Evidence of meeting #117 for Public Accounts in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was assets.
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Principal, Office of the Auditor General
It could be chairs, as you say, or or boats, cars, vehicles, or any types of assets that the government has acquired to conduct its activities.
Liberal
Shaun Chen Liberal Scarborough North, ON
Fair enough.
I want to echo the comments made by a number of the committee members today and say congratulations to the CRA. What a wonderful job. As Mr. Christopherson said, there's a gold star here for you.
What I found really encouraging was what they had done, how they had done it, and the results that came out of those efforts. The AG's report specifically says, under paragraph 2.36, the following:
In July 2014, the Canada Revenue Agency introduced a moratorium that limited the purchasing of new office furniture. Before purchases could be approved, buyers had to show that the asset transfer website did not offer anything that served their needs. The Agency expected to save approximately $2.3 million over three years through this initiative. Instead, the Agency saved more than $4.5 million over three years.
That is a wonderful example.
Ms. Lemay talked earlier about wanting to learn from CRA, and I have a question for each of the departments. I'm looking for just a simple yes or no. Have you put a moratorium on the purchase of new furniture, especially after seeing the results of this audit? The AG has clearly demonstrated that there is a wide discrepancy across departments and that there are assets that could be reused. Have any of the departments here before us put a moratorium on the purchase of new furniture or equipment in light of these findings so that we can better make use of the assets the government departments do hold?
Deputy Minister, Department of Public Works and Government Services
I can tell you that we have not yet, but we are looking into it.
Chief Financial and Administrative Officer, Royal Canadian Mounted Police
As mentioned, we will be looking at our life-cycle asset management and how we go about it. Anything that could help us be more efficient with our resources we will definitely look into. If that's one of the avenues we have to take, we will seriously consider it.
President, Shared Services Canada
SSC has not. We are still in the process of pulling together all of the employees who were transferred to us. We're therefore putting together hubs across Canada of particular groupings of employees and developing that office space.
Liberal
Shaun Chen Liberal Scarborough North, ON
I just want to note what the AG said very clearly in paragraph 2.37 with respect to the CRA's practice: “In our view, this was a good practice that could be applied to other federal [departments].” I believe the answers are all here. You have a model example through which we can learn, across all departments, to better use or reuse usable items and assets.
Conservative
The Chair Conservative Kevin Sorenson
Thank you, Mr. Chen.
Before I go to Mr. Kelly, I would like to wade into this a little bit.
I am actually fascinated with government surplus. I can remember, as a kid, hanging out at an auction ring where government surplus was sold. My parents would be frustrated and upset because I'd come home with this pile of junk, usually, at the end of the sale, but I loved it. I don't think you use the auction sale much now.
You say that you use Kijiji, Ms. Lemay. There is no dispersing of government surplus through mini-auctions, is there?
Deputy Minister, Department of Public Works and Government Services
I'll turn it over to Nicholas, if you don't mind.
Director General, Specialized Services Sector, Integrated Services Branch, Department of Public Works and Government Services
Generally, no; we use the gcsurplus.ca website, not Kijiji. It's similar to Kijiji, but it's not Kijiji.
The in-person auctions don't occur for the federal government. A decade or more ago, people would come to a site and make closed-envelope bids in blind bidding. That's how it used to be done.
The program has advanced enormously since then. A warehouse or a doorway auction may get a few dozen participants. I mentioned the traffic earlier; we have nearly 100,000 site visits. That makes us more confident that we have a fair opportunity for everyone to participate.
Conservative
The Chair Conservative Kevin Sorenson
Except that you could sit with that warehouse full for months.
Director General, Specialized Services Sector, Integrated Services Branch, Department of Public Works and Government Services
No, we turn our inventory over quickly. We had 29,000 transactions last year. These are busy places. Assets come in and out quite quickly.
Conservative
The Chair Conservative Kevin Sorenson
At an auction sale, things in the auction ring are gone in one day. There are multiple people there at the time. They typically get caught up in the passion of the auctioneer and the bidding and buying.
To go back to Mr. Arya's comment about the 2018 Chrysler, it sounds like a minister's car, almost, or a deputy's. They maybe didn't like it. Are you allowed as employees to bid on those?
Director General, Specialized Services Sector, Integrated Services Branch, Department of Public Works and Government Services
No, there are conflict of interest guidelines, so I myself have never purchased anything, and the closer one is to the operation of GCSurplus, the more one is restricted.
Also, the folks who handle the assets, who physically deal with them, aren't involved in determining the winning bid and so on. They don't have visibility of any of the bids. We've got that segregation of responsibilities to combat exactly that type of problem.
Conservative
The Chair Conservative Kevin Sorenson
Mr. Christopherson and others talked about the values of some of these items. The net book value of all vehicles, machinery and equipment disposed of in that year was $67 million. The government received approximately $42 million in proceeds from the disposal of those assets, so there's quite a discrepancy there in actual value.
In furniture, the book value was $82 million, and proceeds were $50 million. Again, that's a massive loss. Is there a chance that our book value is way out of line with what used furniture is worth? I know that in many businesses, you may want to depreciate certain assets quickly. Are we just maybe not putting the proper book value on things?
Director General, Specialized Services Sector, Integrated Services Branch, Department of Public Works and Government Services
I can't really speak to the accounting. I can speak to the sale process, and I'm pretty confident that we're getting market value for the assets. I can't really speak to book value. I don't know the accounting practices in the different departments.
Calgary Rocky Ridge, CPC
Thank you, Mr. Chair.
That leads to exactly the line of questioning that I had intended to get into, and this is the question of accounting practice.
Yes, we all understand that for any given item, you have a book value, and the market value will be determined, I guess, when you put the item up for sale. The market value will be whatever somebody is prepared to pay for it, but on aggregate, across $60 million worth of items, thousands of items, you ought to have a correct or close to a correct number for value. If the value that we are getting at the end sale is the real value, the market value, and the book value is 50% more than what we're selling for, if we're selling for two-thirds of what is on the books, that's a problem.
Does the Auditor General's office have concerns about accounting methods?
November 5th, 2018 / 4:45 p.m.
Principal, Office of the Auditor General
As part of the audit, when we talk in paragraph 2.30 about the book value, those are the public accounts figures. Basically, we looked at specifically excluding assets that are controlled goods of National Defence and other movable assets, and the assets that are at play here are purchased for less than $10,000, so it's not necessarily going to be showing furniture in these figures. I just wanted to put that out there in terms of providing context.
We did not specifically look at how each organization was specifically amortizing their assets to see if they were applying the right technique of amortization of their assets. We did not look at that specifically as part of the audit.
Calgary Rocky Ridge, CPC
Do you think you'll need to, given the discrepancy between what's on the books and what the Crown is getting for these items?
Principal, Office of the Auditor General
Maybe I should have specified that we have no specific concerns with respect to that. We are trying to depict here the whole of government in terms of what the net book value is and specifically the sale of these assets.
Calgary Rocky Ridge, CPC
But I think Canadians would see that if the books say there is one value, and on the disposal of these items we're getting a different number that is only two-thirds of what's on the books, one of those numbers has a problem. We are either shortchanging the Crown in disposal of assets, or across the board, perhaps, we're mis-recording or misrepresenting the value of what's there. I think we need to address one of these two, and I suspect it's on the other side, on the disposal side.
Assistant Auditor General, Office of the Auditor General
Mr. Chair, in paragraph 2.30, right at the end, in the second-last sentence, we say, “These estimates suggest that federal organizations disposed of assets that still had benefits and could have been used by other federal organizations.”
When you take the book value and you look at what it sold for, what it suggests is that there is still good life left in those assets, and that good life could have been used within other departments across government.
Calgary Rocky Ridge, CPC
That, to me, suggests two problems. One is that departments of the federal government are not using items to their full lifespan. Even if a particular department doesn't have need for that item, it should be made available to another department. In the event that the sale of an item is deemed to be the most sensible way to go about disposal and there's no other department that would need that particular item, we ought to be getting the actual value of that item. If we are getting the actual market price for these items, then they're not being recorded correctly right now. I suspect it's the other way around, but I'm probably out of time, so I'll leave it at that.
Conservative