Public Accounts Committee on Sept. 28th, 2006

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

That is an industry council.

[Sheila Fraser]

It is a council of the Canadian Institute of Chartered Accountants, which includes members of other professions. A monitoring committee is responsible for setting standards. Of course, there is quite a lot of resemblance. There are also international standards.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

There is clearly a question of trust involved here. Private sector auditors audited one of these foundations, and you consider that audit to be accurate and complete. You then include those results in the Government of Canada's financial statements. Is that correct?

[Sheila Fraser]

We accept their results as regards the financial information.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

I see. Thank you.

Thank you, Mr. Chairman.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Proulx.

Mr. Laforest, you have eight minutes.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Good afternoon, Ms. Fraser and Mr. St-Jean.

In the report tabled today, and specifically in the part with respect to Employment Insurance, I see that the year-end balance is now at $50,816,000,000 which, compared to last year, represents an increase of $2,269,000,000. Indeed, the amount then was $48,500,000,000. In addition, there was an increase last year of $2,000,000,000 over the previous year. Basically, what we have been observing for several years now is an increase of about 5% per year in the consolidated annual surplus.

In the section of the report that provides supplementary information, you stated in 2004 that the Chief Actuary for Human Resources Development Canada had said that a reserve of $15 billion was adequate. Based on the figures available at the time, you concluded that the government had not complied with the spirit of the Employment Insurance Act. However, that increase has continued, and more money is being accumulated on an ongoing basis. And yet you are not expressing the same opinion this time around.

Would you make the same comment today?

[Sheila Fraser]

As you say, we are not expressing the same opinion. Under the previous legislation, rates had to be established on the basis of an economic cycle in order to ensure stability, which meant taking into account any accumulated surpluses. For five or six years running, we expressed concerns about the fact that the surplus exceeded the amount recommended by the Chief Actuary, and the Government was unable to justify that additional surplus.

In 2005, the legislation was amended. That amendment meant that surpluses are no longer taken into account for the purposes of rate setting. It is considered that every year, the account must be self-funding--in other words, that the premiums paid by employers and employees should be roughly equivalent to the amount paid out in benefits.

Page 4.17 of the English version presents detailed information with respect to revenues and expenditures for the Employment Insurance Account. The amount of $1.3 billion reflects interest credited to the account. That is not actual money; rather, these are book entries. That amount is not taken into account as regards self-financing. There will always be a surplus that is at least equal to the amount of interest, in a self-financing scenario. This year, the surplus is a little higher.

Normally, we would still expect there to be surpluses, albeit not as large as the ones we've seen in the past. Of course, if there were a surplus of $10 or $15 billion, we would have to say that the legislation is not being complied with, because revenues from the Fund would exceed the amount paid out in benefits in the course of the year.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

In relation to today's document on the Government of Canada as a reporting entity, and in light of what Mr. Proulx just said about organizations controlled by the government, on page 2.32, it states the following:

In the analysis that it was required to undertake prior to adopting the current standards, the government focussed on larger entities and on entities deemed mostly likely to be controlled.

This strikes me as a strange way of putting it. It's almost as though you're not certain that they were not controlled or are not controlled.

[Sheila Fraser]

Mr. St-Jean may be able to add something. For several years now, we have been having quite animated discussions with the government with respect to the foundations. We kept asking whether the foundations were or were not controlled by the government. The new standard and the analysis that we conducted have allowed us to conclude that some of them were, while others were not. I believe that the situation has been clarified.

It is possible--and Mr. St-Jean can certainly confirm this--that other organizations have collected more information over time or that circumstances have changed to the point where they should now be added to the Government of Canada's reporting entity, but we are satisfied that the government has carried out the appropriate analysis for this year and that the financial statements accurately reflect the current situation.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Are you authorized to conduct these audits under the Access to Information Act? Is there a connection?

[Sheila Fraser]

There is no connection between the two. Our mandate flows from the Auditor General Act or the enabling statutes of Crown corporations. It has nothing to do with access to information.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

So, the financial statements of these organizations or foundations are not subject to the Access to Information Act.

[Sheila Fraser]

No, not necessarily. I don't have the details for each organization, but I believe that some of them are subject to the Act, whereas others are not. In fact, I believe that most of them publish their financial statements on their website.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you very much.

[Charles-Antoine St-Jean]

Just to complete Ms. Fraser's explanation, I would add that a number of these foundations--probably the majority of them--do in fact publish their financial statements on the Web for the information of their own members, and are also required to file their financial statements with the Government under the contribution agreements they have signed. Most people can easily access that information.

[The Chair, Liberal, Shawn Murphy]

Thank you very much. Merci beaucoup, Monsieur Laforest. Thank you, Ms. Fraser, and thank you, Mr. St-Jean.

Mr. Williams, please go ahead. You have eight minutes.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you, Mr. Chairman.

Again, welcome to the Auditor General and the Comptroller General. It's always nice to see that we have a clean audit, and we're all confident that the books of the Government of Canada are beyond reproach. Speaking about being beyond reproach, as you know we've just been dealing with this issue of authorization of funds in the gun registry. Can we be assured that this year and in subsequent years we will not have that kind of fiasco, and that everything has been approved and voted on by Parliament in the appropriate way to ensure that the government has the authority to spend the money?

Yes, Mr. St-Jean.

[Charles-Antoine St-Jean]

The different bases of accounting for authorization for the appropriation and for financial reporting are always a bit difficult to deal with. We're trying to resolve this situation to make sure there are no surprises for anybody. We had instituted a new cut-off routine this year for the public accounts. We asked every single CFO or SFO in the Government of Canada to report whether there was any transaction that could lead to misinterpretation or a difference of opinion.

We have gone through this routine this year, and we'll do it every year to make sure there are no surprises.

[John Williams, Conservative, Edmonton—St. Albert, AB]

We didn't think it was complex.

Talking about surprises, Mr. Chairman, look at volume III, page 2.18. The bottom line says, “Sponsorship contract”--doesn't that ring a bell?--“$1.2 million under losses of public money due to an offence, illegal act or accident--occurrences or discovery in 2005 - 2006.”

Now, I thought, Mr. Chairman, Madam Auditor General, and Mr. Comptroller General, that we had beaten this thing to death. Mr. Guité is off to jail, and there have been a few other things along the way, and we're still finding that it's raising its ugly head again. On the next page, 2.19, in the footnote it says, “The amount of reported loss”--$1.2 million--“is the confirmed loss to date. It is still preliminary to estimate a total amount of loss to the Government”.

Now, this is a surprise, Mr. St-Jean. This sponsorship scandal--is it finished or is it going to be dragging on for years, with more to be unearthed in the years to come?

[Bill Matthews, Senior Director, Financial Management and Analysis Sector, Office of the Comptroller General, Treasury Board of Canada Secretariat]

The information presented in the public accounts includes a history of the losses as well as recoveries against those losses during the fiscal year. That is why the information is presented in this manner. There are a number of ongoing legal proceedings related to the sponsorship file that will, in the end, determine the final amount recovered. Until that is finally known, you will continue to see this accounting provided here in what we hope is a transparent manner.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Well, certainly I hope it's transparent, but my point is that this has been brought to our attention for the fiscal year ending 2006. The sponsorship scandal, I thought, was brought to an end by Paul Martin a couple of years ago. Why have you discovered this in this particular fiscal year, and is there any more to come in future years? You say here, “The amount of reported loss is the confirmed loss to date. It is still preliminary to estimate a total amount of loss to the Government”. So when are we going to get the final tally of how much we've actually lost to this sponsorship scandal?

[Bill Matthews]

There's the amount of the loss itself, and then you net that against recoveries. It's actually the recoveries against that loss that are in question, and we're reporting on that here in this year because there is an update on the recoveries against that loss in this fiscal year.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Well, this is not very transparent, if you're trying to tell me that this is a previously reported loss that you're just reporting again.

[Bill Matthews]

We're reporting the recoveries against it, and that's the relevant matter for today.