This is actually my twelfth appearance at either a Senate or a House parliamentary committee since the swearing-in of the new government last November. I'm delighted to be here.
I am pleased to have with me from my department Yaprak Baltacioglu, the secretary of the Treasury Board; Brian Pagan, the assistant secretary of the Expenditure Management Sector; Marcia Santiago, from the Treasury Board Secretariat; and my colleague Joyce Murray, , from our department.
To have the opportunity to be here again is great. Since we last met, there has been significant progress made, as evidenced in the paper provided to you.
This committee has played an important role in budget and estimates reform for some time, going back to 2012, with the report “Strengthening Parliamentary Scrutiny of Estimates and Supply”, which provided a very thoughtful analysis and recommendations that have helped serve as a road map on estimates reform. In fact, a number of the steps already taken have been in response to that report and its recommendations. These included the creation of a searchable online database known as InfoBase, which has been recognized by the PBO as the authoritative source of government expenditure information; a pilot project with Transport Canada to test a new program-based vote structure; and the identification in estimates documents of all new funding according to the associated budget document to make it easier for parliamentarians to follow that.
We continue to move forward with this agenda, most notably on the question of budget and estimates timing and alignment, and I want to speak with you briefly on that this morning.
The ability to exercise oversight over government spending is the most important role that we as parliamentarians can play in representing Canadians.
However, the current practice makes it difficult for MPs to carry out that function. Having been an MP for many years, I too have been dissatisfied with the various elements of the estimates process.
The other night in a briefing, which some of you attended, I noted that on June 2 I will have been a member of Parliament for 20 years. By that time, I will have been three and a half years in government, and 16 and a half in opposition, so my perspective on some of these things is shaped not simply by having been a member of a government but also a member of Parliament. That's one of the reasons I'm excited to discuss with you the government's vision for estimates reform.
Change in this area is not easy. In fact, Robert Marleau, former Clerk of the House, noted that the form and content of the main estimates has been modified on only four occasions since Confederation, most recently in 1997. Clearly, there's a lot of work to be done in terms of strengthening the ability for Parliament to hold government to account.
I firmly believe the vision we're proposing will help address the many issues raised over the ineffectiveness of the estimates process in Canada. These include concerns of the Auditor General, who underlined the importance of better timing between the budget and estimates.
Our vision includes four areas that are currently the source of a lot of frustration for parliamentarians. To make things manageable and to achieve early progress, I would propose that we focus our attention on the first area right away. It deals with the timing of the main estimates in the budget and would require a simple change to the Standing Orders.
Once this important reform is implemented, we could take the necessary time to study and consider the other areas. I'd like to go through each area with the committee.
As I said, the first is in the area of timing of the main estimates and budget. Currently, the main estimates for the upcoming year need to be tabled in Parliament by March 1. In practice, this means that the main estimates can only reflect Treasury Board decisions as of January roughly, well before the budget actually comes out.
This timing affects parliamentarians, because the main estimates, which MPs are meant to scrutinize and to vote on, end up not reflecting the government's plans and priorities as outlined in the budget for the same year.
The other thing is that all the work that goes into Parliament's scrutiny of the main estimates is rendered basically irrelevant when the budget comes out. Wasting Parliament's time doing irrelevant work is not my idea of a priority. We need to fix that and make sure Parliament is engaged in meaningful work, including holding governments to account.
Therefore, we propose that the main estimates be tabled by May 1, instead of March 1, so that the main estimates can include budget items.
The second challenge is the differences in scope and accounting methods between the budget and the estimates.
The challenge here is more than accounting concepts. The budget represents the entire universe of federal spending. This includes consolidated accounts—for example, EI, and tax expenditures such as the new Canada child benefit. The estimates, meanwhile, support the more limited appropriation requirements of departments and agencies.
Nonetheless, parliamentarians need to be able to compare items in the budget and the estimates. The government will build on recent efforts to improve accrual planning in departments and reconciliation to cash appropriations in the estimates. There has been some work done on that in terms of reconciliation between accrual and cash accounting. We want to deepen that and expand it.
The third area is the difficulty MPs have in connecting the money we vote for with the program it will be used for.
Departments get their expenditure authority from Parliament on the basis of votes in the appropriation acts. These describe how funds are spent on items such as capital, operating, and grants and contributions. We'd like to focus more on why we're spending, and strengthen the link between the votes and the actual, specific programs they fund.
Lastly, many departmental reports are neither meaningful nor informative.
Every department within government has a lot of people writing reports that aren't that useful in terms of the quality of information and that not a whole lot of people read. In the same way that I said I don't think it's a good idea to waste parliamentarians' time unnecessarily, I think we're wasting a lot of good public servants' time writing reports that people aren't using because they're not formatted in a way that they're useful.
Our new Treasury Board policy on results will simplify how government reports on the resources it uses and the results it achieves. Reports will now tell people what departments do, what they are trying to achieve, and how they measure success, with an increased focus on metrics and measuring results and delivery, so that ministers, Parliament, and ultimately Canadians can hold government to account and have an understanding of the effectiveness of programs. ln addition, detailed information on program spending and the number of FTEs or people working will be provided in a user-friendly online database.
Mr. Chair, these are the broad outlines of our vision for fundamentally changing the estimates process so that MPs are better able to hold the government to account.
With that goal in mind, I look forward to the committee's engagement in driving the reform of estimates to benefit all of parliamentarians. I look forward to engaging, in the short term, on the alignment of budget and estimates timing.
Thank you very much.
I'd like to turn it over to Brian, who will go through a more detailed presentation of the proposed reforms.
As the president of the Treasury Board mentioned, the purpose of today's presentation is to explain to you the government's vision for estimates reform. We also want to explain how we plan to support parliamentarians more effectively by providing the best possible information for the purpose of approving government spending.
I have several slides to go through. I propose quite quickly to go through the four pillars as presented by the estimates. I'll present pillar one, the question of timing, and then perhaps pause for questions around that crucial element of timing.
As we see here in the outline, the proposed approach of the four pillars builds on recommendations from this committee, the 2012 study of OGGO on the estimates process, as well as our initial briefing with this very committee in February of last year, where we laid out the challenges around timing.
We believe that once we have the timing properly sequenced, we will be able to move forward with a better understanding of needs and requirements around scope and accounting, the vote structure of appropriations, and results and reporting.
The estimates are clearly essential to the proper operation of government. They form the basis of parliamentary oversight and control, reflect the government's spending priorities, and serve as the principal mechanism for establishing reports on plans and results.
However, parliamentarians have said on many occasions they are unable to perform their role of examining the estimates to ensure adequate control. That situation is attributable to the incoherent nature of the budgetary process, as a result of which budget initiatives are not included in the main estimates. Estimates funds are hard to understand and reconcile, and reports are neither relevant nor instructive.
Accordingly, the government sets out a four-pillar approach to fundamental change, beginning with the first step of changing the timing of the main estimates. As the president mentioned, taking this step will present a more coherent document and allow for the inclusion of budget estimates.
Then we can more easily reconcile the differences in scope and accounting methods between the budget and the estimates, ensure that vote structures for all departments reach parliamentarians, and reform the departments' annual reports so that parliamentarians are better informed about planned expenditures, expected outcomes, and actual outcomes.
Now I will discuss each pillar in detail.
The issue of estimates timing is very critical to any comprehension of the government's aspirations related to the budget and Parliament's understanding and control of departmental expenditures.
According to existing Standing Order 84(1), the government must table on or before the 1st of March the main estimates for the year. In reality, to be able to do this by the 1st of March, we need to prepare a document that reflects Treasury Board decisions up until the end of January. We know that in a typical year the government will table its budget somewhere between mid-February and mid-March, so evidently locking down the main estimates by the end of January precludes any ability to reflect budget items in the main estimates.
As the president has mentioned, this presents the scenario where we are presenting to Parliament the certainty of program expenditures that do not reflect the new plans of government, the new priorities of government, as they are articulated in the budget that's tabled in February and March. This in itself presents a fundamental challenge and incoherence in terms of understanding the budget and estimates process.
To remedy this, the government is proposing that the main estimates be tabled on or before the 1st of May, instead of on or before the 1st of March. At this point the budget would have been presented, and we would have an opportunity to include budget items in the estimates for Parliament's scrutiny.
This change would include a number of benefits, not the least of which is a more coherent sequencing of the documents, a timelier implementation of budget initiatives, the ability to reconcile the estimates back to the budget that was tabled in February or March, and the possibility of eliminating a supplementary exercise. Currently we have the main estimates and three supplementary estimates. We would be simplifying the process and presenting fewer documents to Parliament and therefore less confusion.
I would emphasize that in terms of beginning the fiscal year and the approval of interim supply, nothing would change. As was clear in the document, we would present an interim estimates and an interim supply bill that would be based on a continuation of the current-year existing authorities that would allow departments to begin the year, and then introduce full supply in June, according to the current supply calendar.
Before pausing for questions on the issue of timing, I would present this in a visual form where we see in the period now, October-November, the government preparing its fiscal and economic update. That becomes the basis for planning the budget. We understand that the government would be intending to present a budget to Parliament in the February-March time frame. We would introduce interim supply for the 1st of March, allowing departments to begin the fiscal year in April with authorities, and then we would follow up with main estimates that reflect budget priorities and a reconciliation to the budget in May for Parliament's consideration of full supply in June.
Mr. Chair, at this time I think it might be appropriate to pause and allow committee members to digest this issue of timing and perhaps ask questions on this very critical step.
Thank you very much, Mr. Pagan.
Thank you, Minister, for your presentation. Before we turn it over to questions and answers, perhaps you'll permit me to make an observation or two.
I haven't been in Parliament as long as you, Minister. Outside of you, however, I believe I'm the longest-serving parliamentarian at this table. I agree with your assessment that the budgetary process, in terms of parliamentary oversight, has been, in my view at least, and I've been saying this for well over 12 years, almost a bit of a joke. We simply didn't have the ability to delve into the numbers effectively and to give the scrutiny that we have been charged with doing. I applaud you in your efforts to try to simplify this and try to streamline the process so that all parliamentarians at least have an opportunity to observe and make comment on a literally multibillion-dollar functioning of Parliament. I applaud you on that.
My question for you is this. In the last Parliament, I was charged with the review of the Standing Orders. As you know, each year a new Parliament sits, there is a finite period of time for Standing Orders to be reviewed. As a matter of fact, there was a debate in Parliament just a week or so ago when we were on the road.
The approach I took with the all-party committee studying changes to the Standing Orders—we made a few minor ones—was that I suggested we needed unanimity to make sure, since Standing Orders are really the backbone of what we do and how we operate in this institution.
Have you, Minister, considered Standing Order changes requiring unanimous consent, or exactly how did you plan to approach that?
First of all, the change to the Standing Orders that is required for this would be moving the deadline for the main estimates from March 1 to May 1. This committee has the ability, as a committee, to recommend to Parliament a change. We will work on this with members of Parliament from all parties.
On the timing of it, really, in order to have this change apply to the next main estimates and budget, it would require something basically sometime in November. I would hate to see us lose a year in terms of this significant improvement. I view any change like this as part of an evergreening approach. We as Parliament should always look at ways we can strengthen parliamentary governance and good governance broadly on an ongoing basis.
In other words, from a change that we make now in terms of the Standing Orders, the next budget and estimates process will see a more logical sequencing of the budget and estimates, with the main estimates actually reflecting what's in the budget. Then, as time goes on....
I look at the Australia model, for instance, where the budget and main estimates appear almost at the same time, or even in Ontario, where it's about 12 days after. As the departments become accustomed to this new timing and sequencing, there will be a tightening of budget and estimates timing over time that will operationalize as a result of greater efficiency. I view this as the start. Over time you'll see a tightening of budget and estimates timing so that they're more coincident.
Thank you, Mr. Whalen, for the question. Just to be clear, what we are proposing with this vision is not to eliminate supplementary estimates. It's to render the process more coherent and sequential, so that the main estimates tabled after the budget in fact reflect budget priorities.
In that scenario, as mentioned, last year we brought forward approximately 70% of the budget in supplementary estimates (A). We would replace that spring supplementary estimates with the main estimates that would have the budget initiatives. Then we would bring forward the remaining budget priorities in a fall supplementary estimate, which would become the first supplementaries of the year, with supplementary (A)s in the fall, and then a cleanup of accounts in the winter in supplementary (B)s. We would continue to have an estimates document in each supply period, which would encourage committees to continue to call on departments and continue their scrutiny of government expenditure plans.
I would also mention, just in terms of history, that we introduced the spring supplementaries in 2007 as a way of facilitating a more timely implementation of budget initiatives. That has proven to be helpful, as we saw last year, but we can make the process more efficient by simply presenting a better main estimates. That's the heart of the proposal.
As presented, this is a four-pillar approach to estimates reform. We've just spent some time talking about the very critical element of timing. I'll quickly walk you through the three remaining pillars.
Once we can fix the timing of the estimates, there are other sources of incoherence and coordination that must be addressed. These include the scope and accounting, the nature of control, and reporting.
Pillar two is about scope and accounting, or what we refer to as the “universe” of the estimates. The problem is quite simple. The budget presents a complete and full picture of the totality of government spending, including crown corporations; consolidated accounts, such as employment insurance; and programs through the tax system, such as the Canada child benefit. In contrast, the estimates are simply a more narrow subset of government spending, and they're focused on the expenditures that must be authorized through an appropriation. That is the universe.
Then, of course, we have accounting differences. The budget is on an accrual basis; the estimates are on a cash basis. The problem has I think been oversimplified by talking about cash and accrual, and it's much broader than that.
What we see in slide 8 are the benefits of reconciling these accounting and universe challenges if we can table the main estimates after the budget. The mentioned our interest in deepening the reconciliation between the two documents.
The federal budget last year presented an expense forecast of $317.1 billion. Supplementary estimates (A) provided authority to spend $251.4 billion. That's a $65.7-billion gap. The universe accounts for about $60 billion of that—that is to say, consolidated specified purpose accounts, such as employment insurance; expenditures through the tax system, such as the Canada child benefit; and then other expenses of government, such as consolidated crown corporations. That's about $60 billion. The actual accounting difference—the difference between accrual and cash—represents about $4.8 billion. This difference is explained by things like capital amortization, bad debt allowances, and interest on future obligations.
Finally, to complete the reconciliation, there would be items that are in the budget but have not yet been brought forward for approval. As we saw in supplementary estimates (A) last year, that was about $4.9 billion.
This is an example of how, if we can table the estimates after the budget, we would be able to provide a reconciliation to the budget and thus eliminate some of the confusion and frustration that parliamentarians and committees experience.
Quickly, in terms of vote structure—we did touch on this in the previous round—the objective here is to improve Parliament's line of sight on program costs and results. We are currently doing a pilot project with Transport Canada for their grants and contributions vote. The idea would be to expand that across all departmental operations and provide committees with a better line-of-sight relationship between resources and programs.
For example, as mentioned by the president, the Treasury Board Secretariat is the employer; we're the expenditure authority and we're the regulatory authority. Rather than having a single operating vote, perhaps we might want to experiment with votes related to each of those core responsibilities.
Mr. McCauley, that's what we mean by that high level related to our core responsibilities. We could do that for any other department.
Global Affairs, for instance, has a single operating vote, but we know that they have responsibilities for development, diplomacy, and trade. We can disaggregate that at almost any level, but of course there are costs and challenges. There are some jurisdictions that have as many as 12,000 votes. I would argue that they're not the best-run jurisdictions, but that's something we could study and work on with the committee.
Finally, we have our last pillar around results and reporting. As was mentioned in the introduction, we have a new Treasury Board results policy. It came into effect on July 1. We are working with a handful of departments now to operationalize this and present new departmental results frameworks and new reports to Parliament that we would see in the spring cycle. This policy will be fully operational by all departments by November 2017.
Before I conclude, I'll say a word—a plug, if you will—for TBS InfoBase. As was mentioned in the introduction, in 2012 the committee recommended the creation of an accessible online database. We've made great strides in making this a reality. If members are not familiar with InfoBase, I would commend this to them as a way of facilitating an awareness and study of departmental operations.
The graphic presented here is simply a snapshot of the types of information that are available through InfoBase that include all kinds of indicators around actual costs, projected costs, FTE utilization, the distribution of FTEs across the country, demographic information, etc. As the minister mentioned, we have plans moving forward to deepen this and enrich the information available to committees.
In conclusion, many complex issues must still be considered before we go ahead, particularly the accounting frameworks and the withdrawal of votes from the main estimates. Changes of that scope will require Parliament to change the way it operates and the way the departments publish their information.
We propose moving ahead by small steps in order to avoid large-scale failures. We recommend starting by changing the deadline for the main estimates and then working with the committee to develop options for the other aspects as that change is integrated into the process.
Mr. Chair, that concludes the presentation. Madam Santiago and I would be very happy to respond to additional questions.
In fact, in the discussion paper, there is an annex that presents an illustration of what interim estimates could look like. We would envision it being very much similar to the present case, where we would present interim estimates on or before the 1st of March. However, these would be based on a continuation of the current-year authorities rather than future-year, which we don't know yet because of the budget.
In our mind, this would have the advantage of avoiding some situations that we've seen in the past. This committee may remember the case of Marine Atlantic in 2015-16, where continuation of certain funding was contingent on a budget decision. Because the main estimates were presented before the budget, there was a fairly significant decrease in the main estimates for Marine Atlantic that year. It was assumed to be some sort of cut, and in fact it wasn't a cut; it was simply the fact that the continuation of the funding was ad referendum the budget.
By presenting interim estimates that would be based on a continuation of existing authorities, there would be no reductions unless those reductions were announced in the budget, and the interim main estimates would continue to be based on a fraction. We talk about “twelfths”. Interim supply is usually 3/12ths of a department's overall requirements.
That would continue to be the basis of interim supply, but we would work with departments. They could identify specific needs very early in the year. They would get incremental fractions to reflect that authority. For instance, grants and contributions that are made to aboriginal bands right at the beginning of the year would justify a higher—
I mentioned that over the last 10 years budgets have been presented as early as the end of January or as late as the 21st of April. There are good and valid reasons for that.
In 2009, the global economic crisis, it was very important for the government to send signals to Canadians and the Canadian marketplace about its ability to invest and support employment and the functioning of credit markets. That is an example of the government's acting early.
More recently, in 2015, with the dramatic drop in the energy market there was some confusion as to whether this was a temporary dip and was going to rebound quickly or if it was a more permanent feature that would impact underlying economic environment, capital investment, employment levels, etc. In that year the government actually delayed the budget, looking for the best information possible before presenting its plans.
Those two extremes, if you will, point to the benefits of some flexibility in the tabling of budgets. Our proposal of May 1 would accommodate either scenario and would present the main estimates after the budget, which would render the documents more coherent and reconcilable.