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.
Merci.
