Opening Statement to the Standing Committee on Access to Information, Privacy and Ethics

Observations on the funding mechanism for the Office of the Auditor General of Canada

24 February 2005

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chairman, thank you for this opportunity to come before you to discuss our views on possible funding mechanisms for the Office of the Auditor General of Canada. With me today is Jean Ste-Marie, Assistant Auditor General and Legal Advisor.

The issue of an independent funding mechanism for the Office was first raised by my predecessor, Denis Desautels in the Capstone Report in February 2001in which he stated:

…the independence of the Office of the Auditor General needs stronger protection. At present, the Office's budget is negotiated with officials of the Treasury Board. Although this has not yet done any harm, I believe it is an uncomfortable arrangement. It could lead to unwarranted pressure on the Office and result in the withholding of necessary funds.

The Office of the Auditor General is the government’s independent auditor, and we believe very strongly that maintaining the objectivity and independence of the Office from the departments and organizations that we audit is central to our ability to carry out our mandate. Because there is no independent mechanism for the funding of the Office, we negotiate the level of funding with the Treasury Board Secretariat—one of the organizations we audit.

We believe the process should be corrected, so that there is no possibility of influence—real or perceived. We fully accept that our Office’s plans and spending should be subject to rigorous challenge. Where we differ from the Treasury Board Secretariat is that we believe that it is inappropriate for a department that we audit to provide that challenge.

We have been discussing alternative funding mechanisms with the Treasury Board Secretariat since 2001. In July 2001, the Treasury Board approved increased funding on an interim basis on the understanding that the TBS, in consultation with our Office, would undertake a process for establishing our future requirements. Over the next three years, we made a number of proposals to the TBS on different funding mechanisms and received little or no response or feedback. We became increasingly discouraged and concerned about the lack of progress by the Treasury Board Secretariat on this issue.

Over time, we have suggested three alternative approaches and discussed them with TBS officials. Two of the alternatives would require legislative changes; the third would not.

The first of the three was modelled after the United Kingdom’s National Audit Office mechanism. The National Audit Office presents its budget to an all-party Public Accounts Commission. The membership of the Commission includes the Chairman of the Public Accounts Committee, the Leader of the House of Commons, and seven other members of the House, appointed by it. None of the seven is a minister. The NAO prepares an estimate of its expenses annually. The Commission examines this estimate and lays it before the House of Commons with such modifications as it sees fit. The Commission is required to take into consideration any advice given by the Public Accounts Committee and the Treasury (the equivalent would be our Department of Finance). Legislative changes would be required to put this model into place.

The second model that would also require legislative changes is that provided for in the Parliament of Canada Act for the Senate Ethics Officer and the Ethics Commissioner. Both of these officers are to prepare annual estimates of the expenses to run their respective offices. These estimates are considered by their respective speakers and then transmitted to the President of Treasury Board who lays them before the House of Commons with the Estimates of the government for the fiscal year. Although there are some differences between these officers of Parliament and agents of Parliament like the OAG, we are confident that this model could be adapted to apply equally well to our Office.

The final approach proposes a blue ribbon panel that would be appointed to review and challenge our spending plans and report to the Treasury Board. The panel members would be drawn from retired high-profile public servants, accounting professionals with established credentials and experience, academics, and former speakers of the House of Commons. At least one of the candidates would be required to have a demonstrated familiarity with the workings of a large audit office. Two members would be appointed jointly by the speakers of the House of Commons and the Senate and the third would be appointed by the President of Treasury Board. The report setting out the panel’s recommendation with respect to the Office’s estimates would be submitted to Treasury Board on behalf of the Office. While Treasury Board Secretariat would retain its challenge role with respect to the amounts requested by the OAG, it would be generally understood by all parties to the process that the OAG estimates had been “substantiated” by the panel. No legislative changes would be required; the panel could be put in place through administrative changes within the existing constitutional and legislative framework. We have provided a paper outlining in more detail how the blue ribbon panel might operate to Treasury Board officials and to the Public Accounts Committee.

We believe that any one of the three models we have discussed or a combination of elements from the three models would achieve our objective of achieving the necessary independence for a funding mechanism and an appropriate review and challenge function of our funding requests.

We also believe that the existing accountability regime for the OAG is strong and sufficiently robust to support such an independent funding mechanism. Officials of the Treasury Board Secretariat have commented in somewhat vague terms about the need for agents of Parliament to have greater accountability. Our Office has described accountability as the obligation to render an account of and accept responsibility for one’s actions, both the results obtained and the means used.

We believe that the existing measures in place ensure our Office’s accountability. We submit annual funding estimates and a performance report to the Treasury Board for tabling in Parliament. The Public Accounts Committee calls upon the Auditor General to explain the spending and performance of the Office and to discuss our reports on plans and priorities and performance as well as our management practices. Our annual performance report includes our audited financial statements which are prepared on a full accrual basis. Our sustainable development strategy was tabled in Parliament in February 2004. We are subject to scrutiny by the Official Languages Commissioner, the Public Service Commission, the Privacy Commissioner, and the Canadian Human Rights Commission. We have ourselves ensured that our annual attest and performance audit practices have been subject to external reviews.

We appreciate very much the support that the Public Accounts Committee has given to the Office in its recent report released on February 14, 2005 on our Reports on Plans and Priorities and Performance. In particular, we support the Committee’s recommendation that a new funding mechanism that safeguards the independence of the Office and ensures that it will be able to meet the expectations of Parliament, be established for our Office prior to the end of October 2005.

Thank you Mr. Chairman. We would be pleased to answer any questions the Committee may have.