Public Accounts Committee on Feb. 5th, 2009

[The Chair, Liberal, Shawn Murphy]

You have two minutes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Okay, I'll be quick.

I also noticed in the financial highlights that program expenses were about 1.7--that's a smaller number--lower than the forecast. I wondered if you had any idea if the money had been allocated and was not spent, or if it had been allocated and not transferred. I hope that wouldn't be a trend in the future, or hasn't been. Why would the moneys that had been budgeted and accounted for not have been spent? Was the money booked and then not transferred, is the question.

[Rod Monette]

Thank you for that question.

I'm asking my colleagues here, and I want to confirm this, but I believe that may represent lapsed money. In other words, a budget has been set, and if you look at all the different departments, no department spends 100% of its money. There's always a little bit there, usually for fear that you're going to go over, because you can't--it's illegal to go over. My suspicion is that it has to do with amounts in departments that aren't spent. Could we confirm that to you? I want to make sure about that.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Do we have more time, or is that it?

[The Chair, Liberal, Shawn Murphy]

Mr. Kramp, for five minutes.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

It's good to see many of you again.

I hate to bring up those dreaded words, “accrual accounting”. I recall back in 2004 when I came on the public accounts committee and the first Auditor General's report made some very serious and strong recommendations for the implementation of accrual accounting. To me, we need to run to get the job done, but first you have to walk before you run--if that's a fair assessment.

I recognize after sitting on this, and to the government operations and special committee for the implementation, and I am pleased to see we now have a pilot in place. I think that's a great step forward. I see we also have a plan to implement starting in 2009-2010, and of course you're moving to require all departments within five years. I have a couple of thoughts on this. We all know it's going to be extremely difficult--it's costly, there's training and manpower. This is not a simple situation. Of course, the Auditor General's office has certainly expressed a desire to go beyond the budgetary and take it to the full implementation of accrual for the appropriations as well.

In your discussions, Mr. Monette, in your original thoughts here today you said that you would like to expand your thoughts on this. I'd like to hear from you now.

[Rod Monette]

Thank you very much, Mr. Kramp, for that opportunity.

I'm starting to worry that we're building a system that's so complex that people just don't understand it. I'm feeling that as accountants, and I'm one of them, we're building a system where it's right on paper, all the theory is right and it's good for all those reasons, but it's very difficult for people to understand it. I'm not saying I'm against it, but, for example, with accrual appropriations—and I know your background, that you've studied this with the operations committee and are very knowledgeable on it—saying that you're voting a level of depreciation, even as an accountant I have to wrap my mind around exactly what that means. I'm always asking myself if there is a way to get the same objective, which is better information and better management, without building a system that is going to be so complex that there are not going to be too many people other than we accountants who get the thing.

If you look internationally, for example, in Australia the head of their finance department just said very recently in terms of the appropriation that if they knew then what they know now they probably wouldn't have gone as far down the accrual line. And I'm all for accrual accounting; I think this budgeting is great.

I know it looks as if we're being slow, but I honestly feel it's something you really have to be careful with. I'm concerned, but I don't make the decision, I just keep providing advice on this. My perspective would be, if asked, that we have to be really careful before putting accrual appropriations in place.

I also think—and I do apologize for being long-winded on this—that there are other ways to get some of the good information for decision-making that are maybe less complex. I think some departments, like the Department of National Defence, for example, are already doing that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

If there are some other suggestions, some other recommendations that you might consider--not as a replacement, but potentially to complement, supplement, whatever--I think the committee would be pleased to hear them.

The government has put in an expenditure plan, and I think it's long overdue, simply because we have to have a process to review expenditures in order to get out deficiencies, cut the dead wood and the waste out of there. The Auditor General has identified eleven departments with action plans that are now addressing the specific deficiencies that exist within departments, yet we still have a few departments remaining that are in the process and are bringing forward potential dates for completion.

I would like to know, have they given you specific deadlines for the time when they expect the implementation to be delivered? In other words, is it an open-ended “We hope to have it in place”, or is it “We will have it in place by a specific date”?

[John Wiersema]

Perhaps, Mr. Chairman, the Comptroller General could first indicate what his information is as to the status of those departments, and then I could ask Mr. Timmins to explain the audit perspective on the readiness.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

[Rod Monette]

All of the departments have agreed to a very specific date for when they will be ready for audited financial statements. That's a date that we put up on our website. One of the reasons it's taking some time is that the departments have to go through a process of documentation of all of their controls. It's not because the controls aren't there, necessarily, it's because they're not documented. You need that to have an efficient audit. Otherwise, the auditors come in and they have to check a whole bunch of transactions; they can't rely on the controls that are there.

As I mentioned, through the recent budget we just received some investment to fix some of these things, to look at the processes government-wide, to fix some of the systems to make sure the systems talk better and so forth. I think that will be very helpful. It was actually my colleague, Mr. Wiersema, who developed this idea a number of years back, and it has had huge benefits in organizations in terms of improving controls and making sure the processes are as efficient as they can possibly be.

[Douglas Timmins]

We wrote these observations on work we did last summer, so they reflect the status at that time. We hope there's been progress. We haven't monitored each department. We are focusing on a few departments that have indicated they're closer to being ready for their audits. We've been working with them. We will update this on an annual basis for the observations for next year. We'll be back in, and next year there will be a similar report. But we certainly expect that there's been more progress for most of those other departments.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

If there are laggards, we want to know.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Madame Faille.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

My question concerns the May 2008 Report of the Auditor General, specifically the fees charged by selected departments and agencies, as detailed in chapters I and II. Mention is made of fees charged, of disputes and of settlements registered further to court orders. Several departments that collect user fees are named, including Foreign Affairs and International Trade, Citizenship and Immigration, Industry Canada, Parks Canada, Fisheries and Oceans and Health Canada. A growing number of users are going to court to challenge the validity of the fees charged. I know of one class action suit that has been filed against Passport Canada, as well as another against Citizenship and Immigration Canada.

On reading the testimony presented, I have noted some things about the way in which various departments measure their operating costs or the cost of calculating these fees. From a revenue standpoint, the fees charged by Citizenship and Immigration Canada generate several million dollars in revenue. This year, I believe revenues are up by $100 million. While fees are collected up front, the public will not be receiving any services during the current year. At Citizenship and Immigration Canada, there is currently a two-year backlog in the processing of applications for citizenship cards. Having served on various committees for four years, I know that this is a significant backlog and that the situation will only get worse.

Are you concerned at all about this situation?

[Rod Monette]

Thank you very much for your question. Since I want to use the correct technical terms, I will answer in English.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

By all means. I have the benefit of the interpretation.

[Rod Monette]

Merci.

The Auditor General tabled a report on user fees about nine months ago now. I'm familiar with that because I was before this committee testifying on user fees.

My colleagues can jump in here if I don't have this right, but what the Auditor General found was that some departments, like Parks Canada, for example, actually do a very good job with their user fees. Then there are other departments, such as the passport office, and I think another one was foreign affairs--the consular fees--where there are problems.

One of the things that has caused the problem is that user fees now, according to the User Fees Act, must come to Parliament and have a review to have the fees increased, but not everybody is going ahead and doing that. We have to encourage them to do that. In fact, what has happened in many cases is that the costs have gone up but the fees haven't. I think that's the general situation. So actually in most cases right now, not all of them, but most, the costs are actually more than the fees. I think that once the fees start coming through, you actually start to see some equalization of that.

Now, on your comment on the systems, you're absolutely right: some of the systems are not very good at setting out the costs. Some of that, again, is this issue we were talking about with Mr. Christopherson, and that is the issue of systems being able to talk with each other and share information. It's something we are working on, and I believe that on user fees you will see improvements in that file over the next the year or two, I would say, as we fix some of these systems issues.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

As far as the immigration file is concerned, the backlog is about one million applications for which fees were collected in advance. Applicants don’t know when they will receive any services. In some cases involving grandparents or parents, files have not yet even been opened. People are challenging the fees charged.

I understand that systems are not communicating with one another. However, we’ve invested substantial sums of money in immigration over the past 15 years.

I was also wondering if you had any concerns about this or any other department. By virtue of what rule are they allowed to carry forward such large sums from year to year?

[John Wiersema]

As the Comptroller General has indicated, the Auditor General did table a report on the management of user fees last spring, I believe, the spring of 2008. In fact, Mr. Timmins was the assistant auditor general responsible for that work. It included a number of user fees in government, but obviously we couldn't audit all of them. I'm not sure, but I think it did cover the passport fee, the consular fee, but not certain immigration fees.

The Auditor General also has work presently under way in Citizenship and Immigration Canada that will be tabled in Parliament in the fall or winter of this year. That work is looking at immigration programs as well. I'm not certain if fees are included in that, but I can take the member's concerns under advisement, Mr. Chairman, for consideration on that audit that's presently under way.

[The Chair, Liberal, Shawn Murphy]

Merci, Madame Faille.

Mr. Shipley, five minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

I also want to thank the representatives for being here today, particularly for your great presentations. It helps with our first time on this committee.

I'll just start off with my first question. It goes to page 7 and page 9 in the presentation deck you have. They talk about our total program expenses as we moved from 2006-07 and 2007-08. Actually, those expenses have gone up $11.2 billion. If you go to page 9, the transfers to other levels of government represent a higher percentage in 2006-07 and higher than that in 2007-08.

I want to thank our chair, Mr. Murphy, for raising the question, because I think it is a significant one. First, could you make comments on the transfer of those expenses with respect to the concern about the trust funds to which most transfers were made? In Budget 2009 we have taken the appropriation of specific funds to transfer payments rather than to trust funds.

I'll be honest with you, when I first read it, the names were misleading. When you hear “trust fund”, you tend to think that there are funds put in trust that actually will be accountable. But it's quite the opposite. So I'm wondering if you could comment on that.

Second, I'm going back to the comments you made, Mr. Monette, regarding the building of systems that are so complex. Who's responsible for wanting to initiate those complex systems? The reality is that we in our constituencies need to be able to understand a little bit about how to explain the accounting process to our constituents. If we have accountants who can't explain it, then I'm wondering why we aren't...? I mean, all kinds of businesses use accrual methods that are accepted and go through audits for CRA that are well accepted and easy to understand. Why are we so persistent, it seems, in building systems that are so complex that nobody can actually understand them? If you're going to have trouble wrapping your minds around them, then I think you've left 98% of the people who are even in the business out of it.

I'm just sort of wondering how we get past that, because we're going to be criticized for building a bureaucracy that is so deep and complex. That's what we battle. People say you're building this big bureaucracy to keep it complex so nobody understands it but them. We need you to help us get away from that for your benefit and ours. How do we remedy that?

[Rod Monette]

Thank you very much, Mr. Shipley, for those observations.

On your first observation on the budget, and I don't have all the exact details with me, you're absolutely right. Most of the programs will be delivered through the government's machinery. So it's not going to be like a transfer out to somebody. It will be through Transport Canada or through Human Resources and Skills Development Canada and their programs. So there will be control and accountability of all that delivery. That is my understanding of how that will be focused. There will be more control over it and more accountability with respect to it.

Regarding the building of complex systems, I think there are a number of parts to that. As accountant types sitting over here, and I know that there are a few professional accountants on the committee, I think it's always important for us to ask if we are doing something that people will understand and that is good for taxpayers. I think one of the ways we do that is through consultation with committees, such as this committee or the government operations committee, to make sure that there's appropriate opportunity for other Canadians, either through focus groups or other consultations, to have a look at these things. Then someone can have a look at it and say, “Well, you guys may get this, but we don't”. And we can go back and try to fix it.

Government is complex, so there will always be some level of complexity, but I think it's something that, honestly, maybe we've lost sight of a little bit and that we need to fix.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Shipley.

Mr. Christopherson.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

This follows up on an earlier discussion in which one of you mentioned accrual in—I believe you said—Australia and said that if they had known then what they know now, they might not....

This popped a question into my head. Are there any jurisdictions that you're aware of in the world that have reversed, that have made the decision yes and then have decided no before they put more than a toe in the water?