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Speech in Senate Chamber: Inquiry—Parliamentary Appropriations Audit by the Auditor General—Debate Adjourned

Parliamentary Appropriations Audit by the Auditor General

Inquiry—Debate Adjourned

Hon. Anne C. Cools rose pursuant to notice of May 14, 2015:

That she will call the attention of the Senate to:

The Auditor General of Canada, and his public role as "the auditor of the accounts of Canada"; and, to the parliamentary action known as the appropriation audit, which audit was the very purpose for the creation of the new and independent auditor general by the 1878 Canadian statute which followed the British practice of 1866; and, to the parliamentary appropriation audit; and, to this audit that tracked the government's public expenditures in the public service and public administration to certify and verify that the public monies were expended, as dictated in the appropriations acts, adopted by the House of Commons; and, to the fact that the appropriation audit was created and intended to assist the Commons House's control of the national finance, the public revenue and the public expenditure; and, to the House of Commons' pre-eminence in the power of the control of the public purse; and, to the fact that the creation of the appropriation audit and its later universal application to all, not some, of the departments of government, was one of the greatest achievements of the House of Commons, and of parliament; and, to the fact that the whole of the powers and duties of the auditor general follow his duties as the auditor of the accounts of Canada, of which the Senate is no part, as it is no part of the public service or the public administration of Canada.

She said: Honourable senators, I speak to the role of audit and the role of the Auditor General of Canada. In Britain, audit examination of the books of the public accounts and public expenditure was ancient. Their House of Commons' audit efforts date to 1689 and include audit commissioners, audit boards, et cetera.

Our 1791, Constitutional Act created the Upper and Lower Canadas. Early, in these pre-Confederation colonial legislatures, the control of the public purse was a large and hard-fought issue. Focused on the national finance, the public revenue and the public expenditure, these conflicts were between the representative houses of assembly and the legislative councils and their governors. They fought constantly on the grave matters of taxing, spending, supply and appropriation, the control of the public purse. These conflicts paralyzed the legislatures and politics, and made the passage of supply bills difficult, and often impossible. The upper houses, the legislative councils, often rejected the lower houses', the assemblies' appropriation acts. In Lower Canada, the disputes were especially aggravated as the lower and the upper houses had difficulty in their constitutional functions. Lower Canada's Governor Lord Dalhousie had to prorogue often. On March 9, 1824, he addressed the two houses, in the House of Assembly Journals, at page 360:

Gentlemen of the Legislative Council, Gentlemen of the Assembly,

I am now to close a Session of the Provincial Parliament, the result of which I am much afraid will prove to be of little public advantage; at the same time your long and laborious attendance is entitled to my best thanks; But before I prorogue this Parliament, I think it is important to that Country that I should here, as His Majesty's Representative, express my sentiments upon the general result of your proceedings during the several Sessions in which I have met you: I declare those sentiments in earnest desire to attract the serious attention of every Member of this Parliament, of every man who values the prosperity of Canada . . .

A claim has been made to an unlimited right in one Branch of the Legislature to appropriate the whole Revenue of the Province according to its pleasure, . . .; this claim, made by one, has been formally denied by the other two Branches of the . . . Parliament; nevertheless it has been persisted in, and recourse has been had to the unusual proceeding of withholding the Supplies, . . .

This subject has occupied every Session from the first to the last, . . . : It has caused incalculable mischief to the Province; . . .

In 1827, Lord Dalhousie had prorogued the same legislature for the same reason.

Honourable senators, these representative assemblies fought long and hard for British rights, powers and freedoms. Of these, their assembly's power of the public purse relation to their executive councils and governor was primary. These assemblies' conflicts and denials of supply were legend. Lord Durham, the High Commissioner and Governor General of British North America, noted this. In his 1839 Report on the Affairs of British North America, he wrote that these colonial assemblies wanted the same constitutional powers as the British Commons House, being responsible government, secured by the representative lower house's control of the public purse in taxation, public revenues and expenditures. About Upper Canada, Lord Durham said, at page 107:

It was upon this question of the responsibility of the Executive Council that the great struggle has for a long time been carried on between the official party and the reformers; for the official party, like all parties long in power, was naturally unwilling to submit itself to any such responsibility as would abridge its tenure, or cramp its exercise of authority. . .

The views of the great body of the Reformers appear to have been limited, according to their favourite expression, to the making the Colonial Constitution "an exact transcript" of that of Great Britain; and they only desired that the Crown should in Upper Canada, as at home, entrust the administration of affairs to men possessing the confidence of the Assembly.

Honourable senators, early Canadians sought and won the constitutional principles and practices called responsible government, by which the Queen's ministers, who spend the monies appropriated by the lower house, are chosen from, and are responsible to, the lower, representative and popular house, exactly as the British Commons House. The 1840 Act of Union set out responsible government principles and judicial independence. But the large constitutional powers were wholly granted by the confederating British North America Act, 1867. This enacted Canada's House of Commons, elected in "representation by population." Its sections 53 and 54 granted the House of Commons its pre-eminence in the national finance, and the control of the public purse. This Senate, the federal house which embodies the federation, was granted a national finance power larger than that of the House of Lords in London. This Senate received full powers to defeat and to reduce, but not to increase the sums in supply and appropriation bills, and not to >Honourable senators, until 1878, Canada's federal Auditor General had been the deputy minister of finance, in a union of the two offices in one person. That year, under Liberal Prime Minister Alexander Mackenzie, we adopted a new audit bill, An Act to provide for the better Auditing of the Public Accounts. That's what we need, right? We need a new act for the better accounting of the public accounts. Based on the 1866 British Exchequer and Audit Departments Act, our act completely severed audit and the Auditor General office from the finance department and government. This new Auditor General independent from government was secured by his commission from the Governor General with life estate in office. In law this life tenure is called "during good behaviour." This tenure was a British practice for certain high officers of trust in the national finance. It is used for judges in the Constitution Act, 1867, section 99. It is also used and held by senators. In his 1889 Parliamentary Government in England Volume II, Alpheus Todd, tells that such offices, at page 6:

, . . . would be elevated, in point of salary and tenure, to the highest position of dignity and independence.

Like senators and superior court judges, Canada's Auditor General was "elevated . . . to the highest position of dignity and independence." Like our section 96 judges, our 1878 statute enacted the Auditor General's salary as a direct and permanent charge to the Consolidated Revenue Fund. These permanent charges to the Fund are not part of the annual supply bills and supply process, and therefore avoid liability to risky votes of confidence. Supply bill defeats, as we know, are confidence matters, which demand the Prime Minister and the ministry's resignation. The alternative always, of course, is the Governor General's sole decision to dissolve the house and to put the defeat to the electorate by a general election. These protected salaries shield the judges from the political conflict of confidence votes, ministry defeats and high-stake politics.

Honourable senators, the 1878 Auditor General was created to free him from government control, from government favour, or government disfavour, but modern Auditors General are currently at the heart of politics. Daily we note their flamboyant forays into the political and policy fields. By their glossy reports to the Commons, they present in the media and to the public as the representatives of the citizen-taxpayer. By an illusory "audit power," they have assumed an audit power to hold governments, Parliaments, members, and now, senators, to account. Auditors do not represent the taxpayer, and have no representative powers. Such actions are unconstitutional and anti-Parliament. There are sad circumstances when the Commons House divided on the Auditor General, as the opposition championed him. In the Commons, April 1, 1970, Opposition Leader, Conservative Robert Stanfield, moved a non-confidence motion on Trudeau's Liberal Government, with whom the Auditor General was then at war. He moved, at House of Commons Debates, page 6109:

That this House condemns the government for criticizing the Auditor General of Canada for carrying out his duties according to law; and reasserts its support of the principle of unfettered parliamentary scrutiny of government expenditures including the right of the Auditor General to comment on the failure of the government —

Are you ready?

— to make expenditure in strict compliance with parliamentary appropriations and to report on these and any other cases he feels should be brought to the attention of Parliament.

This motion was well-defeated, colleagues, but it showed the Auditor General's bold foray into politics.

Honourable senators, in 1988, in studying the Main Estimates, our Senate National Finance Committee, of which I was a member, studied the Auditor General, and presented its Report on March 15. This was not long after the then new 1977 Auditor General Act, which was the political result of the combative Auditor General James Macdonell`s political efforts to enlarge his powers. Once a Price Waterhouse management consultant, his brazen, political and publicly orchestrated campaign for this act won — succeeded. His loud confrontations with Trudeau's Government were infamous. He won his goal, and he wholly re-made, reformed, whatever, re-did the Auditor General and the powers of the Auditor General. Moved November 1, 1976 in the Commons House by Jean-Jacques Blais for Treasury Board Minister Bob Andras, — as we call it — the 1977 Auditor General Act wholly enlarges this office's powers, granting him long denied powers to "validate" government acts, which judgments are not audit. Auditor Macdonell ab initio had sought a power to determine if government public expenditures were economic, efficient and effective, meaning value for money. The act`s sections 7.(2), 7.(2)(d), and 7.(2)(e) say:

7.(2) Each report of the Auditor General under subsection (1) shall call attention to anything that he considers to be of significance and of a nature that should be brought to the attention of the House of Commons, including any cases in which he has observed that . . .

(d) money has been expended without due regard to economy or efficiency;

(e) satisfactory procedures have not been established to measure and report the effectiveness of programs, where such procedures could appropriately and reasonably be implemented;

Honourable senators, these sections gave this auditor a non-audit power to judge government programs' success. This took the auditor out of the audit financial stream, and put him smack right into the public policy stream. Public policy is value laden and qualitative. It is no part of the quantitative, bean-counting role of the auditor. This new Auditor General is a creature unknown to ministerial responsibility, by which qualitative and value laden judgments on public policy properly belong to government and to Parliament's two houses, but not to the Auditor General or to the accountancy profession. We should be told what the value for money is in the Auditor General Ferguson's $21 million audit of senators. I would love to hear what that is.

Honourable senators, Macdonell's predecessor, Maxwell Henderson, Auditor General 1960-1973, set the tone for these political events, that Macdonell described as "the audit revolution," meaning their entry into the policy regulatory role. Regulation is executive. It is no part of financial audits on the public accounts, done for centuries to aid the houses in the control of the public purse. Economy, effectiveness, efficiency and value for money judgment belong to politics, Parliament houses and government, but not to the Auditor General. The next Auditor General, Kenneth Dye, built on all of this and went even farther. In 1985, in the Federal Court of Canada, he brought a court case, Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources). He challenged the federal cabinet. His quest was access and possession of cabinet documents on the 1981 Petro Canada purchase of Petrofina. These were difficult years for the government. Actually, even the provincial government service — very hard years.

Honourable senators, these three Auditors General well knew that the federal government was under stress. It was no coincidence that their adroit media mobilization — like today — and their alliances with the opposition parties were well staged. In the holy name of audit, these auditors engaged in hardball politics, in their real and mortal power struggles with Canada's cabinet ministers. From then, Auditors General have continued to grow their powers, by self-assertion of some definition. This has done incalculable damage to our constitutional system, and it reduced and eclipsed our Commons House, Public Accounts Committee, which is supposed to be the engine that should power the house's control of the public purse, in taxation and spending in the national finance.

Honourable senators, I come to the appropriation audit, and the large constitutional questions posed by Canada's current Auditor General's role, now more qualitative than the old appropriation audit, which in the 1860's Britain had applied to all its government departments, as did Canada slightly later. This demanded an independent Auditor General. Appropriation is the process in which the House of Commons agrees to its sums in dollars to be charged to and drawn on the Consolidated Revenue Fund for payment of the government's public administration and public service. By the Appropriation Act, the Commons House grants the legal authority to the government to draw on the fund. Jowitt's 1959 Dictionary of English law, Volume 1, defines "appropriation," at page 140:

In the primary sense of the word, to appropriate is to make a thing the property of a person. Thus, to appropriate a thing which is publici juris is to obtain a right to the exclusive enjoyment of it, so that the appropriator becomes the owner. . . .

This is what the House of Commons does - it becomes the owner of the public finance.

The definition continues:

Appropriation of supplies is the mode by which Parliament regulates the manner in which the public money voted in each session is to be applied to the various objects of expenditure . ., and the Appropriation Act is an annual Act passed for the purpose.

The Hon. the Speaker: Are honourable senators willing to give Senator Cools five more minutes?

Hon. Senators: Agreed.

Senator Cools: The 1964 A Parliamentary Dictionary, second edition, by L.A. Abraham and S.C. Hawtrey, defines "Appropriation," at page 21:

It is one of the cardinal rules of the system of public finance that no money may be spent for any other purpose than that for which it was authorized by Parliament. The allocation of a sum of money for expenditure on any object is called "appropriation", and money is said to be "appropriated" by Parliament for a particular purpose.

Honourable senators, the Commons House jealous constitutional ownership of the public monies is expressed as their appropriation of public monies. This jealousy is seen here in the Royal Assent ceremony on appropriation bills when the Commons Speaker himself presents them to the Governor General who gives his assent and thanks the Commons for its beneficent gift to Her Majesty. Modern Auditors General rarely say the words "appropriation audit." I have a suspicion that this chamber is probably hearing the words "appropriation audit" for the first time in donkey's years. Their expensive and inflammatory role must be considered and examined, considering that in many jurisdictions these auditors general are now called the SSAI, which stands for Supreme State Audit Institution. Perhaps it is time that the two Houses of Parliament and their head, the Governor General, seek a renewed statute for audit of the public accounts in the national finance.

(On motion of Senator Fraser, debate adjourned.)

The remainder of this day's Senate Debates are available here.