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A municipal auditor general isn’t a cure-all for local government waste

Appeared in Delta Optimist and Business in Vancouver
Release Date: December 16, 2011

BC Premier Christy Clark’s recent announcement that her government will create an auditor general for local government (AGLG) is a ray of good news for British Columbians. After all, local governments across the province spend nearly $10 billion of our hard-earned money annually with little real scrutiny.

Although municipal finances are currently audited, the audits only determine if the finances are accurately reported – not whether taxpayers received value for the money.

As Canadians have witnessed at the federal and provincial levels, auditor generals across the country expose numerous government failures every year – from cost overruns and governments failing to achieve their stated objectives to governments simply spending our money unnecessarily.

There’s little doubt that a municipal auditor will expose similar accounts of government waste at the local level. While the increased exposure of government failure is important, the real question is what will be done about it?

According to the Clark government, the AGLG’s role will be to conduct performance audits to determine if taxpayers are getting value for money. Put differently, the AGLG will investigate local government programs and initiatives to assess whether they’re delivered efficiently and whether the desired results were achieved.

But the AGLG, like its federal and provincial counterparts, will be limited in that it will not “question the merits of policy decisions or objectives of a local government.” In other words, the AGLG will not comment on policy choices; only on the quality of their implementation. The AGLG will also provide non-binding recommendations to the audited local governments through publically released reports.

Without the ability to question the merits of policy decisions and the authority to force municipalities to respond to audits with measurable plans to overcome issues identified by the auditor general, British Columbians should be wary of the proposed AGLG’s effectiveness.

Of course, the audits and public reports will receive significant attention, especially in the media, putting increased pressure on politicians and bureaucrats to deliver better value. But the experience from other levels of government shows that increased exposure does not lead to significant corrective action.

For instance, at the federal level, the auditor general highlighted more than 300 cases of government waste between 1992 and 2006. These failures amounted to an estimated cost of up to $125 billion. Importantly, the failures occurred regardless of the party in power and many reoccurred despite previous warnings by the auditor general.

The main lesson from the failures reported by the federal and provincial auditor generals is that governments are not very effective vehicles for delivering public programs.

The best way combat government waste is to minimize the tasks that are undertaken in the public sector. Indeed, a government does not need to undertake an activity to ensure that it will be done. Many public services such as garbage collection, infrastructure development, and water and sanitation services can be delivered more effectively by contracting out or ceding the activity altogether to the private sector.

When governments contract out the provision of goods and services to the private sector through competitive bidding, research often finds that there are significant benefits in cost savings and quality. A review by Simon Domberger and Stephen Rimmer of empirical studies on contracting out in public sectors in North America, Europe and elsewhere, concluded that competitive tendering and contracting usually leads to substantial cost savings – in the order of 20%.

So while the proposed AGLG will likely highlight instances of government waste that would otherwise have gone undetected, to ensure British Columbians get better value for money, other reforms are needed. A good first step is contracting out and increased use of the private sector.