Public Accounts Committee on Nov. 23rd, 2009

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

Mr. Rochon, I wonder if you might help me understand this chart you've given me, based on our financial results and interest-bearing debt. It seems to me that the unmatured debt here in 2008-09 is $514 billion versus $390.7 billion in 2007-08, a change of $123.3 billion or 31.6%. What does that mean specifically?

[Paul Rochon]

The unmatured debt has gone up by $120 billion—and that is recorded in the government's liabilities—but it is offset by a roughly commensurate increase in assets. The reason is that the bulk of the increase in that unmatured debt is due to, one, the purchase of mortgage-backed securities by the CMHC from the chartered banks in order to provide liquidity to our banks, and two, a fairly large increase in liquidity for the Bank of Canada that was funded through an increase in unmatured debt. This increase in the debt was used to purchase assets, financial assets in this case, so that the net debt, if you will, or the accumulated deficit, shows a much smaller amount, a deficit of $5.8 billion.

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

Farther down that chart, you seem to be reflecting a total pension and other liabilities increase of $5 billion. Is this a concern to you? That's almost a 3% increase.

[Paul Rochon]

I'm sorry?

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

I'm looking at total pension and other liabilities—$5 billion.

[Paul Rochon]

Is this the employee vets? Is that what we're talking about?

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

I'm referring to pension and other liabilities.

[Paul Rochon]

Right, this is what I might describe as the natural increase in liabilities associated with public sector pensions and veterans, the so-called “current service costs” of those plans.

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

Okay.

[Paul Rochon]

Each year the government records in its accounts an increase to reflect the cost, effectively, of pensions of the people who are employed by the government.

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

In volume III, you're showing $9.4 billion spent on professional and special services in 2008-09. I recall an earlier time, in 2004-05, when the spending was only $6.5 billion. So here we have an almost $3 billion increase. That's 42% more. Where do these increases come from? Are you concerned about the amount being spent on professional and special services?

[James Ralston]

Although the amount appears as a single line item in the consolidated financial statements, the expenditures are in fact made across the government in many departments and in respect of many different programs. In each case, it would be the managers of those programs who would need to decide what was an appropriate—

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

Right, but the increases should be concerning.

I note, too, that $586 million was spent on consultants. CRA spent $155 million on consultants; Environment, $31 million; Foreign Affairs, $20 million; Health, $42 million; HRSDC, $82 million. It goes on and on. Public Works spent $178 million on management services. Are these not large numbers spent on consultants, and do they not concern you?

[James Ralston]

They're large numbers, but there's not any particular reason to be concerned with that business input as opposed to any other. You would have to look at the results obtained from those expenditures. They may very well have been the best way to get value for money. It would have been a programming decision. You can't form useful conclusions based solely on the nature of the input.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Crombie.

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Mr. Chair.

It should maybe come as no surprise, but I actually have a question on accrual accounting I'd like to ask both Madam Fraser and our Comptroller General.

Before I get to that question, though, I have another question for our Auditor General with regard to the integrated relocation contract. This is an issue that goes right back to when the chair and Mr. Christopherson and myself originally sat. I can remember A.E. LePage, Envoy, the whole thing. We spent a lot of time on it. It subsequently went to the government operations committee. The same process went on there. It is now, of course, before the courts. Thankfully, the recommendations came from our committees suggesting that there had been potentially some improprieties, so it would be looked at, and it is now in the course of legal action.

What concerns me now, of course, is that we now have a new contract that was established under the fairness monitor and the recommendations of the Auditor General and of the committee. Of course, in this only one company made a bid. The one company that did not make a bid but is of course involved in the action right now is Envoy.

There were no complaints about the process, due obviously to the inclusion of the fairness monitor. The one company that put the bid in, Brookfield Relocation, won the bid. Obviously, they were under the impression that they had healthy competition because the bid came in at 15% less than what had happened before. So we're happy with that. But now that the contract has been awarded, we have some difficulty because we have a lobbyist on the Hill--and I'm not shy in stating that it's Mr. Boudria, who is acting on behalf of Envoy. He's been lobbying--opposition members, government members, whomever, and that's his job, that's his duty--to ask that the contract be extended on the original one. Now they have a civil action going against the original company and yet he wants to extend that contract. Of course, we have a circumstance here that if an award is made to that contract and then subsequently that contract is renewed without going to tender, there could be civil damages extended to extending the contract without giving advice.

Madam Auditor General, this really disturbs me, because Mr. Boudria's client would get even more compensation, of course, actually as a result of the legal action, if they're allowed to extend the contract rather than accepting the process that we have now under the consideration of the fairness monitor, a new contract that's already been allotted. I'm wondering, do you find this is something that should consume the committee again? Quite frankly, we now have a motion before this committee on behalf of the opposition--and honestly, I'm a little bit surprised at the NDP and Bloc presenting this motion before committee--to go back in now and suggest that this tender should not be valid, should potentially be opened up and go back to the original.

Do you really believe that lobbyists, such as Don Boudria and so on, who really are trying to derail the fair and open process...? Is that something we should be looking into again?

[Sheila Fraser]

Mr. Chair, all I'm aware of in this is that the committee passed a motion asking us to review the relocation contracts and processes from 1999 to date. I have replied to the committee that we will make some preliminary inquiries. I don't know if you've received the letter, but we will make some preliminary inquiries and we will inform the committee within the next couple of weeks as to whether we will undertake an audit or not.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, because the timing is obviously very, very important to this. It's time sensitive in that if we have a contract that will be allowed to be extended rather than allocated, and then there's a civil judgment and that civil judgment then goes through to the extension, in essence, we as a committee have been aiding and abetting the remuneration of a civil action. I have some deep concerns with that.

Anyway, going back to the accrual accounting situation, if I may, we've all been a proponent--

[The Chair, Liberal, Shawn Murphy]

You only have seven seconds left.

We'll allow you the question. Go ahead.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Very quickly, we've all been a proponent, and this worked relatively well. Yet there appeared to be some difficulties with the application, particularly from the elected representatives in Australia.

Could the Comptroller General, and possibly even the Auditor General, comment on some of the difficulties? Can we expect the same here?

[James Ralston]

A number of countries have had experience with it. We've read with interest a report put out by the OECD, and it indicated there were mixed reviews, you might say, specifically with the use of accrual appropriations.

I recently received a report from the CICA in Canada, and it cited that same OECD report. Basically it gives a bit of “on the one hand, on the other hand”. On the one hand, there are many purported benefits, but on the other hand, the experience has been that in some cases the results have not necessarily matched expectations.

The conclusion seems to be that any government that wants to go down that road should be very thoughtful and consider the particular circumstances and the manner in which implementation is made. I think the OECD, for example, talks about instances where only certain types of expenditure might be subject to accrual appropriations and modified cash might be used in other situations.

For our part, my colleagues in the Treasury Board Secretariat have been looking at a pilot as a precursor to perhaps an eventual move towards accrual appropriations. It will first look at a kind of restating of the cash basis appropriations we now have to produce a pro forma presentation that might facilitate at least one element of the benefits, which is greater comparability down the line when the financial results become available.

We would like to see whether that in fact helps. When accrual basis financial statements can be compared to these pro forma appropriations in the future, maybe that will address some of the elected members' concerns.

It is a matter we're taking measures on, studying, and we are attentive to the experience of other countries, but we have yet to conclude.

[The Chair, Liberal, Shawn Murphy]

I believe the Auditor General has a comment.

[Sheila Fraser]

Chair, I would add that I am aware that accrual appropriations may not have the same enthusiasm in Australia that they once had. I would remind members—certainly members who were on the committee that did the study—that there are many provinces in Canada that have been using it now for several years. There was testimony given that they felt it was actually very beneficial. I think it would be important to have a broader view than to simply look at the Australia experience.

[The Chair, Liberal, Shawn Murphy]

On a point of privilege, Mr. Christopherson.

[David Christopherson, NDP, Hamilton Centre, ON]

To be very clear, Mr. Kramp left the impression, and all but said, that we were aiding and abetting, and that he was surprised.