Finance Canada deputy minister Michael Sabia defended the government’s unprecedented decision to reopen last year’s books and backdate nearly $10-billion in new spending, telling MPs on Tuesday the move resulted in a more accurate description of the federal accounts.
Mr. Sabia, Auditor-General Karen Hogan and Treasury Board’s Comptroller-General of Canada, Roch Huppé, appeared before the House of Commons public accounts committee on Tuesday to answer questions on the government’s unusual accounting move.
The Globe and Mail reported in December that the Liberal government reopened the federal books to backdate nearly $10-billion in spending, something that had never been done before under current accounting rules.
The move was related to the public accounts for 2020-21, which are the final detailed breakdown of spending during the peak of the federal government’s response to the COVID-19 pandemic. Ottawa posted a $327.7-billion deficit that year, up from $39.4-billion the previous fiscal year. The documents contain important financial information that MPs, journalists and researchers use to analyze government spending.
Those public accounts were tabled later than usual, and more than eight months after the fiscal year had ended.
A section of the public accounts showed the Auditor-General originally approved the public accounts on Sept. 9, 2021, but then approved a change on Nov. 19 that added billions in backdated new spending for the First Nations child welfare system. The accounts were made public on Dec. 14, just days before the House of Commons rose for a six-week recess.
Fiscal policy experts noted at the time that while the Auditor-General’s approval indicated all rules were followed, the backdating of new spending provided a political advantage for the Liberals by allowing the government to show a quicker improvement in the state of federal finances after the high levels of emergency spending.
The public accounts were released the same week the government announced $40-billion to compensate First Nations children and to reform the child welfare system. Finance Minister Chrystia Freeland’s fall economic update, which was also released that same week in December, showed that $16-billion of the new funding was booked for the 2020-21 fiscal year, a $9.6-billion increase over the $6.4-billion previously allocated for that year.
The government officials said on Tuesday the effect of a Federal Court decision on Sept. 29 about Canada’s legal obligations meant it was appropriate to increase the size of its projected liabilities.
Ms. Hogan said that while the public accounts have never been reopened before under current rules, her second signature means she felt the move was in order.
“I looked at why the adjustment was made and how it was made. And I believe it was appropriate,” she said.
Mr. Sabia said the Auditor-General’s approval shows the government made the right call.
“From our perspective, ultimately, the clean audit opinion speaks volumes about the validity of the decision that was made,” he told MPs, describing the government’s approach as one that provides the public with “a more accurate reflection” of the state of federal finances.
Conservative MP Kelly McCauley, who raised concerns with the reopening of the public accounts when it was revealed, took part in Tuesday’s meeting and said he was unconvinced by officials’ statements that the situation warranted the unprecedented accounting move.
“I believe it was politically motivated,” he said. “I just find it difficult to understand how this is the only cataclysmic event ever in Canadian financial history that we have to reopen the books.”
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