Public Accounts Committee on Oct. 31st, 2018

[Michael Ferguson]

First, in terms of the item that you talked about on page 132, I'll just give you a brief introduction to that and then perhaps Mr. Huppé will provide you with more details. Essentially this is the write-off of loans. When the government issues a loan, it sets that loan up as an asset on its books. At the end of every fiscal year it needs to decide whether it thinks it's going to collect on that loan or not. If it thinks it's not going to collect on it, then it has to set up a provision, an allowance for doubtful accounts, saying it's not going to collect it.

As soon as it sets up that allowance for doubtful accounts, that's when the expense would hit the books, to essentially say, “We're not going to collect this loan. We paid out $2.6 billion. We're not going to collect it, so that $2.6 billion doesn't really represent an asset anymore. We have to set up an entry that expenses it.” It will often be years later when the government says, “Okay, now we know for sure we're not going to collect this, so let's write it off,” which just means, “Let's take it out of the records.” The accounting for it as an expense is usually done well in advance, years in advance of when the write-off actually happens.

I'll just go on to the second part of your question, and perhaps Mr. Huppé can then give you some more details, if there are more details.

In terms of access to computer systems, that's something we identify as a problem in many computer systems. When we're doing our financial audits, one of the things we look at is whether there are controls in place in the financial systems that would let us rely on how those systems process transactions. One of the first things we look for is whether departments are properly controlling access so that only people who need access can access those systems. It's a problem we keep seeing in many departments—they aren't controlling access to their systems. I think it's something we need to dive further into and give you more information about, perhaps in a future commentary report, but it is something that is a concern in many different organizations.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Your time is up, but, on that very point, your concern here is not about somebody hacking into the system; it's about whom they actually give access to.

[Michael Ferguson]

It's about whom they give access to and what type of access they give to those people.

[The Chair, Conservative, Kevin Sorenson]

It deals with improper security around access to the system.

[Michael Ferguson]

That's right. You're right that we're not talking so much about hacking, although if there aren't good access controls, that could facilitate hacking as well. Primarily, we're looking at this: Only the people who need access should have access, and they should have access only to the parts of the system they need to access.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll now move to Mr. Massé.

Mr. Massé, you have seven minutes.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

To begin, I would also like to thank all the teams responsible for the publication of the Public Accounts of Canada. They are extremely useful documents that give MPs access to a ton of very important information.

There is still some way to go, though, to make this information more digestible to us, because we often have to take out the calculator and search for various things.

Along the same lines as my colleague Mr. Christopherson, I would like to add that, last week, the media actually reported that Chrysler's debt had been written off. That $2.6 billion is of course a striking amount given the considerable difference in total debt write-offs as compared to previous years.

As I said, all this information needs to be more digestible. For example, I wanted to figure out the total debt write-offs this year. I had to check a number of pages and do some calculations. I arrived at a total of roughly $4 billion in debts written off every year.

Mr. Chair, I would like Mr. Huppé or Mr. Rochon to answer the following question: do you think the federal government and its departments actually have enough control and the right processes in place to deal with debts and bad debts?

[The Chair, Conservative, Kevin Sorenson]

Mr. Huppé, go ahead.

[Roch Huppé]

Thank you, Mr. Chair.

First, several departments are entirely capable of recovering a debt or controlling their receivables.

Second, three quarters of the $4 billion in debts written off each year are Canada Revenue Agency receivables, an agency that collects a tremendous amount of money.

From an accounting perspective, we recognize that we need to assess our assets as effectively as possible to give an accurate picture. Accounting standards require us to review our accounts receivable every year, assess our ability to collect those amounts, and report on the debts that we will be unable to recover.

As to Chrysler's debt, Mr. Ferguson explained earlier the process by which the government decides in the years following the report of a bad debt to ultimately write that debt off. If that process is followed, we do write it off.

Certain departments get better results than others. There are some for which debt collection is not a core activity, so to speak, and whose monitoring framework is perhaps not as well developed. I can assure you, however, that most departments have debt write-off committees. In other words, the final decision whether or not to write off a debt is not made until various committees and senior officials have reviewed the file. Moreover, several departments do not have the authority to write off those debts themselves and have to follow another process instead, such as referring them to the President of the Treasury Board.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Huppé.

Mr. Rochon, forgive me, but I don't have much time.

[Paul Rochon, Deputy Minister, Department of Finance]

Of course.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

I can hear from you later on.

If I understand correctly, certain departments do a good job, while others could do better.

In recent years, I have done some research because I am very interested in public accounts. I learned that, 22 years ago, the U.S. government enacted the Debt Collection Improvement Act of 1996 to address the challenges that federal departments faced in collecting certain debts. As in Canada, most people pay their debts, but others might have more trouble doing so. With this law, the U.S. government wanted to provide a stricter framework for debt recovery. The initiative paid off because it now collects about $40 billion in debt every year. The key to its success is its speed. Each department has six months to collect a debt on its own, and then it is handed over to the U.S. Treasury.

A few years ago, the Receiver General for Canada launched a pilot project. In your opinion, could we do more to recover debts earlier and thereby improve our results?

In closing, when I look at these figures as the MP for Gaspé, I see that a great deal of money is involved. Sometimes we lose perspective when we see huge sums such as $4 billion, or even $40 billion. But if we take a moment to think about it, we realize that $4 billion is 4,000 million dollars, a huge amount.

So I would like to know if we can do anything to establish a better process to limit debt write-offs as much as possible.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Massé.

I'm not certain if that goes back to Mr. Huppé or if you still want Mr. Rochon to answer your first question.

[Roch Huppé]

Let me begin.

Mr. Chair, I can assure you that our current processes are comparable to those used in the United States and to what Mr. Massé just referred to. We have procedures in place to refer some of our debts if there are outstanding amounts, such as taking deductions at source. The Canada Revenue Agency can take responsibility for collecting a debt.

Mr. Massé also mentioned a pilot projet. It is underway right now, and we expect a report in the coming months. The pilot project, which includes Parks Canada, is intended to determine how to help certain agencies recover their debts, agencies for whom it is not a core activity and that do not have the necessary ability to do it. These agencies call upon people who are experienced in this area to get results.

That said, you have to admit that certain bodies do very good work in this regard, including the Canada Revenue Agency. In recent years, studies of revenue agencies in different countries have been conducted to measure their rate of success, and the CRA is among the best in recovering debt quickly.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We are way out of time, but I will give Mr. Rochon an opportunity.

[Paul Rochon]

Thank you, Mr. Chair.

I would simply add that you have to be careful with the numbers, and perhaps we should explain them better.

In Chrysler's case, for instance, the initial loan was $2.9 billion. Chrysler repaid $2.1 billion of that. Over time, however, with the prevailing interest rates and fluctuations in the rate of exchange, that led to a $2.6 billion write-off from the public accounts.

So it is a bit misleading to say that $2.1 billion was written off for a loan that Chrysler received. In the end, the real benefit to Chrysler in this case is the difference between $2.9 billion and $2.1 billion.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Rochon.

We'll now move to Mr. McCauley, please, for the second round.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Ferguson, you'll be pleased to know that your comment following on the 2012 OGGO report on the estimates about the statutory and legislative spending to be included in the estimates—we're studying it right now in OGGO—is going to be part of our recommendations. I think that's a great point, so I appreciate that you brought it up.

I want to talk to Treasury Board and you about the vote 40, the $7.04 billion dollars that was in the main estimates. How is the spending for that going to appear in public accounts?

[Roch Huppé]

First of all, vote 40 does not appear, obviously, in these public accounts, because it was still—

[Kelly McCauley, Conservative, Edmonton West, AB]

I realize that. How will it?

[Roch Huppé]

Exactly, so in the future....

This funding was set aside in a special-purpose vote—

[Kelly McCauley, Conservative, Edmonton West, AB]

I know. I'm sorry. We're very short of time. We have only five minutes.

How will it appear in the public accounts?

[Roch Huppé]

It will appear in two ways. One, the money was provided to the departments because the departments came and got their funding from it, so then it would show as expenditures within these different departments, which would see an increase in their appropriations. Two, if that vote is not completely used, then it would be either lapsed or carried forward to the following year, so you would see that.

[Kelly McCauley, Conservative, Edmonton West, AB]

I want to give you an example. If you look at page 293, there are line items: “Prime Minister's Visit to Tel Aviv..." of $4 spending detail, and “Prime Minister's Bilateral Visit to Havana..." of $32 spending detail. Will money from the vote 40 be broken down in detail as regular spending?

[Roch Huppé]

Yes, vote 40 will appear in the appropriations of the departments. Obviously, as a result of the budget measures, it won't be as—