Public Accounts Committee on Sept. 28th, 2006

[Charles-Antoine St-Jean]

Of course, and this is in line with the stated government policy of bringing down the deficit to close to 25%—

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

The chair doesn't want me to pursue this any further, so I'll cut my questioning.

[The Chair, Liberal, Shawn Murphy]

It should be pursued forever. Thank you very much, Mr. St-Jean.

Thank you very much, Mr. Fitzpatrick.

Colleagues, we're now starting round two. Ms. Ratansi, five minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you.

I have three questions for you.

In the presentation, you said that for nine years in a row we've had a surplus and we are one of three countries that have had an unqualified opinion from the Auditor General.

As a member of the public accounts committee...if I were in private life, I know what an unqualified opinion would be—everything is audited and materiality is much lower. So how does the Auditor General give an unqualified opinion, and help me be comfortable that the accumulated errors are not going to be a problem? I think all members here want to ensure that we look after the funding of the government.

This will be the second question, so I might as well give it to you, so you know where I'm coming from. We were looking at departments, and departments seem to have less accountability, so therefore, when you're consolidating the information, the departmental financial statements may not be as kosher as you want them to be. How does the AG, as the external auditor, have a comfort level? I know you have a billion-dollar materiality, but what else gives you comfort that you can give an unqualified opinion?

[Sheila Fraser]

We do our audits in accordance with the norms and standards that are generally accepted for auditors around the country, so we use the same professional standards that auditors in the private sector would. If there were an auditor in the private sector that had a corporation with revenues of $200 billion, they would be using a materiality, I'm sure, somewhere around $1 billion or more. The way we establish our importance level is based on professional standards that are recognized throughout the profession.

As well, we don't only do our audit at the Comptroller General's shop. We spend literally thousands of hours auditing through departments. I think probably our audit of the public accounts, if we include our audits of Revenue and the agencies, would be 50,000 hours or more—probably even more than that. Just the Public Accounts of Canada, without the Revenue Agency, is about 50,000 hours—

[A voice]

It's 30,000.

[Sheila Fraser]

—or 30,000, and there are another 15,000 or so in Revenue, so we would be up to 50,000 or 60,000 hours of work. And our staff go into all of the major departments and the other less significant ones on a rotational basis. All the significant balances are audited every year.

We take our professional responsibilities very seriously and make sure that when we give this opinion we believe we've done sufficient work to give an opinion on the summary financial statements. But that should not equate to giving an opinion, for example, on a departmental financial statement, because that would be a quite different level of work.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I don't want to put any slight on your professionalism; I have the highest regard for you. My question really stems from how we can better understand. For example, there have been discussions about quarterly financial statements for departments so that we know—we're not the operating body, so we need to understand—where the buck stops. And when the buck stops, does it stop so that we have a comfort level? I think the Canadian firearms situation and everything else gives a lot of discomfort to everyone.

First, should departments be producing quarterly financial statements? Second, would you have the ability currently to ever do an audit of the departments; and if so, how many departments would you be able to do? I know you do it on a rotational basis. And third, how do we bridge the gap between departments reporting on a probably cash or a modified cash basis and the accrual accounting? That's going to be the bane of our existence here.

[Sheila Fraser]

There are many challenges right now in producing the year-end summary financial statements. For example, I'd say one of the major ones is the way revenues are calculated. At the end of the year, the government goes through a very extensive calculation of the receivables and estimating all the revenues on an accrual basis, whereas previously it was on a cash basis. There is not a methodology currently in place that would allow the government to do that every quarter.

There are other aspects that are really only reviewed, I think, at year-end, and until that changes in government and there is more rigour—and I think that's one of the purposes the Comptroller General has in asking for departmental financial statements—I personally think it's going to be very difficult for government to produce financial statements on a quarterly basis to the same level of quality as the year-end financial statements.

I think there's a question there about the level of effort it will take and whether parliamentarians and government want to put the level of effort and the resources into doing that or to programs, for example. There's a trade-off there.

We would not have the capacity currently to audit it. We do not in fact now have the capacity to audit all of the departmental financial statements, and we're waiting to see, when the plan comes along, what it will entail. It will certainly require more resources on our part to be able to audit the 22 large departments.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Ratansi, and thank you very much, Mrs. Fraser.

Mr. Poilievre, you have five minutes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I have two questions. You've largely addressed them in your presentation.

The first relates to the fact that crown corporations and others are considered part of the finances of the nation. When I was reading through the public accounts today, I was struck by that, because I know for most holding companies, for example, that own holdings in other companies that are separate corporate entities, the parent company does not consider the income of the companies they hold as part of its income. It only considers the disbursements it receives from the subsidiary as being income.

So I'm curious as to why it is done that way.

[Sheila Fraser]

Mr. Chair, if you're talking about the financial statements strictly of the holding company, it's correct that they will only record the dividends or whatever received. But most corporations will produce what they call consolidated financial statements, and they will include all of the corporations they own or in which they have interest. That is very similar to what the Government of Canada is doing.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay.

Second, I'm just wondering where in the Public Accounts of Canada we can find evidence of repayment by the Liberal Party of the $1 million-plus it promised it would repay in the aftermath of the sponsorship scandal.

[Bill Matthews]

Mr. Williams actually referred to that part earlier, when he was looking at the losses related to the sponsorship scandal. I can certainly get back to you with details on how much has been received in terms of repayments. It would come through the Receiver General via Public Works and Government Services Canada.

Mr. Williams was focused on the right section, but I will certainly endeavour to get you details on that.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Would there be any way to get a documented public record of that?

[Bill Matthews]

I can certainly look into it.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

But the payment has been received?

[Bill Matthews]

To the best of my knowledge, but I will verify that.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

We would appreciate that.

I'd like to invite Mr. Williams to pose any additional questions.

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

Thank you, Mr. Poilievre, and Mr. Chairman.

I'll go right back to the sponsorship contracts on page 2.18.

You indicated, or led me to believe, Mr. Matthews, that this was a loss in a previous year, that now the money is being recovered or expected to be recovered. But this is under the heading, “Losses of public money due to an offence, illegal act or accident--occurrence or discovery in 2005-2006”. That's this fiscal year, the one we're just talking about, not back a couple of years ago, when we were dealing with the sponsorship scandal before the public accounts, as brought to our attention by the Auditor General. So it seems that you're still uncovering more money that has been lost or illegally misappropriated or stolen--whatever word you may want to use.

Am I correct in saying that?

[Bill Matthews]

There are various proceedings under way to try to recover that money--

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

No, I'm not talking about recovery, I'm talking about identifying more and more losses.

[Bill Matthews]

I'll have to either speak directly with Public Works and Government Services Canada or invite them to this committee, because I cannot speak to that.

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

Can you get a report to us, Mr. Chair?

I'll say again, the heading is “Losses of public money due to an offence, illegal act or accident--occurrence or discovery in 2005-2006”; $1.2 million under the sponsorship contracts. Then it says, in a footnote, that “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.”

I would like to have a detailed answer to those two particular questions. How much loss is yet to be expected to be uncovered, and what's the scoop regarding that?

[The Chair, Liberal, Shawn Murphy]

Are the witnesses clear on what the examiner wants?