Public Accounts Committee on May 3rd, 2022

[The Chair, Conservative, John Williamson]

Welcome to meeting number 17 of the House of Commons Standing Committee on Public Accounts. Pursuant to Standing Order 108(3)(g), the committee is meeting today to study the Public Accounts of Canada 2021.

Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application.

Pursuant to the directive of the Board of Internal Economy of March 10, 2022, all those attending the meeting today must wear a mask, except for members in their seats during parliamentary proceedings.

To ensure the meeting proceeds smoothly, I have a few pointers for witnesses and members.

Wait for me to call your name before you speak. If you are attending the meeting by Zoom, click on the microphone icon so we can hear your voice. Mute when you are not speaking.

Interpretation is available for those on Zoom. You have the choice at the bottom of your screen of floor, English or French. Those in the room can use the earpiece and select the desired channel.

I will remind you that all comments should be addressed through the chair.

When they wish to speak, members present in the room must raise their hand, while those using Zoom must use the “raise hand” function. The committee clerk and I will make every effort to follow the speaking order. Thank you to the members for their patience and understanding in this regard.

In accordance with our routine motion, I'm informing the committee that all witnesses have completed the required connection test in advance of the meeting.

I'd now like to welcome our witnesses. Our list includes, from the Office of the Auditor General, Karen Hogan, Auditor General of Canada; Etienne Matte, principal; and Chantale Perreault, principal.

From the Office of the Comptroller General of Canada, we have Roch Huppé, Comptroller General of Canada; Monia Lahaie, assistant comptroller general, financial management sector; and Diane Peressini, executive director, government accounting policy and reporting.

From the Department of Finance, we have Michael Sabia, deputy minister; Nicholas Leswick, assistant deputy minister, economic and fiscal policy branch; and Evelyn Dancey, assistant deputy minister.

Witnesses will have five minutes to make their opening statement. I understand we have statements from Ms. Hogan as well as Mr. Huppé, so I will call on Ms. Hogan to begin.

You have five minutes. Thank you.

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

Thank you, Mr. Chair.

I want to start by acknowledging that I am on the unceded traditional territory of the Algonquin Anishinaabe people. As this is a virtual hearing and participants may be spread across different locations, I want to pay my respects to indigenous people from all nations across Canada.

With me today are Chantal Perreault and Etienne Matte, financial audit principals. We are pleased to have the opportunity to discuss our audit of the Government of Canada's consolidated financial statements for fiscal year 2020‑2021.

The government's financial statements are one of its key accountability documents. Our audit of these statements provides information that helps Parliament exercise its oversight of the government, promotes transparency, and encourages good financial management.

This year, our audit of the government's financial statements involved most of our 200 financial auditors. It is the largest of the audits conducted by my office.

You will find our audit opinion on the Government of Canada's consolidated financial statements starting on page 57 of volume 1 of the Public Accounts of Canada 2021.

We found that you can rely on the information contained in the financial statements. In all material respects, the information is presented fairly and conforms with generally accepted accounting principles for the private sector. In other words, we issued a clean opinion.

This year, exceptionally, our opinion includes two dates. This is because the government amended its 2020‑2021 consolidated financial statements after it had approved them. The amendments were the result of a significant event that occurred later but before the statements were tabled in Parliament. When the government amends its financial statements, auditing standards require my office to perform additional work to assess whether the amendments were recorded appropriately. The second date in our audit opinion represents the completion of our work on the amendments, which we determined were appropriately recorded.

Our opinion this year also includes an “Emphasis of Matter” paragraph. It highlights the significant impacts of the COVID-19 pandemic on certain amounts presented in the government's consolidated financial statements and related notes.

Every year we provide Parliament with a commentary report that highlights important information about the results of our federal financial audits. This year, the commentary provides an overview of the government's spending in response to the COVID-19 pandemic and discusses possible effects on the government's finances over the coming years. The commentary also describes the additional work we performed to respond to a motion from Parliament.

As in previous years, the commentary raises observations about pay administration and National Defence's inventory. These are recurring issues that we continue to monitor.

For pay administration, we once again carried out detailed audit tests of salary transactions processed through the Phoenix pay system. We found that almost half of the employees in our sample were paid incorrectly at least once during the 2020-21 fiscal year. Despite the significant number of individual pay errors, overpayments and underpayments partially offset each other. At the individual level, it's important to understand that these underlying problems and pay errors continue to affect thousands of people who are being paid incorrectly.

We have been reporting for 18 years on National Defence's difficulties in recording its inventory. National Defence continues to implement the 10-year action plan it submitted to this committee in 2016. We did not see an overall improvement in the rate of errors in our sampling. In our view, errors in reported quantities and values are likely to continue until internal controls are strengthened and the department's plan is fully implemented.

The commentary also provides insights into challenging areas. This year these insights are about cybersecurity and advances in the use of data in federal organizations.

Mr. Chair, I would like to thank the senior officials and staff of the many departments, agencies and Crown corporations involved in preparing the government's financial statements. We appreciate their collaboration during these challenging times.

This concludes my opening remarks. We would be pleased to answer your questions.

[The Chair, Conservative, John Williamson]

Thank you, Ms. Hogan.

Turning now to Mr. Huppé, you have the floor for five minutes, please.

[Roch Huppé, Comptroller General of Canada, Treasury Board Secretariat]

Thank you, Mr. Chair and members of the committee, for this opportunity to discuss the Public Accounts of Canada 2021.

I am pleased to be speaking to you from the traditional unceded territory of the Algonquin Anishinaabe people.

The Public Accounts of Canada 2021 include the consolidated financial statements for fiscal year 2020‑2021, which ended March 31, 2021, in addition to other unaudited financial information.

I am pleased to note that, for the twenty-third consecutive year, the Auditor General has released an unmodified or “clean” audit opinion.

This demonstrates once again the accuracy of Canada's financial reporting and the Government of Canada's commitment as an institution to the responsible financial management and oversight of taxpayer dollars.

I would like to thank the financial management community of the Government of Canada for their excellent work in helping to prepare the public accounts. Its members are responsible for maintaining detailed records of the transactions in their departmental accounts and maintaining strong internal controls.

I would also like to recognize my colleagues at the Department of Finance and the Receiver General for their ongoing support and co-operation in producing the public accounts.

Last but not least, I would like to thank the Office of the Auditor General for its continued co-operation and assistance.

Allow me to present a few financial highlights from the documents.

The government posted an annual deficit of $327.7 billion, compared to a deficit of $39.4 billion the previous year, which was $26.4 billion less than that projected in Budget 2021.

One of the main drivers compared with the prior year relates to program expenses excluding net actuarial losses. Those increased by $270.1 billion, or close to 80%, from 2020, largely reflecting transfers to individuals, businesses and other levels of government under the economic response plan.

The Public Accounts of Canada 2021 were tabled on December 14, 2021. The timing of the tabling was a result of the need to ensure that all the necessary adjustments were made to the government's consolidated financial statements in response to a September 29, 2021 court decision, as well as factoring in the time necessary to print the books.

This court decision altered the estimated contingent liability that was reported in the original financial statements completed on September 9. The government considered the impact of the court ruling and concluded that it required an adjustment to its financial statements. Accordingly, the financial statements were reopened and adjusted after the closing entry was received from Indigenous Services Canada. This is explained in Volume 1, Section 2, Note 22, subsequent events.

This revision is aligned with best practice, as well as public sector accounting standards and Canadian auditing standards. In fact, standards require the Auditor to consider facts up to the time that the financial statements are issued.

The Auditor General then audited the revised estimated contingent liability and dual dated her audit report date on November 19, 2021, to reflect the extension of her audit.

The Public Accounts of Canada 2021 were then finalized, sent for printing, and tabled on December 14, 2021.

While this court decision necessarily delayed the publication of the public accounts, I would note that under the Financial Administration Act, the President of the Treasury Board is required to table the public accounts by December 31, or, if the House of Commons is not sitting during that period, within the first 15 days once the House reconvenes.

I would also like to note that it is not unusual for the public accounts to be tabled in December in years when there is a fall election. In 2019, for example, they were tabled on December 12. In 2015, they were tabled on December 7.

Finally, Mr. Chair, as you know, the government committed to undertake a study of potential changes to the Public Accounts of Canada. We received preliminary feedback from the Library of Parliament on the presentation and format of the Public Accounts of Canada and have started engaging key stakeholders on potential changes to enhance their clarity and usability. Any proposed changes will be carefully examined to ensure that the government’s financial information continues to support transparency and accountability to parliamentarians and Canadians.

As this project advances, the government will continue to work closely with parliamentarians and stakeholders.

This concludes my remarks. Thank you for your attention.

We'd be happy to take any questions.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much, Mr. Huppé.

I appreciate your opening remarks.

Committee members, I'm just going to turn to some committee business for one moment. Because of the votes, we've lost some crucial time here. I'm informed by the clerk that we have an opportunity to extend this meeting by 30 minutes to 1:30. We have translation services available. I will, of course, need unanimous consent for this to happen, so I'm looking for that consent, please.

We will only be hearing from witnesses. There'll be no other committee business to discuss, so that time will not be used to vote on any motions. It will be limited strictly to hearing from witnesses.

With that, Clerk, I can't see the room. Could you see if there's any dissension or if we have unanimous consent to continue by 30 minutes to 1:30?

[The Clerk of the Committee, Ms. Angela Crandall]

It appears that we have unanimous consent, sir.

[The Chair, Conservative, John Williamson]

Thank you very much. I appreciate it. I hope our witnesses can stay with us.

I understand there was one conflict. We will try to turn questions to the Deputy Minister of Finance, who has to leave, I believe, by 1:15—although maybe if he has the opportunity, he can stay until 1:30. But I do understand that he has a conflict and might have to leave at 1:15.

I'm going to turn now to our first round. Mr. McCauley, you have the floor for six minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you, Mr. Chair.

Ms. Hogan, it's good to see you again. I have a quick question. Who approached the Auditor General to reopen the books after you had signed off on them in September?

[Karen Hogan]

There are two types of subsequent events. An auditor—

[Kelly McCauley, Conservative, Edmonton West, AB]

Who specifically approached the Auditor General or was this the Auditor General's decision?

[Karen Hogan]

The Department of Finance and the Comptroller General both—

[Kelly McCauley, Conservative, Edmonton West, AB]

Who in finance was it, please?

[Karen Hogan]

It was the associate deputy minister, Mr. Nick Leswick, and I spoke with Mr. Roch Huppé.

[Kelly McCauley, Conservative, Edmonton West, AB]

Was there any thought that the books were closed and signed off on?

[Karen Hogan]

Absolutely. The conversation was about what type of subsequent event, what the nature was and if there a need to open them. There were lengthy discussions and then consultations with standards before the decision was made.

[Kelly McCauley, Conservative, Edmonton West, AB]

Who made the final decision, please?

[Karen Hogan]

The Government of Canada made the final decision. I do not know who within the government. You would have to ask—

[Kelly McCauley, Conservative, Edmonton West, AB]

There are 400,000 government employees. When you say “the government”, it's not an entity. Was it a physical person who made the decision? Was it Mr. Sabia?

[Karen Hogan]

I would suggest that you perhaps ask Mr. Roch Huppé who exactly made that decision. I do not know.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Huppé.

[Roch Huppé]

Thank you, Mr. Chair.

When the event happened, we had the obligation to take a look at what it meant to our previous estimates. If it meant a material change to any of those estimates, particularly here at the [Inaudible—Editor]—

[Kelly McCauley, Conservative, Edmonton West, AB]

Please just stick to the question.

[Roch Huppé]

Yes, I'm getting there.

[Kelly McCauley, Conservative, Edmonton West, AB]

Please get there.

[Roch Huppé]

In discussion—