Public Accounts Committee on March 3rd, 2009

[Rob Wright]

Is it 2013 when we review the model?

[Yasmin Ratansi, Liberal, Don Valley East, ON]

So my question follows. You probably have been doing it on a five- or seven-year cycle, and I think the province or the federal government--everyone tries to ensure that money is used.... No one is trying to say that money should not be used properly; we all want to do that. However, how do we make the mechanism better? The Auditor General says the government officials they interviewed opted for a conditional transfer to ensure the recipients use the fund for specific purposes. Yet we get unconditional and we go into sensitive negotiations with the provinces. I'm not saying provinces should not have it. I came from the provincial government; they should get the money.

Doing a review of these transfer payments, and wondering which method is a good method, what are some of the parameters you use? How do we ensure that what we sent the money for...? For example, the Canada-Ontario Infrastructure Works program was $25 billion, yet Toronto complains that the roads are terrible, that infrastructure is broken, and a lot of cities do it. How do we collectively work together to ensure that the mode we employ is the right mode?

[Rob Wright]

It's a very important question, and I think what we have to do as a country is take stock of where we are every time this is reviewed.

A very important coalition of programming was expiring or desperately required reform in 2006-07. The process that led up to the 2007 budget when the government announced the long-term enhanced funding for this major set of transfer priorities was an informed choice.

Looking at the decisions around 2012-13, when these programs expire, I think the government of the day will want to start a very serious and important series of public consultations to get people's views all around, not just provincial governments but stakeholders who feel strongly about whether there should be conditionality or no conditionality on health transfer outcomes, higher education outcomes, social policy outcomes and infrastructure, other programming, labour markets, and trusts. You could talk about that whole range in terms of a broad review of fiscal arrangements. One will be required before you do the 2012-13.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Yes, but I've asked you a question.

[The Chair, Liberal, Shawn Murphy]

I just have one brief question, Mr. Wright.

You're using flowery language for these trusts, but again, I think it's a breakdown in accountability. You say there are no conditions put on by Parliament, so there's no requirement that all, some, or any of the money has to be spent. If that's the case, why are the announcements made that this is the way the money is going to be spent and that we're going to reduce greenhouse gases by 16 megatonnes? Why is this done? As a member of Parliament, as a Canadian, I just don't think that's the way government should be run. With all due respect to what you're saying, I don't think you should be party to this, so can you explain to Canadians why that has taken place under your watch?

[Rob Wright]

I'm actually not prone to flowery language, sir, but I don't think I said that. I think I said there is a continuum of financial relationships the Government of Canada can have with provincial governments, and it has a whole range of those choices to make. And I think we do account in terms of a public statement of intent. It does enhance accountability, and I think the Auditor General, in her own way, has acknowledged that as a useful step forward. But it's not the same accountability framework as in some conditional transfers.

[The Chair, Liberal, Shawn Murphy]

But Mr. Wright, with all due respect, Canadians were told specifically by numerous different announcements and statements and speeches that this money, $1.519 billion, was going to be spent for environmental purposes. The public accounts that were tabled in Parliament show this as an environmental expense, and no one can confirm that any, all, or some of this money was spent for environmental purposes. So why was the announcement made, if you're going to say there are no conditions?

This is the problem I'm having and that I think everyone on this committee is having and the public is having.

[Rob Wright]

I have to say I'm not an expert on the environment, but I would say that for that money to flow, the provincial governments would have to agree in trust that they would use the money for the environment in the ways prescribed in the trust.

[The Chair, Liberal, Shawn Murphy]

They were never asked. They were never asked, Mr. Wright. There are no conditions on this money.

[Rob Wright]

Well, there were no ongoing conditions, but they would have had to agree to use the money for that purpose when they signed the trust. Now, these are partners with the Government of Canada, not just on health care and education and infrastructure but on the environment, and so people have to understand that decision-makers do value that relationship with their provincial counterparts.

[The Chair, Liberal, Shawn Murphy]

Mr. Shipley, four minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you. The time has wrapped up and I have to leave, as you do. I appreciate this.

You just talked, Mr. Wright, about a continuum of financial arrangements that work with the provinces, and the provinces sign a trust, sign an agreement, saying that these moneys coming over to them will be used with the intent and for the purpose for which they were given to them.

The trust funds have a bit of ambiguity in the word. When I hear “trust”, I tend to think that trusts are actually the most reliable, the most honest, the best types of funds to have, rather than transfers that you can put more conditions on if you choose. So I'm wondering, if we were to designate trust funds...we leave a bad perception sometimes, I think, with our constituents not knowing actually what we're talking about.

I know this is a study, and I know it doesn't come with recommendations, but I'm not so sure that I wouldn't like you to actually give us some thoughts and directions about how we can actually improve the accountability. The Accountability Act was mentioned earlier. This government is about trying to improve—not that it was bad—and always working to make things more accountable and more transparent--the purpose of the act. And so again, perhaps I could have, at a later time if that is permissible, some thoughts.

I'm going to go to another one, and then I'll ask you to comment.

Health transfers. At a time when we have an incredible situation in my riding where they're closing hospitals down, we have increased funding locally plus the equalization that is going to the provinces. Help me understand. Should we be looking for some accountability through the equalization payments that go out so that we can actually do some tracking on it? Especially at this time when we're losing our health care system within our province...I'm only talking about Ontario particularly. Our small rural hospitals are being attacked and they are shutting down.

So for moneys that are transferred through the health transfer, I can almost assure if you took those dollars and matched them with the provinces, they don't match.

[Rob Wright]

I would just say that this year we transferred $14.2 billion in equalization to provincial governments that are below average fiscal capacity, including Ontario this coming year. That goes into the provinces' general revenues, without condition, to help maintain a comparable level of public services to what other provinces have. I guess for a resident of Ontario it would be very important to say to the overall government, how effective are you in serving the public interest needs of this province? What's your source of revenue, what's your use of that revenue, and how effective are you in spending it? And equalization spending should be evaluated the same as everything else.

In some provinces, transfers from the federal government can make up 20% or 30% of their actual budget, or 40% I think in some provinces. Manitoba, for example, is what percentage?

[Barbara Anderson]

Up to 40%.

[Rob Wright]

Manitoba is, I believe, close to 40% of the overall budget.

So it's not free money that nobody looks at. I think the residents of that community have to ask, what are you doing to make maximum value with that 40% of your budget that you get from the Government of Canada? The alternative would be for us to turn Sheila loose on them and make sure they're getting value for money, but they have a provincial audit system that is, if not as bloody minded, I think pretty effective.

That's the broad approach that we're talking about.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

You've touched on what we mentioned before, performance reporting. Anyone who has been in business, and particularly in times when it gets a little tighter, knows that it's all about performance reporting. It's about knowing where the money's coming from, where it goes when you get it, and how you deal with it so that actually you can be a performance—

[Sheila Fraser]

Can I add one thing? I'd just like to make a link with another audit that we have in this report, which is on the health indicators report, which I think is an interesting example of what happens with these transfers. There were large sums of money transferred to the provinces in 2000, 2003, and 2004. First ministers all agreed that there would be health indicator reports produced every two years. They agreed on a common set of indicators; it took them a while, then they agreed these are the indicators we should all report on.

Well, the federal government has continued to report. We did the reports in 2004, 2006, and 2008, but no provinces or territories are producing those reports anymore. That's why we say that even though there are these statements of agreements with principles, they are not binding, and there is absolutely no consequence if people don't follow through on them.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Shipley. Thank you, Ms. Fraser.

That concludes the second round. I'm going to ask the witnesses for any closing remarks or comments they want to make.

Again, I want to start with you, Ms. Fraser.

[Sheila Fraser]

I'd just like to thank the committee for their interest in our study. As we have mentioned, obviously transfers to provinces and territories represent a very significant portion of the federal government's expenses. We hope that this study will help better inform parliamentarians and clarify what the nature of the transfers is.

[The Chair, Liberal, Shawn Murphy]

I should point out, before we go to Mr. Wright, that if you follow these trust funds since 1999, they're generally used at the year's end, when there is a surplus. It's probably a situation we won't see for the next five or six years anyway, so it's probably not something we'll be dealing with in the future, but it's certainly an important issue.

Mr. Wright, have you any closing comments?

[Rob Wright]

I just want to thank Ms. Fraser for the study. It was well done, and this is obviously an informed dialogue with strong interest, which is appropriate given the magnitude of the dollars involved and the important issues.

In terms of the future, there are no pleasant year-end surprises from the last year or so, but again, I think there will be a determination in a few years to climb out of deficit. Again, not making multi-year programming decisions for a short-term problem is also a factor. This will be around as an active debate, so your interest was appropriately channelled, I would say.

[The Chair, Liberal, Shawn Murphy]

Mr. Monette.

[Rod Monette]

Thank you, Chair, for having us. As my colleagues have said, it is a very important issue, and we have very much appreciated the discussion and the questions. So thank you very much.

[The Chair, Liberal, Shawn Murphy]

Dr. Buhr.

[Nola Buhr]

I'd just like to thank the Standing Committee on Public Accounts for inviting us. As I alluded to, this is an historic occasion for the Public Sector Accounting Board, our first time here. We'd certainly welcome another invitation.