Government Operations Committee on March 28th, 2012

[The Chair, NDP, Pat Martin]

We will call the meeting to order.

Welcome, everyone, to the 36th meeting of the Standing Committee on Government Operations and Estimates.

We will continue today with our ongoing study considering the estimates and supply matters of the federal government. We've had a very interesting study to date, and today we're very pleased to welcome to give his views the Auditor General of Canada, Michael Ferguson. With him today is Nancy Cheng, the Assistant Auditor General, and Richard Domingue, principal with the Office of the Auditor General of Canada.

The normal custom, Mr. Ferguson, is a five- or ten-minute opening statement, and then we'll go to questions and answers from the committee members. The floor is yours, sir, and welcome.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

The review of the estimates is an important part of parliamentary control over spending of public funds. We are pleased to see the committee's interest in the process surrounding the review of the estimates.

With me today are Nancy Cheng, Assistant Auditor General and Richard Domingue, Principal.

The Office of the Auditor General last audited the government's Expenditure Management System in 2006. Among other matters, the audit report commented on the government's use of supplementary estimates. We noted in particular that when in a surplus position, the supplementary estimates increased substantially.

In fact, between the fiscal years 1997-1998 and 2005-2006, the use of supplementary estimates more than doubled. We noted that reliance on supplementary estimates meant that the Main Estimates had become less meaningful because they no longer showed the complete picture of planned spending.

This issue is still relevant today.

The main estimates do not provide a complete picture of the spending plan and are not connected with the budget. When we performed the audit in 2006 we found that the main reason for including items in the supplementary estimates was timing. The tabling of the main estimates in advance of the budget was a key factor that gave rise to increased use of supplementary estimates.

In a separate audit report also tabled in 2006 entitled “Managing Government: Financial Information”, we noted that the basis of accounting for the estimates is different from that of the budget and the public accounts. We commented that accrual-based appropriations in the estimates would provide Parliament with the same basis for control and approval over voted spending as the government's overall financial plan and the summary financial statements.

A full accrual approach to budgeting and appropriations would recognize budgeting and spending by votes when the underlying economic transactions are expected to occur, rather than when cash is expected to be paid.

In the report, we noted that the government had outlined a plan to implement accrual-based budgeting in phases. It would then evaluate the costs and benefits of accrual appropriations during the 2012-2013 fiscal year.

In 2011, the interim Auditor General of Canada reported that the government's progress in implementing accrual appropriations was unsatisfactory. We encouraged the government to complete its studies of accrual-based budgeting and appropriations, and to determine whether or not it will implement accrual appropriations in the future.

As an audit office, we make recommendations based on evidence that is gathered during audit work. Since we have not audited the estimates and the supply process in recent times, we are not in a position to offer specific recommendations.

In closing, I would like to note that the office has recently updated a guide about the estimates process. We have been providing this guide to parliamentarians following every general election, as recommended by this committee in 2003. The guide provides a description of the supply process. It also suggests questions that committee members may wish to ask when reviewing the estimates documents, such as the reports on plans and priorities.

This concludes my opening statement, Mr. Chair. We would be pleased to answer any questions.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. Ferguson.

As is our tradition, we'll begin with the official opposition, with Alexandre Boulerice for the NDP.

You have five minutes, Alexandre.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

Mr. Ferguson, thank you for your presentation. I would also like to thank your colleagues for coming. I must say that I was delighted to hear your opening statement, of which a good part was in French. Bravo! That was great to hear.

Last week, when discussing an issue I know something about, the G8 spending scandal in the President of the Treasury Board's riding, Ned Franks told us that the spending complied with the existing rules because of the way the votes are structured. We also believe that departments should have some flexibility when it comes to the way in which they provide their programs. However, like most Canadians, we think ministers should not be able to distribute money in their ridings for projects undertaken mainly for election purposes. We in the NDP want to prevent ministers from being able to give gifts in their riding.

How can we, parliamentarians or the public, know if taxpayers' money is used for other purposes that are clearly different from those we examined and approved? How can we as parliamentarians restructure these appropriations in order to prevent this type of misuse of funds?

[Michael Ferguson]

Thank you for your question.

In response to the honourable member's question, I think the critical thing is that the votes themselves need to be clear about what they are for and what they are intended to be for. I think that's the fundamental starting point in all of this: it's that what Parliament is approving needs to be clearly laid out in each of the appropriations. Then, once it's clearly laid out, it's I guess part of the process to make sure that the spending then complies with what's contained in those appropriations.

So I think it's purely a matter of making sure the appropriations are clear and then making sure that the overall management structure ensures that the spending is in agreement with what the votes were approved for.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you. We agree on that.

The Parliamentary Budget Officer appeared before this committee during our study on the process. He indicated that both the quantity and the quality of information provided to Parliament by departments are too low now and that the situation has become worse in recent years.

Not only does this lack of relevant information stand in the way of adequate scrutiny of the estimates by members on both sides of the House, but it is also difficult for interested Canadians or Quebeckers to follow their taxes and know how they are spent.

Do you agree with the Parliamentary Budget Officer? Do you think we lack information and that, since billions of dollars are spent every year, that that is a problem for transparency and accountability?

[Michael Ferguson]

Thank you again for the question.

Again, it's difficult for us to answer these types of questions. We haven't done a specific audit on the estimates process, so I don't have a detailed audit report on the process here for me to speak to. Certainly I can agree that it's important to make sure there is transparency in the budget process, transparency in the accounting process, and that's something we have always supported.

But as I say, we haven't gone through a full audit process. In our audits of the federal government's public accounts, we will from time to time bring forward issues that we notice and make recommendations on those. For example, we made some recommendations on accrual-based budgeting and that sort of thing.

So in general, I can say that we certainly support any approaches that help to improve transparency.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.

[The Chair, NDP, Pat Martin]

That's about all the time you have, Alexandre. Thank you.

Next, for the Conservatives, Jacques Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

Mr. Ferguson, thank you for coming. Congratulations on the quality of your French during your presentation.

Mr. Ferguson, is it important for the main estimates to be coordinated with the budget?

[Michael Ferguson]

Again, I don't have a specific document or audit that we have done. Maybe what I will do in response to your question is turn a little bit to my experience in New Brunswick, where I was the comptroller for five years and the deputy minister of finance for one year.

Certainly in New Brunswick, our practice was that the public accounts, the budget document—if you want to refer to sort of the summary information that the minister would have included in his speech when delivering the budget—and the main estimates document were all on the same basis. They were all on an accrual basis. They all used the same reporting entity. So the same definition of government was used whether it was in financial statements or the main estimates.

As well, the main estimates were broken down into things like ordinary accounts, capital accounts, special purpose accounts, with multiple ways of dividing it down. There was a table at the beginning of the main estimates that reconciled all of that. It was easy to follow from the total amount of expenses, for example, in the budget document down into the amount each department was being voted, in whatever account. There was a clear reconciliation between the main estimates, the budget, and then the ultimate financial statement.

So again, just to reply to your question, that's what I was used to in the province of New Brunswick, that there was a very clear trail between all three documents.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Ferguson, we know today federal budgets represent huge amounts of money. We're talking about over $200 billion. We're working with a system that, historically, started in the 1880s and 1900s.

Would it be preferable to table the budget one quarter earlier, which would change the schedule and perhaps improve the system?

[Michael Ferguson]

I think with a number of the questions that I'm going to get on this subject today, I don't have a specific audit report to talk to, so I'll probably go back to my experiences in New Brunswick and how things were done there.

One normal practice that we had in New Brunswick was to table the capital budget usually in December. Again, I realize that New Brunswick is a small province compared to the size of the federal government. The main reason the capital budget was tabled in December was that, for a provincial government, capital spending was mostly about road construction or building construction. If you waited until the end of March to put your capital budget out, and then you had to go through a process of putting out tenders and getting people to respond and evaluating and awarding, you were halfway through the construction season before you could actually get any work done. So capital budgets were done in December so that the process could be under way, and starting April 1 or whenever the construction season was ready to go, that work could commence.

There was also at least one year—possibly two, but at least one year—where the province actually did table their full budget in either November or December, but that probably would be going back at least ten years. So they did do it at least once, but then they moved back to essentially a March budget for the main operating budget.

[The Chair, NDP, Pat Martin]

That's your five minutes, Jacques. I'm sorry.

Next is Mathieu Ravignat for the NDP.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you very much for being here. It's very important that you be here for this particular study.

One thing I've found frustrating as a parliamentarian is being unable to track, through the estimates process, spending that seems to be unjustified or seems to be unmeasured. I'm referring particularly to the overcharging of SNC-Lavalin, for example, for light fixtures and for desks, etc. How could this process be better structured so that we can track these types of out-of-control expenses?

[Michael Ferguson]

Thank you for the question.

Part of what we do is that we audit the federal government's public accounts, but we audit that at the sort of macro level of the public accounts to make sure that the financial statements the government presents are presented fairly. We don't perform our audit in order to track the spending at the sort of individual vote level. We don't audit at that level of detail. It is really left up to the internal workings of government to make sure that the departments are spending according to the budgets they were given.

So again, it's not really something I can comment on, because it's just not the level of detail we get to. If in the course of our audit we were to find spending that we felt significantly didn't comply with an appropriation, we would probably raise that in our observations.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you for that.

Since we are talking about audits, could you tell me why you abandoned the audit for the defence construction?

[Michael Ferguson]

I'm sorry, I missed the question.

[Mathieu Ravignat, NDP, Pontiac, QC]

Since we're on the subject of audits, can you tell me why you abandoned the audit on defence construction?

[Michael Ferguson]

I don't.... We haven't abandoned any audit.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Point of order, Mr. Chair.

[The Chair, NDP, Pat Martin]

We have a point of order from Scott.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

It's called a point of order on relevance. We're here to talk about the estimates. I'm just wondering if audits have anything to do with the estimates we're looking at.

[Mathieu Ravignat, NDP, Pontiac, QC]

That's fine. I can go ahead with another question.

[The Chair, NDP, Pat Martin]

Okay. Carry on.