Public Accounts Committee on Nov. 20th, 2007

[Paul Rochon]

Sure, I can give you a quick answer to that. The government announced that it would achieve that target three years ahead of when it was initially announced, so in 2011-12.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Hubbard.

Thank you, witnesses.

Monsieur Laforest, sept minutes, s'il vous plaît.

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

My question is for Mr. Monette. In the 2005-2006 report that was presented to committee members, in the section dealing with the Royal Canadian Mounted Police, Volume 2, you have recorded the amount of the total expenditures and subtracted from that revenues received from the provinces where the RCMP provide services. In 2006-2007, in the book, you have added the revenues and expenditures together, and the rather substantial difference is $2,797,229, 823.

Is that a mistake, or a way of inflating the figures for the Royal Canadian Mounted Police? It is a rather sizeable difference. Under the same heading, different accounting operations are used.

[Rodney Monette]

Thank you, Mr. Laforest. Perhaps I could ask one of my colleagues to answer the question.

[John Morgan]

I'll try, without having the references here exactly, to see what would happen in 2005-06. Typically, the RCMP is able to net against its expenditures, revenues received for certain activities, primarily those services it provides to the provinces. So it's able to net those revenues against its expenditures, and that's permitted under the vote for the RCMP.

With respect to the presentation in 2006-07, we're just trying to locate that reference. We don't have it quite yet.

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

In 2006-2007, the reference is Volume 2, chapter 22-14. The reference for 2005-2006 is 22-11. I find it surprising to see the revenues added to the expenditures. Chapter 22-14 in the 2006-2007 report is very clear: there is a subtotal of $3.259 billion. The following figure represents the revenues netted against expenditures. The two are added together.

[Rodney Monette]

Mr. Chairman and Mr. Laforest, that is a very good question. We cannot give you an answer. Could we provide you with an answer later?

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

Of course, we will wait for the answer, so that you can look into it, but I think it is very important because in the same column, the difference from one year to the next is $2.797 billion. I expect you will provide me with the answer.

I have another question on the table showing the operating expenditures. The expenditures for the Department of Indian and Northern Affairs rose from $792 million in 2005-2006 to $993 million in 2006-2007. Over the same period of time, expenditures at Human Resources and Social Development increased from $934 million to $3.89 billion, while at the Solicitor General, they went from $5.54 billion to $8 billion. Those variances are rather sizeable.

I would like you to give me a more detailed explanation on that.

[Rodney Monette]

Mr. Chairman and Mr. Laforest, that is a very good question, and you are right to ask for a sound explanation of these variances. I don't imagine we have much by way of explanation for each variance for each department, but it would be happy to provide you with a good explanation later.

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

Don't you have a general explanation?

[The Chair, Liberal, Shawn Murphy]

Excuse me just for a second.

I take it we're not getting an explanation to the question. Can we get some kind of undertaking that we'll get a very full and complete explanation in writing within, let's say, 10 days? Is that possible?

[Rodney Monette]

Absolutely, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

That will be delivered to the clerk and circulated to all committee members?

Okay, thank you.

Sorry, Mr. Laforest, go ahead.

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

Nonetheless, I would have liked a general explanation. In the case of Human Resources and Social Development, the variance is of the order of $1 billion to $3 billion. To me that appears to be a significant variance. I'm having trouble understanding why you don't have any explanation for me.

[Rodney Monette]

I'm going to give you a general explanation. Government of Canada Programs, namely transfers to individuals and transfers to the provinces, have increased by some $14 or $15 million. There are some substantial variances. I would be pleased to provide you with an explanation for each department. There is a huge difference between transfers to individuals and transfers to the provinces. I assume that in the case of Human Resources and Social Development, social programs, more specifically transfers, have increased.

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

Ms. Fraser, you said in your opening remarks that the Canada Revenue Agency's estimates understated tax revenues when compared to actual results, particularly in the area of corporate tax revenues.

Does that mean that estimates for individuals are understated as well?

[Sheila Fraser]

The process of estimating revenue is highly complex and difficult. Canada is one of the rare countries that estimates accounts receivable and revenues linked to the fiscal year, and revenues are not accounted for on a cash basis.

The government takes into account the results of income tax assessments, for example for individuals, up until the start of May and estimates revenues based on those results. It does the same for businesses. It uses the amounts businesses have contributed over the year to estimate revenues for a given year.

When we review the actual results, we identify estimation errors. We have told the government that with more than four years' experience in using these methods, it is time to refine them and to identify the causes of the variances.

The most significant variances are for businesses, as they produce their income tax returns every month, whereas individuals produce them at a given point in time. The estimating method employed must be refined. To obtain a better estimate, the factors that need to be adjusted must be determined. Basically, the amounts are the same from year to year, so revenues for a given year reflect reality fairly closely. At the end of the year, there may be a receivable that has not been accounted for, and that situation is repeated year after year.

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

Can't they predict that anyway?

[Sheila Fraser]

They should predict it, but as with any process for estimations, when you try to estimate some $200 billion in revenues, a small variance in terms of percentage can have a huge impact. They must work on improving the estimating method.

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

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Laforest, and thank you, Ms. Fraser.

Before we go to Mr. Poilievre, at this point in time I want to introduce two distinguished gentlemen who have just joined us, and they're going to be with us.

Mr. Ludovick Utouh, the Auditor and Controller General, the National Audit Office of the United Republic of Tanzania. Also accompanying him, we have Mr. Edwin Rweyemamu, the assistant to the Auditor and Controller General, the National Audit Office of the United Republic of Tanzania.

On behalf of this committee, I want to welcome each of you, and I do hope you enjoy our proceedings.

Mr. Poilievre, go ahead, please, for seven minutes.

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

Thank you for your work.

We have an accumulated deficit of $467.3 billion. What percentage of that is owed to foreign lenders?

[Paul Rochon]

I can answer that.

About 12% of that is owed to foreign lenders, and I distinguish between the amounts of debt that are owed to foreign lenders versus the debt that's actually denominated in foreign currencies. The latter is an even smaller amount. It's in the order of 2% to 3%.

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

Okay.

Secondly, I note that there is a 14% increase in personnel expenses, and this is in table (v), page 2.14. It says in the table--and, by the way, this is volume one--personnel expenses went from, rounding up, $29 billion to, again rounding up, $33 billion in a one-year period. I calculate that as a 14% increase in personnel expenses. How much of that was attributed to wage growth? How much of it was attributed to new hiring? What is the basis for such a large one-year increase?

[Paul Rochon]

I believe the significant difference reflects an actuarial adjustment to pension benefits reflecting legislative changes that were previously made to improve the integration of the CPP and the public sector pension plans. There was a problem with the integration whereby previously, upon attaining the age of 65, public servants actually had their pension benefits reduced. This change was made to correct for that and was one of a number of changes that were made, which included, for example, increasing the share of public sector pensions that employees paid over time to bring it more in line with the historical rate, and going approximately from 30% to where it is now, up to 40%. It was one of a series of changes that were made to better align the public sector pension plans with the reforms that were made to the CPP and that are now taking effect.