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Sylvain Ricard
View Sylvain Ricard Profile
Sylvain Ricard
2019-06-13 8:53
Thank you.
Mr. Chair, thank you for inviting us to discuss the Office of the Auditor General of Canada's current funding situation. This discussion is necessary to ensure that our office is able to deliver on its mandate. With me today are Andrew Hayes, deputy auditor general, and Casey Thomas, assistant auditor general responsible for performance audits.
I'm going to provide a recap of the office's funding and the pressures that have developed. Then I will speak to some challenges presented by the current funding mechanism.
The office has faced funding pressures in recent years. This has impacted our ability to deliver on our mandate, to keep up with the complexity of the audit environment, and to ensure that we have the people, support services and systems we need to fulfill our responsibilities.
Our need for additional funding was first raised by former auditor general Michael Ferguson in the office's 2016-17 report on plans and priorities, in quarterly financial reports since then, and, more formally, in July 2017 correspondence with the Minister of Finance. At that time, we had not requested or received a budget increase in about 10 years.
In 2011, the government undertook a broad budget reduction exercise. Though our office, as an independent agent of Parliament, was under no obligation to make any cuts, we were strongly encouraged by the Minister of Finance to endorse the reduction exercise.
We voluntarily participated. Some audit mandates were stopped, and investments in technology and knowledge building were reduced or postponed. Through these measures, we were able to reduce our workforce by about 10% and our funding by 8%. As a result, we returned $6.7 million in 2014-15 from our vote 1.
Up to Budget 2018, our funding remained largely unchanged, except for receiving $3.2 million for yearly economic increases, consistent with the rest of government. It is important for you to know that we have been and will continue to be forced to use about $1.5 million every year from our vote 1 to cover unfunded salary increases from 2014-2015 and 2015-2016, and also to cover additional measures that we have had to put in place as a result of the Phoenix pay system, so that we could pay our employees.
We managed within our allocated budget for a few years, but by 2017, our budget was no longer sufficient to allow us to keep up with the complexity of the audit environment, the size of our mandate and our operating context.
The former auditor general then asked for a permanent increase of $21.5 million to our vote 1, to be phased in over two years: $9 million starting in 2018-2019, and $12.5 million starting in 2019-2020. This increase was intended to allow us only to maintain the current number of audits that we did, not to increase them. Since that request, we have received additional unfunded mandates.
In Budget 2018, we were allocated $8.3 milllion, which included $1.3 million for accommodations and contributions to employee benefit programs. This means that the permanent increase voted by parliamentarians and available for our operations was $7 million, which was a third of the total increase that we needed.
In July 2018, Mr. Ferguson wrote to the Minister of Finance again to request $10.8 million in additional funding, which represented $3.7 million less than his original request for $21.5 million. The Minister of Finance acknowledged the thorough analysis conducted by our office. However, in Budget 2019, we received no additional funding.
Many audits we conduct are required by legislation, including special examinations of Crown corporations, most financial audits, and some work conducted by the Commissioner of the Environment and Sustainable Development. We continue to receive additional mandates with no related funding, or any discussion of the cost of this work for our office.
There is also the fact that the government's program expenses have increase by almost $75 billion over a five-year period ending in 2019-2020, and they are expected to increase by some $40 billion over the coming four years. Because these increases are reflected in the government financial statements, they mean an increase in our mandated workload.
In parallel, the auditing environment has become increasingly complex. This is due to many factors, including the transformation of the government pay system, new infrastructure arrangements that include different public-private partnership arrangements, and additional complex transactions such as pension investments made by the public sector pension plans.
Auditors must adjust to the increasing complexity of the audit environment. They need access to and must continue to build their expertise in areas such as IT system control environments and data analytics. It's equally important to stay current with accounting and auditing standards and to have access to technical professional development. Without additional funding, we struggle to provide our staff with this expertise.
In performance auditing, we have seen an erosion of our capacity to gather and maintain the knowledge and expertise of the complex government programs we audit. We must be able to assign staff to develop this knowledge before audits begin, so that we have all of the information we need to select the best audits and are ready when it's time to start our audit work.
Our inability to invest in new technologies or audit approaches that are necessary to prepare the office for the present and future remains a serious concern. For example, some of our IT systems will no longer be supported, starting in 2019-20. At our current level of funding, we are unable to replace them before 2021-22 at the earliest. We also estimate that our IT security risk will not be reduced to an acceptable level until at least 2021.
Industry experts have expressed the view that we are significantly behind them in the development and use of IT-enabled audit approaches. We do not have the funding to modernize our approaches and train our staff to keep pace with the industry.
Because most of our financial audits and other work is not discretionary, if our funding remains inadequate, we will be forced to readjust priorities to meet our statutory responsibilities, and to comply with government policies and meet our own organizational requirements, such as replacing IT systems. This means that parliamentarians will receive fewer performance audit reports they can use to hold government organizations to account for the results they deliver for Canadians.
Ten years ago, we were completing about 27 performance audits every year. In 2019, we will complete 16 performance audits. Going forward with our current level of funding, we expect to deliver 14 performance audits each year. This will include three audits for territorial legislatures, four audits presented by the commissioner of the environment and sustainable development and seven audits from the Auditor General.
Before closing, I would like to turn to what Michael Ferguson, our former auditor general, considered to be the largest issue underpinning our funding pressures: the process by which our office, like other agents of Parliament, receives its funding.
The fact that government departments that we audit are involved in determining how much money is allocated to us is not consistent with our independence or our accountability only to Parliament. To give you an example, in the audits we released in early May, we reported on the activities of the Department of Finance and the Treasury Board Secretariat, both of which are involved in supporting government decisions about our funding. That just does not make sense.
We would note that, in his November 2015 mandate letter, the Prime Minister tasked the Leader of the Government in the House of Commons with ensuring—and I quote—“that agents of Parliament are properly funded and accountable only to Parliament, not the government of the day, in collaboration with the President of the Treasury Board.”
In a January 2019 letter addressed to the Clerk of the Privy Council Office, six agents of Parliament, including former Auditor General Michael Ferguson, stated their desire for an alternative funding mechanism, independent of the executive arm of government.
They further detailed the need for an automatic annual budget adjustment based on a factor directly linked or pertinent to the mandate in functions of each agent of Parliament. One option could be to link our budget to the government's total program expenses. In July 2018, Mr. Ferguson wrote to the Minister of Finance to propose such a mechanism.
The process required to release funds is also challenging, not only for our office, but for government as a whole. For example, the $7-million increase to our vote 1 in Budget 2018 was not received by our office until October, after a laborious process of application to the Treasury Board Secretariat. This delay prevented us from using all the funding because of the time required to hire staff and put in place contracts.
In conclusion, Mr. Chair, I thank this committee for the opportunity to present the recent history of our office's budget and the challenges we face as a result.
We would be pleased to answer any questions that you may have.
View Marilyn Gladu Profile
CPC (ON)
I have a quick question.
I'm disappointed that the health minister is not with us so I could ask my standard thalidomide question, but I did get an update that the requirements have been extended to acknowledge those folks who weren't previously able to claim, and they are being processed as we speak. I'm happy about that.
I also got an update on palliative care. I always want to know how much money we spend on palliative care.
In terms of my question today, Diabetes Canada was here and the health committee wrote a report recommending that we implement the diabetes 360° plan. Why did the government give zero dollars in the 2019 budget when they asked for $150 million to fund that program?
Theresa Tam
View Theresa Tam Profile
Theresa Tam
2019-05-28 17:00
First of all, I want to acknowledge the work of this committee. There are quite a number of recommendations. I think the government will provide its formal response to those recommendations, and that might address some of the questions you're asking.
Regarding some of the examples of initiatives, we need to examine them, but we think a holistic, integrated approach that includes prevention, but also supportive social and physical environments, is really vital to diabetes as we address it going forward.
We will definitely look at the recommendations and provide a formal response.
View Wayne Easter Profile
Lib. (PE)
I'll call the meeting to order. As everyone knows, we're still doing Bill C-97 and our continuation of clause-by-clause. We ended yesterday by finishing up with division 20.
We'll start with division 21. We have a witness here from Veterans Affairs. Faith McIntyre is the Acting Assistant Deputy Minister of Strategic Policy with VAC. This relates to the Veterans Well-being Act.
If there are any questions on division 21 in clauses 318 to 322, we're open to that. I see none and there are no amendments in this section. Are we in agreement to carry clauses 318 to 322 on division?
(Clauses 318 to 322 inclusive agreed to on division)
The Chair: You get off easy, Faith.
(On clause 323)
The Chair: Starting with division 22, we have witnesses here from ESDC: Milena Gulia, Director of Policy and Research, Canada Student Loans Program; and Rachel Torrie, Senior Analyst, Canada Student Loans Program.
If there are any questions for officials, we're open to that.
View Pierre-Luc Dusseault Profile
NDP (QC)
Before we start examining this section, I first have a question in order to clarify something. Could someone explain the difference between the Canada Student Loans Act and the Canada Student Financial Assistance Act, so that members of the committee are aware? Essentially, the proposal is that the same changes should apply to both acts. I would like to know the difference between the two.
Milena Gulia
View Milena Gulia Profile
Milena Gulia
2019-05-28 8:53
Thank you very much, Mr. Dusseault.
I can explain that.
As you can imagine, the Canada student loans program has been in operation since the 1960s. Over the course of its evolution, we have introduced various changes along the way.
We have two pieces of legislation that cover off different loan regimes. For example, under the Canada Student Financial Assistance Act, we cover borrowers who came under our direct lending regime that was introduced in 2000. The reason why we have two pieces of legislation is to cover off any of those remaining. They're quite small in number, but nonetheless, this covers off any remaining loans that still fall under the previous regime.
View Pierre-Luc Dusseault Profile
NDP (QC)
You say that a small number of students come under the previous scheme. I suppose that very few, if any, students under the previous scheme will finish their studies after this bill is passed.
View Wayne Easter Profile
Lib. (PE)
If there are no other questions for officials to start off, we'll turn to amendment NDP-28.
View Pierre-Luc Dusseault Profile
NDP (QC)
Thank you, Mr. Chair.
My first amendment in this section is similar to the next one. It follows up on testimony we have heard about the proposal for loans only to be subject to interest six months after students have completed their studies.
We have heard that interest on student loans generates $700 million per year for the country’s coffers. That is far beyond the cost of the program. Simply put, the government is getting rich at the expense of students. That seems to me to be what we can deduce from this.
Students have taken on debt in order to be able to finish their studies. The cost of the studies is too high, so they have to go into debt in order to be able to finish them. The Government of Canada is getting rich at their expense. It would perhaps be to their advantage to put that money somewhere else. Those $700 million could help them to buy a house, for example, to look after their needs, to have children, or to improve their professional skills. In our opinion, those $700 million should stay in the pockets of the former students.
We are proposing that student loans be interest-free for borrowers. That is our proposal. Why limit the interest exemption to six months when it could apply to the entire loan in the future?
That is my proposal, Mr. Chair. I hope that you will find it to be in order and that you will accept it.
View Francesco Sorbara Profile
Lib. (ON)
Thank you, Mr. Chair.
I just need clarification because this amendment requires a monetary adjustment to the BIA.
Is it in order? My understanding is that this amendment would require no interest to be paid on the Canada student loans. Is it in order or out of order?
View Wayne Easter Profile
Lib. (PE)
I'll ask the legislative clerk to explain. You're wondering if it really requires a royal recommendation.
Jacques Maziade
View Jacques Maziade Profile
Jacques Maziade
2019-05-28 8:57
This amendment doesn't need a royal recommendation because it's less money coming into the consolidated revenue fund. It's outstanding.
View Francesco Sorbara Profile
Lib. (ON)
Thank you for that clarification.
The BIA legislation that we put in place following on budget 2016 greatly increased the Canada student grants. The BIA legislation takes a number of steps to make student loans more affordable for Canadian students coast to coast. It's an approximately $1.7-billion investment expenditure to reduce the cost of student loans for students. We've done a lot on that front and we continue to do a lot.
With that, I'll be rejecting this amendment brought forward by Mr. Dusseault.
For example, we brought in a measure to help students, so they didn't have to pay back their student loans until they reached an income of $25,000. To date, that has helped over 325,000 student borrowers who received that support. We are undertaking a number of tangible measures on that front.
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