September 14, 1903

CONSOLIDATED REVENUE AND AUDIT ACT AMENDMENT.


The MINISTER OF FINANCE (Hon. W. S. Fielding) moved for leave to introduce Bill (No. 251) to amend the Consolidated Revenue and Audit Act.


CON
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The MINISTER OF FINANCE.

As my hon. friend (Mr. Clarke) desires me to explain I will. The Bill is intended to remove some difficulties and delays which have sometimes occurred in regard to the payment of accounts against' the government. There are two methods whereby accounts may be paid. One is what I may call the letter of credit system and the other deals with the payment of accounts in a somewhat different way. Under the letter of credit system, where an appropriation has been made to a given department, a certain part of that appropriation is placed to the credit of the department in the form of a letter of credit given to one of the banks. In that case partied having claims against the department can go directly to the department and upon their claims being properly certified can receive their money at once. Perhaps by way of illustration we might take the case that was brought to our notice the other- day in connection with the indemnity of members. That is paid by the letter of credit system. The proper officers of a department receive a letter of credit under which they may pay up to the amount of that letter of credit, and then, in due season the banks are repaid for the advances so made. Now, a member, and I only take this as an illustration, will go to the clerk's office in one of the neighbouring rooms, and upon satisfying the clerk that he is entitled to his indemnity, receives a cheque which is the Sir WILFRID LATJRIER.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

Is the letter of credit system confined to cases where there lias been a parliamentary appropriation V

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The MINISTER OF FINANCE.

In all cases. There can be no letter of credit without an appropriation. We have had some differences of opinion with the Auditor General as to the proper interpretation of the Act. We have thought sometimes that the Auditor General gives the Act an interpretation which goes beyond the object of the law, and in view of the fact that the Auditor General feels it his duty to place this, interpretation upon the Act, we feel that we should relieve him from any possible mistake on that score, and from any undue responsibility, by introducing an amendment which will make it perfectly clear that beyond a certain point the Auditor General's responsibility ceases. We take it to be the Auditor General's duty to examine and adjust accounts. We understand it to be his duty to inquire first as to whether there is a proper appropriation. If there is, and he gives his approval to a certain account, then it is his duty to see that proper vouchers are furnished and that these vouchers correspond with the payments, which is somewhat the same duty in this regard that would be performed by the auditor of any company. If in any case the Auditor General finds anything inaccurate, or if he needs an explanation, he should at once communicate with the proper parties, calling their attention to what is wrong, and asking for an explanation. If it be found that there has not been an explanation given to his satisfaction, and if lie thinks that he is right in the matter, then he lias a further power, and that power is to set forth in writing his objections and opinions on the subject. These views are conveyed to parliament in the form of his reports. In that way parliament is fully

charged with everything in relation to the audit of accounts, and if under any circumstances the treasury board or the government fails in its duty, the party responsible before parliament must be the government. No system of audit can get us away from parliamentary responsibility. The Auditor General sometimes thinks he is bound to go further, and as he claims that he does so in virtue of the law, we think we should make it clear that the law never intended that he should carry his point as far as he does in some cases. If he has a difference with one of the departments at the present time, about an account he will claim the right to hold up the credit of that department, whether his contention is right or wrong. Assuming for the moment that his contention is right, if there is need for further explanation in regard to a given account, when he refuses to issue a letter of credit, he obstructs the business of the country and scores of people who have claims as to which there is no dispute are kept out of their money. The Auditor General claims that it is his duty to take that course. Therefore we think it well to make it clear that parliament never intended that he should reserve that power to himself, and we propose that when an application is made for a letter of credit to the Minister of Finance and the Auditor General, if, within two days the Auditor General fails to do his part the responsibility should devolve upon the treasury board and the government, and the treasury board may authorize the Minister of Finance to issue the letter of credit, and the treasury board and the government must be responsible immediately to parliament. We have no right to hold the Auditor General responsible if he has done his part, if lie has remonstrated and has set forth his objections in writing to parliament. But, in the meantime the public business should not be interfered with. The letter of credit having been issued the bank becomes entitled to repayment. At the present time the Auditor General claims that he has the right to refuse to pay anything until he is satisfied according to his own views. AVe say that when a letter of credit is issued in good faith, where a bank has advanced its money in good faith, and where there is no question as to the accuracy of the bank's claim, the bank should be repaid promptly, and therefore we propose that if the Auditor General does not promptly take steps to repay the bank, the Minister of Finance may take steps to repay the bank, irrespective of the Auditor General or the views which he may take.

In regard to the other method of paying accounts, where you do not deal by letter of credit but where the claim is sent directly to the Auditor General, sometimes delays occur. S- metimes these delays are unavoidable. Sometimes information is needed by the Auditor General. AATe think the delay there

is sometimes very much longer than it should be. We find that there is no provision made requiring the Auditor General to deal with these things promptly. We propose to relieve him from any undue responsibility, from that responsibility which we think properly belongs to the government which is subject to the criticism of parliament. So we say that if the Auditor General delays for an unreasonable time to pass an account, the department concerned may apply to the treasury board, and if the treasury board is satisfied that the delay is uureason-able, it may authorize the Minister of Finance to pay the account; always subject to this proviso, that we must be satisfied by the report of the Minister of Justice that the account comes within an appropriation which parliament has voted. There is another phase of the matter. The Audit Act never contemplated, I think, that the Auditor General should have power to hold up these accounts and credits ; but it does contemplate that the Auditor General, as re-pects a certain portion of his duties, should be subject to the overruling of the treasury board. Where under certain provisions ot the Act he takes exception to a payment, the department concerned has a right of appeal to the treasury board; but there is no fixed time within which that appeal shall be dealt with; and if the Auditor General fails to make out the necessary papers to bring the matter before the treasury board, a considerable delay may take place. AVe propose to make the treasury board the judge of what is a reasonable time ; and if. after a reasonable time, the Auditor General fails to place the papers before the treasury board, it may exercise its right independently of him, may judge of the merits of the case, and may approve or disapprove of the claim. So far as the duties of the Auditor General relate to an examination and audit of the accounts, so far as they relate to the checking of vouchers and the calling of the attention of the various departments to anything that is inaccurate, so far as they relate to the Auditor General placing his views in writing by way of protest, if necessary, before the various departments, or placing his views in writing or in print before this House-in short, so far as the duties of examination, adjustment and audit are concerned-we do not propose to take one iota of power or authority from the Auditor General ; but we simply say that when, as in the ease recently brought before this House, there is a condition producing a deadlock, there should be some authority to overcome the difficulty ; ana under cur system of parliamentary government. we know of no other authority than the government of the day to deal with these matters and to be responsible to parliament for their action. The proposal we make is to amend the Audit Act so that in these special cases, if the Auditor Gen. eral shall neglect or refuse or fail within

a reasonable time to take the course which we believe the Audit Act contemplates, the treasury board may take up the matter and deal with it irrespective of the Auditor General.

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Mr. I@

It is of course impossible to discuss this measure at the present time ; indeed, it would be unusual to do so. So far as I gather from the explanation made by the Minister of Finance, some of the matters provided for are to a considerable extent matters of detail-length of time, and so forth-while others involve considerations which are more serious. I would not regard it as desirable to relieve the Auditor General of responsibility to any considerable extent. If you abolish his duties altogether, you would relieve him entirely of responsibility, but I do not think you would advance the public interest. I would like to ask my hon. friend the Minister of Finance whether or not the proposed measure has been submitted to the Auditor General himself for the purpose of enabling him to make any suggestions which he might have with regard to it. I have no doubt that as to many of these matters he might himself be of opinion that some changes should be made in the Audit Act; but I would like to know whether he has been consulted or not, and whether there are any suggestions of tiie Auditor General which have not been acquiesced in or considered advisable by the administration.

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The MINISTER OF FINANCE.

The Auditor General some time ago-I think last session-for the first time suggested some amendments to the Audit Act, which did not commend themselves in detail to the judgment of the government and the House. The matter has not been very much considered of late. As to this particular Bill, I may say to my hon. friend that it has not been submitted to the Auditor General ; but the subjects dealt with in it have been frequently discussed between the Auditor General and myself, and he is aware of the view of the government with respect to them. He has not seen a copy of the Bill; but he is aware that his conception of the duties of an auditor goes beyond what we think is the letter and certainly the spirit of the Audit Act ; and inasmuch as the Auditor feels that he is obliged by the terms of the Act to take a certain responsibility, we have thought it best to-relieve him of that responsibility- not the responsibility of audit or examination, but the responsibility of refusing a credit for the department in such a case as that which occurred recently. I only cite that as an illustration, as it happens to be one with which the House is familiar.

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CON

Samuel Barker

Conservative (1867-1942)

Mr. SAMUEL BARKER (Hamilton).

Without wishing to occupy the time of the House, I want to say a word on this matter, Hon. Mr. FIELDING.

because I think it is somewhat dangerous to go on with this measure before we know clearly what we are doing. As I understand it, one complaint the Minister of Finance makes is that when differences occur between a department and the Auditor General, the Auditor General in some instances uses the method of refusing to renew credit in order to stop the payment. It strikes me that the method proposed by the hon. Minister of Finance will go to the other extreme, and, by compelling the Auditor General to renew the credit, will enable objectionable payments to be made ; and then perhaps we in parliament, after the horse has been stolen, will be asked to criticize the payments, which may not be very large amounts, but which in the aggregate may amount to a good deal. For example, a dispute may occur between the Militia Department or the Public Works Department and the Auditor General as to whether a particular item should be paid. The Auditor General refuses his certificate, because some vouchers or some particular information which he has called for, which he thinks he has a right to call for under the statute, has not been furnished to him. The department wanting to pay the money asks him to renew the credit. He says, if I do that, you will pay this very money which is in dispute out of the credit. It seems to me that a more practical way of preserving all the benefit of the Audit Act would be to provide in the statute, or in the rules of the treasury board, or in some other manner, that the credit, if renewed, should not be used for the payment of a disputed item, and then let the credit go on in the ordinary course. I have read discussions on various items which have appeared in the Auditor General's Report ; and I could easily see that if the credits were renewed from time to time, the Auditor General could be set at defiance, payments objected to could be made out of the credits, and the whole matter might be left for discussion in parliament. I quite admit that there is always friction between an auditor's department and a spending department in every corporation or company. That is an inconvenience perhaps ; but it is after all a protection to those who provide the money. I think it is very dangerous in any way to infringe on the rights and powers of the auditor, and I hope that this matter will be carefully considered before any alteration is made in the Audit Act along the line suggested by the hon. minister. I think it would be of the utmost importance that the Auditor General should be consulted, and that we should have his report on the propositions made before we take any action upon them. The Finance Minister has referred to delays by the Auditor General, and wishes to give the treasury board the power to override him, and to order payment when he delays giving his certificate. Well, surely the remedy in such a case as

that would be, if the officer entrusted with such important duties neglects or delays to give his certificate, for the minister to report that to parliament, and let us deal with the neglecting official. Not that we should override this duties, so that you would override another Auditor General who might hereafter be appointed and who was not neglectful. I understand that, with regard to the other matter to which the Minister of Finance has alluded, namely, the difficulty in the payment of the indemnity to members, there is some cause beyond what appears on the surface. 1 understand that the Auditor- General is entitled to 'certain statements, or perhaps that certain statements from the bank and those who require the money are necessary before he can certify to the Minister of Finance that a farther credit is necessary, and I am told that these statements-I do not like to say that they were intercepted-have not gone* to the Auditor General, and he is not actually in a position to say whether the money is required or not. It seems that he is expected simply to make application to the Finance Minister for money without the material on which to base such a request. I have not had the opportunity of knowing the Auditor General's side of the question, but I have heard that the bank statements and statements from the accountant's office, necessary to enable him -to know whether a further credit is required in order to pay the indemnity of! members, have not been furnished him. At all events he has not received them ; and if he had received them, he would have been able to make application under the statute and the money would have been provided.

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The PRIME MINISTER.

I quite agree with my hon. friend that it is not very convenient to proceed with the discussion of this Bill until hon. members have had the opportunity of reading it and thinking it over. But I can assure him that there is no statement needed by the Auditor General which has not been furnished him. That at any rate is the opinion of the Department "of Justice. There is no difficulty on that score except what the Auditor General sees fit to create himself, and I am not saying this offensively or with any desire to reflect on him. or the stand he has taken.

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Samuel Hughes

Liberal-Conservative

Mr. HUGHES (Victoria).

Would the hon. minister state the position which the Auditor General takes ?

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The MINISTER OF FINANCE.

I do not think that that is material to the Bill, but shall be very glad to answer my hon. friend. We thought it was wise to learn wisdom by experience, and therefore decided to have a careful examination made of the methods of conducting public accouuts in order to provide against what did happen occurring possibly again, or against anything else of a like nature. With that object in view, we appointed three gentlemen to make a special examination of the system. One of these was the deputy minister of Finance, Mr. Courtney ; the second was Mr. George Burn, general manager of the Bank of Ottawa ; and the third was Mr. Kent, chartered accountant of Montreal. These gentlemen made a thorough examination into the whole system, and their report in the main was highly complimentary to the system followed in the civil service of Canada. But they did point out what they believed to be one or two defects. They advised that instead of sending the bank statements and cheques back to the department from which they came, and thence to the Auditor General, as had hitherto been the practice, they should be sent to the Finance Department for examination and checking and thence to the Auditor General. This was intended to prevent the bank statements and cheques, as in the Martineau case, going back to the same department which issued them and thus falling into the hands of the very person who was guilty of the defalcation. That recommendation will be found in the report of the Martineau investigation in the possession of the House. The government thought that while the change was not of vital importance, still, as the commissioners had advised it, we should put it into operation. But while the treasury board accepted the recommendations of the commissioners, the Auditor General differed from the commissioners as to the wisdom of the change. Whether he was right or wrong, I do not profess to say. But what I contend is that it is not the business of the Auditor General but of the treasury board, under the statute, to make the regulations, and it is for the Auditor General to observe them. And according to the opinion of the Justice Department, every statement which, by the statute, we are obliged to furnish the Auditor General, has been furnished him.

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Edward Frederick Clarke

Conservative (1867-1942)

Mr. E. F. CLARKE (West Toronto).

Was

he consulted by the commissioners ?

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The MINISTER OF FINANCE.

I do not know that he was consulted any more that the hundreds of other civil servants whose duties were being inquired into. I presume that he was, but I have not heard any question raised on that score. The hon. member for Hamilton (Mr. Barker) has cited a case where, under a letter of credit, the Auditor General has taken exception to a certain claim, and while that matter is before the Auditor General, he says application is made for a further credit, and then the Auditor General objects to giving that credit lest the money be applied to the payment of the disputed accounts. Is that the case 1

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The MINISTER OF FINANCE.

Then my hon. friend states an Impossible case.

At the time when ihe examination takes place, the money has been paid under the letter of credit system; the audit is an audit after payment. After the money has been paid, the Auditor General may question the propriety of the payment. He may say it was not contemplated by the appropriation, but in the meantime the money has been paid, so that my hou. friend's idea that the audit takes place before money is paid and that the refusal of a letter of credit is necessary to prevent the payment, is a misconception.

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Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

I was referring rather to cases wherein the propriety of payment at all times was questioned by the Auditor General, and then the accounts were paid. It is evident that the Auditor General was afraid that a letter of credit might be used to cover such an account, although it ought not to be paid at all and had not yet been paid.

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The MINISTER OF FINANCE.

Our view is that the responsibility for all these things must rest upon the government-even a bad government if we should have such. I do not know' of any other way whereby you can conduct public business and make the government responsible. The duty of the Auditor General is, in a certain degree, to act as a brake on the wheel, to check or delay by inquiry or examination, but he should not in the end obstruct the payment of any account. The government is responsible and answerable to parliament; but if the Auditor General's view is to prevail, then because of a difference between him and one of the departments regarding any particular account which is in dispute, hundreds of honest men may be kept out of their money for months.

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CON
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The MINISTER OF FINANCE.

Yes, if the letter of credit is refused these people will be kept out of their money.

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September 14, 1903