Opening Statement to the Standing Committee on Agriculture and Agri-Food

Agriculture Portfolio - User Charges
(Chapter 11 - September 1999 Report of the Auditor General)

I would like to thank your Committee for this opportunity to discuss our September 1999 Report, in particular, Chapter 11, User Charges in the Agriculture Portfolio.

With me today are Doug Timmins, Assistant Auditor General, and Neil Maxwell, the Principal responsible for this audit.

The government's 1997 Cost Recovery and Charging Policy states that user charges should be implemented for "services that provide identifiable recipients with direct benefits beyond those enjoyed by the general public, unless overriding policy objectives would be compromised." A key underlying principle is that user charges should provide benefits beyond generating revenues, such as making services more responsive to users' needs.

To avoid possible confusion, I would like to explain clearly what our audit did, and what it didn't do. We did not question whether there should be user charges, which is a matter of government policy. We did not audit the user charges of other federal departments, nor did we include the provinces or municipalities in our examination. Rather, we looked at whether Agriculture and Agri-Food Canada, the Canadian Grain Commission and the Canadian Food Inspection Agency do a good job of implementing the policy. We reviewed all aspects of the way these organizations manage user charges, including costing their services, distinguishing private from public benefit, and consulting with users of their services. We also examined the quality of information they report to Parliament on their user charges.

We found that despite the intent of the Treasury Board's policy, the organizations often view user charges primarily as a means of generating revenue, instead of designing them to achieve broader benefits.

The organizations have made some overall progress in the past five years:

• Consultation on user charges has improved.
• In some cases, consultation has produced a "win-win" result for both government and industry. For example, federal beef-grading is now done by a private non-profit corporation at a fraction of the former cost.
• The three organizations use a number of good practices that other departments would do well to consider in managing their own user charges.

In our chapter, we identified the management practices required to implement user charges properly. While the organizations made some progress in certain areas, we found a number of areas that require additional effort:

• Each organization needs to improve its costing capability in order to improve its management of user charges and enhance public confidence.
• The organizations also need to improve their assessment of the potential impact of fees, and they need to establish formal appeal processes.

We found that in most cases, the organizations did not properly explain their intentions for user charges, nor the results. Major improvements are needed in the way they report to Parliament, the public, and industry.

One factor that officials cited as an overriding constraint on their management of user charges was a ministerial moratorium on new or increased fees. In November 1996 your Committee was told that there would be no new user fees and no increases to existing fees at the CFIA before the year 2000.

During our audit we found that Officials felt constrained from correcting known inconsistencies among fees and that user charges were not being updated as programs changed. As a result, some groups could be paying either more than their fair share or less.

The moratorium has frozen not only fee increases but also potential improvements in the management of user fees. In some cases, officials have all but abandoned the cycle of reviewing and improving their management practices.

Earlier this month the Minister of Agriculture and Agri-Food announced to the House of Commons that AAFC and the CFIA will freeze changes to mandatory fees until the end of 2002, and the Grain Commission will freeze changes to mandatory fees until the end of 2003.

As we stated in our chapter, we believe that the period of the moratorium is an opportunity for organizations to evaluate whether user fees are being applied properly; to develop measures of program efficiency; to develop better management tools for user charges, including costing systems; and to plan for the future. This is also an opportune time for the organizations to improve information on user charges that is provided to Parliament and others.

Finally, Mr. Chairman, we have been told that the Treasury Board's planned review of the government's policy is now under way. We have communicated to Treasury Board Secretariat officials that we would be happy to work with them to share the knowledge gained through this audit.

Mr. Chairman, that concludes my opening statement and we would be pleased to answer your Committee's questions.