The Fraser Institute

The Fraser Institute

October 17, 2005 07:00 ET

The Fraser Institute-Media Release; Sponsorship Scandal Only One in an Endless Series of Government Failures: Review of Reports from the Auditor General Predicts More Problems

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 17, 2005) - Canadians have been shocked by the revelations of the Gomery Inquiry but these scandals will occur with predictable regularity unless government begins to prioritize and reform its activities, according to Government Failure in Canada, 2005 Report, released today by The Fraser Institute.

The study summarizes 284 cases of federal government failure, ranging from simple waste to cases of misrepresentation, based on reports from the Auditor General between 1992 and 2005.

"The sponsorship scandal is not a one-off event," said Jason Clemens, the Institute's Director of Fiscal Studies and co-author of the study. "We studied report after report from the Auditor General over the past fourteen years and found case after case involving waste, misrepresentation, incompetence, and program failure."

Examples of government failure are classified by type. More than one quarter of the examples cited primarily involve incompetence, with waste accounting for nearly one quarter. Self service (officials creating a non-monetary benefit), program failure, and misrepresentation each account for between 10 percent and 18 percent of the total. Instances of red tape and self-dealing (creating a monetary benefit for the official) were less common.

Along with the well-publicized federal Sponsorship Program, the report also highlighted a number of problems, including:

- 20 separate instances in which contract or parliamentary rules were broken, similar to the current circumstances surrounding the sponsorship scandal.

- 11 instances of government failure dealing with sensitive information such as Social Insurance Numbers (SINs) and immigration information. For example, more than half of current SINs have no supporting documentation and there are 5 million more SINs for Canadians over the age of 20 than there are people in that age group.

- 22 problems were investigated at the Department of National Defence (DND), more than any other identified department.

One example of the many problems at DND was the department's eight year development of a $174 million satellite communication system, which DND concluded was less efficient than the commercial system it had already been using. A more recent example is a $220 million radar system, originally estimated to cost $43.1 million, which only works during daylight and calm weather.

- A startling 65 examples were found amongst the 284 cases of government failure involving some type of capital misallocation, indicating large-scale inefficient use of resources.

The Auditor General's reports document the all too common failure of government to successfully undertake tasks regularly and successfully performed by private sector organizations on a daily basis. The reports demonstrate that the public system is institutionally flawed in terms of the incentives faced by politicians, bureaucrats, and special-interest groups in trying to serve the public good. More limits must be placed on the operations of government to eliminate waste and avoid continuing scandals.

"The structure and incentives of the federal government clearly allow waste and excess to continue," said Clemens.

The report recommends several broad approaches to reducing government failure. First, the study recommends that governments better prioritize their activities with more focus on providing citizens value-for-money.

Second, once objectives are prioritized, governments should use innovative mechanisms such as privatization, private-public partnerships, and outsourcing to ensure that the highest quality, lowest cost combination of program delivery is achieved on a regular basis.

Third, governments should provide more resources and authority to monitoring and watchdog agencies such as the Auditor General, as well as expanding Access to Information abilities of third parties to better ensure internal controls and public accountability.

"Canada's public sector contains hard-working individuals who are trapped in a system with institutional incentives that run counter to productivity and accountability," said Clemens. "We need to provide the right incentives for effective program delivery and ensure Canadians get value for their tax dollars."

This study is the second in an on-going series documenting government waste and inefficiency.

Established in 1974, The Fraser Institute is an independent public policy organization with offices in Vancouver, Calgary, and Toronto. The media release and study (in PDF) are available at www.fraserinstitute.ca.

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