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Nancy Cheng
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Nancy Cheng
2015-05-13 15:32
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Thank you, Mr. Chair.
Thank you for this opportunity to discuss “Report 2, Required Reporting by Federal Organizations” of the Spring 2015 Reports of the Auditor General of Canada.
Joining me at the table are John Affleck, principal, and Colin Meredith, director, who were responsible for the audit.
This audit focused on recurring reporting requirements set out by the Treasury Board, by the Public Service Commission of Canada, and by statute. We undertook this audit to respond to long-standing concerns about the burden these reporting requirements create for federal departments, federal agencies, and crown corporations.
The overall objective of the audit was to determine whether selected reporting requirements for federal organizations efficiently support accountability and transparency, and generate information used for decision making in policy development and program management. Overall, we found that reporting intended to support accountability and transparency was serving its intended purposes.
We also found that clear purposes and timelines had been established for the selected reporting requirements, and that central agencies had provided guidance and support to help federal organizations meet them.
However, with respect to the efficiency of required reporting, we found that neither the Treasury Board of Canada Secretariat nor the Public Service Commission of Canada had determined the level of effort or costs involved in meeting the requirements we examined. ln our view, determining level of effort and costs would lead to a greater understanding of the resource implications of these requirements, and would allow them to be adjusted accordingly.
Furthermore, we found that the secretariat has not maintained a comprehensive inventory and schedule of the 60 recurring reporting requirements stemming from its policies, directives, and standards. Such a tool would both help the secretariat address the burden of Treasury Board reporting requirements and help reporting organizations efficiently prepare the required reports.
The secretariat made some accommodations for the sizes and mandates of reporting organizations when reporting requirements were first established and during subsequent reviews. However, we found that most Treasury Board reporting requirements applied equally to all organizations regardless of their size or mandate. For example, the Canadian Polar Commission, a small organization with 11 staff members, was required to prepare 25 annual or quarterly reports.
We noted that the efficiency and value of quarterly financial reports could be improved to better support accountability to Parliament. We identified only one routine use of the information in quarterly financial reports. The Office of the Parliamentary Budget Officer used the information in preparing assessments of in-year spending for parliamentarians.
Six of the eight reports that we examined were intended to support accountability and transparency. We observed that federal organizations were preparing these six reports. However, they were not meeting the remaining two reporting requirements, which were intended to support their internal decision-making.
We noted that 20% of departmental investment plans had not been completed as required. We also found that about half of the departmental security plans that were due by June 2012 had not been finalized at the time of our audit. A departmental security plan is intended to support internal decision-making by providing an integrated view of an organization's security requirements.
In addition, we found that the secretariat did not take full advantage of the opportunity to use the information in the departmental security plans. For example, although the secretariat reviewed the plans it received and used them to support its policy review, it did not use the information to identify broader government security issues.
In the report, we made six recommendations aimed at improving the efficiency and usefulness of required reporting. The secretariat and the commission have agreed with our recommendations.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer questions that this committee may have.
Thank you.
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Nancy Cheng
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Nancy Cheng
2015-05-13 16:28
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Mr. Chair, we counted about 60 such recurring report requirements. There are ad hoc requests as well, so we're not counting ATIP requests or parliamentary requests in terms of information needed from departments and agencies. Working with the Treasury Board Secretariat, because they didn't actually have a complete inventory, we sat down with analysts to try to figure out what was the quantum there. On a recurring basis, there are about 60 of them.
At the outset, we would not have had a complete list to choose them from, nor were we trying to be representative in the selection. We wanted a bit of a combination of different natures. One for transparency, which seems like a good one, is the proactive disclosure of contracts. Larger contracts often should be subjected to public scrutiny, so information like that is put out there and people can see it for transparency purposes. Weighing that with some that would support accountability requirements and some that might be also for internal purposes as well, we wanted to have both the Treasury Board and the Public Service Commission, so that's why the staffing accountability report was chosen.
There wasn't a particular magic formula that we used, but we wanted a combination of different types of audit reports to choose from.
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Jerome Berthelette
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Jerome Berthelette
2015-03-30 15:35
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Thank you, Mr. Chair.
I thank the committee for giving us this opportunity to discuss chapter 5 of our report, entitled “Support to the Automotive Sector”. It is in our 2014 Fall Report. Joining me at the table is Richard Domingue, Principal, who was responsible for the audit.
The global economic recession of 2008 negatively affected Canada's production and employment in the automotive industry. Vehicle sales declined sharply in the United States and Canada, and some companies, including Chrysler and General Motors, could not generate sufficient income to fund their operations.
In December 2008, the governments of Canada and Ontario joined the U.S. government and offered financial assistance to Chrysler Canada and GM Canada. In total, the federal government provided $9 billion of financial assistance to support the restructuring of Chrysler and GM, including their Canadian subsidiaries.
We looked at how Industry Canada, the Department of Finance Canada, and Export Development Canada managed this financial assistance. The assistance involved complex transactions, high uncertainty, and tight timeframes. These circumstances had an impact on what Industry Canada could do to manage the assistance.
We found that Industry Canada, the Department of Finance Canada, and Export Development Canada managed the financial support to the automotive sector in a way that contributed to the viability of the companies and the competitiveness of the sector in Canada over the short and medium terms.
Industry Canada adequately assessed the recovery prospects of Chrysler and GM. This helped the government decide whether to participate in the financing of the companies' restructuring. However, Industry Canada had limited information on required concessions from unionized labour and other stakeholders, and on GM Canada's pension liabilities. This lack of information made it difficult for the department to understand the impact of its assistance on the long-term viability of the companies.
Industry Canada's information on the use of funds was limited to broad categories. For example, Industry Canada had limited documentation on the actual use of a $2.8-billion loan made to GM Canada for capital expenditures, warranty claims, and other general corporate purposes. However, the department adequately monitored the companies' production commitments in Canada.
Mr. Chair, we also found that there was no comprehensive reporting to Parliament of information about the restructuring assistance. Based on the information publicly available, we found it impossible to gain a complete picture of the assistance provided and of the amounts recovered and lost.
In 2008, the federal government launched the automotive innovation fund program. The program's objective is to support automotive firms in their strategic, large-scale research and development projects to produce innovative, greener, and more fuel-efficient vehicles. In addition, the government expects the program to contribute to a more competitive Canadian automotive sector.
We looked at how Industry Canada managed this program. Overall we found that Industry Canada's assessment of each project proposal was consistent with the program's terms and conditions, but in our opinion its risk assessment framework was more comprehensive than required. The department could streamline its risk analysis, given that recipients assume all of the technical risks and most of the financial risks of their projects.
Industry Canada has adequate information coming from progress reports and site visits to allow the progress of each project to be tracked.
However, Industry Canada has not yet used this information to determine whether the program is achieving its objectives.
Industry Canada has agreed with our recommendations and set deadlines for their implementation. Last December the department met one of its deadlines by issuing a report entitled “Summary Report on Canada's Support for the Restructuring of General Motors and Chrysler in 2009”.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.
Thank you.
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Philip Jennings
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Philip Jennings
2015-03-30 15:42
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With that, thank you, Mr. Chair and committee members, for allowing me to provide you with a brief overview of Industry Canada's response to the Auditor General's 2014 fall report on the restructuring assistance provided to General Motors and Chrysler during the economic crisis of 2009 as well as the automotive innovation fund.
As you are aware, Canada has a strong automotive sector, which generates $17 billion annually of value-added, or 10% of Canada's manufacturing GDP. With some 730 automotive suppliers supporting our 11 assembly lines and three engine plants, the industry employs some 117,000 Canadians directly, and another 377,000 Canadians indirectly. In fact, in 2014, Ontario was the largest automotive manufacturing jurisdiction in North America—larger even than Michigan.
The auto sector is also export orientated. There are 90% of Canadian-made vehicles sold abroad, the vast majority of these in the United States. The proximity to the U.S., one of the most profitable auto markets, is one of our competitive strengths. Our auto sector is truly part of an integrated North American market.
Industry Canada is always interested in views and ideas that will help us support and grow Canada's automotive sector. While we hope we will never face a situation like the crisis of 2009 again, we are also interested in learning from such circumstances and in continuously improving how we prepare and respond. In this light, we welcomed the Auditor General's four recommendations. In fact, Industry Canada has already acted upon two of them and plans to act on the other two recommendations in a timely fashion. I will discuss this later in my remarks.
As you know, Mr. Chair, late 2008 and early 2009 was a period of extreme uncertainty and volatility. Credit was tightening, consumers were scaling down and postponing their spending, and economies around the globe appeared to be heading into recession, if they weren't already. The auto sector was experiencing first-hand the impacts of consumers postponing major expenditures. Annual vehicle sales plummeted in the U.S. in 2009, from about 17 million vehicles per year to a little over 10 million.
With shrinking sales, the financial situation of all companies was becoming desperate, but for GM and Chrysler it was particularly bad, as it did not have access to capital like the others. In November 2008, GM announced it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets. No credit institution was in a position to help either GM or Chrysler.
While Canadian sales did not dip as much, Canadian assemblers were not sheltered by the events in the U.S., given that close to 90% of Canadian-made cars are exported to that country. Canadian subsidiaries were directly impacted by their parent companies' difficulties. There was a real risk that GM and Chrysler might shutter their Canadian operations in an attempt to restructure.
GM and Chrysler were at the time, and continue to be, the two largest carmakers in Canada, accounting for more than 55% of total production. Many of Canada's suppliers depended on contracts with GM and Chrysler. Without this work, many would not have survived, leading to a hollowing out of the suppliers and creating problems for the other original automotive equipment manufacturers.
That would have triggered a collapse of the entire Canadian automotive supply chain. The strong links and interdependencies between our supply chain and our assemblers were the key motivation for government action and support of GM and Chrysler. GM and Chrysler in Canada had to be protected from being collateral damage of the events in the U.S., not only for their sake but for the entire suppliers sector and ultimately the entire automotive industry in Canada.
Mr. Chair, as the Auditor General concluded, the Government of Canada did what it set out to do: prevent the disorderly collapse of the auto sector and ensure a viable automotive sector in Canada.
The clock was ticking. There was a very short timeframe to find a viable remedy for both GM and Chrysler. Both were in dire financial straits, and Chrysler needed to find a buyer. From the point that the crisis started and GM submitted high-level restructuring plans to the U.S. Congress in late 2008, governments had less than a month to decide whether to provide an initial set of loans. Again, once the company submitted more detailed plans, there was only about six weeks to assess their long-term viability.
As these events demonstrate, the restructuring of GM and Chrysler took place under intensely challenging circumstances. It required unprecedented collective action by the federal, Ontario, and U.S. governments.
While Charles and I at Industry Canada were not there at the time of the restructuring, the federal government did quickly organize an automotive response team. It was headed by Mr. Richard Dicerni and Mr. Paul Boothe, the deputy minister and associate deputy minister at Industry Canada at the time, and Mr. Ron Parker and Mr. David Moloney, who are my predecessors and who led a team of dedicated public servants who worked tirelessly and in unique ways to manage the government's response to the crisis. It supported a steering committee made up of deputy ministers from Industry Canada and Finance, as well as representatives from Export Development Canada, the Privy Council Office, and the Ontario Ministry of Finance and Ministry of Economic Development and Tourism, who all played important roles.
The team also reached out to stakeholders and experts to ensure it quickly had access to the necessary knowledge and expertise, whether on financial corporate restructuring from KPMG and Ernst and Young or on U.S. and Canadian insolvency law from Cassels Brock or on the automotive market from CSM Worldwide and Casesa Shapiro Group.
There were external discussions with those in the industry, including assemblers and suppliers, to gather essential information needed to assess and understand the risk. The government then made a responsible decision and took decisive action. Afterwards, my department monitored the two companies to ensure they fulfilled their end of the bargain and to ensure that the restructuring would deliver the desired results.
Mr. Chair, I am impressed by the work accomplished by my predecessors for the Canadian industry and its workers. Their work was the basis of the government actions and it paid off. It also proved to be pivotal in securing the immediate future of Canada's automotive industry and the economy at large. In early 2009, GM and Chrysler assembly plants directly employed an estimated 14,000 workers. Today both companies continue to be Canada's largest automotive manufacturers, employing about 19,000 Canadians, and the economic benefits extend far beyond the two companies. At the time of the crisis, the Department of Finance estimated that a total of 52,000 jobs were directly or indirectly tied to production at GM and Chrysler. Another study, by Leslie Shiell and Robin Somerville at the IRPP, estimated that in 2010 a total of 100,000 jobs, including jobs in the supplier sector, could have been lost without the restructuring. The study further suggested that in 2009 alone the economy could have suffered losses of $23 billion had GM and Chrysler not successfully restructured. The government's decisive actions ensured that there was business for hundreds of suppliers. The effects even spilled over into industries across the Canadian economy.
Today, all Canadian automakers, including GM and Chrysler, are investing in their operations. In the last two years in particular, each of Canada's five automotive assemblers has reinvested in Canada, and auto parts manufacturers have also invested in their operations. Another sign that the sector is doing well is that Canada's production increased to almost 2.4 million vehicles in 2014. The auto sector will continue to contribute significantly to the Canadian economy for many years to come.
All this work was and continues to be recognized, not only by the industry but also by third party analysis such as the IRPP study I mentioned, which concluded that the restructuring assistance was successful. Furthermore, Industry Canada received recognition for its accomplishments, including in the form of the Institute of Public Administration of Canada's 2010 innovative management award. I believe it is a remarkable success story that we were able to partner quickly and effectively with our counterparts at home and abroad, within and outside of government, to provide sound advice and ultimately save thousands of jobs and hundreds of businesses, and to secure a future for Canada's auto sector.
With respect to the automotive innovation fund, I am pleased that the report reflects a program that continues to be well managed. In many respects, it's still early days for the program. It was established in 2008 and seven projects have been supported. The initial projects are just now being completed, yet we know from the initial evaluation we did in 2012 that the program is meeting its short-term objectives. It has leveraged about $2.8 billion in investments since its inception, and as the Auditor General has recommended, we will continue to report against its longer-term objectives as projects are completed.
Mr. Chair, I want to conclude my remarks by noting that we have learned a great deal from these experiences, and the Auditor General's recommendations have helped embed these. The recommendations have highlighted that clear and comprehensive reporting on support provided and the management of that support contributes to the public understanding of the restructuring success. In order to increase the ease of access to the information, last December we published a single summary report on the restructuring support and recoveries. We've also committed to undertaking a review of the management of the restructuring assistance with a focus on identifying lessons learned. This work will be completed this year.
The Auditor General also recommended reviewing how we evaluate proposals for support from the automotive innovation fund, and monitoring the performance of the program.
We have updated the program's risk assessment framework and made explicit the manner in which risk profiles of applicants are assessed. We will also evaluate the program again in 2017-18 to determine to what extent it achieves its long-term objectives.
It is fair to say, just like all Canadians, we hope we never face such a challenge again, requiring us to use the lessons learned from the 2009 crisis.
Thank you, Mr. Chair and committee members. We will be pleased to respond to your questions.
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Jerome Berthelette
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Jerome Berthelette
2015-03-30 16:01
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Mr. Chair, I agree with what you say.
I would make reference to paragraph 5.88, which is our conclusion:
...we concluded that Industry Canada, the Department of Finance Canada, and Export Development Canada managed the financial support to the automotive sector in a way that contributed to the viability of the companies and the competitiveness of the sector...over the short and medium terms.
Generally, this is a good news story.
Mr. Chair, I would then make reference to paragraph 5.23. While I just noted that it is a good news story, there are certain areas where we saw that some more work could have been done. There were areas where there was limited analysis and limited information.
We recognized, as we state in paragraph 5.25, that, “The federal government made its decisions on financial assistance in a period of high uncertainty and within tight time frames.” We understand that. We think more work could have been done in terms of the analysis, maybe relying less on the material presented by the companies and doing a little more independent analysis of it, and perhaps doing a more independent challenge of the information that had been presented.
I think that a final restructuring plan would have been good. It would have provided a place where all of the details related to the restructuring could have been brought together in one place. It would have made it easier for the department and for Canadians to follow what had gone on in the restructuring, and would have made it easier for the department to report against the restructuring.
We have in appendix A, which I believe is at page 25 in my document, some suggestions related to going forward if there is ever another situation like this. We made suggestions related to the planning, monitoring, and public reporting related to such large interventions by the federal government.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:10
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Good.
The report, if I understand the conclusions, said with respect to the management of this particular file, Industry Canada did a good job in assessing the recovery prospects of the company, found on page 7, paragraph 5.24; that Industry Canada monitored the restructuring assistance, page 11; it monitored the production commitments, page 12; and it has been recovering the funds, page 13.
The critiques, if I understand them, are in the nature of how exhaustive the due diligence was, not that there was due diligence absent. Is that a fair assessment, Mr. Berthelette?
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Jerome Berthelette
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Jerome Berthelette
2015-03-30 16:11
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I believe that would be a fair assessment. Our critiques were about the amount of effort that went into the analysis.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:11
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At the time, it said there was no report for the public with respect to the bailout. Is that complete now, Mr. Jennings?
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Philip Jennings
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Philip Jennings
2015-03-30 16:11
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It is completed and is now posted on our website, as of December 2014.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:11
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You pointed out there was no “lessons learned” exercise. That is in progress, as I understand it. What is the expected completion date?
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Philip Jennings
View Philip Jennings Profile
Philip Jennings
2015-03-30 16:11
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It will be completed by the end of this year.
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View Jeff Watson Profile
CPC (ON)
View Jeff Watson Profile
2015-03-30 16:11
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Okay.
On the auto innovation fund—which by the way in 2008 saved Ford's Essex Engine Plant in Windsor, that's a good news story there as well—I note that the Auditor General's report says that risk assessments were completed. I think for the first time I've seen one where they said it was perhaps too exhaustive in the due diligence. We'll take that as noted.
The project risk and proponent risk profiles, the Auditor General points out, were not part of the risk assessment framework. Are they now, Mr. Jennings?
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Philip Jennings
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Philip Jennings
2015-03-30 16:12
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I'll clarify that the department has always used, and continues to use, a risk-based approach when it assesses projects. As noted in the Auditor General's report, we did not have that approach properly documented. As of October of last year, we've now included that explicitly in our documentation.
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View Judy A. Sgro Profile
Lib. (ON)
View Judy A. Sgro Profile
2015-03-30 17:14
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Thank you, Mr. Chair.
Mr. Jennings, how and when do you plan to report the final cost of the financial assistance to Parliament?
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Philip Jennings
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Philip Jennings
2015-03-30 17:14
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As I mentioned before, we put a report on the web. As highlighted by the Auditor General, there was no one place where all the information was together. A report was posted in December 2014, which essentially highlights all the funds that went into the restructuring, as well as all the funds that have been recovered to date.
The final recovery of some funds that make up the equity in General Motors is not yet known. The Government of Canada still owns equity in the company and the two principal factors that will determine the value of those recovered funds will be the share price for General Motors, as well as the exchange rate, so any depreciation in the exchange rate for Canada leads to more recovered funds.
The report highlights what the value of those funds was at the time the report was written, but that has been fluctuating since that point. I should also say that since the report was published, General Motors did call an option on its preferred shares. They bought back preferred shares from the Government of Canada, and Ontario exercised its rights to sell its remaining shares to General Motors, which took place in February of this year.
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View Judy A. Sgro Profile
Lib. (ON)
View Judy A. Sgro Profile
2015-03-30 17:15
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Why do Parliament and Canadians have to wait until 2017 or 2018 to know whether the program achieved its goals? That's a long time.
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Philip Jennings
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Philip Jennings
2015-03-30 17:16
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As I mentioned, in 2012 we conducted an evaluation of the automotive innovation fund. It found that it was on track to meet the objectives. However, it did conclude that it was too early to be able to have a full assessment of the impact of the program, given that it was four years into the program.
We have committed to another evaluation, so we're able to assess that it is meeting its long-term objectives. That date has been set for 2017.
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Philip Jennings
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Philip Jennings
2015-03-30 17:16
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We know that the immediate and medium-term objectives of the program are being met, but to know if the long-term objectives are being met will be evaluated in 2017.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2015-03-30 17:26
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So in essence the government maybe needed to lend the company less money, based on.... Of course, there was $1 billion that GM eventually did need because they self-financed the pension plan. Perhaps they needed to give them less money because there were greater concessions given by the labour force to the company than we perhaps knew about because there was a bit of deficiency in the analysis—albeit it's difficult to do, Mr. Jennings; I understand the timeline you were up against.
Listen, some of us have a real vested interest in making sure that General Motors actually succeeds. I'm one of those people in this country. I happen to be a retiree from General Motors, so I have a vested interest. It goes beyond my general community. I have other colleagues around here as well who have folks in those communities and represent those folks—as Mr. Carrie said, “real” folks in those communities, and I agree with him.
On page 15, Mr. Berthelette, you talk about the lack of comprehensive reporting to Parliament.
I do accede, Mr. Jennings, that your department finally finished the report by the end of last year.
Mr. Berthelette, from what I'm reading at paragraphs 5.62, 5.63, and 5.64, are we talking about the sense that Parliament actually didn't receive any timely reporting in any succinct way, other than unless you chased three or four departments to figure things out, as to what actually happened with a report back on where the moneys were spent? Is that what I'm reading there?
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Jerome Berthelette
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Jerome Berthelette
2015-03-30 17:28
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Yes, Mr. Chair. As we say in paragraph 5.63, we found it impossible to gain a complete picture of the assistance provided, as no single entity had pulled the information together and put it forward in a clear or coherent manner.
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View Stephen Woodworth Profile
CPC (ON)
Thank you very much, Mr. Chair, and thank you to Mr. Ferguson and Ms. Sachs for attending today. It's always extremely interesting. I want to again commend you on the necessary and good-serving function you provide in allowing government to continuously update its processes.
I want to begin with some things that are probably obvious to all of us sitting at this table, but may not be so obvious to those who sit at home. That is with the raison d'être of your department, your agency. As I read it, there are a couple of important functions that your audits and studies provide. One of them is to provide objective information, advice, and assurance to Parliament, territorial legislatures, governments, and Canadians.
Do you consider that as the prime function of your agency?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2014-03-31 15:53
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I think that very much is our prime function.
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View Stephen Woodworth Profile
CPC (ON)
Also, as I understand it, your office assists parliamentarians and territorial legislatures in their work regarding the authorization and oversight of government spending and operations. This too is a very important function and reason for your department.
Is that correct?
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Michael Ferguson
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Michael Ferguson
2014-03-31 15:53
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As we see our role, our role is to do the work, present the work to parliamentarians, and then parliamentarians can use it to hold government accountable.
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View Yvonne Jones Profile
Lib. (NL)
View Yvonne Jones Profile
2014-03-31 16:12
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You talked about the fact that you had been requested by the Senate to do an audit of the Senate.
Do you want to tell us a little bit about the particular aspects you will be looking at in that audit and what timeframe it will cover?
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Michael Ferguson
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Michael Ferguson
2014-03-31 16:12
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We're looking at the spending of each and every senator, at every dollar that was spent by each and every senator over a two-year time period. I'd be going by memory to give the exact start and end date. I don't want to get it wrong. But it's a two-year time period for all of the spending of each and every senator that we're going through.
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View Alain Giguère Profile
NDP (QC)
So if human resources were used for partisan activities, you would investigate. An analysis would be done of the performance of Senate staff. Is that right?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2014-03-31 16:25
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Again, what we are looking at is whether the spending was incurred for Senate business. I am not going to go down into the particular examples that might be outside of that, but what the money was spent for has to meet the test of being for Senate business for all of the spending that occurred in that two-year time period.
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View Alain Giguère Profile
NDP (QC)
Let's talk about resources. You can meet your obligations with the budget you have, as long as departments co-operate with you, open their books wide and hold nothing back.
I remember a report that was presented by the commissioner of the environment and sustainable development on greenhouse gas emissions. He showed us the tables. I pointed out that he could not make a connection between the budgets spent annually and the reduction in greenhouse gas emissions sought, which was the government's objective. He basically told me that the departments themselves had provided approximate objectives in terms of greenhouse gas reductions. He could not do better because he did not have the relevant information.
Does the fact that the information for some files is not accessible influence your ability to prepare your report within the confines of your budget envelope?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2014-03-31 16:31
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Certainly for us to do any audit it's always imperative that we get the information we ask for. If we do not get the information we've asked for, we have an obligation to report that to Parliament.
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View Yvonne Jones Profile
Lib. (NL)
View Yvonne Jones Profile
2014-03-31 16:42
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Have there been any other particular audits that have been done like that more recently and would not have been done in the past that have been added to the work of your office?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2014-03-31 16:42
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Again, I think one place where it has always been a bit of an issue as well in terms of how much access we have is with Parliament itself, either the House of Commons or the Senate. So I think the fact that we have access now to do the audit of the Senate is the type of audit that we have done only periodically rather than on a regular basis.
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View Glenn Thibeault Profile
Ind. (ON)
View Glenn Thibeault Profile
2014-03-31 16:52
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Well, I would state that with all due respect, if you move the goalposts, it's easier to make the numbers look like you're fulfilling your mandate. We need to ensure, especially in this time of transparency and accountability that all parties are saying.... I think all parties want to see more of this. So how can we tell Canadians to rest assured that the Office of the Auditor General is able to do the audits it needs to? Because to quote what Mr. Ferguson said, there is “no shortage” of doing performance audits. That was his quote. There's no shortage of doing those. But what we have right now according to the statistics is a shortage of resources and a shortage of staff.
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2014-03-31 16:53
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Again, I think it's important to understand that we have the financial audits and we have the special exams that we have to do according to legislation, so that's all covered. Then what's left over, essentially, if you want to look at it that way, is what we put toward performance audits. The amount of effort we put into performance audits, as I've said, hasn't reduced. If Parliament decided it wanted more performance audits, we're really at...Parliament telling us how many performance audits they want to do, and the way they do that is essentially by setting the budget.
So we can continue to do 30. Remember that performance audits are not just a function of our being able to do them, they're also a function of the departments being able to have the capacity to accept auditors in. That's another aspect of it. So within this budget, we're able to continue on with the 27 to 30 audits. If Parliament wanted us to do more, that would require more money.
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:33
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Thank you.
Mr. Chair, I am pleased to present my Fall 2013 Report, which was tabled in the House of Commons yesterday. I am accompanied by assistant auditors general Wendy Loschiuk and Maurice Laplante, and principals Gordon Stock and John Affleck.
This report touches on a range of long-standing issues the government has been struggling to address, with potentially significant impacts for Canadians.
Rail safety is one such issue. Fourteen years ago, Transport Canada recognized the need to shift from an inspection-based oversight approach to one that integrates the oversight of safety management systems. This shift is ongoing. Much work remains to be done, and the transition is taking too long.
Transport Canada completed only 26% of its planned audits of federal railways over a three-year period. Most of these audits were narrowly focused and provided assurance on only a few aspects of railway safety management systems. The department has yet to establish an audit approach that provides a minimum level of assurance that federal railways have implemented adequate and effective safety management systems for complying on a day-to-day basis with Canada's framework for rail safety.
Our audit of Canada's food recall system showed that the Canadian Food Inspection Agency does a good job of managing most aspects of recalls. However, the weaknesses we saw in both follow-ups with industry and in large emergency recalls leave significant gaps in the system. While illnesses were contained in the recalls we examined, I'm not confident the system will always yield similar results. The weaknesses we found in decision-making and follow-up stand in the way of the continuous improvement of a system intended to deal with food safety incidents in Canada.
In this report, we also looked at how the Canada Revenue Agency followed up on a list of possible Canadian residents with accounts in a European bank. The Canada Revenue Agency's initial work on offshore banking information shows promise. However, with more lists to look at and changes in legislation that will give the agency access to more information, I believe that it needs to formalize its approach to deal with the increase in its workload.
In another audit, we looked at border controls to prevent illegal entry into Canada. It is very important for the safety of Canadians that controls at the border work as they are supposed to. I am very concerned that our audit found too many examples of controls not working.
Though the Canada Border Services Agency has made significant progress in some of its efforts to detect high risk travellers, it often does not get the information it needs to identify these travellers before they arrive in Canada. Furthermore, even when the agency has the information, we found that controls do not always work. We also found that the RCMP does not know the extent to which it is successful in intercepting people who enter the country illegally between ports of entry.
Though it is not the first time we have raised these issues, border controls are still not working as they should. With better analysis of existing information and better monitoring, many of these issues can be fixed.
Our audit of disaster assistance to agricultural producers is an example of a program with a disconnect between the program's objectives and its outcomes.
Providing quick assistance to agricultural producers is a key goal of the AgriRecovery program. While Agriculture and Agri-Food Canada has delivered assistance to producers for large disasters within their targeted timeline, those producers impacted by disasters with a smaller total payout often wait more than a year for financial help.
Agriculture and Agri-Food Canada needs to streamline its processes for smaller initiatives, and it must track whether it is meeting its timelines.
Let's now move on to our audit of online government services. We found that, since 2005, the government has not significantly expanded the services it offers online to its citizens. As Canadians rely more on the Internet in their day-to-day lives, they expect the government to provide them with online information and services that address their needs.
The government has estimated that savings can be realized by providing better online services for Canadians, but there needs to be a concerted client-focussed strategy. Departments need to work together to make this happen.
Our audit of Aboriginal Affairs and Northern Development Canada's role in supporting emergency management on first nations reserves showed that the department is in a cycle of reacting to emergencies. It has not been able to focus on what can be done to prevent and mitigate these events.
Some reserves continue to be adversely affected in significant ways by repeated emergencies, such as floods. These difficulties are compounded by the fact that the respective roles and responsibilities of the federal government and other stakeholders are unclear. Aboriginal Affairs and Northern Development Canada must work with other stakeholders, including first nations, to reduce the human and financial costs of emergencies over the long term.
We also followed up on our audit of internal controls over financial reporting. Eight years after the government made it a priority to have in place effective internal controls over financial reporting, I am concerned that several large departments are still years away from knowing whether these controls are in place and working effectively. With annual spending of nearly $300 billion across government, effective internal controls are a necessary part of safeguarding public assets. It is imperative that departments get this work done without further delay.
This report also looked at the national shipbuilding procurement strategy, specifically whether it has been designed and managed to help sustain Canadian shipbuilding capacity and capability over the coming decades. It's still early, but so far the strategy has resulted in the transparent and efficient selection of two yards to build ships for the navy and the coast guard.
Although only a few contracts have signed to date, and it will be a few years before any ships are delivered, the national shipbuilding procurement strategy shows promise. As with anything new, there are risks involved, and these will need to be closely monitored on an ongoing basis.
A look over the audits that we are reporting on today shows that, in many cases, the results need to be improved. Even when the government recognizes a problem, it takes too long to develop and implement solutions. The resulting delays can have significant impacts on Canadians, both directly and indirectly.
Departments need to focus on critical success factors that are proven to work. These include setting clear priorities, applying lessons learned, and monitoring deliverables against timelines and objectives.
Mr. Chair, that concludes my opening statement.
We are happy to answer any questions the members may have. Thank you.
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View Dan Albas Profile
CPC (BC)
View Dan Albas Profile
2013-11-27 15:43
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Thank you very much, Mr. Chair.
I want to thank the Auditor General for being here today along with his staff. Obviously, it is a very important function to make sure that Canadians are getting value for money. I certainly look forward to working with you during my time on this committee.
I'd like to start with chapter 1 of your report. Specifically, I want to understand not just the recommendations, but also the problems that are at hand.
First of all, it's my understanding that the Treasury Board policy on internal control was implemented back in 2009. To me, it sounds as if the purpose was to shift the department's focus from audited financial statements to mandatory annual public disclosure of their risk-based assessment of controls over financial reporting and their planned improvements. It's moving from that. It sounds to me as if they're moving from just keeping the numbers, tracking the numbers, to keeping an eye on other priorities such as inventories, liabilities, etc.
Could you explain a little bit more what that shift is?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:44
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The internal control systems are important for many different reasons. They are there to help protect the government's assets. They are there to make sure that all of the revenue that the government is owed is collected and recorded. They are there to make sure that expenses are authorized.
Financial internal controls are not just about producing statements. They are about many other things, such as protecting government assets.
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View Dan Albas Profile
CPC (BC)
View Dan Albas Profile
2013-11-27 15:45
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Thank you for that.
Your report in paragraph 1.7 states:
While the departments had made some progress toward completing their annual risk-based assessments, none of the departments had fully assessed their internal controls for financial reporting.
I'm bearing in mind that this particular committee takes a non-partisan approach. We're not about the policy per se; we're about value for money. I was disappointed to hear that there was an illusion that none of the seven departments had made improvements, but it sounds to me as if two particular departments made some significant progress. Is that accurate?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:46
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We found that two of the departments involved in this audit, Agriculture and Agri-Food Canada and the Department of Finance, completed all of the work necessary to put in place their system of internal control, assess that system of internal control, determine if there are any gaps in it, address those gaps, and put in place a monitoring system. Two of the departments we looked at had completed the work we expected them to have completed.
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View Dan Albas Profile
CPC (BC)
View Dan Albas Profile
2013-11-27 15:46
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So assertions in this chapter stating that the departments do not have controls over spending are not necessarily accurate. What we're talking about is transitioning to a higher level of accuracy and control from a system where they only monitored through statements. I also believe that it has to do with accountability, as in the Comptroller General's overall position in helping guide departments to comply with the policy.
I think that's another issue you've taken up with the departments. Is that correct?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:47
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Again, it's important for the departments to put in place these systems of controls. I think that's been a priority for a while now, to make sure there are good systems of controls in place. Certainly, there is a role there for the Comptroller General's office as well to encourage these departments to get the internal controls in place.
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View Dan Albas Profile
CPC (BC)
View Dan Albas Profile
2013-11-27 15:47
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Because the policy itself didn't actually set deadlines, is it a fair characterization to say that your office, the Office of the Auditor General, and the Comptroller General's office disagreed with the notion that the Comptroller General, as part of the central agency oversight, would have more of an active role in trying to bring those departments into compliance? Is that correct?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:48
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One of the things we noted—and I think it's in the table that's in the chapter—was there were at least two departments that told us they were going to have this work done by the end of the fiscal year ending March 31, 2013. There were three departments that told us that, and in this audit we found that two of them didn't have it done. That was a concern for us.
Also, yes, we spent a lot of time discussing with the Comptroller General's office what their role is and, I guess, what activities they undertake to encourage these departments to put their systems of internal controls in, assess them, and make sure they have monitoring processes in place.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2013-11-27 15:49
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Thank you very much, Mr. Chair.
Thank you to the Auditor General and the department for coming.
I have a quick question regarding chapter 1. My friend across the way has been talking about that.
In your comments I think you stated that this actually is not a new audit of a similar situation, but an audit was done of this some time ago and the government committed to making immediate changes on how they do this. Is that a fair summary of what the last one said? I don't have it in front of me today, obviously. I don't think you do either, Mr. Ferguson, but it seems the gist of it was that this was done before and somehow it was going to get fixed, and it's still not fixed.
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:49
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This audit was a follow-up audit of an audit we had completed in 2011. The reason we came back and looked at it again so quickly in 2013 was that some of the departments told us they were going to be finished in 2013.
I think it's clear in the chapter that other than for the Department of Agriculture and Agri-Food Canada and the Department of Finance—and I want to be clear that for those two departments, we judged their performance to be satisfactory—the other departments we looked at, as well as the role of Treasury Board, we judged the progress that had been made since the last time we did the audit was unsatisfactory.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2013-11-27 15:50
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I guess I would use the term.... I won't ask you to comment, but you can comment if you would like to, of course, Mr. Ferguson. I always love it when you comment.
It would seem when you did the audit the government made a commitment to complete something. You went back and checked, because they said they would do it quickly, and what you found in this particular case is that a couple of departments managed to make it, and a whole pile of them didn't get there at all.
I don't know if you want to comment on that. It's more of a comment from me. I recognize that's not a direct question.
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 15:51
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Again, I think the summary of the audit was.... It was a follow-up audit. When we're doing a follow-up audit, what we are looking at is what departments have told us in the past, and whether they have done what they said they were going to do. Then it's very clear in a follow-up audit. We look at what they have done, and we judge it to be either satisfactory or unsatisfactory. I think our determination is very clear throughout the chapter.
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View Scott Simms Profile
Lib. (NL)
Then we go back to what you say in chapter 1, about the monitoring issues that seem to be severely lacking. It's been going on for quite some time, where we really need to do a lot of catch up on monitoring of these programs to find out if we're getting the measured success that we so desire. Certainly, when it comes to procurement, such as ship building, or even other types of equipment of that size, and the right decision about options, it seems to me that it's prolific across many departments where we lack the amount of monitoring in order to make these decisions.
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 16:41
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As I mentioned in my opening statement, a number of these issues have been around for a while. Departments have been working on them for a while, but they haven't been able to get them resolved. We think they need to go back to the things that have been proven to work in terms of setting deadlines, learning lessons, setting objectives, and those types of things in measuring performance to make sure some of these files move forward.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2013-11-27 16:52
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I would certainly concur with that, sir, in the sense that if you don't know what the dates are when you're recalling a particular product, you may be recalling stuff that doesn't need to be recalled, but that's on the plus safety side, in a sense. It's a loss to the producer or the processor. The problem is if you have the wrong date, and you were supposed to have recalled the tainted material the day before and it's now out there. That seems to me to be a glaring gap when that confusion starts.
However, I want to move on to chapter 7. You indicated that with a hard cap, if I can use that term, in the budget, which the government has talked about before in the House and you've identified, you suggested that perhaps they will be faced with some choices. What do you see those choices being if they, indeed, stay at the same dollar figure that has been proposed, if there's no movement in opening up that budget in the next number of years?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 16:53
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To clarify, Mr. Chair, the question referred to chapter 7. I think you're referring to chapter 3 on—
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2013-11-27 16:53
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Oh, sorry. Yes, it's chapter 3. I beg your pardon, Mr. Ferguson. You're right. I got ahead of myself; I want to go there next.
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 16:53
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Really, the types of choices, I think, are the normal types of choices you would see in any large project, whether it's acquisition of military equipment, acquisition of a building, or an information technology project where there are constraints. There's the amount of money you want to spend, there's what you want to buy, and there's when you want it delivered. I think people in the consulting business will usually tell you that you have those three constraints and you can have any two of them.
That's really what this is about. There are budget caps, there's the number of ships they want, there's capability they want in those ships. When you put all of those things together, I think it's a normal part of this type of large project that at some point in time there will have to be considerations made about whether there needs to be more money in the budget, whether it's fewer ships, whether the capability of the ships can be reduced, and we've already seen that within these projects. They're faced with having to make considerations in some of those areas.
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View Dan Harris Profile
NDP (ON)
View Dan Harris Profile
2013-11-27 17:06
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Thank you very much.
I'll jump right into it so we can get in a little bit more questioning.
Mr. Ferguson, in recent times you've expressed a concern.... We know how important the work of your office is. The public accounts committee is an important part of reviewing the work so that we can write reports that go back to Parliament and get responses from government to see some action moving forward.
Recently you've expressed some concerns that the committee is not studying as much of your reports as it used to. Your fall report has just come out. The spring report came out in late April and to date, this committee has studied only one chapter of it. To date there is no plan to go back and study more chapters of it, and some important chapters like those on search and rescue.
Because we have five or six months before your next report comes out, do you believe this committee should, over the next few months, go back and study more chapters from the spring report?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 17:08
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Mr. Chair, the work schedule of the committee is up to the committee. We do the audits, and we present the audits to the committee. I think there were a number of important audits in the spring report. There are a number of important audits here as well.
Certainly, we feel it helps to get our message through to the departments as well if there are hearings on the audits. Our preference is that there be hearings on as many chapters as possible, but again, it's up to the committee to decide its work schedule.
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View John Carmichael Profile
CPC (ON)
View John Carmichael Profile
2013-11-27 17:14
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Thank you.
I don't want to put words in your mouth, so you can stop me at any point. You concluded that the CRA was diligent in its approach with the Liechtenstein lists and bank procedures. In your conclusion, paragraph 9.46, you state:
We concluded that overall, the Canada Revenue Agency adequately conducted compliance actions for those named on the Liechtenstein list. It followed its own procedures to determine which files to audit and how to conduct those audits. Agreements allowed the Agency to learn about the structure of these investments, which was in line with the project goals.
Previously, in paragraph 9.36, you go on.... This is what I wanted to ask you. Based on your review of the Liechtenstein project, do you feel the measures that were introduced in economic action plan 2013 will meet the objective of ensuring that we have greater scrutiny in the future of these types of situations?
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Michael Ferguson
View Michael Ferguson Profile
Michael Ferguson
2013-11-27 17:15
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What we've identified—and we refer to the legislative changes in paragraph 9.36—is that the agency will now have access to more information so that they can identify some of these schemes more quickly. That will give them more information. They also have more lists.
The concern we've raised about that is they'll have all of this information. How are they going to manage the increased workload that will come along with more lists, more information, and now more knowledge about how these schemes are put into place? How are they going to manage that moving forward?
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View Dan Albas Profile
CPC (BC)
View Dan Albas Profile
2013-11-20 15:41
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Thank you, Mr. Chair.
I just want to thank all of our guests for being here today to offer your expertise. Obviously, we appreciate the service you do for the country to make sure that again, as Ms. Cheng said earlier, this is a key accountability measure for parliamentarians and thus for the public, so we certainly appreciate your being here.
In regard to that, this is the 15th consecutive year that the Auditor General has issued an unmodified opinion on the Government of Canada's consolidated financial statements. Could you please comment on what this means for Canada?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 15:42
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Thank you, Mr. Chair.
As we have mentioned in the past, this is rather rare in terms of the global situation on financial reporting at the government level. We're not aware of too many jurisdictions that actually have clean opinions on consolidated accounts, let alone having 15 years of consecutive records like so. The closest I think we could find would be New Zealand and Australia where they have consecutive unmodified opinion for about four or five years, but not anywhere close to what we have here in Canada.
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View Dan Albas Profile
CPC (BC)
View Dan Albas Profile
2013-11-20 15:42
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Excellent. I'm very happy to hear that, Mr. Chair.
Now the government's clean audit testifies to the high standards of the government's financial statements and reporting. Can you please share with this committee the requirements needed for the government to achieve this opinion. Are so-called clean audits common in the rest of the world? I know you did say that Australia and some other areas are working toward this same standard. Could you just comment a little further on that?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 15:43
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Thank you, Mr. Chair.
It requires a lot of due diligence on the part of the various departments and agencies that have a role in preparing the financial information.
First and foremost, the proper systems and processes to capture the data are needed; good systems of internal control are needed to be able to ensure that the data collected would be valid; and then the central exercise is needed, which is under the charge of the comptroller general, to make sure there's proper consolidation and proper elimination of accounts. Where there are significant accounting judgments on estimates and more complex issues, the comptroller general would work on those to make sure we follow the standards.
The auditor's role is, in turn then, to look at those accounts and make sure we obtain sufficient and appropriate audit evidence to support the accounts to make sure there are no material misstatements to consolidated financial statements.
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View Kirsty Duncan Profile
Lib. (ON)
Thank you, Mr. Chair.
And thank you all for your work and for coming today.
I'm new. Is the Auditor General's office receiving enough information from the government for the Auditor General's office to do its work?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 16:10
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We have received excellent cooperation from both the comptroller general's office as well as all the line departments and agencies, so there are no issues of any concern that I would bring to the table.
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View Kirsty Duncan Profile
Lib. (ON)
How do you ensure that the departments implement your recommendations? You have talked for 10 years about National Defence. We haven't seen those changes.
How do we ensure that, and do you have recommendations for doing so?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 16:12
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We have some success stories along the way. As I pointed out, we have a very good working relationship with the comptroller general's office, or with other departments, for that matter.
To take an example, if you go back to observations several years ago, estimation of tax revenue was on the block. We talked about things that would be better for assessing tax revenue and estimating the amounts, and these are not on the list anymore.
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 16:13
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We tend to present the results to senior management, and wherever the department might allow us to do so we would go to the departmental audit committee as well to explain some of the differences and some of the weaknesses in their area and encourage them to do that.
As with any other recommendations and performance audit reports, we do not have the authority to require departments and agencies to take certain actions. But the reason I mentioned the centre is that often the comptroller general's office can influence a department to encourage them to make those adjustments and changes.
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View Kirsty Duncan Profile
Lib. (ON)
Thank you.
I'm concerned that there's little follow-up. For example, there's an audit and a few years later there's another audit and we learn the recommendations weren't implemented. Would it be possible to table with the committee what's done to ensure the recommendations are followed? Is that possible?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 16:37
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Mr. Chair, the management letters are intended as a management communication. It was never, I guess, drafted or written with it in mind that it was going to go to a full committee discussion.
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Jim Ralston
View Jim Ralston Profile
Jim Ralston
2013-11-20 16:37
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I think Ms. Cheng has indicated that first of all, there are.... In your first questions, you referenced performance audits. I think it's important to point out that this would not be classified as a performance audit. This is an audit of financial statements.
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View Kirsty Duncan Profile
Lib. (ON)
Thank you.
How accurate do the government's consolidated financial statements have to be to receive a clean audit opinion?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 16:39
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Mr. Chair, in order to receive a clean opinion, we have to conduct sufficient audit procedures to make sure that there are no material misstatements. In that process we look at the different cycles of businesses, we look at the various financial statement line items, and we have audit procedures to audit them.
Because the Government of Canada is composed of many, many activities in more than 100 departments and agencies, we then decide on the larger ones that we would do more work on, and the smaller ones, it stands to reason, we would do less work on. We roll up all of those findings into an overall account to sort of say what some of the differences are that we found.
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-11-20 16:40
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For example, in concluding the 2011, 2012, and 2013 public accounts, we had discussions with the government and the government made $1.5 billion worth of adjustments to the financial statements in terms of the statement package that you see here. When we find differences, we discuss them with management and make sure they understand why we say that those are the differences. When they come to an agreement on that, they make adjustments to the financial statements.
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Tom Scrimger
View Tom Scrimger Profile
Tom Scrimger
2013-04-16 15:39
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Thank you, Mr. Chair.
If you would permit a suggestion, we were going to make opening remarks on behalf of all departments, and I will do this in a few moments. I would be pleased to introduce the delegation of the departments, and perhaps that will save us a few moments. Then we can move from there.
Assisting me today, Mr. Chair, is Sue Stimpson, the chief financial officer of the Canadian International Development Agency. From Human Resources and Skills Development Canada is Ms. Nancy Gardiner, director general of program operations management and accountability. From the Public Health Agency of Canada is Carlo Beaudoin, acting chief financial officer. And from Western Economic Diversification Canada is Donald MacDonald, director general of operations.
Mr. Chair, thank you for the opportunity to speak about Chapter 2 of the fall 2012 report regarding the federal government's grant and contribution program reforms.
In addition to considering the role played by the Treasury Board Secretariat in the reforms, the Auditor General of Canada also examined selected activities undertaken by the five federal organizations I just mentioned. I would like to start by thanking the Auditor General for his work in this file.
As the report notes, the Auditor General last looked at how the federal government managed grant and contribution programs in 2006. At that time, concern was expressed about the heavy financial and administrative burden associated with applying for funding programs and with meeting the various requirements of these programs.
In June 2006, the President of the Treasury Board commissioned an independent blue ribbon panel on grant and contribution programs to recommend measures to make the delivery of grant and contribution programs more efficient while ensuring greater accountability.
In its report “From Red Tape to Clear Results”, published in December 2006, the panel provided recommendations aimed at simplifying the administration of grants and contributions, while at the same time strengthening accountability and risk-based approaches for managing programs.
The Government of Canada' s action plan to reform the administration of grant and contribution programs, announced by the President of the Treasury Board in 2008, outlined how the government would improve the management of grants and contributions as well as the expected results.
The plan consisted of three elements.
First, to build the right foundation, the new policy on transfer payments was introduced. This new policy and its supporting directive and guidelines have clarified accountabilities and simplified administration. The policy reform also established a new regime that is more sensitive to risks and is citizen and recipient focused.
Second, departments developed their individual plans to fundamentally improve their delivery of grants and contributions.
Third was sustained leadership to help guide reform across government. New approaches were developed, shared, and implemented throughout government, such as risk-based management and oversight, simplified approval and claims processing, service delivery standards for recipients, consolidated multi-year agreements, and coordinated recipient audit approaches.
The Auditor General's report has recognized the progress made in implementing the action plan. The Treasury Board Secretariat actively led the policy reform, supported the implementation of departmental action plans and fostered coordinated activities across federal organizations.
Federal organizations are increasingly using recipient monitoring and reporting requirements focused on risks. They are also consulting applicants and recipients on program changes and establishing service standards.
However, the report has also highlighted the need for additional work in two areas.
First we need to better assess the impact of efforts on departmental and recipients' administrative burden. In response, we are undertaking an assessment of the impact of our collective reform efforts, as measured against the expected results in this regard, which were outlined in the action plan.
In collaboration with federal organizations, an assessment will be completed by fall 2013, with a final report made publicly available thereafter. The timing of this assessment aligns with the five-year administrative review of the policy on transfer payments to commence in spring 2013. The results of the assessment will be used to inform this policy review and to identify opportunities to further strengthen the policy.
Secondly, we need to provide additional guidance to federal organizations to ensure that the risk ratings they apply in the ongoing management of their programs and agreements are appropriate and current. We are now working with departments to strengthen the policy guidance related to risk management. The new guidance will provide clearer direction on the need to review and validate risk assessments throughout the life cycle of grants and contributions. We are looking to implement this in spring 2013.
In closing, I would like to acknowledge the ongoing efforts of my colleagues in departments in implementing the action plan.
Mr. Chairman, we look forward to answering your questions, as well as those of the committee members.
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View Gerry Byrne Profile
Lib. (NL)
Mr. Scrimger, one of the concerns that was raised by the Office of the Auditor General in 2001 and 2006 was that the government was indeed moving more and more towards a granting system as opposed to the accountability of a contribution system. There was a criticism and a concern raised by the Office of the Auditor General at that time. In 2005, total votable grants and contributions totalled $27 billion. Now total grants and contributions, votable grants and contributions authorized by Parliament, are $37 billion per year. The Auditor General expressed the concern that the Government of Canada was moving more and more to the granting-based system as opposed to a contribution-based system. The concern was that grants do not have accountability built into them. Of the $37 billion now in grants and contributions, how much of that is grants and how much of that is contributions? Have we actually moved to limit the use of grants and moved more towards contribution agreements?
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Tom Scrimger
View Tom Scrimger Profile
Tom Scrimger
2013-04-16 16:42
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I'm afraid I don't have the number in front of me of the split between grants and contributions, but I would comment on your comment that there is no accountability with grants. I would suggest that between a grant and a contribution there are different accountabilities that departments have between the two instruments. Certainly there is a larger accountability regime attached to most contribution agreements, but there is also the accountability that's required in departments when they're dealing with grants that very much focuses on ensuring the eligibility of the individual or the organization receiving that grant having been confirmed or verified.
When it comes to your other question, I really don't have an ability there.
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-03-05 15:32
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Mr. Chair, thank you for the opportunity to meet with your committee today to discuss chapter 7 of our fall 2012 report, on long-term fiscal sustainability. Joining me at the table is Richard Domingue, the principal responsible for this audit.
Long-term fiscal sustainability refers to whether the government can finance its activities and debt obligations in the future without imposing an unfair burden on future generations. Factors like changing demographics can put pressure on Canada's fiscal position in the long term.
After the financial turmoil in 2008 and its negative impact on the government's fiscal outlook, long-term fiscal sustainability became even more important. In this context, analyses that provide a long-term budgetary perspective would help parliamentarians and Canadians better understand the fiscal challenges we face.
Our audit objective was to determine whether the Department of Finance Canada took into account the long-term fiscal impact when proposing budget measures and policies, and whether it reported this type of information publicly.
We first selected six recent budget measures to determine if the Department of Finance Canada analyzed the long-term fiscal impact of these measures and considered the results when recommending them. To protect the government's fiscal position in the long run, it is important that policy makers understand the future budgetary impact of decisions made today.
Based on our audit, we concluded that the Department of Finance Canada had the capacity and tools to carry out long-term fiscal analyses. We found that such analyses were carried out when the department considered it to be relevant. For changes to the Canada Health Transfer and Old Age Security, the department analysed the long-term fiscal impact of the proposed changes on the federal government, and on the provinces and territories. We noted that the results of those analyses were used to make recommendations.
We then looked at whether the department reports projections on Canada's long-term fiscal position. Although the department analyzed the impact of individual budget measures, it is also important to make available, before concluding the budget process, an overall assessment of their combined impact on the government's long-term fiscal position.
We found that Finance Canada does prepare an analysis of the overall long-term fiscal position of the government. However, it is not prepared or provided to the minister before the budget process is concluded.
For example, we found that an analysis of the long-term overall impact of the March 2012 budget was given to the minister in August 2012, five months after the budget was tabled.
At the conclusion of the 2012 budget measures, senior management and the Minister of Finance had not been informed of the measures' combined impact on the government's long-term fiscal position.
We recommended that the minister be informed of the overall impact of budget measures before final choices were made and approved. Finance Canada agreed with the recommendation. Starting in 2013, it plans to provide the minister with this information before decisions are finalized.
In its 2007 budget, the Government of Canada committed to publishing a comprehensive report on fiscal sustainability and intergenerational equity. We found that the government had not followed through on this commitment. In the absence of publicly available information—and to illustrate the overall impact of the 2012 budget on the government's fiscal sustainability—we prepared 40-year projections by replicating the economic and fiscal conditions at the time when those decisions were made. As we illustrate in exhibit 7.5 of our report, our projections showed that the 2012 budget will have a significant positive impact on the sustainability of public finances for the federal government.
Within hours of our report being submitted, the department published the government's first long-term fiscal report. In response to our recommendation, the Department of Finance committed to publishing long-term fiscal analyses for the federal government annually. It is commendable that the government implemented this recommendation so quickly. As a result, Canada joins a good number of OECD countries that have published long-term fiscal sustainability analyses.
In addition to reporting at the federal level, we also recommended that from time to time the department report an analysis for all levels of government combined, including the federal, provincial, and territorial governments. We note Finance Canada has the capacity and the information to prepare a combined report. A comprehensive report would provide a complete long-term fiscal outlook for Canada.
We note the International Monetary Fund recently urged Canada to publish a fiscal sustainability report covering all levels of government. We encourage the government to take steps to analyze the fiscal position for all of Canada and to report it periodically.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer questions from members of your committee.
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View Andrew Saxton Profile
CPC (BC)
View Andrew Saxton Profile
2013-03-05 15:43
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Thank you.
In the opening statements of the assistant auditor general, she mentioned that the federal government had not released its sustainability report until quite recently, even though it had committed to doing so quite some time ago. I think it was in 2007.
Can you explain why it wasn't released sooner? Was it possibly because of the recession and other things that came up in the meantime, or what was the reason?
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 15:44
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As explained in the report, we prepare analyses on a regular basis at the department. We knew that the government wanted to publish reports, so we did prepare some reports.
Now, as to when these kinds of reports get published, I would say that, effectively, when the global financial crisis happened, our focus changed dramatically and quickly toward the economic action plan and the different phases of it.
For some time, then, this was clearly not a priority at the department, and it was probably not a priority for the government, although I can't speak for the government.
This is one of the reasons that it was kind of postponed. As far as the decision to publish, and when, I think that's more a question for the government.
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View Lysane Blanchette-Lamothe Profile
NDP (QC)
Thank you very much.
When you say a report should be produced, do you also mean it should be made public? Is that part of your recommendations to the Department of Finance?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-03-05 16:03
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Our recommendation is to have such information published in the public domain.
We suggested that it would be from time to time, so we're certainly not trying to put excessive onus on the government and the Department of Finance to try to produce this type of information on an annual basis. It's really up to the judgment of the government as to when it might be appropriate. Once you've done it once, then I guess it depends on the measures that get introduced. If there are significant changes, then maybe it's time to publish another one. It doesn't seem to call for an annual publication of this type of report.
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View Gerry Byrne Profile
Lib. (NL)
Thank you, Mr. Chair.
I'd like our witnesses to draw their attention to the issue of making long-term fiscal sustainability analyses public.
Ms. Cheng, you noted in your remarks that long-term fiscal sustainability analyses have been regularly prepared since 2010. Without prejudice, notwithstanding the issue of making provincial or territorial analyses public, which I'll defer because the issue is a bit contentious, regarding the federal fiscal long-term sustainability analyses, are you disappointed and is the Auditor General of Canada disappointed that the Government of Canada has failed to make public the long-term fiscal sustainability analyses that have been prepared since 2010?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-03-05 16:13
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Mr. Chair, we basically noted the situation. As a matter of fact, we did identify that some years ago when we did a study on long-term demographics. We did encourage the government to provide information in a public forum. We saw that the government made a commitment in 2007 to provide such information, so our hope and expectation were to see that the government does make this particular information public. The government did not, and we basically take note as a matter of fact.
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View Gerry Byrne Profile
Lib. (NL)
Then I'll turn to Mr. Robidoux.
Would you be prepared, Mr. Robidoux, to make these reports available to the committee for our own analysis, since they are indeed referenced in the Auditor General's report?
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 16:16
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I think you have the report of the government with you, or if you don't, we could provide it to you, the one that has been published. I think this is the report. I think the other reports that are mentioned are not reports but are analyses that we are doing on a regular basis to advise the Minister of Finance.
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View Gerry Byrne Profile
Lib. (NL)
Well, I think, Mr. Chair, that we have a hostile witness, because we're splitting hairs. If there was a report given, unless it was a verbal report, there must have been something on paper.
I'll now refer this, and provide a notice of motion to the committee, which I'll move later on, Mr. Chair, that the committee order the Department of Finance to produce the documents referred to in paragraph 7.50 of chapter 7 of the Fall 2012 Report of the Auditor General of Canada to the House of Commons, entitled “Long-Term Fiscal Sustainability—Finance Canada”, and which have not already been made public, namely, long-term fiscal sustainability analyses from 2010 to the present; and that the documents be deposited with the clerk within seven calendar days of the adoption of this motion; and that the committee defer the consideration of a draft report on chapter 7 of the Fall 2012 Report of the Auditor General of Canada to the House of Commons, entitled “Long-Term Fiscal Sustainability—Finance Canada”, until the documents are deposited with the clerk.
I give notice of that motion because, Mr. Chair, we do not seem to have a sense within this committee that you are committed...the Department of Finance of the Government of Canada does not seem in the least bit committed to honouring its 2007 commitments in the budget, wherein it was stated that you would provide this information on a public and ongoing basis.
If you're telling me now that these reports don't actually exist from 2010, 2011, and 2012, and that the Auditor General actually had it wrong when the Auditor General stated to us in his report to Parliament that “while long-term fiscal sustainability analyses have been regularly prepared since 2010” but “have not been made public”, would you like to re-craft your answer to this committee now?
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 16:19
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Sure, I will not re-craft but restate that we did analyses, and they are documented in this report, in the report of the Auditor General. I was just making the nuance about a report for publication. Those—
Hon. Gerry Byrne: I understand...[Inaudible—Editor]
The Chair: Mr. Byrne, please, you're out of time.
Mr. Benoît Robidoux: —were internal analyses of the Department of Finance. They were not reports prepared for publication with the intention of getting them published. This was my only nuance.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2013-03-05 16:25
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Sir, I'm going to have to interrupt you. You said you didn't know. Fair enough, I accept that.
Then I would ask the chair if we could instruct the witness to supply that information to the clerk. We'll all get that.
I heard you say in 2008-09 there was a crisis. Mr. Saxton walked you through that very ably. We got that.
Clearly, there were reports after the fact. I believe we talked about 2010, 2011, and 2012. It takes me to the obvious, sir, which is on page 23 of the English version of chapter 7, paragraph 7.57. The recommendation reads:
The Department of Finance Canada should publish yearly the overall long-term fiscal sustainability analyses for the federal government and provide from time to time an analysis for all governments combined, including the federal, provincial, and territorial governments, to give a total Canada perspective.
There are two things in here. I'll accept the fact that you don't feel comfortable with the provincial piece, and that's okay. I'm not too concerned about that with this particular question.
You did, sir, say, and I don't know whether you did yourself or who actually responded to this recommendation, but under “The Department's Response“ is “Agreed.” We intend not only to do the analysis, but we intend to publish them and make them public.
This brings me back to the very beginning when I started the statement. What I believe I heard you say earlier, and obviously, we'll be able to get it when the recording comes back, on a question about why you didn't publish them, I believe what you said was because the government decided not to, and I'm paraphrasing here. It was not your decision; it was theirs.
I am asking a pointed question. Was the reason that those other reports were not published publicly a governmental decision or a departmental decision?
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 16:27
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At the end of the day, those are reports that are endorsed by the government, so it's a decision that is taken by the government to decide to publish or not.
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View John Williamson Profile
CPC (NB)
This is I think to the auditor's side. I'm curious to probe the idea of the long-term reporting that involves the provinces and territories. I know it's in the report and I know you've mentioned it again, but can you just explain it to me? I'm trying to get my head around the point you're trying to get to with this data and the precision.
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-03-05 16:31
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Mr. Chair, the question is not to get to a point of precision but for the perspective of completeness. Currently, Finance has agreed to provide the information at the federal government level, but it doesn't include the provinces or the territories, so the overall fiscal outlook of Canada is incomplete at the moment and it's to try to encourage Finance to consider doing that.
We do know that they do that kind of analysis and it does have information. Perhaps it's not as precise as it can be because they don't have direct access to all the cabinet assumptions and all of that stuff, but Finance certainly has the capacity and the information to do so and it would provide for a much more complete picture if we could have the provincial element in that.
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View Gerry Byrne Profile
Lib. (NL)
Thank you, Mr. Chair.
The Auditor General in his report to Parliament states: This lack of reporting means that parliamentarians and Canadians do not have all the relevant information to understand the long-term impact of budgets on the federal...governments in order to support public debate and to hold the government to account.
I'll note that the Department of Finance in its action plan that was tabled with the committee has indicated that they will indeed this year provide the minister with long-term fiscal sustainability analyses to budgetary proposals before the budget is actually drafted and tabled. That's a commitment that the department has given to not only the minister, but to us as well.
There is a presumption that in order for this information to be valuable to parliamentarians, it has to be delivered before a decision on appropriation is made by Parliament.
Would you agree, Ms. Cheng, that in order for this to be valuable, that information.... As the Auditor General says to us that there is a disconnect, that there is a problem that parliamentarians don't have this information, would you agree, and do you think the Auditor General of Canada would agree, that having this type of information available to the minister is important? Also, given the fact that parliamentarians are the ones who openly vote and appropriate these resources, would it be valuable for Parliament to have this information before such votes are taken?
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-03-05 16:38
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Mr. Chair, first and foremost, we feel that the minister needs to have this as one piece of many pieces of information for him to recommend to his colleagues and finally have the government support the budget, so that, in the first instance, is the essence of our recommendation.
The recommendation doesn't go as far as requiring the government to table information in whatever form. In principle it would be important for information to be out there, so that it can support parliamentary debate. It really depends on the level of detail that really would be necessary and what kind of measure we might be talking about. I think it would vary from case to case.
Certainly, some information would be relevant to parliamentarians with regard to supporting its study of the estimates.
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View Gerry Byrne Profile
Lib. (NL)
Thank you very much.
I'll ask our representatives from the Department of Finance, is there an intention of making this information available to Parliament before the votes on appropriations are made regarding the business of supply for 2013?
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 16:40
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I would repeat that we made that information available in October. We published a report which you don't seem either to be aware of or to want to recognize. A report was published in October 2012 and we committed at the same time in the AG report to publish one in 2013. That is one every year.
This is matched by only a few other OECD countries. Most other OECD countries publish every four or five years, so we're going to be the highest standard with that commitment.
I just want to be clear about that. Maybe there is some—
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View Earl Dreeshen Profile
CPC (AB)
View Earl Dreeshen Profile
2013-03-05 16:43
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Thank you, Mr. Chair, and thank you to the witnesses for being here today.
I have a couple of things. I get an opportunity sometimes to speak to parliamentarians from other countries, and of course, they simply wish they had the issues that we deal with on a day-to-day and a month-to-month basis. When we talk about how we fit in the G-7.... Again, hearing of the advances, maybe it's delayed as far as some folks are concerned, but the type of reporting that will be out there is to be championed as far as Canada is concerned.
It's important that we look at that, but also, by the same token, look at how proactive the government is in addressing future challenges and make a comparison for what we are doing at the international level.
Perhaps, Ms. Cheng, you could go through some of those aspects and then I'd like comments from Finance as well.
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Nancy Cheng
View Nancy Cheng Profile
Nancy Cheng
2013-03-05 16:44
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Mr. Chair, as part of the audit we actually have looked at what other OECD member countries have done in this area of long-term fiscal sustainability. There is a fairly extensive table on pages 19 and 20, which shows the various jurisdictions and what they do in this area. In the narrative paragraph 7.51 we have also indicated that a good number of countries have actually published 40-year projections. Some of them do it annually. Some are on a 50-year cycle. In the United States they actually go 75 years out. It gives you a bit of a sense of what the benchmark might look like in terms of some of the more developed countries. As I mentioned in my opening statement, now with the government tabling its report—they tabled it in October and plan to publish it every year—we would be standing in good stead among the member countries of the OECD.
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 16:45
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I believe this is a good survey of what other countries are doing. I think doing it every year for the federal government is something fairly impressive.
The other commitment we made, at the suggestion of the Auditor General's office, to brief the Minister of Finance at the end of a cycle on the budget, is also something I'm not aware other countries are doing. I discussed this with colleagues and officials from other countries, and I'm not aware of another country that does that. Again, this will add vigilance into the system to make sure our minister is fully aware of the implications of the decisions he is making on the long-term fiscal state of the country.
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View Malcolm Allen Profile
NDP (ON)
View Malcolm Allen Profile
2013-03-05 16:50
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I understand the difficulty of the modelling. For me, it was an issue on how close we are getting.
The other piece, of course, is to go back to the recommendation because you did say earlier, sir, that the preceding analyses were done, given to the minister, not reported. We've all agreed they weren't reported publicly. You said that was the government's decision, not the department's decision. In the recommendation that you agree to, you will publish, it says, long-term fiscal analyses. So do you now have a green light, sir, on when these are done? Granted, they may not be done every single...but they ask for it. They should be done every year if there's a budget cycle. Have you now been given the green light to actually go ahead and do it, or do you still have to take it back and ask for permission to let it go out?
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Benoît Robidoux
View Benoît Robidoux Profile
Benoît Robidoux
2013-03-05 16:51
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For every document we publish, we always as a department consult with our minister, and he approved these publications. So we'll have to go back to him, but again, the government here, this is a commitment from the Department of Finance, supported by the government, to publish every year a report. It's a commitment, so I believe it will happen.
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View Lysane Blanchette-Lamothe Profile
NDP (QC)
Mr. Robidoux, we need a clear and precise answer. Earlier, you said that you would accept part of the second recommendation. Does that mean you are not accepting the second part of the second recommendation?
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