Thank you, Mr. Chair.
Mr. Chair, thank you for this opportunity to discuss chapter 10 of our spring 2013 report on advance funding of the P3 Canada Fund. Joining me at the table are, Lucie Cardinal, Principal, and, Shawn Audette, Project Director, who were responsible for this audit.
PPP Canada, a crown corporation established in 2008, administers the P3 Canada fund. The fund provides support to infrastructure projects procured by other levels of government through public-private partnerships known as P3.
To minimize the impact on government resources and borrowing levels, a Treasury Board directive prevents crown corporations from receiving advance funding. However, PPP Canada has received yearly exemptions from this directive and received funding long before its disbursement needs. As a result, the corporation had accumulated about $670 million in short-term investments as of September 30, 2012.
The audit objective was to determine whether PPP Canada's funding arrangement results in a financing cost to the government. We examined the amounts provided to PPP Canada to fund P3 projects, when these funds were disbursed, and the related financing costs.
We noted that as of September 30, 2012, PPP Canada had received $683 million of the $1.2 billion approved for the P3 fund and had disbursed $23 million for P3 projects. We also found that the amount of advance funding it receives is expected to grow over the next two fiscal years. By the end of 2013-14, the corporation is expected to receive the balance of the $1.2 billion with only $83 million of those funds likely to be disbursed by that time. In addition, in budget 2013, the government announced that it will provide PPP Canada with an additional $1.25 billion for the P3 Canada fund over five years, starting in the 2014-15 fiscal year.
We also found that the government did not calculate the cost of providing advance funding to PPP Canada. We estimated that advance payments to PPP Canada for the P3 Canada fund resulted in $1.6 million in avoidable financing costs between the 2009-2010 and 2011-2012 fiscal years.
More importantly, the government is exposed to risk related to financing costs with the current funding arrangement of providing money to the corporation years before it is dispersed. In our view, there are approaches that would minimize the government's exposure to this risk.
We made two recommendations in this chapter. The Department of Finance and PPP Canada agreed with our first recommendation to examine the current funding arrangement, taking into account the financing costs to the government. They committed to monitor the investment returns and borrowing costs associated with the advance funding. In response to our second recommendation, the Treasury Board of Canada Secretariat committed to specific actions to confirm that financing costs are taken into account in cases where crown corporations seek an exemption from Treasury Board to get funding in advance of needs.
Your committee may wish to explore progress made to date, including the adequacy of any action plans and timelines to address the recommendations of this chapter.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.
Thank you.