Federal Auditor General Sheila Fraser will be permitted to conduct a performance audit of how parliamentarians control their budgets, but won't audit the individual spending of all MPs.

Auditor General Sheila Fraser says her performance audit of Parliament's spending will not reveal individual MPs' office expenses. (Fred Chartrand/Canadian Press)

Fraser joined Conservative House leader Jay Hill and Liberal MP Marcel Proulx in Ottawa on Tuesday to announce the terms of a deal reached with the Board of Internal Economy, an all-party body that oversees Parliament's expenditures.

The secretive board initially rejected Fraser's request to examine $533 million in annual spending by the House of Commons and the Senate, saying the proposed audit "would go beyond the scope of the auditor general's mandate."

But board members agreed to meet with Fraser and hear her intentions following a fierce public backlash and calls from other MPs for the decision to be reversed. Similar audits of politicians' expenses in Britain and Nova Scotia sparked scandals and police investigations.

Fraser said performance audits only examine existing management practices, controls and reporting systems. She stressed that her office's audit would not be looking at the management of individual member's offices or the merits of their transactions.

"Nor will we comment on the performance of the House, its committees, or individual members," she told reporters. "We are not going to mention individual cases."

Audit an 'extra step': Hill

Instead, the audit will examine some specific expenses of MPs to see how well the existing controls function, she added.

The Conservatives' Hill insisted the board has not changed its position that existing oversight measures "perform the necessary tasks of ensuring the protection of Canadian tax dollars."

"While we remain confident that these rules are robust, we have decide to take this extra step," Hill said.

Currently, Parliament's expenses are audited by the private accounting firm KPMG, but only the broad outlines of the expenses are made public. The details aren't disclosed.

Fraser said she expects she'll be able to report her findings to the House by fall 2011.