Opening Statement to the Standing Committee on Public Accounts

December 2002 Report of the Auditor General

3 December 2002

Mr. Chairman, thank you for the opportunity to meet with the Committee to discuss the Report tabled earlier today, my fourth since taking office in May 2001.

As Auditor General, it is my role to promote greater government accountability and a more effective public service. Canadians are increasingly demanding both.

This report deals with two issues of great concern to me: the need for Parliament to receive full and accurate information from government, and the government's ability to successfully manage its long-term reform initiatives.

Accountable government requires that members of Parliament be able to approve the government's plans for spending and scrutinize the results of that spending. To do this properly, Parliament needs sufficient information about costs and expected results.

When it comes to the Canadian Firearms Program, Parliament could not fulfill this vital duty because it was never given a realistic estimate about what the program would cost to implement, or explanations for changes in the program along the way.

Back in 1995, the Department of Justice told Parliament that the program would cost taxpayers about $2 million. The Department now says that by 2004-05 the costs of this program could amount to more than $1 billion.

And even though the Department has many explanations for this ballooning of costs, it never shared any of them with Parliament.

The issue here is not gun control. And it's not even astronomical cost overruns, although those are serious. What's really inexcusable is that Parliament was in the dark. I question why the Department continued to watch the costs escalate without informing Parliament and without considering alternatives.

My Report also brings to light other instances in which Parliament is not being given the information it needs to authorize large expenditures of public funds.

For example, the government still has not taken the steps required to obtain Parliament's authorization to create Downsview Park. I believe that spending more than $100 million of taxpayers' money over the next 20 years requires formal Parliamentary approval. This is the third year in a row that I am drawing attention to this issue. I hope it will be the last. I look forward to reading your Committee's report on this matter.

But I'm happy to report that the news is not all bad.

Significant advances have been made in providing vital information on health to our elected representatives and to Canadians. This fall, for the first time, the federal, provincial, and territorial governments published indicators of the performance of their health systems.

Canadian legislative auditors were asked to verify the accuracy of the health data. We conducted this work for the federal government and the three territories. In my view, adding an opinion attesting to the information's validity makes the reports more credible.

Good national health statistics are vital to a fully informed public debate on the future of our health system.

Moving on to another major area that concerns me…

I am disappointed by the government's lacklustre progress in achieving key government-wide management reforms.

Over the years, the government has launched several ambitious initiatives with far-reaching and very commendable objectives. They range from improving the security of information technology systems, to reforming the management of human resources, to modernizing comptrollership and strengthening financial management and control.

Unfortunately, I see a large gap between the government's commitment and what it has actually achieved in all these areas.

Given the size of government, any initiative that seeks to change how government functions is a formidable challenge. Progress is especially difficult and momentum may be hard to maintain when the agenda extends over several years.

To succeed, the commitment to change must be translated into concrete action through strong leadership on the part of senior management and the central agencies, such as the Treasury Board Secretariat and the Privy Council Office.

Clear direction is essential. Government must do more than say where it wants to go; it must also explain how it will get there.

And those responsible for implementation must be held accountable for achieving key milestones by specified target dates.

Take the initiative to improve government financial management, for example. More than 40 years ago, government started to modernize the way it manages and controls its finances. It has spent an enormous amount of money—hundreds of millions of dollars—to set up state-of-the-art financial systems.

And yet, public service managers still cannot easily find out the true cost of their programs, nor do they have complete and reliable information on the assets and liabilities they are responsible for managing.

Canadian taxpayers expect more. They expect federal program managers to base their decisions on accurate and complete financial information, which reflect the true costs of their programs.

And they certainly expect the people running government departments to know if the public money they are spending is actually accomplishing what it is supposed to.

The initiative aimed at improving financial management and control has not received the commitment and leadership it needs to succeed. For an organization that spends almost $180 billion a year, this is not acceptable. It is time for government to get serious and get on with making the necessary improvements.

Your Committee's reports to the House and hearings on the government's progress in implementing the Financial Information Strategy are very important and I hope that you will continue to follow this initiative closely.

Returning for a moment to accountability, the bedrock of our democratic form of government…

Canadians sometimes tell me they don't think government is accountable, that those responsible for managing programs—which should mean producing results while playing by the rules—aren't watching closely enough, and that nothing seems to happen when things go wrong.

If Canadians are to have confidence in government, it must account for its performance in a clear and timely way.

Today's public sector is a changing one. The government now delivers many policies and programs through arrangements with the provinces and with private sector organizations. We're seeing a new culture of results-based management emerge as well as more encouragement for managers to innovate and take reasonable risks.

All of these developments challenge our traditional notions of accountability. We think it's time for a definition that better fits the times. One of the chapters in this report proposes an enhanced definition of accountability in response to these changes.

It stresses the importance of the means used as well as results achieved. It points to the obligations of all parties. It underlines the need for review of performance by managers and by Parliament. It emphasizes the importance of transparency in the accountability process. Finally, it takes into account managing for results, and sharing accountability among partners.

Essentially, what I'm saying is: rules should be few, clear, meaningful, and consistently applied. Meaningful rules are those that directly support the principles of fairness, propriety, and good stewardship of public funds.

Now, in the area of First Nations reporting, the existing rules don't seem to be meaningful at all. When we looked at a selected group of First Nations, we found that those communities are required to submit a total of 168 reports a year to four federal organizations in order to receive funding.

This is an onerous burden for these communities, most of which are small and located in remote areas. But what's worse is that the bulk of this information is never used.

There's not much point in First Nations exchanging data for dollars with the federal government when the information is of no real benefit to either party.

Good reporting is essential for accountability and for good management. First Nations want and need a reporting system that actually helps them to manage their own affairs as well as meet the requirements of federal organizations.

Now I'd like to talk about rules of another kind…

The income tax rules for foreign affiliates are having a significant impact on Canadian taxpayers. Over the last 10 years, these rules have resulted in foregone tax revenue totalling hundreds of millions of dollars.

We first raised this issue a full decade ago. It was looked at by the Public Accounts Committee in 1993 and in 1997, the Minister of Finance's Technical Committee on Business Taxation also sounded the alarm bell. It's time to fix this.

Before concluding, I would like to draw one other matter to your attention, namely, the failure to observe the best possible management practices to ensure that taxpayers are getting good value for money.

This report notes several such examples—some of them long-standing—that need to be addressed.

Fisheries and Oceans Canada needs to better manage its navigational support and boating safety activities to meet the changing needs of boaters.

The Canadian Customs and Revenue Agency would be able to make better use of its scarce international tax expertise if it improved its assessment of risk.

Better strategic planning would help the Real Property Services Branch of Public Works and Government Services Canada get the best value in the office space it acquires for government use.

Finally, an up-to-date strategic plan would help the Canadian Space Agency plan its workforce to support its priorities.

Thank you Mr Chairman, these are only a few of the issues we cover in this Report. I hope the Committee will consider hearings on as many of the chapters in the Report as possible between now and the next report in April 2003. We would be pleased to respond to questions.