Opening Statement to the Standing Committee on Public Accounts

Involving Others in Governing: Accountability at Risk
(Chapter 23 - November 1999 Report of the Auditor General)

Canada Infrastructure Works Program: Phase II and Follow-up of Phase I Audit
(Chapter 17 - September 1999 Report of the Auditor General)

The Canadian Adaptation and Rural Development Fund: An Example of Involving Others in Governing
(Chapter 24 - November 1999 Report of the Auditor General)

Thank you, Mr. Chairman, for this opportunity to discuss our work on three reports we tabled in November last year.

As auditor on behalf of Parliament, an important part of our role is to monitor areas of government where there are threats to accountability or an erosion of Parliament's ability to scrutinize federal public policy. Some of our recent audits have raised concerns about accountability in new program arrangements where important aspects of the delivery of federal programs have been shifted outside the federal government. These new governance arrangements are growing in number and their magnitude is striking - over 5 billion federal dollars are now spent annually through these arrangements.

These arrangements call for new ways of holding the federal government accountable. This issue may seem theoretical but it has important, real consequences for the way federal programs are managed and how Parliament scrutinizes them. In my view, this is one of the most important issues facing Parliament and it needs to be addressed head-on.

Over the last decade, the face of government has changed substantially. The government is increasingly partnering with other levels of government and with the private and voluntary sectors to deliver its programs and services. In the 1998 and 1999 Budgets, the federal government even created two independent, not-for-profit partners mandated to pursue its objectives: the Canada Foundation for Innovation and the Canada Millennium Scholarship Foundation. The Social Union Framework Agreement signals an intent to enter into more partnering arrangements with other levels of government.

What concerns me, Mr. Chairman, is not the fact that new governance arrangements exist. On the contrary, many of them can be highly beneficial, provided they are properly implemented. An important aspect of this is ensuring appropriate accountability to Parliament and to the Canadian public for the federal policy purposes these arrangements pursue. It is not easy to arrive at an appropriate, acceptable accountability regime when a joint program is delivered under the separate authority of federal and provincial partners. Nor is appropriate accountability obvious when a partner operates beyond the public sector under the Canada Corporation Act or the Canada Business Corporations Act.

First, let me focus on Chapter 23, which deals with these new governance arrangements.

At the start of our audit, we discovered that the government did not know how many of these arrangements exist, what forms they take or how much federal money they involve. Consequently, we undertook a government-wide survey and found that 77 new arrangements have been created since 1990. And, this trend is on the rise. As I have said, they spend over $5 billion in federal funds a year.

These arrangements take two forms. In delegated arrangements the federal government gives an outside organization discretionary authority over program delivery, including key functions like planning and decision-making. There is no direct accountability by federal ministers and often there is little reporting back to Parliament on the use of federal funds or federal authority. Federal funding for delegated arrangements is usually provided through grants with few or no strings attached, or through contribution payments, which impose certain conditions on performance.

Our audit found weaknesses in the governing frameworks of many delegated arrangements. For example, performance expectations have not been established for the Canada Foundation for Innovation, and there is no requirement for reporting its performance to Parliament.

The Canadian Adaptation and Rural Development Fund, the subject of Chapter 24, is another delegated arrangement. For the most part, we found that Agriculture and Agri-Food Canada had developed controls for this arrangement that provide for appropriate accountability. This shows that it is possible to strike a reasonable balance between giving industry councils freedom to make decisions and respecting the need for accountability for public funds.

Collaborative arrangements are the second form of new governance arrangements. The federal government shares key functions with partners that may include policy-making and planning, but a responsible federal minister still oversees federal involvement in the arrangement. The Labour Market Development Agreements between the federal and provincial governments are an example. Federal funding of collaborative arrangements is usually provided through contribution payments.

A collaborative arrangement that has given me some concern is the Canada Infrastructure Works Program, initially a temporary program by the federal government to stimulate additional investment in local infrastructure and direct job creation. In this case, the federal government was responsible for approving joint funding for the projects proposed by provinces; provincial governments were responsible for day-to-day operations and program delivery.

In our view, the Canada Infrastructure Works Program did not appropriately balance the need for administrative flexibility with adequate accountability for the way the money was spent and for the results the projects achieved.

As we state in Chapter 17, our audit of Phase II of this Program found that from an overall federal perspective, the program was essentially "running on trust" with little accountability. Criteria for project selection were not clearly defined, and many of the files we reviewed lacked persuasive evidence to justify claims by applicants that they met selection criteria.

Chapter 25 of our December 1998 Report on Transport Canada - Investments in Highways, identified a number of similar concerns about the Department's collaborative agreements with the provinces to help fund highway projects. Overall, we found that Transport Canada administered its highway investment programs more like grant programs than the contribution programs they are. We also found that the Department assigned too few resources to this area, and provided little or no support to guide and facilitate the work. Not surprisingly, the Department did not do much of what it was required to do under the programs. The lessons learned from these audits should be applied when government is designing future program activities, to ensure that they will be well managed and provide for proper accountability.

Chapter 23 describes, based on our own work, essential elements of an effective governing framework for all new governance arrangements. In fact, these include appropriate reporting to Parliament and the public on the arrangement's spending and its performance toward its objectives; effective accountability mechanisms to ensure that adequate evaluation and audit regimes are established; adequate transparency of important decisions; and mechanisms to protect the public interest such as vehicles for citizen complaints and redress.

The collaborative and delegated arrangements we examined were not always created with these elements. The Committee might want to ask the Treasury Board Secretariat about progress in developing a framework for departments to use when they design new governance arrangements. We believe that members of Parliament should be consulted to ensure that their concerns about accountability are addressed within the framework.

The Committee might also consider asking departments to review their existing arrangements and, where there are gaps in the governing frameworks to provide plans for corrective action.

We think it is important that Parliament insist on proper accountability from new governance arrangements. Parliament needs information to determine whether these arrangements are working, whether public money and resources are being used wisely and whether the public interest is being well served. Parliament needs to be able to scrutinize the use of federal authority and the spending of federal funds, whether the decision-maker acting for the federal government is a federal official, a provincial official or a private or voluntary organization.

Parliamentarians should be given the opportunity to review accountability, transparency and mechanisms for protecting the public interest when considering legislation to create new arrangements that are outside the reach of traditional mechanisms like the Financial Administration Act. It is equally important for Parliament to regularly scrutinize whether these arrangements are properly accountable.

The Committee could play a pivotal role in encouraging the dialogue with members of Parliament.

In conclusion Mr. Chairman, the challenges raised in these chapters are not insurmountable. I applaud the important progress made in some of these areas, although much work needs to be done.

We now welcome the opportunity to answer the Committee's questions.