Government Operations Committee on Nov. 26th, 2013

[Bill Matthews]

We would police it to the extent that we're aware of what was forecast and what was actually spent. I'll get Marcia to correct me, but typically, Finance's starting point for the new fiscal year for their statutory programs is what was spent in the last fiscal year, and then they will adjust. If you think about the health transfer, there was 6% inflator. So they do revise them.

I'm not overly concerned by their forecast. It is an entitlement program. It's a very different issue from the lapsed funding for voted programs.

Marcia, do you want to add anything?

[Marcia Santiago]

If the concern is around the level of scrutiny at the Treasury Board in terms of voted increases, yes, even now we go through at the point of not just the policy decision in cabinet around establishing the funding levels, but also when it comes to Treasury Board to seek program authorities, and then again when the department prepares its supplementary estimates.

The department can get asked several times at each stage: do you really need this money? Do you really need all of this money? As Mr. Matthews mentioned earlier, the level of questioning does increase in final supplementary estimates.

[Bill Matthews]

Maybe I'll make one final comment on the statutory piece because your question was on statutory.

If you look at the forecast, and it's wildly different from what was spent in the previous fiscal year, your first question should be why is it different? If it's because there is an increase in OAS rates, or an increase in GIS rates, that's understandable. Demographics are changing. But you should be able to get an answer to that.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you.

It is now Mr. Aspin's turn for five minutes.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you.

Welcome, Mr. Matthews and guests.

The Treasury Board is requesting $275 million for vote 25b, a centrally managed vote for operating budget carry forward, in addition to Treasury Board's plans to transfer $173.9 million from vote 33, a centrally managed vote for capital budget carry forward, to the operating budget carry forward to address incremental requirements.

My question is, why is an amount of $173.9 million being transferred from the capital vote to the operating vote in 2013-14?

[Bill Matthews]

I understand the member's concern here because members often get very interested when it looks like money is being moved from capital to operating. This is a different case.

These are the carry forward amounts where Treasury Board has a central vote that it allocates out to departments to basically allow them to spend money in the current fiscal year that they didn't spend in the previous fiscal year. To do that, we have to wait until the previous year is finalized so we can see what each department spent, or more importantly didn't spend. When we finished crunching those numbers, it was clear if we added up all the five percents of departments for operating, we would exceed what was in the central vote for operating.

When we did a similar exercise for the capital, it was clear we could give each department their 20% and still not exceed the vote. There was money left, in this case about $174 million. So the decision was made to put into estimates a transfer to take the money we did not need from capital budget carry forward and move it into operating to allow departments to get their full 5% carry forward.

So this is not a case of moving money that was planned for capital and switching it to operating, which I know is a concern frequently of members. It is because of the size of the unspent money in fiscal year 2012-13. We did bump into a bit of an unusual circumstance.

I will also say, though, if you looked at government spending over the years, it has gone back down, but it's up over where it was 10 years ago. The amount we have put aside for operating budget carry forward has not really been increased in many years. So we never increased the ceiling of operating budget carry forward to properly allow for the growth in government spending, so this was a bit of a one-time catch-up adjustment.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Would this transfer be in line with generally accepted accounting principles?

[Bill Matthews]

The accounting comes in when we're actually doing the books for what was spent. This is a mechanism to resource departments for what they can spend. But when a department spends money, if they spend it on operating dollars it will be characterized as operating. If they use the money on capital, if it meets the definition of an asset, it will still show up on the financial statements of the Government of Canada as an asset.

So it doesn't matter where the source was. From an accounting perspective they will account for it based on what it was spent on. So to answer your question, yes.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Can I ask you then what incremental requirements are being addressed by the transfer of funds from the capital budget forward vote to the operating budget forward vote?

[Bill Matthews]

It's nothing specific, but I will say that during the last couple of years as departments have been implementing the deficit reduction action plan reductions to their budgets, they do need flexibility because they've been absorbing costs for things like severance and winding down programs. So they will often use operating budget carry forwards to fund things like severance payments to the extent necessary to give them the flexibility they need to implement those budget reductions.

There is not one specific thing I can say this money is targeted for, but I will say that in times of restraint departments can use whatever flexibility we can give them and this is a way to give them flexibility.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Mr. Chair.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you.

It's now over to Mr. Martin for five minutes.

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you, Mr. Chair.

Thank you, witnesses.

I would like to use my bit of time to pick up where Gerry left off. He was talking about the unused portion.

The lapsed money is the same as the unused portion. Is that correct?

[Bill Matthews]

Lapsed typically is unused, and I would say is typically for voted money. Statutory is just for information purposes.

[Pat Martin, NDP, Winnipeg Centre, MB]

Right.

It seems that it goes beyond just being cautious so they don't exceed and break the law by overspending. In some areas like Transport Canada, 37% of available funds were left on the table unspent, $785 million.

We all see what's happening with the Montreal Champlain bridge.The Federal Bridge Corporation Limited left 30.8% of available funds. I'm getting this from public accounts.

I found the training that you guys brought to our committee was very helpful. We try to follow the buck through the whole continuum of spending. But it's useful to look back a little bit and see what's left on the table.

It seems to me—and Gerry would know, being at the cabinet table—that there seems to be pressure being put on ministers to shave and shave and shave, and not spend their budget, knowing full well that only 5% can be rolled over. Is that correct?

Let's use Transport Canada as an example. How much of the $785 million can be rolled over without having to be voted on again?

[Bill Matthews]

Well the automatic rollover would be the 5% of operating, and we talked about 20% of capital.

When you're into grants and contributions, which is part of the issue at Transport Canada, there is no such thing as a 5% or 20% for grants and contributions. Departments actually do have to make a case to say, “Yes, we need to reprofile that money”.

[Pat Martin, NDP, Winnipeg Centre, MB]

But it seems to me that when the finance minister stands up and says, “We're whittling away the deficit”, it's under direction at the cabinet table to cut and hack and slash and make sure you don't spend anywhere near the money that was approved by Parliament. There is something disingenuous about this, which is what I'm getting at, and it's the political lens that Gerry is looking through and I am, too.

We lived for years with completely disingenuous budgets under the Liberal regime. There were surpluses but we were told all through the year, “No, there is not a penny. Sorry, the cupboard is bare, not a nickel” and then this rabbit gets pulled out of the hat, a $10 billion surplus, and everyone had been told there wasn't a nickel to be spent.

I sense something similar happening today because it worked so well, frankly, in the last administration. That's more of a comment than a question.

My question would be something that's come out of the whole Prime Minister's Office/Senate scandal. Deloitte Touche was given a $20-million contract to advise government how to save money, $90,000 per day. You think that giving Mike Duffy $90,000 was bad; this is $90,000 per day.

First of all, isn't that cabinet's job or your job to advise government? Does that Deloitte & Touche contract and other Deloitte & Touche contracts go through Treasury Board? Do they advise you?

[Bill Matthews]

I have a couple of things. If I may return to your first comment, I will say, where you see money unspent—and I will get to your second question in a moment—in the case of Transport, the question you should ask is, has the money been reprofiled and submitted back for approval? In that case, in Transport's case, over $600 million has been reprofiled and is back to be voted on again. It's hard to argue that this is a reduction when it's back to be voted on again.

When you're dealing with some of the issues Transport is dealing with in terms of reaching agreements—

[Pat Martin, NDP, Winnipeg Centre, MB]

Bill, it is a reduction. It wasn't spent that year. If they needed another $600 million, they would have asked for another $600 million—

[Bill Matthews]

No, but if you're just extending out the profile by a year, then it's really not a reduction. The profile is different in terms of timing, but it's a fair question to ask.

I will say normally the—

[Pat Martin, NDP, Winnipeg Centre, MB]

Deloitte Touche....

[Bill Matthews]

—the government has an excellent track record of forecasting expenses. Last year is a bit of an outlier in terms of the size of the lapse being big. You did mention the previous governments. If you went back to those surpluses, you would see that the surprises were always on the revenue side, not the expenditure side.

To come back to your final question on Deloitte—

[Pat Martin, NDP, Winnipeg Centre, MB]

Deloitte...well, actually, management consulting generally, because $459 million in 2012-13 in outside management consultants.....

I mean, you're about the smartest guy I know. I don't know why we'd have to hire anybody else. If they would listen to you and your team, they'd be well served. Do those contracts go through you? Do you end up taking orders or recommendations from Deloitte Touche?

[Bill Matthews]

Any department is free to strike a contract with the management consulting firm of its choice through competitive process or otherwise. The one you mentioned on the deficit reduction action plan actually did indeed go through the Treasury Board Secretariat as a department because they were advising TBS. My colleague, Christine Walker, was equally involved in the management of that contract. So that one did.

I can say—

[Pat Martin, NDP, Winnipeg Centre, MB]

How did that make you feel when they were getting $1,600 a day to tell you your job? They probably couldn't even figure out their way through the supplementary estimates (B), because nobody can except you...to be honest.