The Fraser Institute

The Fraser Institute

October 31, 2013 06:15 ET

The Fraser Institute: Government Waste Cost Canadian Taxpayers as Much as $197 Billion Since 1988

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 31, 2013) - Federal government waste and mismanagement is estimated to cost Canadian taxpayers between $158 billion and $197 billion over the past 25 years, concludes a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

Federal Government Failure in Canada: 2013 Edition examines Auditor General reports from 1988 to 2013 and finds 614 instances of government failure including cost overruns, unnecessary spending, inefficiencies, inaccurate reporting of financial information, and other failures in federal programs and initiatives.

"The study covers a fairly long period with five prime ministers from two different political parties. While there's a tendency to blame the government of the day for mismanagement and failure, the reality is that government failure is a systemic problem," said Charles Lammam, Fraser Institute resident scholar in economic policy and lead author of the study.

"Many people continue to look to government to solve new problems in society. But as the Auditor General reports illustrate, government can't be counted on to deliver a range of tasks-whether it's basic things like accurately issuing cheques or managing credit cards, or whether it's more complex activities like major procurement projects, economic development initiatives, or helping low-income Canadians."

The estimate of government failure includes costs reported by the Auditor General ($44.7 billion to $45.1 billion), costs based on information provided by the Auditor General and other statistical sources ($107.8 billion to $115.7 billion), and costs of over- and under-payments related to income support programs such as Employment Insurance and Old Age Security that rely on Social Insurance Numbers ($5.8 billion to $36.1 billion). The latter calculations are partly based on major problems with the SIN system identified by the Auditor General.

The study notes the true cost of government failure is likely much higher, since the estimate excludes the cost of 235 failures (or 38 per cent of the total examined) where the Auditor General did not provide enough information to calculate a cost. It also excludes potential failures in programs and initiatives that the Auditor General did not review.

"Our estimate of the cost of federal government failure is only the tip of the iceberg. There's a strong chance the amount of waste and overspending far exceeds our $197 billion top end estimate because we don't get at the full gamut of initiatives the government is involved in," Lammam said.

Among the failures catalogued in the study:

Icebreaker Modernization (1990)

A $125 million project to modernize a major Canadian Coast Guard icebreaker not only ended up costing $74 million more than planned but the Auditor General concluded the entire modernization was a "major capital expenditure not based on a demonstrated need."

Tradespeople Productivity (1994)

The productivity of tradespeople within the Department of National Defence was approximately 33 per cent lower than comparable commercial tradespeople, resulting in additional costs of $50 million a year.

Regional Economic Development Programs (1995)

Industry Canada sponsored the construction of a new $2.2 million fish plant in Quebec. However, the more than 250 jobs created by the new plant were completely offset by the resulting closure of a nearby established plant with as many employees that also received federal subsidies.

Credit Cards for Public Servants (1997)

Balances on public servant credit cards were not paid on time and resulted in $80,000 in unnecessary interest costs over the span of just four months.

Office Space (2000)

Public Works and Atlantic Canada Opportunities contracted office space in Sydney, Nova Scotia that was twice as large as similar offices and cost 20 to 30 per cent more than alternatives of superior quality. The facility was never used for its intended purpose and at most, two federal employees were located at the site.

Heating Expense Relief (2001)

Less than a quarter of the $1.5 billion spent to assist low-income families facing emergency heating costs actually went to low income families and roughly 90,000 Canadians who were in need of immediate assistance did not receive relief.

Satellite Communications (2002)

The Department of National Defence took eight years to develop a $174 million satellite communications system but later determined that the commercial system it had been using was sufficient to meet existing needs and required fewer staff to operate.

Foreign Aid (2005)

The Canada International Development Agency spent $69 million intended for tsunami relief in Southern Asia on non-tsunami related activities in the 2004/05 fiscal year.

Staff Overtime (2008)

Staff overtime costs at Corrections Canada rose 42 per cent between 2002/03 and 2007/08 although the number of corrections officers, inmates, and violent incidents remained constant over that time. The Auditor General cited unrecorded leave-between three and 35 per cent of staff absences-as a main cause.

Security Screening Visa Applications (2011)

Canada Border Services Agency (CBSA) failed to properly conduct security screenings for visa applications. For permanent residence applications, 80 per cent of reviewed security screenings did not include all the mandatory security checks.

Public Security and Anti-Terrorism Initiative (2013)

The Auditor General could not determine how $3.1 billion had been allocated over the previous decade for the $12.9 billion Public Security and Anti-Terrorism Initiative.

The study also spells out several ways to reduce government waste, decrease taxpayer costs, and improve service delivery. This includes:

  • Rationalizing government services in a way that clearly defines the government's role and eliminates or restructures any of the activities not supportive of its core functions.
  • Enabling a greater role for the private sector to deliver services either through outright privatization, a greater emphasis on public-private partnerships, or the outsourcing of publicly financed goods or services.
  • Improving internal control and monitoring mechanisms such as providing more resources for the Auditor General to increase the scope of available audits and requiring mandatory audit compliance.

"The over 600 cases of government failure examined in our study clearly demonstrate the limitations of government. As Canadian taxpayers, we need to think more critically about what tasks governments can and can't do well, and how to harness the strengths of the private sector," Lammam said.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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