Public Accounts Committee on Nov. 23rd, 2023

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you, Mr. Chair.

AG Hogan, I just want to get back to the wage subsidy. What is the difference between what your reporting and analysis shows were improper payments and what CRA is showing?

[Karen Hogan]

I just need to clarify that question. I'm sorry. What they are showing where? Was it in that recent report?

[Kelly McCauley, Conservative, Edmonton West, AB]

I mean for ineligible payments for the wage subsidy.

[Karen Hogan]

The difference is that we identify—

[Kelly McCauley, Conservative, Edmonton West, AB]

Please just give the totals.

[Karen Hogan]

I don't know the totals that they reported as ineligible. I'm sorry.

[Kelly McCauley, Conservative, Edmonton West, AB]

It was considerably less than yours. Is that right?

[Karen Hogan]

It was less. However, we identified all businesses that were potentially ineligible, and the only way to determine whether they were eligible was to do post-payment work. There is a very small portion of those businesses that are being followed up on from a post-payment perspective.

[Kelly McCauley, Conservative, Edmonton West, AB]

I think the difference is over $20 billion. How do we get past this impasse? That is a lot of taxpayers' money. Is it a political solution? How do we get CRA to look at this?

[Karen Hogan]

I can only refer back to the testimony from when we appeared before this committee to study my report on the COVID benefits.

The Canada Revenue Agency has taken a risk-based approach to how it plans to follow up and to post-audit businesses when it comes to eligibility.

Our view is that it was not rigorous enough. There was not enough work being done. For example, only 4% or 5% of businesses being followed are not sufficient.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right, but the CRA commented that there's a high level of compliance, even among those identified by the Auditor General.

[Karen Hogan]

Again, when I read that report, as I mentioned earlier today, the Canada Revenue Agency highlighted that it looked at 53% of the businesses we identified as being potentially ineligible for the wage subsidy through either pre or post-payment work. When you break that down, there is 4% that was done through post-payment work. The rest was prepayment work.

As you know, there were limited controls in prepayment work. There was very little information gathered on monthly revenues. The main eligibility criteria was a decline in monthly revenue in order to be eligible for the wage subsidy.

In my opinion, the only way you can determine if a business is eligible is to do post-payment work. Hence, that is why I stand by my recommendation that much more rigour and more work are needed when it comes to examining the eligibility of businesses with regard to the wage subsidy. Then, a decision can be made whether or not collection should occur.

[Kelly McCauley, Conservative, Edmonton West, AB]

I would agree with you, considering that this year we will spend as much on debt as we will on health care transfers and spend double as much on interest debt as we do on our DND. I think the difference between what your analysis shows and what CRA shows, from the CRA numbers, is almost the equivalent of what we actually spent on our defence department. I hope CRA is watching, or I hope the government is watching. We can follow up on the analysis that you have put forward.

Thanks very much, colleagues.

I'm going to read a motion into the record. I'm not looking to debate it today, but I want to table it today. It's from November 17. It reads:

That, given the fact that,

GC Strategies, a two-person company, that does not perform any actual work but exclusively subcontracts contracts they acquire, has received $59 million in taxpayer dollars from 2017 to present; and

despite government promises to reduce outside contract spending the recently released supplementary estimates...show an increase in contract and services spending of $1.2 billion

That the committee initiate a six-meeting investigation concerning the value for money the Government has obtained through contracting GC Strategies and that the committee report its findings and recommendations to the House.

To facilitate its investigation, pursuant to Standing Order 108(1), the committee order the production of all contracts between GC Strategies and the Government of Canada from 2017 to 2022 in an unredacted format.

The witness list include the following:

1. All GC Strategies employees...[all two of them]

2. All federal departments and agencies that hired GC Strategies from 2017 to present:

[DND]

...Employment, Workforce Development and Disability...

...Innovation Science and Industry

Courts Administration Service

Treasury Board...

Department of Families, Children and Social Development

Global Affairs...

—GC Strategies is very busy, evidently—

Canada Border Services Agency

[DFO]...

...Secretary of the Governor General

—maybe that's for the $8 million barn—

Department of Natural Resources

Department of Agriculture...

...Nuclear Safety Commission

...Public Safety Canada

...Transport Canada

...Environment...

[PSPC]

Additionally, the Ministers of the aforementioned departments and agencies are invited to appear alongside their departmental contracting agencies.

[The Chair, Conservative, John Williamson]

Thank you, Mr. McCauley. That is your time almost spot on.

I will turn now to Ms. Yip for the last five minutes.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

That should be Ms. Bradford.

[The Chair, Conservative, John Williamson]

Pardon me. It should be Ms. Bradford. I'm very sorry. I looked at the wrong sheet.

Over to you, Ms. Bradford, for five minutes.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you, Mr. Chair.

The Auditor General found deficiencies in controls over access to key systems that store and process data related to payments, receipts and accounting records.

What corrections were made starting in May 2023, and are they satisfactory?

[Karen Hogan]

I can speak to what we saw, and then invite Mr. Huppé, if he would like, to add to it.

We did enough work to find out that there were some concerns around access controls, and we raised those with Shared Services Canada and the other central agencies. Immediately, access to several hundred individuals was corrected, and now they are going through the effort of making sure they have a comprehensive list and of seeing what other accesses need to be corrected.

There were steps taken immediately, but it is still an ongoing process.

I don't know if you want to add anything, Mr. Huppé.

[Roch Huppé]

The plan is ongoing.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Could you explain what else you would consider necessary to fully correct the deficiencies identified and reduce the risk of fraud or privacy breaches?

[Karen Hogan]

Obviously, I was pleased to see some immediate action in that the entities we raised these concerns with were taking them very seriously.

This really comes down to every department making sure that when a new employee is onboarded and given access to IT systems, a good evaluation is done around what access they need to carry out their functions. Also, you need ongoing monitoring. Every year, you should reassess whether those make sense. You should revoke access when an individual transfers to another department or is terminated.

While those processes are in many of the departments we audit, they're not always operating effectively. It's just better vigilance, I think, on a daily basis by IT folks across the government.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you.

The Auditor General did devote a fair bit of time in the report to asset retirement obligations.

Mr. Huppé, could you explain why the government wasn't prepared to estimate its asset retirement obligation, which resulted in that observation?

Do you expect the balance to change materially as you refine the estimate in the next year?

[Roch Huppé]

First of all, I'd like to thank the Auditor General for all the work she's done on the implementation of the new standard. It is major for an organization like the government. We own many assets and the work that needed to be done was quite considerable.

I'm happy. We didn't get any qualification as a result of the implementation, to be fair, but I also recognize that a lot more work still needs to be done. For example, when you look at removing asbestos in different types of buildings, if we have the same type of building, the cost per square footage should be similar. There should be consistency.

Again, we're seeing inconsistencies. We're seeing departments still struggling to build that. It's not always obvious. You need to gather the data on, for example, the cost of removing asbestos. You need expertise in those areas to really establish the estimate that....

I don't expect a major shift in that area, honestly, but a lot more work needs to be done. I think a little bit more hand-holding also needs to be done on our part for getting the departments together and taking that additional step in improving the processes. The Auditor General needed to do a lot of additional work to make sure there was no material misstatement in the books as a result of that implementation.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

I was wondering if you could elaborate on the plans you're making to ensure the timely, complete and accurate reporting of in the financial statements in the future.

[Diane Peressini, Executive Director, Government Accounting Policy and Reporting, Financial Management Sector, Treasury Board Secretariat]

I can answer that, given that my team has been overseeing it.

We did put a significant amount of work into this over the past year. We issued a directive on accounting standards to guide departments. We've provided them with information on how to code their transactions. We've worked with our IT folks to build in the information to allow departments to track it.

Probably most importantly, we've had working-level meetings as well as meetings at the director-general level to bring all the implicated departments together so that they can work together. They can share what one is learning from the other and the resources they're using for how to tackle some of the challenges.

Through that, we've issued questions and answers to some of the frequently asked questions and issues that have come up. There has been an awful lot of collaboration across the government to give the departments the information they need to improve their estimates.

It's hard. There's a lot of old information. We have historic sites. I met with my provincial colleagues last week. They have all the same issues. We have buildings that are hundreds of years old. Floor plans may not exist. Work needs to be done.

I know that national defence is currently in the process of bringing in.... I forget the word, but there's a technology that does an electronic floor plate to determine the square footage. On blueprints that are 50 or 60 years old, they found they couldn't even read the numbers anymore.

Trying to get the completeness and accuracy on old, historic sites is a challenge. That's the type of work and refinement that will need to happen.

We will continue to look. Specific to asbestos, if there are differences in rates, do they make sense or not? There might be a difference in cost between downtown Toronto and Nunavut. They might need to be consistent or there might be reasons that they're different. That's one of the things we'll do with our working groups this year.