Public Accounts Committee on Nov. 20th, 2013

[Benoît Robidoux]

For 2012-13 it's basically that there was a small increase in the size of the debt because of the deficit, which was more than offset by lower effective interest rates because of the fall in interest rates observed through that whole year. This explains the fall in interest rates.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

I guess that if we had an interest rate increase and had to reorganize our debt, that would be quite a risk.

[Benoît Robidoux]

You're perfectly right. If we don't eliminate the deficit before interest rates increase, it will compound and create more pressure on the fiscal framework.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

So I guess a deficit reduction action plan is very significant.

I want to again go to page 1.3. It speaks to nominal GDP growth. There's a chart there showing that in June 2013 nominal GDP growth was 3.1%.

Is this chart specific to Canadian nominal GDP growth, or is this a global figure for GDP growth?

[Benoît Robidoux]

Mr. Chair, this is for Canada. This table tries to explain what happened between the beginning of the year, when we had budget 2012, and when we closed the accounts, showing how nominal GDP evolved compared with what was expected. We were expecting 4.6% and we ended up in March and June at 3.1% and then up a little bit, at 3.4%.

The essence of this is that the nominal GDP is essentially the tax base. If you get less nominal GDP, you get less tax revenue. This affected our expectation for tax revenue through the year. We had less at the end of the year than we thought at the beginning of the year we would have.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

When we look at our trade with other countries in terms of the GDP of another country and how it is impacted—say, for example, the United States, if its GDP goes down—I expect that would have a dramatic impact on Canada's economy. There's a sense in which this says to me that this means we need to diversify our economy and move to trade with other countries, because we can't be solely reliant upon the United States.

Would you agree with that comment?

[Benoît Robidoux]

I think the government would surely agree with it, and most people would agree with the idea that we need to diversity our trade to ensure that we are not hostage to any development happening in the U.S. The recent agreement with Europe in that respect is very useful in trying to diversify our trade.

Obviously, diversifying towards Asia would be quite important for Canada too, as Asia is the place where growth will be in the future and where the demand for goods will be. Connecting Canadian exporters and producers with Asia and Europe is very good news for diversifying trade. It is fair to say that in the public domain, that means something that is good to achieve—not necessarily easy to achieve, but very good to achieve.

[The Chair, NDP, David Christopherson]

The time has expired. Thank you, Mr. Hayes.

Now we go over to Ms. Duncan.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Thank you, Mr. Chair.

And thank you all for your work and for coming today.

I'm new. Is the Auditor General's office receiving enough information from the government for the Auditor General's office to do its work?

[Nancy Cheng]

We have received excellent cooperation from both the comptroller general's office as well as all the line departments and agencies, so there are no issues of any concern that I would bring to the table.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Thank you.

Performance audits contain recommendations for addressing the most serious deficiencies identified. How do you develop recommendations, and how do you ensure that the department implements your recommendations?

[Nancy Cheng]

Similar to what happens in the private sector, usually what the auditors do is provide room for improvement and provide pointers to help management consider areas in which to make changes, so that the systems and the controls can be better the next time around.

The financial audit and the public accounts audit are reporting at different levels. If we look at a particular scenario, the revenue stream or an expenditure stream, and notice that there are some shortcomings, then we would form a view as to how serious they are.

If there is something really quite serious, to the point that we would consider it a significant deficiency, we would take it to what we consider the signatories. We have an exit meeting with the four signatories: they are the deputy minister of Finance, the deputy receiver general, the comptroller general, and the secretary of the Treasury Board. We would report to them that these are some of the weaknesses they really should know about, that are pan-government or significant enough that at the centre they really should know.

The next level down would be issues that are not as significant; for example, some of the issues relating to National Defence that you see in part here. The audit team that audits the Department of National Defence would provide a management letter. We would write to the deputy minister indicating that as a result of doing the audit—not that we go out to specifically assess controls—we notice that there are some areas they should or could improve upon.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

How do you ensure that the departments implement your recommendations? You have talked for 10 years about National Defence. We haven't seen those changes.

How do we ensure that, and do you have recommendations for doing so?

[Nancy Cheng]

We have some success stories along the way. As I pointed out, we have a very good working relationship with the comptroller general's office, or with other departments, for that matter.

To take an example, if you go back to observations several years ago, estimation of tax revenue was on the block. We talked about things that would be better for assessing tax revenue and estimating the amounts, and these are not on the list anymore.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

I'm sorry. I hate to interrupt. The question is how—without examples—you ensure that the departments implement your recommendations.

[Nancy Cheng]

We tend to present the results to senior management, and wherever the department might allow us to do so we would go to the departmental audit committee as well to explain some of the differences and some of the weaknesses in their area and encourage them to do that.

As with any other recommendations and performance audit reports, we do not have the authority to require departments and agencies to take certain actions. But the reason I mentioned the centre is that often the comptroller general's office can influence a department to encourage them to make those adjustments and changes.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

You said “where the department allows us to come in”. Could you expand on that?

[Nancy Cheng]

What I was referring to are departmental audit committees. They are advisory in nature to deputy ministers. It's not a forum where we naturally would go. But in some cases the departments do invite us to attend the departmental audit committee so we can explain the audit findings. If we have the occasion to do so, we would highlight any improvements for them so they can advise the deputy minister as well.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Can the Auditor General's reports mention a point person responsible for implementing recommendations in each department that the committee could regularly go back to for follow-up on the implementation of those recommendations? This would be a point position, something like that.

[Nancy Cheng]

Mr. Chair, we tend not to do that. If you follow the concept of the accounting officer, really it's the deputy minister. So when we direct a recommendation to a specific department, it's addressed to the deputy minister. He or she has the responsibility to make sure the mandate, the operations, and the wherewithals to have them properly executed. So we go back to the deputy minister. For that reason, the management letters usually are addressed directly to the deputy minister as well.

[The Chair, NDP, David Christopherson]

Sorry, time has expired. Thank you.

We go over now to Mr. Woodworth.

You have the floor, sir.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you very much, Mr. Chair.

My thanks to all of the witnesses for your attendance. I know that collectively you all have your finger on the pulse of the government's finances and it's great to hear from you.

I have questions regarding the discussion and analysis in section 1 of volume 1 of the Public Accounts. I'm going to direct them to Mr. Ralston I think, unless I'm told that they're authored by another department or agency.

I'm specifically going to look at the last paragraph on the left-hand side of page 1.3. The question I have revolves around a comment that I've heard from some opposition members and others in which the government is accused of deliberately underestimating revenues so as to create a better financial picture when the numbers eventually turn up. Looking at that paragraph that I've just referenced, I want to ask you, did you find the government's 2012-13 downward adjustment for risk to revenues to be unnecessarily exaggerated?

[Jim Ralston]

I think this is probably a question that should be addressed to the Department of Finance. I'll just point out that our involvement, as has been outlined so far, is to really look at the actual results. The notion of comparisons of budget to actuals are best addressed by the Department of Finance.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

I'm looking at the observation in that paragraph. It seems to suggest to me that in fact the government allowed for a $3-billion downward adjustment for risk to revenues but in fact not only was that not exaggerated, it was in fact not sufficient. If you're not familiar with that paragraph, I'll transfer my questions to Mr. Robidoux. Would that be better?

[Jim Ralston]

I would think that would be better.