Public Accounts Committee on Nov. 3rd, 2016

[Paul Lefebvre, Liberal, Sudbury, ON]

The reason I'm saying this is that when we look at the strength of our economy and the strength of Canada and take into account all the taxes that will be paid eventually, nowhere are we accounting for that. When we even look at where we are, we're pretty strong country compared to other countries.

Anyway, that's my observation when I look at it. I don't know if the Auditor General wants to make a statement on that or not. I'm just trying to figure out what is in our assets, and if there is even a way of calculating the value of taxes that will be paid later on—taxes that by statute have to be paid, and will be paid.

[The Chair, Conservative, Kevin Sorenson]

Unfortunately, your time is up. Can it be a very quick answer? Most of it has been answered.

Could you give a quick reply, Mr. Rochon?

[Paul Rochon]

I'll only say that as the Comptroller General said, we include in revenues the revenues that are payable in the year in question. Similarly, we include expenses that are payable in the year in question, so for something like OAS, while we can predict with fair certainty what the future payments are for OAS, we would only include those expenses as veritable expenses in the year in which they are due, so there is a symmetry in how we are accounting for both our revenues and our expenses.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Mr. Godin, you have the floor for seven minutes.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chair.

Thanks to the witnesses for taking part in this exercise. You are, in a way, our eyes. We believe in the competence of the people who have worked on the drafting of these reports. That is very much appreciated.

As you will see, I will not be going into any depth. The objective is above all to have you give us tools that we can use to do a better job as parliamentarians and to ensure that public funds are being well-used.

First, I am going to read the last paragraph in the document entitled 2015-2016 financial highlights. This is on page 1.2 under the heading “Financial statements discussion and analysis”. It reads as follows:

1.2 As reported by the International Monetary Fund (IMF), Canada's total government net debt-to-GDP ratio, which includes the net debt of the federal, provincial/territorial and local governments, as well as the net assets held in the Canada Pension Plan and Québec Pension Plan, stood at 26.7 per cent in 2015. This is the lowest level among Group of Seven (G7) countries, which the IMF expects will record an average net debt of 83.0 per cent of GDP for the same year.

Since the variance here is nearly 60%, I would like you to explain this situation to me. I understand that the previous government did an excellent job, but this is a large variance. I would like to know the reasons for it. I would venture to say the figure is gigantic. It seems to me we cannot be top of the class when everyone is on the third basement level. So much the better if that is the case.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Godin.

Go ahead, Mr. Rochon.

[Paul Rochon]

For Canada, the figure for the year just ended includes the federal government's net debt, which is approximately 31%, and the net debt of all provincial governments, which stands at approximately 50%, less the net assets of the Canada Pension Plan and the Québec Pension Plan, which also stand at approximately 50%.

This is a combination of these three factors. Two of the factors include the indebtedness of the governments and the third comprises the assets of our public pension plans.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

I would like to know your opinion on how to interpret these results. I do not know whether to put my question to representatives of the Department of Finance, the Office of the Auditor General, or the Treasury Board Secretariat. It seems to me you are experts on the subject. That is why I would like you to tell me the reason for this gigantic variance between Canada and the other countries. What are we doing in Canada that is so extraordinary?

I have the distinct feeling we should not start celebrating too soon.

[Paul Rochon]

The net result is that the level of savings in the pension plans is significantly higher in Canada than elsewhere and that our fiscal situation is generally manageable.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

In other words, you are confirming that we can pat ourselves on the back.

Thank you very much.

Mr. Ferguson, in paragraph 7 of your opening remarks, you say the following:

Because the new system was only in place for one month, these errors were, taken together, not material to the consolidated financial statements.

We are talking here about the 2015-16 financial statements. I understand this because the impact was that of one month out of 12. And yet we know the situation is not entirely under control.

What should be done to ensure that public monies are well managed and that employees are paid and receive the salaries they are owed without overpayments or shortfalls? What solution should be considered, sir?

[Michael Ferguson]

During the audit, we noted a number of errors and a higher rate of overpayments and underpayments. Since that occurred in only a few months during the year, it was not a major challenge or problem for the year we considered during the audit. Of course, now we are taking this into consideration as we plan our audit of the financial statements for that year.

Furthermore, the government must find ways to manage this problem. It must identify the necessary controls to improve the accuracy of payments. It is really important that the government now find a way to manage this system. During the audit, we noted a disturbing rate of error. It is therefore important to find ways to manage the problem.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you.

Mr. Ferguson, paragraph No. 9 concerns the Department of National Defence. What I understand is that the same problem still reoccurs year after year. What measures do you think should be put in place to require the Department of National Defence to comply and properly manage public funds. This situation reoccurs year after year. You yourself say it is repetitive.

I hesitate to use the term “error” because I do not want this to be perceived as accusatory. However, as far as I'm concerned, and as an administrator, I think an error is being made when the same problem is constantly repeated.

[The Chair, Conservative, Kevin Sorenson]

Your time is up, Mr. Godin. I'll take a quick answer, but we're going to have to come back to that. I think it's a little longer answer than what we may need.

If you do want to give a quick reply, go ahead, Ms. Hogan.

[Karen Hogan, Principal, Office of the Auditor General of Canada]

As mentioned in our analysis, this question is not necessarily an easy one to answer. So many issues and sectors must be considered. However, I can assure you we have seen an improvement at the department, although it still has a great deal of work to do. I think we could elaborate on this subject later on.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Mr. Christopherson, welcome. Go ahead for seven minutes, please.

[David Christopherson, NDP, Hamilton Centre, ON]

Very good. Thank you, Chair.

Thank you all very much for being here.

I'd like to begin with just a couple of comments. As you know, Chair, I take great delight in raising issues that the Auditor General finds when money is being wasted and when procedures aren't being properly followed and when the bureaucracy is being all the worst things that people think of bureaucracies, but I also try to balance that by being fair-minded and I give the government of the day, regardless of the party, credit where credit is due.

As a member of this committee and as one of the more senior members of the House, but more importantly as a Canadian citizen, I want to give most of my thanks to our bureaucracy, to our public servants, for the fact that this our 18th straight clean audit. I don't know if it covers both governments—both parties—during the transition. That is something to be proud of as a Canadian. For those of us who have travelled around the world and have seen what the other way of doing things is, this needs to be mentioned.

Quite frankly, I'm tickled that it is an opposition member who gets to do this, because when it's the government, it looks like they're patting themselves on the back, but this is something that we should be very proud of. I've been here for 12 or 13 of these 18 years, and it's just kudos to everybody involved. It says a lot about our public servants and about their professionalism and their dedication to doing the best job they possibly can. I'm proud of this and I think everybody should be, so congratulations to everyone involved.

As well, I have a second compliment. Again, that's good. I won't make a habit of it, and it is me, in case you're wondering if I was kidnapped. No, it is me.

I try to be fair-minded, and again I want to point out that last year.... The Auditor General mentioned it in his remarks also, and of course fair-minded is their motto.

In the auditor's Public Accounts of Canada report, page 2.44, it does say:

Last year, we recommended that the Government develop better processes to refine the accounting estimates and record the liabilities associated with contaminated sites at earlier stages of investigation.

I think we even picked up on that ourselves and talked about it the last time. I'm very happy to see that the last line in that paragraph says, “We are satisfied that the Government has addressed last year's recommendation.”

Again, congratulations. Well done. That deserves to be given credit.

That said, you mentioned, Auditor General, in your report on page 2.42 that you're going to be doing a performance audit of the transformation of the pay administration initiative. That's that whole Phoenix thing. What time frame are we looking at? When would we receive your audit report on that, sir?

[Michael Ferguson]

As you are aware, Mr. Chair, it usually takes us about 18 months or so from the time we get in to start the planning until we report. We are starting the planning now, so that probably puts us into spring 2018 before we will have something to actually present to this committee.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay, great. Thanks.

I will now turn to the document that the comptroller presented us with, and I want to thank the comptroller for the role he played here in presenting this in the information briefing the other day. It was very good. I was very impressed. Thank you again for that explanation.

Where there are frozen allotments, there are a couple with some great disparities that come to mind. For Treasury Board, if you take away even the frozen allotments, there is still over $2 billion that lapsed, and it's the same with infrastructure and communities at a time when we're trying to get money out the door and the government is trying to get projects started to create jobs and economic stimulation. You can't help but notice that there was a lapse of $858 million of that, and only $185 million is carrying over.

Why is that great discrepancy there, and is there a particular problem we should be looking at?

[Bill Matthews]

Thank you for the question, Mr. Chair.

I have two comments. Treasury Board is a bit of a unique animal. The bulk of Treasury Board's lapse here is in what's called “central votes”, and they are very much continency funds, so they're only called upon if needed. They're not programs.

With regard to the other five departments here—and you've highlighted infrastructure—these are our most frequent lapsers, and it's because of the nature of the business they're actually in.

With regard to infrastructure, most often you're negotiating agreements with either provinces or municipalities, sometimes both. Because of the way the vote structure works—you have the up-to amounts—departments have to come in with their most optimistic view of the world, and reality never works out quite as fast as their optimistic view of the world, so these five departments, based on my recollection, are the same five that would be on top of the list every year.

For DND, it's because of large procurements. The others here are usually involved with negotiations either with provinces or with first nations organizations, and it's those negotiations that typically cause delays.

I think the unique thing on infrastructure this year is that the Windsor-Detroit bridge falls under that ministry, and that's a major project that had some lapses.

[David Christopherson, NDP, Hamilton Centre, ON]

Right.

What are the internal mechanisms to ensure that the money's not being spent because of inefficiency within the department or reluctance by the decision-makers to do things? We have run into those kinds of things. Just because it's not lapsed.... There are good lapses and bad lapses. There are good lapses when maybe they did it more efficiently than expected or there are reasons to explain why. Bad lapses would be when for some political reason you say that you're going to spend this money and you put it in the budget and take all the bows, but you really don't want to do it, so you don't spend the money.

What are the internal mechanisms to ensure that when money is not being spent, it's for the good reasons, not the bad reasons?

[Bill Matthews]

It's a mix of both. My colleagues from the Department of Finance can weigh in, but we have discussions on a regular basis with departments on their forecasts for the year and on how they are actually coming along. Usually partway through the year, you have a discussion about whether, if they're not going to spend it this year, they can spend it in a future year or whether we are going to withhold it in the centre. There's a mix of both.

What you really have to get to is the results around what their spending was—was it projects that didn't occur, or have they actually come in under budget, as you mentioned? It's those discussions around their forecasts that drive it.

The key public document is the quarterly financial statements that departments produce, but frankly, nobody looks at those. They're out there, and you can get some sense of departmental spending. They're public. Internally we have different conversations about what their projected spending is. The quarterly one says what they've spent; internally we have discussions about their projected spending.

Partway through the year you would see the government come in with supplementary estimates, if cases of increased spending are planned, but they don't come in with decreased spending. It's really a forecasting piece.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We'll now move back to the government side and to Ms. Shanahan.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you, Mr. Chair. Thank you very much, all of you, for being here today. I'm feeling a bit more comfortable dealing with these accounts than when we first arrived.

My first question is for the Auditor General, around the observations. My colleague already mentioned the first one, but I'd like to go to the observations that were in the Public Accounts of Canada 2014-15 and the improvements we're seeing. That would be the inventory for the Department of National Defence and—

[The Chair, Conservative, Kevin Sorenson]

Perhaps you could reference the page number and the volume.