The Senate has long been controversial largely because it is unelected and proves difficult to reform. The expenses scandal that broke out in 2012 made it all the more so. The allegations of misuse of public funds for personal rather than parliamentary business captured media and public attention to an unprecedented degree. In June 2013, Senator Marjory LeBreton, then Leader of the Government in the Senate, told senators that they “must face reality…and listen to Canadians who are outraged by what has happened in the Senate.”
The issue was not entirely new. To get a sense of the issue, the Standing Senate Committee on Internal Economy, Budgets and Administration (the Internal Economy Committee), with jurisdiction over expenses, had commissioned external audits; an internal audit function was also in place.
On a parallel track, the Auditor General released a report on the Senate Administration in 2012, the second such audit since 1991. It was designed to examine the approximately $100 million in public funds spent by the Senate each year. Although the audit did not examine individual expenses incurred and claimed by senators, it found that the Administration needed to improve documentation and recommended “sufficient information to ensure that expense claims are appropriate.” The Auditor General also noted that internal audit had done little to verify the expenses claimed by individual senators.
The scandal grew out of questionable claims for travel and living expenses. The Senate’s policy was to reimburse senators for living expenses in the National Capital Region (NCR), provided that their primary residence was more than 100 km away. Media attention focused on senators who claimed living expenses, but actually lived in the NCR and/or claimed inappropriate travel expenses. To deal with these matters, the Internal Economy Committee launched audits and reviews; as a result, some senators made repayments voluntarily and others were ordered to do so. The Senate adopted new rules governing travel and expenses.
In May 2013, the RCMP launched an investigation, leading to fraud and breach of trust charges against three Senators, one of whom, Senator Mike Duffy, later went to trial. In June 2013, the pressure of public opinion led the Senate to ask the Auditor General to undertake a comprehensive audit of Senate expenses, including senators’ expenses, and the Auditor General agreed to conduct it. The audit did not include senators who were the subject of an RCMP investigation.
The Auditor General’s Report
In June 2015 the Auditor General released his report. It examined all expenses (except salaries) incurred by 116 senators and former senators between 1 April 2011 and 31 March 2013. It covered 80,000 transactions, cost $23.4 million, and made 22 recommendations. It named 30 senators for questionable expenses, including nine for possible RCMP investigation. No findings were reported on the other 86 senators. The Auditor General called for “transformational change” in the way senators expenses are handled – and made recommendations on how it could be done.
The report found that senators governed themselves with limited independent oversight. They did not place a priority on costs to taxpayers, and the information they provided to support expenses was often insufficient. Disclosure of information about expenses did not provide sufficient detail to convey whether the expenses were appropriate; and was also insufficient to identify potential conflicts of interest. Recommendations addressed each of these areas.
However, the Senate has not acted on the recommendations. Moreover, some of the questionable expenses identified in the audit have been reduced through a dispute resolution process. What happened to the accountability for public funds?
The Auditor General has the power to audit federal entities, and publicly report to the House of Commons (the AG’s mandate is posted: http://www.oag-bvg.gc.ca/internet/English/). The reports are generally considered by the Public Accounts Committee and other committees. The audited entities respond to recommendations, and senior departmental officials appear as witnesses before committees. While the Auditor General cannot compel remedial action, the levers of media exposure, the public and parliamentarians help call the government to account.
However, the Auditor General does not have the right to audit inside Parliament; he must be invited to do so. In the case of the 2012 audit, the Senate Internal Economy Committee invited the Auditor General to carry out the audit and the report was addressed to the Committee, with recommendations made to the Senate Administration. The Committee met once in camera when the audit began, but not on the report itself. However, the Committee issued its own report to the Senate, which brought the audit to the attention of the Senate. In addition, the Senate Administration agreed with all the Auditor General’s recommendations, and provided responses in the text of the report.
The Senate’s Response:
In contrast, the Senate itself has been silent on the expenses audit. To date, there has been no response to the recommendations, either in the report itself or in a meeting of the Internal Economy Committee, although comments from individual senators were included in the sections of the report addressed to them. The only Committee meeting occurred in June 2013, when the Auditor General first agreed to undertake the audit.
In addition to the recommendations dealing with the whole process, the Auditor General recommended that the Internal Economy Committee act immediately on the nine cases for further investigation; consider the findings on the other 21 senators; and determine whether further action was required in those cases.
Instead, the Committee decided to set up a dispute resolution process. The Committee Chair wrote to the 30 named senators, informing them that the Steering Committee had reviewed the audit report, and offering them the option of paying what the Auditor General said they owed, or going through arbitration, heard by former Justice of the Supreme Court Ian Binnie. Fourteen of the Senators opted for arbitration. The Committee itself did not meet to consider the findings on individual senators or make any determination of further action. In ten of the cases, the Binnie report reduced the amount owed. The Committee had the legal right to establish the dispute resolution process. The problem lay in the fact that the senators themselves control their own expenses, so that their objectivity could be questioned. This conflict of interest was recognized by the Auditor General who recommended the creation of an independent body to oversee expenses.
The dispute resolution process considered evidence not always available to the Office of the Auditor General. The Auditor General was also unable to share audit files with the arbitration, to protect the confidentiality of individual senators. When the Binnie report was made public in March 2016, the Auditor General issued a statement standing by his Office’s findings and noting that his audit applied the same measures and judgments multiple times to all files examined, to ensure fair and consistent findings.
The Resources and the Impact
It should also be noted that the Office of the Auditor General took longer and used more resources than planned to complete the audit. The decision to examine the 80,000 transactions of all senators and former senators over a two-year period created a heavy work-load. In terms of audit practices, this was an unusual step, since auditors generally take a statistical sample rather than audit all transactions. In testimony before the Internal Economy Committee, the Auditor General stated that the audit would likely include samples of transactions, but this was before the audit scope had been determined; the Senate’s request for a “comprehensive” audit led to the examination of all of the transactions.
The media and public pressure, essential for accountability, has dropped off since the audit was completed. Senator Duffy was acquitted on all counts in April 2016 and then returned to the Senate in full standing. The RCMP and prosecutors dropped the charges against the other senators a month later.
However, in January 2017 the media reported an exchange between Senator Peter Harder, the Government representative in the Senate, and Senator Leo Housakos, Chair of the Internal Economy Committee, that suggested possible action on some of the Auditor General’s recommendations. Senator Harder wanted the Senate to run regular internal audits, and create an outside body to oversee spending instead of having senators police themselves. Senator Housakos replied that work was underway and indicated that a proposed new spending oversight body would be announced after the Senate returned from the Winter break. It remains to be seen if this will amount to the transformational change that the Auditor General called for.
Tom Wileman , Principal (Retired),Office of the Auditor General of Canada, and Treasurer of the Performance and Planning Exchange.