Louis Lévesque, retired from the public service in July and is now a senior fellow with the C.D. Howe Institute. He was replaced on July 20 by Mr. Tremblay, who came from the Privy Council Office.
Both Mr. Lévesque and Mr. Tremblay also had responsibility for the Infrastructure and Communities file during their time as deputy minister of Transport.
However, Prime Minister Justin Trudeau announced on March 2 that those duties would be split in two, with Mr. Tremblay keeping responsibility for infrastructure. Michael Keenan, the former associate deputy minister of Natural Resources, will take over as deputy minister of Transport on Monday.
Signs of tension inside the department over staffing issues surfaced publicly in March, 2015, when the then-deputy minister, Mr. Lévesque, appeared before the House of Commons transport committee alongside the then-transport minister, Lisa Raitt.
During the meeting, Mr. Lévesque blamed officials in his department for failing to maintain staffing levels in response to a turnover rate of about seven per cent per year.
"What happened is that certain managers did not take the appropriate measures quickly enough to replace the people who were naturally going to have to retire," he said.
As a result, Mr. Lévesque said managers had been reminded of the need to fill vacancies and hiring shot up by about 240 employees as the department went "full tilt" on recruitment.
In an interview Tuesday, Mr. Lévesque said he had to take into account that the department had a pattern of overestimating its hiring plans and then falling short at the end of the year.
"You're always in a risk situation," he said. "There's a balancing act to be done."
Mr. Lévesque said the timing of his retirement was not related to this issue.
Staffing at Transport Canada has fluctuated considerably in recent years. It rose from 4,970 in 2006 to 5,553 in 2011 before dropping to 4,771 in 2014 and then back up to 5,205 as of March 31, 2015.
Mr. Garneau, the Transport Minister, and Mr. Tremblay, the outgoing deputy minister, are scheduled to appear Wednesday before the Transport committee to discuss spending in the department.
"The minister is dealing with the difficult financial situation he inherited from the previous government," said Mr. Garneau's spokesman Marc Roy.
Ms. Raitt, the Conservative MP and former transport minister, said she plans to attend the committee. She said Tuesday the increased hiring was in response to recommendations from the Auditor-General and the Transportation Safety Board and she was not aware of any internal budget concerns.
"They needed to be hired in order to fulfill the deficiencies that were pointed out by independent officers," she said, adding that she would have argued for more money later in the year, if necessary. "I certainly would hope that Minister Brison and Minister Garneau are doing this in order to ensure that safety is paramount."
With a report from Grant Robertson