This site will look much better in a browser that supports web standards, but it is accessible to any browser or Internet device.

Skip to Content

Speech in Senate Chamber: Inquiry—Comprehensive Audit of Auditor General—Debate Adjourned

Comprehensive Audit of Auditor General

Inquiry—Debate Adjourned

Hon. Anne C. Cools rose pursuant to notice of June 2, 2015:

That she will call the attention of the Senate to;

(a) our 1988 Senate National Finance Committee study of the Auditor General of Canada; and, to then incumbent Kenneth Dye's February 3 testimony, wherein he described parliament as his "client," but also said, ". . ., our office views itself as a servant of Parliament"; and, to his explanation of the comprehensive audit, the term used by the June 6, 2013 Senate government motion, inviting the auditor general to audit exam senators; and, to the Auditor General's term, "performance audit," that describes this same audit of senators; and,

(b) to the learned research and scholarship on the auditor general's role and its incursion into the political, policy spheres; and, to Carleton University's Professor Sharon Sutherland's January 28, 1988, testimony before our National Finance Committee; and, to the abandonment by auditors general of their traditional audit role as quantitative bean counters; and, to their movement into the policy and advice spheres, the inexorable consequence of the then new 1977 Auditor General Act, the political result of then Auditor General James Macdonell's, successful public media campaign to that end; and,

(c) to the political fact that this Act enlarged this auditor's powers to add a new unknown power to judge and opine on the "value for money" of government expenditures; and, to these judgments which, not amenable to arithmetic measurement and quantification, will inevitably be flawed, because by human nature, such judgments will tend to be social, political and qualitative in character, which judgments, so totally liable to human subjectivity and selectivity, cannot be sound measures to form sound conclusions on government spending; and,

(d) to the fact that such auditors' opinions, politicized as they are, having of necessity become public policy opinions, will undermine the constitutional fact that public policy is the exclusive domain of politics, governments and parliaments; and, to Auditor General Act "value for money" section 7.(2)(d), which says:

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 which he has observed that . . .

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


(e) to the fact that Mr. Macdonell's 1977 Auditor General Act wholly altered audit of the public finance; and, to this then new audit role's drift away from the appropriation audit, towards the regulation of government, and now even the houses of parliament, with the result that, in the public mind, the auditors general have become a check on politicians, parliamentarians and senators; and, to this auditor general's new role in social and political control, with all its unfortunate results; and, to the Canadian Comprehensive Auditing Foundation, founded, financed, and operated by Auditor General Macdonell's office; and, to its famous paper, Comprehensive Auditing — An Overview, which, at page 6, states that:

Although the primary function of auditors is to add credibility to financial information, recent developments seem to indicate a growing trend towards viewing them in a broader context as agents of social control, . . . .

She said: Honourable senators, for years I had served on the Senate National Finance Committee, called the estimates committee. This committee is always chaired by an opposition senator. As deputy chairman, always a government senator, I sponsored the government's estimates in committee and their appropriation and supply bills here in the Senate through the annual supply cycles. When I came to the Senate in 1984, senators knew the then-new 1977 Auditor General Act. Many were still smarting from the political turmoil of Auditors General Henderson, Macdonell and Dye, and their well-publicized campaigns. This act's sections 7(2)(c) and 7(2)(d), gave the auditor new powers to judge economy, efficiency, effectiveness and value for money in government spending. Senators knew that these are qualitative and subjective judgments that properly belong to Parliament's two houses and government. Not quantitative, these judgments are not for Auditors General nor accountants. All of us knew that these new powers were big trouble.

Honourable senators, in 1985, in the Federal Court of Canada, Auditor General Kenneth Dye brought a lawsuit against Prime Minister Mulroney's government. In the case Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources), Auditor General Dye sought access to confidential cabinet papers for the Trudeau government's purchase of Petrofina. He won in the court of first instance, but lost in the Federal Court of Appeal. On appeal of that decision to the Supreme Court of Canada, he lost. On August 10, 1989, the Supreme Court ruled against him and his access to cabinet papers.

In 1988, while studying the Main Estimates, our National Finance Committee studied the Auditor General's role in the national finance. We heard witnesses, including Auditor General Kenneth Dye and Professor Sharon Sutherland, of Carleton University Public Administration School.

Auditor General Dye had difficulty explaining the still then unclear term "comprehensive audit," which term is not in the act. Yet Government Leader Senator LeBreton's June 6, 2013, government motion, that brought Auditor General Ferguson to audit all senators, ordered him "to conduct a comprehensive audit of Senate expenses. . . ." She did not explain this rare, unclear phrase. The Auditor General's website FAQ on our Senate audit answered a question on the Senate's audit type, thus:

We are conducting a performance audit.

The term "comprehensive audit" is now in disuse. As senators, we did not know what a "performance audit" was but we did know, senators, that our audit was a forensic audit.

Honourable senators, Professor Sutherland`s January 28, 1988 testimony at our committee was stunning. Chairman Senator Fernand Leblanc told of her 1986 article published in Canadian Public Administration, Vol.29, number 1. It was called, "The politics of audit: the federal Office of the Auditor General in comparative perspective." He noted her conclusion, headed "The political consequences of the new audit role." These consequences are many and large, and include the auditor's weakening of our House of Commons Public Accounts Committee, which had been the engine to drive the House of Commons' "control of the public purse." She boldly states the problem, at page 118 of the committee proceedings:

The argument of the paper is that the AG's move into the advice stream, as opposed to the traditional duties of an auditor, constitutes his Office as a force in policy-making, a factor that cannot be reconciled with responsible and representative government.

She concluded:

. . . the 1977 legislation should be rewritten so that the OAG would once more work from the base of a replicable, objective financial audit, reporting as broadly as it would wish.

Honourable senators, one must wonder what the auditor's work base is? The Senate must do a serious review of the role of the auditor general and audit in Canada's public accounts, and this officer's occupancy in the political, public policy stream. I shall read a revealing exchange between Auditor Dye and senators in our committee on February 3, 1988. The issue was federal transportation services and transport across the Northumberland Strait to Prince Edward Island. Nova Scotia Senator John Stewart asked a question on audit and government policy. I read at page 22:16 of the committee proceedings of that day. I want to share this with senators so that senators now can have some insight into what we were seeing and hearing that day:

Senator Stewart (Antigonish-Guysborough): . . . We know that there is a constitutional requirement that the Government of Canada provide a reliable year-round service across the Northumberland Strait to Prince Edward Island. Up until now the Government of Canada has performed this requirement by providing a ferry service. Is the policy in this case . . ., that there shall be a reliable year-round service, or is the policy that that service shall be performed by ferries? . . .

. . . I would like to know what the policy is here. Is the policy that there shall be a service or is it the question of the means?

Mr. Dye: Mr. Chairman, if I understand the arrangements regarding the crossing of the Northumberland Strait, Senator Stewart is telling us that there is a constitutional requirement that there be a method of getting back and forth. Certainly this office is not going to examine issues on the Constitution. . . . The next question is how should government fulfil its responsibilities? Years ago the government decided to have ferry crossings. . . . I cannot see any reason why my office would get into that question. The existing service is not run by the Government of Canada, nor by a crown corporation of which I am the auditor. I do not think we would touch that.

Senator Stewart (Antigonish-Guysborough): That is the policy level that you are talking about.

Mr. Dye: Let us hypothetically suggest that there might be a change in the crossing and it becomes a tunnel or a bridge. The government . . . . sets a new way of fulfilling its constitutional requirement and decides to build a tunnel. The Parliament . . . is asked for funds to build an alternative way of getting back and forth. Parliament then allocates X number of dollars and sets about building the tunnel. I would say that we would undertake an audit of the construction process — the capital project. It would be a significant expenditure of public funds, and we would audit the process. Part of that process would be to look at all of the alternatives.

Senator Stewart (Antigonish-Guysborough): In other words, you would look at the possibility of remaining with the ferry service?

Mr. Dye: We would determine whether or not those who had made the decision had looked at alternatives. But I would never get into the question of policy. . . .

Senator Kelly: With respect, you have. If the government has said that it is going to build a tunnel, having weighed the alternatives, it is up to the government to arrive at a policy. If you are going to reach behind that policy decision, then you are getting back to what you said you would not do. You are going to say, "Come on, cabinet, this is what you have decided, but we want to know why you decided it . . .?" So you are, in fact, leading yourself into the very thing I do not think you have any business doing. You are going to second-guess policy decisions that emerge out of cabinet. . . .

Mr. Dye: . . . I am trying to find a way to express it in different terms so we will get back to this nice relationship that we were enjoying before. I believe that it is my job to inform Parliament that the government of the day has exhibited due regard to economy when it is getting into a major capital project.

Senator Kelly: Once the capital project is decided upon? In other words, it will build the best and most economical tunnel. It has decided on a tunnel. That is not what you are saying. You are saying that you will go behind that and find out why it did not think of a bridge. Why did it not think of an airlift? Why did it not stay with the ferries?

Mr. Dye: Mr. Chairman, when you get to that level of looking at auditing of policy, or looking at auditing the implementation of a policy, which is what I am doing, it will be pretty obvious to us by public record that Parliament was informed in the discussions that the government of the day had and, indeed, considered helicopters, rocket ships, time machines and all other alternatives available . . . . A bridge, a tunnel or continuing ferry service are the obvious alternatives. However, it may build an aerial tramway. I do not know the answers, but presumably the reasonable alternatives will be so publicly known that we would not waste our time on that.

Senator Kelly: Nor should you. I think we are coming back together again.

Mr. Dye: Good. That is my objective.

Senator Kelly: A wise and . . . intelligent opposition, as this government certainly has, would be asking all those questions . . . . However, you and I agreed at the opening . . . that the auditor starts once the policy is decided and goes forward from there. You scared me a moment ago when you said that you want to know if the cabinet had considered all alternatives. I think that is reaching further than you and I earlier agreed you should.

Mr. Dye: Had an obvious option been completely ignored, and I am speculating here — I wonder whether or not we would think it important to say to Parliament that despite the obvious merits of an alternative, it was not considered, and then go on to audit whatever it was. I am not sure what we would do in that regard, but it would have to be very obvious.

The Chairman: It is a very thin line.

Senator Kelly: Yes, and Mr. Dye clearly has one very hefty foot on both sides of the line.

Mr. Dye: I am trying to be very careful not to go over that line.

The Chairman: If the population, in their referendum, have asked for a tunnel, then that would be built. The government would proceed to build a tunnel, whether or not it is more expensive than another alternative. Will you have to find out if the population made the right decision?

Mr. Dye: No. In that case I would be engaging in the political process and we would stay away from that.

Senator Stewart (Antigonish-Guysborough): Surely, Mr. Chairman, if a government were to go ahead with, . . ., a tunnel, it would be incumbent upon the Auditor General, given the Act, to compare the actual cost of that construction with the projected cost of continuing the existing mode of performing the policy, which is laid out in a constitutional document. You would have to compare the selected option with the existing mode of performing the service.

Mr. Dye: Senator Stewart raises an interesting question. I am trying to speculate on what my response might be. If the legislation directed the government . . . to build a tunnel and the legislation said that that tunnel shall perform comparative services at comparative cost to existing means, but in a more modern way, I think we would be obliged to go back and make that comparison because the legislation said one has to understand the comparison of which way is best. But it is unlikely legislation would ever say anything like that. I suspect the legislation would simply say "Go and build a tunnel; here is the money." Therefore we would audit the building of a tunnel and not question whether it should be a tunnel or a time machine.

The Chairman: And you would audit how the contracts were tendered.

Mr. Dye: Indeed.

Senator Stewart (Antigonish-Guysborough): But that is the old-fashioned auditing procedure and not very modern.

Senator Stewart said it all.

Honourable senators, Mr. Dye was ill at ease. His knowledge of parliament and its appropriation lexicon was sparse. He said parliament was his "client." He said, at page 22:14 of the committee proceedings:

. . . , our office views itself as a servant of Parliament.

I asked him how his master, parliament, could be the "client" of its auditor general servant. He continued:

Now, with the additional mandate presented to my office in 1977, a third element was brought in of "value for money" auditing. . . .

He said, at page 22:6 of the committee proceedings:

Legislative auditing exists to help legislators maintain control of the public purse.

These are strange words from the officer who displaced, actually replaced, the influence of the Public Accounts Committee in the national finance. That day, I learned little about "value for money" audit, less about the public accounts, and nil about the appropriation audit. Lee Berthiaume writes about the 1977 Act in his June 13 Ottawa Citizen piece, headed, "Shining the spotlight into darker corners of state." On the auditor general's role, he quotes Professor Sharon Sutherland:

The `seismic shift' that created the modern Office of the Auditor General, gave the organization more than money and ubiquity; it brought with it political power, . . .

The OAG vision of its own pre-eminence in the House of Commons as Government's regulator seems even to overtake the role of the opposition parties.

It was clear to all of us here in the Senate that the Auditor General's Senate audit was politics. It was not about audit.

Honourable senators, the Canadian Comprehensive Auditing Foundation was founded, financed, and run by Auditor General Macdonell. On his 1980 retirement, he became its chairman. Its famous paper, Comprehensive Auditing - An Overview, authored by him, informs of this auditor's new role, at page 6:

Although the primary function of auditors is to add credibility to financial information, recent developments seem to indicate a growing trend towards viewing them in a broader context as agents of social control, . . . .

This "agent of social control" role is clear. This officer's self-given role to define and redefine Senate rules has created absurdity in his Report of the Auditor General of Canada to the Senate of Canada. His Senate audit, as the Government's business, is a fatal compromise to his independence. His $24 million report's recommendations reveal much.

The Hon. the Speaker pro tempore: Would the honourable senator like more time?

Senator Cools: Yes, I would, please.

Hon. Senators: Agreed.

Senator Cools: Lee Berthiaume is prescient in this auditor's unhappy audit regrets on senators' "questionable spending," In his June 13 Ottawa Citizen article, "Auditing MPs a waste: ex-AG," he wrote, at page A12:

Ferguson said he was "not happy" with the audit's price tag, given that it uncovered only $1 million in questionable spending.

I repeat he was "'not happy' with the audit's price tag, given that it uncovered only $1 million in questionable spending." Evidently, he was hoping for much more "questionable spending." "Questionable" is his created word, not tested fact. "Questionable" is his selective, subjective opinion, perhaps induced by his biased wish for more "questionable spending." He has inflicted incalculable pain and suffering on some splendid and fine senators. In my view, his wish for more "questionable spending" renders his audit of senators wholly suspect.

Honourable senators, the Auditor General Act and its officer both need to be reviewed in its principles, practices and statute. I think in the new session, we should look at a very serious review of that.

I thank colleagues for their attention.

(On motion of Senator Cools, for Senator McCoy, debate adjourned.)

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