Opening Statement to the Standing Committee on Finance

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 the subject of user charges. Our presentation is based on Chapter 11 of our September 1999 Report, User Charges in the Agriculture Portfolio.

With me today is Neil Maxwell, the Principal in our Office responsible for this audit.

Our audit looked at three federal agriculture organizations — Agriculture and Agri-Food Canada, the Canadian Grain Commission and the Canadian Food Inspection Agency — to determine whether they have done a good job of implementing the policy. We reviewed all aspects of the way these organizations manage user charges, including the quality of information they report to Parliament on their user charges.

Successful implementation of user charges requires good management practices in a number of areas. These include:

• program costing;
• service standards;
• impact analysis;
• a consultation process;
• planning — and understanding how user charges can achieve program objectives;
• reviewing performance;
• learning from experience; and finally
• clarity and completeness of public and parliamentary reports.

I would stress that these practices are not only necessary for the implementation of user charges, but are part and parcel of good management.

We noted that the organizations have made progress in the past five years in improving certain management practices. For example:

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.

Further, Agriculture and Agri-Food Canada was the first department to undertake a cumulative impact study of federal fees, and it significantly advanced knowledge of agriculture fee impacts.

We also illustrate a number of good practices at the three organizations that other departments would do well to consider in managing their own user charges.

In our chapter, we also identified areas that require additional effort.

First, each organization needs to improve its costing capability in order to improve its management of user charges and enhance public confidence. While the Treasury Board Secretariat and my Office have emphasized the importance of good costing systems, we found a reasonable costing system in only one program area.

Second, service standards are not widely used.

Third, the organizations need to improve their assessment of the potential impact of fees. Impact assessments that we reviewed were imprecise and contained little information that would help the reader understand the fee's expected impacts.

Fourth, formal appeal processes were either not well known or not in place.

Fifth, the organizations need to improve the quality of information on user charges that is made available to parliamentarians and the public. Among other things, organizations need to indicate the rationale for charging a fee and demonstrate that services are efficient. They need to report the service standards achieved, the revenue raised, the ways in which user fees have helped the organization meet its objectives and the means of obtaining more detailed information on individual fees.

Finally, our audit found that these organizations have often viewed user charges primarily as a means of generating revenue. There are opportunities for the organizations to achieve the broader user charge benefits set out in the Treasury Board policy. For example, user charges can be a tool to help increase compliance with government regulations and make services more responsive to users’ needs.

I am happy to report that on 30 March of this year, the Standing Committee on Agriculture and Agri-Food received the commitment of the three organizations that they would act on the recommendations contained in our chapter. This is a step in the right direction.

In November 1996, the government announced that there would be no new user fees and no increases to existing fees at the Canadian Food Inspection Agency before the year 2000.

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

The moratorium also stalled potential improvements in the management of user fees. In some cases, officials had all but abandoned the cycle of reviewing and improving their management practices.

In March of this year, the Minister of Agriculture and Agri-Food announced that the Department and the Canadian Food Inspection Agency 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.

We believe that the period of this freeze is an opportunity for these organizations to develop better management tools for user charges and to improve the information on user charges available to Parliament and others.

Mr. Chairman, as you know, 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.

I would like to conclude by summarizing several key points on the subject of user charges raised in the chapter on Matters of Special Importance chapter last year. I noted that many observers have criticized the way user charges have been implemented, and that our audit work over the years supports many of those criticisms. But I also noted that our work provides evidence that user charges can provide benefits beyond the revenues generated. User charges can serve as an incentive for users to work with managers and focus services on what is truly of value. The pressure that user charges create to improve service standards, costing systems and efficiency of operations should be welcomed. I concluded by saying that user charges can play a valuable role in the management of government services.

Mr. Chairman, that is the end of my opening statement and my colleague and I would be pleased to answer your Committee’s questions.