Public Accounts Committee on Nov. 18th, 2022

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay. I'm just going to stick with that subject, and perhaps you'd just give me an opinion on it.

In the fall economic statement, there was a change on the payment for the Canada workers benefit, and they're forecasting $4 billion in writeoffs for non-recouped prepayments. Is that a political decision to write off ineligible accounts in advance, as opposed to what we're doing with the CERB or CEWS by trying to recoup ineligible payments after the fact?

Auditor General Hogan, do you have an answer for that? Have we seen this before, where we're writing off ineligible accounts in advance and making provisions for it?

[Karen Hogan]

In our financial commentary report, we did provide a bit of an outline of the process the government goes through in order to write off amounts it believes are uncollectible.

At first, it identifies whether or not it believes they are collectible and sets up an accounts receivable. When collection efforts have been exhausted, it then writes them off and they show up in volume III.

[Kelly McCauley, Conservative, Edmonton West, AB]

This is specifically writing them off in advance. The government has put down $4 billion in committing to not recoup ineligible advance payments.

Have we run into this before? Is this common? Does this require a change in how we process...?

[Karen Hogan]

I'm not sure, Mr. Chair, that I understand the question. I don't know how to properly answer it.

[Kelly McCauley, Conservative, Edmonton West, AB]

This is in the fall economic statement—

[The Chair, Conservative, John Williamson]

Mr. McCauley, I'll let you collect your thoughts there.

I am going to move on to our next questioner.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'll get back to it.

Thanks.

[The Chair, Conservative, John Williamson]

Mr. Dong, you have the floor for six minutes, please.

[Han Dong, Liberal, Don Valley North, ON]

Thank you very much, Mr. Chair.

I want to thank the Auditor General and all her colleagues for coming today.

The public accounts reported that the deficit was $23.6 billion lower than forecast. They also showed a declining debt-to-GDP ratio. What does that say about the direction of the fiscal policy, in your opinion?

[Karen Hogan]

My thoughts on the debt-to-GDP ratio start with understanding the calculation of debt. There are several ways you can calculate the debt-to-GDP ratio. The government's financial statement discussion and analysis uses a few, which are the actual debt reverse.... There is also a calculation that looks at the International Monetary Fund one.

I guess it depends on which one you're looking at in order to understand.

The IMF calculation is one that levels Canada to other countries and allows you to compare it to other countries. Then there would be the straight debt-to-GDP ratio, or your equity ratio, that you would normally look at when you analyze financial statements. They both tell a slightly different story.

I would go back to whichever element you want to discuss.

[Han Dong, Liberal, Don Valley North, ON]

On that, is the government's method of calculation consistent with the one the IMF uses to compare to other countries? You have to compare apples to apples. Is that right?

[Karen Hogan]

As I mentioned in “Financial statements discussion and analysis”, the government does the IMF calculation, which gives you a table and reconciles it. That's to allow you to compare us to other countries.

Yes, it levels the playing field among countries.

[Han Dong, Liberal, Don Valley North, ON]

In your commentary on the 2021-22 financial audit, you stated that “in all material respects, the government properly accounted for COVID‑19 measures in its 2021–22 consolidated financial statements.”

Could you explain all of the audit processes that led to this finding?

[Karen Hogan]

It was quite an extensive audit process that we looked at when we looked at payments for all the COVID relief benefits.

I would say that money out the door represents an expenditure to the Government of Canada. All the payments that flowed out are properly recorded as expenditures in the year in which they occurred. That's the statement about it being properly reflected in the financial statements. When the government has assessed that some elements are potentially receivable, it sets up that accounts receivable.

The work we did was to verify that payments went out the door. We looked at the estimation around the accounts receivable process, and we feel that the elements that are recorded as at March 31 are reasonable amounts and properly disclosed.

[Han Dong, Liberal, Don Valley North, ON]

How confident are you that the government spending was reported accurately?

[Karen Hogan]

We issued a clean opinion, which sends a message to everyone that we are confident the financial statements accurately reflect the financial transactions of the government and its financial health as at March 31.

[Han Dong, Liberal, Don Valley North, ON]

Does the Auditor General audit every part of the public accounts? If not....

I'll let you answer that question first.

[Karen Hogan]

We do not audit every part of the public accounts. I think that's a fundamental aspect of an audit. An audit is not looking at every single dollar or every single transaction. We take a risk-based approach. That risk can look at financial significance and a qualitative aspect related to risk. We look at significant departments that account for large spending or represent heightened risks. We also independently audit many of the Crown corporations—not all of them, but many of them—that are consolidated into the Government of Canada.

All of that work being put together is how we audit. All of those are done following Canadian auditing standards.

[Han Dong, Liberal, Don Valley North, ON]

It's not every part of the public accounts.

Isn't it misleading to suggest that the public accounts are complete once you issue your opinion?

[Karen Hogan]

Not at all. We gather sufficient and appropriate audit evidence to base our conclusion and issue our opinion against.

If we felt we had a concern, we would continue to audit until we were done. We've obtained sufficient coverage and are confident that the financial statements are fairly presented as at March 2022.

[Han Dong, Liberal, Don Valley North, ON]

Thank you.

There are several large sums presented in the public accounts regarding potential fraud and overpayment.

What's being done to handle the fraud and recover the public funds?

[Karen Hogan]

For the exact steps that are being done to recover fraudulent payments, you should ask the Government of Canada. What we do during our audit is....

An audit isn't designed to detect fraud, but when we suspect there might be some, we do special procedures. We adjust our audit procedures in order to not have them be the same every year, so that they're unpredictable, and when we find instances of fraud, we bring them up with management.

[Han Dong, Liberal, Don Valley North, ON]

Do you think it's on the right track to recover those funds?

[Karen Hogan]

Most of that work will come out in the audit in December on the COVID relief programs. Out of an abundance of respect for parliamentary privilege, I would prefer to wait to have that discussion then. However, when it comes to the audit of the financial statements for March 2022, we believe any amounts that are unrecoverable have been accurately recorded.

[Han Dong, Liberal, Don Valley North, ON]

That's fair enough.

Thank you.