Public Accounts Committee on April 30th, 2019

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Lawyers, auditors and accountants always show immeasurable imagination about risk.

[Michel Bergeron]

Yes.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

In the area of probability, in Canada, what scenario could be more catastrophic than the simulation we did in 2017? To have said that, you need to have an analysis that says there are other risks that could have been tested, right?

[Michel Bergeron]

I could give you an example by doing some reverse engineering.

What factors could cause the corporation to have capital difficulties? For example, if the 2007 recession in the United States had lasted five years instead of two and there had been a subsequent recovery, and if house prices in the United States had fallen by 60% instead of 30%, what would have happened?

There must be stress tests, whether it is this one or another. The purpose is to see which factors could endanger the corporation's capital. These situations are hypothetical and may never happen—which is what we hope—but if in 20 years' time we were to move towards such a situation, the corporation would have simulated scenarios to know how to react and which direction to take for two, three or four years. It would have time to react because it would have defined the long-term impacts from these scenarios.

These are the kinds of things you have to analyze. In the scenarios, can we extend the crisis periods and see what problems would occur? If such scenarios became a reality, they would have already been analyzed. You have to go as far as using scenarios that are striking.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

In a practical sense, for the 2017 simulation, was a certain period of time or several years used? What are we talking about?

My question can be for the corporation's representatives.

[Michel Bergeron]

They aren't exact models.

[Evan Siddall]

I can address this. When we look at stress testing, we look at it over a five-year period.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Okay.

[Evan Siddall]

We look at a range of cases. We look at economic stresses and in particular the variable that drives our losses the most is the unemployment rate. House prices are a little more stable and don't drive it as much, so we look at anything that could affect the unemployment level. The cases we looked at last year, for example—this was published in October—were a low oil price, a global trade war, a cyber-attack on the country, an earthquake in western Canada and a volcano. We try to make up crazy things so that we can look at things differently, all of which could result in unemployment and impact on it.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

That answers my question.

Thank you very much.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Arseneault and Mr. Siddall.

I'm going to give Mr. Christopherson the last word today.

You have under five minutes, and then we'll go to votes.

[David Christopherson, NDP, Hamilton Centre, ON]

I appreciate that. Thank you, Chair.

Once again it falls to the NDP to defend poor government entities just trying to do their jobs and helping out Canadians. Oh man, it gets tiring.

[Voices]

Oh, oh!

[David Christopherson, NDP, Hamilton Centre, ON]

I appreciate the questions my colleagues are asking. They're obviously very intelligent and very insightful, but I want to draw back to the conclusion. With a grade 9 education, I rely on the auditors. I look at the conclusion on page 22. If there's anything serious to worry about—serious serious—I expect it to be here.

What does it say in the conclusion? It says, “In our opinion, based on the criteria established, there was a significant deficiency”. Now, I underscore to colleagues that “significant deficiency”, in the world of auditors, that's swearing. I mean, that's strong language. There's a big difference between “significant deficiency” and “weakness” and “improvement needed”.

I'll finish the quote. There was “a significant deficiency in the Canada Mortgage and Housing Corporation's corporate governance systems and practices,”—recognizing that they don't do the appointments, the government does—“but there was reasonable assurance that there were no significant deficiencies in the other systems and practices that we examined.” It continues:

We concluded that except for this significant deficiency, the Corporation maintained its systems and practices during the period covered by the audit in a manner that provided the reasonable assurance required under section 138 of the Financial Administration Act.

Hence my overview that I thought this was a fairly good report, and I want to focus, if I can—I only have a couple of seconds—back on the governance again, because that's the major issue here. I won't find the quote, but you made some reference that there were a couple of things the board could have done to offset that, and I'm curious as to what it is that they should have done, recognizing that they had a huge problem. They couldn't fix it directly in terms of appointments, but you suggested that there were some things they could have done but didn't.

Would you articulate those for me in the moment or two that we have left?

[Lissa Lamarche]

One of the things that was suggested in the report related to training. Often what we see is that boards that identify competencies that aren't being filled by the board members either will seek external consultants to come and assist them in playing their oversight role in specific areas or will try to obtain training that will give them a bit more competency in those areas.

I come back to my earlier example of IT, technology. When there are significant IT projects, if that expertise isn't sitting on the board, then perhaps there's an opportunity to seek external advice or training.

[David Christopherson, NDP, Hamilton Centre, ON]

Great. Thanks.

Thanks, Chair.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much to our guests for appearing today. One never knows how some of these committee meetings will go, but certainly I think today was a very interesting day. We had a good report by our Auditor General's office and good questions by the committee. Thanks to all of you.

We will now adjourn.