Public Accounts Committee on Feb. 5th, 2009

[David Christopherson, NDP, Hamilton Centre, ON]

Which one looks better for the government--not the sitting one, but any government?

[John Wiersema]

I don't think it's a question of which one looks better; it's a question of clarity and communication. The difference arises because the government's investment in its financial assets or its capital assets might change. If the government buys lots of military equipment, it might borrow money to do that. That appears on the balance sheet, and it might result in an increase in debt even though the new government might be in a surplus position. This is why the Auditor General continuously comes back and says it's not technically correct that the surplus automatically pays the debt. It goes to the accumulated deficit, which is an accounting number, which is different from the interest-bearing debt.

[The Chair, Liberal, Shawn Murphy]

Thanks, Mr. Christopherson.

Mr. Young, you have five minutes.

[Terence Young, Conservative, Oakville, ON]

Thank you, Mr. Chair.

Mr. Wiersema, you made a comment that struck me. You said that the public account numbers can be trusted. I think that's a very important statement, because the world is full of numbers that can't be trusted, if you think to Enron, and Worldcom, and more recently Merrill Lynch and a whole bunch of other companies in the United States and in Canada as well. It strikes me as something we should be very proud of, which benefits Canadians in a real way.

If you could, I'd like you to just briefly tell me how these numbers compare in that trust with other nations, for example, with the results in other public accounts in G-7 nations.

[John Wiersema]

I don't have complete information on that, Mr. Chairman. Perhaps Mr. Timmins does. I know there are few other G-7 nations that can claim that they, on their summary financial statements, have received ten consecutive years of an unqualified auditor's report.

The General Accounting Office in the United States, which is roughly the equivalent of the Auditor General's office here in Canada, has not been able to give a clean opinion on the summary financial statements of the government of the United States. I believe a similar situation exists in the U.K. at the summary level. Australia is a different story. They have had some clean opinions. I don't have entirely up-to-date information, but as I said in my opening statement, I think this is something Canada can be proud of, and Canada continues to be a leader among national governments for its summary reporting. So, yes, it is an important statement.

[Terence Young, Conservative, Oakville, ON]

Feel free to pat your team on the back, as well.

[John Wiersema]

It's the work of not just our team but of government officials also.

[Terence Young, Conservative, Oakville, ON]

I'd like to ask Mr. Monette something, if I may. I've watched politics for a long time. I studied political science at York University way back in the seventies. A lot of cabinet ministers who have served in the House of Commons didn't have their ministerial budgets scrutinized and published in the same way in the Public Accounts of Canada. It's a new thing, and it comes from the Federal Accountability Act. I think that's also a very positive measure.

I wanted to ask you about openness and transparency, but also ask you to explain, if you can, what actually governs ministerial budgets.

[Rodney Monette]

Thank you.

The inclusion of the section on the expenses of ministers' offices is a new one. It was a result of the Federal Accountability Act. It's new this year. It does reflect increased accountability and transparency, of course, for those budgets.

Those budgets are established according to policies set by Treasury Board. For example, if you were a minister and you had a regional operation, the policy would determine a budget for that. If you were a minister and you didn't have a regional operation, you might have a slightly lesser budget. There's a whole set of guidelines that establish what's appropriate, what isn't, what the rules are, and what the budgets are. Treasury Board ministers approve that, and if they need to look at that, they open it up and look at it again.

[Terence Young, Conservative, Oakville, ON]

All right, thank you.

Do I have just a little more time, Chair?

[The Chair, Liberal, Shawn Murphy]

You have a minute and a half.

[Terence Young, Conservative, Oakville, ON]

Thank you.

Mr. Monette, I wonder if you can explain to me how I might explain to my constituents, in plain language, the benefits of moving to the accrual basis. I hate to get back to that again, but could you explain in simple language, because it's a complex issue. I'm hoping there's a simple way to explain the benefits to the public and to the taxpayers.

[Rod Monette]

The way I usually try to explain it is by saying that an accrual basis looks at what you use. Economists would use a fancier word--they would say something like “consumption”--but it looks at what you use. For example, if you have $10 and you go out and buy something that's worth $10, whether it's sitting there in cash in front of you or whether you have this book, you still have something of value that's worth $10. Accrual basically means let's not worry too much about whether you have the cash or the book; let's worry about what you're using. How much of the wealth that belongs to the taxpayer are we using to run the government? That would be the way I would explain it.

[Terence Young, Conservative, Oakville, ON]

So it would be a benefit in being fiscally responsible?

[Rod Monette]

Yes, that's correct.

[Terence Young, Conservative, Oakville, ON]

Okay, great, thank you.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Mrs. Crombie, five minutes.

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

Thank you, Chairman.

I want to look again at projected versus actual, and let's look at the surplus. The surplus was projected at $3.3 billion, and it came in at $9.6 billion, which is $6.3 billion higher than projected, and that's obviously a good thing. And as you know, the previous prime minister, Paul Martin, had instituted a practice of putting down money for a rainy day, of building a contingency fund using some moneys to build the contingency fund and other moneys to pay down debt.

My question is this. Since we have a much larger—triple that expected—surplus in 2007 and 2008, was there money set aside for a contingency fund to prevent the kinds of economic circumstances we're going into and facing today?

[Rod Monette]

Mrs. Crombie, I think I know the answer, but I don't want to say something and be wrong. I know there always used to be this prudence reserve that was set aside. Unless Cheryl can talk right off the top with an answer to that, I would want to get the finance department to confirm that.

[The Chair, Liberal, Shawn Murphy]

Ms. McMullin, I'll ask you to respond to that with perhaps a letter and then file the letter with the clerk of the committee, and that will be circulated to all members.

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

Thank you. I'm sorry to get tabled responses.

I'm also interested in the composition of our revenues. As you commented when you were reviewing it in the package, they've maintained pretty constant at 46.6%—just under 50%—for personal income taxes and corporate pretty steady at 16.8%—just under 17%—of the total. I wonder how that compares to other nations in the G-8. Is that fairly consistent, and have there been any significant changes over the years?

[Rod Monette]

I'm going a little bit off the top of my head right now, thinking about other information I've seen from other countries, but I believe that other countries are kind of in the ball park. I would want to just have my folks check to make sure I haven't said anything that's wrong here, but I think that having the majority come from personal taxes in today's world—and Mr. Christopherson made the point that it was different some time ago—I think that is the case. You would find in many modern countries it's the personal side that does have a larger portion than the corporate side. But I don't have those kinds of figures with me at the moment.

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

Okay, so we don't know how we compare to the others in the G-8.

Do I have time for a final quick one?

[The Chair, Liberal, Shawn Murphy]

Two minutes.

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

Lots of time.

How about the lag in the presentation of the statements as our fiscal year ends at the end of March but the accounts aren't tabled until September? The Auditor General has noted that the usefulness of the statements is diminished when they can't be made public for six months after year-end. What is the government doing to speed up the completion of the consolidated financial statements?