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Several thoughts flashed through Carney's mind. He was due to take over as senior associate deputy minister of finance (No. 3 in the department hierarchy) in a few weeks, and the Petrocan windfall was a lot bigger than expected. Yet he also knew there would be about $15 in new spending requests for each dollar raised. He briefly imagined some new tanks for the military, or saving a plant full of workers, but he also realized he would never see details of any requests, just the total dollar figures. The 39-year-old former investment banker with Goldman Sachs did a quick mental calculation as well: At his public service salary, he'd have to work about 250 years to earn the equivalent of the $56 million in fees paid to the investment banks that acted as underwriters on the Petrocan deal. "I don't think there are many transactions in Canadian Capital Market history that have worked out better for the client," said one investment banker involved in the sale. "And Carney was the engineer behind the deal."

The Petrocan sale was just one of tens of millions of transactions Ottawa was involved in that day, processed either by the government directly or by storekeepers and other agents. At about the same time as Carney answered his phone, I handed six cents to a Tim Hortons server near my office in Toronto to pay the GST on a maple dip doughnut.

Carney is one of a small team of top Finance Department officials who operate by far the largest and most complex financial organization in the nation. Federal revenues totalled $186 billion for the fiscal year ended last March 31, roughly six times the total for Canada's largest corporation, George Weston Ltd. The cost of miscalculation can be enormous--mistakes can become law and take decades to undo. Just scanning their CVs, you realize the team is one of the smartest groups of financial engineers in the country, yet they toil in obscurity. Few Canadians know their names, or that the current lineup has been in place for only a few months.

The man who put the team together has been in his job for just over a year and, paradoxically, he has almost no experience in financial services. He started out as a farmer. But as you might expect from someone who's been a career Liberal politician from Saskatchewan for 30 years (the only one, really), whatever Finance Minister Ralph Goodale lacks in financial designations he more than makes up for in smarts and sheer endurance. Before I met him, people joked that he could talk for three hours and say absolutely nothing. "The guy's got a lot between the ears," says Susan Whitney, a Regina art dealer and friend of Goodale's. She often bumps into him at the local YMCA. "I see him working out there," she says, and then pauses. "He doesn't go there just to shower, like I do."

Goodale and his team have assumed the helm at a critical turning point. Yes, Ottawa moved from a record $42-billion deficit in 1993-'94 to a $9.1-billion surplus last year. But in many ways, that has made Finance's job a lot harder. In the 1990s, almost every federal initiative was routed through the department and the mandate was clear: Just say no. Now that the country no longer looks broke, all kinds of people figure they deserve a few billion more. There is also a long backlog of contentious, unresolved policy issues, including bank mergers, a national securities regulator, outdated tax laws and plenty more.

As if Goodale's job weren't complicated enough, the Liberals are in a minority position in the House of Commons. Now finishing a budget he will likely deliver in a month or so, he is well aware of the risks. "The issue becomes management in that kind of an era where you're really dealing with the fruits of fiscal responsibility rather than the task of creating them in the first place," Goodale tells me in what for him is a sound bite. (I interviewed him in an airport VIP lounge in Toronto. Allotted a half-hour by an aide, he had to be pulled away an hour later to be driven to Guelph to give a speech.)

Think of him as the nation's chief financial officer. And to get a better handle on what he and his team are up to, it helps to look at them as if they were managers of a public company.

(the team)

Any good Bay Street or Wall Street analyst will tell you that evaluating an organization's management and culture can be just as important as tracking its cash flow. In Finance, the bigwigs can all be found in downtown Ottawa in a 23-storey 1960s-era building that would rate about four out of 10 on the architectural elegance scale. Inside, it looks like almost any office--lots of cubicles, though there is more security than in the average workplace.

Although there's a new team in charge, some things at the working level haven't changed that much in years, decades even. Until recently, meetings between the Minister, the deputy minister and other officials were still referred to as "CMOs." That stood for "Cohen, Minister and others," a reference to the clout wielded by Marshall (Mickey) Cohen, who was Marc Lalonde's deputy minister in Energy and Finance in the early 1980s.

Ian Bennett officially took over as deputy minister last November. The 56-year-old economist joined the federal civil service a long, long time ago--in 1970--and worked his way up. For the past three years, Bennett has had a sojourn in Washington at the International Monetary Fund (IMF) as executive director for Canada, Ireland and the Caribbean. I've heard that Ottawa puts smart people there because they want reps from other countries to think all Canadians are that bright.

Bennett is regarded as far less autocratic and domineering than the previous deputy minister, Kevin Lynch, who had held the position since 2000, and was deputy minister of Industry before that. Not that there was much wrong with being autocratic and domineering, given that Finance was--and is--trying to keep a lid on spending. Now, Bennett and Lynch have switched jobs, with Lynch going to the IMF in Washington.

Bennett is affable and savvy. What's the worst part of the job? "Lack of control of my agenda." It sounds like a job interview when someone says their biggest weakness is that they work too hard. Is there really a surplus? "The surplus is a bit of a myth." To make sure you've got the point, Bennett reminds you that last year, the Martin government agreed to transfer an additional $74 billion to the provinces over the next decade for health care and equalization.

Immediately below Bennett are three other recent appointees: Carney is the point man for the financial services industry. Louis Lévesque, a 45-year-old economist with two decades of experience in the Quebec and federal governments, is an associate deputy minister. A specialist in intergovernmental relations, Lévesque knows how to steer right down to the municipal level if necessary. Paul Boothe, 49, a University of Alberta economics professor, was hired last summer as an associate deputy minister and Canada's G-7 deputy.

Carney doesn't look nearly old enough for the job, but his résumé is packed. Before joining the Bank of Canada as a deputy governor in 2003, he worked at Goldman Sachs in London, Tokyo, New York and Toronto, squeezing in time in the early 1990s to get a PhD in economics at Oxford. "I always had a personal motivation to work in public policy," he says. "If you do, you should." (I don't, but I admire people who do.)

What does Carney like best about his job? "The responsibility." He adds that "the people here are comparable in intelligence to the top-level people in any business." The pay isn't as good, however--top investment bankers at Goldman Sachs can make as much in a week as Carney now earns in a year. There's also the bureaucracy. "In most businesses, if you're 70% convinced your decision is right, you make it and move on," he says. In government, he figures the threshold is 90% plus.

Boothe hasn't come into a government job cold. He worked in the Alberta Treasury for a year under the Conservatives, starting in 1989. From 1999 to 2001, he was deputy minister of finance for Roy Romanow's NDP government in Saskatchewan. Boothe declined to be interviewed, but he answered written questions. As G-7 deputy, he says, "a typical trip might have me going to Paris for meetings with other G-7 countries and the OECD [Organization for Economic Co-operation and Development], then on to London to meet with IMF officials and representatives from other countries. It usually takes three days." Back in Ottawa, his days are like those of many public servants--"lots of meetings."

Boothe is keenly aware of both the mechanics of policy and the politics. In a 2002 article in the Canadian Tax Journal, he recalled Saskatchewan's troubles with tax reform in 2000. The NDP wanted to extend the provincial sales tax to cover more items, including restaurant meals, which might have raised enough new revenue to lower the sales tax rate. They retreated after full-page newspaper ads showed a young girl begging Romanow not to tax her lunch. "How many schoolchildren regularly purchased their lunches in restaurants was never made clear," Boothe wrote.

Lévesque is eager to talk, and a bit of a wag. He moved to Ottawa in 1991 after a somewhat bizarre recruitment. He'd been an economist in Quebec City, working on harmonizing the province's taxes with the GST, when a headhunter called and urged him to apply for a forecasting job in Ottawa. It was far more mathematical than the policy jobs he'd had, but he went to the interview anyway. The first thing then-fiscal policy director Don Drummond said to him was, "I don't know what you're doing here." A bit embarrassed, he flew home. But Finance officials soon offered him another job, in agricultural policy. For the past two years, as an assistant deputy minister, he has been the go-to guy on federal-provincial relations. He's often called to meetings on short notice, where he may have to contend with fevered egos. Last Dec. 22, he got to fly to Winnipeg (high temperature that day: -24 C) with Goodale to negotiate offshore oil revenues with Newfoundland and Nova Scotia. That meeting ended when Newfoundland Premier Danny Williams stormed out and told reporters, "They've slapped us in the face at Christmastime." Williams then ordered Canadian flags taken down outside provincial buildings throughout Newfoundland and Labrador.

(the boss)

Ralph Edward Goodale grew up on a grain farm in Wilcox, Sask., about a half-hour's drive south of Regina. A good student and a straight arrow, he got his BA at the University of Regina and his law degree at the University of Saskatchewan. After graduating in 1972, he operated the family farm and worked for the provincial Justice Minister. He had another side job as a CBC announcer, and he still has a booming radio-guy voice.

In 1974, at age 24, Goodale was elected MP for the rural riding of Assiniboia. The following year, he was appointed parliamentary secretary to Transport Minister Otto Lang, who was also in charge of the Canadian Wheat Board--and probably the most hated politician in the West besides Pierre Trudeau.

Not surprisingly, Goodale was defeated in the federal elections of 1979 and 1980. In 1981, he won the leadership of the provincial party. He finally won a seat in 1986, becoming the legislature's only Liberal MLA. Two years later, he quit to run federally again--and lost. He then joined Pioneer Life Assurance Co. in Regina as the company's corporate secretary and director of regulatory affairs.

In 1993, Goodale won the riding of Regina-Wascana. Jean Chrétien appointed him Agriculture Minister and put him in charge of the Wheat Board, a post Goodale kept right up until he was appointed Minister of Finance in December, 2003. He quickly showed an ability to grasp details and to deftly avoid confrontation. In the summer of 1995, when Prairie farmers were flush from the highest wheat prices in years, he quietly phased out the 98-year-old Crow's Nest Pass rail transport subsidies. Even farmers joked that it was cheaper to send a bushel of wheat to Vancouver than to mail a letter there, but the Crow had also been a touchstone. Yet there were no protests.

Goodale moved to the Natural Resources portfolio in June, 1997, in time to handle the contentious Kyoto Protocol on greenhouse gases. He was in Japan when the terms were finalized. Alberta Premier Ralph Klein started squawking right away. So did the oil and gas industry. But criticism ebbed over time, and Canada ratified the accord in December, 2003. Paul Heinbecker, a negotiator in Kyoto and later Canada's ambassador to the United Nations, said that having Goodale on hand along with then-environment minister Christine Stewart made it easier to sell the deal politically: "His participation in the delegation brought greater credibility to the outcome than you would have had if an environment minister alone had been there."

Goodale's ability to defuse explosive issues was tested again soon after. In 2002, Chrétien appointed him to handle the controversy over allegations of decades of abuse in native residential schools. Goodale agreed to allocate up to $1.7 billion to settle as many as 18,000 lawsuits. In October, 2003, Chrétien tapped him to clean up the scandal in the Public Works ministry over Quebec advertising contracts. In his budget last March, Goodale proposed sweeping changes to the procedures for handing out government contracts. Officials tell me his dogged efforts allowed him to have his pick of ministries. Goodale wanted Finance because, as one staffer puts it, "It drove him crazy not to have a hand on all the levers."

(department of finance 101)

Going back to the public company analogy, Goodale, the nation's CFO, works with the CEO (the Prime Minister) and his executive committee (the Cabinet). The CFO's own department has lots of branches: the Economic and Fiscal Policy Branch, the Economic Development and Corporate Finance Branch, the Federal-Provincial Relations and Social Policy Branch, and six more. Why so complicated?

Here, by way of explanation, is a tiny, tiny example of how involved Finance's work is: What's the government's policy on dividends from Canadian taxable corporations? Specifically, what happens to the dividend if someone short sells a stock? (A refresher: A short seller borrows shares, sells them and hopes to profit by buying replacement shares later in the open market at a lower price.)

Finance has spent years thinking about dividends. Does the person who loaned the shares get the dividend? Does the short seller or the company pay it to them? What about investors who bought the shares that were shorted--do they get a dividend too? How are the dividends taxed? Does the short seller get a tax deduction for paying it? What about tax arbitrage between pension funds, which earn dividend income tax-free, and individuals, who have to pay tax on dividend income? What about foreign shareholders? Officials also have to consider the economic impact, the impact on federal revenues, fairness, how to draft the law in a way that won't be picked apart by legions of high-priced Bay Street lawyers, and so on and so on.

Finance's biggest job, of course, is to raise and allocate money. Unlike a public corporation, the government can't sell equity in the business. It can borrow, but the Liberals don't want to do that anymore. They've run surpluses since 1997, but the total federal debt is still about $502 billion. Servicing that debt cost close to $35 billion last year, roughly one dollar out of every five that Ottawa spends.

Occasional sales of assets--like the Petro-Canada stake--generate some cash. But the primary source of revenue is taxes. Of the $157 billion in tax revenue raised in 2003-'04, the biggest sources were personal income tax ($85 billion), the GST ($28 billion) and corporate income tax ($27 billion). Although employment insurance premiums aren't classified as taxes (a hot-button issue itself), they raised almost $18 billion.

The nation's financial results have been stellar lately. Over the past decade, Canada has moved from being the fiscal Joker of developed countries to poster child status. You can't calculate a return to shareholders, but the economy is growing at about 3% a year with no inflation in sight. And financial markets like what they see--the Canadian dollar has climbed from near 62 cents (U.S.) to more than 80 cents (U.S.) over the past three years.

(the outlook)

The demands on Finance are mounting. Other departments and the provinces are eyeing a piece of that surplus, real or not. Bay Street economists have yet to encounter a problem that couldn't be solved by more cuts in taxes and federal spending. As well, actual decisions are long overdue on issues that have been studied, studied and studied again for years: bank mergers, a national securities regulator and income trusts. Meanwhile, Goodale, who is a policy über-wonk, figures he has room to stretch out. "There needs to be a more creative side to what the Department of Finance now does," he says.

On basic fiscal discipline, Goodale says, "You never get sloppy or careless and allow the government to fall back off the wagon." But the fact that surpluses keep coming in larger than forecast is a sore point for taxpayers and economists. The surplus for 2003-'04 was projected to be $1.9 billion. It came in at $9.1 billion. Goodale has appointed BMO Financial Group chief economist Tim O'Neill to study the department's forecasting. There are so many variables. Goodale says that 2003-'04 revenues were about $5 billion more than forecast, and about half of that was a tax windfall from the Big Five banks. Much of it resulted from the banks' revaluation of their assets and liabilities due to the rise in the value of the Canadian dollar.

As that windfall shows, decisions by corporate CFOs can affect Goodale's bottom line dramatically, so he and his team are trying to meet with corporate executives more often and less formally. Off the record, some executives complain that meetings with Finance used to be like an audience with royalty. "We have to get out more," acknowledges deputy minister Ian Bennett. Goodale still has to be careful, though, about what he promises, particularly concerning big issues like bank mergers, on which he doesn't want to send the wrong signals.

Income trusts are another headache. Companies that convert themselves into trusts are allowed to pay out the lion's share of their cash flow to investors very tax efficiently. There has been a deluge of trust conversions over the past few years, and more than 15% of the issues on the Toronto Stock Exchange are now trusts of one form or another. In total, they cost Ottawa about $50 million a year in lost revenue. That's modest, but what if every business in the country converted itself? "Of course I worry about these things," says Bennett.

Yes, but what to do about them? The budget Goodale delivered last March (which, to be fair, was pretty much ready before he became minister the previous December), limited pension funds to holding no more than 1% of their total assets in business trusts, and owning no more than 5% of any individual trust. Real estate and resource trusts--the sectors where trusts are most popular--were exempt. Still, just about every big pension fund in the country protested. Goodale backtracked in May, promising another solution "soon." Time for more study.

Goodale also talks tough about a national securities regulator. Only Bosnia-Herzegovina and Canada have multiple securities commissions, which means a lot of form filling and rule hopscotch for public companies. "I'm going to continue to urge the provinces to move on this, but I have said to them my patience is not infinite," says Goodale.

Well, yeah, but the Constitution gives securities regulation to the provinces and territories. Securities regulators, speaking privately, are blunt. "The issue," says one, "is that the little provinces want to get paid off to get out of the business." That's a tall order for a minority government.

As for Goodale's talk about the department's "creative side," that could show first in tax policy. A lot of North American economists are looking wistfully at Ireland's astonishing growth over the past decade. The Irish have cut corporate and personal income taxes--both complicated and difficult to collect--and shifted the burden to value-added taxes on consumption.

Another bold proposal comes from Roger Martin, dean of the University of Toronto's Rotman School of Management. He suggests giving Canadians a personal tax holiday on their first $250,000 of lifetime income. In return, they would lose existing personal deductions once income taxes kick in. One goal is to encourage bright young graduates to stay in Canada.

Goodale also has pet projects. He's keenly interested in Africa, which he visited last August on a fact-finding tour for the Commission for Africa, a body set up by British Prime Minister Tony Blair to focus rich countries' attention on African issues. Goodale knows that as a G-7 Finance Minister, he can have a large voice in the World Bank and the International Monetary Fund on debt relief for poor nations. Longer term, there's also the prospect of a leadership bid--he is 11 years younger than Paul Martin.

With all that on his plate, it doesn't leave a lot of downtime, which makes you wonder who looks after finances and balances the chequebook at home. Goodale hesitates for a second, then answers: "My wife. Absolutely. She doesn't let me near the accounts. Whenever I get close, I destroy her system, and it seems to work, so I'm leaving her to it."