Opening Statement to the Standing Committee on Public Accounts

2003-04 Performance Report and 2004-05 Estimates of the Office of the Auditor General of Canada

18 November, 2004

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chair, we are pleased to be here and would like to thank you for the opportunity to discuss our Estimates documents, including our 2003–04 Performance Report and our 2004–05 Estimates. More details are included in our Report on Plans and Priorities, which was recently tabled.

Accompanying me are John Wiersema, Deputy Auditor General; Rick Smith, Assistant Auditor General, Strategic Planning and Professional Practices; and Mary Clennett, our Comptroller.

Let me begin by briefly summarizing the scope of our work. We audit the federal government, which includes some 70 federal departments and agencies, 40 Crown corporations, 10 departmental corporations, and 60 other entities. We also audit the three territorial governments, 15 territorial agencies, and two United Nations agencies, UNESCO and the International Civil Aviation Organization (ICAO). For these two, we recover costs.

How are we doing as an Office? Our Performance Report addresses that question. It includes an introductory section called Performance Highlights. Using a number of key indicators, it describes our performance for the year. I have appended my message and the Performance Highlights sections to my statement. I have also included a list of planned performance audits for the next 18 months.

We do this with a budget (Main plus Supplementary Estimates) of $75.7 million for 2004–05, and a staff equivalent to 580 full-time employees. This is comparable with our 2003–04 parliamentary appropriations, and is, in my view, sufficient to enable us to fulfil our mandate to serve Parliament.

Looking ahead, Mr. Chair, I regret to inform you that our financial position is less rosy. There are two related issues I would like to bring to your attention today: our funding for next year (2005–06) and the mechanism for determining our funding over time.

Let me provide you with some context. In 2001 I requested a permanent increase to appropriately fund our performance audits and our investments in methodology, technology, and intellectual capital. Treasury Board ministers provided temporary funding with a condition: that the Secretariat would work with us to develop a more appropriate funding mechanism by the fall of 2002.

That deadline was not met and Treasury Board ministers extended the temporary funding through this year – 2004–05. They also provided additional resources for new work. Together, these total $11.5 million this year.

In anticipation of an October 2004 meeting of the Treasury Board, we presented a submission asking for resolution to the funding mechanism by 31 December 2004. We also asked that the $11.5 million in temporary funding be extended.

However, as a result of continuing discussions with Secretariat officials, our submission has not been sent to Treasury Board Ministers. So the $11.5 million has not been considered or approved by ministers. At this time, our approved funding for next year is $60.8 million – a decrease of more than 15% from this year. A picture of our longer-term planned spending is attached to my statement (see page 23 of our 2004-05 Estimates.)

I have formally communicated my concerns to the government. Yesterday, I received a response from the Treasury Board Secretariat. It again commits to bringing the “question” of a funding mechanism for my Office to Treasury Board Ministers this time by the end of the calendar year. It also asks us to again justify resource requirements previously approved by Treasury Board Ministers. I responded to this letter earlier today.

We have discussed this issue with the Treasury Board Secretariat since 2001. I believe that an appropriate funding level must be determined in an objective manner that is not influenced by those we audit. The existing process is not sufficiently independent and impartial to ensure that our budget is appropriate for meeting Parliament’s expectations.

At present, like almost all federal departments and agencies, we negotiate our budget with representatives of the Treasury Board Secretariat. In the past, I have said that this has not been a major problem for the Office. However, because of our current funding situation, I can no longer say that. And as a matter of principle I believe that this situation should be corrected so there is no possibility of influence, real or perceived.

The issue is, in my view, how to establish a balance between the independence of the Auditor General and the rightful challenge to our expenditure of public funds. You will recall that when the Treasury Board Secretariat responded to this Committee’s Eighth Report in November 2001, it said that it would consult with us to reach agreement on a new funding process.

We have presented to the Treasury Board Secretariat three different approaches to establishing a more appropriate funding mechanism for the Office. Unfortunately, those discussions have yet to bear fruit. I would be pleased to discuss the three approaches with you.

Mr. Chair, it has been more than three years since Treasury Board ministers requested a resolution to this issue. We have prepared proposals and held meetings – with no result. I believe it is crucial that this issue be resolved. I request your support in obtaining an appropriate mechanism and funding for my Office which would respect our independence.

Thank you, Mr. Chair. My colleagues and I would be pleased to answer your questions.

Annex 1

Office of the Auditor General Reports Planned for 2005

February 2005

Status Report

• Information Technology
• Transport Canada: Oversight of the National Airports System
• Human Resource Management Modernization
• Accountability of Foundations
• Canada International Development Agency: Contracting
• Canadian Nuclear Safety Commission: Power Reactor Regulation
• Crown Corporation Accountability
• Managing Government: Using Financial Information

April 2005

• Natural Resources Canada – Governance and Strategic Management
• National Security Enhancement Initiatives – Phase II
• Foreign Affairs and International Trade – Passport Integrity
• National Defence – Information Management in Support of Command and Control
• Rating of Departmental Performance Reports
• Non-Renewable Resource Development in the North

September 2005

Report of the Commissioner of the Environment and Sustainable Development

• Ecological Integrity in Canada's National Parks
• Follow-Up Audit of the Canadian Biodiversity Strategy
• Canada 's Oceans Strategy
• Safe Drinking Water
• Water Quality and Infrastructure on Reserves
• Sustainable Development Strategies
• Environmental Petitions

November 2005

• RCMP - Contract Policing
• Improving Service Quality Government Wide
• Individual and/or Trust Taxpayers
• Implementing the Government's Innovation Strategy
• Managing Horizontal Issues
• Support Given to Cultural Industries
• The Federal Electoral Process

Tentative list for Spring 2006

February 2006

Status Report

• Military Recruiting and Retention
• Firearms Program
• Managing Government: Using Financial Information
• Grants and Contributions
• First Nations

April 2006

• The Management of Government Information
• The Government’s Expenditure Management System
• Canada Revenue Agency – Collections
• Public Safety Probity Issues
• National Defence – Financial Management and Control
• Health Canada – Financial Management and Control
• Canada Revenue Agency – Source Deductions
• Rating of Departmental Performance Reports

Annex 2

Forecast and Planned Spending ($ millions)

¹ Includes Supplementary Estimates