Public Accounts Committee on Nov. 18th, 2022

[Evelyn Dancey, Assistant Deputy Minister, Economic Policy Branch, Department of Finance]

I probably will cede the floor to people who may have more precision, but I can offer a first-level response.

Of course, Crown corporations were involved in the delivery of COVID programming to some extent. That is trickling through the financials, and their circumstances are improving over time as a result of that.

Enterprise Crown corporations that are active in financial markets and delivering financial services are also benefiting in terms of their performance along with the broader economic recovery. Looking ahead, we also talked in the fall economic statement about improvements that would arise from interest-bearing activities of the enterprise Crown corporations, as well as of the government in a rising interest rate environment.

If anyone else wishes to add, they're welcome to.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Is there opportunity for even more growth of those types of programs going forward? What specific programs contributed to this improvement and this situation? Is there potential for further growth going forward?

Anyone can jump in to this.

[Roch Huppé]

I'll step out on a limb here, and I'll have my colleagues correct me. To the first question of the member, I think part of the explanation is the Bank of Canada's loss of $19 billion last year, which the previous member mentioned. Again, that loss not being there this year, in 2022, had an impact on the variance of the results of the Crown corporations.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

I was wondering if you could comment on the net foreign exchange revenues. In 2021 that was $2.1 million, and for 2022 it dropped to $873,000. Could you explain why there was such a substantial drop?

[Diane Peressini, Executive Director, Government Accounting Policy and Reporting, Treasury Board Secretariat]

I can take that one.

There was a decrease of about $1.1 billion related to net gains on sales of marketable securities, largely because of changing interest rates and the fair value of bonds moving in opposite directions, plus another $160 million on interest on cash, cash equivalents and marketable securities. It's all just related to market impacts over the course of the past year.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Okay. Now, in looking at actuarial losses, Ms. Hogan, could you explain first of all what “net actuarial losses” means?

[Karen Hogan]

I'm not a pension expert, but I will do my best.

Really, it is the accumulation of.... Let me back up. Pension liabilities are very complex and long-term liabilities. In order to determine the value today—and in this case at March 31—of this very long-term liability, actuarials get involved. They include a whole bunch of assumptions about demographics, how long people will live, the economy and inflation. There are tons of input. Every year, that fluctuates, and as those fluctuations happen, those are the actuarial gains and losses that are reflected in the liability.

They are then, under public sector accounting standards, deferred and sort of amortized over time into the accounts. It is just a way of sort of present-valuing the long-term liability into today's dollars.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

How does that impact the annual deficit?

[Karen Hogan]

In any given year, it's a portion. The actuarial gains and losses are amortized over time into the deficit. It's an increase of the deficit over time when it's a loss.

[The Chair, Conservative, John Williamson]

It's a sliding scale, I think, and that is the time.

Ms. Sinclair-Desgagné, you now have the floor for two and a half minutes.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you, Mr. Chair.

Now that we appear to have some consensus that Crown corporations need to be more transparent and accountable—I'm pleased that we do—I'd like to ask Mr. Huppé from the Treasury Board Secretariat a question.

In her commentary on the 2020‑2021 financial statements, the Auditor General notes that 31 of 34 corporate plans for Crown corporations had not been approved by the Treasury Board before the start of each Crown corporation's respective fiscal year.

How could that be?

[Roch Huppé]

Crown Corporation corporate plans are spread over a three-year period, as I recall.

Every year, they are supposed to get their new three-year plan approved by the Treasury Board. However, if they don't do it, their previous three-year plan remains in effect until they get their new plan approved.

You're right that in some situations, unfortunately, the plans are not submitted in the allotted timeframe.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Do you follow up on that?

Are you in contact with the Crown corporations to urge them to submit a new plan every year?

It doesn't seem like too much asking them to submit a plan every year.

[Roch Huppé]

I'm not exactly sure what kind of follow‑up is done, but some of my colleagues at the Treasury Board are responsible for looking into that and making sure that the plans are produced in a timely manner.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

In Table 1 of the Library of Parliament analysts' document, the budgeted revenue for Crown corporations for 2022 was $7 billion, but the actual revenue was $12.8 billion, or nearly twice that.

How is it possible to get the modelling so wrong? Are the Crown corporations on auto-pilot?

[Roch Huppé]

I don't have the analysis of that variance on hand, but I can send it to you.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you very much, Mr. Huppé.

[The Chair, Conservative, John Williamson]

Thank you very much, Ms. Sinclair-Desgagné.

Mr. Desjarlais, you have the floor now for two and a half minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I just want to return quickly to a line of questioning I had earlier on the Phoenix pay system and pay administration in the public service. In the financial commentaries, again, there were comments on the fact that there were 310,000 outstanding pay action requests as of March 31, 2022, an increase compared to 254,000 as of March 31, 2021. Of course, some of those requests, as the Auditor General mentioned, are straightforward actions—banking changes, general enquiries and other items.

What I think is important is if the Auditor General could comment on what would be an acceptable number of outstanding pay action requests in light of Phoenix.

[Karen Hogan]

Mr. Chair, unfortunately I don't think I would be able to estimate what that might look like.

As the member mentioned, there were about 310,000 pay action requests at the end of March. Unfortunately, they're not triaged, so we couldn't tell you how many were for monetary impacts on someone's pay. I'm not really sure I would do justice in trying to estimate what a reasonable amount would be.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Perhaps the member from Treasury could respond.

[Roch Huppé]

It's something lower than 310,000, for sure.

PSPC handles about 100,000 to 120,000 pay requests on a monthly basis. The objective is to treat all of these requests, 95% of the time, within an acceptable time frame. You're never going to have no backlog, obviously, as the Auditor General mentioned a little earlier. One could see that something in the neighbourhood of rolling 5%, or around there, would probably seem reasonable.

As I said, our colleagues at public services would need to weigh in here. I'm stepping out on a limb. It's just to give you an idea of the number of requests they receive per month and what they're shooting for as a target, to deal with them in the established timelines 95% of the time.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Out of the amount that—

[The Chair, Conservative, John Williamson]

Mr. Desjarlais, I'm going to cut you off, because you're basically at time. I will get back to you. You'll have one more turn. By keeping everyone on the clock, I'll get back to you again.

We'll turn now to Mr. Kram. You have the floor for five minutes, please.

[Michael Kram, Conservative, Regina—Wascana, SK]

Thank you very much, Mr. Chair.

I would like to go back to Mr. Leswick on the topic of debt-to-GDP ratios. The Bank of Canada has raised interest rates several times this year. Can you explain what the effect of rising interest rates would be on Canada's debt-to-GDP ratio?