FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 3, 2001

• 0945

[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order.

As you know, the order of the day is Bill C-17, an act to amend the Budget Implementation Act, 1997 and the Financial Administration Act.

We have the pleasure to have with us the parliamentary secretary to Minister of Finance, along with departmental officials, who I'm sure he will introduce. Mr. Cullen.

Mr. Roy Cullen (Parliamentary Secretary to the Minister of Finance): Thank you very much, Mr. Chairman.

I'll ask the officials to identify themselves and their function within the Department of Finance, starting with Mr. Bob Bartlett.

Mr. Bob Bartlett (Senior Analyst, Government Financing Section, Financial Markets Division, Financial Sector Policy Branch, Department of Finance): I'm a senior analyst, government finance, Department of Finance.

Mr. Richard Botham (Chief, Knowledge and Innovation, Economic Development and Corporate Finance Branch, Department of Finance): I'm Richard Botham. I'm a chief in the economic development and corporate finance branch of the Department of Finance.

Mr. Werner Heiss (Director and General Counsel, General Legal Services, Department of Finance): I'm Werner Heiss. I'm the general legal counsel in the Department of Finance.

Mr. Roy Cullen: Thank you very much, Mr. Chairman, for the opportunity to appear before you today to discuss Bill C-17. I'll keep my remarks brief so that we will have time for questions.

Mr. Chairman, Bill C-17 amend two acts. First, it legislates funding increases totalling $1.25 billion for the Canada Foundation for Innovation through amendments to the Budget Implementation Act, 1997. Second, it amends the Financial Administration Act with regard to the Canada Pension Plan Investment Board and the borrowing power of federal departments.

[Translation]

I will begin with the amendments that affect the Canada Foundation for Innovation. However, before discussing these measures, I want to provide some background.

[English]

As honourable members will recall, the CFI was established in the 1997 budget as an independent corporation operating at arm's length from government. It was designed specifically to provide financial support for modernizing research infrastructure at universities, research hospitals, and not-for-profit research institutions in the areas of health, environment, science, and engineering.

The 1997 budget provided the CFI with an initial upfront federal investment of $800 million. An additional $200 million was allocated in the 1999 budget. Without this extra funding in 1999, the foundation's awards would have ended this year.

The 2000 budget subsequently provided the CFI with a further $900 million and extended support until 2005. The October 2000 economic statement and budget update followed up with an additional $500 million in funding. Then on March 6 the Minister of Finance and the Minister of Industry jointly announced a further federal investment of $750 million for the CFI.

[Translation]

Mr. Chairman, Bill C-17 legislates these last two funding increases—the 500 million dollars from the October 2000 Economic Statement and Budget Update and the 750 million dollars announced last month by the Finance and Industry ministers.

[English]

Together these increases will provide the foundation with an additional federal investment of $1.2 billion in 2000-01 and extend its activities to 2010.

The $500 million announced last October will be invested in two ways: $400 million will allow the foundation to contribute to the operating costs of new awards, and $100 million will help support the participation of Canadian researchers in leading-edge international research projects and facilities that offer significant research benefits to Canada. The additional $750 million announced in March will build on this funding by providing additional stability to universities as they plan their future research priorities.

Mr. Chairman, these new measures will enable the Canada Foundation for Innovation to support the operating costs of new awards and facilitate the participation of Canadian researchers in international research projects.

• 0950

[Translation]

In considering this bill, I urge my honourable colleagues to keep three things in mind.

First, I suggest that you think back to the many initiatives in support of university research that the government has funded over the last few years. These initiatives include, for example, increased funding for the granting councils and the Networks of Centres of Excellence; funding of 900 million dollars over five years for the Canada Research Chairs; and funding of 300 million dollars for Genome Canada, just to name a few.

[English]

The Canada Foundation for Innovation complements these other initiatives and therefore deserves more funding.

Second, additional funding for the CFI will help the federal government reach its goal of at least doubling its current investment in R and D by 2010. The government made this commitment in the Speech from the Throne in January.

Third, and equally important, is the strong support the provinces have demonstrated for the CFI through the participation of their research institutions in the foundation's programs. Each province either contributes to projects supported by the foundation or has established funding programs to complement the CFI program. Quebec and Ontario, for example, have created funds that match CFI awards.

I should point out that CFI awards are determined through a peer review process where projects are evaluated by committees of experts, who are in the best position to recommend whether a project should proceed.

The CFI provides up to 40% of funding to support research infrastructure projects. This funding helps universities and research hospitals acquire the laboratories and equipment they need for state-of-the-art research.

[Translation]

CFI support, for example, has been instrumental in the purchase of major research equipment and the establishment of new research laboratories, along with assisting smaller institutions and individuals with their research capacities. In addition, it has helped collaborative research infrastructure initiatives across universities.

[English]

The foundation has funded projects in every part of Canada and created opportunities for established and new researchers. To date the CFI has supported 95 research organizations, including 65 universities, 18 colleges, and 12 research hospitals.

The $1.2 billion in funding legislated in this bill, Mr. Chairman, will bring total federal investment in the Canada Foundation for Innovation to $3.15 billion.

Mr. Chairman, Bill C-17 also improves the operation of the Financial Administration Act, or FAA. The scope of this statute includes the financial administration of the Government of Canada, the establishment and maintenance of the government's accounts, and the control of crown corporations. In addition the Financial Administration Act sets out the statutory framework under which the government can borrow money. It provides for the authority to refinance maturing debt and ensures that the Minister of Finance is the minister responsible for debt management subject to limits authorized by Parliament.

The first FAA amendment in Bill C-17 concerns the Canada Pension Plan Investment Board, or CPPIB. Amendments to the Canadian Wheat Board Act in 1998 inadvertently deleted CPPIB from subsection 85(1) of the FAA, meaning that the board was subject to various crown corporation control provisions under the FAA, which put it in conflict with its own mandate. Clearly, this was neither wanted nor intended.

Bill C-17 reinstates the CPPIB as one of the crown corporations exempted from part X of the FAA, as was the intention of the CPPIB legislation in the first place. This change will be retroactive to December 1998 to ensure that the CPPIB has always operated within the laws of Canada.

• 0955

Mr. Chairman, the second measure reinforces the authority of Parliament over any borrowing by or on behalf of the crown. This amendment provides for greater certainty that Parliament must specifically authorize borrowings made on behalf of Canada. It also provides clarification and consistency with respect to the role of the Minister of Finance in ensuring the appropriate management of government indebtedness.

Bill C-17 ensures that all borrowings, not just the borrowing of money, are subject to supervision by the Minister of Finance.

[Translation]

In closing, Mr. Chairman, let me leave you with two thoughts about this bill.

First, the amendments to the Financial Administration Act will improve the operation of the Act and protect the role of Parliament.

[English]

The changes to the Budget Implementation Act 1997, which increased funding to the Canada Foundation for Innovation by $1.25 billion and extended its activities, deserve to be passed so the foundation can continue to promote research in Canada and inspire young Canadian researchers.

I and officials present with me here today will be pleased to answer your questions. Thank you.

The Chair: Thank you very much, Mr. Cullen.

Mr. Epp.

Mr. Ken Epp (Elk Island, CA): Thank you, Mr. Chairman.

This is going to sound a little funny, Mr. Cullen, but you know I have this weird sense of humour. When does the fiscal year end? It's a rhetorical question.

Mr. Roy Cullen: The fiscal year of the government?

Mr. Ken Epp: Yes.

Mr. Roy Cullen: March 31.

Mr. Ken Epp: March 31.

In your comments you kept using future tense—“This will enable the government...”. Yet on page four, for example, and on other pages, the impact of it for 2000-2001 quite clearly has passed. You should have been using past tense.

I think it's incredibly ironic. That's why I chuckled when you said “this measure reinforces the authority of Parliament”. You're asking us to authorize what you've already spent since 1997. Isn't that right?

Mr. Roy Cullen: Mr. Epp, we always have this situation where the Government of Canada introduces a budget or an economic statement and introduces measures through ways and means. It then works up the legislation in a more detailed fashion, consults with major stakeholder groups, and brings the legislation through to the House and Parliament. Conceivably, Parliament could turf out a bill, in which case it would unravel things.

This is the way it operates. The department tries to bring the legislation forward as soon as possible. In fact, it's something the minister and I have pushed. We hear these comments from committee members, whether it's here or in the Senate, that bills come back and there's some delay.

We're pushing as hard as we can to get this legislation before Parliament and the committees. Given the fact we had an election, there was the Christmas break, etc., this bill has come back reasonably quickly.

I take your point.

Mr. Ken Epp: Yes. The point is we had the election in 1997. Right? This goes back to 1997.

I appreciate your statement that you would try to be as prompt as possible. It's now four years later. I guess that's pretty impressive. I do remember debating a bill in the House not terribly long ago that went back to 1990, even before the Liberals were in power.

To me, that's not adequate. I think there's a bit of a gap there. I'll probably say the same thing in the House when we debate this bill.

Mr. Roy Cullen: Mr. Chairman, I need to clarify Mr. Epp's comment. I'm a little confused.

This bill makes amendments to the act and the Canada Foundation for Innovation. The process of Parliament is to introduce amendments to the act.

Are you talking about the retroactivity or the proximity of the bill to the budget? I'm not sure.

Mr. Ken Epp: No. I'm talking about how far back some of this funding goes. I think most of it is for the year 2000-2001, which has just passed, right? So that money has been spent.

Mr. Roy Cullen: No.

Maybe the officials could talk about what this bill covers and what has already been passed by Parliament.

Mr. Richard Botham: The Canada Foundation for Innovation was established under the Budget Implementation Act of 1997. It received funding of $800 million from the government initially through that act. Subsequent to that, the 1999 budget was $200 million and the 2000 budget was $900 million.

• 1000

In each of those cases, parliamentary authority has been given. Funding to date used by the foundation through awards is $850 million. All that funding has been sourced from the amounts I referred to from the three budgets Parliament has provided approval for. The funding that's in this particular act is forward-looking. None of it is related to funding or awards given to date by the foundation.

Mr. Ken Epp: Then I need to ask this question. You indicate that on March 6 the Minister of Finance announced further federal investment, as you call it, of $750 million. By the way, I also consider innovation and research to be an investment. But on March 6 he made the announcement, a scant 20 days, a little more, before the end of the fiscal year. When we pass this bill, does that approve the $750 million that is going to be charged against last year's budget, or is that going to come out of this year's money?

Mr. Richard Botham: It is sourced against the fiscal year 2000-2001.

Mr. Ken Epp: Okay. We haven't yet approved it. The money has already been advanced, I'm sure—right? Where is the money right now? That's my question.

Mr. Richard Botham: No money has been provided as yet to the foundation, because it awaits parliamentary approval.

Mr. Ken Epp: Does that mean, then, that there are all of these researchers who haven't been paid their salaries, that there are thousands of facilities where there's rent that hasn't been paid? Is this an account payable?

Mr. Richard Botham: No.

Mr. Roy Cullen: What Mr. Botham was saying is that under the authorities that have already been granted by Parliament, the funds are being expended, so there's no problem there. In addition, it's a standard practice that the government will make certain announcements, introduce a ways and means motion, or indicate its intent, and then bring the legislation through to Parliament as soon as possible. What Mr. Botham was saying, notwithstanding that, was that the expenditures to date are within the amounts that have already been approved and authorized by Parliament.

Mr. Ken Epp: Okay, but I am still confused. We're approving the expenditure of money for the last fiscal year. Either the money has been spent and there's an overrun, and that's what we're now trying to correct, or we have people who haven't been paid bills that should be paid. I still am not in receipt of the answer to that question.

Mr. Roy Cullen: With respect, I think you are, but maybe Mr. Botham could elaborate.

Mr. Richard Botham: The government's investments in the Canada Foundation for Innovation are made. It's an arm's-length organization that provides support for research infrastructure. The amounts given by the government are essentially held in trust by the foundation. They're used through competitions. The money that's provided through this bill would be used in future competitions. The foundation already has funds at its disposal for current competitions that it has planned, so the money here has not already been allocated by the foundation in any way. It's in respect of future awards.

Mr. Ken Epp: In other words, the finance minister has authority all by himself, one individual alone in Canada, to say: I'm going to spend $750 million of taxpayers' money in March 2001. We will approve it some time between now and the end of May, probably, in Parliament, and that money will be charged back on the last fiscal year when we spend it now.

Mr. Roy Cullen: Just to clarify that—because Mr. Botham makes a good point—the Canada Foundation for Innovation is an arm's-length agency, so the government can make allocations to such an agency with the approval and blessing of the Auditor General and then introduce legislation. If the Parliament doesn't pass the legislation, then the funding wouldn't be there. So I would suspect that the Canada Foundation for Innovation would be careful about committing itself too far ahead, unless the acts of Parliament have been approved.

• 1005

This is standard practice. The government comes out with a budget every year, there are various initiatives announced, and then the legislation is produced as quickly as possible and brought before Parliament. That's the way it's been working for thousands and thousands of years.

Mr. Ken Epp: Thank you, Mr. Chairman. I'm going to have to move on, because I'm going to run out of time here.

I guess it would cause a real problem, then, if we ever had a minority government and it couldn't be just assumed that the government would be able to pass these things.

I want to go ahead here. You made a very curious statement: “Bill C-17 ensures that all borrowings, not just the borrowing of money, are subject to supervision by the Minister of Finance.” If the Minister of Finance doesn't borrow money, what does he borrow? I used to lend by car out to my friends when they wanted to use it, but what is it we borrow that isn't money?

Mr. Roy Cullen: I'll start it off, and maybe the officials could expand.

There were some instances when—you understand the concept of a capital lease—capital leases were entered into that were basically seen as being outside of borrowing. In normal disclosure terms, a capital lease would be capitalized and the liability would be shown. So the government wanted to reassert or make it very clear that instruments like capital leases, for example, are within the ambit of borrowing.

Mr. Heiss, did you want to add anything to that?

Mr. Werner Heiss: I think that's correct. The intention here is merely to allow those types of instruments that are typically viewed as borrowing in today's context, but technically may not be considered borrowings, because we've used that narrow language of borrowing money, now also to be considered, for our purposes, as borrowings. They are considered borrowings in an accounting context, so it brings those two concepts together.

Mr. Ken Epp: Okay. Thank you, Mr. Chairman.

The Chair: Mr. Loubier, any questions?

John.

Mr. John Williams (St. Albert, CA): My apologies. I'm not totally up to speed on the finance committee. Does it go around, or does anybody get to ask questions?

The Chair: We just sort of bounce around.

Mr. John Williams: Mr. Chairman, first, I have an amendment to make.

The Chair: We'll do that when we get to the clause-by-clause. This is the question and answer session. Which committee do you belong to?

Mr. John Williams: Public accounts, Mr. Chair.

Mr. Ken Epp: It's been so long since John's been in the real world, you know.

Mr. John Williams: Mr. Cullen, in your opening remarks, on your last page, you say: “Bill C-17 reinstates the CPPIB as one of the crown corporations exempted from Part X of the FAA”. But I read the acts, and it doesn't say that. It says exempted from divisions 1 to 4.

Mr. Roy Cullen: Mr. Bartlett.

Mr. Bob Bartlett: The only difference would be the beginning section, then, in part X, which deals with definitions. So the operations of part X are essentially divisions 1 to 4.

Mr. John Williams: Okay. Is it all of part X?

Mr. Bob Bartlett: Divisions 1 to 4, the operational aspects.

Mr. John Williams: So you're not correct, Mr. Cullen?

Mr. Bob Bartlett: Technically, you're correct.

Mr. John Williams: I'm correct, Mr. Cullen is wrong. Okay. We've got that straightened away.

Mr. Roy Cullen: Maybe I could just add that amendments to the Wheat Board Act some years ago had the unintended result of bringing the Canada Pension Plan Investment Board back within the ambit of the control provisions, if you like, of the Financial Administration Act. So this legislation corrects that unintended consequence.

Mr. John Williams: The Canada Pension Plan has, give or take, $40 billion, and I understand it's being run by an independent agency. We don't have a problem with that, but why would you exempt it from an audit by the Auditor General, for example? Right now the CPP board has a financial audit by an independent auditor, and that's okay, but we know the Auditor General is the Canadian taxpayers' watchdog and he does value-for-money auditing, efficiency auditing, and so on. Why would you prevent the Auditor General from looking at the Canada Pension Plan Investment Board?

• 1010

Mr. Bob Bartlett: The corporation itself is exempt from AG audit, but the operations of the Canada Pension Plan are not, so in effect the total operations of the plan, including the pillar that is the CPPIB, are subject to the AG's comments and examination. It's an exemption that was given to the CPPIB as a corporation so it would not be treated as a government department.

Mr. John Williams: I appreciate that it's a separate agency—well, it's a board—with its own board of directors. However, you're exempting it from the sections of the FAA, the Financial Administration Act, that allow the Auditor General to do a value-for-money audit on the Canada Penson Plan Investment Board if the AG so desires. You have removed that authority for him to go in there, and I want to know what the rationale is for preventing the AG from looking at the board.

Mr. Roy Cullen: You know, Mr. Williams, the Auditor General can go in and do the audit of the plan. The operations of the plan—

Mr. John Williams: But the plan is run by the board, and he can't touch the board.

Mr. Bob Bartlett: No, that's only one part of the plan.

Mr. John Williams: The board handles the investing—

Mr. Roy Cullen: What would his interest be in auditing the board? Would he be listing their travel expenses and...

Mr. John Williams: No.

Mr. Roy Cullen: I'm just asking.

Mr. John Williams: They've got $40 billion of investments. That's Canadians' retirement money. Many people don't think it's going to be there when they retire. The board is in charge of the investments.

Now, it's fine to have a financial auditor audit the financial statements of the board and say that everything seems to be A-OK and that nobody ran off with the petty cash. That's fine, but there's a huge administration of an organization for managing Canada's pension plan. With regard to value for money, perhaps we need to know if investments being made are prudent or less than prudent, perhaps losing money. I'm sure most of that information will never come forward just by way of the normal financial audits. Therefore, I want to know why the AG is being precluded from looking at the investment management of $40 billion of taxpayers' money.

Mr. Roy Cullen: First of all, Mr. Williams, we need to understand that the Canada Pension Plan is a plan whose primary revenues are made up of contributions from employees and employers. While the Government of Canada clearly has a huge interest and the power of oversight, the plan is managed and operated within a legislative framework by members of the board, who are acting in the best interests of the individuals and the companies that have contributed to the board.

It's not really the intention of the government to go in and micromanage the investment decisions of the Canada Pension Plan, but the government does set out some broad parameters. In fact, the Minister of Finance has the authority to go in to do special reviews if for example the minister is concerned about the rate of return or if there are other issues he wants to examine. He could go in and call for a special review.

What we're trying to do here is to preserve the arm's-length nature of the CPP Investment Board. Given that, the board should be permitted to appoint its own auditor. This is pretty standard business practice whose integrity is ensured by the high standards of the auditing profession. I'm a CA myself, and if the Canada Pension Plan Investment Board appoints an auditor of repute—which they would—I'm sure that this auditor will have the capacity and the integrity to examine those records in a way the Auditor General would as well.

Mr. John Williams: Mr. Cullen, you—

Mr. Roy Cullen: In fact, if I could add this, Mr. Williams, the Auditor General was consulted on this draft legislation, and he's very comfortable with this approach. As I said, we can't deem the board to be semi-independent or at arm's-length from government and then if we want say, we're going to go in and micromanage every decision you want to make.

Mr. John Williams: Mr. Cullen, if you're an auditor, you know that auditors don't micromanage. They hold the management accountable. As you know, auditors audit the financial statements on a test basis, and in their auditor's report they give their opinion that everything is as presented. The financial statements tell us the assets, the liabilities, the revenues, and the expenses of the fund over the year. That is it.

• 1015

Now, Canadians need to be assured that the plan is being managed properly, efficiently, and productively because it concerns their retirement. They want more information than just an audit of the financial assets of the plan. I can't believe that the Auditor General said that he is quite comfortable with being prevented from looking at this act. Therefore, I would like, Mr. Chair, to either call the Auditor General as a witness or request that this committee ask for a letter from the Auditor General confirming that he is in agreement with his right to look at this plan being disallowed.

The Chair: Mrs. Barnes.

Mrs. Sue Barnes (London West, Lib.): Mr. Cullen, perhaps I could ask you as a chartered accountant to explain the concept of notes to a financial statement for unusual circumstances to my colleague across the floor.

Mr. Roy Cullen: You want me to speak about notes.

First of all, the responsibility for producing the financial statements would be with management, but the auditor would review the full set of financial statements, which would include the balance sheet; the income statements; statements of funds flow, cash flow, and source and operation of funds; and any notes that would be appended to the financial statements. The auditor would be required to satisfy himself or herself that the notes were substantially correct and were not misleading in any way. The notes form part and parcel of the financial statements, and the auditor reports on the full set, including the notes.

Mr. John Williams: Mr. Chairman, as you know, the Auditor General audits the financial statements of the Government of Canada. He includes the notes, which take about eight or ten pages if I recall correctly. In addition to that he tables three or four reports about a foot thick on his managerial, value-for-money audits of the different departments of the government. These go far beyond looking at the management of the financial assets.

We have dealt with Health Canada and the horrible way they treat our natives, and it's just disgusting what is happening there. He brings that to the fore. We have many other issues we've dealt with, such as HRDC and the billion-dollar boondoggle with grants and contributions. You name it, and he uncovers these things. We wouldn't want to wait until the Minister of Finance orders a special audit. If he so desires, the Auditor General should have on behalf of Canadians the opportunity to investigate and audit on a value-for-money basis the Canada Pension Plan Investment Board.

The Chair: I take your point. However, I thought Mr. Cullen said that in fact the Auditor General was consulted and that he feels comfortable with the way this particular bill addresses that issue.

Mr. Roy Cullen: Yes, absolutely. That's correct, Mr. Chairman. Maybe I could just clarify a couple of things.

The Auditor General will continue to have a responsibility for auditing the annual financial statements for the CPP. This will include a statement on the consolidated accounts of the CPP, the CPP Investment Fund, and the CPP Investment Board. The auditor's report, Mr. Chairman—if I could just continue for a moment—

Mr. John Williams: Is the Auditor General the auditor for the board?

Mr. Roy Cullen: Sorry?

Mr. John Williams: You're saying he's the auditor for the board?

Mr. Roy Cullen: What I'm saying is that the Auditor General will continue to have responsibility for auditing the annual financial statements of the CPP, and that includes the consolidation of the accounts of the CPP, the CPP Investment Fund, and the CPP Investment Board. Is that okay?

The independent auditor the investment board appoints, perhaps one of the big five or six companies or whoever, is required... By the way, their auditor's report is of course completely available to the public; it's on the public record. They must examine the board's transactions to make sure that they're in accordance with the act, its regulations, and the by-laws of the subsidiaries. They must also ensure that the record of investment is kept in accordance with paragraph 39(1)(c) and that they fairly present the information required by that particular paragraph. In other words, the act spells out some of the mandate or terms of reference the auditor must address in conducting his or her audit of those records. Part of that, of course, is to make sure that it's totally in compliance with the intent of Parliament and with the intent of the act.

• 1020

Mr. John Williams: Isn't that because, if I recall, the Canada Pension Plan assets are included in the financial statements of the Government of Canada, and therefore, since the Auditor General audits the statements of the Government of Canada, he has to include the assets that would be managed by the board, but it would still...

Just as a closing comment, Mr. Chairman, I would like to have verification that the Auditor General is in agreement that he is exempted by this new clause in the act from doing value-for-money audits, that he's in agreement with that.

The Chair: Above and beyond, Mr. Cullen, can the officials give input on that particular issue, or not?

Mr. Roy Cullen: Which particular issue? Whether the Auditor General is in agreement?

The Chair: Yes.

Mr. Roy Cullen: We don't have anything in writing with us today. This goes back some time, but what we can do is undertake to get that assurance and bring it back to the chair.

The Chair: Well, in that case, we won't be proceeding with clause-by-clause today.

Mr. Roy Cullen: Why not?

What I'm saying is we have the Auditor General's assurances that he's in agreement with this approach.

The Chair: Oh, do you have it?

Mr. Roy Cullen: We have that assurance, yes.

The Chair: Well, what are you looking for?

Mr. John Williams: Do we bring the Auditor General in to confirm it? Have you a letter, or do we just have your word for it?

Mr. Roy Cullen: We don't have a letter with us, that's the problem.

The Chair: Okay, but there is a letter.

Mr. Roy Cullen: We're not sure if it's a letter per se. We'd have to go back to the files.

Mr. Bob Bartlett: The position of the OAG is that he accepts the comprehensive auditing scheme, which is in place for both the CPPIB and the AG's role in protecting the CPP, as he is the auditor of the plan.

In any case, consultations did occur, and the agreement of the OAG was obtained prior to this legislation going through the House.

The Chair: Mrs. Barnes.

Mrs. Sue Barnes: I was just going to make a comment, Mr. Chair, that I've heard from the finance officials and the parliamentary secretary to the finance minister, both of whom I do not believe would try to mislead this committee. I'm prepared to go ahead today, based on what they've told me.

The Chair: Yes. Thank you.

Well, Mr. Williams, as a member of the committee at least for today, can request in fact whether the committee wants to have the Auditor General appear or not. That's his right, and we'll have to deal with it as a committee. We do have to deal with issues brought up by members of the committee. The question I'm going to be asking, obviously, is whether the committee feels it necessary for the Auditor General to appear to deal with this issue. If the committee says yes, we will invite the Auditor General, and if the committee says no, we won't. It's pretty straightforward.

Mr. Roy Cullen: I would add that within the act there's also what is called a “duty to provide information” and it says:

The Investment Board and its auditor shall provide the Auditor General of Canada with any records, accounts, statements or other information that in the opinion of the Auditor General of Canada are necessary to audit the annual financial statements of the Canada Pension Plan.

So the Auditor General basically has the right and the duty and the obligation to request any information that he or she sees fit.

The Chair: Mr. Williams.

Mr. John Williams: Let me object to that, Mr. Chairman. I'm looking at clause 139, which of course is going to be exempted. These do not apply.

No, that's not the Auditor General. Where was I? Sorry, I had it here.

Appointment of the auditor, subsection 134(2), Auditor General: “On or after January 1, 1989, the Auditor General shall be appointed...”. That's exempted, so he doesn't need to be appointed the auditor.

It goes on to talk about all these things being exempted. Special examinations are exempted, reports to the minister are exempted, right to information is exempted—and it continues—audit committee is exempted. So all of these restrictions and accountability procedures built into the Financial Administration Act are exempted—all of them. That's my concern, Mr. Chair.

• 1025

I can understand Mr. Cullen saying that the board should operate at arm's length from government. I don't even have a problem with that. I would just like one proviso: that the Auditor General be allowed, if he so desires, to look at the CPPIB. That's all I ask.

The Chair: Mr. Cullen.

Mr. John Williams: In exchange for granting approval for the waiver of all this accountability.

Mr. Roy Cullen: Well, the Auditor General, as I mentioned before, will continue to have the responsibility for auditing the annual financial statements of the Canada Pension Plan, and they'll include the statement consolidating the accounts—

Mr. John Williams: That's different.

Mr. Roy Cullen: —of the CPP, the CPP Investment Fund, and the CPP Investment Board.

Mr. Chairman, another thing the committee should realize is that if any auditor... If I'm the auditor, let's say, of a parent company and the subsidiaries are audited by other auditors, I can rely on the opinion of the other auditors, but I have a duty, responsibility, and the right to call in those auditors to take me through exactly what their scope was—any concerns they had—and if they have a qualifying opinion or an unqualified opinion, to actually examine their audit files. This is a standard practice.

The Auditor General, considering the fact that he's looking at the consolidation, would have a right to call in Price Waterhouse Coopers or Deloitte and Touche or Mr. or Mrs. ABC Auditing Company or whoever it was and say that he'd like to review their files and go over these issues. In fact, auditors have the right, the duty, and the obligation to do that if they have any concerns at all.

We're talking here about independent auditors and practices that are very standard within the public and the private sector.

Mr. John Williams: Independent auditors, Mr. Chairman, while highly qualified—and I agree with Mr. Cullen and everything he says—do not do value-for-money auditing. They don't do it. They do financial auditing. That is the point I'm trying to make. We're ships passing in the night.

Mr. Cullen is talking about financial auditing. I'm talking about providing the Auditor General the full authority to go in and do value-for-money auditing and so on, which he has been denied by virtue of this clause.

I want to know on what basis he is proposing that the Auditor General—the watchdog of Canadians—be denied access to what's going on at the CPPIB on a value-for-money auditing basis.

Mr. Roy Cullen: With respect, I think we're missing the whole philosophy here. We have trusteed a pension fund that is made up of contributions from working Canadians, from companies, from employers and employees. Yes, the Government of Canada clearly has a strong interest in how the funds are invested, what the investment strategy might be, but we've also appointed an arm's-length board. The Canada Pension Plan Investment Board has very qualified investment advisers. And it's not the government's intent to go in and micromanage.

As I say, the Minister of Finance and indeed the Auditor General, if there are some concerns, would have the right to call in the auditors of the plan and question them on certain aspects. If the Minister of Finance, for example, was not satisfied that the fund was earning an appropriate return in his view, he can go in to do a special review.

So I think we have to be careful about designating a board as being arm's-length and then, at the same time as saying they're arm's-length, go in and try to micromanage all their decisions.

Mr. John Williams: But boards are answerable to their shareholders. In essence, you're just saying there's only one shareholder, the Minister of Finance, in this particular instance, rather than the vast majority of shareholders who are the citizens of Canada and who have contributed to this. There is no real accountability being built into the CPPIB because in essence the Minister of Finance is the only person. If he's not aware there are problems, he is not going to know to ask for an audit. And even if he is, he may say it's better not to rock the boat at this particular time.

Openness and transparency lead to accountability. We're talking here about Canadians' retirement plans and about $40 billion and growing of Canadian taxpayers. Why is there the unwillingness to accept accountability and openness and transparency of Canadians' money and Canadian investments?

• 1030

The Chair: I think, Mr. Williams, we're also repeating our points. At one point I have to cut off debate, because it's...

Mr. John Williams: My final point is that I want assurance, by way of either letter or witness, that the Auditor General is satisfied by this clause, being exempted from investigating the board. That's all I want.

The Chair: Have you heard from the Auditor General that he's not? Is that why you're asking that question?

Mr. John Williams: No, I'm just asking for the record. I have not talked to the Auditor General on this issue.

The Chair: Mr. Cullen.

Mr. Roy Cullen: First of all, in terms of transparency, this is a very transparent structure, I would submit. To add to that, the board, by legislation, is required to have a public meeting once every two years in each participating province to discuss the board's most recent annual report and to give interested persons an opportunity to comment on it. In addition, the financial statements are tabled in Parliament for scrutiny and debate there.

At the moment we are attempting to see if we can find out whether there's a letter from the Auditor General. One of the officials from the department is trying to do that as we speak.

The Chair: I'm going to go to Mr. Epp.

Mrs. Barnes, is your point following on that?

Mrs. Sue Barnes: No, actually, mine's one sentence.

The Chair: Okay.

Mrs. Sue Barnes: I have university researchers in my riding who would love to get their hands on more Canadian Foundation for Innovation money, and I want to get this thing passed. That's my only point.

The Chair: Mr. Epp.

Mr. Ken Epp: I hope this doesn't involve the official who's right now gone on a research project. I need a little bit of legal advice.

Generally, laws cannot be passed retroactively. For example, if I do something that's legal, and next year Parliament or a provincial legislature passes a law that makes it illegal, they cannot make it retroactive and charge me with disobeying a law when what I did was in fact not against the law at the time I did it.

In this bill, the exemption we're talking about, at the very last clause of the bill, clause 6, says:

Subsection (1) is deemed to have come into force on December 31, 1998.

Quite clearly, the reason for that coming into force three years ago is to avoid the idea of the Canada Pension Plan Investment Board acting illegally. We're now having retroactive legislation to declare them not guilty, which is really just the opposite of the example I used, but I would think the principle still applies.

I need some legal advice on that. Is it actually legal to do that?

Mr. Roy Cullen: Mr. Epp, I think I can get the gist of what you're saying. Parliament can enact legislation at will, essentially. We do have precedents. The government does not like to go looking backwards, making retroactive changes, but there are some precedents.

For example, in terms of tax policy, if the change that's needed to clarify or to change something that, by unintended consequences, has clearly gone against the government's stated policy intent, the government can go back retroactively.

In this case, it was never the government's intent to include the Canada Pension Plan Investment Board within the parameters of the Financial Administration Act. If this change isn't made, the investment board will have been basically offside of the legislation, and it was never the government's intent to have them comply with those provisions. That's why we're asking Parliament to legislate it in that way.

Mr. Ken Epp: You see, to me this begs the question, because you can't pass a law retroactively to make me guilty of something that I was innocent of at the time I did it. In this particular case, they were guilty of something, and you're passing retroactive legislation to say that they're innocent. But that presumes that the intention was there, and Parliament did pass that bill. Whether or not this actually can be done legally would be an interesting thing to challenge in the courts, I think.

• 1035

Mr. Werner Heiss: Maybe I can just briefly address this. The situation here is not, I think, a criminal act. You're correct in the sense that, in terms of criminality, you cannot turn an act that was previously considered not criminal into something criminal and hence prosecute the individual for that.

In this context, what is being done is that administrative requirements in the Financial Administration Act under part 10 appear to apply inadvertently. Originally, this statute had indicated that the requirements did not apply. The board proceeded on that basis, and unfortunately, inadvertently, when another amendment was made to that very same section, the exemption got dropped for some reason. It is not clear why.

But we're not talking about criminal acts here. We are talking about administrative requirements that would have applied to them but in fact have not been taken into account at this point in time.

Mr. Ken Epp: That's interesting, because I know I've had some cases in my riding where the income tax people have come in with some retroactive things, and it's caused some real problems.

Mr. Roy Cullen: I'll tell you, Mr. Epp, many of us here would have the same abhorrence of retroactive tax policy. In fact, members of our caucus flagged some issues some time ago. As a result of that, the government has made more clear the guidelines under which tax policy could be made retroactive. It's a very circumscribed area. The government has clearly stated its intent, and within the spirit that is clearly understood, then they can go back and correct an anomaly that some individuals might have used as a loophole when it was clear, very clear, that the government's policy intent was not to move in that direction.

Mr. John Williams: It's interesting to note, Mr. Chairman, that, again, the exemptions that they have not been exempt to—and this bill will reinstate that exemption—are, first, accountability to Parliament, second, rules regarding directors and officers, and third, rules regarding financial management and control. These are the areas where they're now asking the exemption to be reinstated.

We did pass legislation saying “No, no, you can't have that exemption”, and now Mr. Cullen is saying, “Well, this is contrary to government policy. We goofed. We slipped up. We put it in a piece of legislation that nobody noticed went through.” And perhaps it was. You know, there's nothing more open and transparent than government legislation.

The Chair: I'm going to ask committee members whether everybody is satisfied with the questions and so on.

Some hon. members: Yes.

The Chair: I'm going to ask committee members whether or not they now want to move to clause-by-clause.

Mr. Williams.

Mr. John Williams: Mr. Chair, I don't have a problem going to clause-by-clause with the proviso that, as a member of Parliament, if Mr. Cullen says he has the Auditor General's verification that they're happy with this legislation, then I need to see it. Bring it to me. Let me see it. That's all I ask.

Mr. Roy Cullen: We're searching that out now. Whenever we get it we'll be happy to provide it.

The Chair: So you have no problem moving to clause-by-clause?

Mr. John Williams: No—

The Chair: That's good.

Mr. John Williams: —with the proviso that if it cannot be produced...

The Chair: Then what do you want me to do?

Mr. John Williams: I'll put it this way: Let's do clause-by-clause with the exception of the final one. All the other ones I don't have a problem with.

The Chair: In order for me to do clause-by-clause, I have to consider all clauses. I mean, I can't report a bill with the exception of one clause.

Mr. John Williams: Mr. Cullen has made a statement. The department officials are backing it up. I'm just asking him to verify it. That's all.

Mr. Ken Epp: Let's make a deal.

Mrs. Sue Barnes: I move that we move to clause-by-clause—with all the ramifications, that is. I think most chairs know what they are.

The Chair: Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Thank you, Mr. Chairman.

I have not really participated in the debate from the start, but I have listened to my Alliance colleagues. In response to questions directed to Mr. Cullen and Mr. Bartlett, they told us that they had assurances from the Auditor General. In the beginning, they told us that these were written assurances, but later they were not so sure. Mr. Bartlett is presently checking this out.

How can we agree to go ahead with clause-by-clause study of the bill when we have had three different answers to a question, and Mr. Bartlett is in the process of looking for the answer in his office and has not yet found it? Perhaps Ms. Barnes will agree to anything with her eyes closed, and is only interested in going for lunch on a outdoor patio, but we must show some responsibility here. If questions were asked, if three different answers were given and we don't yet have the right answer, I think that it is too early to vote on this bill, unless we are a bunch of irresponsible people around this table. There's something about this that is not right, that is not clear, that is not the way our committee normally works.

• 1040

[English]

The Chair: Thank you, Mr. Loubier.

Mr. Cullen.

Mr. Roy Cullen: Just to clarify a point, there's no confusion, as I understand it, as to whether or not the Auditor General is in agreement. This goes back a few years. Of course these provisions were there, and then they would be exempt from the FAA, and then inadvertently they were brought back into the FAA. So this was going back three or four years where there was this consultation with the Auditor General.

So it's not a question of ambiguity around whether or not the Auditor General is in agreement with this. It's a question of where the correspondence is and how quickly we can dig it out. In fact, we're just having a 1997 letter faxed over now, and maybe we'll show that to the committee.

Mr. John Williams: Well, yes, if we can just recess for a couple of minutes, I'll wait for the fax.

Mrs. Sue Barnes: Maybe you could have lunch while we're doing that.

Mr. John Williams: Well, it's already lunch time. You don't have to get so snippy about it.

Mrs. Sue Barnes: I was talking to Mr. Loubier.

Mr. Roy Cullen: The fax is on its way over, if you want to recess for a minute.

The Chair: I could suspend, but please stay within the vicinity of the room. Otherwise, we won't be doing clause-by-clause.

Mr. Ken Epp: The other thing we could do is just get all of the committee members here to sign a paper that guarantees that they will vote against this legislation if that assurance isn't forthcoming.

Mr. John Williams: If I'm not comfortable, and you proceed, I'll just rise on a point of privilege in the House.

Mr. Roy Cullen: It's on its way, Mr. Chairman.

The Chair: Anyway, I do have to deal with the motion to move to clause-by-clause regardless.

Mr. John Williams: That's fine, Mr. Chairman. It's just that if I feel I have been misled, I will rise on a point of privilege in the House if you proceed to clause-by-clause.

The Chair: Okay. I'm just saying there is a motion by Ms. Barnes that we proceed to clause-by-clause, and as chair I have to deal with that. You know that as well as I do.

Mr. John Williams: And I don't have a problem with that. I'm just saying—

The Chair: Can I have a vote on that?

Mr. Roy Cullen: Mrs. Barnes isn't here to speak to her motion, is she?

Ms. Albina Guarnieri (Mississauga East, Lib.): Perhaps we could suspend, Mr. Chair, since the letter is coming.

The Chair: Yes, okay. I'm going to suspend, then.

It's coming through a fax, right?

Mr. Roy Cullen: It's coming through momentarily.

The Chair: Momentarily, okay.

• 1043

• 1053

The Chair: Mr. Cullen, Mr. Bartlett.

Mr. Roy Cullen: Mr. Chairman, we have a confirmation that the amendment was in relation to this act. Bill C-2 became Bill C-40, and the Canada Pension Plan investment... The motion to amend was adopted by Parliament and it's in the act.

Mr. Bob Bartlett: Subsection 112(4). It gives the AG power to access information from CPPIB specifically.

Mr. Roy Cullen: I think it's pretty clear, Mr. Chairman, that the Auditor General is very happy with the amendment we introduced some time ago.

The Chair: Thank you very much for that clarification. I think it's pretty clear to me.

Mr. John Williams: My final point is that the letter, which I heard off the record, allows the Auditor General, and he seems to be satisfied that he has the access to the financial records to complete his audit of the books of the Government of Canada. But it does not allow him value-for-money auditing.

I will follow up with the Auditor General and find out if there's other correspondence they have provided to the Department of Finance raising these concerns. If there is, I will not be a happy camper.

• 1055

The Chair: Okay. Thank you, Mr. Williams.

Just to make sure, we're going to get this letter tabled so that everybody understands exactly what we're talking about.

Mr. Ken Epp: I need a point of clarification.

The Chair: Yes, Mr. Epp.

Mr. Ken Epp: The point of clarification I'm seeking is whether or not introducing this bill that's before us today, which exempts the Auditor General's access to the board, would in fact take this out of it.

Mr. Roy Cullen: Which would take what out of what?

Mr. Ken Epp: Whether it would remove the provision that was in that original act.

Mr. Roy Cullen: No, that stays. That 114 is still in the act. In other words, the motion to amend the bill at that time—which the Auditor General was supportive of and said that would satisfy his concerns—is in the bill. That is not being amended today at all. It remains in the bill.

Mr. Ken Epp: Okay, thank you.

The Chair: Okay. So the letter that has been tabled with the committee was dated 24 November 1997. It was signed by Denis Desautels, and that's about it.

Now, I still have a motion here from Ms. Barnes to move to clause-by-clause.

Mrs. Sue Barnes: Perhaps it's not necessary any more.

The Chair: Mr. Williams, I thought you had some questions, so we allowed you to get on the record as much as you could on your particular issue.

Mr. John Williams: I've been on the record, Mr. Chair, and I'm going to vote against the motion. I'd like to have the Auditor General here, but if the motion carries and I find out what has been given to me as evidence today is not an actual fact the way it is, I'll be, as I said, one mightily upset camper.

The Chair: Is the committee ready to move to clause-by-clause?

Some hon. members: Agreed.

The Chair: Of course the officials will stay here in case we need guidance.

(Clauses 1 to 5 inclusive agreed to on division)

The Chair: I believe there is an amendment by the Canadian Alliance on clause 6. Is that correct?

Mr. John Williams: That's correct. I believe it has been distributed in both official languages, Mr. Chair. Do I have to read it?

The Chair: If you like.

Mr. John Williams: I move that Bill C-17 in clause 6 be amended by replacing lines 14 to 24 on page 3 with the following:

6.(1) Section 85 of the Act is amended by adding the following after subsection (1):

(1.1) Sections 89 to 119, 127 to 130.2 and 153 to 154 do not apply to the Canada Pension Plan Investment Board.

(2) Subsection (1.1) is deemed to have come into force on December 31, 1998.

The Chair: Do you want to speak to that, Mr. Williams?

Mr. John Williams: Yes. It's largely self-explanatory. It brings back the Auditor General and gives him the power and the authority to get in and take a look at the Canada Pension Plan Investment Board.

I would briefly go through the sections, other than the sections that are exempted from the act.

Section 88, which would remain in, says that each crown corporation is ultimately accountable, through the appropriate minister, to Parliament for the conduct of its affairs. Why we would exempt that clause I've no idea, because I think that if Parliament is exempted from... If we state that the minister is not responsible to Parliament, then we have a serious problem.

Sections 89 through 119 are exempted, and section 120 deals with the financial management and control, which remains in, up to and including 126. Then we exempt borrowing, bank accounts, surpluses, and all that stuff, which is fine.

Section 130.2 is the waiver of dividends and so on.

The auditor's reports I talked about. That would remain in.

Sections 153 and 154 are exempted, dealing with commercially detrimental information. Of course that's no problem whatsoever.

• 1100

That's the intention of the motion, Mr. Chair: one, that it remain accountable to Parliament; and two, the audit of the financial affairs will remain with the Auditor General of Canada.

The Chair: Thank you very much, Mr. Williams.

Do you have further comment, Mr. Cullen?

Mr. Roy Cullen: No. I think we've had the discussion, the debate. The motion essentially implements Mr. Williams' intent. I'm not going to go over the same arguments.

The Chair: Okay. Shall the amendment carry?

Mr. Ken Epp: No. Oh, just a minute.

Some hon. members: Oh, oh!

The Chair: That's not even on division; that was unanimous.

Mr. Ken Epp: Should the amendment carry? Yes.

The Chair: This was all an academic exercise for Mr. Williams.

(Amendment negatived)

The Chair: Just for the record, Mr. Williams did vote in favour of his amendment.

(Clause 6 agreed to)

The Chair: Shall the title pass?

Some hon. members: Agreed.

The Chair: Shall the bill pass?

Some hon. members: Agreed.

The Chair: Shall I report the bill to the House?

Some hon. members: Agreed.

The Chair: Thank you very much. Once again, thank you very much to the officials.

The meeting is adjourned.