Public Accounts Committee on Feb. 5th, 2009

[Rod Monette]

Thank you, Mr. Christopherson.

I think they need some investment to.... They have different systems, and I'm probably not using very good technical language, but they're not talking with each other. So they need to make these systems talk with each other, and to do that costs a little bit of money. Actually, in this last budget we have received some money that will help them fix that. We call it systems interfacing, and I think that will help fix that problem.

[David Christopherson, NDP, Hamilton Centre, ON]

So we should get a different report next year in this area?

[Rod Monette]

I would say maybe two years. It will probably take two years.

[David Christopherson, NDP, Hamilton Centre, ON]

Chair, if I could ask, I wouldn't mind it being noted that from the beginning this has not been correct, and we're hearing there may be some action, but I'd like to see some reflection of work in progress, something so that we don't lose this. Two years from now, if that's what I'm hearing, we'd like the accountability piece then.

I'm just worried about an agency that's created and from the day it's created until now—and how long has it been? it's a number of years, correct?—they're still not even doing the accounting right, to the point where our professionals are coming forward and saying to us, hey, we've got problems with this.

[Rod Monette]

The issue of systems not talking actually exists in a lot of organizations and departments.

[David Christopherson, NDP, Hamilton Centre, ON]

I understand that, sir, but you don't say that about everybody else.

[Rod Monette]

No, it's because some talk a bit better than others. It's an issue that needs a bit of fix in a lot of different places, if I could put it that way.

Mr. Chair, I did say two years, and I would appreciate the opportunity to go to the Border Services Agency before I commit on their behalf and get them to confirm their plan.

[David Christopherson, NDP, Hamilton Centre, ON]

That's fine, I'll move on.

Do I have time, Chair?

[The Chair, Liberal, Shawn Murphy]

No, you've run out of time, Mr. Christopherson.

Are you going to get back to the committee on that issue, Mr. Monette? Is that the deal?

[Rod Monette]

Yes, we will.

[The Chair, Liberal, Shawn Murphy]

Okay.

Do you have a brief comment on that, Mr. Wiersema?

[John Wiersema]

Very briefly, Mr. Chairman, as is noted on page 2.37, I think, in part, this is a result of the move toward accrual accounting--when the government adopted accrual accounting. Accrual accounting for tax revenue poses some particular challenges. Some of the sub-systems we've referred to here were never designed to work in a world of accrual accounting. This is what's causing the differences between the general ledger, which is working on an accrual accounting basis, and the sub-system, which was never designed to do that. That's causing some of the difficulty here.

[David Christopherson, NDP, Hamilton Centre, ON]

Certainly it's big enough that the Auditor General felt it necessary to say, and I quote again, “However, unexplained differences remain at year-end”. For us lay people, that's a red flag.

[The Chair, Liberal, Shawn Murphy]

Mr. Timmins.

[Douglas Timmins]

Mr. Chairman, I would like to clarify two things.

Yes, that's correct, but in the end we gave an unqualified opinion, so we don't believe it's a material difference. That's number one. Number two, we keep this table in our observations, so we will continue to report until this is resolved.

[David Christopherson, NDP, Hamilton Centre, ON]

That is the point. At some point this has to be fixed, but it doesn't look right now like it's being taken seriously enough to be fixed.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson.

Before we go to the second round, there's one issue on which I want to get the opinions of Mr. Monette and perhaps Mr. Morgan and Mr. Matthews too.

This morning we had the report of the Auditor General. I'm sure you're aware of the government trusts, the $37 billion that was sent out in the last four or five years. As it's told to Parliament, it's sent to the provinces on the auspices that it's being spent on certain very specific purposes.

An example is the $1.5 billion clean air and climate change trust fund. As you people know, when it reaches the provinces there's absolutely no accountability. They don't have to spend it in that manner, and in some cases--probably in most cases--they don't. It leaves Ottawa as an apple, and it arrives in the province as an orange. There's no consistency in the ten provinces.

As a member of Parliament, I find that extremely troubling. I think Parliament is being misled, and the Canadian public is being seriously misled as to what's going on. It's contrary to the principles of accountability. I think it's also contrary to the fundamental principles of accountancy. There's no consistency. The statements do not fairly reflect the underlying economic nature of the transactions that have occurred.

I know the reason is that these are the Public Sector Accounting Board's standards we're following. But as a member of Parliament, I have a real problem with these standards. I think this body is controlled by the provincial senior financial officers.

Do any of you, Mr. Monette, Mr. Morgan, or Mr. Matthews, have any problem with these standards? Do you share the concerns that I have?

[Rod Monette]

Thank you for the comment. You made the comment to us last year as well. We noted that. In fact we have done some work on it, because we know it is a concern to you and this committee.

We've been speaking with the provincial comptrollers about what they're doing to make sure things are being done consistently from province to province, and also about visibility, so that when something is transferred from the federal government to a province, the visibility will be clear.

We've started these discussions. You mentioned a particular example last year. In fact, Bill has actually done some work in particular on that one to find out the visibility and so forth.

I believe these transfers should have visibility in the provinces. I think the provincial comptrollers and auditors can make sure it's clear that the money was received for a certain purpose and what's happened to it.

[The Chair, Liberal, Shawn Murphy]

The point I'm making is that the standards are the problem. The provincial governments are allowed to take this money into general revenue and spend it in whatever way they want. That's what they're doing. We know that. The public is being misled to a certain amount because of this, and the reason is because of the standards published by the Public Sector Accounting Board of Canada, which I have a real problem with.

Do you share my concerns?

[John Morgan]

I could comment, Mr. Chair, on a couple of fronts, one being the accounting standard of the Public Sector Accounting Board for government transfers. That standard has been under review for three or four years now, to arrive at a general view of what the appropriate accounting treatment is for revenue recognition or expense recognition. That work is under way, but it hasn't been completed yet.

With respect to the trust arrangements, I do know that prior to any money being transferred to a province, that province must agree to spend the money for the intended purpose, and also to report to their own constituents on how it is being used.

So we're relying on the regime within each province, and the auditors general of other provinces as well, to review those transactions and to report to their constituents. We have done some work to look at the financial statements of provincial governments, in which they disclose the balance of the trust that has not been used and how much of it has been taken into revenues. So there is some disclosure on that matter.

A final point to note is that we've just issued a new policy on transfer payments for the Government of Canada, which outlines the general directives governing all transfers, whether they are transfers to not-for-profit recipients or to provinces. And there is a separate section on provinces, which gets at the accountability requirement to get information or to be held accountable for the use of those funds. So we believe that we have raised the bar in that area.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Ms. Crombie, for five minutes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thank you.

I thank the members of the Auditor General's office and the Treasury Board Secretariat. It's nice to meet you all for the first time.

In fact, I was newly elected to the House of Commons this past October and it's my second committee meeting. I'm very impressed by the proceedings, and I thank my committee members for their indulgence. You've already had a very long day.

I just want to qualify that I have an MBA, but I am not an accountant, so I need some indulgence there too.

I want to better understand how the financial reporting works. I just bring your attention to page 1.3 of volume 1 of the public accounts, to the financial highlights there.

It just seems to me that the government is understating their projected revenues. Of course, in my riding of Mississauga—Streetsville, we would be concerned about that for program funding. For instance, you see that between the budgeted and the actual revenues for 2007-2008, there seems to be a $6.5 billion gap. Does that mean there could have been an additional $6.5 billion that could have been invested in things like social programs for the vulnerable, or infrastructure for cities—my city, in particular, Mississauga, has great infrastructure funding needs, and a large deficit—or for the Public Health Agency of Canada, or affordable housing and transportation?

So what does that gap represent?

[John Wiersema]

Perhaps I'll start, Mr. Chairman, and the two gentlemen may add to it.

That number in the budget column is the government's estimate when it tabled its budget in the House of Commons. As I'm sure you can appreciate, trying to estimate the future revenues of the Government of Canada, the amount of tax revenue it is going to collect, is a very, very difficult challenge. It is not money that's gone missing or shouldn't be there; it was their estimate. When the Minister of Finance tabled the budget, he said he was estimating or budgeting for this amount of revenue. The actual amount of revenue came in $6 billion higher than that, but it is a difference between the budget, or the estimate or forecast, if you will, and the actual results.

Mr. Chairman, very briefly on the Public Sector Accounting Board, if I may just make a quick comment there, you indicated that you were concerned that the board may not be independent and that provincial comptrollers control that board. I would like to assure you that the CICA goes to great lengths to assure itself of the independence of those standard-setting boards; and I, personally, am quite satisfied that the board is setting standards independently of preparers, of comptrollers, of auditors. It is an independent standard-setting board. It consults broadly. It seeks opinions and advice, but it sets those standards independently. So I want to give you that assurance, if I may.

Perhaps the Comptroller General wishes to add something on the budgeted versus actual outcomes.

[Rod Monette]

Thank you very much, Ms. Crombie, for the question.

When revenues are being forecast, there are really two variables or lags that are taken into consideration. One of them, of course, would be the economy and predicting what's happening with the economy. The second part is that once the year is up, for organizations or individuals, particularly corporations, there is often a lag before they get their actual tax returns in. So there's a double variable, one with the economy, and another when the system catches up with it, if I could put it that way. So this does make it a challenge to make those predictions.

It is a lot of money; it is billions of dollars. On a percentage basis, though, it's a couple of percent—and I don't mean to diminish it.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

No, $6.5 billion is a lot of money. That is a big gap.

Thank you.

I have about ten questions, and I'll try to get through some of them here.