Government Operations Committee on Dec. 1st, 2022

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Giroux, the carryover of lapsed funds from one year to the next is currently limited to 5%. Is that a reasonable number? Should we increase it?

Also, is there any point in carrying over these funds, when we see that the appropriations are not necessarily used, whether they are carried over or not?

[Yves Giroux]

There is a carryover of 5% of lapsed funds for operating expenditures and 20% of lapsed funds for capital expenditures, but the 5% limit is the one that is most talked about. I think that's appropriate for a number of reasons, one of which is that it allows for some sort of reward for departments that manage their affairs well and don't spend all of their funds. So there is a small portion of funds that can be carried over to the next year. It also avoids what has often been referred to as “March madness”, where departments spend money only to use their entire budget. Much of this is myth, but there are also instances where it did happen.

So I think this is a good practice. You could increase the limit on the carryover of lapsed funds from one year to the next to 10%, but if you increased it much more than that—for example, if there was no limit—it would bring instability and make forecasting government spending more difficult. That's the argument against it. If, for example, a department could carry over hundreds of millions of unused dollars from year to year, it would make budget forecasting much more difficult.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I'll go back to the departmental reports.

Normally, by April, departments should have completed them or be well on their way to doing so, where translation remains to be completed, in particular.

If departments were required to table their departmental reports four to six months after the end of the fiscal year, would this have any particular effect on the parliamentary financial cycle, on the tabling of supplementary estimates (A), (B) and (C), and so on?

If it had no effect on the cycle, which remained the same, would it make the cycle more efficient because the analyses would be more complete?

[Yves Giroux]

I think that the same budget cycle could be maintained. It would be eminently more efficient for you, insofar as the departmental reports are useful to you—and I believe they are—if the departments that submit them take steps to ensure that the information in those reports is useful to you. I don't think that tabling these reports at the same time as the public accounts or by September 30 would make any difference to the rest of the budget cycle.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I will ask you a more general question about lapsed funds.

Over the years, have you noticed any patterns that repeat from year to year that would be important for us to know about?

If so, to what extent are they related or unrelated to the COVID‑19 pandemic?

[Yves Giroux]

The general trend that emerges is that, when the government increases spending, as it has since 2015‑16, the bureaucratic machine often has difficulty keeping up. When the government is in a period of expansion, it is difficult for the bureaucratic machine to spend to the same extent. Typically, it is during these times that we see an increase in lapsed funds. Conversely, when times are tougher, government spending growth is lower and lapsed funds tend to decrease. This seems to be consistent with the size of government.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I will refer to the brief the committee received from Dr. Amanda Clarke of Carleton University. The brief states that spending on consulting services, specifically for information technology, has increased by 54% over the past five years, or an average of 10.8% per year. Contractors do not have the same conditions as public servants: pensions—

[The Chair, Conservative, Kelly McCauley]

I'm sorry, Ms. Vignola, but that's the time.

Do you have a very quick question that perhaps Mr. Giroux can get back to us on? No. Okay, thanks.

We'll go to Mr. Johns for five minutes.

[Gord Johns, NDP, Courtenay—Alberni, BC]

In your report on the fall economic statement, you noted that the federal public accounts are published later than most provincial public accounts and that the government continually falls short of the standard for advanced practice in the International Monetary Fund's financial reporting guidelines. Those guidelines recommend that governments publish their annual financial statements within six months of the fiscal year end.

Do you have a sense of why the federal government continues to have issues with timely financial reporting, and can you maybe explain why six months is considered a best practice?

[Yves Giroux]

There are probably two ways to answer the question.

First, in response to your question of why, I'd say it's because they can; it's just because they can. The more honest answer would probably be because there's no hard deadline for government departments, the Treasury Board Secretariat or the government to be timely in their tabling of the public accounts. There's no deadline other than December 31, so work expands to fill the time available. They do that relatively well, and they've done that over the last several months. By saying that, I think I'm off the Christmas card list of many more people, but that's okay.

[Some hon. members]

Oh, oh!

[Yves Giroux]

Six months is a good practice, because it's seen not only as fully sufficient to provide accurate public accounts, but also to be meaningfully within a period of time when, if there's a need to course correct, it is still possible. When you have public accounts that are tabled in November or December, the fiscal year is already two-thirds of the way over, so, if you as parliamentarians see that there's a major issue with an area of spending—which has not been the case in Canada, but should that ever be the case—it's very likely too late to make any corrections to that wrong trajectory.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Can you cite any jurisdictions where they are doing it much better?

[Yves Giroux]

I want to say Australia, but I'd have to get back to you on specific examples that are appropriate and have relatively the same or comparable system of government, or are comparable.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you.

In the PBO report on the 2021 supplementary estimates (B), it was noted that the PBO was collecting performance data from numerous federal departments and agencies. Is the PBO continuing to collect performance data? Is so, can you please provide details on the type of information being collected and from where.

[Yves Giroux]

We regularly look at performance indicators of various departments, especially in areas that we know are of interest to parliamentarians. We do that on an ongoing basis when that information is available. For more details, I'll probably have to get back to you.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Do you think the federal spending can be leveraged to better support the domestic PPE industry and generate both economic and national security benefits? Can you speak a bit on that.

[Yves Giroux]

As one of the main purchasers of good and services in the country, it's clear that if the government wants to leverage its spending power and its contractual capacity, it can indeed contribute to the support, and even the development, of significant industries if it wishes to do so. It has clearly stated its intention to do that with the naval strategy, and it could certainly do the same thing with PPE.

[Gord Johns, NDP, Courtenay—Alberni, BC]

This month you published a report analyzing the fall economic statement. In it you compared economic risk scenarios put forward by the PBO and the Department of Finance.

The PBO scenario depicts the possible implications of over-tightening of monetary policy, whereas the Department of Finance scenario depicts the consequences of persistent inflationary pressures that require tighter monetary policy.

Which scenario do you believe is more likely and are we past the point where a soft landing is possible?

[The Chair, Conservative, Kelly McCauley]

I'm afraid I have to interrupt. I think I'll be off your Christmas card list.

Would you be able to provide that in writing to the committee, please?

We now have Ms. Block for five minutes.

Happy birthday, Ms. Block.

[Some hon. members]

Oh, oh!

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

Thank you to our witnesses for being with us here today. I was looking forward to having you here and being able to ask some questions about the supplementary estimates (B) and the report you put forward.

First I want to go to something you mentioned in your opening statement. You said: “The balance pertains to other new policy measures that the government identified outside its standard financial cycle.” You identified the fall economic statement as being outside the standard financial cycle.

What is the impact of introducing something new into the standard financial cycle on the information that we receive and all of the processes within our budgetary cycle?

[Yves Giroux]

It's something that all governments, to my recollection, have done. It's nothing new.

What was surprising in the fall economic statement was the number of spending items that were contained in one of the annexes. This annex listed all the spending items that had been taken or decisions made after the budget and before the fall economic statement. The list was quite long. For me, who follows government spending rather closely, I saw items there that I had never heard about. There were items there from decisions that were made on spending outside of the budget and fall statement normal cycle.

It's not an issue in and of itself. Governments need to have that flexibility to make government announcements or funding decisions as they see fit. But the number of these measures suggests that the budget was not a firm, solid government spending plan if a couple of weeks or very few months after there were already a number of additional spending decisions that had to be made.

It begs the question as to what the purpose of a budget is if a couple of weeks afterwards there are already new items appearing on the radar screen for new government expenditures.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much. I appreciate your pointing that out and providing that explanation.

On page 6 of your report you highlight lapsed funding, and we've had a fair bit of discussion around that. You highlighted that lapsed funding has doubled. We don't know why that funding has lapsed, because the government has failed to release the departmental results reports and we don't have a commitment from the President of the Treasury Board as to when they will be tabled or made public.

You've potentially described what the impact is on our ability to do the work that we need to do as parliamentarians, but in particular for this committee where we are mandated to scrutinize public spending, I want to ask you if the work of parliamentarians is being impeded by the fact that these reports are not being tabled in a timely manner.

[Yves Giroux]

I think you're collectively in a better position to determine that than I am. I would think your work is negatively impacted if you don't know what the performance of government departments has been for the year that ended in March 2022. Here we are on December 1 and we still don't know how government departments did, yet you're on the point of approving almost the final numbers or the final spending items. Next time you'll have a serious opportunity to scrutinize spending. If you find that something went amiss in 2021-22, you'll see that it will be for the 2023-24 spending cycle. There will be a full year where if government departments have failed, they'll have had a free pass. I think that's detrimental to proper government accountability and scrutiny.