Government Operations Committee on May 28th, 2013

[Mathieu Ravignat, NDP, Pontiac, QC]

Maybe we should be having a rather detailed conversation about those policies issued to departments to ensure that the narrative is robust and the information is present, but I'll leave that question and move on to other things.

I want to question one of your assumptions on the Australian model. One of the reasons is that, by your own admission, you said that the Australian model is very different from the Canadian model. To use the Australian model as a kind of litmus test of whether or not cash or accrual is better is not really appropriate. Also, with the witnesses that I heard, compared to the Auditor General, what concerns me about the witnesses who were against accrual is a lot of them themselves were from the public service. I understand. I think we have one of the greatest public services in the world; however, there is an institutional conservatism with regard to change. That's normal. It creates stability in our society and our services.

The Auditor General, obviously, finds that there's a problem. It's his job, compared to that of public servants, to find problems, so I guess my level of trust is higher in the Auditor General's understanding than it is necessarily with that of the public service on this case—let me get that straight—on this case.

What is it about the model of Canada—and I haven't heard the answer—the system we use that going to accrual more so is problematic and not appropriate?

[Bill Matthews]

I'll give you a couple of examples.

The benefit for Canada is the same as for some other countries in that it's simple and it's understandable. I need cash to buy a new vehicle or a new building. Everyone knows what that means. When you're dealing with accrual, if you are talking about buildings, you are dealing with concepts of depreciation. Are you voting money to spend on depreciation? No, you don't really have a choice about depreciation; it's an accounting thing. When you get into environmental liabilities—we've already talked about that today—you have a liability on the books. That doesn't obligate you to spend money to clean it up. There's an accounting standard that says you must recognize it. It's more a matter of the focus of the study was around increasing Parliament's scrutiny of the estimates with an acknowledgement that they don't understand the current system today. What I've said is that I can't think of a better way for parliamentarians to get further confused than to go to accrual. It introduces a lot of assumptions, which is fine for accounting, but all parliamentarians aren't accountants.

I've come full circle on this myself. I'll admit that 10 years ago I thought accrual was probably a good idea. Based on a caveat that says Parliament should understand what they're voting on, cash just makes more sense.

[The Chair, NDP, Pat Martin]

That's it, Mathieu. Thank you very much.

We're going to Mike Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

As has been mentioned by some of my colleagues, I have recently done little tutorials for some of my colleagues and staffers on the estimates. I can tell you just by looking that it's so much clearer the way we have it laid out now. I appreciate it. I appreciate that you're saying to take a bit of a time out, but think about the information that we have.

I'm with you, Mr. Matthews. I don't think we embarked on this review of the estimates because we didn't like the way we were voting. It wasn't the voting part; it was the information we had. We didn't know what the big blue books were about, what information was in them, how you compared one year with another. That information wasn't there. You have done a tremendous job over the seven years that I've been here to improve that. I want to thank you for that.

The other comment I need to make—and I think the Auditor General is helping us make the point—is that the opposition parties wait for the Auditor General's report because they are going to use it politically, and the government side gets nervous about what it is going to say. Those reports are performance audits, not accounting audits. They talk about how we could do things better, not necessarily about whether an invoice measures up with a payment. I think governments should embrace them as things to make improvements to the public service.

In this particular case, the vast majority of which happened under a different government's rule, the issue of terrorism came to full light. What they did was they had 30 departments do different things all under the terrorism umbrella. I would say that the Auditor General reported that there was, unfortunately, no umbrella formulated so that all the information could be gathered together.

As the Auditor General said, there was no misappropriation of money. Money was spent on terrorism activity; it was just that it was within a bunch of different departments and that it would be very hard to follow the ball concerning how much was spent where and what it was for. It wasn't that it was lost or misappropriated; that $3 billion, put into various departments for terrorism, was spent on the terrorism piece. But we didn't do a good enough job of having an umbrella terrorism file to look at, and the Treasury Board, I think, took some responsibility for that.

If we went to what you're recommending, in which the accounting shows the program, you would be able to see as a member of Parliament that we spent this much on that program in this year, that we've had supplementary estimates (A), (B), and (C) over the year, and this is what we're spending this year. How is it that there's a difference in that particular program?

I'm hoping that the bureaucratic staff will be able to answer the question by saying it's because x dollars were allocated for this program to do this; that it's now either done with, so that we don't need the money....

Often we hear from members of Parliament, “They have cut the program.” Well, in fact the program had a deadline; it was from this year to that year. The bureaucratic level cannot automatically renew that money without our voting on it, so they have to wait until they make the request, it is voted on, and then the money is added back in. We will hear, “You have cut this”, for example, in agriculture, which is not really the truth. The truth is that the program had a deadline; the deadline has passed and bureaucrats can't automatically add money. We have to do that when we stand up and vote for it.

What you have done here in moving from the aggregate.... I call it the aggregate; the capital and operating budget is all it was, basically. If you look at the books—when I first got here they had three or four of the strategic outcomes, but no programs, or nothing behind them—they will give members of Parliament an opportunity to question why the numbers have changed in those programs. We want to understand where the money is spent, and the opposition wants to question the government on where the money is spent.

I want to promote the way we're spending money, and having it by program will work. I don't believe we're here to be micromanagers. I think that's the reason we have a bureaucracy: to manage.

If we're not happy with how things are going, we make a change, but not as members of Parliament in terms of worrying about transfers between programs and so on. There is an opportunity to understand what's going on and question the government on that.

I came here with the question as to what you are expecting the committee to do and do we need to continue to push on. To be frank with you, having a year or two of MPs seeing this information and seeing whether they find more value in it is actually a good approach, because on the three times a year I stand up to vote for appropriations bills, whether I vote on aggregate or not is not my issue. My issue is understanding what went into those votes. That's what you've done here with this. I do appreciate the effort.

I'm looking forward to the database piece, to be honest with you, unless somebody is teasing me about it. I think there's an opportunity. I know that there's another office. What is it called?

[The Chair, NDP, Pat Martin]

Parliamentary Budget Office.

[Mike Wallace, Conservative, Burlington, ON]

The Parliamentary Budget Office also has a database that we can use to compare what the bureaucracy is saying and what they are saying. There's lots of information available to us and I just wanted to say that before the end of the meeting.

Thank you, Mr. Martin.

[The Chair, NDP, Pat Martin]

I'm reluctant to interrupt you as you are a guest here, Mike, but you're well over your time in your preamble.

Now Denis Blanchette would like the floor.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you very much, Mr. Chair.

Mr. Matthews, you talked about a downtime. However, I have the impression that you are treading water and that cosmetic changes have been made, that what already existed is being made better use of, but that, essentially, investments will eventually be made in the modernization of accounting systems and that will be the end of it. That is the impression I got from your message today.

I would like to go back to the continuum relating to estimates. The government spends money, but in the final analysis, we are trying to see what is being done. That is the information that was mentioned. You talked about monitoring, either by parliamentarians, yourself, or Treasury Board. However, at the end of the cycle there must also be accountability. In other words, do we really know what we voted on? Did we spend money in an efficient and effective way? We are talking about the information-efficiency-effectiveness continuum. If we set the technical vocabulary aside, we can say that the objective of all this is to be able to answer questions concerning those three aspects correctly. If we stop there, I really think that we will only have done half the work needed to give us a better overall understanding.

I agree with my colleague that we must not micromanage. That is quite correct. However, you were talking to me about strategic outcomes, but the departments already refer to them in the reports on plans and priorities. Is that not the case? You tell me that there are no more horizontal programs. However, at the local level, the departments already have horizontal programs related to departmental strategic outcomes.

My question is quite simple. You are asking for funds to modify and modernize the accounting systems. You tell us that strategic outcomes are the way of the future. With regard to what exists currently, what more do you need to attain your objectives? Does the Government of Canada, through the Treasury Board Secretariat, want to manage all the activities strictly on the basis of mega-strategic outcomes?

[Bill Matthews]

The question of today is at what level should Parliament vote money. We have put strategic outcome out there as the proposed model.

It is true that departmental information in RPPs already includes information on strategic outcomes. The advantage to moving to a new model is that you can more easily tie the money you're voting on under strategic outcomes to RPPs. If there is a program that is of interest, you can then drill down and see what the performance objectives of a program were. Is the program performing? That's a question of efficiency and effectiveness. If you're really captivated, program evaluations are posted online, so you can actually review an evaluation of the program to see whether it is meeting its objectives.

All of that information exists right now. The question is whether Parliament is better served by tying the vote on strategic outcome or some other level to all of the information that already exists. The reason the answer could be yes is that parliamentarians think of departments more along the lines of strategic outcomes, programs, and those types of things than of capital, operating, and Gs and Cs. That's the question at play.

I spoke about modernizing the accounting system. There is already work ongoing that pushes departments to move to fewer financial systems. It's just a more efficient model to have one, two, or three financial systems in departments rather than have each one operating its own.

If we were to pursue such a change, the most opportune time would be when they're redoing the financial system. That's the reason there is a very strong link. If we are changing the financial systems of departments and we want to change the control structure, now is the time.

[Denis Blanchette, NDP, Louis-Hébert, QC]

You want to see changes made to the financial system over 5 years, but you are also asking us to set aside our reflection for a time.

Would it not be more logical to conclude our examination process first, and invest afterwards?

[Bill Matthews]

The work to standardize the financial systems is ongoing. They are not going to be reprogramming systems next month. There's a lot of detailed design work to do before that starts to happen. What would be critical, if there is a decision made to change the structure of the votes, is that the decision be arrived at before they start the work to redesign the financial systems.

It's not a pressing matter for today. That work is ongoing—they are working on standardizing business processes and other things—so we have some time, which is why I suggested to the committee that it might be a good time to take a pause. We will continue to work with departments to understand their detailed questions and engage them in considering what a model might look like—because we still have some work to do—and to better understand the costs. We'll be doing that anyway.

I think Sally may want to add something.

[Sally Thornton]

On the systems side, with shared systems for financial management, the horizon really is three to seven years, with more substantive changes actually happening in five to seven years.

What we have before you, in terms of the work plan, is what we would be doing now with existing systems. It would take five years in changes to the 130 organizations. If there were a decision to go this way and we were to dovetail, that could have an impact on costs and consistency, but on a different timeframe.

[The Chair, NDP, Pat Martin]

I think we're out of time for that.

I thought the point Denis was making, though, is that if departments are already presenting information about strategic outcomes in their estimates and RPPs, why would it take five years to reflect that information the way we want it?

I think there's broad agreement that we like the way it's presented in your model. Why would it take five years to take that information, which they're already producing, and put it into the model that we like?

[Bill Matthews]

There are a couple of points on that front.

It's not just the estimates that would change. We're changing the whole reporting framework for the Government of Canada. It's the estimates, the public accounts—because actuals have to go with the estimates—as well as the format of the quarterly financial reports that would change.

The key thing right now is that information is provided for information purposes only. Departments do their best to forecast what their actual spending will be, but because Parliament controls right now on capital, operating, and such other things as Gs and Cs, there is more accuracy with those estimates than there is with the strategic outcome.

If we're asking departments to control their spending on strategic outcomes and programs and such things, we have to get them to redesign their systems, which will take some time. We have to get them to redesign the way they plan, because there's a need for greater accuracy, if Parliament is controlling on this basis, than we have right now. That's what takes the time.

It is a substantial effort, and it's not something you want to do on the back of a napkin, because it is parliamentary control that's at stake here. Exceeding your votes in terms of your spending is a significant issue, so we want to give departments the time they need to build in the proper processes, procedures, and systems to make such a change.

[The Chair, NDP, Pat Martin]

Thank you for that clarification.

We have Bernard Trottier and then John McCallum, and then we're finished, because we need five minutes for planning.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you, Mr. Chair.

My questions are along the same lines, around the five years to implement this. I understand there are some initial estimates that are in the tens of millions of dollars to actually make this change happen.

Today you mentioned when there's reporting that's done by strategic outcome and there's also reporting done by the traditional buckets of capital and operating, things aren't done at every single transaction level to filter out. For example, every cheque that's issued or every payment that's received is not necessarily coded by strategic outcome. You're saying the departments have to do some manual work to report things that way today. Is that correct?

[Bill Matthews]

They would code right now. Every transaction does have to get attached to a program. The key thing is, if you go back to capital, if they're coding against capital, it's very clear that it's capital. A building is a building. There's a control check to make sure they're not exceeding their spend total when they actually plan that purchase.

If you're dealing with strategic outcome, think about a building. What percentage of the building belongs to this strategic outcome versus that, if we're all in one department? You'd have to make some allocations and decisions. There is room for greater allocation and that whole process to make sure they've allocated their expenses or expenditures properly against strategic outcomes becomes important.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Okay. Let's say it takes five years to fully implement this. There would be some parallel processing where you'd continue because you have to continue to run the government reporting things by capital and operating, and then in parallel, you'd do things by strategic outcome. You wouldn't necessarily phase this in department by department because this is the fundamental control mechanism for the government. It wouldn't be a phased-in approach. It would be a big bang, if you will.

After that big bang occurs and there's a transition to doing things by program activity, would you turn the old mechanisms off or would you still...?

[Bill Matthews]

That's one of the key questions. We've had discussions with our Department of Finance colleagues, and internally there's still some value in tracking capital and operating. That's one of the questions departments asked: do they still have to report capital? Finance is interested in knowing what the capital spend will be. We have our own reasons internally for wanting to know what capital and operating spending will be. So there would be a need to keep some of the existing structures in place.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

After you went live with the new structure of reporting things by program and activity, would there be a higher cost in terms of reporting, by having two different sets of books, or two different ways of reporting financial information?

[Bill Matthews]

It's a difficult one. I'll let Sally give her views. This is pure speculation on my part. Right now we have controls by capital, operating, grants and contributions, and we provide information by program. Effectively we'd largely be flipping it, so we would be doing controls by strategic outcome program-type structure but still tracking information on capital, operating, and Gs and Cs. I think ongoing it's hard to say there's an additional cost because we're really just switching the roles.

Sally may have a different view.

[Sally Thornton]

No, I actually agree with Mr. Matthews. Particularly the technology that is now available in some of the off-the-shelf systems, some of the SAP systems that we're looking at, they actually have the capacity to do the matrix mapping and the coding. If that's where we wind up going in terms of our clustered systems or streamlining in financial administration, if we build in that need at the beginning before we actually implement those systems, we should be able to track on both levels and perhaps some others at no additional cost.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Finally, what's required at our end, at Parliament's end, to get this process started? You mentioned there's no official launch to the project yet. Obviously, you can't do things without approval. When is the likely commencement of this, and what is required legislatively to make this process start?

[Bill Matthews]

Legislatively there's nothing required. What is required is a decision from the government to go ahead and start implementation. We've been given instructions to work with departments to see if we can drive down the costs. That will likely feed into a discussion about the timeframe or if this should be done.

I have suggested to members that now might be a good time to take a pause and play with the information you now have at your fingertips as you go through supplementary estimates (A) and supplementary estimates (B) in the fall, and maybe reconvene for a short discussion at that point, because we have some work to do at our end before we are ready to go forward.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you.

Those are all my questions.