Evidence of meeting #39 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was projects.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Karen Hogan  Auditor General of Canada, Office of the Auditor General
Andrew Hayes  Deputy Auditor General and Interim Commissioner of the Environment and Sustainable Development, Office of the Auditor General
Annie Ropar  Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
John Casola  Chief Investment Officer, Canada Infrastructure Bank

1:15 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, all.

We'll go to Mr. Cumming, followed by Mr. Fragiskatos.

Go ahead, James.

June 22nd, 2020 / 1:15 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

Thank you, Mr. Chair.

Thank you, Ms. Hogan, and congratulations. I look forward to working with you on this committee. I wish you all the best in your new role.

When you testified at the public accounts committee, I think the number you said was that roughly 575 employees are with the Auditor General. Can you tell us today how many of those are auditors? What's the split between performance and financial audits? Are there plans to change that balance, given the scope of the audits you have under way?

1:20 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

Right. I'm going to give you what's in my mind, and then I'm going to hope that Andrew can confirm it and not dispel it. I would hate for a lawyer to tell me, the accountant, that I got the numbers wrong, but we'll try.

From a financial auditors perspective, our practice there has about 220 individuals out of our 575. In the performance audit practice, I believe we're about 120 individuals. The rest would then be our HR, IT and all of our support services. We do also have some support from a technical aspect that supports both financial and performance audits for methodology and changes in standards. They would not be included in those numbers but they are very much needed in order to support an audit practice.

Andrew, did I get those numbers right? He is nodding yes. There we go.

1:20 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

Well, you successfully passed that test, from Andrew's position.

You talked about technology. I used to be involved with a public accounting practice. One of the drivers for them was the implementation of technology to improve productivity, to keep their staff counts stable, or even down, and be able to deliver more audits and more performance. Is it your philosophy going forward to try to update from a technology standpoint so that you can produce more, maybe with AI or maybe with analytics? Perhaps you can give us a bit of your thought process on the improvements in that area.

1:20 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

That is absolutely one of our angles in trying to modernize how we work and bringing in more technology. It comes with the understanding, at least in my experience, that in a new technology project, a new IT system or whatever links it to IT, there is a period when you need to increase your workforce in order to deal with bringing that on board. You're training individuals, investing in understanding the tools and working with the entities you audit in order to get quality data, to be able to use these systems. After a couple of years, you then start to see the efficiencies of making that investment over the long term.

You mentioned data analytics and artificial intelligence. IT brings about not only efficiencies but also better analysis, better value and better focus on outcomes. We're hoping that we'll see efficiency and better recommendations and advice to the departments and the Crowns we audit.

1:20 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

We will now go to Mr. Fragiskatos. Then we'll have time for one question, if Mr. Poilievre wants one, and one from Ms. Koutrakis.

Go ahead, Peter.

1:20 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

Thank you, Mr. Chair.

Congratulations, Auditor General, on your appointment.

Mr. Hayes, it's nice to see you again.

Auditor General, I'm not sure if it was in your opening remarks or in response to a question, but either way, you said you were interested in taking a look at PPE and the experience we've had in Canada in terms of purchasing over the past few months. You mentioned CERB and one other area. Can you just remind me of it, if you don't mind?

1:20 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

Obviously, it's overall preparedness for the pandemic. The other specific area is Canada's food supply.

1:20 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

Thank you very much for that.

What sort of issues are you particularly interested in examining?

1:20 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

That's probably a harder one to tackle. Each of them brings a unique angle we would need to look at. As with any audit we might approach, we will obviously look at the design of the audit, controls around it, whether or not it was rolled out in that individual's new would-be objective and outcomes and did they have a way to measure that they're achieving them. We'd like to see departments doing a self-assessment and correcting as they go.

I think one of the unique things about auditing a program in response to an emergency as this pandemic is, is that initially you might start a program with an intended objective because you believe it's very short term and quick. Then as you realize that it might need to last a little longer, the program needs to grow and amend.

That's the kind of self-assessment we would like to see departments doing and ensuring that throughout they are making sure they've put down their rationale and that they've designed it well, thinking about needed controls around handing out a program or funds in such a fashion.

1:25 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

When you say design, what do you specifically mean? You said design of the audit. Do you mean design of the policy? I'm misunderstanding your point.

1:25 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

When I said design of our audit, it's how we might approach it, what we might look at. When you look at a topic area, you don't necessarily audit a topic from A to Z. You might pick bits and pieces of it to make sure you're hitting the riskier areas. When it comes to a program, we won't be looking at a policy, but we will be looking at the intended outcomes of the policy or the program decision and making sure that a department rolled it out in such a fashion or set it up in a way that will meet those intended outcomes.

Did that help?

1:25 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

It did help very much. Thanks a lot.

1:25 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

We'll go to you, Ms. Koutrakis, and then come back to Mr. Poilievre for the last question.

1:25 p.m.

Liberal

Annie Koutrakis Liberal Vimy, QC

Thank you, Mr. Chair.

I would also like to offer you my congratulations, Ms. Hogan, as the new Auditor General. Your role is essential to our democracy, and I am certain I speak for all when I say you will have our full support and collaboration, and we are eager to work with you.

We know that generally Canadians are unlikely to submit fraudulent claims for government subsidies and support programs. That being said, we must also be prepared for the reality that some people will try to take advantage of federal COVID-19 support programs through fraud. Will the Office of the Auditor General play a role in evaluating fraudulent CERB claims? How can the office evaluate the federal government's COVID-19 response plan and similar programs in the future? What can you put in place to make sure these programs are audited as they should be and I'm sure they will be.

1:25 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

When it comes to any program that is set up in response to these times, obviously decisions are made quickly. Maybe processes didn't follow the traditional processes that normally would have occurred when a new program is rolled out. Unfortunately, there are individuals who will take advantage of that, as you mentioned, and fraudulent claims could be made.

As an auditor, when you know there is an increased likelihood or an inherent likelihood that there would be fraud in a program or something you are auditing, you will design your audit to look for that.

In the case of CERB, we'll be able to focus on the design and controls in a first short-term quick audit so we can provide some best practices for future programs. To be able to look at whether or not there was fraud that we have intentions of targeting, that will likely be a little later on. You need to allow the system to self-identify those problems and be able to try to implement corrective measures to recover monies, if needed. While you might not see it in the short term, we intend to look at it.

Any audit is always approached by making that assessment about inherent risk that might alter or amend the kinds of procedures we plan.

1:25 p.m.

Liberal

The Chair Liberal Wayne Easter

With that, we will have to call it quits and go to our next panel.

I'll just remind members that at the start of the next panel we will deal with a motion on the committee budget for COVID-19. We have to get that done.

On behalf of the committee, Ms. Hogan and Mr. Hayes, we sincerely want to thank you for appearing. We know this is the second time we've had the Auditor General before us—two different individuals—in a few short weeks.

I know economic papers aren't always the most fun to read, if I can put it that way, but I highly recommend that people read the Auditor General's reports. Whether it's a department, an agency or a project, you do such a wonderful job of explaining the background, so that we may understand what was intended here in the policy approach or whatever, and then get into your results, more or less, in terms of the audit. I want to congratulate you on that as a department over the years. I've seen many of them in 26 years, and I do find them a real education in areas that may not be my expertise.

Thank you again, and we wish you and your whole department and staff all the best going forward to do your work as we look back on these interesting but difficult times.

1:30 p.m.

Auditor General of Canada, Office of the Auditor General

Karen Hogan

Thank you.

1:30 p.m.

Liberal

The Chair Liberal Wayne Easter

We will suspend for about two minutes and come back to the next panel of witnesses.

The meeting is suspended.

1:35 p.m.

Liberal

The Chair Liberal Wayne Easter

We shall reconvene, and I'll call the meeting to order.

This is the second panel of meeting number 39 of the House of Commons Standing Committee on Finance. Pursuant to the order of reference from the House, we're meeting on the government's response to the COVID-19 pandemic. Today's meeting is taking place by video conference, and the proceedings will be made available on the House of Commons website.

I want to welcome the witnesses for this panel. From the Canada Infrastructure Bank, we have Annie Ropar, chief financial officer and chief administrative officer; John Casola, chief investment officer; and David Morley, group head, corporate affairs, policy and communications.

Welcome to all of you. I expect somebody has a presentation to make.

Before I get there, though, we do have a little bit of committee business that we need to attend to. Members were emailed the request for the project budget, which is the COVID-19 study, and the amount requested is $17,000. The costs are allocated in that paper that was extended to you. Does anybody object to that expenditure? Are there any objections or questions on it?

Are we all in agreement on the budget of $17,000 for our study, which we've been doing for a while?

(Motion agreed to)

We have agreement on that. Thank you.

We'll turn then to the Canada Infrastructure Bank. Ms. Ropar, the floor is yours.

1:35 p.m.

Annie Ropar Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank

Thank you, Mr. Chair. I'll be starting my remarks in French.

Mr. Chair and members of the committee, good afternoon.

My name is Annie Ropar. I am the chief financial officer and chief administrative officer of the Canada Infrastructure Bank. I am glad to be speaking to you today. I am joined by my colleagues John Casola, chief investment officer, and David Morley, group head of corporate affairs, policy and communications.

Thank you for giving me the opportunity to discuss the importance of investing in infrastructure and the role of the Canada Infrastructure Bank, the CIB. At the CIB, we know that new infrastructure is a powerful lever for recovering productivity and growth, now more than ever. New infrastructure can generate considerable economic, social and environmental benefits over time.

Fortunately, Canada has a great deal of experience in infrastructure projects carried out through public-private partnerships. We also have a solid ecosystem of companies that support investment in infrastructure. Those companies include construction and consulting engineering companies, as well as financial institutions. Cooperation with public sector partners is at the heart of the CIB's actions. We have discussions periodically with federal, provincial and territorial governments, as well as indigenous communities on their needs and their priorities in infrastructure.

Although we bring to projects a thorough knowledge of industry and investment capital, it is public sponsors—in other words, governments of all levels—that generally have the assets and manage projects. Those are our clients. We have announced our participation in 10 new projects. Those projects are located in different regions of Canada and involve various investment sectors.

We have announced participation in 10 new projects. They are in different regions and in various sectors.

We are helping bring to life projects that are priorities for governments. A key rationale for creating the Canada Infrastructure Bank was that governments alone could not underwrite all the required investment in infrastructure. That was the view before the pandemic struck. Public budgets will be even more strained in the near term. Expanded partnerships with the private sector are needed to spark activity and get new assets built. That’s where we come in. The CIB acts as a catalyst to encourage new financing approaches.

CIB was established by legislation in 2017 and became operational in 2018. It has a mandate to invest $35 billion dollars as one element of the government’s investing in Canada plan. Our objective is to advance a new partnership model and transform the way infrastructure is planned, financed and delivered in Canada. We focus on revenue-generating projects. Projects must be linked to national, provincial or local priorities. Our current priority sectors are green infrastructure, public transit, trade and transportation, and broadband infrastructure.

In those sectors, we have three key roles.

First, we advise governments across Canada, at all levels, on revenue-generating infrastructure projects and innovative investment options. We offer specialized expertise in structuring financial instruments and provide financial advisory and project structuring. Second, we invest in projects and seek to attract private and institutional capital to co-invest alongside us. To be clear, we do not provide grants or traditional government funding. Rather, we can extend loans, take equity positions in a project, or use other innovative tools to help get a project built. Third, with partners, we develop and share infrastructure knowledge and research.

Our activities and efforts have yielded results. We have, so far, announced participation in 10 projects across Canada, with more to come.

Infrastructure is a long-term asset class. The capital costs of transformational projects can range from hundreds of millions to billions of dollars. Projects often entail complex design and analysis work, with dozens of expert parties involved.

In some projects, we act as early-stage advisers to governments. In cases where projects are more advanced, we are investors. With our public and private partners, we work to understand infrastructure problems and create financial solutions that are tailored to each project. That is a unique feature and a net benefit for us being a federal organization that adapts to the needs of our partners.

Good ideas for necessary and valuable infrastructure can stall, for many reasons. There might be a lack of public funding or an inability to attract private capital. At the CIB, we play an active role to identify and address the gaps, thereby supporting projects that would likely otherwise not proceed without our involvement.

As mentioned before, we do not provide grants, but we also need to ensure that we don’t crowd out private capital, meaning that we don’t invest where there is otherwise institutional financing available. A few examples can demonstrate our positive impact.

We announced a $300-million facility to build the Contrecoeur port terminal in Montreal. This expansion will increase container-handling capacity and meet forecast demand from international shippers, as well as Canadian exporters and importers.

We are advising on the proposed Kivalliq Hydro-Fibre Link. It involves the construction of a new, 1,200-kilometre, 150-megawatt transmission line from Manitoba to Nunavut. The project would deliver renewable and reliable hydroelectricity and broadband infrastructure to the Kivalliq region.

In Richmond, B.C., we are working with the municipality’s Lulu Island Energy Company to expand the city’s existing district energy system, and this month we were pleased to announce our first partnership with the Government of Alberta, on the Calgary-Banff rail project. This rail link would support Alberta’s economy by connecting the Calgary International Airport to the city’s downtown and Banff National Park.

Our advisory and investments team has deep knowledge in our priority sectors. My colleague John, for example, despite his very youthful appearance, has more than 20 years of experience advising on project finance and transactions. His senior team has the experience and knowledge to work with the public sector, mobilize private capital, and manage risks.

At any given time, the team is evaluating a long list of ideas and confidential proposals. These come from governments or public agencies, as well as from the private sector. In the most recent fiscal year, we assessed 172 potential projects. The proposals covered all provinces and territories. There is a great supply of creative ideas on how to successfully align private and public interests in delivering infrastructure.

Twenty-four months ago, there was nothing: no staff, no risk management program, nothing was operationalized. It takes a lot of heavy lifting to set the right foundation to ensure proper controls and processes surrounding the stewardship of taxpayer money, and to make sure we have consistent, rigorous due diligence processes in our review and structuring of investments, but even during that time period, while we were building, we got a lot done.

The CIB operates at arm’s length from government. We have an independent, professional board of directors. This provides independence to make investment decisions based on commercial assessments and analysis. The board, led by our new chair, Michael Sabia, provides expert governance and strategic guidance. It ensures oversight and accountability. The directors bring a balance of professional skills, infrastructure expertise and investment experience. They reflect gender, linguistic, cultural and regional diversity. Our board truly understands the important links between government and business.

All of us at the CIB take our purpose very seriously. We have a culture that is committed to public service, and the experience and drive to achieve results in a business-like way. We are headquartered in Toronto and have strong representation in Montreal and Calgary. We also have an expert focused on engaging with indigenous communities about their infrastructure priorities.

I am very proud of our diversity. We are a small team of about 50 people, and we are an inclusive organization. Some 41% of our team members identify as visible minorities, 40% of us are women, and 33% are bilingual.

We are also committed to transparency as a public institution. Our corporate plan, quarterly financial results, annual report, annual public meeting, expense and other disclosures are available on our website. During the pandemic, our business continuity plan allowed us to continue working while ensuring the health and safety of our employees. We are still very actively engaging with partners across the country.

The pandemic has required collaboration and creativity in government, business and communities, but it is obviously going to leave financial and economic scars. The CIB offers infrastructure advisory and investment expertise that will help revitalize Canada’s economy. New forms of investment are required to address our pressing needs, and new infrastructure delivers both immediate and long-lasting benefits to our country.

Thank you, and we look forward to your questions.

1:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Ms. Ropar, especially for the quite informative background on the Canada Infrastructure Bank.

The questions for this round will start with Mr. Poilievre and then go to Mr. Fragiskatos, Mr. Ste-Marie and Mr. Julian.

Mr. Poilievre, the floor is yours.

1:45 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Thank you very much.

My question for Ms. Ropar deals with the methods of financing that the Infrastructure Bank provides.

Ms. Ropar, you said that you don't do grants. That said, discounts on interest rates for a project are effectively grants. They have a commercial value to them. They transfer public funds to a project. Giving loan guarantees and then having those guarantees cashed in, in the event of a project cost overrun, is effectively a grant. When you guarantee a project and that guarantee is called, then you're granting funds. Do you not worry that what you're effectively doing is providing grants in the most complicated manner and therefore making it actually more difficult for the public to follow what cost the bank is absorbing and what benefit they're getting in return?

As a supplementary to that, is it not just simpler to give a grant and say, “This is what we're contributing, and this is what we're getting”? Taxpayers can be the judge as to whether or not it is a worthy transaction.

Thank you.

1:50 p.m.

Liberal

The Chair Liberal Wayne Easter

Ms. Ropar, I'll let the question go to you, and you can direct it to one of your colleagues, if you care to do so.

Go ahead. The floor is yours.

1:50 p.m.

Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank

Annie Ropar

Certainly, I'm not sure if I would agree with it being easier to give a grant. I don't think.... Depending on the situation, it may not be the best route to take in terms of leveraging taxpayer dollars available.

As I said, we don't give grants. The big difference is that we actually structure our transactions with the anticipation, the diligence, to get that capital back. Once you get that capital back, you can then redeploy it into other transformational projects. That's going to be the big difference, obviously, between ordinary government grants, which are done in a different process and absolutely have a place, versus what we're doing, which is filling a different gap in the market.