The federal government is facing a new damaging report from the auditor general, this time on how it has spent money on national security, CTV News has learned.

After the Sept. 11, 2001 terrorist attacks on the U.S., the federal government allocated $7.7 billion for security.

It was budgeted to be spent as follows:

• $4.3 billion for increased intelligence and policing, better screening of entrants to Canada, enhanced emergency preparedness and support for the military;
• $2.2 billion for greater air security
• $1.2 billion for initiatives aimed at strengthening border security, facilitating the flow of goods and people and improving border infrastructure.

In a report scheduled for release on March 30, Auditor General Sheila Fraser will question how well that money was used.

"Are there things we could have done better? I think yes, probably so," Prime Minister Paul Martin said Wednesday in Quebec City, but added the situation is improving.

"Effectively what happening here is that the world is learning how to deal with terrorism and obviously as you learn, there are mistakes made and hopefully you learn from them."

With last week's horrific bombing in Madrid still fresh in peoples' minds, the auditor general's report will raise troubling issues here.

For example, despite the massive infusion of funds, the 17 agencies in Canada dealing with intelligence and anti-terrorism still don't coordinate or communicate very well.

The Office of Critical Infrastructure Protection and Emergency Preparedness -- which has a budget of $52 million per year -- will come under particularly heavy criticism.

It faced a big test last August 14 when most of Ontario was hit with a power blackout and was found wanting.

For example, OCIPEP lost telephone, electricity and computer services at its own building.

Memos obtained by the media early this year indicate the Canadian Armed Forces felt the blackout showed its overall command grid was "extremely fragile," but that some weak points identified from Y2K and 9/11 have been corrected.

The government's point person after 9/11 was former deputy prime minister John Manley. "There is a lot more for us to do in our seaports, in our airports, ground crew security, all of that," he said last Friday.

CTV's Craig Oliver says unlike the auditor general's sponsorship scandal report, which came out February 10 and is still causing political reverberations, no wrongdoing will be suggested.

The government will likely point out that all of Canada's security and intelligence agencies now report to the Deparment of Public Safety and Emergency Preparedness, headed by Deputy Prime Minister Anne McLellan, he says.

That department was created when Martin unveiled his new, reorganized government upon becoming prime minister last December.

Based on a report by CTV's Craig Oliver