Bill C-2 (39th Parliament, 1st Session) Committee on May 9th, 2006

[Sheila Fraser]

Our role is to audit to determine whether an adequate system is in place. If no such system exists, we would report on that and we would expect the department to correct the situation. Otherwise, there would be a follow-up to report on the situation.

The prime responsibility always lies with the department and with the government. We do not have the resources required and it would not be appropriate for us to audit everything that goes on in the federal government. There could be misappropriations that we would not see, and I would not feel responsible for that.

[Benoît Sauvageau, Bloc, Repentigny, QC]

Let me give you an example. This is not what the Conservatives wanted to do, but if the Department of Industry were to give a grant to Bombardier, you would not audit Bombardier's books to determine whether the money was handled properly. It would be up to the Department of Industry to do that.

[Sheila Fraser]

That is correct.

[Benoît Sauvageau, Bloc, Repentigny, QC]

Fine, I understand.

Now, with respect to the accountability of the Department of Indian and Northern Affairs, you say:

We have engaged for some time in discussions with First Nations and government officials on the creation of a First Nations Auditor General.

Do you think that as it is worded at the moment, Bill C-2 somewhat distorts this focus with respect with a First Nations Auditor General?

[Sheila Fraser]

I do not think so. We have recently had discussions with representatives of the Assembly of First Nations and the Grand Chief. They still want a First Nations Auditor General. How will we achieve that, what form will it take and what will the structure be? That has still not been determined. There are still a great many details that have to be worked out. The fact that the Auditor General of Canada has such a mandate would not prevent the creation of a First Nations Auditor General. This would be an institution for their own development and their own accountability.

[Benoît Sauvageau, Bloc, Repentigny, QC]

Do you think that you should have a mandate to audit the grants and contributions of aboriginal communities, or should you, rather, audit the Department of Indian Affairs and Northern Development, which determines whether the money has been managed properly?

[Sheila Fraser]

We are already auditing the department's books. The first nations are already subject to audits by private sector firms. As mentioned previously, if these audits are not done and are not forwarded to the department, its funding is interrupted. A financial audit is already done of all first nations, or almost all of them. So many audits are being done.

In fact, the first nations will have to have their own institution for auditing the management of the first nations accounts and should report to this institution. The creation of a First Nations Auditor General position goes further than accountability to the federal government. This auditor will play a different role, but will also have to satisfy the federal government.

[The Chair, Conservative, David Tilson]

Thank you.

Mr. Poilievre.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Do you believe the first nations should proceed with an independent auditor general of first nations?

[Sheila Fraser]

The Assembly of First Nations has indicated that they would like to establish an auditor general for first nations. We are supportive of that.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

You are supportive. What would be their function?

[Sheila Fraser]

The function would be a bit like the function of the Auditor General for the government. I guess there would be a question about all the auditing that's currently going on by private sector firms, if that would remain or not, but they could also do broadly scoped audits. They would be in fact reporting to the communities. It wouldn't be an exercise of accountability in reporting to just the federal government but rather to the people of those first nations.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay. What I don't understand is that if we agree that there is a need for a first nations auditor, there isn't one now, so presumably the need for a first nations auditor signals to us that certain auditing or accountability mechanisms do not presently exist.

[Sheila Fraser]

Yes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

What would be the problem with your office filling that void in the meantime?

[Sheila Fraser]

The mandate that would be given to me would be only in regard to federal funds that are given to first nations, and the reporting would be to the Parliament of Canada. A first nations auditor general would audit all of the funds, all of the moneys, be it government transfers or own-source revenues, and would report to first nations people, not to the Parliament of Canada.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Right. But ultimately the reports would be made public and they would be available to first nations people if your office made them. Just because your office would not be able to go as far should not be a reason for us not to proceed at all.

[Sheila Fraser]

I guess we could easily get into questions of policy here. If it is the policy that first nations should move toward self-government, they should have in place their own institutions that support self-government.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

That's a normative statement that many of us would find admirable, but the fact is they don't. We've all agreed that no auditor general exists for first nations people right now. We've all agreed that there should be something of that sort. But there is no guarantee whatsoever that there will be in the immediate future. As such, the money that is being transferred to these reserves is the money of the Government of Canada. As you correctly pointed out, we're not talking about auditing moneys that are raised on the reserve through legitimate activities on those reserves. This is money that comes from the federal government to organizations that are not self-governing bodies.

[Sheila Fraser]

Perhaps I could just remind the member, Mr. Chair, that these funds are audited. These communities, small communities--the majority of them are under 500 people--produce over 200 reports a year to four departments. When we did that audit, those departments did little, if anything, with those reports. So the responsibility to actually manage and make sure that the funds are being used appropriately lies with the federal government and the bureaucrats, not an external auditor. There should be management systems in place that will provide sufficient information to government and to Parliament as to how those funds are being used and what outcomes are being attained.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

When we talk about transfers to grant recipients or to corporations, we don't just say, “Trust the ministry. Trust the department.” We don't say that the department should really look into it and take care of it themselves. We assign an auditor general to that mandate.

So why, in this one single situation where we don't have self-governing agreements, should we make a glaring exception?

[Sheila Fraser]

Absolutely. Our role is to look at those systems and practices in place and to ask if they are adequate or not, if any improvements should be made. I can tell you that we've been doing probably, on average, two audits a year in the Department of Indian and Northern Affairs. There are a lot of improvements that we keep noting. Many improvements should be made to the management systems. But we're not making a separate category; we're saying the same thing for any grant and contribution and any transfer program. The same thing would apply to the grants, the loan to Bombardier, or the loans that are made by EDC for export development.

We saying that those organizations should have in place the systems and practices to make sure that those funds are being used in accordance with the terms and conditions of the program and that they are achieving the outcomes. In the case of first nations, we're also saying that there is a project that we've been working on to establish an auditor general for first nations.

[The Chair, Conservative, David Tilson]

Thank you.

Mr. Martin, go ahead, please.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Fraser, some day when they build a statue for you on Parliament Hill, it will probably have a little plaque underneath with some of your more famous sayings. One was, “They broke every rule in the book”. Everyone loves that one. The second most popular one I think is pointing out the appalling lack of documentation. I remember very well your using that phrase.

One of the big letdowns for us in Bill C-2 that we're talking about has been that they promised to put in the access to information changes that we'd all been working toward for years, and then they pulled them out just before the bill went ahead. One of the justifications for doing so was that if that information were subject to more access to information requests, it might be driven underground. In other words, there might be even less documentation for our use, for your use, etc. Has it ever come up before that access to information has a perverse effect sometimes in forcing an oral culture to develop instead of a documented culture? Would you agree that there should be mandatory documentation as per our recommendations, and even make it an offence to fail to produce documentation as you go about the business of government? Can you share any views on that?

[Sheila Fraser]

Thank you, Mr. Chair.

It is the case that access to information has negatively impacted upon documentation. We mention it here in this opening statement about internal audit. When we did the review of internal audit in government we were told that access to information was affecting the timing of reports and whether reports were written or not. There are oral reports on internal audits. It is really affecting their effectiveness. That is why we support better protection of audit working papers under access to information, because it is impeding our ability to work.