Public Accounts Committee on March 3rd, 2009

[The Chair, Liberal, Shawn Murphy]

I just have a quick question for Dr. Buhr, again on this issue of trusts.

As you know, Dr. Buhr, these are very controversial. I'm not speaking here for the committee, but in my opinion, they're a total breakdown in the concept of accountability, in that the executive of the government is accountable for their spending to Parliament and, through Parliament, to the Canadian people. We all know the reason these trusts are set up. They have very good purposes. They're worthwhile and in the public interest.

The one I'm going to give you as an example is the climate change and ecoTrust fund of $1.51 billion. It was a good exercise, there was a lot of self-congratulation, and the expense was recorded the day the trust was set up, whatever the year-end was. All Canadians felt that the money would be spent on climate change and environmental issues and that Canadians generally would benefit. We all know that is not the case. Nothing close to that is the case.

The provinces, according to the agreement, can do whatever they want with this money. Some took the money into general revenue. Some spent the money on environmental issues. Some spent the money on environmental issues, but it was a bait and switch; it wasn't incremental. But we don't know that, and there was no consistency, in that all 10 provinces handled it differently. One did it one way and one did it the other, so there's absolutely no consistency to the fund at all.

But in the meantime, Dr. Buhr, it's my opinion that the public was fooled in this whole charade that went on. There are 650 people working at the Office of the Auditor General. Not one of them could confirm that one dollar was spent on environmental issues.

Then, to add insult to injury, the announcement was made that this money would reduce greenhouse gas emissions by some amount. Of course, we know that the Commissioner of the Environment and Sustainable Development said that's just the fabric of somebody's imagination. There is no way at all that anyone could confirm, or deny, or give any indication of what reduction in greenhouse gas emissions occurred.

The point I'm making is that it's a breakdown in any concept or notion of accountability. These are not the concepts that I view as accounting. We look for consistency and transparency, but we also look for the statements that are tabled—in this case the $1.519 billion for environmental purposes—to reflect the true underlying economic nature of the transactions. In this case, it's my premise that it doesn't. It doesn't come anywhere near that.

I ask everyone why this is done this way. Why this charade? They all come back to the same answer: that is the standard published by the Public Sector Accounting Board. I know that your organization, not you personally, has wrestled with this since 2002, I believe. There's obviously a dispute within the board. Obviously you're getting pushback--from the provinces maybe, I don't know--but it seems to me that a lot of members of your board are very uncomfortable with this, as you should be. It's been going on since 2002. You've published a number of different standards.

Can you give this committee some indication of where it's heading? I don't think you're ever going to get unanimous consent from all your board members. At what time do you move on and publish a standard that I think reflects proper accounting and that I would expect as a parliamentarian and as a Canadian?

[Nola Buhr]

Thank you. I think I counted about four questions there.

Let me start with the accountability versus the accounting issue. Those are two different things. Accountability is a relationship set up by, in this case, someone providing funds and someone using funds. How that relationship is understood, either formally through terms and conditions or informally through practice, history, and agreement, will determine how the recipient views the transaction and how they treat the transaction. Then accounting comes in and says, how do we account for that relationship? What has to be established first of all is what that relationship is. What was the expectation for what was to be done with that money? How is that money handled?

Part of what we're grappling with when we're dealing with transfers is that the accountability is not clear. I'm very sympathetic, speaking as a citizen, that the flexibility is needed, yet by eliminating the terms and conditions, you make it very open as to what is done with the money and how the money is reported, which leads me to my second point.

This was alluded to earlier. Rob Wright spoke to segmenting dollars and keeping them separate. We don't do that. Financial reporting is done on a summary basis. We aggregate information. It is not possible in summary financial statements to trace a dollar from the federal government and see how it was spent. That is where you need things like performance reporting, which will measure things like new homes created or greenhouse gas emissions reduced. Those are different kinds of reporting mechanisms that are needed.

As I said, we don't get into policy. I can understand that there's a concern about the accounting, but the accounting has to reflect the substance of what has taken place.

As far as where we go with the government transfers, we will not wait for unanimity, but we must come to some level of consensus. There is a standard currently existing. We are striving to provide a standard that is an improvement on what we have, but we have to have some level of consensus because that is how we operate.

[The Chair, Liberal, Shawn Murphy]

Okay then, we'll move on.

Mrs. Crombie, you have four minutes.

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

Four minutes will go quickly. Thank you.

I have a question for the Auditor General first, if I may.

With reference to Mr. Kramp's statement, I think I'll follow up. The government would like Parliament to release a $3 billion stimulus package with no strings attached, and no accountability, and no transparency, ahead of the budget passing. In your opinion, is this legal and advisable, and what would you suggest?

[Sheila Fraser]

I'm sorry, Chair, but I'm not in a position to be able to comment on that. I haven't seen all of the documentation. What I have understood from conversations is that it really is about supply, so in order to have the authority to spend the money at April 1 rather than having to wait for supplementary estimates, which are sometime, I believe, in June or July, it's simply moving up an authority to spend. Beyond that, I can't comment.

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

Thank you, Ma'am.

To the Treasury Board Secretariat, I just want to go back again to the use of conditional versus unconditional transfers. Obviously the provincial and territorial governments would all prefer the unconditional transfers to use the funds according to their own priorities and, as you mentioned earlier, to their own needs. You demonstrated that they believe they know best what their needs are--and they're not obliged to report how they spent the transferred moneys or what effect, if any, these had.

Why would the federal government not want the accountability and transparency that the conditional transfers would require? Do you feel there is a trend towards negotiating more unconditional or conditional transfers?

[Rob Wright]

That's a really good question. It's not quite a four-minute answer, though, I'm afraid. But that is the question.

There are some areas in which the government would be very comfortable providing a transfer with some pre-agreement as to what's going to happen with it; it's a shared priority. But there are other areas where, indeed, conditionality is vitally important. In this current stimulus package there's a really important economic focus on incrementality. So I think we do want to track what provinces are doing in those areas. We want to ask, so that there is an economic impact, if they are accelerating their effort to get the money out now, when it's needed, as we are. Second, is it incurring incremental impact? In those cases, it's vital to have conditionality in the tracking.

In other areas, if it's a common priority or an urgent issue, a trust can be a perfectly natural use of resources, and there have been good results with this resourcing as well. But again, you have to be comfortable. The government, when it makes a policy choice, as the Auditor General and our colleagues at the accounting board say, needs to make an informed choice. I can assure you that they do make informed choices, and they're careful about choosing subjects.

I would say, as well, as the example from Rod Monette.... I haven't seen it in detail, but I do know that provinces are stepping up their game in terms of being accountable to their legislatures on action, including on the ecoTrust. Because there is a strong body of public interest in watching those issues and there are very active folks who'll make sure they're held to account in that format.

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

Do I have time for just one more quick question?

[The Chair, Liberal, Shawn Murphy]

You have 30 seconds.

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

Again, this is for the Department of Finance and the Treasury Board Secretariat.

On trust and trustees, how are trustees selected? And is there an open bidding process? Is there a fee involved? Does interest accrue, and who collects the interest? And does the Department of Finance monitor whether provinces draw down the funds in accordance with the trust agreements?

[Rob Wright]

We do that. I'll let Barbara answer.

[Barbara Anderson, Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

I can answer that.

Yes, we do have an open process for the trustee. I don't believe that interest is ever accrued. Yes? Krista is the expert over there. I should let her answer that.

We have an open process. We sign a contract with the trustees. Those trust agreements are all put in place before the end of March so as to meet the accounting prerogative. After that, the Department of Finance pays administration costs. But the trustee does not report on the actual speed of the provinces drawing down. The provinces report that to their own legislatures.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Crombie.

Thank you, Mr. Wright.

[Krista Campbell, Acting Director General, Sectoral Analysis, Privy Council Office]

If I could clarify, the interest does accrue in the accounts. It belongs to the provinces that have left money in the accounts. So it is dealt with entirely in the trust indentures, like any funds. The provinces are able to direct how they want that interest to flow if they leave it in longer or if they take the money out earlier.

[The Chair, Liberal, Shawn Murphy]

Mr. Saxton, you have four minutes.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair, and thank you to all of you for coming here today.

This issue is a very important one because, as we've heard, a lot of money, and a big portion of the budget, is transferred to provinces for very worthwhile programs.

I wanted, first of all, to thank you for the study and to also mention that a new policy on transfer payments came into effect on October 1. This study was completed on May 31. So I want to ask if this study took into account the new policy. I suppose that's a question for the Comptroller General.

[Rod Monette]

Thank you very much, Mr. Saxton, for that question.

Yes, the new policy does look at the issue of transfers to other levels of government, including the provinces. The old policy didn't really address that specifically; the new one does. As you mentioned, Mr. Saxton, that is in force as of October 2008, and it does say that there are some specifics with regard to getting commitments on how the money is flowing, what it's to be used for, how it's to be reported on, and so forth.

[Andrew Saxton, Conservative, North Vancouver, BC]

Could you give some specifics as to the highlights of the policy? Also, does it refer to trusts specifically?

[Rod Monette]

In terms of it referring specifically to trusts, I know that it covers trusts. Absolutely.

In terms of the policy, it basically, for example, talks about making sure there's a commitment to spend the funds for the purposes that have been identified and to identify the outcomes. It does allow the provinces to use their own accountability mechanisms, such as their public accounts, for example, and their own legislatures, to provide accountability. But it does clearly say that information should be provided in those forums. It looks at monitoring and reporting on a timely basis, and it also says that there should be ways to ensure that the results of that funding are given some profile and are identified.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

On page 11, the AG's report mentions that this policy came about because of an independent panel established in 2006. Can you give us some background on this panel, please?

[Rod Monette]

Perhaps Mr. Morgan could address that.

[John Morgan, Assistant Comptroller General, Financial Management and Analysis Sector, Treasury Board Secretariat]

The panel was the result of a commitment made in the federal accountability action plan. The government undertook a review of the administration of grants and contributions in order to improve the overall efficiency and effectiveness, so that study took place. It involved consultations with recipient groups, including other orders of government. The report was issued and we took its recommendations into account in developing our new policy, as well as the directive on transfer payments.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Saxton.

Monsieur Desnoyers.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

I would like to ask one question of Ms. Fraser and one of Mr. Monette.

Ms. Fraser, in chapter 1 of your report, under 1.15 you list the conditions provinces have to meet in order to receive the Canada Health Transfer, in other words public administration, comprehensiveness, universality, portability and accessibility. You also say that Health Canada is responsible for monitoring compliance with these conditions. Are the conditions met? It would seem that throughout Canada, in all the provinces, there is a significant push to privatization in the health care sector, often calling accessibility into question. In the case of private institutions, accessibility is no longer the same. Has that been assessed or audited? If not, could you tell us how we could verify if this is truly the case?

I'll ask Mr. Monette my second question straightaway. When it comes to federal transfers to international organizations, like for instance the World Bank, do these organizations which receive funding have to comply with the same criteria, agreements or conditions for accountability as the provinces or territories?