The Auditor General and the $3.1 billion

By Aaron Wherry - Thursday, May 9, 2013 at 1:05 PM - 0 Comments

The Auditor General appeared at the Public Accounts committee last week to testify about his latest report. Conservative MP Andrew Saxton asked him directly about the $3.1 billion.

Andrew Saxton: Some people have been claiming that the government lost $3 billion. Is this an accurate portrayal of your report?

Michael Ferguson: What we reported in the chapter on spending on public security and anti-terrorism initiative was that there was $12.9-billion worth of budget allocations to some 35 departments and agencies. When we looked at the reports that agencies made to Treasury Board Secretariat about their spending under these initiatives, it totalled $9.8 billion, so a difference of roughly $3 billion that we tried to get an explanation for why there’s that difference between the budget and the actual, and we were not able to get that explanation. So what we were trying to do was understand what that difference was and where it came from. That’s how I would characterize what that report included.

Andrew Saxton: Thank you.  Now, can you please tell me if the reports that were done by the public security and anti-terrorism initiative, or more commonly known as PSAT, if the PSAT reports were for internal government use or for external use?

Michael Ferguson: My understanding is that the reports were given to Treasury Board Secretariat as part of Treasury Board Secretariat’s role in monitoring these initiatives, and we expected that they would then be used as a summary reporting tool to Treasury Board itself. So all of that is internal reporting. There was never a summary report prepared for Treasury Board, however.

Andrew Saxton: During this period of time, did individual departments report their normal planned spending and actual spending to Parliament?

Michael Ferguson: Certainly there’s the normal process whereby departments report their budgets and actuals across all of their activities, and that goes on every year.

Later, Liberal MP Gerry Byrne asked for clarification.

Gerry Byrne: I have a quick question on chapter 8. Could you help clear up some confusion that I think exists in many people’s minds? If the government can’t readily identify specifics of what $3.1 billion was spent on, how can Parliament be confident it was spent properly and within statutory and policy guidelines?

Michael Ferguson: What we were looking for—Again, this was a very large initiative. This was a horizontal initiative. It included a lot of departments. It had specific identified objectives, things that were trying to be achieved. Also there was this mechanism put in place for Treasury Board Secretariat to collect information that could be used for monitoring purposes. We felt that would have been the important information to produce summary level data about what was spent, what was it spent on, and what was achieved. That wasn’t done so there’s no overall summary picture that can go forward to anybody. Now in general, of course, any dollar that goes out of the federal government’s bank account is subject to all of the controls in place in those departments. But that doesn’t mean that it’s captured in a way that it can reported against this type of initiative.

Gerry Byrne: Understood. Thanks. In this context, we had a situation not long ago where there was abuse of parliamentary authority. Parliament had voted and authorized certain expenditures for the Canada Border Infrastructure Fund . We later found out that it was spent on gazeboes, 200 kilometres away from the border. Is there a risk that some of the $3.1 billion may not have necessarily been spent on what Parliament had approved it for?

Michael Ferguson: Certainly the first part of trying to answer that question is to look at what the budget appropriation was, what was spent, and then trying to analyze that difference. The one thing that was occurring in this case was that there was this process for reallocation, and they were tracking when RIA allocations happened. There’s just nothing captured in terms of the total amount of the reallocations. What’s hard to say is how much of that difference was things that we just now spent, how much of it were things that were reallocated and went through the proper process to be reallocated. It’s not possible based on the information we have to answer the question of whether anything was spent on things outside of these initiatives.

Gerry Byrne: Mr. Auditor General, you would suggest to the committee that there is a risk, then?

Michael Ferguson: I guess I would have to say that there would be a risk because there is not enough information to answer the question completely.

For further information there is what Scott Clark and Peter DeVries, two former finance officials, wrote about the Auditor General’s report.

While we’re at, let’s just fix the whole system

By Aaron Wherry - Thursday, May 9, 2013 at 12:28 PM - 0 Comments

The House is currently debating the NDP’s motion on the $3.1 billion in anti-terrorism funding. Earl Dreeshen, the first Conservative to speak to the motion, objected on the grounds that the premise of the motion is wrong—that the money is not, as the NDP motion puts it, “missing.”

The Liberals are proposing an amendment that calls for wider reform to the estimates process.

“; and that in order to avoid losing funds in the future, the House request that the government take all actions necessary to transition to Program based appropriations according to the timeline provided to the Standing Committee on Government Operations and Estimates.”

Liberal MP John McCallum explains.

“The Liberal Party agrees that it is essential for Parliament to track down the $3.1 billion lost by this Conservative government, but equally, we must fix the way Ottawa spends money to ensure that this doesn’t happen again. That is why we are proposing to amend today’s NDP motion so that it not only provides a chance to look backwards, but also a solution going forward.

Currently when Parliamentarians vote on appropriations they are forced to approve huge blocks of money, allowing the funds to be shuffled around behind closed doors. Unfortunately this system can result in funds going missing. If instead we voted to approve funding directly by program, money would be tied to those programs and thus be nearly impossible to lose track of.

Former Parliamentary Budget Officer Kevin Page called for this system because it puts spending decisions back in the hands of Parliament; and in fact, Minister Clement has already examined this proposal in response to a recommendation by the House of Commons Committee on Government Operations and Estimates. It is now simply a matter of having the will to implement it.

Canadians elected us to be effective managers of the public purse. We hope that all MPs will agree and support our amendment and the entire motion.”

Tony Clement is apparently reluctant to commit to that can kind of accounting, on account of the cost—$70 million—to transition to such a system.

Making it punishable to obstruct the parliamentary budget officer

By Aaron Wherry - Thursday, May 9, 2013 at 8:38 AM - 0 Comments

Independent MP Bruce Hyer has tabled two bills that would make it a crime to refuse impose a regulatory penalty on those who refuse to provide information requested by the parliamentary budget officer and auditor general respectively.

Hyer argues that there should be penalties for lack of compliance. “The jobs of the PBO and AG are extremely important for Canada. The PBO provides independent analysis of the government’s spending estimates and trends in the Canadian economy. The job of the AG is to hold the federal government accountable for its stewardship of public funds. Obviously, both need full access to the information in order to carry out their duties. Today’s complete lack of consequences puts limits on these Officers’ ability to scrutinize the expenditures of the government… and thus limits how Parliament can hold the government to account.”

C-507 covers the parliamentary budget officer, while C-508 covers the auditor general.

Update Friday, 3:36pm. Via Twitter, Mr. Hyer notes that his bills wouldn’t make it a crime to obstruct the PBO and auditor general. Corrections above and in the headline.

In search of $3.1 billion

By Aaron Wherry - Wednesday, May 8, 2013 at 4:16 PM - 0 Comments

The New Democrats will ask the House of Commons on Thursday to demand documentation related to the $3.1 billion in anti-terrorism funding that the Auditor General has questioned.

That, in light of $3.1 billion of missing funds outlined in Chapter Eight of the 2013 Spring Report of the Auditor General of Canada, an order of the House do issue for the following documents from 2001 to the present, allowing for redaction based on national security: (a) all Public Security and Anti-Terrorism annual reports submitted to the Treasury Board Secretariat; (b) all Treasury Board submissions made as part of the Initiative; (c) all departmental evaluations of the Initiative; (d) the Treasury Board corporate database established to monitor funding; that these records be provided to the House in both official languages by June 17, 2013; that the Speaker make arrangements for these records to be made available online; and that the Auditor-General be given all necessary resources to perform an in-depth forensic audit until the missing $3.1 billion is found and accounted for.

In terms of the vote on that motion, I wonder for now what argument the government could make for opposing this motion.

Thomas Mulcair asked the Prime Minister during QP this afternoon if the government would support the NDP motion, but the Prime Minister offered no direct response. I’ve asked Tony Clement’s office if the government will be supporting the motion, but have not yet received a response.

Can Tony Clement find the $3.1 billion in the public accounts?

By Aaron Wherry - Tuesday, May 7, 2013 at 1:26 PM - 0 Comments

Liberal MP John McCallum has asked the government to explain where in the public accounts he might find information about the unaccounted for $3.1 billion.

As previously noted—Warning: Spoiler Alert—this might prove difficult.

Is it the NDP’s fault Tony Clement doesn’t know where that $3B went?

By Aaron Wherry - Monday, May 6, 2013 at 11:09 PM - 0 Comments

Last week, Thomas Mulcair recalled, it was discovered that the Conservatives had lost track of $3.1 billion. The Auditor General, Mr. Mulcair declared, has regularly suggested that the Conservatives be more transparent. And so what, Mr. Mulcair wondered, have the Conservatives done to date to find that $3.1 billion.

Jason Kenney, leading the Conservatives this day, was unimpressed.

“Mr. Speaker, as usual,” Mr. Kenney lamented, “the question of the honourable Leader of the Opposition is not fair.”

Life, alas, is not fair. But protesting that fact tends to be counter-productive.

The Auditor General, Mr. Kenney explained, had said that the money hadn’t been used in a way in which it should not have been. Thus, it is all good.

Mr. Mulcair, mostly eschewing his notes to engage the government side directly and with the benefit of something the government seems unable to account for, was confidently unpersuaded. Continue…

Improvements to search and rescue pledged after auditor complaints

By Murray Brewster, The Canadian Press - Thursday, May 2, 2013 at 6:32 PM - 0 Comments

OTTAWA – Days after the auditor general’s sharp warning about Canada’s search-and-rescue capability, the Harper government announced largely symbolic changes but promised more substantive reform later.

Rescue bases will have more flexibility to adjust their hours of operation to better match incident times, and the government will spend up to $16.2 million in improvements to satellite search systems, said Defence Minister Peter MacKay.

The air force could improve its response times by slightly adjusting hours of operation, auditor general Michael Ferguson said in his spring report this week.

Continue…

The $3.1-billion question

By Aaron Wherry - Thursday, May 2, 2013 at 11:26 AM - 0 Comments

Scott Clark and Peter DeVries explain the problem with the $3.1 billion in unaccounted-for anti-terrorism funding.

Given the sensitivity of this issue and the size of the amount missing, it is surprising that Treasury Board did not undertake a detailed analysis of what happened to this $3.1 billion, prior to the release of the Auditor General’s report.  There was certainly sufficient time to do so. This would have saved the Government considerable embarrassment. Instead, it is viewed as a major blow to their credibility as sound managers of the public purse…

Once again the ability of Parliament to oversee government spending has been eroded. Parliament should ask the Parliamentary Budget Officer (PBO) to undertake a review of the missing $3.1 billion. It simply cannot be shrugged off as “lacking clarity” and “bureaucratic error” and a claim that better controls will be put in place so that it won’t happen again.

The Prime Minister’s assertion yesterday was that “all spending has been reported and accounted for,” but no detailed accounting of the $3.1 billion has yet been released.

What good are the public accounts?

By Aaron Wherry - Wednesday, May 1, 2013 at 1:47 PM - 0 Comments

Of the $3.1 billion in anti-terrorism funding this was identified yesterday as a source of some concern by the Auditor General, Tony Clement has pointed to the public accounts.

“The fact is it all is accounted for, but through a different methodology and that methodology is the traditional way that governments — both the Liberal government before us and the current government on its anti-terrorism measures — reported to Parliament, through something called the public accounts,” Clement told CTV’s Canada AM on Wednesday.

I asked the Auditor General’s office earlier: “In regards to the $3.1 billion in anti-terrorism funding that are in question, could the auditor general have tracked that funding by reviewing the department by department spending reports in the Public Accounts?” Here was the response from the auditor general’s spokesman.

The information reported annually in the public accounts was at an aggregate level and most of the PSAT spending was not separately reported as a distinct (or separate) line item. Furthermore, with over 10 years elapsing since the beginning of the PSAT program, much of that information is now archived and unavailable.

I put that to Mr. Clement’s office and wondered if that undermined Mr. Clement’s suggestion to Canada AM. Mr. Clement’s office responded as follows.

We agree with the AG that the information is in the Public Accounts but was categorized and reported differently.

Auditor general cites error in terrorism fund reporting government-wide

By Murray Brewster, The Canadian Press - Tuesday, April 30, 2013 at 6:47 PM - 0 Comments

OTTAWA – The federal auditor general says he’s been unable to properly track as much as $3.1 billion in funding set aside to combat terrorism.

Michael Ferguson’s spring report says the Conservative government must do a better job in reporting how taxpayer money is spent.

Ferguson’s review of the Public Security and Anti-Terrorism Initiative found a paper trail for $9.8 billion of the $12.9 billion spent between 2001 and 2009 on a myriad of anti-terrorism programs.

Ferguson said he’s not concerned the money is missing or has been misappropriated, but rather the federal Treasury Board is unable to say clearly how all the cash was spent.

Continue…

Highlights of the federal auditor general’s spring report to Parliament

By The Canadian Press - Tuesday, April 30, 2013 at 3:05 PM - 0 Comments

OTTAWA – Highlights of the federal auditor general’s report, released Tuesday:

— Aboriginal and Northern Affairs, and the Truth and Reconciliation Commission, haven’t been able to work together on assembling the documents needed to create a solid historical record of the Indian residential school system and its tragic legacy. They can’t agree on basic questions, including what documents are needed and what time period should be covered.

— The national search-and-rescue system run by the Canadian Forces and the Canadian Coast Guard is troubled by aging equipment and shortages of pilots and flight engineers. They are doing an adequate job now, but will face sustainability problems in the future.

— The Human Resources Department needs to tighten up the way it goes after EI overpayments. The system loses more than $100 million a year to fraud and misrepresentation.

— Revenue Canada still needs to improve the way it chases down delinquent tax accounts. It has made some progress, but still has to find better ways to track its progress in pursuing tax arrears estimated to be worth $29 billion.

— Federal health agencies need to better co-ordinate their efforts to prevent and control diabetes. Health Canada, the Public Health Agency of Canada and the Canadian Institutes of Health Research have all spent millions of dollars in isolation, producing fragmented efforts and limited progress.

Search-and-rescue system in need of rescue, says auditor general

By Murray Brewster, The Canadian Press - Tuesday, April 30, 2013 at 3:01 PM - 0 Comments

OTTAWA – The federal auditor general says the country’s search-and-rescue system is in distress and some elements are near the breaking point.

Michael Ferguson’s latest report issued Tuesday singled out the Royal Canadian Air Force, saying a continuing shortage of pilots and trained crew puts the system in jeopardy.

He also said the country doesn’t have enough — or the right type — of aircraft to respond to emergencies across the vast, open spaces of land and sea.

The Harper government has repeatedly promised to deliver new aircraft to replace the air force’s aging fleet of C-115 Buffaloes and older model C-130 Hercules, the workhorses of rescue missions.

Continue…

Feds need to work harder to crack down on EI overpayments: auditor general

By Stephanie Levitz, The Canadian Press - Tuesday, April 30, 2013 at 10:18 AM - 0 Comments

OTTAWA – The auditor general says Ottawa is overpaying employment insurance by at least $300 million a year, and fails to get millions of it back.

The Conservative government has taken a beating in recent months for what critics say is an overly aggressive approach to policing EI, including sending public servants door-to-door to check up on recipients.

In his spring report, Michael Ferguson says the government needs to do even more to make sure it prevents, finds and recovers overpayments so the program stays fair.

Human Resources and Skills Development — the department responsible for EI — identified $295 million in known overpayments in 2011-2012, with about $110 million lost to fraud.

Meanwhile, the auditor general found the federal government is currently owed $662 million in clawbacks from cases stretching back more than two years, but was doubtful two-thirds of it will ever be recovered.

Continue…

AG report: Clock is ticking while infighting impedes Truth and Reconciliation Commission

By Heather Scoffield, The Canadian Press - Tuesday, April 30, 2013 at 10:14 AM - 0 Comments

OTTAWA – The federal auditor general says two of the government’s key pillars meant to improve the lives of aboriginal peoples have gone awry because of infighting, poor co-ordination and lack of planning.

Auditor general Michael Ferguson says attempts to deal with the fallout of the residential school system are a mess as the Truth and Reconciliation Commission bickers with the federal government over what historical documents need to be provided and how they should be preserved.

And he says Ottawa’s plans to deal with rising rates of diabetes — especially on First Nations reserves — are showing no results because government programs aren’t working together or checking the effectiveness of their projects.

At stake are the mental and physical health of First Nations families across Canada at a time when aboriginal communities are crying out for better treatment from the federal government.

Continue…

Documents, what documents? Government departments ignore committee’s request

By The Canadian Press - Friday, March 8, 2013 at 10:55 AM - 0 Comments

OTTAWA – Several departments are ignoring a House of Commons committee’s demand to turn over action plans after being scrutinized by the auditor general, a failure one MP calls contempt of Parliament.

The public accounts committee passed a motion in 2011 that all departments who have their performance audited must table their plans within six months of an auditor general’s report.

The requirement applies whether or not the department is invited to appear before the committee.

But 18 months after the auditor general’s fall 2011 report, only two out of 13 departments and agencies targeted with recommendations have responded to the committee. More recent reports have similarly poor response rates.

Continue…

The public accounts committee decides it’s only so interested in fiscal sustainability

By Aaron Wherry - Friday, March 8, 2013 at 9:00 AM - 0 Comments

The Conservative MPs on the public accounts committee apparently voted down a Liberal motion that would have ordered the finance department to turn over long-term fiscal sustainability analyses produced over the last two and a half years.

The auditor general reported last fall that such analyses existed.

Regularly since 2010 and on occasion before that, Finance Canada has been providing the Minister of Finance with the results of fiscal sustainability analyses that project budgetary balance and public debt in the long term. However, the Department does not prepare these analyses—which indicate how budget measures will impact the fiscal position of the federal, provincial, and territorial governments—in time to inform budget decisions and before budgets are tabled in Parliament. For a given budget, the Minister is not informed of the overall long-term fiscal impact until months after the budget measures have been approved…

While long-term fiscal sustainability analyses have been regularly prepared since 2010, they have not been made public. 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, provincial, and territorial governments in order to support public debate and to hold the government to account. Many of the countries that are members of the Organisation for Economic Co-operation and Development (OECD) already publish reports on their long-term fiscal positions.

In October, the Harper government produced a report on the fiscal implications of an aging population. And that’s apparently enough for Conservative MP Daryl Kramp.

Tory MP Daryl Kramp said Thursday the October 2012 report encompassed a number of long-term fiscal analyses stretching back to 2007, and rendered the opposition motion moot. “It’s a published report, it’s all in there,” said Kramp. “That why if there’s working papers, or other things like that are part of a composition of developing a report, they’re probably not there, as they wouldn’t be. That’s the government prerogative to be able to decide what they should or shouldn’t have.”

But Liberal MP Gerry Byrne said it’s preposterous to suggest that a report on a single issue — demographics — would represent the kind of large-scale analysis recommended by the auditor general. “For instance, a report on changing demographics would obviously not deal with any analysis that would also exist dealing with the long-term sustainability of defence procurement spending, of the sustainability of infrastructure spending and other matters not necessarily dealing with demographic concerns,” Byrne said.

In its response to the auditor general last fall, the government said it would start publishing annual analyses for the federal government starting in 2013 (it seemed to decline the auditor’s recommendation the state of provincial and territorial finances be included in some of those reports).

It is perhaps useful here to recall Brent Rathgeber’s understanding of parliamentary democracy.

I understand that Members of Parliament, who are not members of the executive, sometimes think of themselves as part of the government; we are not. Under our system of Responsible Government, the Executive is responsible and accountable to the Legislature. The latter holds the former to account. A disservice is provided to both when Parliament forgets to hold the Cabinet to account.

The F-35: The Conservatives were ‘dead right’

By Aaron Wherry - Tuesday, January 22, 2013 at 12:53 PM - 0 Comments

You might have thought that the auditor general’s report and the KPMG audit amounted to a repudiation of the Harper government’s accounting for the F-35. Gary Goodyear would like to assure you otherwise.

“I can tell you the F-35 is another file – now we see KPMG come out with a report that couldn’t be more plain and simple – that Conservatives were dead right and that those planes would cost $9 billion and that the service contract for 20 years would be $16 billion.”

Setting aside everything the Conservatives said about the F-35 beyond the cost estimate, Mr. Goodyear seems to have chosen a particular set of terms on which to define the government’s correctness.

Granted, this is all a bit confusing, but let’s go over this one more time. The stated acquisition cost does, indeed, remain at $9 billion: that’s the budget the government says it will adhere to in purchasing new fighter jets. But $16 billion was once thought to be the total cost for acquisition and maintenance—in March 2011, the government tabled an estimate of $14.7 billion. The KPMG audit, meanwhile, identified $15.2 billion in “sustainment” costs, in addition to that $9 billion for acquisition.

But the “life-cycle” cost estimate was a particular concern of the auditor general and here, so far as the math is concerned, is the real trouble.

Treasury Board policies require consideration of all relevant costs over the useful life of equipment, not just the initial acquisition or basic contract cost. Careful planning and full costing are needed to ensure that all of the elements required to provide the needed capability come together in a timely and predictable way and that adequate funds are available to support the equipment over the long term. We examined whether National Defence conducted full life-cycle costing related to its Next Generation Fighter Capability project and whether cost estimates were complete, supported, and validated, using the best information available at the time. Estimating future full life-cycle costs for military equipment, especially the F-35, is challenging…

We have a number of observations regarding the life-cycle costing for the F-35. First, costs have not been fully presented in relation to the life of the aircraft. The estimated life expectancy of the F-35 is about 8,000 flying hours, or about 36 years based on predicted usage. National Defence plans to operate the fleet for at least that long. It is able to estimate costs over 36 years. We recognize that long-term estimates are highly sensitive to assumptions about future costs as well as to currency exchange rates. However, in presenting costs to government decision makers and to Parliament, National Defence estimated life-cycle costs over 20 years. This practice understates operating, personnel, and sustainment costs, as well as some capital costs, because the time period is shorter than the aircraft’s estimated life expectancy. The JSF Program Office provided National Defence with projected sustainment costs over 36 years…

We also have significant concerns about the completeness of cost information provided to parliamentarians. In March 2011, National Defence responded publicly to the Parliamentary Budget Officer’s report. This response did not include estimated operating, personnel, or ongoing training costs (Exhibit 2.6). Also, we observed that National Defence told parliamentarians that cost data provided by US authorities had been validated by US experts and partner countries, which was not accurate at the time. At the time of its response, National Defence knew the costs were likely to increase but did not so inform parliamentarians.

As Andrew Coyne has pointed out, National Defence agreed with the auditor general in 2010, on a separate file, that life-cycle costing was appropriate.

As noted above, in responding to the parliamentary budget officer, the government tabled an estimate of $14.7 billion over 20 years for capital, acquisition and sustainment costs.

According to the auditor general, National Defence had an internal estimate in June 2010 that covered capital, acquisition, maintenance, personnel and operating costs over 20 years. That estimate came to $25.1 billion. (Andrew has noted that a $25 billion estimate was briefly, and fleetingly, acknowledged in June 2010, only to disappear from the debate soon thereafter.)

According to KPMG, an estimate that covers capital, acquisition, maintenance, personnel, operating and development costs comes to $45.8 billion over 42 years.

So we have three sets of numbers: $15 to $16 billion over 20 years (the publicly debated cost), $25.1 billion over 20 years (National Defence’s internal estimate) and $45.8 billion over 42 years (the KPMG estimate).

But as Andrew has argued, it is difficult to compare the KPMG estimate to the previously acknowledged estimate because the KPMG audit includes money and time for development. If you remove the development figures from the KPMG audit, you get an estimate of $45.2 billion over 30 years.

For the sake of comparison, it is probably most accurate to say that the stated cost has gone from $15 to $16 billion over 20 years to $45.2 billion over 30 years. (Peter MacKay’s office has waded into this debate and Colin Horgan has parsed it here.)

Harper on the F-35

By Aaron Wherry - Saturday, December 22, 2012 at 3:26 PM - 0 Comments

From the Prime Minister’s interview with Global, Mr. Harper’s explanation of the F-35 procurement.

Dawna Friesen: Let’s talk fighter jets for a moment.  I don’t want to go through all of the numbers because I think we’ve done that.  What I’m wondering is why wasn’t there more transparency about the full cost of the fighter jet program right from the beginning, and do you wish in retrospect that there had been?

Stephen Harper: Well I think we’ve been very clear about what the numbers are that we projected, which actually have been validated by the recent KPMG report. But what the Auditor General said in the spring was he looked at the process as it had gone to this point and let’s remember we’re very early in the process. We haven’t spent any money on acquiring the next generation of fighter jets, but he said that he thought that both the costs and the options analysis had not been as thorough as it should be. So, based on that, the government has reset those parts of the process and we’re going through that again.  As I say, I think the cost numbers from the KPMG report look in fact, identical to what the government has budgeted but they’ll also do an options analysis.  I think what happened here, I think it’s very easy to explain the process whether it’s right or wrong, is that you know, back in 1997, the previous government made a decision with an international … with its allies to be involved in an international consortium to actually develop the new fighter jet and to make sure that Canadian industry was part and parcel of the development of that airplane, as opposed to coming in after the fact and trying to get what we can an industrial and regional benefits.

Dawna Friesen: And so there would be Canadian jobs?

Stephen Harper: There would be Canadian jobs, a much more profound position of Canada in the worldwide supply chain for this aircraft. I think because of that, an assumption was just made all along the way that of course, if we’re developing this plane, this will be the plane we’re purchasing. It’s not an unreasonable assumption, but I think what the Auditor General pointed out is because of that, National Defence had not done as thorough an analysis as it should on some aspects of this, both the costs and options and that’s what we’re now doing.  And we will continue to do that. And we’ve been very clear; we’ve set up a multi-stage process. We set up some independent expert panels and we’ll go through this step by step to make sure we are making the right purchases. The CF-18, the current fighter jet fleet will start to reach the end of its life in the middle to end of this decade and we’ll make sure both that we have aircraft ready to go when we need that and also at the same time that Canada is involved in the development of next generation airplanes.

Colin Horgan reviews and footnotes the Prime Minister’s explanation. The Auditor General’s report on the F-35 is here.

The Prime Minister at year’s end

By Aaron Wherry - Wednesday, December 19, 2012 at 9:30 AM - 0 Comments

From a pair of year-end interviews, the Prime Minister discusses the NHL lockout, Newtown, proroguing Parliament and the auditor general’s language skills.

Although Harper defended his decision to appoint Michael Ferguson auditor general even though he was not bilingual, Harper said he doesn’t want to do it again. “I admit that it is my responsibility to avoid similar circumstances in the future and I hope that Quebecers and francophones don’t doubt my commitment to the French language and our two national languages.” But while Harper said it is important for the head of an organization to be bilingual, he doesn’t feel all senior members of an organization have to speak both languages. For example, Harper said Canada’s prime minister and the chief justice of the Supreme Court should be bilingual but doesn’t believe every Supreme Court justice and every cabinet minister has to speak both English and French.

Harper shied away from commenting on Quebec’s PQ government’s plans to beef up the French Language Charter, Bill 101, saying it is provincial jurisdiction, and he defended his own track record on language. “Honestly, as prime minister, I have given a greater place to French than any other prime minister in the history of this country.”

Mythbusting the F-35

By Aaron Wherry - Saturday, December 15, 2012 at 12:12 PM - 0 Comments

A note posted to Facebook by Chris Alexander, the parliamentary secretary to the minister of defence. (It seems to have gone out from the PMO as an internal Conservative memo on Thursday evening.)

Replacing Canada’s CF-18s – Just the Facts

Media have incorrectly reported on some aspects of the replacement of Canada’s CF-18s. Here are the facts:

Myth 1: Costs have risen from $9 billion to $45 billion.

Fact 1: Our government has set a $9 billion budget for the purchase of new fighter aircraft. This amount is for the purchase of new aircraft and will not change. The remaining costs are the long-term costs associated with owning and flying these planes, such as maintenance, fuel and salaries. These costs are now presented over 42 years, as compared to 20 years previously. It goes without saying that the dollar figure for operating and sustainment costs for more years will be proportionately higher.

Myth 2: The Auditor General’s report increased the costs from $16 billion to $25 billion

Fact 2: The Auditor General recommended that operating costs be included in the total lifecycle cost estimates, resulting in the apparent “increase”. This is not new money as DND currently spends this money for our CF-18 fleet. These costs are currently being incurred by our fleet of CF-18s and will be incurred by whichever aircraft is chosen to replace the current fleet.

Myth 3: The review of options is a competition

Fact 3: We have a seven point plan that has reset the process to replace Canada’s aging CF-18s. As part of that plan, we have released the rules that will guide the review of alternative fighter aircraft. No decision on a replacement will be made until that work is complete.

Myth 4: Costs are rising, so $9 billion will not be enough to pay for these aircraft.

Fact 4: We have identified $9 billion for the purchase of replacement aircraft. We will not exceed that amount.

Myth 5: Canada is leaving the Joint Strike Fighter development program.

Fact 5: Canada will not end Canadian industrial access to F-35 contracts before the Seven Point Plan is complete and a decision on the replacement of Canada’s CF-18s has been made.

Myth 6: The government did not follow the rules when it released costs over 20 years.

Fact 6: Previously lifecycle costing was done over 20 years, consistent with long-held practices for this type of acquisition. The Auditor General recommended extending that time frame to cover the complete costs over the full life cycle; we complied by adopting the aircraft’s entire program life of 42 years.

Myth 7: The options analysis will find that the F-35 is the only viable option because it is the only plane that meets the Statement of Requirements.

Fact: 7: The original mandatory requirements for this purchase (known as the Statement of Requirements) have been set-aside. Once the options analysis is complete, a determination will be made as to whether a new statement is necessary.

Myth 8: Canadian companies have only received benefits equal to 1% of the total cost of the contract.

Fact 8: Over 70 Canadian companies have won nearly $450 million in contracts already. We believe our world leading aerospace industry will be able to continue to compete for and win contracts in the global marketplace.

Myth 1 seems to depend on the meaning of the word “risen”—the stated cost of the procurement has increased from $9 billion (for acquiring the planes) and a total of $16 billion (for acquisition, operation and sustainment) to $45.8 billion (for development, acquisition, operation and sustainment), owing to an acknowledgement and calculation of a full life-cycle costing. The timeline of 42 years is problematic though. For the sake of comparing the previous estimate for acquisition, operations and maintenance to the current estimate for acquisition, operations and maintenance, the price has gone from $16-billion over 20 years to $45.2 billion over 30 years.

As for Myth 6, the auditor general’s report in April states that “Treasury Board policies require consideration of all relevant costs over the useful life of equipment, not just the initial acquisition or basic contract cost.” And, as Andrew Coyne, has pointed out, National Defence agreed with the auditor general in 2010 that life-cycle costing was appropriate. Of the life-cycle costing for the F-35, the auditor general found in April that “costs have not been fully presented in relation to the life of the aircraft. The estimated life expectancy of the F-35 is about 8,000 flying hours, or about 36 years based on predicted usage. National Defence plans to operate the fleet for at least that long. It is able to estimate costs over 36 years. We recognize that long-term estimates are highly sensitive to assumptions about future costs as well as to currency exchange rates. However, in presenting costs to government decision makers and to Parliament, National Defence estimated life-cycle costs over 20 years. This practice understates operating, personnel, and sustainment costs, as well as some capital costs, because the time period is shorter than the aircraft’s estimated life expectancy. The JSF Program Office provided National Defence with projected sustainment costs over 36 years.”

In the defence of Myth 8, 450 million is one percent of 45 billion. There is the potential for more contracts for Canadian companies, but as Canadian Press reported this week, there are doubts about how much Canadian companies will get.

Cash-strapped Ontario to write off at least $1.4B in unpaid taxes

By Maria Babbage - Wednesday, December 12, 2012 at 1:07 PM - 0 Comments

TORONTO – Ontario’s cash-strapped government plans to write off at least $1.4 billion in unpaid taxes because it failed to act promptly and lacked the manpower to collect them, auditor general Jim McCarter found in his annual report.

The province — which is facing a $14.4-billion deficit — is owed about $2.4 billion in taxes, mostly from businesses, the report found. But it isn’t doing enough to collect them.

About three-quarters of Ontario’s tax collectors were transferred to the federal tax agency after the governing Liberals brought in the harmonized sales tax in July, 2010. At the time, the Liberals boasted that the move would reduce their spending by taking public servants off their payroll. Continue…

The F-35: The way we were

By Aaron Wherry - Wednesday, December 12, 2012 at 1:07 PM - 0 Comments

Ahead of the release of the KPMG audit, here is the transcript of the September 15, 2010 meeting of the national defence committee, at which Peter MacKay, Rona Ambrose, Tony Clement, assistant deputy minister Dan Ross, assistant deputy minister Tom Ring and Lieutenant-General J.P.A. Deschamps appeared to discuss the F-35. Two months earlier, the Harper government had announced it was “acquiring the fifth generation Joint Strike Fighter F-35 aircraft.”

Mr. MacKay was enthusiastic in his opening statement to the committee.

Our commitment, colleagues, to procure the F-35 is part of the overall strategy to give the Canadian Forces the tools they need in order to deliver security to Canadians…

The Commons: Thomas Mulcair attempts to conduct an intervention

By Aaron Wherry - Tuesday, December 11, 2012 at 7:23 PM - 0 Comments

The Scene. The leader of the opposition had asked again for the Prime Minister to account for the government’s fraught relationship with the F-35 and the Prime Minister had again reassured the leader of the opposition of the government’s intent to follow a “seven-point” plan. And Mr. Mulcair was apparently ready for this.

“Mr. Speaker, instead of following their seven-point program, they should inspire themselves with 12-point programs,” the NDP leader offered, “and start by admitting they have a problem.”

This drew some desk-thumping from the New Democrats. Continue…

‘Unbelievable, unreliable and incredible’

By Aaron Wherry - Tuesday, October 30, 2012 at 10:33 AM - 0 Comments

Scott Clark and Peter DeVries review the Auditor General’s recommendations on fiscal sustainability.

In its response, the Department of Finance has agreed to publish fiscal sustainability reports for the federal government on an annual basis, by 2013 at the latest.  It will not, however, publish its long-term fiscal projections for the provincial governments, arguing that it is not accountable for their fiscal situations. In its latest report, the PBO concluded that, although the federal government’s finances are sustainable over the long term, the provincial governments collectively face a huge fiscal challenge. For some reason, the Minister Flaherty does not seem to be interested in the long-term fiscal sustainability of the total public sector in Canada.

To us, this is “unbelievable, unreliable and incredible”. Federal actions can have profound impacts on provincial finances (e.g., restraining the growth in the Canada Health Transfer from 6 per cent per year to between 3.5-4%). The Department of Finance should publish its sustainability reports for the provincial government sector. Who else is in a position to do so or has the responsibility to do so. There is only one taxpayer and it is extremely important that Parliamentarians and Canadians fully comprehend the implications of federal actions, not only on federal finances, but on the provincial finances as well.