Government Operations Committee on May 2nd, 2012

[The Chair, NDP, Pat Martin]

That sounds like a challenge and we will try to rise to it.

We will suspend the meeting briefly while we change our witnesses.

The meeting is hereby suspended.

[The Chair, NDP, Pat Martin]

Ladies and gentlemen, we will reconvene the meeting and welcome as our next guest and witness Mr. Peter DeVries, an expert in public management issues with a long and storied history with the Department of Finance. He has a great deal of experience in these matters. We welcome you here, Mr. DeVries. You have five or ten minutes or as long as you see fit to give us a presentation and then we'll look forward to questions.

The floor is yours.

[Peter DeVries, Consultant, Budgetary Affairs, 3D Policy, As an Individual]

Thank you Mr. Chairman.

I don't propose to go through my opening remarks, per se, but instead will summarize them and hopefully within the next five minutes.

At one time, when I was working at the Department of Finance back in the early 1980s, the estimates were a fundamental input in setting the expenditure framework contained in the budget. Officials from the Department of Finance and from the Treasury Board Secretariat would spend weeks compiling the individual expenditure forecasts for the departments and agencies, and then roll them up into an envelope-type of system, which then would form the basis of the direct program spending that was contained in the budget.

However, the budget and the audited financial statements, which sort of relay how well the budget did, evolved over time. All activities controlled by the government are included, cash accounting was replaced by accrual accounting, and the expense figures and revenues are presented now on a gross basis, rather than a net basis.

The estimates, however, have remained relatively static. Today, the estimates are largely irrelevant for budget planning. I believe that the budget should be the anchor for the estimates. The estimates should be put on the same basis as the budget and the audited financial statements, and they should be tabled after the budget.

Under the current supply processes, and with the fiscal year beginning on April 1, this would require that the budget be tabled no later than the middle of February.

Until recently, this was the practice, primarily based on a discussion paper that was released by the department in 1984. At that time we had the budget, we had a borrowing authority bill, we had projections of expenditures to the provinces, and we had the estimates. The budget sort of formed the basis for those three types of information, the estimates, the borrowing authority bill, and the transfers to the provinces.

Of course today, we don't have a borrowing authority bill anymore, so that reduces some of the importance of that linkage.

Tabling the budget before the estimates would mean that the estimates would be more in line with the budget. Reports on plans and priorities should be tabled with the estimates, incorporating the impact of the initiatives proposed in the budget. If that's impossible to do, there should at least be a full reconciliation of those things that were included in the budget but not included in the estimates.

Parliamentarians would then have a much more comprehensive picture on proposed spending by department for the upcoming year. Based on current reports, detailed information on the impact of the spending cuts proposed in budget 2012 will not be fully available until some time in 2013, and the reports on plans and priorities, which normally should have been tabled shortly after the estimates are now not expected until some time in May, and will not incorporate these changes.

One has to ask themselves, what is the use of the reports on plans and priorities, especially in this round?

There should also, as I mentioned, be a detailed reconciliation between the budget and the estimates. They will never be on the same basis. There will always be some differences, but there should be a full reconciliation of that difference. The last time there was a reconciliation between the budget and the estimates was in budget 2007, whereby the expenditure numbers, the expense numbers in the budget, were fully reconciled to the expenditure numbers in the main estimates.

We haven't seen that since.

If the estimates are to remain as is, then I believe they should be tabled much earlier in the process, say, for example, November. There is no reason why not, if they're not going to be tabled, or they're not going to be based on the budget estimates, and they're not going to be consistent with the budget accounting on a conceptual basis.

In that time, that would give parliamentarians much more time to assess the estimates and get them passed before April 1.

The estimates, in my view, then should only contain voted expenditures. Statutory expenditures should not be included. They're not being voted on. They're good for information purposes, but at the end of the day parliamentarians do not spend a lot of time on statutory programs unless there are proposed changes to those statutory programs, as we saw in budget 2012.

Statutory programs need a basis to be included anywhere. They need an economic context and unless you're tabling with the budget, I see no reason why these estimates should contain statutory spending.

With respect to the Parliamentary Budget Office, I believe it should be made an agent of Parliament, as it was originally promised, with increased resources and much more access to information.

Now, last week the PBO published a report entitled “Budget and Expenditure Reporting to Parliament: Strengthening Transparency and Oversight in an Era of Fiscal Consolidation”. I would recommend that this committee seriously consider the recommendations in that report.

I think it does go a long way to help focus what type of information should be obtained and how that information could be used.

That concludes my opening remarks. I would be pleased to answer questions the committee may have.

Thank you, Mr. Chairman.

[The Chair, NDP, Pat Martin]

You've packed a great deal of information into a very short presentation, Mr. DeVries. Thank you very much.

[Peter DeVries]

I wasn't going to read through all that.

[The Chair, NDP, Pat Martin]

That's very helpful, thank you.

We're going to begin with the official opposition, the New Democratic Party, Linda Duncan. You have five minutes, Linda.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you very much, Mr. Chair.

Welcome to the committee. I was trying to speed-read your presentation. You did a very good job of speed presenting. It was a fabulous presentation, and a good number of your recommendations seem to be in keeping with those of all the other experts who have come before us, including the PBO.

What mechanism would you recommend be in place to require the government to be fully disclosing the information to the PBO and in a timely fashion?

[Peter DeVries]

I think that if the PBO were made an agent of Parliament, then the rules with respect to the passing on of information should be the same as the other agents of Parliament, such as the OAG. If the rules and regulations with regard to the Office of the Auditor General are sufficient, and I believe they do go a long way, then those should be the same types of rules that the PBO should have.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

These are good points.

I'm trying to remember the PBO's report. As I recall, one of the things he pointed out was that Treasury Board already gets access, has all the detailed information online, I think it's from the estimates. He recommended there doesn't seem to be any reason why that information can't be made available to members of Parliament. I wonder if you could comment on that.

[Peter DeVries]

It is true, all the information is online. Departments submit their detailed information as to what they are proposing to spend to Treasury Board for review and approval as the first stage of the estimates process. That usually starts in the spring of each year for the next fiscal year. All that is now passed through using computers, so it is there. As I said, even back in 1984, we used to go through detailed printouts. All that information was online. So there's no reason why, subject to some confidentiality requirements that may be considered too sensitive at a particular point, that the PBO or this committee shouldn't be allowed access.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you very much.

Finally, every expert in this field who has come in has recommended exactly the same thing, that we should be having the budget tabled at least by mid-February—some said January—and the estimates should be tabled simultaneously, and I know you're also adding the report on plans and priorities.

This is all common sense. Where did we go astray? Why are we not doing this? This seems like a sensible thing so that all parliamentarians could make wise decisions. We have the scenario now where we get the main estimates, then we get the budget implementation bill. We're finding out about some of the cuts. We're finding out entire agencies or commissions are ended, even though the main estimates had a budget for them. The whole process is completely nonsensical.

All I can say is that your recommendations seem to make common sense, and frankly, I can't think of any reason why we wouldn't move in that direction.

[Peter DeVries]

I strongly agree that the estimates need an anchor, and that anchor should be the budget. The budget sets out the overall economic and fiscal policy of the government, and the estimates support that fiscal policy that the government has set out. Some new spending proposals have their own legislation, either through the budget implementation bill or through separate legislation on their own, but the majority of the initiatives that are included in the budget go through the estimates process. Without knowing what the budget contains, it's very difficult then to vote on a set of estimates, which have no relevance to the budget.

I've always been a strong believer that the budget should be tabled first. That's the way it had been for most of the period up to 2006. Some study had been done on the reasons I cited for continued interim reports, where there was a logical order as to how things should flow. Right now when you take a look at the estimates, their anchor is last fall's economic and fiscal update, so all the statutory program spending numbers are out of date, and a lot of things that have happened in the budget are not included in the estimates per se.

If you're going to study the estimates, the estimates are a very highly aggregated type of number, you need another document to provide you with the details. That document should be the reports on plans and priorities. I'm not saying that document should be the same as today; I think it needs a major overhaul. I felt the document that Martin talked about before, called part IIIs, had a lot more relevant information in it than what the reports on plans and priorities have today.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you.

Is that my time?

[Pat Martin, NDP, Winnipeg Centre, MB]

I'm afraid your time is up, Linda. Thank you.

Next, for the Conservatives, we have Ron Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair, and thank you, Mr. DeVries.

I share sentiments similar to those of my colleague, Ms. Duncan. Common sense isn't as common as it used to be, I guess. With a mere 30 years of experience, this probably isn't the first time you have felt this way. Were you not in a position to make recommendations at that time? Is that why these weren't implemented? From your past experience, maybe you could elaborate on some of the hesitation of previous governments—why they didn't accept your wisdom.

[Peter DeVries]

First of all, I'm from the Department of Finance. The estimates are controlled by the Treasury Board.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

But you guys talk.

[Peter DeVries]

We talked continuously on this whole process. When the estimates and the budget were on the same accounting basis, you could put them together very quickly. You had a linkage between the two. Today that's not the case. Ever since we moved to a full accounting for the budget and the audited financial statements, without having the same thing happen to the estimates, there has been a big delink between the two, to the point where the estimates are basically irrelevant for budget planning purposes.

The comments I made today are comments that I also made in my 30 years in government. Up till now, they have had no effect. I did make a presentation at one time on why the estimates should be on an accrual basis of accounting. I did that to an outside group. Treasury Board was there. They had a copy of my paper. Treasury Board has been looking at this issue for I don't know how long. The Auditor General has raised this issue in numerous reports for a number of years without any satisfaction, without any resolution.

Why hasn't it happened? It's not because we haven't pushed. I think it's a little bit because the estimates are not as prominent as other types of government information. They are not seen as being headline news and haven't gotten the attention that they should in approving spending.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

That's very succinct. I appreciate that because it's something we all want to change. We'd like to bring some of the collective wisdom of previous witnesses to bear on this question.

So you're saying that if the middle of February was the deadline for budget, and the RPPs would come with the estimates, and that would eliminate supps?

[Peter DeVries]

I think you would still have to have supps.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

How many? We're trying to get rid of one of the supps.

[Peter DeVries]

Well, I think you need a minimum of two. Three is maximum, which is normally the case now.

One of the issues with the budget is that it could include various measures, or set-aside money, for certain types of proposals that the Treasury Board committee is still looking at but hasn't approved. Those types of things cannot go into the estimates for parliamentary approval until they have had Treasury Board approval.

So you are going to have supplementary estimates to reflect those types of changes in programs. In addition, things happen during the course of the year. You could have an emergency disaster. You may have to respond to certain types of events, and those events may have been provided for in a budget with money set aside. But because you don't really know what the event is, you can't approve it beforehand. This would have to be done during the course of the year through supplementary estimates.

But I think if you were to table estimates in advance of the March 1st supply period, or deadline, then you would get a lot more of the spending into the estimates than is currently the case.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Moving on to cash versus accrual, you're saying to stick with accrual?

[Peter DeVries]

I'm saying that the budget is on full accrual. The financial statements are on full accrual. Those are the bookends for each fiscal year. The budget starts it off, and the public accounts ends it and says how well the government has done. The estimates are a piece in between. So because they're in between, and linked to the other two, I think they should be on the same accounting base.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

The issue of “deemed”. We heard from the previous witnesses the history of the negotiations that took place. Should we leave “deemed” in place? What about the deemed rule?