Thank you, Mr. Chair, and members of the committee.
I would like to take this opportunity to thank the committee for inviting me here today to participate in this review of the estimates. I am here in my capacity as a CFO representing Public Works and Government Services Canada, PWGSC. I am joined by Diane Hall, Manager of Estimates.
The history of the estimates is rooted in legislation and parliamentary tradition. This committee launched its review of the process for considering estimates and supply, and l am pleased to be part of your review along with the other parties that have appeared before you with a view to improving the effectiveness of the supply process.
As you will recall, our minister was here a month ago to present PWGSC's 2012-13 main estimates. My objective today is not to repeat the minister's presentation or to discuss the programs of my department, but rather to cover the estimates cycle from beginning to end with a view to informing this committee about the large and varied amounts of information now being provided by departments.
In addition I will overlay the timelines of the estimates documents with those of the federal budget and the public accounts, using PWGSC as a reference. That said, as the Treasury Board Secretariat is one of the stakeholders for this review, I want to emphasize that questions touching on potential changes and implementation arising from this review should be addressed directly to the secretariat. TBS manages many of the systems and procedures in the supply process at the government-wide level.
At this point I also want to acknowledge the secretariat's efforts to improve the estimates process.
I appreciate that the context for this review is to provide views on the form, content, and cycle of the estimates document. My understanding is that this committee is primarily interested in Parliament's accountability and control over expenditure, thus in voting by expenditure type versus voting by program; the timing of the estimates vis-à-vis the federal budgets; the type and format of information presented; and the usefulness of cash versus accrual information.
Any changes contemplated by Parliament to the existing estimates process dealing with timing, voting, and the type of information provided would require an examination of the pros and cons. Parliament must also be mindful that the request for additional information as a means to exercise more or better control may produce unintended consequences in terms of complexity and confusion. Therefore, Parliament may wish to take this opportunity to review the estimates and streamline information that it deems less useful and/or that causes confusion.
In principle, controls are essential to ensuring that taxpayers' dollars are directed to priority programs, that they are spent as intended, and that results are achieved. Hence, the following questions remain for your consideration: what is the right level of control and what does Parliament want to control? Is it programs or the types of expenditures with their corresponding authorities?
Now, let me describe the PWGSC funding structure for the 2011-12 main estimates.
Last fiscal year, PWGSC set out to spend $6.1 billion to fulfill its mandate as a common service provider to government departments.
Parliament ultimately approved a net appropriation of $2.5 billion, as PWGSC anticipated earning $3.6 billion, or 59% of its budget, in revenues from client government departments.
PWGSC's funding structure is more complex than that of many other departments. In 2011-12, PWGSC had 13 different funds, served over 100 departments, one of which is PWGSC, and presented information in at least six different ways to Parliament, at seven different junctures.
I understand you are interested in a walk-through of the estimates process from a PWGSC perspective. For that I have a presentation deck addressing the three key themes that have emerged from discussions with previous witnesses.
This presentation will take about 20 minutes. If you prefer, I could present it in an abbreviated fashion. Either way I would be pleased to address your questions at the end.
I understand, Mr. Chair, that you prefer the complete version. With your permission, I would now like to go to the deck presentation.
I understand that everyone has a copy in French, English, or both languages. I will start by saying the following.
The goal of this presentation is to provide the committee with a walk-through of the estimates process and documents from PWGSC's perspective.
On page 3, you can see what I am going to cover. I will briefly describe the estimates and supply cycle. I will discuss the main documents listed in points B to H. Then I will summarize the facts and differences.
Also included are four annexes on PWGSC's program architecture, the structure of the department's votes, the matter of gross versus net expenditures and lastly, cash versus accrual information.
Moving on to page 4, you'll see that this slide provides an overview of the cycle. It may be familiar to you, so I'm going to summarize it at a high level.
Basically, although you see four arrows, it shows three supply periods. I'm not going to go into the details as they are all in front of you in the documents. The message here is that departments produce about 11 documents every year, eight of which are tabled. “Tabling” doesn't mean just for vote purposes: some are tabled for vote purposes and others are tabled for information purposes. We're going to go through them one by one later on in the deck.
The page 5 slide bring us back to the basics: what are we trying to achieve? The purpose of the supply cycle, we have to keep in mind, is to ensure that taxpayers' money is directed to government priorities and programs; that due diligence is exercised by departments, central agencies, and parliamentarians; that departments have sufficient expenditure authority or flow of cash in a timely fashion; and that there is transparency and accountability and the measurement of results. The goal here is to ensure that the cycle remains practical, effective, and efficient.
Moving on to page 6, you can see that the slide shows the five major exercises. To produce the 11 documents I talked about earlier, eight of which are tabled before Parliament, there are five major exercises in addition to the federal budget and the public accounts. These are the main estimates; the reports on plans and priorities; the supplementary estimates, of which there are three; quarterly financial reports three times a year; and lastly, departmental performance reports, which are built from the three quarterly financial reports.
On page 7, we have a pictorial view of the tabling order of these documents. Under each document, you have a box that starts with an arrow and either a V or an I, which stand for “voted” or “information”. You should note that what provide spending authorities to departments are numbers one and three, those being the main estimates and the supplementary estimates (A), (B), and (C). Each of these documents has specific coverage in terms of time, so the coverage varies from one quarter to three years.
In essence, each document brings something different to the table. I will go through them one by one later on, after we look at the timelines and the sequence on the next page.
We'll turn to page 8, please. This is a key slide because it shows the sequence and the overlap factor of documents over two fiscal years. At the top, we took 2010-11 as an example. At the bottom of the horizontal line, we took 2011-12 as an example. In the middle, you have a red mark. That is the end of the fiscal year and the beginning of the next.
So while departments are working in supplementary estimates (B) and (C) for a given year, they are also working at the same time on the ARLU—I will come back to what ARLU means—main estimates, and the RPPs, those being the reports on plan and priorities, for the new year. So there is an overlap in terms of documents over two years.
The federal budget is tabled in the February-March timeframe. Interim supply is issued before or at the beginning of the fiscal year. Then departments continue working on the DPR and public accounts for the old year.
Right now we are in April and we're working on the DPR and the public accounts for the year that has just finished. At the same time, we're working on supplementary estimates (A) and supplementary estimates (B). Later on in the year, we'll be working on supplementary estimates (C).
So these exercises work based on a tight calendar between central agencies and departments and on cut-off dates. Needless to say, there is a significant workload behind the cycle to produce these documents on time with the information required or prescribed.
Now let's dive into these documents one by one. In doing so, I'm going to talk about what each one of these documents does—what it is, what it does, and what it doesn't do. I will start with
the main estimates on page 9.
The main estimates are the department's planned financial requirements for the upcoming fiscal year. They represent the first year of the approved departmental Annual Reference Level Update, or ARLU.
In English it's the ARLU.
What is the departmental Annual Reference Level Update? It is an internal exercise undertaken by departments with the Treasury Board Secretariat. It is a technical or accounting exercise that begins with a base budget that is adjusted to take into account all the decisions that have been made and approved by committees, by Treasury Board. The ARLU is simply a multi-year update of approved Treasury Board submissions.
So it covers multiple years.
The first year of this planning exercise becomes the main estimates, which are tabled by March 1. House rules stipulate that they be tabled no later than March 1.
The main estimates support the government's request to Parliament for authority to spend public funds.
Moving on to page 10.
The main estimates allow parliamentarians to see the department's budgets by vote, by program and by standard object. They explain year-over-year variances and provide the information on a cash basis. They focus on two fiscal years: the upcoming one and the previous one. They are used as a basis for interim and full supply.
This does not appear in the presentation, but the main estimates set out statutory initiatives for information purposes only. The main estimates do not capture new federal budget initiatives or cabinet authorities that come after the departmental ARLU.
The members of Parliament must vote on the main estimates appropriation bill.
Now on to page 11.
It illustrates the page proof. That is basically what you see in the blue documents. I've put here four pieces of information for your information. First are the types of expenditures, or basically the votes on which Parliament is expected to vote. The second view is by program activity. The third view is year over year. I ran out of space, so I put here the distribution by standard object.
Therefore, we have at least four angles of information in the main estimates. Each is relevant on its own. The question here is that if someone wants to draw the full picture they need to connect the dots and draw conclusions. Sometimes it gets into a thorough analysis, or endless analysis and reconciliations.
I'll move on to page 12.
We all know what the federal budget is: the annual blueprint for how the government wants to set its annual policy agenda. It serves as a vehicle to implement the government's priorities and sets out the government's economic and fiscal outlook.
Page 13 now.
The federal budget includes both revenue and spending measures. It provides financial information on an accrual basis, unless stated otherwise. The budget has a multi-year scope ranging from 2 to 5 years. The federal budget is not fully reflected in the main estimates, nor does it provide spending projections by department.
It is important to understand that the government is under no obligation to table the federal budget on a specific date. Members of Parliament vote on the federal budget implementation bill, once it is introduced in Parliament.
The next slide is about the RPP, the reports on plans and priorities. The purpose of the RPP is to provide departmental details to support the main estimates.
On page 15, in terms of the details it allows parliamentarians to see the planned spending by program activity. It provides information on a cash basis and has a four-year scope: the current year plus three planning years. It highlights the planned departmental expenditures and outcomes and may include cabinet approval after the ARLU. It also includes the future oriented financial statements on an accrual basis with a two-year scope, the current year and one future year. It includes supplementary information via hyperlinks, including revenues and capital transfer payments.
The RPP does not always capture the federal budget announcements, depending on the budget timing. It does not provide information by votes and standard objects, and Parliament does not vote on the RPP.
On page 16, I included two tables to contrast the transition from the main estimates to the RPP and to show you the difference. We took as an example at the 2011-12 main estimates.
If you look at the bottom line of the main estimates, in the circle you will see there is a plan to spend $2.581 billion on specific program activities. In the RPP, that number became $2.717 billion. It's explainable. These are approvals that occurred post-ARLU or post the main estimates. In this case specifically, they include the long-term vision plan, the homelessness program, and the financial interoperability stewardship initiative.
Here I would note that an item could be known but be in the process of approval and therefore not be reflected in the RPP. The question I pose here is whether the RPP provides a full and stable picture of the planned spending. The answer is probably no, but it gives the best information of the plan at the time of the tabling.
With regard to the supplementary estimates, page 17 shows that there are three supplementary estimate exercises in a fiscal year. They seek approval for additional spending authorities for the planned spending or against the planned spending for things that are not in the main estimates, including Treasury Board submissions after the main estimates and transfers between departments. The question here is, are three supplementary estimates exercises needed? We used to have two not that long ago.
Moving on to page 18, the supplementary estimates allow parliamentarians to see the department's budget by votes, by items and by standard objects. They are on a cash basis. They focus on one year, the current fiscal year, and they capture the federal budget announcements. The departments supply the Parliamentary Budget Officer with departmental budgets by program activity five days after their tabling. The supplementary estimates do not include or show information on a gross basis, but on a net basis. Therefore, the revenues are not reflected in the supplementary estimates. Parliament votes on the supplementary estimates appropriation bill.
On the next page we're going to talk about quarterly financial reports, or QFRs. They are financial tables comparing planned and actual expenditures, and explain variances for both the quarter and year-end as well as comparative information for the preceding fiscal year. QFRs must be prepared for the first three-quarters of each fiscal year. Key components of these reports are financial highlights, risks, uncertainties and significant changes to operations, personnel and programs. QFRs supplement year-end reporting, they're entering a view of spending. I think of QFRs as mini departmental performance reports. The only difference is that they are based on types of expenditures, not by program.
On page 20, QFRs are published on the website. They allow parliamentarians to see the budgets by votes and by standard objects. They are on a cash basis. They cover two years, the current year and the previous year, and they reflect cabinet authorities. They do not, however, reflect the full fiscal year and there is no report in the fourth quarter of a fiscal year. They are not audited or tabled in Parliament and therefore are not subject to votes.
On page 21 you have an illustration using PWGSC. Be mindful that 2011-12 was the first year these reports were introduced. On the left we have a display of type of expenditures by votes. On the right you have the distribution by standard objects in these reports.
On to page 22 and public accounts.
The accounts of each individual department and agency are rolled up into the Public Accounts of Canada.
The public accounts are tabled by the receiver general and are presented in three volumes. The public accounts represent the complete set of departmental financial statements for the Government of Canada in its entirety. The public accounts show all expenditures made under each appropriation, all government revenues and payments, assets and liabilities and so forth.
The public accounts are reviewed by the House of Commons Standing Committee on Public Accounts, and not by this committee.
Moving on to page 23.
The public accounts provide information by vote, by program activity and by standard object. They give members of Parliament the information they need to understand the financial affairs, resources and transactions of the government. They have a 2-year scope: the fiscal year just closed and the previous year, for comparison purposes. They provide information on an accrual basis, and I am referring to Volume I. However, Volumes II and III provide information on a cash basis.
The public accounts do not capture departmental performance, simply the facts.
Members of Parliament do not vote on the public accounts.
Some of you may be wondering what Volumes I, II and III cover, so here are a few details. Volume I is a summary report of the financial statements of the Government of Canada. Volume II provides the details of expenses and revenues for each department. Volume III provides additional information and analyses, such as the financial statements of revolving funds.
Page 24 now.
refers to the departmental performance reports.
The purpose of the DPR is to present and report on results and accomplishments by comparing actual spending to the total authorities given in a fiscal year. Specifically, the DPR presents results against the main estimates, the RPP, the total authorities, and actual spending. It is normally tabled in the fall following the end of the fiscal year. It could take up to seven months after the year end.
Page 25, in terms of the details, shows that the DPR provides a financial summary of the estimates exercises that occurred in the fiscal year that just closed. The DPR allows parliamentarians to see the department's actual spending by program. Also, it provides information on a cash and accrual basis.
It has a two-year scope: the year just closed and the previous year. It includes departmental financial statements, on an accrual basis, with a two-year scope, and it links to the public accounts.
The DPR does not provide information by votes and standard objects. Parliament does not vote on the DPR.
Page 26 is an example extracted from PWGSC's DPR for 2010-11. It displays multiple stages of the budget cycle, from plan to results.
In the main estimates, the department was planning to spend $2.5 billion on a net basis. In the planned spending for the RPP, that number moved to $2.538 billion. The total authorities by the end of the supplementary estimates (C), that is, what the department had authority to spend, were $2.963 billion. The actual spending against that total authority was $2.743 billion. This shows the evolution of the planning, the authorities, and the spending.
I am nearing the end of my presentation.
Page 27 provides a summary of the facts and differences. On this page, what you see in the left column are all of the documents I talked about. As I mentioned at the beginning, departments produce 11 documents. Eight are tabled and five are voted on. There is significant work behind producing these documents. Yet there are challenges with respect to the availability and clarity of the right information needed to exercise due diligence.
At this juncture, I would suggest going back to the basics and would ask the following questions: What does Parliament want the controls to be on? What is the level of the controls? What information is needed to support these controls?
Right now, controls are on the type of expenditures, with a huge amount of information supplied at different times. Each type is relevant on its own. The challenge is connecting the dots and performing the analysis to extract the full picture.
The second column, the votes or the funding mechanisms, is where the controls are. That's what drives the supply. The information is what you see following the second column: program activity; standard object; cash versus accrual; gross versus net; and time scope, from a quarter to three years.
In the column before the last one, you will see what Parliament does and doesn't vote on, and the tabling dates.
On the last slide, slide 28, I would like to offer other considerations supporting this review. I grouped them into three categories. Under timing disconnects or timing challenges, in the category of main estimates versus budget time lag, I note that the DPR is tabled approximately seven months after the beginning of the new fiscal year.
On the budget versus RPP timing, a ministerial reference could be made to budget items. I'm referring to the federal budget here. I also refer to the relationship between the main estimates and the RPP.
The second category has to do with control of departmental spending. The vote is on the type of expenditure versus the program activity or outcome. The vote is on a net basis and not a gross basis.
The third category is on the accounting methodology. Votes are on a cash or accrual basis.
That concludes my presentation. I have a few annexes here that I don't intend to go through unless you want me to. They are related to how we manage this internally, including on a gross versus net basis, and accrual versus cash basis.
Thank you very much, Mr. Chairman.
I greatly appreciate the opportunity to appear before the Standing Committee on Government Operations and Estimates, and I do applaud members of the committee for undertaking this study of the estimates and the supply process.
As a former public servant, I spent a good number of years dealing with budgets and the estimates in Ottawa, and I'm happy to report that I now have the time in a university to actually think and to write about these important matters of the management of public money.
I know you've heard much testimony from witnesses over the last number of weeks and months, and it's not surprising that everyone who has come before the committee has really made suggestions for improvement. I think it's a telling point, given our deep and important traditions of parliamentary government, that no one has recommended the status quo.
It's not my intention to quarrel or argue with what other witnesses have said, but I do want to set out what I think are some of the important issues that the committee is grappling with and suggest some improvements that I think might be made. In a way, it will be my small way of maybe helping you connect some of the dots.
A central principle of responsible parliamentary government is that the House of Commons holds the power of the purse. This means that the government has no money. It has no money except for that granted by Parliament, and the government can make no expenditures except those that are approved by Parliament. The House, of course, must be satisfied as a matter of confidence that all spending and taxation is consistent with legislation, with Parliament's intentions and the principles of parliamentary control.
The fundamental principles of parliamentary cabinet government limit the role of Parliament in the estimates process. It's the responsibility of the government to govern, in other words to establish the priorities, to put together a budget and the pending proposals, and then to present the estimates. Parliament approves the estimates and authorizes the government to spend the money. Government, not Parliament, spends the money.
In the estimates process, the role of Parliament is limited. It can only make one of three decisions on specific expenditure items. It can lower the amount proposed by government, it can reject the proposed expenditure in its entirety, or it can approve it unchanged. Reduction or elimination of an expenditure item is normally viewed as a want of confidence.
I'll spare the committee any history of the supply process, but I do want to make one important point, that the problems of supply and Parliament's frustrations with the estimates are not new. They are not new at all. In fact, they are very longstanding.
Shortly after the turn of the 19th century, in 1908, a royal commission observed that supplies were duly voted in the customary course in the small hours of the night by jaded members in a tired House. The resulting royal commission concluded dismally that parliamentary control over the government's expenditures was negligible. By mid-century it was no better. And in 1962, a leading student of Parliament, W.F. Dawson, observed that “...there is no part of the procedure in the House of Commons which is so universally acknowledged to be inadequate to modern needs as the control of the House over public expenditure.”
The substantial amendments to the supply procedures in 1968 did not really improve the process, and in fact by 1995 J.R. Mallory observed that from all sides, the view was the same: the review of the estimates was often meaningless.
By 2003, some parliamentarians were admitting that they were simply overwhelmed. The traditional notion of holding government to account was no longer feasible. There were just too many expenditures, too many reports, and too many programs to review.
If the criticisms have been many over a long and sustained period of time, the studies, the reviews and the suggestions for improvement have been very numerous. Since 1968, there has been three studies by committees and MPs: “The Business of Supply”, “Meaningful Scrutiny”, and “The Parliament We Want”. These have resulted in some 113 recommendations, but, unfortunately, there has been little change.
I find this most regrettable, but I think it's also telling. It suggests that there is really no silver bullet here; there is no magic wand. I don't think there's a universal solution that we can somehow import best practices from somewhere else in the world and bring them to Canada. As in all matters of public money, particularly in democratic government, there are many competing interests at stake and there's a need to balance and rebalance things. This does not mean that nothing can be done; however, it does suggest that if we're to do something more than studies and reports, then the feasibility of things will be almost as important as their desirability.
Let me touch briefly on some of the issues and then suggest some areas where I think improvements could be made. These are in no order of priority.
First, I would make the Parliamentary Budget Officer a full agent of Parliament to assist parliamentarians and committees. I think the role and mandate of the Parliamentary Budget Officer needs to be clarified and strengthened by making the office legislatively separate and independent of the Library of Parliament, thereby operating as a full agent of Parliament. A confused mandate, which I think we've had since its creation, only serves to increase partisanship and the scoring of political points rather than channelling substantive information to elevate the level of debate to assist parliamentarians in the scrutiny of the budget and the estimates. As a full agent of parliament, the Parliamentary Budget Officer would have authority to have greater access to documentation.
To date the Parliamentary Budget Officer has primarily focused on economic and fiscal forecasts and costing analysis of selective government expenditures. However, the office has an important mandate with respect to the estimates, and it's a mandate that I think has received too little attention to date. As a full agent of parliament the Parliamentary Budget Officer could and should provide significantly greater support to parliamentary committees in their review of the estimates and in dealing with the business of supply.
My second suggestion is to obligate the government to include budget items in the estimates. The estimates have increasingly become unaligned with the budget. This year is especially glaring and troublesome, with the result that the main estimates is almost meaningless as a document to actively reflect the government's spending plans. In addition, the decision not to include the budget initiatives in the departmental reports on plans and priorities, the RPPs, to be tabled next month, is most regrettable and adds to this misalignment. It clearly reduces significantly the incentive for committees to thoroughly review the estimates.
In my view there is an urgent need for closer alignment between the budget and the estimates. I'm not particularly worried about the budget's economic forecast being done on a full accrual basis and the estimates being done on a cash basis. This is and can be reconciled. The real problem, to my way of thinking, is the lack of inclusion of budget items in the main estimates. The key challenge here is to ensure, to the extent possible, that budget items are included in the main estimates.
While the budget and the estimates have never been fully aligned, my experience was that there was greater alignment in the past between the budget and the main estimates. I recognize that it's not always possible to include budget items in the main estimates, particularly when we have budgets that deal with major economic difficulties, such as the program review budget of 1995, and more recently the major economic stimulus budget of 2009. These, I suspect, will be treated as exceptions; but the expectation and the norm should be to include the budget items in the main estimates.
To make this happen I think that two things need to be done: one is that there needs to be very close cooperation between the Treasury Board Secretariat and the Department of Finance; and secondly, I think we need to look at either an earlier date for the budget or a later start to the fiscal year. Those are two options to provide sufficient time to ensure that the main estimates are aligned with the budget.
My third suggestion is that we make committee membership permanent. I don't need to remind anyone how complicated and difficult the estimates are to review and how limited your time as members of Parliament is. I would suggest making committee membership permanent for the duration of the parliamentary session and restricting the number of associate members. I think this might help to foster greater continuity within committees and encourage more specialization and expertise, in particular in policy, program, and expenditure areas.
My next suggestion is to review tax expenditures and include them in departmental reports. By tax expenditures, I mean tax exemptions—deductions, rebates, deferrals, and credits—used to advance a whole wide range of economic, social, and other public policy purposes. These are a significant amount of public money. They amount to over $100 billion annually. They've been variously described as backdoor spending, dark holes in the budget, and giving with both hands.
Despite the large amount of money and their increasing use, tax expenditures are not subject to a system of review and scrutiny as other expenditures. Tax expenditures are forgone revenues. In fact they are not budgeted the same way as direct expenditures—in fact are not budgeted at all.
Since the first tax expenditure account was published in 1979 in the John Crosbie budget, little has changed with respect to the scrutiny of tax expenditures. They are not included in budgets and the estimates of departments. They are not part of the public accounts of government. They are not reviewed by Parliament and its committees. They do not come to the attention of financial watchdogs. They are not regularly audited by the internal auditors or by the Office of the Auditor General nor evaluated by program evaluators.
At a minimum, as part of the estimates documents, departments should provide parliamentary committees with a report on the tax expenditures relating to their areas of responsibility.
My next suggestion is to better align the vote structure and the program activity structure.
As you know, the vote structure is the essential element for parliamentary control of the budget. Parliament grants money on the basis of votes. The estimates are broken down by votes, and the government cannot spend more than Parliament grants without coming back to Parliament. The government must then come back with supplementary estimates. The vote structure is a fundamental balance between adequate control by Parliament to hold government to account and sufficient flexibility for government to ensure efficiency in government expenditures. Over the last decades, the vote structure has been adjusted, and in some cases loosened, to increase the flexibility of the government to organize the financing of its activities.
Proposals for changing the vote structure have come from government, the Treasury Board, and not from Parliament. The government's program activity structure, on the other hand, is a structure that the government uses to report on programs against its objectives. It is a program structure that's used in the reports on plans and priorities, tabled in the spring, and the departmental performance reports, tabled in the fall.
I would simply encourage parliamentarians to examine the vote structure and to ensure that you're comfortable with it. I would also encourage you to examine the government's program activity structure and to ensure there's sufficient alignment between the vote structure and the program activity structure.
My next suggestion is to keep budgeting on a cash basis; I would not move to accrual budgeting.
As you know, in the private sector accrual budgeting is the norm, and in government budgeting is done on a cash basis. Also in government, the financial statements are done on an accrual basis. I don't think that because financial reporting in government is done on an accrual basis, budgeting should also be done on an accrual basis.
Cash budgeting is not only simple and straightforward, but it's also easier to understand than accrual budgeting. Accrual budgeting requires relating future expenditures to present expenditures through discount rates, social rates of return, and requires judgments and discretion. As a result, it is more open to interpretation and I would worry that accrual budgeting could be more prone to fudging of numbers, budgets, and allocations.
Forward-looking budgeting and after-the-fact accounting and reporting are not the same thing. Accounting, while important and essential, should not drive budgeting and the estimates. Financial reports can and are reconciled with budgets.
In considering the estimates, it seems to me that what's important for parliamentarians is to receive accurate and up-to-date information on how much the government has to spend and where it has to spend it. All things considered, I would stick with cash as a basis for budgeting.
Let me make one final suggestion before I conclude: I would suggest that committees need to develop a strategy for reviewing the estimates. From my experience as a public servant, the committees that have been most effective in reviewing the estimates have used a simple strategy. This strategy usually includes elements of the following. The members have been thoroughly briefed by government officials on the department, its programs, and expenditures; and the committee decides on a very simple and clear work plan for investigation, and its questioning of witnesses is disciplined and coordinated. The focus consists of one or two areas of expenditure where the committee feels the department is at risk, and the committee continues to seek additional information and analysis so that it can back up its focused investigation.
I know that some people, perhaps including academics, will not think this is very comprehensive, fulsome, thorough or complete. But from my own experience it can and does work for committees when they function as committees. I think that a clear and focused strategy would allow the committee to effectively draw upon the expert advice of the Parliamentary Budget Officer. It could also assist the committee in fulfilling its obligation to report on the estimates within the very limited timeframe it has available.
Mr. Chairman, that concludes my statement. I want to thank you very much for the opportunity to appear before the committee.