Public Accounts Committee on Oct. 17th, 2017

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We'll now move to Mr. Lefebvre for five minutes.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

I would like to thank everyone for being here this morning.

I will continue along the same lines as my colleagues Mr. Christopherson and Ms. Shanahan.

When we attend these meetings, sometimes outside Canada, we say how proud we are of the public service and of the professionals in it. We are of course fortunate to have their support, and 19 years of solid audits by the government illustrate their competency. It is not really the politicians, but rather the public service that should receive the credit.

That being said, Mr. Ferguson, at the beginning of your remarks, you talked about the three issues you had addressed in the past year: pay administration, discount rates, and National Defence's management of its inventory. We have already talked about discount rates and National Defence's management of its stocks with my colleague Mr. Christopherson, but we have not talked about pay administration. This is something that you have studied closely. You also noted that, this year, your employees spent over 60,000 hours on the annual audit of the consolidated financial statements.

Mr. Ferguson, in paragraph 13 you stated: “Even though the accumulated error was not significant, the extent of the errors that affected individuals and the time it takes to correct errors in pay are unacceptable.”

Your performance audit will be released in November, so I do not want to compromise that work. I would ask you, however, to talk about the efforts you have had to make regarding the pay system. Is this a unique situation that has never happened before? I would like to know how you arrived at that, why you did it, and what your findings are. Moreover, how can we be sure, as regards the public accounts, that we will henceforth be aware of the next steps to be taken?

[Michael Ferguson]

In our observations, we indicated the problems and challenges we faced in our audit of the government's accounts. Once again, the purpose of our audit is to provide an opinion on the financial statements. In this type of audit, we do not try to provide the details of all the problems; we simply provide an opinion on the results of the financial statements. It is in our performance audits that we will provide all the details about the efforts departments made to try to resolve this problem. So the observations present key points about each of the problems we identified.

As I indicated, in the past year, we reviewed about 18,000 pay transactions for 246 employees. So we did a lot of work to understand the pay problems. Nonetheless, the purpose of this audit was not to identify the efforts made to resolve these issues. We will comment on that in our performance audits.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you.

On another topic, Ms. Shanahan also talked about tangible assets.

I will switch to English because the document I have is in English.

On the tangible capital asset side, we talked about lands and buildings, and how you guys account for that. When we talk about buildings, I know we look at net book value, and on the accounting cycle, that's how we look at them. However, is there anywhere that we actually have determined the inventory of the number of buildings we have, that the federal government owns across Canada, and their worth? For accounting purposes, we look at the net book; however, in real life, often they have a value that is more than the net book value.

Is there anywhere in any department, whether it's procurement, that actually looks at what value we have in assets that are actually the fair book value?

[Bill Matthews]

There are a couple of points on this one. Yes, there is a database of property. It's publicly available, and shows you what we own. It doesn't tell you what it's worth, or what it could be worth. That being said, I should flag that in last year's budget, it was announced there would be a review of the government's fixed assets. That review has started, and it's in three phases.

[Paul Lefebvre, Liberal, Sudbury, ON]

Very quickly, I find it odd. As a business owner, I always look at myself and ask what I am worth when I do a net worth statement. At the same time, if we're always looking at net book value, often it doesn't paint the real picture.

Are you telling me there's nowhere right now within the federal government that can tell us what our...?

[Bill Matthews]

To actually ascertain what your buildings are worth is only important if you decide you're going to sell them. Once a decision is made that an asset is surplus, we will go and get a market assessment. If it's not in great shape, there's an organization we can use to repurpose it. Until the asset is actually viewed as surplus under the current system, you won't see anywhere where it discloses that we think this is worth x.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Lefebvre.

Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Ladies and gentlemen, welcome to your House of Commons.

First of all, I would like to thank you for being here and for the quality of your presentations and remarks. When we receive so many documents, we have to take them one bite at a time.

As the shadow minister for the Treasury Board, I would like to discuss the part pertaining to the Treasury Board, in volume II. I would like to look at the revenues section together.

Actually, it will be easier if we start at section 7 right away. In the last line on page 7.14, it says that the revenues were $32 million in the past fiscal year and $24 million in the current year.

I have a quick technical question to be sure we are using the same yardstick. When you say the current year, does that mean that you track each month against the previous fiscal year, or are there still amounts to be paid in the current fiscal year?

[Bill Matthews]

Thank you for your question.

That's the total revenue for 12 months. So the two figures can be compared.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Very good, Mr. Matthews. I appreciate the effort you are making to answer us in French. There is no problem with you answering in English, if you like. Know that we are very respectful toward those who make such efforts, and toward you in particular.

When we compare the two amounts—$32 million and $24 million—we note that the revenue for the current fiscal year is lower than that for the previous fiscal year.

Let's now look at page 24.13. I am a bit puzzled by the significant discrepancies between the amounts for the current fiscal year and those for the previous one. For example, parking fees brought in $3.3 million last year and $2.6 million this year. So much the better if people are taking the bus more than before. They are avoiding driving their car because of the parking fees. That's why we created a tax credit for people who use public transit, but that's another issue.

However, there are two elements that puzzle me. In the column on the right on page 24.13, around the 15th line, is the heading “Disciplinary penalties”. For the previous fiscal year, those penalties are $31,000, but they are less than $2,000 for the current year. Can you explain that? We are talking about disciplinary penalties, after all, and that's not nothing.

[Bill Matthews]

Unfortunately, no. I am the president, and I cannot explain that discrepancy. I could take a guess, but I don't want to do that. We could provide you with that information after the meeting.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

That is one of the lines I was curious about, but honestly, the line that puzzles me the most is the one further down on the same page, titled “Public Service Health Care Plan recoveries”. Last year, the amount was $3.2 million, and this year, it is $157. That is a major difference, after all. It is no longer anecdotal like the parking example I just brought up. It is even more confusing, since we are talking about the Public Service Health Care Plan. In addition, we all know about the issues with pay. Can you explain this? Is there a connection with the public finance management issue?

[Bill Matthews]

There is possibly a connection with the pay system, as benefits are paid under that plan.

You do pay that through your payroll deductions, so we can verify if this is in fact a change that results because of the change in the pay system or if it's just a change in the natural cycles. Sometimes there are some cycles that change from year to year.

I will say for the Treasury Board Secretariat as a department it's not a huge revenue generating department as you would notice. They are very much fees related to being the employer for the public service. There's parking, and you mentioned health care, but really the core of the department is more around monitoring other departments and agencies for their spending.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

My last question is about the Canada School of Public Service and its revenue. The question is very simple, and I should perhaps already know the answer.

I assume that employees of federal departments pay to attend courses provided by the school. Is that covered through a fund transfer from the department to the Treasury Board or do people pay out of their salary for the training they receive?

[Bill Matthews]

That's a very interesting question, Mr. Chair.

The funding model for the Canada school has been revisited from time to time over the years. There was a point in time when you paid by the course. There were some other courses that were offered free of charge. The current model for most departments is almost a tax based on the number of employees you have. Basically, based on the size of the department, there is an amount that is given to the school. There are some exceptions to that, such as if there's one-off training they have to do, so it is a mix. There are some courses where you would pay, but generally speaking, it's based on a head count and that's the way we resource the school.

Paul, did you want to jump in? No. Sorry, I thought I saw my colleague wanting to talk.

It is a mix. To give you an example, if I as head of my organization thought my employees needed a course custom designed and I thought the school was the best vehicle to do that, I would likely end up funding the school to do that work, but if it's just generic training for the public service, that's based on essentially a head tax based on the number of employees.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you so much, Mr. Matthews.

[The Chair, Conservative, Kevin Sorenson]

We will go now to Mr. Nuttall and then Mr. Massé.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you, Mr. Chair.

I want to go over a specific item we already talked about, but before I do that, I want to confirm that my thinking is actually correct here. The deficit came in at about roughly $12 billion under what was projected. With that there was an additional $1.9 billion. I'm on page 7 of the presentation.

There was $1.9 billion in found dollars to make the accumulated deficit at roughly $15.9 billion. I'm going to ignore that $1.9 billion for this conversation.

I look at the National Research Council of Canada again. It's close to $260 million in unspent dollars. Is that $260 million part of that $12 billion that is lower than the projected deficit was? Is it dollar for dollar?

[Bill Matthews]

It's a little more complicated than dollar for dollar and so I'll start and then turn to Finance.

When departments are resourced through their appropriations, which is on a modified cash basis, and that's what Parliament votes on, we have to translate that into accrual dollars. If I'm buying a tank, while it might cost me $1 million this year, I know from an accrual perspective it's going to cost me a portion of that over the next 10 or 15 years. There's an accrual translation that's made.

The more important point for my colleagues in Finance is they know departments are not going to spend every dollar that Parliament votes, so they build a lapse into the overall fiscal framework. Where a department's actual results differ from their assumptions, then you get a dollar-for-dollar pick-up. I'm not sure if Finance wants to add anything on how they forecast for expenses.

[The Chair, Conservative, Kevin Sorenson]

Mr. Rochon.

[Paul Rochon]

Yes, what Mr. Matthews said is accurate. You'll recall that departments can automatically carry forward roughly 5% of their operating budget, and not always but in most cases, they carry forward something similar to that. Each year when we do the budget forecast, we do an estimate of the amount of money that departments have been allocated that they will not spend, and we try to update that over the course of the year by surveying the chief financial officers of every department.

Although I can't give you an exact answer on your question, my suspicion is that a fair portion of the lapse you are referring to would have gone into the better than expected deficit outcome.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

When I look at these numbers, I see that this department accounts for 0.33% of total expenses, and then it accounts for 2.1% of the found dollars, that $12 billion, meaning it's seven times the value when you're comparing them. That is way out of what I would consider a norm. I'm wondering how that comes to be, that their value is 0.3% of the total expenditures, but 2.1% of the found dollars, and how we highlight that and understand going forward for next year. From my municipal background, when I was on the finance committee there, the last thing we wanted, or I wanted, was a department with a budget that continually comes in outside of what they're projecting, and then the actuals are at the end of the year.

I'm not sure there's a question there, to be honest with you.

[Paul Rochon]

No, it's a fair question, and from time to time when the situation you're describing has occurred, we've looked into the departmental budget and asked ourselves whether there needed to be some kind of adjustment. Having said that, I think the thing that will typically lead to large lapses will be either a large capital project that has been budgeted that will be delayed, or a new program that takes more time to be put in place and to ramp up than we expected.

I can't speak to the exact circumstance you're referring to, but we're happy to look into it.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

If you could look into for us, that would be great.

Sorry, am I out of time?