Public Accounts Committee on Jan. 26th, 2021

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you, Madam Chair.

Again, it's an absolute pleasure to be back in this committee; it's one of my favourite committees.

We definitely have the opportunity as parliamentarians to dig into the work and hear from government. One of the most important aspects is hearing from the Auditor General about finding ways in which we can improve government, which I believe is the core reason all of us are here.

I'll begin with my questions for the Auditor General.

Our 2019–2020 financial audits have raised management letter points, some of which were not resolved within the year. Of the total management letter points that were unresolved as of 30 June 2020, 40% have been unresolved for 2 years or more, 28% have been unresolved for between 1 and 2 years, and another 32% were newly issued within the past year.

Can you take a moment to talk about the importance of the management letter points and why you issue them? Then, perhaps most important, of the management letter points that have been unresolved, would it be possible to know why?

[Karen Hogan]

Thank you, Madam Chair.

We issue management letter points after most of our financial audits, as throughout the course of our audits we find opportunities to improve internal controls, streamline operations or improve financial reporting practices. We take the time to make some of those recommendations and get management's commitment to a timeline and an action plan in order to continue to improve financial reporting.

Those are, then, very important. We started to monitor them and follow them up a few years ago, because we recognize that some of them take a long time to resolve and others are resolved more quickly. We thought that a more rigorous follow-up would keep the pressure on departments and Crowns to improve their practices.

Most that remain unresolved in the longer buckets are really about IT access. We always carry out work to make sure that we didn't find any inappropriate access, but as you can imagine, so many individuals access IT systems that it takes rigour to stay on top of warning about proper access and removing it when an individual leaves an organization or changing it when they change functions.

It would be up to the departments to tell you individually why they take so long, but I think it's because of the vastness of how many individuals have access to systems, hence why we're seeing some time to weed through all of that.

[Matthew Green, NDP, Hamilton Centre, ON]

I noted in your opening comments, and of course section 23 where you talk about it, that you targeted access controls because they're fundamental for financial processes that depend on IT. Then you go on to state that access controls go beyond financial processes. In an IT environment, access controls ensure that only authorized individuals can access electronic data, and if those controls are absent or weak, the data's integrity is at risk. To ensure that, particularly in a COVID era where there's just an increasing volume of information that is going to be transmitted from home and through the government, we need to have that efficiency.

Can you take a moment and explain why that should be a significant concern?

[Karen Hogan]

Data is used to make good, informed decisions, and data is used to develop financial statements where the government is accountable to the promises they've made. The financial statements then show you the actual result. Therefore, it's important that the data isn't compromised by an individual who shouldn't have access to it.

You want to limit who has access to what. People only need so much information to do to their jobs, so it is really just a best practice that you should make sure that those who have access have the right access to the right information and only when they need it.

We've talked a lot about data quality, and this is the entry into good, proper data quality, because good data allows you to make better-informed decisions.

[Matthew Green, NDP, Hamilton Centre, ON]

Maybe just help me understand more specifically as I drill down into this. You noted in your opening remarks on system access that there were instances where it was granted but people didn't need it or no longer needed it. It seems to me that it ought not be a complicated matter for systems management that strict requirements are put in place, department to department, to ensure that this is not the case.

Why would that be the case, and why haven't departments come along on this? What should they be doing to address it?

[Karen Hogan]

At times when you're talking about a Crown corporation, the controls are all very centralized and fixes like this probably happen a lot more quickly than they would in the government itself, where sometimes central agencies manage access to main systems, hence there is a constant communication and oversight that's needed and a horizontal management of access.

Again, I think a good question to ask the government is where it sits in its priorities to control. What I can tell you is that when we look at access controls and we see that individuals have access they shouldn't have, we also look for compensating controls where there is monitoring to make sure that those people didn't access that information, so we're happy to see that as well.

This is really about cleaning up access. Even though we haven't seen any issues, the risk is there and that's why a good cleanup is needed.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Green.

We will now move on to our second round, starting with Mr. Lawrence for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much, Chair.

I welcome and congratulate the deputy minister, Mr. Sabia.

I'll present my question to Mr. Leswick, because I want to build on the issue of carbon taxing, but if Mr. Sabia wants to enter the conversation, that would be great.

Mr. Leswick, I'm just a little confused about your answer, as you seem to convey that it is revenue-neutral. However, it says in there that $2.7 billion goes back to the government of origin. That doesn't necessarily mean individual Canadians, now, does it?

[Nicholas Leswick]

Thank you for the question and for asking for added clarity.

It does go back to Canadians through the climate action incentive payment, which is administered through the personal income tax system. It doesn't go back to the government of jurisdiction; it goes back directly to households via that tax transfer program.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Is there also GST paid on the carbon tax, or HST as the case may be?

Do Canadians pay HST or GST on the carbon tax?

[Nicholas Leswick]

No. The fuel charge is levied upstream, so the GST or HST is not applied against the fuel charge downstream at the consumer or household level.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Are you saying that GST is not charged on the carbon tax?

[Nicholas Leswick]

GST is not charged on the carbon tax.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

How come I have statements from many constituents that show that GST or HST is charged on the carbon tax?

[Nicholas Leswick]

I appreciate the question.

I think I would take it away just to make sure I'm understanding your question clearly and then clearly how the fuel charge is administered at the producer level, which is where the origin of the revenue is. I just want to make sure I completely put the plug in the wall in terms of understanding both sides of this.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I would appreciate it if you did that. Thank you.

Continuing on a different track, the Auditor General indicated that the department did not obtain the authority of Parliament to make payments to the Province of Newfoundland and Labrador of $138 million in 2019 and 2020 under the Hibernia oilfield agreement. Do you agree with this assessment?

[Michael Sabia]

Mr. Lawrence, I will take that one. Nick, please jump in if you want to clarify anything I'm about to say.

I think this issue has been with us for some time. From the department's perspective, I think, Mr. Lawrence, you're probably aware that with all the respect in the world for the work of the Auditor General and her team, this is an area where I guess I would say the Government of Canada has not fully shared the analysis or the conclusion arrived at by the Auditor General, and that the government does believe it had authority under the Financial Administration Act for that payment.

All that being said, in the current year we have pursued that through supplementary estimates. I believe the Auditor General is comfortable with that path forward, and I can assure you that going forward—because these payments to Newfoundland and Labrador will continue, as you know, for some extended period of time—we are working now on finding the best way of regularizing this, fully in the spirit of the comments and concerns that have been expressed by the Auditor General. This is an issue that I think we have put behind us, and we will certainly be putting it behind us going forward.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perhaps I could just get commentary from the Auditor General. Do you stand by your comments that the payments were made without the authorization of Parliament, or are you agreeing with the deputy minister?

[Karen Hogan]

The Hibernia agreement called for an appropriate legislative measure to be put in place to ensure that parliamentary authority was received. I still stand by our view that initially that was not properly obtained, but including it in supplementary estimates (B), that measure going forward to have Parliament authorize that payment, satisfies the concern we raised.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

Maybe I'll go over to Mr. Huppé for his comment on this. The Treasury Board is to review the expenditures of government. How was this allowed to occur, that $100 million was spent without parliamentary permission?

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Lawrence. Your time is up, so perhaps we could pursue that line of questioning during another round.

I will now move to Mr. Sorbara for five minutes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair.

Good morning, everyone.

My first question is for the Auditor General. It's a bigger-picture question. We are in a time of COVID. We have seen a lot of departments.... For example, as a PS to National Revenue, the CRA was called upon to deliver benefits to Canadians in a very short period of time. Within 48 hours, Canadians received the response benefits, and now the recovery benefits.

Where do you see digitization within the Auditor General's office? You obviously examine a lot of government, really all of government. For me, digitization is a huge thing going forward, not only to drive growth but to be efficient and deliver services and goods to Canadian citizens. Can you comment on that briefly, please?

[Karen Hogan]

I agree with you that the pandemic has definitely seen almost every Canadian interact with the government in an electronic or digital way. I think everyone across the federal public service needs to look at their own processes and see how we can move further towards digitization to support that. That is something we plan to do within our office with some of the increased funding we received. I think it is where we all need to go, because we've seen that it's needed.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Yes, and we must do it without delay. We have no time to lose.

My second question relates to page 68 of volume I. I am someone who grew up in the private sector and saw his parents save, sacrifice and work very hard to build a future for their children in this blessed country we live in. I worked in the private sector for some 20 years before coming into public office. I see the increase in terms of personnel costs from $49 billion to $55 billion from 2019 versus 2020. It's actually on page 67 of volume I.

Can I get an explanation of what drove the increase in staff expenditures, and where this 11% increase was allocated to, because, frankly, it's not sustainable on a year-on-year basis?