Public Accounts Committee on Feb. 14th, 2013

[The Chair, NDP, David Christopherson]

I now declare this 77th meeting of the Standing Committee on Public Accounts in order.

Colleagues, you will know that today we are studying the public accounts for 2012.

We have with us folks from the Office of the Auditor General, the Treasury Board Secretariat, and the Department of Finance.

I would ask the head of each of those delegations to introduce themselves and their delegates, please.

Nancy, I will start with you.

[Nancy Cheng, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

My name is Nancy Cheng. I am the assistant Auditor General responsible for the audit of the public accounts.

With me is Madame Louise Bertrand, one of two principals responsible for this work.

[Jim Ralston, Comptroller General of Canada, Treasury Board Secretariat]

I am Jim Ralston, Comptroller General of Canada.

With me are Sylvain Michaud, an executive director in my office, and Tom Scrimger, assistant Comptroller General.

[The Chair, NDP, David Christopherson]

Mr. Nevison.

[Douglas Nevison, General Director, Economic and Fiscal Policy Branch, Department of Finance]

I'm Doug Nevison, general director of economic and fiscal policy branch from the Department of Finance.

[The Chair, NDP, David Christopherson]

Excellent. Welcome all. We are looking forward to a productive afternoon.

Unless there are any interventions from colleagues, I will commence the rotation.

It looks like we're all good. Therefore, we will kick off with Mr. Saxton, who now has the floor, sir.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair.

Thanks to our witnesses.

[The Chair, NDP, David Christopherson]

Oh, I'm sorry. I jumped ahead. Not only that, I forgot a nicety, too. It's been so long since we've had a public hearing I've forgotten how they work.

[Voices]

Oh, oh!

[The Chair, NDP, David Christopherson]

Mr. Opitz is here today, replacing Mr. Aspin.

Welcome, Mr. Opitz. It's good to have you with us, sir.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

Thank you, Mr. Chair.

[The Chair, NDP, David Christopherson]

Yes, indeed, my mistake. I apologize. Of course, we'll begin with opening remarks.

First will be Madame Cheng. You have the floor, Ma'am.

[Nancy Cheng]

Yes, Mr. Chair.

Thank you for the opportunity to discuss our audit of the consolidated financial statements of the Government of Canada for the 2011-12 fiscal year.

As I mentioned, I am accompanied today by Louise Bertrand, one of two principals responsible for this audit.

We thank the committee for taking an interest in the Public Accounts of Canada. This is an important accountability report of the government. The statements show the types and amounts of taxes that have been raised, where tax dollars have been spent, and the fiscal balance, all in comparison against the budget. They also provide a picture of the government's financial position as at March 31, 2012, including the net debt and changes to the net debt position during the year.

The Comptroller General will be explaining to the committee the key points in the government's consolidated financial statements. I will focus on our audit opinion and observations.

As you are aware, the Public Accounts of Canada are tabled in three volumes. Our audit covers the consolidated financial statements. These statements, our independent auditor's report, and the observations of the Auditor General are contained in section 2 of volume I. Unless otherwise noted, all other sections of this volume and the two other volumes are government information that is unaudited.

Our independent auditor's report on the 2011-12 consolidated financial statements can be found on page 2.4 in volume 1 of the Public Accounts.

Mr. Chair, for your reference we have attached the independent auditor's report as well as the AG's observations to the opening statement.

This marks the 14th year that we have given a clean audit opinion. We commend the government for its efforts and due diligence in preparing these statements.

Our observations highlighted the fact that many government entities were required to transition to new accounting frameworks in 2011-12. We noted that certain transitional adjustments were required within the public accounts for entities transitioning to International Financial Reporting Standards, or IFRS. We have reviewed these adjustments and are satisfied that the consolidated financial statements adequately reflect the adoption of the new accounting standards for these government entities.

I would also like to draw your attention to two specific items noted in our observations.

Last year, we raised concerns about how departments and agencies charge their capital expenditures against the capital vote and the operating vote. We asked the Treasury Board of Canada Secretariat to study this issue to better support parliamentary authority and government accountability to Parliament.

This committee, in its 8th report, also urged the government to clarify this matter. The secretariat agreed to assess the circumstances in which capital votes are required and the factors that determine which expenditures are to be charged to capital votes rather than operating votes.

We are pleased to report that good progress has been made during the year. This includes reaffirming the $5-million threshold for establishing a capital vote and revising the definition of “capital expenditures” to better align with the government's accounting policies. These changes are expected to take effect for the 2013-14 main estimates.

The second item of note relates to long-standing issues in the financial reporting of inventory and asset-pooled items at National Defence. In the audit of 2011-12 public accounts, we continued to find differences that required adjustments related to pricing, verification of quantities, and the timely reporting of the department's inventory and asset-pooled items. In addition, we observed various issues related to the recording and amortization of its tangible capital assets.

We note that National Defence is working on several initiatives to improve its financial reporting capabilities. We wish to emphasize the importance of active monitoring of these initiatives by management.

The observations also include other matters that we have reported for the past several years. They are listed on pages 2.40 and 2.41, in volume I of the Public Accounts. We are pleased to note that the government is taking action to address these matters.

We thank the Comptroller General and his staff, as well as others in the departments that were involved in preparing these accounts. A great deal of work was involved, and we appreciate the cooperation and assistance that were provided to us.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer the committee's questions.

[The Chair, NDP, David Christopherson]

Excellent. Thank you, Madame Cheng.

Now Mr. Ralston, for your opening remarks.

Sir, you have the floor.

[Jim Ralston]

Thank you, Mr. Chair.

Hello to you and the other members.

Thank you very much for the invitation to appear before the committee to discuss the Public Accounts of Canada. I am pleased to be here in my role as Comptroller General of Canada.

For the 14th consecutive year, the Auditor General has issued an unmodified opinion on the government's financial statements. This is a testament to the high standards of the government's financial statements and reporting.

I would like to thank the Office of the Auditor General for the continued professional working relationship that we have enjoyed.

Mr. Chair, we submitted a slide presentation outlining some of the key financial results for the fiscal year ending on March 31, 2012. We can go through the presentation, or if you would prefer, we can go straight to the questions from the committee.

Thank you.

[The Chair, NDP, David Christopherson]

Thank you.

I understand that ends our opening remarks, and now we will do the rotation.

I notice that when I said we would go to rotation, nobody jumped in to save me; you all let me fall off the cliff there.

Okay, Mr. Saxton, you have the floor, sir.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair.

And the clock has been moved back, I assume.

[The Chair, NDP, David Christopherson]

There is no clock. Be nice.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay.

Thank you, Chair.

Thanks to our witnesses for being here today, and welcome back.

My first question is regarding the fact that this is the 14th consecutive year that the Auditor General has provided a clean audit opinion on the Government of Canada's financial statements.

Can you please comment on what that means for Canada?

This question is for the assistant Auditor General.

[Nancy Cheng]

Thank you, Mr. Chair.

It is a very commendable result for the Government of Canada. It speaks to the high quality of the preparation in the first instance. It also speaks to a good working relationship between both sides. When we have come across differences, there has been a lot of openness in discussing them and making adjustments when necessary.

It is very exceptional, in terms of results in comparison with other countries, to have this type of audit report 14 years in a row.

[Andrew Saxton, Conservative, North Vancouver, BC]

Could you please share with the committee the requirements necessary for the government to achieve this?

[Nancy Cheng]

Essentially, the audit opinion speaks to the fair presentation of the financial statements in comparison to its accounting policies, which conform with the public sector accounting standards. So the extent to which the financial reporting and the various results fall in line and are consistent with the framework earns that clean opinion.

In the first instance, there need to be good systems in place to capture financial information, there needs to be proper roll-up, and then there are the various adjustments and consolidation efforts needed to come to the consolidated financial statements of the Government of Canada.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay, thank you.

How would Canada stack up against other countries in this regard?

[Nancy Cheng]

This is not based on audited information, but based on our contacts with our colleagues in other countries. This is quite outstanding in its own way. In many other jurisdictions they don't even have consolidated financial statements, let alone have clean audit opinions. When they have summary accounts, they may not have earned clean opinions, as we have here in Canada.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

The consolidated financial statements show that the annual revenue of the government has increased over the past year. Do you know whether this was anticipated?