Good afternoon, to all of you.
You've invited the two of us to comment on two papers we have jointly written, a large part of them by Martin. I should let you know in advance that I got him started. The two of us have very different backgrounds as your chairman has just pointed out, but we worked together very cooperatively a number of years ago. Because we have different experiences we're going to speak in sequence, if that's satisfactory. We'll make a few remarks each.
Initially let me say that our writing, and my earlier writing before Martin joined me, was prompted by distress at Parliament's ineffective review of the estimates and its inability to detect and point to any misexpenditure of funds.
Before Martin Ulrich joined the centre I had already expressed concern that the estimates were being ignored. The fact that I was writing about this led John Williams, very soon after he was elected in 1993, to ask me to appear before a group of colleagues from the Reform Party—not a committee meeting—to talk about the situation. That's an example of how he got started and made it a kind of life work. It was only after Martin joined the centre that we were in a position, drawing on his experience—over 30 years in Treasury Board—to suggest ways that Parliament might propose of improving the situation.
I should say that the two of us have been much impressed by the quality of the speakers you've had, and their knowledge. I know many of them and I can affirm that you've made the right choice of people to come here. I'm not so sure about today, but anyway, it's not only the fact that you have had good speakers but the time you have devoted to looking at the problem.
You have managed to work in this Parliament fairly cooperatively, which is a bit unusual. I think it's going be a matter of how far you can draw on your experience to suggest satisfactory ways of improving the situation.
With Martin and I, a lot of the work we've done involved going to members of Parliament who were then in office to try to see how they were working. The conclusion we reached very quickly, and it's one of the things we wrote about, was the need for a substantial, what we called, financial service.
To be candid, we actually envisaged a much larger service than I'm sure you're going to be able to get. We were thinking about up to a dozen individuals with extensive experience in government financial services who could understand the complexity of government finances, which are really pretty difficult to penetrate.
The proposal we have proposed has been supported by a number of your witnesses, I'm happy to say. Indeed Kevin Page, along with his colleagues who came here, is an example of the kind of person we think should be in the financial services.
The only difference is that I think he should be reporting directly to Parliament, perhaps even to your committee, and I would like to see him reporting to you rather than reporting to the media.
Second, I'd like to see him taking some time to decide to take direction from you as to what subjects to work on, rather than deciding himself what's needed.
In our study, the one which we wrote for the IRPP, we advocated that committees on estimates should continue throughout the year. In effect, we share the opinion of those who say that it's a mistake to terminate the inquiries on May 31.
In our papers, we concluded that it would be more effective if, rather than looking at the annual estimates only in the spring, members were to concentrate right from the beginning on examining individual programs. This way you would get some sense of whether the performance on each program corresponded with what you perceived to be the public's needs and expectations.
We've been asked to report our conclusions in our study prepared for the Gomery Commission on the sponsorship scandal. It reminded me, when we received this request, that although we wrote that report with some hopes that someone would pay attention to it, as far as we are aware, this is the first parliamentary attention that's ever been given to that report.
I mention this because I hope that the report you will be preparing will have impact and will not be ignored the way ours was. In other words, come up with a report that has some chance of getting some parliamentary support and public support.
If your report has a positive and constructive tone, especially if it has the support of members from all parties, which is pretty hard to get but worth trying for, its chances of being seriously considered by government will be greater.
Bob Marleau was quite right in suggesting that conclusions with a positive tone that proposed ways to improve a program were more likely to be taken seriously by the ministry. It may take time. It's not something that's going to happen immediately, but it's worth considering whether that's something you could do.
Over the years that I have been observing—and they are substantial, as you mentioned—and working with parliamentary committees, I can advise you that I know of instances where a report that had the support of all parties had an extraordinary effect on the government. If opposition members on a committee, rather than looking for ways to attack the government, were to work with government members on ways to improve the effectiveness of government operations—to use words that you have already heard from Joe Jordan—you could jointly establish a base for demonstrating to the public that it was getting value for money for a program, something that the government might respond to if you agreed on ways to improve it.
Good afternoon, everyone.
I'm going to go into a bit more depth, particularly on the study for the Institute for Research on Public Policy. I think that is a bit dated now. It's almost 10 years old. It was one thing where we looked at, not the estimates in particular, but government oversight of financial management very generally. One of the reasons for that, as you all know, is that this was an issue internationally, not just in Canada. At the time, there was a lot of criticism of Parliament in the academic world, in the media, and so on.
We wanted to get into that subject in depth, so we took all the studies of all the committees during one calendar year. We identified those which had, in some way, shape, or form, an oversight of financial management. Both Peter and I met with members of all the parties at that time. I would say it wasn't a random sample by any means. We chose people who had been around a longer time and had more experience with the process to essentially get the best advice going.
Out of that process, it became very clear that financial oversight should be looked at on three different levels. One level is the broad, macroeconomic level. That's the overall budget, deficit, and debt—those kinds of things. Another level is the individual transactions—the individual contracts and all those things. Between the kind of control framework that the government had set up at the time, the Financial Administration Act, which provided all kinds of constraints as to how the government could use these funds that were either used through legislation or through votes, and the Auditor General's office doing its audit—there was this middle level, and that was the program or departmental level.
We reported in the paper the clear views of parliamentarians. We, after all those discussions, happened to share those views, but they were not essentially our views. They were the views of people like you, roughly 10 years ago. Their conclusion was that Canada, the Canadian Parliament, and the Canadian House of Commons does a pretty good job at that high, broad level—the aggregates. The budget is a big event in Parliament. There's a lot of preconsultation and so on. At the time, the finance committee was very active in pre-budget consultations. It worked pretty well.
They also had a lot of confidence, even though they didn't get into it a lot, at the individual transaction levels. But that middle level—the one where the estimates are—is the one that essentially did not work. That was not a surprising conclusion, I suppose, but it was nice to know that experienced members of Parliament felt this was the case.
A number of recommendations came out of those discussions, but one that I think is particularly interesting is—I'll use a bit of jargon here because I don't know what other words to use—the control framework. Since it is responsible for voting these funds, how does Parliament assure itself that Canadians have received what the government intended they receive, and that they were done effectively, efficiently, and all those good things?
Over the years, the vote structure and the kinds of things you technically vote on in Parliament have been evolving. As Peter referred to it, there were many cases where, over the years, the government gradually ended up making the votes larger votes. Therefore, when you had a number—when parliamentarians saw a number of x billion dollars for some great, noble purpose, they had absolutely no way of comparing that amount of money with that result.
They asked what they could do. In many ways, that's one of the reasons for the financial analysis service. One of the things we had recommended was that the financial analysis service, working under the direction of this committee, would take a look at that. How do you sort that stuff out to make it sensible? It's not that the government doesn't need flexibility. The government does need flexibility. At the same time, you represent all Canadians. Parliament needs to be able to ensure that it has taken a look at how the government, the big administration, has used that authority and money it has provided.
I think that control framework—largely the centre is the vote structure—is something that really needs to be looked at. Kevin Page certainly recommended that when he advocated that votes be on programs, and I think that is a huge step in the right direction.
A couple of other things came out of that study. One of them was the idea that committees should at least look at indicators. I believe—and as Bob Marleau made very clear—there's a lot of misunderstanding among parliamentarians as to what you have the power to do and what you can get done if you're willing to do so.
You have an enormous amount of power. There's an enormous number of things you can do if you get agreement in committee. We looked at committees, and the estimates were supposedly one of the reasons you should have committees. Well, in this study, we actually documented how much time committees spent on the estimates, and it was a minute amount compared to the other things they did.
Now, if the estimates are as important as certainly we believe and the people we talked to believe, then it might be a thing to think about how you would judge whether committees have performed well in their financial oversight duties. It might be something that this committee, with its overall responsibility for the estimates, might wish to consider.
So that was that study. The only thing I would mention about the sponsorship study we did was that we didn't actually investigate the sponsorship. The question we were asked to address was would it be possible, if Parliament did a better job of its financial oversight, to reduce the odds of something like the sponsorship scandal?
Needless to say, we concluded that certainly parliamentarians could not be said to be responsible for what happened, but certainly they could be said to have not done the kind of oversight that would discourage officials from doing what was evidently done in that case.
So I think the question that was posed in that study was quite a legitimate one. Could parliamentarians be seen as somehow, by not having done their jobs, encouraging bad financial administration? You might want to think about that.
I'll close with four observations that I think are supported by the two studies I'm talking about.
One, it is I think exceedingly important to think about the estimates as not just about money. It is money for a specific public purpose. You have to be able to relate that money to that purpose. If the kind of information you get does not link those two in a way that makes sense to you, then I think you can't really do the process.
In the times when I was in government, which is now more than ten years ago, I worked for the Treasury Board and we had a lot of dealings with Parliament at the time. It worked quite well. It was clear that the officials who worked in government, working with parliamentarians' staff, consulted quite a lot, or at least they were able, in that era, to do it. They were encouraging the parliamentary staff to figure out what parliamentarians actually need for information, and how it should be structured.
Two things came out of that. One was that there really was openness to doing that. The other was that you had to make sure it wasn't just a financial document—it was a financial document related to results that Canadians could understand. Mr. McGee from New Zealand, I believe, emphasized that point, and I would say everything we have done reinforces that.
I was also struck by the comments from Mr. Marleau and Mr. Williams about the authority in parliamentary procedures that you have available. As I read them, it was not that you shouldn't change them; it was that if you think that the solution is through another change in the Standing Orders, odds are it won't work. You have to look beyond that. You have to look at the way things are done, beyond the authorities and the powers and so on.
The vote structure I've already mentioned. What I call the control framework for programs, but whatever you call it, is certainly an area that deserves some attention.
Peter mentioned near the closing of his comments about getting consensus in committees and elsewhere. One of the things I've always been skeptical of is that Mr. Williams mentioned that report of more than a decade ago where there were some suggestions as to changing a certain amount of money that you can vote on. I think that's a delusion. I don't think that's going to help.
I think it's more important to see that it is the government that should control. It has a plan. It's worked it out. It's asked for it. If you don't have confidence in it, then you do what parliamentarians do, but I think to mess around in the detail is not a good thing to do. But all of these studies from 2001—there were 19 studies that had recommendations regarding either change in resources or change in results—were tabled in Parliament. They were sent to committee.
It doesn't change the votes for the specific year, but it does allow for downstream change, and usually, in the past, that has been acceptable to governments to consider.
If you try to change the votes in the year, you're just asking for difficulty. If you try to evolve the process, you might have some sort of success.
I think one of the reasons that estimates have not gotten much attention is that there's too much desire to change the numbers, and if you don't change the numbers, you feel you've failed. Well, if that's the way you feel, it won't work.
Thank you. I really enjoyed our chat before we began. I want to follow up a bit on that. I want to thank you very much for all of your writing in this area. It's very thoughtful.
One of the things that really struck me was your comment to me, which has been brought up by quite a few of the other experts, that, in fact, everybody at this table is simply an elected member of Parliament. So we all have accountability when we're voting on the estimates and the budget implementation bill. We have accountability to our electorate, and we have accountability for every portfolio we're in. We're really all in this together.
I like your idea. It was raised previously by somebody else whose article I read. They were saying that this committee is supposed to be neutral, so maybe we ought to start shuffling the chairs and not make it so adversarial, right off the bat. I have been on committees where, in fact, we did that. It might actually change the mindset, certainly for the purposes of developing this report. It's a refreshing idea.
I want to ask you three questions. I'm going to give them to you, and you might want to merge your response.
First, what do you see as the key barriers to actually instituting changes to the estimates and budget processes? There have been previous reports, with excellent recommendations. We've heard some really interesting recommendations from some of the experts. A lot of them seem to be in sync. There seem to be a lot of areas where we probably could reach consensus, if we're all free to agree on that. I'm interested to know your advice on that, apart from the fact that we should shuffle the deck chairs.
The second is something that has come up certainly in the Auditor General's reports and was, I think, mentioned by you indirectly, and that is the choice of instruments. The Auditor General very roundly chastised Aboriginal Affairs and recommended that they be more accountable for spending. The way to do that was actually to get away from the year-to-year negotiated contribution agreements and do it through a legislative mandate, in the same way service is delivered at a provincial level.
When I look at that from our perspective, and as members of Parliament looking at the estimates, there's no way you can delve into individual contribution agreements. If there's not a clear legislative mandate saying that this is what the government commits to do, and here are the criteria by which it will be judged, it makes it all the harder for us. We don't generally get into the details of all these individual contribution agreements. That might get even more complex when government starts contracting out more of its activities. You have to delve into those contracts and what the terms are for delivery.
Third, we have now had our second DM-led committee to have oversight of spending. We have the F-35 deputy-led committee, called the point seven or something, presumably as a mechanism of accountability for the terms of reference and how they're going to spend and assess and determine what's appropriate to buy.
The government senior officials now seem to be suggesting that it was very successful for shipbuilding, and therefore it's going to be a good model for the F-35s. I guess an obvious question arises for me. If this mechanism is one the government is starting to use, should it, in fact, become the mechanism we use, instead of wasting three years fighting over what the truth is on the criteria and spending and what things cost? Is it the kind of mechanism we should be thinking about recommending, or others like it, from the outset? It actually has problems, because it could muddy accountability if you had too many people accountable.
Sorry. I don't know if you could track those three questions, but I would appreciate your comments.
I'll leave number three for you.
Question number one concerns the key barriers. I might be dreaming in technicolour here, but it seems to me that there is a huge job to be done, and I think it rests with this committee to really look into the process of oversight at the program level. How can parliamentarians do it? It's not only your committee, it's all the others. You have the mandate on this committee, I believe, to deal with other committees and their work on the estimates, to kind of figure out what needs to be done.
I think the second thing that is closely related to this is that in an awful lot of committees the government members are protecting the government. The opposition members are protecting the opposition, and the question is, how can each party get something of value by overseeing, on behalf of all Canadian citizens, how the government is spending their money? There are answers to this. I have some of my own, but I don't live in your world, I've never lived in your world.
It is a very difficult question, but I think it you address it openly and say the people on the government side have a certain belief that they have the right kinds of programs.... They vote for it. We know they do. But what's wrong with the opposition members saying, “Well, you're going to have that, but let's at least understand what is happening. Why do you need that amount of money to achieve those specific results?” If opposition members see that as a waste of money, they can't change it but they certainly have a better idea how to communicate with the Canadian people as to why a change would be a good idea.
The government members, it seems to me, since they are in favour of the programs, would be in a better position to defend why it is exactly what their policy requires. It seems to me there is a zone here. I don't know exactly how to do it, but I sort of raise this as an issue of what parliamentarians should do. They should try to develop a way of testing it down to the party level at some stage.
On question number two, if I understood it correctly, talking about the sort of contribution process and deputy ministers, committees, and all that sort of thing, one of the things that's very big on the contribution agreement is.... Some of them are huge, but as Mr. Williams mentioned to you, the committee can certainly ask for an evaluation of that. In the past this was a perfectly normal thing for a parliamentary committee to do—ask the government for an evaluation of it, and in that evaluation they might even suggest that they consult with the members of the committee in doing it. This is a way, at least it was in the past, where you could get information over a period of time and come to some kind of understanding of what this huge thing is and why it needs to be the way it is, and what might be wrong with it.
This is probably going to be longer than you intended.
Just by way of context, I'll note a couple of things. I think I mentioned—maybe I didn't—that you had Mr. Williams here, who talked a little bit about the Global Organization of Parliamentarians Against Corruption. I served as the executive secretary to that organization for seven years.
One of the things we did was to have a whole bunch of international groups of parliamentarians working with experts from the World Bank and from all kinds of different organizations to develop indicators largely related to parliamentary performance as related to preventing corruption, or in general to provide better government. There's documentation on that. One of the things that I always encouraged Mr. Williams to do when he was around was to use one of the committees he was on and to have them, in their sense, do a test on this.
That brings me to a key point I'd like to make. On performance, initially at least, I think it works best if parliamentarians themselves do the assessment of how well they've done their job. But to do that, they will have to come up with a set of indicators as to how they feel about whether or not they've done a good job for the people of Canada.
There are all kinds of starting places for developing this, but I think if you develop them yourselves, do it in an all-party kind of a group, and try to assess it, then even if you don't agree, I think you're going to develop an inordinate amount of understanding of the process and an understanding of the difficulties each different perspective has to bear. I think it can be a powerful influence.
Also, when I was in the Government of Canada and responsible for essentially building results management into the management of individual departments and agencies, where the departments and agencies actually started doing this themselves—rather than being told what they should measure—they started working their way through. Now, some of them, obviously, didn't play the game—not everybody does—but for some of them, it really was a transformative kind of development.
Thank you Mr. Chairman.
I don't propose to go through my opening remarks, per se, but instead will summarize them and hopefully within the next five minutes.
At one time, when I was working at the Department of Finance back in the early 1980s, the estimates were a fundamental input in setting the expenditure framework contained in the budget. Officials from the Department of Finance and from the Treasury Board Secretariat would spend weeks compiling the individual expenditure forecasts for the departments and agencies, and then roll them up into an envelope-type of system, which then would form the basis of the direct program spending that was contained in the budget.
However, the budget and the audited financial statements, which sort of relay how well the budget did, evolved over time. All activities controlled by the government are included, cash accounting was replaced by accrual accounting, and the expense figures and revenues are presented now on a gross basis, rather than a net basis.
The estimates, however, have remained relatively static. Today, the estimates are largely irrelevant for budget planning. I believe that the budget should be the anchor for the estimates. The estimates should be put on the same basis as the budget and the audited financial statements, and they should be tabled after the budget.
Under the current supply processes, and with the fiscal year beginning on April 1, this would require that the budget be tabled no later than the middle of February.
Until recently, this was the practice, primarily based on a discussion paper that was released by the department in 1984. At that time we had the budget, we had a borrowing authority bill, we had projections of expenditures to the provinces, and we had the estimates. The budget sort of formed the basis for those three types of information, the estimates, the borrowing authority bill, and the transfers to the provinces.
Of course today, we don't have a borrowing authority bill anymore, so that reduces some of the importance of that linkage.
Tabling the budget before the estimates would mean that the estimates would be more in line with the budget. Reports on plans and priorities should be tabled with the estimates, incorporating the impact of the initiatives proposed in the budget. If that's impossible to do, there should at least be a full reconciliation of those things that were included in the budget but not included in the estimates.
Parliamentarians would then have a much more comprehensive picture on proposed spending by department for the upcoming year. Based on current reports, detailed information on the impact of the spending cuts proposed in budget 2012 will not be fully available until some time in 2013, and the reports on plans and priorities, which normally should have been tabled shortly after the estimates are now not expected until some time in May, and will not incorporate these changes.
One has to ask themselves, what is the use of the reports on plans and priorities, especially in this round?
There should also, as I mentioned, be a detailed reconciliation between the budget and the estimates. They will never be on the same basis. There will always be some differences, but there should be a full reconciliation of that difference. The last time there was a reconciliation between the budget and the estimates was in budget 2007, whereby the expenditure numbers, the expense numbers in the budget, were fully reconciled to the expenditure numbers in the main estimates.
We haven't seen that since.
If the estimates are to remain as is, then I believe they should be tabled much earlier in the process, say, for example, November. There is no reason why not, if they're not going to be tabled, or they're not going to be based on the budget estimates, and they're not going to be consistent with the budget accounting on a conceptual basis.
In that time, that would give parliamentarians much more time to assess the estimates and get them passed before April 1.
The estimates, in my view, then should only contain voted expenditures. Statutory expenditures should not be included. They're not being voted on. They're good for information purposes, but at the end of the day parliamentarians do not spend a lot of time on statutory programs unless there are proposed changes to those statutory programs, as we saw in budget 2012.
Statutory programs need a basis to be included anywhere. They need an economic context and unless you're tabling with the budget, I see no reason why these estimates should contain statutory spending.
With respect to the Parliamentary Budget Office, I believe it should be made an agent of Parliament, as it was originally promised, with increased resources and much more access to information.
Now, last week the PBO published a report entitled “Budget and Expenditure Reporting to Parliament: Strengthening Transparency and Oversight in an Era of Fiscal Consolidation”. I would recommend that this committee seriously consider the recommendations in that report.
I think it does go a long way to help focus what type of information should be obtained and how that information could be used.
That concludes my opening remarks. I would be pleased to answer questions the committee may have.
Thank you, Mr. Chairman.
As I indicated earlier, up until about 2006 there was a logic, an order, whereby the budget was first, then the estimates. part IIIs used to be tabled with the estimates, and there used to actually be a lock-up for the estimates at that point in time, so that officials were available to the media in order to go through the numbers. That created quite a flurry of activity in the media during that day and the next day.
Since 2006, we seem to have gone away from that process more and more. I'm not saying it didn't happen in the past, but since 2006 we've gone away from it more and more. Part of the reason, of course, is elections. If you hold an election late in a fiscal year, it becomes very difficult or impossible to table a budget. You go on Governor General warrants. As soon as the House comes back, then you are required to table those Governor General warrants. The budget may not be ready yet for tabling, but you have to table the other ones.
So there are reasons why there are delays at certain points in time. But normally what would happen is that the major policy decisions with a budget are made at the end of the last calendar year, so that by December a budget is largely put in place. What you're waiting for after that is to know whether there is going to be any new economic information that could impact upon the budget's economic projections and then upon the fiscal projections and the projections of the deficit or surplus.
You may want to wait a little longer to get a better feel as to what is happening on the economic front, because it could have a major impact on your budget projections. Having said that, however, what information do you get after, say, December of the preceding calendar year? You get the fourth-quarter national accounts results at the end of February; however, you also get information on the inter-months within the last quarter, to give you a fairly good idea what is going to happen for that final quarter of the year and for the year as a whole. So I would argue that by the end of January, there's not much more information that you're going to get to help you finalize your budget to table in February.
So—to me, anyway—there's no reason that a budget can't be tabled in February based on the information you have at that point in time. Something might happen in February that would throw you way off, but that could be acknowledged in a supplementary statement shortly after the tabling of the budget.
There's no reason why, in my view, the estimates cannot be tabled after the budget, if the budget is tabled in mid-February. That was the practice before. It was the practice when we didn't have all the computerization that we have today. I don't see any reason why it can't be done. The same thing goes for the reports on plans and priorities.