1.1 The tenure of every Auditor General is shaped to some extent by the bureaucratic, political, cultural and economic climate surrounding it. My appointment comes at a time when the country faces unique challenges. This year's Report reflects some of these national issues - the relationship between the government and First Nations, the need for better co-ordination between governments with overlapping jurisdictions, the protection of the environment, and the deficit. The Report can be viewed as a microcosm of the wide-ranging concerns of Canadians - from specific, local issues to those of interest nationwide. My intent in this chapter is to weave together some of the common threads in this Report, from my perspective as a relative newcomer to Ottawa, with a few "first" impressions.

1.2 My natural inclination - and my professional training - is to ask questions. This chapter will focus less on solutions to the problems raised in the Report than on the questions those problems lead me to ask.

1.3 There are two overriding messages in this chapter. The first is that means must be found to more effectively manage programs that involve different levels of government. The second is that managers and departments need to better account for results, for what they have - or have not - achieved with taxpayers' money. Such an accounting, with its emphasis on results, would help Parliament consider past performance in the allocation of scarce resources.

First Impressions of Ottawa

Credibility is the Office's most valuable asset

1.4 My first impression on assuming my new role was that the Office of the Auditor General enjoys real credibility, both in Ottawa and with the taxpayers across the country. It is perhaps the Office's most valuable asset, and I intend to channel it along constructive avenues. The stature and credibility of the Office reflect the vision, innovative thinking and energy of my predecessors. James J. Macdonell translated his vision of comprehensive auditing into a new Auditor General's Act. He reaffirmed the role of the Office as an independent legislative auditor and established the basis for the development of new audit methodologies. Kenneth M. Dye continued with the development of comprehensive auditing. Under his tenure the Office's credibility and recognition by the Canadian taxpayers became well established. His term was characterized by many accomplishments in the international sphere, in the accounting profession, in the government, and within the Office. One measure of his accomplishments is the creativity, professionalism and dedication of the staff I found in the Office.

A dedicated, competent public service

1.5 Another early impression was that a dedicated, competent public service is dealing with complex problems that have developed over the years, with both the complexity and its consequences compounding over time. The $29 billion annual deficit is not a result of bureaucrats simply burning the taxpayers' money; it cannot be attributed to a single cause. An analysis of the financial statements of the Government of Canada in the Public Accounts suggests to me that the reasons for the deficit are profound, complex and difficult to solve. I sense there are few easy fixes, panaceas, or substitutes for some degree of sustained sacrifice. Immense challenges lie ahead. Clearly, there is no room for a false sense of security. Yet we must believe there can be alternatives. Cynicism or a pessimistic belief that government cannot address these problems could become self-fulfilling. The times call for re-establishing our faith in our ability to improve things, for optimism, shaped by a feeling for history and tempered by a sense of what is achievable.

Widespread concern about the deficit

1.6 There is serious and widespread concern about the annual deficit and the accumulated debt. People are worried about the deficit's potential impact on their standard of living and that of future generations. Senior public servants seem frustrated by a fundamental problem: how to reconcile the increasing cost of the services that taxpayers and successive governments demand with the limits on the financial resources at their disposal.

The need to focus on results

1.7 Another impression has to do with the administration of public affairs, the need to focus on results instead of on process. There are cumbersome internal rules in government, an emphasis on procedures, a complex budgeting process, and so on. To a newcomer it seems evident that successive governments, concerned about probity and prudence, economy and efficiency, have placed pervasive, systemic reliance on central controls. Why? One explanation is that it is hard to manage by results when few meaningful ways to measure them have been put into use. Reporting of results - outputs (efficiency) and the outcomes (effectiveness) of program activities - would appear to be a precondition for moving from a regime of central control. This is especially true in Ottawa. For nowhere in Canada is there so much talk about accountability which nevertheless still remains such an elusive goal.

A troubling dichotomy

1.8 Then there is the impression of a troubling dichotomy: an emphasis on improved administrative processes on the one hand, and the financial condition of the country on the other. There have been major initiatives in public administration in the last fifteen years: the emergence of value-for-money auditing, the creation of the Office of the Comptroller General, Part III of the Estimates, the emphasis on internal audit, the advent of program evaluation, the many acronyms - PPBS, MBO, PEMS, the three E's of economy, efficiency and effectiveness - and now, IMAA and Public Service 2000. A great many of these had their origins in the government itself.

1.9 Yet, despite these many initiatives, Canada's finances are not in any better shape. Changes in process have not solved the fundamental problem of balancing expenditures with revenues. The Auditor General in 1976, James J. Macdonell, was "deeply concerned that Parliament - and indeed the government" - had lost, or was "close to losing, effective control of the public purse". The Public Accounts for the year ended 31 March 1976 showed an annual budgetary deficit of $4 billion; the accumulated deficit, represented by the excess of liabilities over net recorded assets, was $23 billion. Fourteen years later, despite all the intervening initiatives, the annual deficit has increased to $29 billion and the accumulated deficit to $358 billion. How does a taxpayer observing Ottawa reconcile the growing deficit with the previous prescriptions for better public administration? Has there been too much emphasis on process and not enough on results?

1.10 I came to Ottawa with the realization that there are some fundamental issues facing the government - and a number of related questions: about the history of administrative reform and the causes of the deficit; about the relationship between the government and First Nations; about the roles of different levels of government in areas involving overlapping jurisdictions; about the protection of the environment. This, my first Report, touches to some degree on all these issues. This chapter provides an overview of my Office's findings and observations on them.

Department of Indian Affairs and Northern Development - the Dilemma of Reconciling Accountability to Parliament with Funding Arrangements for First Nations

Increasing trend toward devolution

1.11 During 1990-91, various government departments spent an estimated $4 billion on basic services to First Nations. A large portion of the $2.6 billion voted by Parliament to the Department of Indian Affairs and Northern Development goes to Indian bands, with grants and contributions the main vehicles for funding. There has been an increasing trend toward the transfer, or devolution, of program administration to bands for self-administration. For 1989-90, the Department transferred $1.9 billion, or 72 percent of total program expenditures, to Indian bands or tribal councils for self-administration of health care, education, housing and other essential services. However, the Department has not been able to provide information to Parliament on how well the money was used. In the past, this Office and the Standing Committee on Public Accounts have expressed concern about the issue of the Department's accountability to Parliament for the use of these funds.

1.12 As early as 1965 the government began using bands to carry out program activities. By 1975, 400 bands were managing $100 million. In 1980 this Office reported that the planning and implementation of additional transfers of responsibility for program delivery had not been well thought out.

1.13 In 1981 the Public Accounts Committee noted that expenditures by Indian bands were not subject to appropriate accountability processes. The Committee observed that the First Nations had voiced concerns about the inflexible conditions they were required to meet under existing contribution agreements. The Department stated that it had responded by initiating negotiations with central agencies to develop an accountability process that would be acceptable to both the First Nations and the government.

The need to resolve a long-standing dilemma

1.14 In 1986 this Office reported that the Department's mandate was not clear; specifically, the Department was not sure whether it was still accountable for ensuring social and economic gains to native people, or was now responsible simply for ensuring an equitable distribution of financial support as native groups pursued their own objectives. The Office noted that there was a great difference between these two orientations, with different measures of accountability for each. In 1988, the Office observed that it had been reporting for over 20 years on the Department's inability to assure Parliament that funds provided to bands, through contribution agreements and other funding arrangements, were used for their intended purposes.

1.15 Case studies in this year's Report illustrate a partnership between the Department and some bands that works. The accountability framework that seems to serve the band can also serve funding agencies. The leaders of these bands feel accountable in both directions - to funding agencies and to band members - and they report their results to both constituencies.

1.16 An important question is what type of accountability is appropriate for funding arrangements, when more than 70 percent of the Department's funds are devolved to Indian bands or tribal councils for self-administration? Who is ultimately responsible, in an environment of devolution, for meeting the needs of the First Nations in health, education and housing?

1.17 Whatever the fiscal and funding arrangements in the future, an appropriate accountability framework will be needed. The resolution of the long-standing dilemma of reconciling the Department's accountability to Parliament with the funding arrangements for First Nations is overdue.

The Need for Better Co-ordination between Governments with Overlapping Jurisdictions

The complexity of operating in overlapping jurisdictions

1.18 Another issue in this year's Report is the complexity of managing federal programs that operate in an environment characterized by overlapping jurisdictions. Many government activities involve more than one department of the federal government as well as provincial and municipal governments, and sometimes other countries. Past audits have noted the difficulty of co-ordinating action among levels of government - for example, the enforcement of environmental legislation - due in part to the federal and provincial jurisdictional complexities inherent in Canada's constitutional framework.

1.19 This year, three chapters provide insight into these complexities and the distinct approaches adopted by governments and departments operating in overlapping jurisdictions. Each demonstrates a different approach to finding workable administrative solutions.

Department of Agriculture

1.20 The federal and provincial governments are all involved in economic support to agriculture. From the mid-1950s to the early 1970s the federal government was the primary player. As provincial involvement grew in the late 1970s and early 80s, there were cases of duplication and overlapping of federal and provincial agricultural programs. There was also a risk of programs working at cross-purposes.

1.21 During the mid-1980s the parties concerned with agricultural programs - the federal and provincial governments and the producers - agreed to principles that would reduce the potential problems resulting from jurisdictional complexities - principles for the management and cost sharing of certain significant agricultural programs. These broad principles became an important basis for the National Tripartite Stabilization Program.

1.22 In reviewing how that program was developed and implemented, this Office came to two general conclusions about the process followed in this case for trying to achieve program effectiveness in overlapping jurisdictions. First, there was a need for consultation, negotiation and co-operation, and for a genuine desire to achieve mutual understanding and agreement. Second, there was a need to follow up with clear, practical and workable agreements that would provide a basis for clarifying responsibilities and for mutual co-operation, rather than a potential for conflict. Such agreements would provide a mutually agreed-upon framework for the sharing of information, for the division of program responsibilities, for resolving disputes and for reporting results against specified goals or objectives. Agreements are an important element in the complex process of transforming political debate into practical plans of action directly affecting people. Clearly, they are not panaceas, but provide additional assurance that there will not be duplication and that things will not fall through the cracks.

Department of the Environment

1.23 The chapter on the Department of the Environment illustrates the intended use of agreements and other vehicles for co-ordinating the achievement of objectives and goals that involve different levels of government. Such vehicles include the Canadian Council of Ministers of the Environment, and administrative and equivalency agreements provided for under the Canadian Environmental Protection Act.

1.24 The 1990 chapter on the Department of the Environment noted that, in the federal government alone, some 24 departments have responsibilities relating to more than 50 Acts with environmental implications. The chapter also noted the provision for administrative and equivalency agreements under the Canadian Environmental Protection Act.

1.25 These agreements, concerning the management and control of toxic substances, were to be between the federal and provincial governments. They would provide that federal regulations under the Act ceased to apply in a province or territory that had its own equivalent or stronger regulations and enforcement regimes. As of June 1991, three years after the proclamation of the Act, no equivalency agreements were yet in place. However, progress has been made in drafting administrative agreements and work is proceeding on developing the criteria for equivalency.

1.26 I do not wish to imply that these agreements are the only mechanism for ensuring clear responsibility for the management and control of toxic substances. However, I believe they are a very important vehicle for dealing with two matters of concern to taxpayers: the risk of duplication of effort and the risk of incomplete or inconsistent protection of the environment.

Department of Fisheries and Oceans

1.27 The chapter on the Department of Fisheries and Oceans also illustrates the difficulties in reaching a consensus among different levels of government on broad principles, and translating these principles into agreements that promote co-operative and effective action.

1.28 In the 1986 Report, the Office commented on the delegation of administrative responsibility for freshwater fisheries under the Fisheries Act. The Report noted that delegation by the Department of Fisheries and Oceans to Ontario and the Prairie provinces had caused considerable confusion over respective roles in fish habitat and fishery management. The administration of the Fisheries Act is further complicated by the fact that administrative responsibility for its water pollution provisions is shared with the Department of the Environment.

1.29 This year's chapter on the Central and Arctic Region of the Department of Fisheries and Oceans reports that the question of the extent and nature of responsibilities to be delegated to the Central provinces still remains largely unsettled, awaiting the clarification of fish habitat and related environmental responsibilities. With this ambiguous division of responsibilities, the Department risks being unsure of the extent to which the fisheries and habitat management activities are being carried out in the provinces. Progress has been slow in implementing the Department's Policy for the Management of Fish Habitat. In the meantime the provinces in the Central Region have been carrying out habitat management responsibilities based on informal agreements and without monitoring by the Department.

Summary - the need to harmonize the efforts of departments and levels of government having overlapping jurisdictions

1.30 Overlapping jurisdictions are a fact of life. Co-operation and co-ordination among government departments and agencies, and among different levels of government, appear to be prerequisites for addressing the issues surrounding agriculture, the environment and fish habitat management. There is a need for a clear understanding about respective responsibilities, both within the federal government and between the federal and provincial governments, in order to effectively hold to account those operating in areas where jurisdictions overlap. In this regard I am encouraged by announcements that the Standing Committee on the Environment will be taking a look at the roles and responsibilities of the different levels of government involved with the protection of the environment. I am also encouraged by the Statement on Interjurisdictional Co-operation on Environmental Matters issued by the Canadian Council of Ministers of the Environment. This is an issue that the Office considers important and will continue to address in future audits.

Protection of the Environment - Are We Making Progress?

1.31 There can be serious weaknesses in the way federal departments account to Parliament for the results of their efforts to protect the environment. For example, the Department of the Environment does not have adequate information on the extent of compliance with the water pollution provisions of the Fisheries Act that have been undertaken by the provinces. Thus the Department is not in a position to provide Parliament with the appropriate information on the levels of compliance with the regulations it is responsible for administering.

1.32 This year's chapter on the Department of the Environment indicates that the 1988 Report to the International Joint Commission failed to show what progress has been made toward eliminating toxic substances from the Great Lakes. This report did not indicate when fish from the Great Lakes could be eaten without concern for health.

Providing More Useful Information about the Deficit

1.33 The many significant and interrelated issues affecting Canadians include - along with environmental protection and sustainable development - the country's debt and financial condition.

1.34 One of my responsibilities is a requirement to provide the Parliament of Canada with an audit of the federal government's financial statements. This involves making an assessment as to whether these statements reliably inform readers about the government's financial condition. Decisions about the deficit, its size, and the necessity for it are political matters; my interest is in the adequacy of information about the deficit. Among the statements I audit is the Statement of Revenue and Expenditure. The annual deficit for 1989-90 was $29 billion and the annual deficit for 1990-91 is expected to be near the same level. Another is the Statement of Assets and Liabilities, which showed the accumulated deficit to be $358 billion as at 31 March 1990.

Widespread concern about a vicious circle

1.35 The interaction between accumulated debt and annual deficits is pernicious. Canada's persistent annual deficits have led to a high accumulated debt and meeting the interest costs on the debt contributes to high annual deficits.

1.36 There is widespread public concern about the effects of this vicious circle. In his last budget, the Minister of Finance stated that we have been living beyond our means, with the end product a growing burden of debt. He also told the House of Commons that, in 1991-92, the accumulated debt will be equal to about $15,000 "for every man, woman and child", with the interest alone consuming $43 billion, or 27 percent of planned expenditures. He warned that "if we did nothing to deal with this worsening fiscal situation, the deficit would be significantly higher than forecast over the next five years."

1.37 Exhibit 1.1 illustrates debt servicing costs as a percentage of total budgetary revenues and expenditures over the past ten years. It illustrates that today approximately one third of every dollar collected in taxes goes to public debt charges. Ten years ago it was 22 percent. Today 27 percent of total budgetary expenditures is spent on debt charges; ten years ago it was 17 percent. What is obvious is that if deficits remain at current levels, this crowding out will continue and a greater portion of taxes will be consumed by debt servicing, with less available for services to taxpayers.

1.38 Each year at budget time, the government announces a fiscal course of action that it plans to follow to deal with the deficit. This course of action is based on a set of economic assumptions and on forecasts for financial variables that directly affect the level of the annual deficit. With this year's budget, the Minister of Finance made a number of financial forecasts: he announced that he expected short-term (90-day) interest rates to fall, from 13 percent in 1990 to 9.5 percent in 1991 and 9.0 percent in 1992; that inflation would moderate from 4.9 percent in 1990 to 4.8 and 3.0 percent in 1991 and 1992 respectively; that these interest rates and inflation would average out at 7 percent and 2.2 percent over the 1993-96 period; and that the deficit would fall to $6.5 billion by 1995-96.

1.39 Making such forecasts is not an easy task, as there are many variables in play at the same time - interest rates, domestic economic activity, political events, the value of the Canadian dollar, the global economy, public sector responsibilities. Some are controllable by the government, while others are not. Often, as the year progresses, it becomes obvious that the original plans cannot be fully realized. Yet they still have an impact on the deficit and accumulated debt. That is, they affect the level of revenues received through taxation, and they influence the amount of expenditures that the government either chooses to make through annual appropriations or is required to make by law, such as transfer payments to the provinces.

1.40 Other budgets too have included the government's expectations about inflation, interest rates, and other variables that affect the deficit. They have also included forecasts of expected revenues from taxation and of anticipated expenditures. Yet where in this information is a comparison between budget forecasts and actual results, in one concise presentation?

The need for a "scorecard"

1.41 It would seem reasonable that Canadians be told by their government how it has performed relative to its action plan. Did it succeed or did it miss the targets? And why? Did things happen that it did not foresee? How accurately did it anticipate revenues for the year? How did it predict expenditures? How well did it assess interest rates and inflation for the year? A basis for comparing the government's deficit reduction plan to its actual results would help all Canadians understand the enormity of its task. In other words, it may be time to consider the need for a kind of "scorecard" where actual results are compared with budget forecasts, and significant variances explained, in a concise and readable form. This is common practice in the business world, and I am puzzled why it isn't used by government.

1.42 The idea of a "scorecard" is not new. The Public Sector Accounting and Auditing Committee of the Canadian Institute of Chartered Accountants has recommended for some time that governments prepare and publish a budget-to-actual comparison. The Committee had in mind such a comparison for items in the financial statements. I feel that the government should go even further and include comparisons for the economic information behind the financial forecasts, such as inflation, interest rates, unemployment, etc., as part of a deficit/debt "scorecard".

1.43 Accountability of government to Parliament is multi-faceted. As a minimum, it means complying with parliamentary authorities and reporting on that compliance. It also means describing the major activities and issues the government is dealing with and indicating the prospects for their resolution. And, finally, it means reporting on the degree of success the government has had relative to those prospects.

1.44 The government has made deficit reduction a major issue and wants Canadians to accept the sacrifices associated with it. It makes sense to me that the onus should now be on the government to report not only on its prospects for reducing the deficit, but also on the extent to which they have been realized. A "scorecard" could be one means of communicating that information, of closing the loop.

The Need to Scrutinize Expenditures in the Context of Outcomes

A brief history of program evaluation

1.45 Departments and managers are given funds to administer programs. An obvious question is "Did the expenditure achieve the desired result?" Program evaluation has been identified by the government as one key way to address that question. According to the government, program evaluation could, and should, provide managers with information on program performance in order to reconfirm, improve or discontinue programs. Analyzing past outcomes can help in designing new programs.

1.46 Rather than focussing on the nature of expenditures, the Royal Commission on Government Organization (Glassco Commission) in the early 1960s recognized the need to focus on the purpose of expenditures. A number of important reforms were proposed, such as changing the form of the estimates to disclose the costs of individual programs within a department. This would allow Parliament, in holding government accountable, to better focus its attention on programs rather than on detailed expenditures. Pioneering steps were taken by the Treasury Board Planning Branch in the early 1970s, with pilot evaluations of effectiveness and efficiency. In 1977 the government made deputy ministers responsible for evaluating their programs on a cyclical basis. All of this was reinforced by the Royal Commission on Financial Management and Accountability (the Lambert Commission) in 1979. Lambert proposed that program effectiveness evaluations be performed by departments. In 1981 the government issued its guide on the program evaluation function, which set out in some detail its expectations for departments in conducting program evaluations.

1.47 In 1983 the Office reported that most major departments and many agencies had the basic infrastructure in place for program evaluation. At that time we raised concerns about significant weaknesses in the methods used for evaluations. In 1987 the Office reported that program evaluation had not covered most of the activities of departments. The Nielsen Task Force also expressed concerns about the adequacy and availability of information from program evaluations. In 1991 the Standing Senate Committee on National Finance observed that more systematic use of program evaluation findings could provide it with a powerful approach to its reviews of the Estimates and, in particular, could enable it to make concrete proposals for improving government programs.

1.48 This year's chapter on the Department of Agriculture illustrates the risks of embarking on new programs without the benefit of having formally measured and evaluated past results. The chapter reports that the absence of timely program evaluations limited the Department's ability to provide information on program effectiveness - through either program evaluation studies or ongoing performance measurement - to program managers, program stakeholders and Parliament at a time when critical program decisions were being made. The chapter also illustrates the importance of defining program objectives, a starting point for useful evaluations.

1.49 In the last six years departmental management has invested a tremendous amount of energy working in a difficult policy environment. During that period, the federal agricultural policy agenda included reducing interprovincial barriers, encouraging a greater sense of shared fiscal responsibility among farmers, provinces and the federal government, and enhancing co-operation and co-ordination in this area of shared jurisdiction. In 1986 the Office pointed out the need for ongoing effectiveness measurement, and the Department agreed. It also made some effort to develop performance indicators, but has not since gathered, analyzed or reported results in relation to these indicators. There are major risks associated with introducing new programs without first formally measuring and analyzing the outcomes of existing programs - evaluating what worked and, perhaps more important, what did not.

1.50 Other chapters note the need for evaluation. Chapter 8 on Debt Management and Employee Pensions points out the need for the evaluation of existing arrangements for financing employee pensions. At the end of 1989-90, $71 billion, or about 18 percent of the gross public debt, was owed to federal government employees pension accounts because, over the years, successive federal governments have borrowed from these accounts to help finance annual budgetary deficits. Obviously, the financial, economic and political implications of any change in the way employee pensions are to be financed need to be carefully considered. Chapter 19 on the Department of Supply and Services notes that there has not been an evaluation of the effectiveness of using the procurement process as an instrument to achieve long-term industrial and regional development objectives.

Why is effective program evaluation so elusive?

1.51 There seems to be general agreement that it is fundamental to accountability. Moving beyond the general consensus on the concept, what are the practical impediments to achieving accountability through program evaluation? The following section of this chapter notes that these questions are germane to any efforts at management reform. In the coming years, the Office will be conducting a government-wide audit of program evaluation.

Reflections on Three Decades of Management Reform

1.52 Since my appointment as Auditor General, I have been asked about my views on Public Service 2000, the government's current initiative for the renewal of the federal public service.

Past efforts at reform

1.53 It is obvious to a newcomer that considerable attention has been paid over the past three decades to achieving greater effectiveness, efficiency and economy in the administration of public affairs. There has been a host of inquiries, ranging from royal commissions to task forces to internal studies, most notably the Glassco and Lambert Commissions. There have been a number of efforts at management reform such as the Planning, Programming and Budgeting System, Increased Ministerial Authority and Accountability and, most recently, Public Service 2000. A common thread in these is the objective of administering public affairs efficiently and economically, with probity and prudence. There is also a belief that public service managers must be enabled to realize this goal and then held to account for doing so.

1.54 In the early 1960s the Glassco Commission focussed attention on the need, given the rapidly growing and changing nature of government operations, to dismantle the centralized and restrictive form of financial control then in place. It advocated financial management practices that would give program administrators more flexibility to respond appropriately to changing conditions. This was to be accomplished largely by transferring most financial responsibility to departments. Glassco generated a theme that was to recur in subsequent reform movements: "Let the managers manage", within an overall framework of guidance and accountability. Glassco did not forget the importance of a framework of control. But instead of detailed centralized controls, performance evaluation was to be the major vehicle for accountability.

1.55 The Lambert Commission, in the late 1970s, reinforced and elaborated on Glassco's recommendations for a framework of control and accountability, to accompany the proposed increase in the powers of departments. If Glassco could be characterized by "Let the managers manage", the phrase identified with Lambert's report would be "Make the managers manage".

1.56 During the 1980s, other initiatives re-examined the question of relaxing central controls to give more flexibility and autonomy to departments. But by the end of the decade there was a feeling among public servants that the detailed expenditure and administrative controls continued to be overly burdensome, frustrating the prospects at all levels for greater delegation and decentralization as well as for flexibility and innovation.

PS 2000 in context

1.57 At the end of 1989 the government announced Public Service 2000 (PS 2000), "the policy of the government concerning the measures necessary to safeguard and promote the efficiency and professionalism of the Public Service in order that it may serve Canadians effectively into the 21st century". PS 2000 proposes creating a public service that would be more client-focussed and results-oriented, with more emphasis on the importance of people. It proposes a new management approach, a focus on results rather than process, flexibility rather than conformity, judgment rather than rules, innovation rather than risk aversion, and accountability rather than heavy central regulation.

1.58 Like earlier reforms, PS 2000 - through the White Paper - proposes giving increased authority to operating departments, and makes some specific suggestions as to which central controls might be removed. To provide flexibility in financial management it proposes vehicles such as the retention of non-tax revenue for encouraging organizations to generate additional revenue, through such means as user fees. Recent legislative amendments will allow departments to retain and spend all or a portion of these revenues, subject to certain conditions. Increased delegation is under way in other areas such as procurement contracting on a competitive basis for services and employee incentive awards. Commensurate with increased responsibilities for departments, there would have to be increased accountability. This year's chapter on the financial management and control of non-tax revenue concluded that the effective use of incentives, better disclosure to Parliament and improved financial control are needed, particularly in view of changes taking place in authorities and policy.

A window of opportunity

1.59 The reform and renewal of the federal public service in a time of global competitiveness, a time of change, is essential to enable it to meet the challenges that lie ahead. The White Paper stresses that such a renewal "will not be achieved simply through legislative and administrative action to set in place new mandates, structures and processes. It requires fundamental changes in attitudes by Public Servants, by Ministers, by Parliamentarians and ultimately by the public." In accordance with its mission statement - to encourage accountability and bring about improvements in government operations - the Office supports the objectives and principles of PS 2000. They are generally consistent with good management practices. And PS 2000 has the potential to address specific human resource management issues and others that the Office has identified in audits since 1979.

1.60 PS 2000 and its initial broad objectives and philosophy must succeed. However, as implementation takes place, I believe there are lessons from past reform efforts that provide useful insights.

Lessons of history

1.61 An area of difficulty for past efforts at management reform appears to have been the absence of concrete proposals for moving from "here" to "there", for managing the process of change. One of the challenges for PS 2000 is to manage this process of change, to make the transition from where the public service is to the ideals proposed.

1.62 Another challenge will be to address the question of why it has been necessary to revisit some of the same questions over and over again. Have the practices of decades become too deeply ingrained? What are the obstacles to greater delegation of powers? Is there some deep-rooted institutional resistance in the government, the public service, the parliamentary system or its political environment?

1.63 Then there is the challenge of developing performance measures. A review of three decades of successive reports and internal reforms shows that almost all have emphasized the need for performance measures as an instrument of accountability. More recently, PS 2000 also talked of measuring individual management proficiency.

1.64 As noted previously in this chapter, the Office has been consistently concerned about the lack of information on effectiveness and efficiency, where it would normally be expected. In a special study on efficiency in government in 1990, the Office noted that any formal assessment of due regard to efficiency must rely on information about cost and performance. Yet, with the exception of a few instances, the quality of information had not improved since 1987, when the Office reported that the quality of information was poor.

1.65 Each successive study, or reform movement, seems to implicitly recognize that adequate performance measures have not been used, despite their central importance to improved accountability and a more effective public service. Again, we have to ask why. Are the technical difficulties in developing such measures insurmountable, given the characteristics of many government programs? What is the inherent difficulty in using the information, both within government and between government and Parliament?

1.66 How are these difficulties taken into account by PS 2000? What controls are still essential? Controls are often process-oriented, focussing largely on resource requirements and utilization, while accountability is more closely related to results. The White Paper on PS 2000 raises concern about excessive, detailed controls, but does not provide enough indication of the controls for government that are both essential and cost-effective. I believe that such controls are important to good public administration, but much needs to be done to achieve the right balance.

1.67 Another challenge is that of encouraging innovation within the parliamentary control framework. Chapter 5 describes initiatives by managers in the Department of Fisheries and Oceans to improve the delivery of services at a lower cost to taxpayers. The chapter illustrates the dilemma of reconciling an innovative approach with the requirements of parliamentary control over the appropriation of expenditures and the re-use of revenues. Program innovations by the Department, such as the use of barter as a means of financing, do not fit easily within existing parliamentary conventions.

1.68 In the coming years the Office will continue to seek improvements and will be watching the progress of PS 2000 with interest. In the course of our audits we will observe aspects of its implementation. The approach of the Office will be to raise questions during the reform process that need to be addressed to ensure that the objectives of PS 2000 are met. The intent will be to stimulate the debate and discussion essential to ensuring that this initiative does not become just another acronym.

Continued Lack of Access to Information on Ministers' Travel

1.69 In 1989-90, the Office of the Auditor General planned to conduct an audit of expenses claimed for travel on official government business by ministers, and accompanying exempt staff and public servants. All the expenses that were to be audited were paid out of departmental budgets. The audit was to include examinations of the adequacy of financial controls and of the government's reporting on costs of ministerial travel, including the use of the Administrative Flight Services (VIP Fleet) by ministers and staff.

1.70 In April 1989, the Office requested access to receipts and other documentation supporting ministers' travel expense claims and the specific purposes for the use of the VIP Fleet. In June 1989 the government informed the Office that the needed information would not be made available. As a result, my predecessor decided not to proceed with the audit. Instead, as required by the Auditor General Act, the Office reported this denial of information to the House of Commons in the 1989 annual Report.

1.71 The Standing Committee on Public Accounts considered this matter and made its recommendations in its Eighth Report to the House of Commons, December 1990. Among those recommendations was that "the Government consider allowing the Auditor General access to ministerial travel receipts to the extent that he can discharge his statutory duties by means of an authority and attest audit of the Accounts of Canada under the Auditor General Act." In March 1991 the President of Treasury Board replied that the government was unable to accept this and the other recommendations of the Committee.

1.72 There are two aspects of the government's response that cause me particular concern. The first is the government's denial of access to information to my Office. As previous Auditors General have stated, the government's denial of information that my Office requires for audit purposes is inconsistent with the role of this Office in a parliamentary democracy. Without access to information, the role of my Office would be severely circumscribed, and its ability to assist Parliament to control the public purse would be diminished.

1.73 In the present case, the government is denying my Office access to two types of information: receipts for travel expenses incurred for official government business and paid for out of departmental appropriations; and information on the specific purposes for which ministers used airplanes provided by the Administrative Flight Services section of the Department of National Defence. I find it difficult to understand why there is an impasse over access to receipts for expenses and details on the reasons for use of government airplanes.

1.74 The Public Accounts Committee has asked the Office to conduct an audit of the Administrative Flight Services. In the absence of details on the purpose for which ministers use the planes, an audit would not be able to verify that aircraft were being used for official business and under the conditions stipulated in the Treasury Board's Guidelines for Ministers' Offices.

1.75 My second concern relates to the government's explanation for why it is unable to accept the Committee's recommendation that my Office be provided with access to this information.

1.76 The government stated that it was rejecting the recommendation because "ministers of the Crown are accountable directly to the Members of the House of Commons and to the Canadian public"; and that "requiring ministers to submit receipts to support travel expenditures and their subsequent audit by officials of the Auditor General would not be consistent with this principle." The government also pointed out that the subsequent availability of more information on ministerial travel, to Parliament and the public, would enhance the direct accountability of ministers in "a manner consistent with the underlying principles that have long been part of the Canadian parliamentary system."

1.77 I believe that the government's argument reflects a misunderstanding of the role of my Office in the Canadian parliamentary system. Audit does not, as the government implies, constitute some form of accountability to auditors or interference with the direct accountability of ministers to the House of Commons.

1.78 Ministers of the Crown are and should be directly accountable to the House of Commons for their actions. Audit is a process that strengthens this accountability relationship by providing an independent report to the House of Commons on how the moneys voted to ministers have been used. This process increases the ability of the House of Commons to hold ministers directly accountable.

1.79 I welcome the government's decision to increase the amount of publicly available information on travel expenses and on ministers' use of government airplanes. However, I do not agree that the provision of such information eliminates the need for any kind of audit.

1.80 While the increased disclosure of information by government is always desirable, its usefulness is markedly reduced without audit. By analogy, few persons, if any, in the private sector would suggest that the provision of unaudited financial statements by management to shareholders of publicly held companies would be sufficient simply because they could ask questions at the annual shareholders' meeting.

1.81 What the government has provided are representations by ministers summarizing a multitude of transactions. For example, the "certified statements" on ministers' travel expenses, referred to by the government, provide minimum information on types of expenditures. The certification refers to a statement signed by the minister that the expenditures have been incurred by the minister on official business. An audit of the receipts would verify whether the information shown in the certificate is correct and fairly presented.

1.82 In fact it is my view that such expenditures should be subject to the same audit process as all other government expenditures.

1.83 I would like to thank the Public Accounts Committee for supporting my Office's right of access to the information needed to fulfil its responsibilities under the Auditor General Act. I hope that this issue can be resolved in the near future.

Making a Difference

1.84 I look forward to my tenure as Auditor General, to serving the House of Commons in conducting independent, high-quality audits and examinations. My objective will be to encourage accountability and improvement in government operations - in departments, agencies and Crown corporations. My overriding concern is to promote the efficient and effective use of taxpayers' money. Accordingly, the greatest professional satisfaction for me - and for my colleagues in the Office - will not be the disclosure of error, waste and loss, but rather the evidence that management has corrected unsatisfactory situations.

1.85 Many of the issues facing government - the environment, the deficit, relationships with First Nations, the interaction of different levels of government, and so on - will shape not only the immediate future but our legacy to future Canadians. Respectful of the mandate given the Office, I want to make a difference. At the end of my term I want to be able to point to concrete achievements to which the Office has contributed. As we close in on the 21st century, I am looking for changes that translate into better results for the taxpayer. Where the Office makes recommendations, the focus will be on helping to find solutions that narrow the gap between the ideal and what is possible, recognizing the political process and the operating constraints on all levels of management.

1991 Report of the Auditor General of Canada

Chapter 1—Matters of Special Importance and Interest