Federal foundations like the Canadian Foundation for Innovation (CFI) are exempt from federal Access to Information legislation. While they might be laudable in their intent, it is currently impossible to tell if they are so in action without them being subject to such legislation. To be sure, universities like Trent love it when they receive grants from of millions of dollars from CFI for projects - like the $3.6-million grant for DNA Cluster - the details of which remain out of reach of public scrutiny and for which there is no accountability.

The February 2005 Auditor-general's report calls for foundations to become accountable, a call supported by many.

Out of public sight, out of parliamentary mind. First as finance minister and now as prime minister, Paul Martin has shown a penchant for arm's-length, not-for-profit corporations into which the federal government can funnel public money for good works. The Millennium Scholarship Foundation, the Canada Foundation for Innovation, the Aboriginal Healing Foundation, Genome Canada -- the list goes on. More may arrive in next week's budget.

Enter Auditor-General Sheila Fraser, who yesterday released her annual report. In contrast to the areas of "satisfactory progress" she has identified within government -- Transport Canada's transferring of airports, the reporting of the Canadian International Development Agency -- the foundations fall under "unsatisfactory progress." When the Auditor-General worries, Canadians have cause to worry.

As of March 31, 2004, the government had diverted $9-billion in public funds into the independent foundations. Of that total, $7.7-billion was still in the foundations' bank accounts and investments. The Auditor-General worries that the government may be using the foundation route not in the interest of sound public policy but out of a political desire to take the money off its books in one year rather than another. Even though the money won't be spent for a long time, the government chalks it up as an expense in the year the funds are transferred. The result? The government stitches together a wallet that Parliament will have a tougher time peering into, and the huge payments in advance of need "could limit the flexibility of future parliaments."

Because of those advances, "foundations are effectively exempted from the kind of periodic scrutiny by Parliament that occurs when funds are appropriated annually. Once taxpayers' money is transferred to a foundation, the government relies on the foundation's directors and members to achieve public policy objectives." The government even keeps its own people in the dark. "Some sponsoring departments informed us that they had first learned of the amount to be paid to foundations only when federal budgets were announced."

It's a recipe for inefficiency. Even when departments and the foundations they sponsor engage in similar work, there is little guarantee that their results will be correlated. This makes it hard for Parliament to weigh expectations against achievements and to have a clear idea of what the foundations are up to.

The Auditor-General is also concerned that if a foundation is going off the rails, the sponsoring minister may have to wait until the corporation goes into default before he or she can act. Ms. Fraser wants to make it easier for ministers to intervene sooner if a foundation strays from the public purpose for which it was created. This is a tricky proposition; it may be as important to protect foundations from political interference as to enable the government to hold them to greater account. But Ms. Fraser is right. The foundations are sitting on huge pools of public money. The public's representative shouldn't have to wait for the Apocalypse before going in to knock heads together.

The Treasury Board wants no part of Ms. Fraser's suggestion that the government let her staff conduct external audits of the foundations. The foundations have their own expert boards of directors, the government says. Those boards must be independent; they must make their own decisions about auditors; they must be free to make their own mistakes. But again, this would be easier to swallow if the foundations weren't, in effect, acting as banks for billions of dollars of the public's money. Parliament has a stake in knowing all it can about how, why and whether the foundations are spending those tax dollars, and whether the public is receiving value for money. Parliament needs a performance audit to tell it whether the foundations are being run efficiently, whether they are complying with authorities and whether their internal controls are adequate.

Instead, the government seems to be flying blind. It transfers money to the foundations using conditional grants, the report says, but "the transfer-payment policy does not define 'conditional grant.' " The government says the definition "is under development" and "may be included in the revised policy on transfer payments." Hey, no rush. Only $9-billion-plus has been handed over so far.

The Auditor-General also recommended that the Treasury Board Secretariatreview the policy that permits so much money to be transferred in advance to the foundations. The response? "It has planned no such review."

The government is financing its foundations through unsettling means and using the claim of arm's-length independence to prevent more light from being shed on their operations. The Auditor-General is right to sound an alarm.