Thank you, Mr. Chair.
I would ask that my full statement be put into the record, but I will just go through and shorten some of it.
We would like to thank you for this opportunity to present the results of our study of federal transfers to the provinces and territories that was published in our December 2008 report. As you mentioned, I am accompanied today by Neil Maxwell, assistant auditor general, who is responsible for this chapter.
Federal transfers to the provinces and territories make up a significant portion of the federal government's annual spending, and they are a major source of funds for services provided to Canadians. In the 2006-07 fiscal year, the most recent year for which complete information was available to us during the examination, these transfers amounted to about $50 billion, or just under 23% of federal spending. We carried out this study to answer questions that parliamentarians have raised about federal transfers. Because this is a study and not an audit, it is descriptive and does not include recommendations.
In this work, we examined the three main mechanisms the federal government uses to transfer funds to the provinces and territories. In our statement you will find further details on each of these transfers.
We found that the nature and extent of conditions attached to federal transfers to the provinces and territories vary significantly. While some transfers have specific conditions that recipients must meet, often including reporting to the federal government on the use of the transferred funds, others are unconditional.
As auditors, we recognize that decisions on whether, and to what extent, conditions are attached to transfers are policy decisions, often involving sensitive federal, provincial and territorial negotiations. We do not question policy decisions in our work.
According to the federal government, the level of federal accountability for how the provinces and territories spend transferred funds depends on the nature and extent of conditions attached to the transfers. In all cases, the federal government is accountable for its decision to use transfers with or without conditions as the best policy choice available in the circumstances.
The government's introduction of trusts in 1999 was a significant change in its use of transfer mechanisms. Since then, 23 trusts have been established to transfer about $27 billion to the provinces and territories. Transfers of this type are earmarked in public announcements by the federal government for specific purposes--for example, police officer recruitment or affordable housing--but there are no conditions that legally obligate provinces and territories to spend the funds for the announced purposes, or to report subsequently on that spending to the federal government.
As an alternative, federal officials told us that the government has opted in recent trusts to require provinces and territories to publicly announce how they intend to use the funds, on the assumption that their legislative assemblies and citizens will hold them to account for these commitments.
Mr. Chair, that's a very brief summary of my opening statement. We will be pleased to answer any questions committee members have.