Public Accounts Committee on Oct. 17th, 2017

[Bill Matthews]

Just give us two minutes and we'll have an answer on that.

[The Chair, Conservative, Kevin Sorenson]

Okay, in two minutes his time will be up.

Go ahead and ask your other question, Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

This is for the Auditor General. Typically in reports by auditors general there's a commentary about how governments have responded to previous reports of auditors general. Are there things you have recommended in the past few years that continue to linger and that government hasn't dealt with?

[Michael Ferguson]

In the course of our financial audit.... The way we report on financial audits is different from the way we report on performance audits. Again, the instruments we use to report on the most significant issues are our audit observations. This year, you will see that we are again reporting on the issues at the Department of National Defence in how they account for their inventory. We've been reporting on that for 14 years in a row. The department has brought forward a plan to this committee. I think that in this year's audit observations we tried to go back to the plan they presented to the committee to see whether they seem to be on schedule with that.

The only other one I would raise that in fact we didn't mention in this year's audit observations—we've mentioned it in the past and it still hasn't gotten better—is that we are still not able to provide an audit opinion on the reserve force pension plan financial statements. That's a long-standing issue as well.

In terms of the pay issues that we raised last year in our audit observations for the first time, again we're raising those. The government is obviously working on trying to resolve that situation.

On the discount rates, we've now raised that for a couple of years. The government has said that they are going to look at how they calculate discount rates.

All of those major issues, I think, we deal with through the audit observations. We also issue letters to departments if we come across more normal issues around some internal controls that they need to fix. We do that through management letters with the individual departments. Usually when we raise those things with them, they work their way through trying to improve them.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Mr. Matthews, did you quickly want to respond to his question? Then we'll move to Mr. Christopherson.

[Bill Matthews]

Thank you. I'll be very quick, Mr. Chair.

It is indeed in volume III, section 2, where there are all sorts of disclosures, department by department, on the amounts written off or forgiven. The ones that will jump out at you if you're looking to that section are related to child and family services and the revenue agency. Here, you're looking at programs like the Canada student loans program and taxes and those types of things. It's very much tied to the nature of the program, where the government has determined that either they cannot collect or they have basically written off the debt.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Mr. Christopherson, you have seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Very good. Thank you, Chair.

Thank you, all, for your attendance today.

I just want to start by shouting from the rooftops how great it is that we've had 19 clean audits in a row. I've had the honour of sitting at this table for 15 of them and I have to tell you, every time it's still a great feeling. I get no credit at all. My party has never been in power. Any credit I get—we get—is being part of the parliamentary system.

Given that this committee's job is the premier oversight of government spending, we don't pull our punches around here. This is the one place where we can't afford to. We hit hard when money is being wasted and when government is not following the policies they should.

Conversely, when something is done right, and is good and positive, we need to give over-the-top praise, so I want to give that over-the-top praise personally, as someone who has invested a lot of blood and sweat and heart into the work of this committee. It's a wonderful thing. Canadians should be proud of the fact that, at the very least, nobody is robbing the treasury. I've been to enough countries in the world where you can't say that, and it does make you want to come back here, pound the table, and say, “Congratulations to every single person who works in the financial community in the government to bring us to this day.”

Congratulations to you. You did a great job, and we are proud of you. Please keep up the good work.

Having said that, now we get down to some nitty-gritty.

I also want to pick up, if I can, Chair, where the Auditor General did in commenting on Mr. Matthews and his job. Some of us got to know Mr. Matthews a lot better when we were at an anti-corruption conference in London.

I can tell you that I wholeheartedly agree with the praise the Auditor General is giving you for your job as comptroller general. You've done an outstanding job, and you're just a fantastic public servant. I wish you all the best at National Defence. I know that all of our ongoing problems at National Defence are going to be gone like that, Bill, because you're going to be there to take care of it for us, which is my segue to my question, actually.

We are making some headway. In his remarks the Auditor General said, “We found that, while problems remain, National Defence appears to be on track with its action plan.” Finally. It took long enough. However, I don't want to take my foot off the gas. It says that there are problems that remain. Auditor General, would you please touch on what some of those outstanding problems are?

[Michael Ferguson]

Thank you, Mr. Chair.

I'll actually ask Ms. Hogan to go through it. The issues are itemized in our audit observations, but I'll ask Ms. Hogan to go through what they individually were.

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

Thank you.

We did see some progress this year, as we have seen over the last four years, at the Department of National Defence. This year, they did take on a large project, looking at the pricing of ammunition, so we definitely saw reduced errors in the pricing of ammunition.

Where we continue to see work needed is in the area of obsolescence and in the area of valuation for consumables. They have two types of inventory, ammunition and non-ammunition, so it's all the non-ammunition that they now need to tackle a little better.

We mentioned that last year they implemented an allowance, which accounted for some of the obsolescence, but again, that fixed the statements; it doesn't fix the underlying records.

Some of the steps they have in their action plan this coming year are to look at some of those things.

[David Christopherson, NDP, Hamilton Centre, ON]

Very good.

I'll just pick up where Ms. Mendès was talking about the documents, because I still have that bugaboo that we don't have it paginated in a common-sense way. I would just suggest that something for us to consider is a workshop between the departments affected and the committee, to go through what your needs are, because you have certain guidelines you have to follow, and try to marry that with some of the concerns we have to make this as user-friendly as possible.

This is my last question, because I'm running out of time.

Mr. Matthews, you mentioned the frozen allotments. I understand that, but just because it's frozen, that doesn't necessarily mean there isn't a problem. It just puts a nice label on it. I'll say that first.

Second, what is to prevent a department from artificially slapping the label of “frozen asset” to get itself out of this jackpot with this huge number, to reduce that? What is to prevent them from just saying, “We're going to note that as frozen, and that mitigates a lot of our problem”?

[Bill Matthews]

Thank you, Mr. Chair.

There are two things. A department can't do it by itself. They actually have to come to the Treasury Board Secretariat, central agencies, and Finance, and basically get agreement that they are indeed going to freeze that. It's not an action that a department can take by itself.

Typically, they freeze it because there has been a reduction in another area, or maybe because it's acknowledged that the funding can't be spent this year and they'd like to spend it in a future year, which is subject to parliamentary appropriation, but typically it's because something else has happened. They cannot do it by themselves.

You're right, it doesn't explain away the issue. It's just additional context.

[David Christopherson, NDP, Hamilton Centre, ON]

What about that last part, though? You've come in and said that these are frozen, and that this mitigates or gives some explanation, but how do we get to the point you just raised? Where does that show itself?

[Bill Matthews]

You'll see it in the analysis.... In the InfoBase, you'll see some additional disclosure, department by department.

If you are ever calling departments as witnesses, it's a great question to ask around, “Why did you lapse? What was frozen, and what's going to happen with that frozen?” Those are perfectly acceptable questions. The explanation varies department by department.

[David Christopherson, NDP, Hamilton Centre, ON]

It looks like I'm down to my last seconds.

What is the process, then, for getting approval? You said that they have to go through a process. What is that process, please?

[Bill Matthews]

It typically involves a Treasury Board submission—not always, but it would typically involve coming to the Treasury Board. We always make sure our colleagues in Finance are on side as well. If a department is not spending money in the year that was planned, one of two things happens: it just goes away, or they say, “We'd like to spend that in a future year.” That has an impact on the fiscal framework, so the Department of Finance has to mull that over and then basically—

[David Christopherson, NDP, Hamilton Centre, ON]

Does that require a ministerial sign-off?

[Bill Matthews]

They're better off to answer that question. My understanding is yes, but—

[Paul Rochon]

Yes, it would require a ministerial sign-off.

[David Christopherson, NDP, Hamilton Centre, ON]

Very good.

Thank you so much for your answers.

Thank you, Chair.

[The Chair, Conservative, Kevin Sorenson]

Just on that, because there is still a little time left, does any of that become public? We have a public document with the budget, so this amount is allocated. If all of a sudden, midway through the year, we have a frozen allotment, does any of that become public before the public account? How would we know that something is allotted?

If a minister is standing and saying, “Well, we've designated x amount of money in the budget”, how do Canadians understand when an allotment has taken place?

[Bill Matthews]

That's a great question.

It's a recent improvement. It is now disclosed as part of the estimates process, because it is in a planning document. The estimates are one of the precursors to the public accounts. When the estimates are updated throughout the year, you will see disclosure that is public around what has been frozen and what has not. That's a fairly recent improvement. It is public.

When the parliamentary budget officer is looking at their analysis on spending, they will often refer to those frozens, and you can get at it through the Treasury Board Secretariat website.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll now go back to the government side and to Mr. Massé.

Mr. Massé, you have seven minutes.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

I would like to continue on the topic of writing off debt, which was raised by my colleague opposite. This also relates to the comments by my colleague Ms. Mendès.

Looking more closely at volume III of the Public Accounts of Canada, we see that more than $4 billion dollars of debt were written off last year. It is roughly the same amount from year to year. Of course, even excluding the debt written off under the Bankruptcy and Insolvency Act, $4 billion is still a substantial amount.

Mr. Matthews, could you elaborate on your answer by explaining what leads departments to write off a debt? How do departments decide to write off a debt?

[Bill Matthews]

Thank you for your question.

There are two things.

First, in preparing the Public Accounts of Canada, as accountants we have to assess how much money we will receive from individuals and organizations. If we think that we will not receive certain amounts, we can make adjustments to the Public Accounts.

That's all background accounting that we would do. If the loan is worth $100 and we think they are going to pay only $90, we can do an adjustment—and the Auditor General would actually require us to—that says, “Here is our best estimate of what we are going to collect.” That is separate from the process of writeoff, forgiveness, or remission.

To do that, with some exceptions, one has to come to the Treasury Board and formally get an approval. It's good housekeeping, and it does get publicly disclosed. That's why it is important to do.

If you are in the business of issuing student loans, or if you are in the business of supporting some vulnerable Canadians and thinking about loans for immigration, you're going to lose some money. We do encourage departments, if they think they can't collect this, to come on in, when the time is right, and write it off.

On the one hand, it's a big dollar amount; on the other hand, we do want departments to do good housekeeping and get this stuff done.