Thank you very much, Mr. Chair, honourable members of the committee, and ladies and gentlemen.
I am joined this morning by Bill Crosbie, the assistant deputy minister of the consular services and emergency management branch, and my colleague Francine Côté, who is the director general of corporate finance, planning and systems within our chief financial officer branch.
The Auditor General's report on the management of fees in selected departments and agencies included a review of the $25 consular services fee that is collected from adult passport applicants when they apply for a new or renewed passport.
The Auditor General has made two recommendations with respect to that fee. Paragraph 1.58 of the report has recommended that the department review its time-reporting practices and the allocation of costs and activities to the consular services fee to ensure that they remain consistent with the authorization for the fee, and exclude costs of any services provided by Canadian missions abroad on behalf of other departments and agencies that are not part of the consular services fee.
It also recommended that the department amend our reporting to Parliament to take any necessary action to adjust the fee in view of the trend toward surpluses, which is indicated in the report.
In addition, the Auditor General recommends that we--along with other departments--take steps to improve the transparency of the fee by providing more complete public reporting of financial and non-financial performance information.
The Department of Foreign Affairs and International Trade agrees with the recommendations of the Auditor General, and we will be implementing these recommendations as we outlined in our response contained in the report.
Mr. Chairman, if I may, I would like to give a short history of the Consular Services Fee in order to explain to committee members how the Auditor General and the Department have come to an agreement on the recommendations contained in her report.
In 1995, as part of Program Review, the Government decided that the Consular Program should be self-financed through the imposition of a fee levied at the time passports or other travel documents were issued. This shifted the cost burden to those Canadians who hold Canadian passports.
The fee was fixed at $25, as at that time approximately 1.5 million passports were issued annually and the estimated cost of the consular program was $47.9 million. However, instead of providing the funds directly to the department to manage the program, the funds from the consular services fee were deposited into the consolidated revenue fund.
As was noted in the original Treasury Board submission, the consular services fee is in the nature of an insurance fee that will support services delivered abroad to Canadian citizens as per the Vienna Convention on Consular Relations. These services provide protection and assistance to Canadians who travel abroad and find themselves in distress as a result of an accident, illness, crime victimization, arrest or detention, natural disaster, and civil unrest. Because of the nature of insurance, not all passport holders will require consular services.
The types of the consular services provided have not changed significantly since the fee was introduced in 1995. However, the nature and complexity of the cases has increased substantially, particularly since 2001. For instance, demand for more complex services, including cases of arrest, child custody, and medical evacuation, increased by some 39% between 2004 and 2007, and this trend is expected to continue.
As we noted in our response to the Auditor General, we have also faced a general increased demand for consular services, increased expectations from Canadians abroad for more services, and must provide services to larger communities of Canadian citizens who are permanently resident abroad. The evacuation of Canadian citizens from Lebanon in 2006 is the most visible example of how the complexity of consular services has evolved over the last decade.
At the same time, the number of passport applicants has increased dramatically in the last few years, particularly and principally due to the U.S.A.'s western hemisphere travel initiative. When the fee was established in 1995, an estimated 1.5 million passports were issued, whereas for the year ending March 2007, over three million adult passports were issued. The result has been both increased revenues and increased workload.
The original approval for the consular services fee required that the cost of the program to the department and the revenues from the fee would be reviewed annually. If there was a significant difference between the costs and the revenues, we would seek Treasury Board's approval to adjust the fee. The department prepared a costing of the fee on an annual basis and compared it to the revenues generated. Based on our original assumptions at that time and as reported in the departmental performance reports, we believed the costs exceeded the revenues generated by the fee.
When the Auditor General reviewed the original documentation on the calculation of the fee, it was determined that the department was incorrectly interpreting the original Treasury Board submission. The department calculated the full cost of the consular program and subtracted the revenues received primarily from Passport Canada to determine the costs to compare with the revenues generated.
However, the Auditor General determined we should not be deducting the revenues received. Rather, we should have been deducting the cost of the activities related primarily to passport issuances abroad. Since the revenues for these activities are much lower than the costs, the change in interpretation from deducting the revenues to deducting the costs of those services resulted in moving from a deficit to a surplus for some of the years audited.
As a result of the Auditor General's observation, we reviewed our data and report and we performed a second recalculation which was accepted by the Auditor General. The calculation excludes the time spent on passport issuances and includes other passport services performed by consular staff abroad. The Department's new calculation shows a similar trend of surpluses. However, over the five-year period, it shows a cumulative deficit.
Even with this deficit over the five-year period examined by the Auditor General, the department agrees it is important to review the costing methodology. We believe this is an opportune time, as budget 2008 announced additional funding of some $32.4 million in 2008-09, rising to $95 million ongoing, to improve the delivery of vital consular, business, and diplomatic services abroad. A significant portion of this will be directed at improving consular services.
It also announced that the government would be instituting a ten-year passport by 2011. Therefore, spending on consular services will increase, while the consular fee will be collected half as often.
The department is committed to working with the Comptroller General, the Treasury Board Secretariat program sector, and the Department of Finance to resolve the outstanding issues related to the consular services fee and to ensure the department is in compliance with the recommendations of the Auditor General.
Mr. Chair, thank you very much.