Opening Statement to the Standing Committee on Public Accounts

Parc Downsview Park Inc.— Parliamentary control of programs and spending
(Chapter 13 - December 2001 Report of the Auditor General)

Mr. Chairman, thank you for this opportunity to appear before your Committee to discuss our audit observation on Parc Downsview Park Inc. from our December 2001 Report, Chapter 13. Joining me are Shahid Minto, Assistant Auditor General and Louise Bertrand, the Director responsible for the Downsview Park audit.

As I highlighted in my first annual Report and in my discussion of the Employment Insurance Account before this Committee, I am concerned about the erosion of Parliament's role in controlling how the government raises money and spends it. The creation and funding of Downsview Park, the matter before us today, is an example of this erosion of parliamentary oversight and scrutiny.

In 2000 and 2001 we reported our concerns about Downsview Park in our opinion on the financial statements of Canada Lands Company Limited and its subsidiary, Parc Downsview Park Inc., and in our reports to Parliament for those years. I also outlined my concern in my 2001 Report chapter, Matters of Special Importance.

Generally, when a new Crown corporation is established with unique operating characteristics—in this case, to transform a military site into an urban park#&151;it receives a mandate from Parliament through legislation that establishes it as a parent Crown corporation. Downsview Park, however, was set up as a subsidiary of Canada Lands Company Limited by an order-in-council; as a consequence, its mandate was not presented to Parliament for review and approval.

Until now, Downsview Park has financed its operations through the sale and leasing of land to third parties and with funding from the current owner of the property, the Department of National Defence. In 2000 Downsview Park spent roughly $2 million, funded by National Defence, on developing the Downsview Park site. As we reported, we do not believe that this was a valid charge against National Defence Vote 1.

Furthermore, in 2000 the government transferred $19 million in cash indirectly, and without Parliament's formal approval, to fund Downsview Park operations. This was accomplished by a series of transactions that, while all seemingly legal, together meant that the transfer was made with no formal approval by Parliament.

It also appears that the full ramifications of the current corporate structure were not thought out fully when Downsview Park was created. For example, as mentioned in our audit observation in 2000, the particular structure used to create the new park contemplated that Downsview Park would receive donations and use them to develop the park. Canada Lands was authorized to incorporate a Downsview Park Foundation that would solicit the charitable donations. Under the Income Tax Act, however, the foundation could donate its funds only to a "qualified donee." Downsview Park is not a "qualified donee" for income tax purposes, because it was established as a taxable, commercial, for-profit entity.

Action by the government is needed—in particular, action by senior officials of the Privy Council Office—for it is obvious that management at both Canada Lands and Downsview Park can do little by themselves to resolve this matter.

To the best of our knowledge, this matter does not involve a violation of any law, with the possible exception of the payment of $2 million that I described earlier. In our opinion, however, the process of creating the Downsview Park organization and the method of funding its operations left Parliament out of the decision.

As we have noted in our reports, if the government wishes to set up an urban park and invest in it more than $100 million of public funds, we think it should obtain Parliament's clear and explicit approval. In my opinion, Canadians are not well served when Parliament's oversight is bypassed by administrative manoeuvres.

We believe that a possible way to resolve the issues and remedy Downsview Park's current financing and operational problems is to seek parliamentary approval to make the Downsview Park corporation a parent Crown corporation, with a suitable mandate from Parliament and appropriate means of funding.

I hope the Committee will obtain the government's assurance that in future, before creating special entities and Crown corporations, it will focus more on effective accountability, legal aspects, and greater transparency.

We have reported this matter to Parliament twice. We now need to determine the appropriateness of continuing to include this as an "other matter" in our opinion on the financial statements. One possibility is to continue reporting it until either the government deals with the matter or Parliament indicates that no further action is required. The other extreme may be to determine that we should now cease reporting it. Or we can opt for something in between, for example, reporting only if there is significant spending. We would appreciate some guidance from the Committee on its preference in the matter.

Mr. Chairman, that concludes my opening statement. We would be pleased to answer any questions that the Committee may have.

Opening Statement (4 June 2002) - Parc Downsview Park Inc.