Finance Committee on June 22nd, 2020

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Ms. Hogan. That's very reassuring.

Now I'd like to turn to you, Mr. Hayes. If I'm not mistaken, the environment commissioner's budget is part of the Auditor General's budget. Given the funding challenges her office is facing, I'd like to know how much that impacts your work and ability to carry out analysis.

I'd also like more information on the environmental follow-up on the government's measures. Do you check whether the government is honouring the environmental commitments it undertook as part of its COVID-19 response?

[Andrew Hayes]

Thank you for your question.

My work as commissioner is part of the Office of the Auditor General's performance audit work, so that's where my funding comes from. In the past few years, the former commissioner conducted six audits. I, however, plan to conduct just four, and they will be slightly delayed owing to the COVID-19 pandemic. I am actually providing support to the Auditor General right now.

I can tell you that the government's environmental and sustainable development commitments will indeed be examined as part of our pandemic-related work.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you. I think this is a really important point of view in the analysis of all the implemented measures. After all, we are talking about hundreds of thousands of dollars, or nearly, so it is very important to ensure that the government is respecting its commitments in this area.

Mr. Hayes, what kind of progress has been made in following up on the commitment the government made in 2009 to end fossil fuel subsidies? I feel that, every time you look into this, you find that no progress is being made and that the government has still not come up with a definition of fossil fuel subsidies.

[Andrew Hayes]

Thank you. We have carried out two audits of those subsidies. The first time we submitted a report to Parliament, we said that we did not have the information needed to come to any conclusions. The second time, we received government analyses and concluded that slight progress had been made, but that the definition was unclear.

In my opinion, we cannot do much more on this issue right now because the government has until 2025 to reduce those subsidies.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Hayes. Let's hope that it will be done.

[The Chair, Liberal, Wayne Easter]

Sorry, Gabriel, we are quite a bit over.

We'll go to Mr. Julian, who will be followed by Mr. Cooper.

Peter, you have six minutes.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thanks, Mr. Chair.

Welcome, Auditor General Hogan.

Mr. Hayes, thank you very much.

Congratulations. It's a very important position that you hold. I have no doubt that people right across the country are looking to make sure that money is spent effectively and wisely.

I will start off by mentioning the finger pointing between the Conservatives and Liberals, which I don't think anyone finds credible. The reality is, as we all know, that we look at constant dollars. It is only under minority parliaments that the Auditor General's department has been adequately financed. The moment the Harper Conservatives became a majority government, they started slashing. The current government has continued that practice, a massive slash from a decade ago that has made it very difficult to have the Auditor General do the important work on behalf of Canadians.

The contradiction is very clear. We've seen previous Conservatives governments and the current Liberal government splurging on banks and big businesses at the same time as they nickel and dime the Auditor General and that important function to death. I think it's good we have unanimous support around restoring the funding, but the reality is that only happens in minority parliaments. Now we can move forward.

You mentioned earlier the importance of putting in place an independent funding mechanism. You have cited other countries that have in place an auditor general function that is independent from whether or not the majority government can run roughshod over the important function the auditor general performs.

In your mind, what is the best example of other countries that have independent funding mechanisms that should really apply in the case of the Auditor General?

[Karen Hogan]

There are a few examples we can look to. There are provinces across our country that have an independent funding mechanism, and there are also the U.K. and New Zealand that have such a mechanism. While we can look to those to inform what we might want to come up with, I do think it's something that even Parliament plays a role in helping shape.

I have been talking with the public accounts committee and their chair about exactly that. There is a role for Parliament to play in oversight once an independent funding mechanism is in there. There is a control function to rightsize, when needed, the Auditor General's budget and to do so in such a way such that it can be stable for the organization.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Yes, that's it, and you'll certainly have the support of the NDP on that. We believe it shouldn't depend on a minority parliament whether or not the Auditor General gets the support she or he needs. It really has to be something that is put in place on behalf of all Canadians.

Now I'd like to move to the issue of the COVID-19 funding.

You mentioned some of the areas you're prepared to look at. I want to come back to your opening statement, where you mentioned examining issues such as liquidity supports. As you're probably aware, we've uncovered that the amount of liquidity supports being provided the banking sector, with no strings attached, no requirements, nothing, is an astounding $750 billion, three-quarters of $1 trillion.

Are those supports offered through OSFI and other federal institutions part of what you would be looking at, given the fact this is a massive amount of support and that it comes with no strings attached?

[Karen Hogan]

Obviously, as we sat back and looked at the scope of everything that's covered by the response to COVID, a few programs stand out because of the magnitude of the dollars associated with them. Dollar amount is just one factor we look at when we decide to select the audits we look at. We'll look at risks, impact on Canadians and so on. Looking at liquidity is one of those. Obviously CERB is another big one.

We have begun to have some conversations with the government about liquidity measures and exactly where decisions are being made about the liquidity measures. As you may be aware, the Bank of Canada is not within our mandate to be looked at, but we have begun discussions with the Department of Finance so that we can figure out the best way to tackle the important programs that are there to provide relief to the economy.

It is on our radar. It might take us just a little bit longer to get started on those because of some of the little technicalities we need to get through in order to get access to some of the information.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much.

That's reassuring because this has been something that needs to be thoroughly examined, particularly given the significant bank profits we've seen so far in the pandemic.

Another program that raises real concerns is the LEEFF program. Of course, we've seen, under this current government, loan forgiveness. Loans are granted, and then, all of a sudden, they're magically forgiven, which means that they are grants, but it's not done in a forthright transparent manner. It's done in two stages.

We saw the current government forgiving $196 million in loans earlier this year. They are not releasing the name of the company, the corporation, that benefited from that.

What are the difficulties when you have two stages, where first the loan is granted, and then, magically, the loan is forgiven? In terms of auditing and following up, and making sure the taxpayers' interests are protected, what are the challenges around that sort of two-stage process, which many people fear will be part of the LEEFF program, where first the loan is granted and then it is magically forgiven?

[Karen Hogan]

You raise a very important question, as we try to tackle the timing of when we might want to do certain audits, when there is a program that has a two-stage tiering to it, sort of an eligibility criteria and then, depending on whether or not certain factors are met further down the line, there's a forgiveness or a repayment that's needed.

Those are the kinds of programs that maybe we can look at in the beginning, and then we would have to pause and provide you with some information on perhaps how they were designed and how the funds were rolled out, but we couldn't really talk about the intended outcomes until later on in time, when stage two comes out. It presents a challenge from that perspective when you're looking for whether or not there is value for money in what occurred.

From a financial perspective, it's a completely different audit that would impact the financial statements of the entities or the departments that are running that program, so that's a whole other different set of challenges that we would have to examine and look at every year. The complexity of a program adds to the time and effort needed to audit, which again adds to the reasons we need sufficient funding in order to have the right amount of auditors on the ground, looking at programs from financial angles as well as performance angles.

[The Chair, Liberal, Wayne Easter]

Thank you all.

We will now go to Mr. Cooper, followed by Ms. Dzerowicz.

Michael, the floor is yours for five minutes.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you, Mr. Chair.

Thank you Auditor General Hogan for appearing today. Again, congratulations on your appointment.

You noted in your testimony that it will take years in terms of audits to go through the COVID spending. Just having regard for the scope of COVID and the additional mandate that places on your office, the $10.8-million request was made at a time when the office had already had its mandate expanded and was already doing additional work without additional resources. Is that not correct?

[Karen Hogan]

You are correct. Back in 2017, there was an initial request made by Mr. Ferguson. Some funds were received in 2018. It was about a third of what was requested. Then the $10.8 million was part of the second tranche that Mr. Ferguson had been looking for.

As you mentioned, that was following some mandates we received that were unfunded. Since then, there have been additional mandates added. Then there are the three orders from the House related to investing in Canada, special warrants and COVID-19. Then, as well, just dealing with our technology gap, we were able to fund some of the other requests earlier on that we need to address.

The $10.8 million is an outdated request and, as I mentioned in my opening statement, one that we are looking at and hope to be able to refresh very soon.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Would it be fair to say that it's a significantly outdated request?

[Karen Hogan]

Three years is a very long time even without a pandemic in the middle of all that, so yes, it would be fair to say that it's significantly outdated.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

When interim Auditor General Ricard last appeared before our committee, he noted, “The COVID situation simply demonstrated—times 10 if I can say it that way—the struggle we were living.”

Would you agree with that statement in principle?

[Karen Hogan]

I would absolutely agree with that statement.

Many organizations are seeing some of the areas that maybe they would have not treated so well as being amplified throughout COVID-19, especially when it comes to the reliance on technology, the ability to connect and interact virtually with individuals we audit. Yes, it is definitely magnifying some of our issues.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

I want to ask you a question about technology, since you mentioned it a couple of times.

Before I do that, interim Auditor General Ricard stated that all audits other than the orders coming out of the House, or the three motions passed in the House, have been put on hold. I presume that remains the case.

[Karen Hogan]

As a little clarification on that front, and an opportunity for me to let you all know, we did have a few audits ready to be tabled just before the pandemic struck. I wrote to the Clerk saying that on July 8 we will table those three reports that were sitting there.

Then we had some audits that were ongoing, so they were expected to be tabled in the House in the fall of 2020. We have delayed those into 2021.

Unfortunately, at this time all other audits, other than one audit under the commissioner of the environment, have been cancelled or delayed indefinitely so we can focus on investing in Canada and COVID-19.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Are special warrants audits tied to that?

[Karen Hogan]

That's correct. It's my understanding right now that there have been no special warrants issued, but should there be, yes, there would be an audit there.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Finally, in terms of technology, you noted as an issue that the operating system the office is currently using is DOS. Would you be able to elaborate on some of the issues with respect to technology that are creating a barrier to the office being able to do the job it could otherwise be doing?

[Karen Hogan]

That operating system was one of our operating systems. It functioned very much like DOS and used F key functions to navigate across the screen. I'm very happy to tell you that a couple of weeks ago we transitioned off that system. It makes many of us happy that we don't have to keep our cheat sheet about what F2, F8 and F6 mean. We're quite happy about that.

In terms of the other technology gaps we have, some of it is like every other federal government, with legacy systems that have reached their end of life and are no longer supported and need to be replaced. For example, our electronic working paper software is one of those we are looking to replace.

Then there is new technology in order to be able to deal with data analytics. While we have some, there is an opportunity there for us to find a creative way to add better value to those we audit.

I would even go so far as looking at communication tools. As I mentioned, we want to be able to report our audit reports in different ways to Canadians. It isn't all about IT. It's about other mechanisms as well, and then making sure we all have the skills to use those tools to the best of their abilities in order to be more efficient and add better value.