Articles

Ottawa’s Champion Penny-Pincher

Watson Sellar never studied bookkeeping but his staff of watchdogs pries into every corner of the government’s purse. Maybe you’ve never heard of him but he’s the man who watches how they spend your taxes

BLAIR FRASER May 14 1955
Articles

Ottawa’s Champion Penny-Pincher

Watson Sellar never studied bookkeeping but his staff of watchdogs pries into every corner of the government’s purse. Maybe you’ve never heard of him but he’s the man who watches how they spend your taxes

BLAIR FRASER May 14 1955

Ottawa’s Champion Penny-Pincher

BLAIR FRASER

Watson Sellar never studied bookkeeping but his staff of watchdogs pries into every corner of the government’s purse. Maybe you’ve never heard of him but he’s the man who watches how they spend your taxes

LIKE A fastidious monk ordering a customtailored hair shirt, the Government of Canada has just raised the pay of its greatest and most persistent nuisance. Watson Sellar, Auditor General of Canada, will now get $20,000 instead of $15,000 a year for digging into the government’s accounts and reporting to parliament—which means to the public —anything he finds that strikes him as irregular in the government’s annual spending of roughly $3 billions.

On paper Sellar can be made to seem a fearsome figure. He and his men can go into any government office and examine any file they ask to see. He can demand the vouchers for any expenditure, check expense accounts of any government servant from minister or general down to office boy. In his annual Auditor General’s Report he pillories anyone, however eminent or obscure, whom he suspects of a free-and-easy attitude toward public funds.

Actually Sellar is a middle-sized, middle-aged, anonymous-looking man who could pose for a Gluyas Williams suburbanite. His chief recreations are mowing the lawn in summer and shoveling the walk in winter. Though he has a hundred-odd college-trained accountants working for him Sellar himself has never even studied bookkeeping. He and his wife have a joint bank account and Sellar never knows what’s in it until his wife tells him at the end of the month. A former editor and publisher of a country weekly, he looks like what he is—the archetype and representative of the average tax-' paying citizen.

Sellar is the only civil servant who does not work for the government. The post was created here in 1878, in Britain in 1866, but it’s the modern answer to a problem that dates back at least to 1353. In that year the English parliament imposed a war tax with the express stipulation that King Edward III must spend it fighting the French and not on “wine, women and song.” Sellar’s job is to try to see that this stipulation is observed. Nominally his employer is parliament, to which he reports directly every year; the minister of finance tables the report but takes no responsibility for it.

Parliament isn’t always too enthusiastic about it either. Since the House of Commons is always ruled by a majority devoted to the government of the day, most MPs tend to be morosely unappreciative of Sellar’s efforts to embarrass the powers that be for parliament’s edification. Only the Opposition applauds wholeheartedly.

Nevertheless Sellar regards himself as a servant and defender of parliament. Historically the dearest right of the House of Commons is its control of the Queen’s Treasury. Sellar tries to make sure that every cent voted by parliament for the government’s use is spent the way parliament intended whether parliament cares or not.

Other civil servants, who have detested the auditor general on principle since the job was created in 1878, say he is nothing but a fuss-budget. They say he puts large expensive padlocks on stables after the horses are stolen—or still oftener,

on birdhouses he mistakes for stables. They call him a cheese-paring, penny-pinching, motivesniffing Nosy Parker who costs Canada more money ($700,000 a year for his whole department) than he ever saves.

Petawawa Didn’t Smell Right

It’s true that not once in seventy-seven years of existence has the Auditor General’s Department exposed a major scandal. In the 1880s, when the boodling went on in Public Works that finally blew up into the McGreevy scandal, the auditor general of the day was writing long indignant letters about a Mountie out west who’d got three fifty a day as living allowance when the usual figure was three dollars. (He got the extra fifty cents because of “the excessive cost of living in Winnipeg,” his commissioner explained.) The customs scandal of the 1920s was exposed by the Opposition and confirmed by parliamentary enquiry. The Bren gun scandal of the 1930s was exposed by a series of articles in this magazine. Both the Petawawa scandal of 1952, which led to the Currie report on the army’s accounting system, and the recent scandal involving No. 11 Works Company in British Columbia were exposed by the army’s own auditors.

Watson Sellar is neither perturbed nor embarrassed by this unsensational record. It’s not his job to catch crooks, he says. He thinks the standard of honesty in the civil service is extremely high; the occasional thief is usually caught by his own department. This, according to Sellar, is why his auditors so seldom run across actual breaches of the Criminal Code— the internal audit in each department beats them to it.

An example was the Petawawa scandal (“horses on the payroll”). Two of Sellar’s men went to Petawawa shortly before the story broke and the grafters were arrested.

They came back to report that the accounts seemed to be in order but the place didn’t smell right. Stores weren’t properly guarded and were in charge of incompetent men. Inventories were sloppy. Also, two men had followed them around the whole time they were there, going to each department after they left and asking what questions they had asked. They thought National Defense should be warned to make a thorough physical inventory to see whether goods were being stolen or misused.

National Defense said thanks very much, but the investigation is already on. The RCMP are working at Petawawa and expect to make some arrests shortly. At this, of course, the auditor general’s men dropped out but Sellar points out that they would have turned up the scandal if the department hadn’t done it first.

What Sellar and his men do turn up are cases where departments spend money in ways or for purposes that parliament didn’t aut horize.

One such, which Sellar regards with a rueful pride, was his own salary increase. Last summer the Government by order-in-council raised the pay of several deputy ministers and senior civil servants, including the auditor general. Sellar, with t he air of Brutus condemning his own son, pointed out that the Government had no authority to raise or lower the auditor general’s pay. His salary was “authorized by statute”; to change it, parliament would have to amend the law. (Parliament did, making the increase retroactive to last July, so Sellar’s vigilance didn’t actually cost him any money.)

Quite different was the case of the officer commanding a military establishment at Regina, who lived in a house that had cost $14,000. Repairs and improvements amounting to $800 were authorized and duly voted by parliament. In fact the commanding officer spent not $800 but $15,000 on improving his house, bringing the total cost of his dwelling to $29,000 “over and above materials drawn from military stores,” as the Auditor General acidly noted.

This officer had been transferred to Korea by the time the Auditor General’s Report came out, and was involved with the Department of External Affairs in a wrangle about something else altogether —the transfer of some Canadian troops to U. S. command for guard duty at prisoner-of-war camps. His abrupt retirement from the army may have related solely to the Korean matter, or it may have been pure coincidence. It can be stated as a general rule though, that to evoke a mention in the Auditor General’s Report does not contribute to the rapid advancement of any civil servant.

Toward the end of World War II a smaller but similar item turned up Continued on page 114

Continued on page 114

CONTINUED FROM PAGE 23

in t.hti National Housing Administration, a now-extinct branch of the Department of Finance. NHA was authorized to acquire buildings for conversion into apartments. The aim was to relieve a desperate housing shortage and the flats were to be “sublet to suitable tenants at reasonable rates.” NHA was authorized to buy whatever furniture was “necessary to carry out the provisions of this order.”

In one Montreal building NHA didn’t rent all the apartments, but kept, one for the convenience of its own visiting officials. NHA also bought household furnishings at the taxpayer’s expense, including cocktail shakers and sets of matching glasses.

No one outside the National Housing Administration knew anything about this cozy arrangement, and perhaps never would have known if it hadn’t been for one of the auditor general’s men. He happened to notice that in this particular set of NHA accounts, revenue items appeared for all but one of the apartments supposedly for rent. Since it was quite incredible in those days that an apartment should lack tenant, he looked into the matter to find out why an apartment was apparently vacant.

As usual, the Auditor General’s Report described the incident with studied moderation. It didn’t even mention cocktail shakers just said “the nature of certain furnishings is such that they do not appear to qualify within the phrase ‘necessary to carry out the provisions of this order.’ ”

Stimulated perhaps by what he found in that case, the Auditor General looked into some other Housing Administration accounts. He found that out of a hundred and twenty-two converted dwellings available for rent in the Ottawa-Hull area, no fewer than nineteen were occupied by current or former officials of NHA itself. Seven of these had been furnished at the ' I ’ rea s u ry ’ s ex pe n sc*.

Again asa matter of pure coincidence, the National Housing Administration was abolished shortly thereafter. It was replaced by the Central Mortgage

and Housing Corporation, a Crown company.

Offener than deliberate misuse of public funds, the Auditor General finds plain ordinary mistakes, some of them pretty expensive. Last winter an auditor going through National Defense accounts noticed a freight charge of $1,300 on a shipment of asphalt from Fort Churchill to Regina. There was nothing remarkable about it except its direction—why ship asphalt from Fort Churchill, on the shores of Hudson Bay, back to Regina where it’s made?

On enquiry he discovered that the asphalt was made in Regina and sent to Churchill to pave airstrips. The shipment was supposed to go north by -July at the latest. By somebody’s oversight it didn’t start to move until August. When it finally arrived in Churchill the temperature was forty below zero; the asphalt was frozen solid. Perhaps thinking it would never thaw out at Fort Churchill where the permafrost is only a foot or two below ground, or perhaps because it would cost more to keep it there all winter than to send it back, the air force shipped the asphalt back to Regina.

Why Did Ottawa Sell Oil?

That incident may or may not be deemed worthy of mention in the Auditor General’s Report tabled next winter. Meanwhile the Department of National Defense has been told about it, and presumably somebody has been ticked off.

Not that disciplinary action always follows this kind of revelation —that’s one of the Auditor General’s grievances. He thinks blunders are treated far too lightly in the public service.

A few years ago an auditor was making a routine check of revenue vouchers when he noticed one that struck him as odd. It was a payment of $12,000 to the government by Imperial Oil Limited for 355,000 gallons of oil.

The auditor wondered why Imperial Oil should buy oil from National Defense. He also wondered why the price should be less than four cents a gallon. So he asked for the file, and then the whole story came out.

A private at Fort Churchill had turned the wrong valve, and inadvertently pumped six thousand gallons of

high-octane gasoline into a tank which held 349,000 gallons of fuel oil. The mixture was useless for the purposes of either ingredient. Imperial Oil offered to buy it back for $35,000 if the government would pay the freight to Regina, $23,000 National Defense accepted the bargain and Imperial Oil paid the difference between the purchase price and the freight bill; hence the revenue item for $12,000 which had attracted the auditor’s attention. The net cost to the Treasury of the whole transaction was $80,000.

Nothing had been done about the mistake except that the man who made it had been promoted from private to corporal as a reward for his honesty in reporting the incident at once.

When External Affairs acquired a residence for the Canadian High Commissioner in London in 1950, it paid twenty-two thousand pounds for the unexpired portion of a ground lease which bad thirty-two years to run. The budding had been badly bombed, and repairs were estimated at $65,000. The War Damage Commission was expected to pay $40,000 of this, so the net cost to the Canadian taxpayer for repairs would be only $25,000.

In fact, the War Damage Commission’s award turned out to be smaller than expected while the repair bill was much larger. Altogether the work on the High Commissioner’s residence cost $220,000 over and above the amount paid for the lease. The Auditor General reported that a grand total of $295,000 had been spent on a piece of property on which Canada’s lease expires in 1982. So far as he knows, nothing was ever done about this curious piece of business judgment.

Sometimes the complaint concerns neither error nor impropriety, but simply an action which the Auditor General thinks parliament did not authorize.

Last year Jimmy Sinclair, the bright young Minister of Fisheries, wanted to get rid of a surplus of salt cod before it knocked the bottom out of the market. Canada has become famed for donating salt cod to charity campaigns for the relief of disasters abroad, but there were no disasters available at the moment. Sinclair persuaded C. I). Howe to have the unsaleable fish bought by the Canadian Commercial Corporation, a Crown company set up to develop international trade.

CCC bought a half-million dollars worth. An earthquake in Greece came along, and Canada promptly donated $200,000 in salt cod to the victims, but at the end of the year CCC still had nearly $300,000 tied up in fish. Jt reported that this investment had been made on the understanding that if the corporation couldn’t dispose of all its cod, the Department of Fisheries would “take it off your hands” as soon as parliament voted supplementary estimates.

Sellar mentioned this as an example of one of his pet dislikes, the use of Crown corporation funds to bypass parliament. Since he also managed to make it appear that young Jimmy Sinclair had sold a bill of goods to the veteran C. I). Howe, he probably forestalled any repetition of this particular device.

Sellar tilts at all these assorted dragons and windmills without ever leaving his large bare corner office on t he ground floor of the Justice Building, a block away from Parliament Hill.

He himself never sees the inside of the books of any department. His office doesn’t contain a filing cabinet, a card index or even a desk. Surrounded by a double row of signed photographs of ministers, deputy ministers, ambassadors and other bigwigs, he sits at an oak table in the middle

of the room. As often as not, what he’s doing is reading the newspaper —few Ottawans keep a closer eye on The Times, the Manchester Guardian, the Economist and a similar range of Canadian and IJ. S. publications.

“From November to the end of February, 1 might as well not be here at all,” Sellar explains cheerfully. That’s the season when one year’s reports are all in. and the next set barely begun.

While he sits and reads the paper, his hundred-odd accountants are browsing through the books of various govern-

ment departments. They don't try to examine everything. They make spot checks here and there, skimming over one division and plunging deep into another. No section head ever knows in advance whether or not his will be the section to get the full treatment.

These auditors spend most of their time actually roaming through other government offices; their own are merely places to hang their hats and keep a secretary to answer the telephone. Whatever they find they report to a supervisor, one for each of five main divisions into which they have

sorted the whole civil service. The supervisors then take up to Sellar, for final decision, what they consider to be the sticky problems.

There was a time, before Sellar’s day, when everything however small had to go up to the auditor general. No member of his staff was permitted to give a friendly or informal tip to the department under scrutiny. Errors involving less than ten dollars would be the subject of an “unofficial” letter from the auditor general to the particular division concerned; more than ten dollars meant an “official” com-

Sellar deployed his auditors through all government departments. He told them to stop niggling about trifles and act like humans.

munication to the deputy minister. practice, these blasts from Mount Sinai used to go unanswered for months a time, and seldom led to any action.

Sellar introduced a different approach when he took over the job in 1940. He found the auditor general’s staff concentrated in one place, poring over bills and vouchers sent in by the various departments— the auditor general then insisted on receiving the original (no copies accepted) of every bill stmt to the government, and his clerks laboriously copied them by hand into enormous ledgers. It meant complete duplicate set of public accounts, and required anywhere from three to eight copies of every voucher.

Every payment of more than ten thousand dollars was subject to pre-audit, and departments were not allowed to issue cheques for more than that amount. Since it often took three or four days to complete the pre-audit on a single item, the delay imposed on government business was staggering.

The Auditor General’s Report used to list by name every merchant who did business with the government, stating the commodity supplied, the quantity, and the amount paid for it. Items like this were commonplace in the 1930s and earlier:

“Canada Law Journal Co., Toronto, two copies index to Railway Acts . $2.30 “Cox, George, Ottawa, cleaning and repairing stamps. . $4.00”

Every salaried employee of the government was listed by name, with the amount he received. Today that would mean a hundred and forty thousand separate entries. Even in prewar days, when the national budget was about one ninth its present size in dollars, it meant the Auditor General’s Report ran to two volumes each three or four inches thick.

Sellar’s very first report was only one volume; he has since cut the document down to pamphlet size, usually bound with the Public Accounts like an appendix. He deployed his men into the departments they were examining, told them to stop niggling about trivialities and behave like human beings.

One reason Sellar changed the system was that he was an insider. For nine years before he got his present appointment he had been Comptroller of the Treasury, the man in charge of checking expenditures before they are made. He knew how the auditor general’s machine worked, and how it could be evaded.

“When I had to put through something a bit political—nothing illegal, you understand, just something they didn’t want publicized too much—I would always contrive to get the auditor general thoroughly absorbed in some small irregularity that didn’t amount to a row of pins. While he was writing letters about that, we’d put the other item through.”

In another sense though, Sellar was an outsider who’d got into the job more or less by accident. Before he became a civil servant he had been a reporter, soldier, lawyer, night watchman, editor, and private secretary to the minister of finance, in that order. He had never at any time been or intended to be an accountant.

Though he has spent a good deal of his career annoying Liberal governments, Sellar is about as close as a man can be to being a congenital Grit. His father, Robert Sellar, was sent down to the Eastern Townships of

Quebec in 1863 by George Brown’s old Toronto Globe, the organ of the Clear Grit Party. He was to found the Huntingdon Gleaner as a kind of missionary enterprise lighting a candle of Liberalism in the dark Conservative wilderness of Quebec. Sellar the elder performed this duty so faithfully that several times, in the years before Laurier’s victory of 1896, infuriated mobs stoned his printing shop and threatened to burn it down.

By the time Watson was born in 1894 these rugged days were over. Laurier’s triumph was imminent, and Liberalism in Quebec became not only respectable but epidemic. Growing up to work on his father’s paper as a cub reporter before World War I, Watson could be a hereditary Liberal without ever feeling himself a crusader or even a heretic.

He Sets IIis Own Salary

After he got back from overseas in 1919 he decided to study law, took one of the accelerated courses offered to veterans, and started practice with a legal firm in Regina. After a year his health broke down. The doctor prescribed a long, complete rest. Sellar had no money, but he went to Vancouver and took a job as a night watchman—he still recommends this as a poor man’s rest cure. Then his elder brother died, and Sellar was called back to Huntingdon to take charge of the family newspaper.

He hadn’t been home very long when he was offered the job of private secretary to the new Liberal Minister of Finance, Hon. James Robb. The threethousand-dollar salary was more than Sellar was paying himself as editor and publisher of the Huntingdon Gleaner, so he took the job and turned the newspaper over to his younger brother Adam. (Adam still runs it, but intends soon to turn it over to the third generation, Watson Sellar’s twentythree-year-old son.)

Just before Robb died in 1929, a scandal came to light in the Department of Finance. Funds had been misappropriated. There were some abrupt changes in the upper reaches of the department, and Sellar was asked to take over as acting deputy minister to tidy up the mess. He was still there when the 1930 election tossed the Liberals out of office.

Sellar asked for an interview with the new Prime Minister who was his own Minister of Finance, R. B. Bennett.

“When you want my resignation,” he said, “I have it all written out.”

“Why should I want your resignation?” R. B. harrumphed.

“Because I’m a political appointee,” Sellar answered. “I’m not a civil servant; I’m only in this job by accident, and even if you wanted to appoint me I’m not qualified to fill it permanently.”

This wasn’t the kind of talk a new prime minister heard every day, and Bennett liked it. He kept Sellar on through the reorganization period, asked his help in drafting a new Consolidated Revenue and Audit Act. This act created a new job, Comptroller of the Treasury. Bennett appointed Sellar to the job and told him to write in his own salary. Sellar wrote in nine thousand dollars, and Bennett passed it without a word.

For the rest of the Bennett regime and the first term of Mackenzie King’s return, Sellar remained comptroller. Thus he already had a pretty thor-

ough acquaintance with the machinery of government finance when Mackenzie King appointed him to his present job in 1939. He hadn’t turned into an accountant, but he had a lot of useful experience to help him distinguish between the important and the trivial.

He applies that experience as bis department gets busier and busier through spring and summer to the grand climax of actually writing the Auditor General’s Report — normally ready for tabling by autumn, and given to the House of Commons soon after parliament assembles.

Through Sellar’s office from morning to night files a parade of divisional supervisors, each with a slate of hard cases. Whether to pass or not to pass this particular item; whether or not the estimates can be stretched to justify that unforeseen expenditure; whether this dispute with a department’s accountants is worth mentioning in the report, or whether it should be dropped —Sellar’s job is to listen, chew on it, and say yes or no.

He tries to limit his men’s attention to matters large enough to be worth while. One of his horror stories is about the civil servant in a western town who kept his whole staff working all night because his books were seven cents out of balance. The culprit confessed this enormity to the auditor when he arrived, and got a sharp scolding for wasting all that time for seven cents.

On the other hand, Sellar doesn’t forget that small things can sometimes

point to big things. That scgndal in the Department of Finance in 1929, which indirectly led Sellar into the job he holds today, was exposed because a set of books was out of balance by eleven cents.

In big things and small, Sellar tries to get a clear idea of what the physical situation is, what the figures mean. Sometimes the most straightforward items represent a pure waste of money, detectable only on the spot.

During the war the RCAF built soundproof rooms in which to train wireless operators. The soundproofing material was expensive, but it seemed necessary.

Later, when the operators left the school for sea duty, they found they had to work in the midst of a great clatter; they couldn’t hear at all until they learned all over again to listen to the code through a screen of irrelevant noise. Apprised of this defect in its training methods, the RCAF proceeded to cut holes in the soundproof rooms, so that the outside noises would give some approximation of conditions their trainees would meet at sea.

This routine had been going on for some time before one of Sellar’s auditors noticed that the RCAF was still using the costly soundproofing material called for in the original specifications, even though it was then chopping holes in the walls to keep them from being soundproof. This matter never got into any Auditor General’s Report. The auditor merely mentioned it to RCAF accountants, who mentioned it to RCAF architects and engineers. They, somewhat red-faced, altered the specifications for wireless training rooms.

Standard regulations for stores accounting in the armed services allow an overage of one item to be balanced against a shortage of another, provided the items are “of a similar genericheading.” In the ordnance depot outside Montreal, an auditor turned up one such pair:

The shortage was “one boat, rowing” —value $300. It was solemnly balanced off with a conversion voucher by “one boat, gravy.” A later entry showed that the “one boat, gravy” had been written off because of a broken handle.

Army accountants had that conversion voucher framed, and hung it on the wall as a horrible example.

On the other hand, some apparent errors or anomalies turn out on inspection to be perfectly sensible. One of Sellar’s favorite stories concerns an incident in the Bennett regime, when he was Comptroller of the Treasury. As an economy measure someone suggested a close check on telephones in government offices. Sellar was told to have the switchboard girls list every call to each government local for a fortnight.

They found one local that averaged a hundred calls a day, another that averaged only one call. Prime Minister Bennett told Sellar to remove the telephone that got only one call, and put it into the office that was getting a hundred calls.

“I’d like to have that order in writing, sir,” Sellar replied. “The phone with the hundred calls is in the Public Works Department, and the calls are applications for snow-shoveling jobs—though in fact no jobs are given out by that office. As for the phone with the one call a day, I’d want written authority before I took away the office telephone of t he Chief Justice of Canada.”

Prime Minister Bennett looked -it him, and uttered a rather trite remark which Sellar nevertheless is fond of quoting:

“Figures don’t mean a thing unless you knowwhat’s behind them.” if