Public Accounts Committee on May 19th, 2016

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair. I appreciate that.

I want to continue on this, recognizing that I don't have drilling time but may have a little bit of probing time.

Picking up on the excellent questions of Mr. Harvey, I'm still concerned, given that we're talking about billions of dollars here, and that there's a transfer of debt going on between....

Is anybody there, as the financial people who are the macro-eyes for us, concerned about this as a growing concern? I know I am. I can give you examples in Hamilton of how situations are arising in which land is polluted, and then suddenly it becomes a question of whose problem it is. Since it's supposed to be a case of “polluter pays”, I want to hear a little bit more about this. I would think this is a growing problem, and since we're talking about billions of dollars of debt that Canadians are assuming they didn't incur, I just don't want to let it go so easily.

Mr. Matthews, it looked as though you were ready to say something, sir.

[Bill Matthews]

I'll start. I don't know who wants to help me out on this one, but it's an important question, Mr. Chair.

Here are a couple of points.

These big liabilities especially are old. They do date back to a time when corporate expectations, shall we call it “social responsibility”, were different from what they are today. The expectation of polluter pay—some of those concepts—didn't exist way back when.

The second point I would make, and it's probably the reason you're concerned, is that when the health and safety of Canadians are at risk, the government is the ultimate risk-holder. If a corporation packs up and leaves, you can pursue various legal avenues and do what you have to do, but at the end of the day, often it's the government that's left holding the bag.

Of the unassessed sites, one thing that often comes up is the question, who is responsible? It could be the federal government, it could be another level of government, or it could be the private sector. In part of the assessment process, one of the key question is who is responsible. If you're into joint ventures and partnerships, sometimes it's shared and sometimes there's a debate. If you go back to—what's a good example?—the Sydney tar ponds, there has been a lot of discussion about them. Is the responsibility federal? Is it provincial? Is it shared? There was a process not only to assess what the clean-up cost is, but who is responsible. That is part of the assessment process.

I know it's cold comfort to say that we own these things now. That's probably not fair from a “what's just to the Canadian taxpayer” perspective, but at the end of the day this stuff has to be cleaned up and, because of the rules at the time, the Canadian government and the taxpayer are the ultimate risk-holder.

[David Christopherson, NDP, Hamilton Centre, ON]

In light of that—and I probably should know this, but I do not—is there a fund that polluters have to pay into, almost like workers' compensation? Is there a fund that they collectively put into whose money is then used to pay for these cleanups? Something has to change.

[Bill Matthews]

I'm not an expert in this area. I don't believe there's any sort of generic fund—certainly not a government-held fund that people in certain types of industries would have to contribute to. What happens in the current day, if you're a company involved in mining or whatever where there is a risk of pollution, is that you're are booking contaminated site liabilities just as we are. You are actually booking the liability, as you should, for their books, for their cleanup.

So they're recording the cost. Are they putting away money to allow them to clean it up? I'm not aware of any specific fund. I don't think anyone here is.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm from Hamilton. I don't know an awful lot about mining, but I've been in public office long enough in Ontario that you have to know something about it. It's a big part of our economy. I know that you can't do mining without generating tailing ponds. Tailing ponds, in effect, are pollution. It's still continuing. I know this isn't the place to pursue it, but it is a good place to be talking about the dollar value of who ultimately is responsible and whether you and the Auditor General are satisfied that the Canadian taxpayers' interests are well protected in this regard.

[Bill Matthews]

I have maybe one final point. It's a question that certainly goes beyond my area of expertise.

Environmental standards are different now than they were then. That helps, but it's not the endgame. Also, there wasn't a good understanding of some of the impacts of these things way back when. By example, with regard to Giant Mine, I think people knew there was contamination there, but the assumption was that it was going to stay frozen. It's up north. It's underneath the ground. Guess what, with changing temperatures some of that stuff is starting to melt. All of a sudden the plan has to change in terms of how to clean it up. It's a really interesting area. Things do change. It does come down to what the oversight mechanism is for industries in these areas, which again is not my area of expertise.

[The Chair, Conservative, Kevin Sorenson]

We'll now move to Ms. Zahid, please, for five minutes.

[Salma Zahid, Liberal, Scarborough Centre, ON]

Going through the public accounts, I've noticed a pattern of large variances between the total authorities available for use and the amount that was actually used. For example, the Department of Citizenship and Immigration has loans to immigrants and refugees authorized for approximately $68.4 million, as per volume 2, whereas only $1.2 million was spent, creating a budgetary difference of about $67 million.

Another example can be found in the Department of National Defence. Their national combat and support operations are budgeted for about $1.6 billion whereas only $1.2 billion was spent, creating a variance of almost $350 million.

A third example can be found in the Office of Infrastructure Canada where the new building Canada fund has funds for national and regional projects authorized for $114 million, but only $11 million, or less than one-tenth of the authorized funds were spent.

This seems to appear as a common theme of underspending of authorized funds or the estimation of projected expenditures. What can be done to address these discrepancies? Is there any specific reason as to why such a large variance is being seen?

[Bill Matthews]

It's an important question, so thank you, Mr. Chair.

There are a couple of points from me on this front.

First of all, the way that the parliamentary appropriation system works is that it's illegal to overspend your vote. Number one, you have an authorized amount. You don't want to spend right up to the penny because then you're risking overspending, which is against the law. We actually want some cushion.

The other thing is that when you're dealing with programs where take-up is important, so loans to immigrants and veterans affairs programs and any kind of grants and contribution program, the government is estimating how many people will come forward and apply. However, at the end of the day, we are takers. If the applications don't come in, you can ask whether you were not advertising this properly and why you underestimated.

[Salma Zahid, Liberal, Scarborough Centre, ON]

Sorry for interrupting, but how are these estimated the first time? Do you compare some facts from the previous years and do projections for the next year?

[Bill Matthews]

We'll look at previous years. Some programs, by their nature, change. For instance, veterans programs changed last year. There were emerging issues with increased take-up due to post-traumatic stress. It is hard to project those things. Other things are very easy to project. You should be able to project your salary costs. That's kind of steady state-type stuff.

We have what I call the serial lapsers. We have a few departments that lapse big dollars on an ongoing basis. Infrastructure Canada, as the member highlighted, is number one. To spend money, they have to negotiate agreements with provinces, territories, and municipalities, so they're taking an estimate at the beginning of the year on how many agreements they might be able to negotiate. They have to get cover in case they all come to fruition, but the reality is that negotiations typically take longer.

It's the same thing with Aboriginal Affairs. When you're into negotiations of land claim agreements and some settlements, they're projecting what might happen. Frankly, they have to project the worst-case scenario because it's illegal to overspend.

The third one you mentioned, National Defence, is usually around procurement. Defence procurement is a very complex area. Again, they have to assume, I guess we'll call it best-case scenario, in terms of how many contracts they can let and how much equipment they can buy. Historically, it takes longer than expected.

The big ones are normal, and I would call them serial lapsers. The same ones pop up every year.

The final one I would flag for you, because it's a little more complicated, is that Treasury Board Secretariat as a department manages things called central votes, where we're holding money for other departments. There are things that allow them to carry a certain amount of their operating budget forward, a certain amount of their capital budget forward. Those dollars lapse every year as well, and that's quite normal. Where you should look is where you have a department that normally doesn't lapse dollars in a program but all of a sudden lapses significant dollars. You can ask why that is. That's where I like to look; it's where they've changed.

The ones here that you've highlighted are quite normal in terms of lapses.

[Salma Zahid, Liberal, Scarborough Centre, ON]

For the new building Canada fund, only one-tenth of the actual amount projected was spent. That means the money was there, but it did not flow out to the municipalities or whoever it was.

[Bill Matthews]

Right. Again, with applications, you have to negotiate agreements. Once you miss the construction season, if you don't get the agreement in place in time, you've lost the season for the next year. Infrastructure is a notorious lapser. When my colleagues in Finance actually project the budget, they assume a certain amount of lapsing will occur because we want to project the best possible spending. From a departmental perspective, they have to assume the worst-case or best-case scenario, depending on your perspective, to make sure they don't actually overspend what Parliament authorizes.

[Salma Zahid, Liberal, Scarborough Centre, ON]

Is my time over?

[The Chair, Conservative, Kevin Sorenson]

Do you have one more quick one?

[Salma Zahid, Liberal, Scarborough Centre, ON]

I will share my time, Mr. Chair.

[The Chair, Conservative, Kevin Sorenson]

We will come back to you because you're already over time.

We'll go to Mr. Poilievre, please.

[Pierre Poilievre, Conservative, Carleton, ON]

To go back on the term to maturity of our debt, according to the budget, the average term to maturity of domestic market debt is seven to seven and a half years, yet of the $133 billion in new debt issuance being auctioned off this year, $92 billion is five years or less. In fact, the majority of it, roughly half of it, is two years or less.

Why, in this low interest rate environment, is Finance shortening the term of debt rather than locking in low interest rates over a longer period of time?

[Nicholas Leswick]

I think it's a valid question. I just don't have a very good answer here today in terms of—

[The Chair, Conservative, Kevin Sorenson]

When we have questions like this, is it possible for the department—and I know it is—to come back with the answer to those questions?

[Nicholas Leswick]

Absolutely.

[The Chair, Conservative, Kevin Sorenson]

If you could provide those questions to the chair or to the clerk of the committee, we will see that the answers are circulated.

Please continue.

[Nicholas Leswick]

I don't think I have anything to add. I think it is a valid question about why we're borrowing more in the two-year tranche. My hypothesis is around liquidity and cost and risk dynamics against our entire $660-billion borrowing program. In terms of exactly how we're matching our new cash requirements against our new borrowing program, the member's question is a good one, and I'll follow up with the clerk with a clear answer.

[Pierre Poilievre, Conservative, Carleton, ON]

Does the Auditor General audit the debt strategy of Finance Canada?

[Michael Ferguson]

Mr. Chair, we did a performance audit a couple of years ago I believe, where we looked a bit at some of the debt strategy. I don't have the details of everything that was in that. We don't specifically audit that strategy on a regular basis, but we did do a performance audit that looked at some of those issues a few years ago, as I recall. Like I said, I don't remember the details of it.