Thank you, Mr. Chairman.
Thank you for this opportunity to present the results of our audit from the May report of the Auditor General on management of fees in selected departments and agencies.
Joining me today, as you've mentioned, is Clyde MacLellan, assistant auditor general, and Rona Shaffran, director, who were responsible for the audit.
In this audit we looked at 13 fees established by six federal organizations that are responsible for a major portion of the fee revenue reported by the government. In addition, we looked at any related government policies or guidance on the fees that the Treasury Board of Canada Secretariat provided to organizations. We also looked at the scope and application of the User Fees Act.
There are two categories of fees. The first category includes fees for goods, services, or the use of a facility, such as the purchase of a government publication. For these fees the amount that is charged normally cannot exceed the cost of what is provided. The second category includes fees for rights or privileges, which mainly involve the authorization to use publicly owned or publicly managed resources, such as commercial fishing licences. For these fees the amount that is charged is normally related to market value rather than cost.
Departments and agencies are not required to charge the full cost or value of the good or service provided but need to know this information. Other factors must also be considered when determining the amount to be charged. For example, consideration should be given to the proportion of the cost or value that should be borne by the fee payer.
As a result, we expected to find that departments and agencies had appropriate systems and practices in place for managing fees and establishing a reasonable relationship between the fee and its cost or value. A clear accountability mechanism was also a critical component of our audit criteria to ensure that Parliament, fee payers and taxpayers receive fundamental information about fees.
For the cost-based fees we audited, we found that organizations varied from those with systems and practices that captured the full cost of fee-related activities, such as Parks Canada, to organizations that did not know the cost.
The rationale for the amount charged for fees also varied, from fees based on a comprehensive analysis of the amount charged to fees based on factors unrelated to cost or value of what was provided. We concluded that some organizations do not have all the necessary information to determine what amount to charge for the fee or to determine whether there is a reasonable relationship between the fee and the cost or value.
As previously mentioned, the total amount collected as a fee for a service should not exceed the cost of providing that service. For the consular service fee in particular, we found that Foreign Affairs and International Trade Canada allocated to the fee included in the cost of an adult passport costs for activities that were not outlined in the Treasury Board approval of the fee. These additional costs were for activities performed on behalf of other government organizations.
The department reported a deficit for this fee in its departmental performance reports. However, our audit work and recalculations by the department showed there was actually a trend toward surpluses. In other words, the amount collected through this fee was more than the cost of providing the services. The department therefore is at risk of not having determined fees in a way that is consistent with cost recovery, as its own legislation requires.
Foreign Affairs and International Trade Canada has acknowledged it needs to review the impact of the surpluses on the amount charged for the fee, as well as related issues. The department also agrees that the costing methodology for the consular service fee, including its time reporting system, needs to be reviewed. The committee may wish to ask the department to outline its specific actions to resolve this matter as well as how it intends to amend its reporting to Parliament.
We also found that many accountability provisions of the User Fees Act cover only fees that are new or have been increased since the act was introduced in 2004. This means, for the vast majority of fees that were set before the act was passed, that the related organizations are not required to publicly report costs, performance standards, or performance information, nor are they required to reduce fees when service standards are not achieved.
The Treasury Board Secretariat has agreed that there have been challenges in the interpretation and application of the User Fees Act and has agreed to provide the President of the Treasury Board with an analysis of the issues raised in our report by November 2008. The Committee may wish to ask the secretariat for its plan and timetable for its report on the User Fees Act.
Mr. Chairman, this concludes my opening statement. We would be pleased to answer any questions the committee may have.