Government Operations Committee on June 14th, 2016

[Nicholas Leswick]

It's difficult to say.

Again, it depends on the machinery change we're talking about. I think the system is nimble enough to start to establish more discipline up front so that when new programs and initiatives are brought into the budget process, they have some sort of substantive costing attached to them.

Whether departments and agencies are ready for that—whether they have the financial management and accounting capacity to be able to appropriately cost initiatives, not just at some indicative level but at an actual substantive level, so that when they roll out of the budget process they're immediately included in estimates—is probably a question better focused to the Treasury Board Secretariat and its overall stewardship of the CFO and financial management community.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

As far as I understand, harmonization could take place pretty quickly. We know that the machinery of government can ensure that transition.

What would be the medium-term benefits of that harmonization?

[Nicholas Leswick]

The ultimate coherence is the benefit or the ability to table a budget document and an estimate document that are inclusive and linked.

Obviously the theory is that we table a budget at the beginning of February, that we table interim supply, and that we roll any new budget items into the next available estimates. However, that success all depends on how quickly departments can turn around costings from the budget and turn them into substantive costings so that they can be included in the next available estimates. We've proven that for a good percentage of those items, it's difficult for departments to turn that quickly.

Is it a three-year time frame? It's difficult to say. It depends on the architecture we're considering.

[The Chair, Conservative, Tom Lukiwski]

We'll be going to Mr. Weir.

Before I do so, though, if there are questions to our visitors from the U.K, could you identify yourselves before you present your answers so that our translators and the people who are taking minutes of this meeting will be able to identify who is giving which answer?

Mr. Weir, you have seven minutes, please.

[Erin Weir, NDP, Regina—Lewvan, SK]

Thank you, Mr. Chair.

I'm struck by the fact that we brought in very senior British officials via video conference and we've barely heard from them yet. I'd like to use my seven minutes to ask them for their thoughts on the key differences between the British and Canadian budgetary processes, and if they have any views on how the Canadian process could be improved.

[Michael Sunderland]

My name is Michael Sunderland. I'm acting deputy director of government financial reporting for the Treasury.

I would not pretend to be an expert in the Canadian system in any way. However, one of the benefits we see in aligning the estimates, the budgets, and ultimately the financial accounts is that it has improved transparency. It is easier to track the Treasury's expenditure plans.

Ultimately, there are still challenges, and the challenges come from.... Under transparency, people require different levels of granularity of information and people have different needs. Sometimes we are asked for much more granular kinds of information in the presentation of the estimates and the financial accounts. At other times people are concerned that there is too much information and say that it's quite hard to see the wood for the trees.

Ultimately, most countries are trying to strike a balance that enables them to have firm control over their public expenditure while providing some rigorous transparency to their parliaments for the expenditure they've undertaken.

[Erin Weir, NDP, Regina—Lewvan, SK]

One of the sources of transparency in the Canadian process is that we have three rounds of supplementary estimates that this committee reviews every year, so there's an opportunity for scrutiny of departmental spending on each of those occasions.

I believe that in the United Kingdom there is only one round of supplementary estimates, so I wonder if you have any thoughts on that. Do you see any loss of transparency by only having one round? Do you find that to be effective? Do you have any thoughts on having three rounds?

[Michael Sunderland]

I think we previously did have further updates, but we moved to having one supplementary estimate, I think mostly to reduce the administrative burden and to make it a more efficient process overall.

The tradition around parliamentary scrutiny of expenditure in the estimates is different in the U.K. compared to Canada. We have a stronger tradition that focuses on ex post scrutiny of the expenditure undertaken, with quite rigorous processes oriented around a particular committee, the public accounts committee.

[Erin Weir, NDP, Regina—Lewvan, SK]

I guess our supplementary estimates are ex ante scrutiny, but do you see anything desirable in having more or fewer rounds of supplementary estimates?

[Michael Sunderland]

I think, from a financial management perspective, we would want departments' plans to be as rigorous as possible, and we would hope not to change those on too regular a basis.

Having only two rounds, with one at a further point in the year when an expenditure total could be changed, provides clarity to departments on the remit within which they're working. There's an onus upon them to take the necessary financial management steps to live within those resources, as opposed to having multiple opportunities to revisit requests for resources from Parliament.

[Erin Weir, NDP, Regina—Lewvan, SK]

Fair enough. Good answer.

In Canada the budget is prepared by the Department of Finance, whereas the estimates are prepared by the Treasury Board Secretariat. That's one of the reasons they've been difficult to align.

I believe in the United Kingdom those functions are conducted within the same agency. I wonder if you could comment a bit on the pros and cons of having the two separate organizations challenging each other and perhaps holding each other to account a bit, versus having consistency and alignment between the different parts of the process?

[Michael Sunderland]

In the U.K. the Treasury is both the finance ministry and the economic ministry. I think we see benefits in having strong coordination and having those functions that you refer to within the Treasury. If you are exposed to particular challenges or trade-offs, those are addressed internally and in as constructive a way as possible, but maybe not between different departments.

The British system has a strong centre in terms of the role of the Treasury. That assists us in exerting good spending control overall over public expenditure and enables us to make sure we have good incentives in place to achieve value for money.

[The Chair, Conservative, Tom Lukiwski]

Mr. Drouin, you have seven minutes, please.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

I want to thank the witnesses in the U.K. for being with us so late at night.

I will address most of my questions to you. Just to build a bit on what Mr. Weir was saying, in Canada we have main estimates, and as part of these main estimates we have reports on plans and priorities at the beginning that outline what the departmental plans are over three years. We also have the DPRs, the departmental performance reports, which analyze whether or not they have achieved their strategic outcomes.

How does the U.K. report back to Parliament with their main estimates in terms of the plans of the department?

[Michael Sunderland]

If I separate out the financial aspect versus the broader performance aspect in terms of financial performance within the financial statements, there is a particular statement that goes beyond what commercial accounts would produce. It's called the statement of parliamentary supply, which in effect is the outturn against the estimates. If a department exceeds any of those expenditure limits, it results in what we call an excess vote and results in the qualification of the accounts. It's likely the accounting officer for that department would then have to appear before the Public Accounts Committee.

In terms of performance frameworks, performance frameworks in the U.K. have changed over time with different governments. Most recently, the existing government is introducing a regime called single departmental plans, which largely brings together the different objectives of the government, including their specific manifesto commitments. It allocates particular performance objectives to different departments and coordinates those. It also has a number of key performance indicators that underpin those, or it reports against those performance objectives. They will be published, and they are fed into the front-half narrative, as it were, of the annual reports and accounts.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I know in Canada we're mimicking a bit of the U.K. model with regard to the results and delivery unit. Was that because of that, or...?

[Michael Sunderland]

Sorry; can you repeat the question?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

In Canada, we have a results and delivery unit, which was built on the model of the U.K. In the Privy Council, we have somebody specifically assigned to the results and delivery unit to make sure the strategic priorities of the government are followed through. I was just wondering about the impact of that with regard to the department. Again, going back to how departments report back to Parliament, does that have an impact? Did this have an impact in the U.K.?

[Michael Sunderland]

It does. There's what you might call the central coordination role around government plans and delivery, and it has been done in different ways by different governments. It typically is driven by something out of the Cabinet Office, which is another core central department. We have something called the implementation unit, and I would say it has a significant role, certainly in this government.

Also, under this government there is an increased focus on ensuring coordination between the Cabinet Office and that implementation unit and the Treasury, which controls the finances side.

Certainly it sounds very similar.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you.

Mr. Weir asked questions to the U.K., but I will ask this question to the finance department.

Finance Canada prepares the budget and Treasury Board prepares the main estimates. If we were to move to a line budget in main estimates, how would that impact your department? Have you thought about that? Is somebody thinking about that, in terms of collaborating with the other department?

[Nicholas Leswick]

Simply stated, there would have to be much greater collaboration. This gets into the spirit of the answer I was trying to formulate for Mr. Godin. There would have to be a whole different kind of psyche for the entire government machinery in terms of what comes into the budget process being substantively costed so that it seeks its budget approvals and its Treasury Board approvals concurrently, so that you're able to table a budget and a main estimates document at the same time.

If Treasury Board and the Department of Finance were in the same place, would that help? Maybe. It's difficult to say. We work together. We're in the same building. They occupy the first five floors; we occupy the next five floors. There's a certain synthesis already. It's difficult to speculate on an ultimate machinery change of that nature.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you.

[Nicholas Leswick]

May I just add one comment, though, on supplementary estimates, just as the committee frames its recommendations and considerations?

I know you're talking to the Government of Ontario later this afternoon as well. We do have multiple supplementary estimates in the federal government context, but what we don't have in our main estimates is any sort of contingencies plug. While we have supplementary estimates, we don't have, in some ways, a substitute for a main estimates document that has some sort of contingencies built into it.

There's a little give-and-take there from a parliamentary perspective. We could seek, let's say in a federal context, just one estimates document, the main estimates document, but then have some sort of contingencies as a percentage of our total spending plan as a plug, should cash requirements, spending requirements, need to be met further down the road. You would eliminate the supplementary estimates, but you would forgo some sort of authorities on what exactly the nature of that contingencies vote is used for. That would be some consideration for the committee. I'm not advocating that our system is best—far from it, actually—but there's a balance there.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We'll now go to a five-minute round. We'll begin with Mr. Blaney.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Thank you very much, Mr. Chair. I would like to thank our colleagues from Great Britain, and I want to thank our witness for being with us this afternoon here in Canada.

In Great Britain, just for my own knowledge, can you tell me how long you've been working on an aligned accrual basis for your budgetary format presentation?