Public Accounts Committee on Nov. 23rd, 2023

[The Chair, Conservative, John Williamson]

Good morning everyone.

I call this meeting to order.

Welcome to meeting No. 86 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 2023, referred to the committee on October 24, 2023.

Before I welcome our witnesses, I'm looking for agreement, which I think I've received informally, but I just want to make it formal here in front of the committee. I'll need unanimous consent to run the hearing until approximately 10 minutes before we have to vote to give members time to get to the chamber or vote remotely.

You've all noticed that I have added time to the tail end of this meeting, so the more we scrunch the vote time and get back here quickly, the less time I'll keep you at the back end.

We have a very good set of witnesses here today, and I do want to give them time to answer all of the questions from members.

Can I have consent, please, once the bells ring at approximately 11:15, to go for about 20 minutes and end 10 minutes before the vote begins?

[Some hon. members]

Agreed.

[The Chair, Conservative, John Williamson]

That's very good; it's been approved.

Let me begin now by introducing our witnesses.

From the Office of the Auditor General, we have Karen Hogan, Auditor General; Sana Garda, principal; and Etienne Matte, principal. From the Treasury Board Secretariat, we have Roch Huppé, comptroller general of Canada; Blair Kennedy, senior director, government accounting policy and reporting, financial management sector; and Diane Peressini, executive director, government accounting policy and reporting, financial management sector. From the Department of Finance, we have Chris Forbes, deputy minister; and Evelyn Dancey, assistant deputy minister, fiscal policy branch.

All departments have an opportunity for a five-minute opening.

I believe, Ms. Hogan, that you are the only one who is going to make an opening statement, so we turn the floor to your for five minutes.

[A voice]

[Inaudible—Editor]

[The Chair, Conservative, John Williamson]

You certainly can. I'm glad I raised that. I just wanted to make sure that my information was correct.

There will be two opening statements.

Ms. Hogan, we'll start with you for five minutes, please.

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

Mr. Chair, thank you for this opportunity to discuss the results of our audit of the Government of Canada's consolidated financial statements for the fiscal year ended March 31, 2023.

I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.

With me today are financial audit principals Sana Garda and Etienne Matte.

The consolidated financial statements provide an overview of the government's financial position and performance. These documents are an important source of information for the use of Parliament and Canadians to hold the government accountable for its management of public funds.

This annual financial audit is the largest that my office conducts. It involves the work of almost all of our 260 financial auditors. This audit promotes transparency and supports continuous improvement in the stewardship of public resources. Our auditor's report starts on page 56 of volume 1 of the Public Accounts of Canada 2023.

We issued an unmodified or clean audit opinion on the consolidated financial statements. In other words, we found the financial statements to be credible and prepared in accordance with generally accepted accounting principles for the public sector. Parliament can rely on the information presented in these statements.

Of note this year, the auditor's report is longer, as it is now required to include key audit matters. These are matters of significant importance to our audit, such as tax revenues and pensions. Their disclosure is important to help readers such as the members of this committee understand our work.

As we have done every year since 2016, we have also provided a commentary report that highlights matters of importance coming out of all the federal financial audits we completed.

This year's commentary draws attention again to a significant uncertainty about the continued operations of the Trans Mountain Corporation. The uncertainty relates to the corporation's ability to fund the remaining construction costs of the Trans Mountain expansion project and to continue repaying its existing debt. The corporation reported this uncertainty in its financial statements.

The commentary also reiterates our concerns about the government's process for identifying and recovering overpayments or payments made to ineligible recipients of COVID-19 benefits. Where the government identified amounts that should be recovered, it has properly recorded them in the financial statements. However, the government stated that it has not determined the cumulative value of overpayments and that it expects that post-payment verification activities will take several years to complete.

The commentary also includes an observation on the government's adoption of a new accounting standard that requires it to record liabilities related to the future retirement of tangible capital assets, such as buildings, equipment and vehicles. Our audit noted that some federal organizations relied on poor or incomplete data to calculate the retirement costs of assets, and that a lack of centralized guidance led to duplication of efforts and inconsistencies. These weaknesses highlighted the need to improve how they estimate these long-term liabilities.

The commentary also notes a weakness in controls over the access to key government IT systems, such as the ones that store and process data related to payments. Certain users had access to systems and databases that they did not need to fulfill their duties. While we did not come across any inappropriate changes made to data or any data breaches, this weakness opens a door to potential wrongdoing.

Lastly, this year's commentary once again contains observations about pay administration and National Defence's inventory. These are recurring issues that we continue to monitor.

Mr. Chair, we appreciate the ongoing collaboration of the senior officials and staff of the many departments, agencies and Crown corporations involved in preparing the government's financial statements.

This concludes my opening remarks. We would be pleased to answer the committee's questions.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Now we'll go over to you, Mr. Huppé.

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

Thank you very much, Mr. Chair.

I'm pleased to have this opportunity to say a few words about the Public Accounts of Canada.

I will skip introducing my colleagues because you did a wonderful job at it, Mr. Chair.

I would like to thank the financial management community of the Government of Canada—the Department of Finance, the Receiver General for Canada and the Office of the Auditor General—for helping to prepare the public accounts.

Mr. Chair, the government is committed to being open, transparent and accountable to Canadians and parliamentarians. To that end, the public accounts are part of a series of reports that outline how the government spent the money it requested from Parliament and how it generated revenue.

The public accounts include the government's audited consolidated financial statements and other detailed financial information for the fiscal year ending March 31.

In reporting on how taxpayers' money has been spent, the Public Accounts of Canada provide parliamentarians with information that enables them to understand and evaluate the financial position and operations of the government and to provide effective monitoring.

As an additional monitoring mechanism, the Office of the Auditor General, within the Public Accounts of Canada process, publishes an audit opinion on the government's financial statements and makes observations on the main issues raised in the audit. For the Public Accounts of Canada 2023, which were recently tabled, the Auditor General issued an unmodified or clean audit opinion on the government's consolidated financial statements. This is the 25th year in a row that we have received such an opinion from the Office of the Auditor General, which means that the financial statements were presented faithfully in accordance with accounting principles. I'd like to point out that this is indicative of the high quality of Canada's financial reports and of the work being done by my colleagues in the public service.

Let me now turn to some of the highlights in this year's consolidated financial statement.

Total revenue amounted to $447.8 billion in 2023, which represents an increase of $34.5 billion or 8.4% from 2022. Total expenses amounted to $483.1 billion in 2023, which is down $20.5 billion or 4.1% from 2022. One of the key reasons for the decrease in spending is related to the wind down of temporary COVID support measures.

For the year that ended on March 31, 2023, the government adopted two new accounting standards for asset retirement obligations and financial instruments published by the Public Sector Accounting Board. Of these changes, the new accounting standards will place more of an emphasis on the government's obligations with respect to costs involved in retiring asset and liability derivatives and coming up with a consolidated statement of re‑evaluation gains and losses. Other details about these two changes can be found in note 2 of the consolidated financial statements in section 2 of the Public Accounts of Canada.

I'd like to thank everyone involved in the Government of Canada's financial management, and the Office of the Auditor General, for the successful implementation of these new standards.

The Government of Canada continues to improve public accounts for parliamentarians and Canadians, and we thank the members of the committee for their advice and their unstinting work on the public accounts.

We would now be pleased to answer any of your questions, Mr. Chair.

[The Chair, Conservative, John Williamson]

Thank you very much.

We're going to turn to our first round and first member, Kelly McCauley.

You have the floor for six minutes, Mr. McCauley.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you, Mr. Chair.

Witnesses, thanks very much.

Mr. Forbes, congratulations on your appointment. Welcome back to Finance. You have a phenomenal reputation. I've heard from many people how lucky we are to have you back in Finance.

I'm going to clip this. This is the first time in eight years I've been nice to a committee witness.

Sincerely, congratulations. It's very good to have you aboard Finance.

I want to start with you, please, Mr. Forbes.

In the public accounts, we used to show, in the year, how much in net terms was collected in carbon taxes, how much was actually paid in rebates to people, and how much went to other uses. Because the payment dates have changed, we don't have net numbers in the public accounts.

Are you able to provide them to us for the backstop provinces?

[Chris Forbes, Deputy Minister, Department of Finance]

Thanks for the question.

I can certainly provide you with what I have and what I know.

I'll ask my colleague Evelyn to answer if I get anything wrong, because that is possible.

We have, in the accounts, I think, reported revenues of.... I'm going to find the number here.

[Kelly McCauley, Conservative, Edmonton West, AB]

I have the recorded revenues and what's been paid out, but I'm looking...because the payment dates have changed....doing quarterly. I'm looking for how much was collected in the fiscal year, how much was paid out, how much was not paid out directly in rebates, and how much went to organizations or operations.

[Chris Forbes]

Okay. I'll give you a few numbers, and you can tell me whether it answers your question. I hope that's okay.

The total pollution price proceeds we recorded were a little over $8 billion, of which $7.75 billion was from the fuel charge and about $300 million was from the output-based pricing system. We paid out just a little under $7 billion in total.

[Kelly McCauley, Conservative, Edmonton West, AB]

Do you know how much was paid out or kept for non-rebate? A couple of years ago, it was listed. I think it was around $200 million for operations, buildings and other issues.

Do you know how much was not directly rebated?

[Chris Forbes]

I don't have that number in front of me now.

[Kelly McCauley, Conservative, Edmonton West, AB]

Would you be able to provide it to us?

[Chris Forbes]

Absolutely. We'll find that.

[Kelly McCauley, Conservative, Edmonton West, AB]

Wonderful.

I'm trying to look for the following. I think it's in volume 2. It's table 9.4, where it shows Crown corporations. From what I can read, it looks like the Bank of Canada lost $3.4 billion last year.

Is that correct?

[Chris Forbes]

I don't have the number, but that sounds.... I know there was a loss in the $3 billion range.

[Kelly McCauley, Conservative, Edmonton West, AB]

Could you walk through how we ended up with the Bank of Canada's losing $3.4 billion? Dumb it down for people like us.

[Chris Forbes]

I'll try to walk you through the basics and make it as simple as possible.

Over the course of the pandemic, the bank bought a lot of Government of Canada bonds at the interest rates that were prevailing at the time. If you take those interest rates now, they're much lower than the interest rates the bank is paying on settlements, on balance. The gap between those two is effectively what's driving the losses.

[Kelly McCauley, Conservative, Edmonton West, AB]

Do we know what the forecast loss will be this year? I noticed on June 30 that they were up to three and a half billion already.

[Chris Forbes]

I'll ask Evelyn to answer that.

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

As of the fall economic statement that we tabled on Tuesday, our forecast in-year for this fiscal year is $3.9 billion.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's $3.9 billion. So we lose money on pipelines. We lose money running a bank. Maybe we should get Loblaws to run it for us and they can actually provide a profit. It's remarkable.

I want to touch briefly on overall debt, because we hear the government talk non-stop about it.

I've brought this up at the last two public accounts meetings: net debt versus gross debt. Where are we, in OECD levels, on gross debt when we don't include the assets from the CPP? That's knowing, of course, that we're not going to touch the CPP. I don't believe we should be using it as an asset.

On gross debt, where are we?