Colleagues, I'll call the meeting to order and welcome our guests.
Monsieur Fréchette, thank you very much for being here.
Colleagues, this is a televised meeting. Before we begin, I have just a couple of quick notes. We may be interrupted by bells this morning. I'm not 100% sure on that, but I have a sense that we'll probably hear the bells ringing at about a quarter after 10 or so. Since we're next door to the chamber, if we still have questions of our guests, we have the ability to stick around here a little longer rather than just leave immediately when the bells start ringing. I'll do a little consensus building at that time and see what we need to do.
Since this will be in all probability our last meeting before the summer, I want to thank each and every one of you for all the hard work you've performed on behalf of Canadians and your own taxpayers. I particularly want to acknowledge all the hard work you did with our most recent report, which we tabled last week, on the whistle-blower protection act. We hadn't had a report like that for 10 years, as all of you know. I have heard, as I'm sure you have heard from many of your constituents and many public service holders themselves, that an update of that act was desperately needed. We had many, many government employees and public servants who were feeling shut out of the process. They felt that they couldn't really go forward to their supervisors, in some cases, with evidence or suggestions of wrongdoing, for fear of reprisal. I think the work you all did on drafting that report, which we've tabled, will go a long way in comforting a lot of our public servants and in fact encouraging them to come forward with evidence of wrongdoing, should they see it in the workplace.
This is, I think, a very memorable—I won't say “historic”, as I'm not prone to hyperbole—and good piece of work that all of you did. I give my thanks to each and every one of you for that. It's going to stand the test of time, I believe. We'll see what happens in five years when we do another review. Congratulations to each and every one of you. You should be proud of the work you did.
Colleagues, I also just want to mention to you that our clerk, Philippe, will not be with us come the fall. This is his last meeting. It's been 18 months since this committee began sitting, and I think we will now be going through our fourth clerk, which I take as a direct reflection of my abilities as your chair.
Some hon. members: Oh, oh!
It kind reminds me of my love life when I was younger, when the woman always used to say, “It's not you, it's me. That's why I'm leaving.”
Philippe is going on to bigger and better things. I know we all wish him well.
Thank you for all of the hard work you've done.
Some hon. members: Hear, hear!
The Chair: Of course, I will never ignore, and nor should I, our two hard-working analysts. Both Audrey and Raphaëlle have done exemplary work over the course of the last several months. Frankly, without them, we wouldn't be tabling reports in the House of Commons as comprehensively as we have been.
Ladies, thank you very, very much for all your work.
Some hon. members: Hear, hear!
The Chair: With that, Monsieur Fréchette, we will have your opening statement. We'll continue with a round of questioning until we are interrupted by bells. Hopefully, sir, we can get the majority, if not all, of the meeting under our belts by that time.
The floor is yours, sir.
You made a good segue when you mentioned the fall. Should Bill be passed in the next few hours, all of the PBO team members are looking forward to working with your committee, which is one of the four committees mentioned in the PBO legislation. We're looking forward to that.
Mr. Chair, Mr. Vice Chair, members of the committee. Thank you for the invitation to appear before you to discuss the estimates process and our recent reports on the estimates.
Today, I am joined by Mostafa Askari, Assistant Parliamentary Budget Officer, and by Jason Jacques and Alex Smith. I feel that Mr. Jacques and Mr. Smith are members of quite a small group of experts who have been following the evolution of the budget process for many years.
Of course, I include in that group Brian Pagan and his colleague Marcia Santiago, who are both not unknown to your committee.
As you know, in October 2016, the Treasury Board Secretariat released its vision for estimates reform. It rests on four pillars: aligning the estimates with the budget, scope and accounting, vote structure, and finally, the departmental plans and results reports.
We welcome the government's efforts to enhance Parliament's role in financial scrutiny. To help parliamentarians examine the government's proposals, we prepared a document outlining issues to be considered when reforming the business of supply. We have also been monitoring the implementation of the government's reforms through our reports on the estimates. While we have observations on each of the four pillars, I will focus on the government's proposal to improve the alignment of the budget and the main estimates by delaying the main estimates—originally until May 1, and now until April 16 based on a recent motion that would amend Standing Order 81. We will come back to that standing order during the question period, if you want.
As the inclusion of budget measures in the spring estimates is an indication of whether delaying the main estimates will lead to alignment with the budget, we tracked the number and value of budget 2017 spending measures in supplementary estimates (A) 2017-18. We found that only 44% of the additional funding allocated in budget 2017 for 2017-18 was included in the supplementary estimates (A). This is a decrease from the previous year, when 70% of the budget funding was included in supplementary (A)s 2016-17.
Given the limited number and value of budget measures that were included in supplementary estimates (A) 2017-18, we are concerned that the government's proposal to delay the main estimates may not result in meaningful improvement in the alignment of the budget and the main estimates.
It is worth noting that, in 2008, the government began tabling spring supplementary estimates with the stated intention of facilitating a closer alignment of the estimates to the budget. As the number of budget measures included in the spring supplementary estimates has varied considerably, it could be concluded that delaying the main estimates would result in similar challenges.
Our examination suggests that successfully aligning the budget and the estimates will require substantial reforms to Finance Canada's and the Treasury Board Secretariat's budgetary approval processes. Thus, parliamentarians may wish to wait for additional details regarding the government's plans to streamline and align those processes before changing the timing of the main estimates.
To help parliamentarians hold the government to account for the implementation of its budget plan, we also decided to track spending and tax measures from announcement in the budget to parliamentary approval through appropriation and budget implementation bills.
As a result of that exercise, we found a number of budget 2016 spending measures, 44% of them, line up with items included in the 2016-17 supplementary estimates. However, many spending measures had more funding or less funding than indicated in the budget, or were simply not funded through the supplementary estimates in 2016-17.
On that basis, we concluded that there is often no clear line of sight between budget spending announcements and their implementation. The different presentation, wording, and accounting methodology makes it challenging to align budget spending measures with items included in the estimates, and it is not possible to track spending on most budget measures beyond the first year or what was actually spent on specific measures. It is thus very difficult for parliamentarians to follow the money and hold the government to account for implementing its fiscal plan as outlined in the budget.
We believe that the government may be able to address some of these challenges by preparing and presenting its budget and estimates concurrently and using a more consistent method of presentation, as was recommended by this committee in 2012.
We have provided copies of the documents I have mentioned to the clerk.
My colleagues and I would be happy to respond to any questions you may have regarding our analyses, as well as the government's estimates process.
Thank you very much, Mr. Chair.
Good morning, Mr. Fréchette. It is an honour to meet you and your team. Thank you for joining us this morning.
Last fall, in 2016, we debated some reforms of the main estimates a little. We did so without focusing on whether the figures or the accounting methods were exact and without discussing all those questions of a technical nature. Instead, from a more philosophic perspective, we spent time discussing whether the reforms would actually reduce the time allocated to members to scrutinize government spending in depth.
In your opinion, if these reforms were adopted, would that actually reduce the time allowed to scrutinize the expenditures?
Thank you for the question. The answer comes in two parts.
First, we all know that your time is limited. So, if the documents are clearer and easier to understand, and if the figures in the budget and the main estimates are better aligned and better organized, clearly, your examination of them will be made easier, and consulting the documents from end to end will be quicker.
Second, according to the proposed changes—you are referring to those that are the result of the reforms and probably to those regarding the Standing Orders of the House—the amount of time you have is still being increased. Even if you put the tabling of the main estimates back to April 16, parliamentarians still have more time, up to June 10, to examine them.
That is certainly enough time if the documents do indeed turn out to be clearer, plainer and easier to understand. As I said, if we, as experts who have been observing the budget process for years, have difficulty in finding figures ourselves, we can understand how difficult it can be. Any reform proposal that clarifies the process is clearly welcome.
And with the same accounting, yes.
That was a recommendation of the committee in 2012. As I explained, it is what happens in other countries. The difficulty is that I am not convinced that it can be done and I refer specifically to 2012. That is when senior officials said that the main estimates and the budget could never be aligned, for various reasons, such as accounting, financial year and cash flow, but also because of the amounts of the spending. They said that we would always need supplementary estimates in order to align some expenditures, and we agree on that.
That is why alignment could be extremely difficult if there is no change of culture inside the public service itself in terms of providing data. We will not achieve that by changing the Standing Orders of the House. I do not see what incentive there would be, especially as that change is for two years. It goes to the end of the current, 42nd Parliament, unlike other regulations that, once changed, stay changed forever—accepting that nothing is really forever. However, in this case, it is a trial run for two years. So it has to be seen as a pilot project.
Thank you, but I have no further comments, except to repeat that we find the approach very commendable in trying to harmonize the estimates and providing parliamentarians with clearer documents. I want to be very clear on that. In the budget process, it is your role to approve those sums of money. In order to do that, you need clear documents that are easily understood in a short time. That is my main comment.
However, as Mr. Jacques and I mentioned, It is currently difficult to take such an approach in the public service and the two central organizations. We hope that the reform will result in the main estimates being presented a little later, and that it will bring about better alignment.
Based on our analyses of the last two years—I am not giving you an opinion of mine—70% of the funding proposed in the budget was accounted for in the 2016-2017 supplementary estimates (A). That was easier, because it was about overall infrastructure programs. This year, it is more difficult because it is about individual programs. So the performance of the departments has to be a factor.
It gives the government between two and six weeks of extra time, essentially, because the budget date is not fixed, so we don't know when the government will actually table the budget. It could be the beginning of March, it could be the end of March, it could be in April. We don't really know how much extra time the government will get with this proposal.
The other part that has already been mentioned is that the problem really is not the date of the main estimates; the problem is the internal processes for the Treasury Board to approve the various budget measures. Based on the report from the government, those could take up to 18 months. If that's the case, then four or five weeks or two weeks of extra time will not help the government to include most of the budget measures into the main estimates.
Another problem with this proposal is that you are going to lose the supplementary estimates (A), which are normally tabled in the month of May. What that means is that you will see most of the budget measures in the estimates only in November, when the first supplementary estimate is tabled.
It's not clear this is actually an improvement relative to the current system in terms of the alignment between the budget and the main estimates. What you need, really.... The test is very simple for every kind of measure that is proposed by the government in this regard—namely, is this going to increase the capacity of parliamentarians to hold the government to account and scrutinize their spending? Based on our evaluation, this proposal is not going to do that. Again, the problem is not the date; the problem is the internal processes. The Treasury Board submission process is completely separate from the cabinet process for approval of the budget measures, so when you get the budget approved, then you have to start the Treasury Board process, which will take up to 18 months. That's why we don't see the budget measures included in the main estimates.
Thank you for joining us, gentlemen.
We are talking of harmonizations, but, actually, parliamentarians need clear documents in order to base themselves on relevant information so that they are able to vote. I have familiarized myself with the document that was sent to us. It is called “Following the Dollar—Tracking Budget 2016 Spending and Tax Measures”. It is an interesting document. It really shows us the differences, the difficulties and the challenges, as you mentioned previously. Following the money comes with a number of difficulties and they are structural ones. What you are telling us is not new.
There are in place plans, a test and a pilot project that help us to follow the expenditures with faster and more rigorous study. A budget sets a course, but it sometimes varies in a year and, at that point, we have to react. That is the time when we as parliamentarians have to make decisions.
Is this initiative, of following each expenditure and providing statistics, currently improving communications between your organizations, parliamentarians, the Minister of Finance and the ministers in the Treasury Board?
Thank you for the question.
We hope that it will improve things. A document like this is interesting for anyone involved in the areas of finance and accounting. We do hope that it will improve understanding for parliamentarians. Do not forget that we do not work for the departments, we work for parliamentarians. This document is a good example of something that can help parliamentarians to better grasp the difficulties that they have to resolve when they are looking at the budget process.
As Mr. Askari mentioned, it is not just a question of examining the budget process from the figures that you see in the main estimates or the budget. It is also important to clarify all the steps. It starts somewhere, meaning that an amount that appears in the main estimates has first been argued over in cabinet, then in the Department of Finance and the Treasury Board, not to mention in the approval stage.
In fact, we can see that amounts mentioned in the federal budget do not necessarily appear in the main estimates. They may only appear in the supplementary estimates. We have given the committee some examples. It gives you an overview of the difficulty for the Treasury Board and the time that approving some budgets can take. Infrastructure programs are good examples of programs that can require a lot of time.
I would like to thank the witnesses for being here today.
I have a question about the structure of votes. We are often asked whether we have to vote on the programs. In the last report, the 2012 one you mentioned, I remember that the senior assistant secretary of the Expenditure Management Sector seemed a little reluctant to suggest this. Perhaps we can understand why. Parliament would have to hold over 2,000 votes if we voted on all of them.
I want to understand how we could ensure that we don't have to hold 2,000 votes. It would obviously be far too many.
There was talk of holding 191 votes last week. We would have spent 30 hours voting. It would take a long time because we don't have an electronic voting system.
Do you have any suggestions about establishing a limit on the amount of expenditures, a cap or base amount, for instance?
That is an excellent question. Thank you.
Indeed, you are asking whether it would be better to have a lot of details and to vote on those, or to have fewer details, but a main objective and to vote on that, while giving the departments the freedom to use funds by objective, as I mentioned previously.
That's precisely the debate that Mr. Matthews referred to, in 2012, and that you mentioned. It's the exact same debate that the current secretary, Mr. Pagan, mentioned before your committee. It's really up to you to choose, namely, whether you want to have all the details and the accompanying votes.
I can ask Mr. Smith to respond as well. His approach may be different from mine.
Well, there's a need to strike a balance between parliamentary control and government flexibility. For the government, they need to be able to make changes throughout the year and not have to come to Parliament every time they want to make a change. When you have a vote for Parliament, they cannot exceed that. It is a limit on how much they can spend. If you break that spending out into further categories and more categories, they have to be more careful about how they spend their money, and they need to have very thorough accounting systems.
Right now their accounting systems are not robust enough to make sure that they do not exceed a vote if you give them, say, 10 or 12 categories of their spending within a particular organization. That is why, to some extent, the government prefers the current method, because there are overall categories of expenditure by capital, by operating, or by grants and contributions.
The motivation of this committee in 2012 was that when you vote on a grants and contributions, or a capital, or an operating, it really doesn't say a lot to a parliamentarian: “I'm more interested in what you're going to achieve with the funding.” If you have a vote based on the results or objectives that the government is going to achieve, it's more meaningful to parliamentarians. If you want to affect the amount that is spent, are you really interested in reducing the amount that is spent on capital? Or are you interested in the amount that's going to be spent on rail safety as opposed to highway safety, other marine safety, or other things that a department might be interested in, and seeing how the funds are organized in that way?
The challenge for the government is that if you have to come forward every time you want to move funds around between these votes to Parliament, it can make it difficult to respond to emerging issues during the year. That's why in some jurisdictions—and as they put in their discussion paper—you could have a system whereby government can move up to a certain percentage of the vote without coming back to Parliament.
There are various ways in which you can accommodate these things. The committee, if it wanted to, could do a more thorough study on this particular pillar, on the the vote structure, and see how it could work for government and for parliamentarians to find the balance you're talking about.
Thank you for your question.
The objective of the Treasury Board is precisely to make life easier for parliamentarians and to help them play their proper role in holding the purse strings. It's clear. There is a spirit and a will in this sense. As Mr. Askari and I mentioned earlier, we aren't convinced that this will really make it easier for them. We believe that, at the beginning at least, so the first cycle of next year, we will be able to realize this, meaning we will verify whether parliamentarians are in a better position to hold the government accountable for its expenditures.
You asked if there was something normative behind all this. We are going to see whether the promises of this reform will be realized—it will be the ultimate test. At the moment, we do not see how changing the dates or making the budget mobile in time will change things. There is no mention that the budget must be presented in February, March, April or May. On April 16, when the main estimates will be tabled, it might be harmonized with a budget tabled two weeks in advance, as we have seen in the last few years when the budget was tabled very late.
Is this a step forward? We can hope so. Is it a step forward that see happening? Not necessarily.
Thank you very much to the panel. It's always interesting to discuss this subject. I think every time we do, we clarify somewhat more just how this process works, for ourselves and of course for the people who are watching this.
I think we need to clarify right away that it's not a one-year test. This change will be for the foreseeable future, over the next two years, certainly until the next Parliament. I think that's important to understand, because it's not a short-term process. It's not, “Let's try this, and if that doesn't work, let's try something else.” Many changes need to be done in this process, and I think we need to give it a chance.
Could you just clarify, Monsieur Fréchette, that it's not your understanding that it's just a one-year deal?
Thank you very much, Mr. Chair.
Thank you to all for coming today from the parliamentary budget office. It's very helpful for us as we continue to meet with Treasury Board about this process.
There's been some discussion today about targets, timelines, and a detailed plan, yet the Treasury Board has come to us many times setting a very clear strategic direction and goal of competently aligning the budgets and the estimates process, and doing so in a way that will allow parliamentarians to have better oversight. In my view, getting there in a reasonable way, any improvement will be greatly appreciated by parliamentarians.
In terms of baselining, why do you think it's important that they should establish some benchmark criteria for a number of estimates that get wound up in the mains, or an amount of spending that gets wound up in the mains, when the first step appears to me to be just to align the timing and provide an opportunity to table the estimates as closely as possible after the budget? Doesn't the change to the standing order allow them to make that first step?
Perhaps I can add something very quickly, Mr. Chair.
What's interesting is that in the standing order, if you remember, the original plan, as I mentioned, was May 1 from the beginning, since February 2016 when these discussions began. Eventually it was refined, and in November with the reform, the proposal, and so on, it was always May 1. Now it is pushed back two weeks, to April 16, which is interesting to see. Were there some negotiations somewhere at one point? We are not aware of that. Is it because the Treasury Board believes that no matter when the budget is tabled, they will have sufficient time by April 16 as opposed to May 1?
It is intriguing a little bit. I have to admit that it is intriguing to see that they pushed that date back a bit.
We've talked a lot about needing a plan for improving the processes. A couple of weeks ago we had the President of the Treasury Board here. We asked what the plan was, and we got.... We didn't get an answer, basically, other than, oh, we're improving, and then he pointed toward his four pillars discussion paper as his concrete plan to improve the processes.
You've read the four-pillar plan that he has. Do you think this is the concrete plan to improve the processes with the estimates, to get the spending done, to get the programs started, etc?
One of the advantages of aligning the budget and the main estimates, from a government perspective, is that you can implement things earlier in the fiscal year.
One of the things they talked about in their discussion document is that some things take from 15 to 19 months before Parliament approves them after announcement in the budget. If you are able to present things and implement them earlier in the fiscal year, it's easier. If you have to wait until December to get parliamentary approval to spend money, you have three months left to spend the money.
With respect to provinces, most of the transfers are under statutory authority and don't go through the estimates, so that particular thing might be less affected, but non-governmental organizations and first nations communities get money well into the fiscal year. They're told they have to spend it within a couple of months' notice. It's not really a good way to design a system.
Thank you, Ms. Shanahan, and thanks, Mr. Chair.
I might disagree with the last statement that obviously it's not part of the plan, because the President of the Treasury Board has been before us. He did initially ask for until May, and then over the course of a couple of fiscal cycles to have the opportunity to bring the preparation of the documents back up to where they currently stand so that they would be able to achieve more of the recommendations outlined in the 2012 report.
In the fact that this current change to the standing order doesn't mandate that, the current state of the proposed change to the Standing Orders is perfectly consistent with having the budget tabled before March 1 and the main estimates tabled along with the budget once the machinery of government has had two full fiscal cycles to deal with the change.
Would you not agree that the changes are consistent with the recommendations of ultimately having budgets and estimates tabled both before the start of the fiscal year and in an aligned fashion?
I cannot really comment on the staffing at Treasury Board.
I want to come back to your question and to the previous question about timing and this committee, but also the staffing of this committee. If you do see, as you say, that the path of this reform will drive this committee to have a greater role to play and have all the information right at the beginning of the fiscal year, as recommended in the past by this committee and other committees, you're going to need not only more time but more resources to scrutinize all this and do a proper job.
As for Treasury Board, it's up to them to decide whether they have enough people to achieve that, to change the culture and have this better alignment for the documents.
Your chair is always at the behest of the committee. Should you choose to invite Finance officials here, I'm sure this committee would welcome the opportunity to question them.
Gentlemen, thank you very much for your attendance here. You've probably seen the flashing lights, which means that we have a vote being called now. I'm going to adjourn at this point, but I do want to once again thank you very much for your testimony here. It's been very instructive and very helpful.
If there's one take-away above any others that I can suggest, it's that all committee members should heed your very sage advice that until such time as there is better integration and communication and a true commitment between Treasury Board and Finance, we may be having this discussion again and again over the years. Hopefully, those two entities can come together in an integrated fashion and benefit all parliamentarians with the results.
Thank you so much.
Colleagues, we are adjourned.