This resolution, Mr. Chairman, seeks leave to introduce a bill to provide for the financial administration of the government of Canada, the audit of the public accounts and the financial control of crown corporations, and as I indicated, I should like to make this statement at this time.
Briefly stated, the purpose is threefold. In the first place, it is proposed to consolidate in one statute, in simplified, clarified and, where necessary, in amended form, the provisions relating to the financial organization and administration of the government of Canada and the audit of the public accounts, which are now included in the Department of Finance and Treasury Board Act, the Consolidated Revenue and Audit Act and certain other statutes.
In addition, certain new provisions will be introduced which experience has shown are essential for the administration of the collecting, disbursing, borrowing, and accounting activities of an enterprise of such magnitude as the government of Canada.
In the second place, it is proposed to provide a statutory basis for the management and control of public stores similar in principle to that provided in the Department of Transport Stores Act. Thirdly, it is proposed to establish a more uniform system of financial and budgetary control, and accounting, auditing and reporting, for crown companies.
The Department of Finance and Treasury Board Act has been on the statutes in virtually unchanged form since 1869. The Consolidated Revenue and Audit Act has not been amended since 1931. The pronounced and rapid growth in the size and complexity of government business in recent years, and particularly in the war and post-war period, has shown the need for certain changes in the existing legislation. In bringing together in one statute the principal provisions of these acts relating to the financial organization and administration of the government, some obsolete and unnecessary provisions have been eliminated, and a number of amendments have been introduced.
Financial Administration Act
After this resolution is approved the bill will be given first reading. There will not be time for further action on it at this session, but it is the government's desire that the bill be given full and careful study, and by introducing it in the house at the present time it is hoped that hon. members and others interested will have an opportunity to consider fully its terms. When it is reintroduced at the next session of parliament in the autumn, it is the intention to refer the measure to the public accounts committee for detailed consideration; and it is our hope that by making it public at this time its consideration then may be facilitated.
Financial operations as extensive as those of the government would, under any set of circumstances, require an elaborate administrative organization. Day-to-day operations must be carried on smoothly and efficiently, and decisions based on accurate and current information must be made and executed without delay. This calls not only for a high degree of speed and technical efficiency in the collecting and disbursing processes, and in recording and classifying financial transactions; it also means that those who are required to make decisions must be in a position to do so promptly. Inevitably, in an enterprise of any magnitude, this involves some delegation of authority. However, the government's financial business must be carried on with full regard to the traditional relationships which exist under our parliamentary system of government between the legislature and the executive. With the substantial increase in the amount of public business which comes before it, parliament can no longer deal, as it once did, with the details of administration. However, the government is the executant of the will of parliament, and must look there for its authority, and a broad measure of control and accountability is both necessary and proper.
The working out of the precise degree of control that should be exercised raises many difficult problems, but I believe that when hon. members have had an opportunity to study the provisions of the bill in detail they will agree that a very real effort has been made to preserve for parliament the final word on those fundamental matters which are, and indeed which should be, for parliament alone to deal with. When authority has been granted to the executive a full measure of accountability has been assured. In short, the aim has been, by the proper delegation of authority, to achieve business efficiency in operations with full regard for the fundamental concepts of parliamentary sovereignty and executive responsibility.
One of the most important parts of the bill is the provision for the continuation of an
independent audit of the public accounts on behalf of parliament. The office of Auditor General, as we know it today, had its genesis in 1878, when provision was made for an examination of the accounts of Canada by an officer independent of the executive and responsible directly to the House of Commons. In succeeding revisions of the Consolidated Revenue and Audit Act, the Auditor General's independence as a servant of parliament was carefully preserved. The present bill makes no change in this regard, except to remove the present rather anomalous requirement that the Auditor General shall, if so directed by the governor in council, examine the accounts of any branch of the public service before payment.
Although in practice in recent years the Auditor General has been called upon to undertake few pre-audits, it has seemed to us wholly inconsistent that, on the direction of the governor in council, he should be obliged to commit himself to the propriety of expenditures before payment. It is the statutory duty of the comptroller of the treasury, as an executive officer, to make the necessary prepayment examinations and satisfy himself that there is authority for proposed disbursements. To project the Auditor General into this administrative process is, I am convinced, wrong in principle, and for this reason it is not proposed to re-enact this provision in the bill.
The treasury board is an integral part of our machinery of government. The new bill will replace the main portion of the Department of Finance and Treasury Board Act, but provision will be made for establishing the department and providing a statutory basis for the board's existence and position as a committee of the privy council. It is proposed to provide a clearer definition of the board's powers and field of operations, to authorize it specifically to make regulations with respect to various financial matters and the administration of the public service, and, when authorized by the governor in council, to perform certain purely administrative duties now performed by the council.
One of the most pressing problems of central administration in recent years has arisen from the fact that council has been obliged to concern itself with a multiplicity of minor matters of purely administrative character. To relieve it of some of these routine matters, it is proposed to introduce a provision enabling it to authorize the treasury board to exercise a number of the administrative powers conferred on it-that is, the council- under the civil service and certain pension and superannuation acts. Not only will this result in a considerable reduction in the volume of work which now comes before council,
but it will enable many of these routine matters, which are referred to the treasury board before being considered in council, to be dealt with more expeditiously than in the past.
A number of new provisions are being introduced with respect to the collection, management and disbursement of public moneys. Most of them are of a technical nature relating to the mechanics of the financial processes, and are designed either to clarify existing legislation or to improve or simplify present administrative practices, and I think it would be more appropriate if they were explained in the committee stage of the bill. However, there are two or three of the proposed revisions which I believe are of more immediate interest to the house, and I should like to refer briefly to them. First, however, I might say that the provisions relating to the office of the comptroller of the treasury, which was established when the Consolidated Revenue and Audit Act was amended in 1931, are being re-enacted in substantially unaltered form, with such additions as experience has shown are advisable.
Among the new provisions of the bill it is proposed to include specific provision making it clear that the Minister of Finance may purchase, hold and sell securities of Canada. The authority to invest balances of public moneys not immediately required for use has always been regarded as vested in the minister as part of his duties in managing the consolidated revenue fund. In placing the practice on a statutory basis the purpose is to give a clear definition of these powers as part of the general function of managing public moneys and the public debt, and to provide a direction as to the accounting treatment to be given profits and losses incidental to the investment operations.
Another new provision will relate to writing off uncollectible debts owing to His Majesty that have been outstanding for many years. At the present time there is no parliamentary authority to write off such debts, and considerable expense has been incurred by departments in maintaining records of -claims that are valueless. The problem of dealing with these uncollectible items has been considered from time to time by the public accounts committee, and hon. members will recall that in its third report last year the committee recommended that consideration be given to the establishment of a procedure whereby amounts which have been outstanding for the previous ten years could be written off. A procedure is now being proposed for dealing systematically with such bad debts of limited size, which I commend to the public accounts committee for its consideration.
Financial Administration Act
It is also proposed to include a clause to provide that when a guarantee has been given under the authority of parliament, any amount required to be paid under the terms of the guarantee may be paid without any further appropriation. I believe it is a matter of the utmost importance that when the government, in the name of His Majesty and under the authority of parliament, has given a guarantee, there should be no question that its terms may be implemented and any necessary payment made without delay.
Another important new feature of the bill is the proposal to establish a system for the control of public stores. The principle involved is not new. It is essentially that now followed under the Department of Transport Stores Act, but it has seemed desirable to provide more comprehensive legislation which may be applied to the stores of any department. Briefly stated, the proposed measure provides for the general regulation of the acquisition, custody and issue of departmental stores, and establishes the accounting machinery for financial control through the operation of revolving funds. It is not intended that a revolving fund should be established for every department, but for those departments where the requirements of several services financed from different appropriations may be met by centralized purchasing and warehousing practices, there should be substantial economies in the use of such funds. The use of revolving funds will be subject to the approval of parliament, possibly through the inclusion of an appropriate item in the estimates; and when a department has been authorized to operate a fund and the amount that may be charged to the fund at any time has been fixed by parliament, the department's stores investment will be limited to the amount authorized.
One of the important new parts of the bill is that providing for the control of the financial affairs of crown corporations. The crown corporation form of enterprise is not a new type of organization, but in recent years, as the work of government has become more complex, increasing reliance has been placed on it as the appropriate instrument for administering and managing many public services in which business enterprise and public accountability must be combined. In the schedules to the bill some thirty-three corporations are listed, engaged in activities ranging from the production of munitions and synthetic rubber to the provision of housing, transportation and broadcasting services. Apart from the Government Companies Operation Act of 1946, which applies only to certain crown companies incorporated under part I of the Companies Act, 1934,
Financial Administration Act there is no comprehensive legislation dealing with the financial operations of these enterprises and their financial relations to the government. In the present bill it is proposed to remedy thiis omission and to make systematic provision for the financial control of those crown corporations that are listed in the schedules of the bill and such others as may be designated by the governor in council as falling within the several categories established in the bill.
It is apparent from an examination of the acts under which the existing corporations were established that parliament has not granted all of them the same degree of independence and autonomy. Ultimate accountability to parliament has in all cases been a prime objective, but the way in which this has been achieved has varied widely. At the one extreme are those bodies which, as departments of government, are responsible for administrative, supervisory or regulatory services and are subject to more or less continuous day-to-day control and direction of the government or a minister, but which, for one reason or another, have been given corporate status. At the other extreme are those bodies that conduct lending and financial operations, or manage commercial and industrial operations involving the production of or dealing in goods or the supplying of services to the public, and are normally required to pay their own way. These proprietary corporations, as they are designated in the bill, have usually been given a considerable degree of managerial freedom, and such control as is exercised by the government or a minister may be compared to that of the equity shareholder of a business corporation.
Falling neither within the class of departmental corporations on the one hand, nor of proprietary corporations on the other, are those crown corporations which are created to manage trading or service operations on a quasi-commercial basis, or to undertake procurement, construction or disposal activities on behalf of the crown. These bodies, which we term "agency corporations", are normally dependent on appropriations to meet deficits, and it is this characteristic which suggests that they should be subject to somewhat more detailed financial control than are proprietary corporations.
It is proposed that departmental corporations will be governed as at present by the same provisions as are applicable to departments generally.
With respect to agency and proprietary corporations, it is proposed that the terms of the crown corporations part of the bill should
apply, but in the event of any inconsistency between the provisions of that part and any other act, it is specifically provided that the provisions of such other act shall prevail. The purpose is to lay the groundwork for uniform financial control and to legislate with respect to those matters which the present acts do not cover. At some future date the financial provisions of the special acts may be reviewed, but for the present it is proposed that they should continue to operate.
I will not attempt at this time to cover all the provisions of this part of the bill, but I might say that it is proposed that the annual capital budgets of both agency and proprietary corporations, as approved by the governor in council, should be laid before parliament. Provision will also be made for regulating the establishment of reserves and the treatment of surplus moneys; for enabling corporations to meet emergency requirements for working capital; and, in the case of agency corporations, for prescribing the conditions upon which they may undertake contractual commitments. It is also proposed to make provision for keeping proper books of account, for the preparation of financial statements and the submission of annual and other reports, and for auditing the accounts and financial transactions of corporations.
In the provisions relating to the appointment and reports of auditors of crown corporations it is proposed in some respects to override existing legislation. We propose to qualify the Auditor General for appointment as the auditor, or a joint auditor, of a crown corporation, in any case in which he is not now eligible for appointment, and to require the auditor to report on the financial affairs of the corporation in the terms specified in this bill.
In effect, the auditor is now being asked to examine the income and expenditure statement as well as the balance sheet, and to satisfy himself not only that transactions have been accurately reported, but that they do not exceed the powers of the corporation. In recent years the scope of the auditor's examination and the phraseology of his report have been subjects of serious consideration in the United Kingdom and in the United States, and in both countries within the past three or four years new forms of report have been introduced. This is a field in which professional accountants and auditors are well qualified to give advice, and, in seeking to develop a satisfactory form of audit certificate applicable to crown corporations, I would welcome an expression of views from accounting organizations and others professionally interested. The bill, as
I have indicated, will be reintroduced when the house meets again, in the autumn, and in the intervening time I should be pleased to receive and consider any recommendations or suggestions which may be submitted.
I think I have mentioned, Mr. Chairman, the more important aspects of the bill. There are a number of other proposed provisions, such as those relating to the management of the public debt, placing the government officers' guarantee fund on a statutory basis, and re-enacting the provisions of the Debts Due to the Crown Act, which will be repealed; but I think that it is more appropriate that these be explained in committee.
In bringing together in one place the provisions covered by the proposed bill, it will be possible to repeal a number of existing statutes which hon. members will find listed in a schedule to the bill.
I know, Mr. Chairman, that it is not customary to call the attention of the house to the work of departmental officers in connection with the preparation of legislation, but on .this occasion I feel impelled to depart from the usual practice and to mention the name of my deputy minister. In the preparation of this bill, as in so many matters of importance to this house and this country, Dr. Clark's contribution cannot be overemphasized, and I consider it fitting that I should record this fact.
I should like also to express my appreciation of the valuable and constructive advice and assistance which I and my officers have received from the Auditor General at every stage in the preparation of this bill. All of the suggestions proposed by Mr. Sellar have been worthy of, and have received, the most serious consideration, and many of them are embodied in the text of the measure covered by this resolution.
The bill will provide a more positive and effective regulation of financial transactions and public stores and property; it will ensure a more satisfactory control of the financial affairs of crown corporations, and it will enable parliament to receive a full accounting of the manner in which public moneys have been collected and spent. I commend the measure to the committee, and ask that the resolution be adopted.
Subtopic: PROVISION FOR AUDIT OF PUBLIC ACCOUNTS, FINANCIAL CONTROL OF CROWN CORPORATIONS, ETC.