Government Operations Committee on Nov. 23rd, 2023

[The Chair, Conservative, Kelly McCauley]

Very briefly.

[Jill Giswold, Senior Analyst, Office of the Parliamentary Budget Officer]

Sure. I'm happy to add a little bit.

With the estimates, the votes are on dollar amounts, so the purpose of a one dollar often is to change something within the vote, but they have to put a dollar, so it's changed when Parliament votes on it.

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

Thank you.

[The Chair, Conservative, Kelly McCauley]

We have Mr. Bains, please.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you to Mr. Giroux and to our analysts for joining us today again.

I'm going to pick up a little bit on what my colleague Mr. Sousa was asking about on the different methods. In your view, of the accounting methods you were talking about, which one is more appropriate for federal financial documents?

[Yves Giroux]

I think the accrual accounting method is much better. It's a better reflection of the actual flows and responsibilities, financial obligations and revenues of the federal government, but it's confusing in the sense that it does not always reflect the cash needs of the federal government.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Would it be feasible to use the same accounting approach for all financial cycle documents?

[Yves Giroux]

I think it would lead to huge discrepancies. For example, in a year where we buy warships or fighter jets, then there would be a huge hit on the fiscal bottom line if we were to use a pure cash approach to the government's books. The comptroller general would be in a much better position to explain the pros and cons of different accounting methodologies.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

You mentioned fighter jets. I have a quick question on that. On the F-35 life-cycle cost estimates, do you have them available from other nations, and if so, are Canada's in line with other partners?

[Yves Giroux]

Yes, they are roughly in line. We looked at the Americans, and I think we also looked at other countries. However, the Americans have good historical records, because they have by far the most of these fighter jets in use, so there's good data on that. I think our costs overall are fairly in line with the Americans. The variable that drives some of the life-cycle costs is the number of hours flown per year and per aircraft, which is taken into account in our estimates.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

I was visiting recently the Seaspan Vancouver shipyard and was able to see the icebreaker. There were some cost savings there. Have those been indicated in the supplementary estimates?

[Yves Giroux]

Yes, we usually use comparable and historical data based on specifications that are proper to the ships the government is procuring and also look at the experiences of other countries.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

You've mentioned how higher than projected spending by provincial governments also poses an upside risk, so if provincial governments step up to help Canadians the way we have, how much could that positively impact our federal finances?

[Yves Giroux]

That's a good question. It depends on which areas specifically you are looking at. For example, if it's assistance to help the unemployed, it could relieve pressure on EI, but usually provincial spending is more in the area of training, with contributions from the federal government. It could also be in terms of education, so post-secondary education, which helps people become more easily employable in areas that are in high demand.

These are a few examples where provincial spending can alleviate pressure on federal spending.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Just on that then, in Alberta, with the CPP, how much do you think that could impact...?

[Yves Giroux]

It would depend on the comparability with the Canada pension plan.

If an Alberta pension plan were to happen, if it were to be significantly more generous than the Canada pension plan and cost more, it could have adverse impacts on the labour market and on the competitiveness of businesses. On the other hand, if it were to be less generous and less expensive in terms of contributions from employees and employers, then it could have positive impacts on the labour market and the competitiveness of businesses, but at maturity, it would also provide lower replacement rates for workers who contributed to an Alberta pension plan. It depends on the design of the Alberta pension plan, were it to be created.

[The Chair, Conservative, Kelly McCauley]

Thank you very much. We're going to suspend briefly to bring in Mr. Robson from C.D. Howe.

[The Chair, Conservative, Kelly McCauley]

Colleagues, we are back in session.

Mr. Robson, welcome back to OGGO. I recall that you were with us a few years back. We were talking about pension liability.

It's wonderful to have you back with us. Thank you for all the work you do at C.D. Howe.

We will turn the floor over to you for a five-minute opening statement, sir.

[William Robson, Chief Executive Officer, C.D. Howe Institute]

Thank you.

I will try not to run over five minutes. Of course I'm happy to answer questions on anything else the C.D. Howe Institute has done, though I do want to say that, on the work I want to profile for you, the work on fiscal transparency, a big motivation is to really raise the profile of the work you're doing in this committee and similar work in Parliament. It's rather foundational to representative democracy that elected representatives should approve the Crown spending and taxation.

We do have a strong tradition in this regard in Canada. Most countries would trade places with us if they could. Particularly pertinent to what I'll say is that we do have well-developed public sector accounting standards, and along with the legislative auditors—the federal Auditor General and her colleagues across the country—we have strong mandates there and independence and capable staff.

The best way for me to cut into my opening remarks is to say that, notwithstanding these advantages, most people find that public finance is obscure. When I taught public finance, I quickly learned that most students just wanted to learn how to follow the money. These were smart, motivated students, but most of them did not really know how to get started on it. Many of you will have heard constituents expressing skepticism about not just how government manages their money but also the numbers they see and hear.

I think there are some in the group with backgrounds in municipal governments. You'll know that the situation at the local level is often quite bad. I've had more than one former municipal councillor say that they didn't understand their city's budgets but that, while they were in office, they hadn't wanted to admit that. That just shouldn't be. It seems to me that anybody who is motivated and who can add and subtract really ought to be able to make a start at finding the key numbers.

Certainly elected representatives need to be able to find them. In the case of elected representatives, timeliness is an important issue as well—before the fiscal year begins, early in the fiscal year and then after it closes.

This is essentially the goal of the institute's annual fiscal accountability report card. I think you have a copy available to you. I hope so. If not, I'll just say we're trying to put ourselves in the position of someone who is motivated and numerate but not necessarily expert, and who is possibly time-constrained, as a member of Parliament would be. How easy is it for that person to confidently find and identify the key numbers either at the beginning of the fiscal year to understand what's planned and approve it if necessary, or afterwards to understand what happened and correct any problems that we find?

In that report, we have a large table that summarizes the performance of the 14 senior governments using 16 individual criteria. I will not take you through that in detail. I'm happy to take questions. If you look across the top of the table, if you do have it in front of you, you'll quickly get an overview of what we think matters most to parliamentarians and citizens.

With respect to budgets, we have timeliness, particularly before or after the fiscal year has started. We ask about the placement and nature of the key numbers—consolidated revenue, expenses and surplus or deficits—consistent with public sector accounting standards. We look at whether the budget provides comparisons to actual estimated results for the year. Also, contingency reserves are something that came up earlier in the discussion.

I'll move over to the public accounts block of the table, in which a lot of what we ask about is similar: timing, placement of the key numbers, and comparison to budget. We ask if the legislative auditor gave an unqualified opinion and, if not, how much money was at stake. We also look at below-the-line adjustments.

I'll skip that now and close on the estimates block of the table. In that we also ask about timeliness, with higher marks if you're ahead of the beginning of the fiscal year and bonus points for main estimates presented simultaneously, where the federal government tried and had a misfire. We also ask whether the estimates are consistent with public sector accounting standards or clearly reconciled with them.

I'm sorry that Mr. Giroux did not have time to finish his comments, but we do think the estimates should contain numbers that are consistent with public sector accounting standards and accrual accounting so that parliamentarians can easily see whether or not what they're voting on is consistent with the framework they previously saw.

We've had a lot of excellent feedback on this from elected representatives, legislative auditors, members of public accounts committees and the Public Sector Accounting Board. I'd welcome thoughts from this group, both in this meeting and afterwards.

The final column is a new one this year. It is our attempt to capture the main estimates approval process. You will know more about this than I do.

Coming at it for the first time, we simply looked for published schedules and whether there was one available or not. The federal government got two out of three on this. Perhaps that's generous. Perhaps we should be looking at the proportion of dollar amounts actually voted, but that's our attempt to start it. I do welcome the feedback.

That concludes my opening remarks. I hope I was within time.

Again, I hope the C.D. Howe Institute's work in this area is helpful to you and helps to make some of these documents a little less daunting to your constituents and to Canadians in general.

Thank you for your time.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Robson.

Let's start with six minutes with Mrs. Kusie.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Chair.

Thank you very much, Mr. Robson, for joining us here today at the government operations committee. It's a pleasure for me to see you out of the Civitas environment. Again, welcome. It's really nice to have you here. Thank you so much.

You mentioned the main estimates. You mentioned the supplementary estimates. I'm going to add another document here. When the President of the Treasury Board—my counterpart, as shadow minister for the Treasury Board—came into the House and was really proud to lay down this huge pile of documents, which were the supplementary estimates, she also presented with them the departmental reports.

Now, I recognize that a major theme in your report card is that the government should be significantly more proactive in its publication of financial documents and have greater transparency, yet in the most recent Treasury Board Secretariat departmental results report, it stated that it has “changed the cycle for updating departments' frameworks from every year to every third year.” It claims that this change will increase accountability and transparency.

Would you agree, Mr. Robson, that changing this reporting cycle from every year to every three years will increase government accountability?

[William Robson]

I'm not familiar with the change you just referred to, so I'm answering a little on the fly. I stand to be corrected if I'm misunderstanding what's behind this change.

In general, I would have thought it makes sense to have a tighter reporting cycle. If I go to some of the considerations that lie behind our report, we spent quite a bit of time talking about the speed with which different governments produce their financial statements.

Speed is a good thing. It's good for accountability. You don't want results out at a point when it sort of feels like old news and when, if there was a problem to be corrected, it might be too late to correct it. The speedy collection of information is valuable for all kinds of other reasons. If you're slow collecting your information for the year, you're naturally on your back foot when it comes to preparing your budget for the next year, because the natural place to start with many plans is to understand where you are and what just happened.

My quick reaction—and I admit it's not after having studied it—is to say it's better to have tighter reporting cycles. It's better to have more frequent reporting cycles. There's real merit in collecting and releasing information quickly.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

I couldn't agree with you more. I do believe more frequent reporting leads to a higher level of accountability and transparency.

You state in your report that you feel more optimistic about the federal government's financial reporting in the future. This is a two-part question.

Why would you state that you feel more optimistic about the federal government's financial reporting in the future? Maybe it is because it might be a different government. Secondly, did the most recent estimates that were tabled reflect this optimism, or does the government continue to fail on many accounts, would you say?

[William Robson]

The federal government's performance in our report card has recently been very bad. The failure to produce a budget at all in 2020, as everyone in this group will know, was unprecedented. It was a dismaying thing to see happen, because it appears as though there weren't the kinds of consequences that one would hope for. World wars and other disasters have not prevented governments from presenting budgets.

Relative to the “F” that we awarded that year, the federal government's performance is improving. When we look ahead in the report, we're able to look at the most recent budget cycle to get a sense of how things are developing, and the federal government, in some respects, did improve its performance relative to where it had been.

I would love to see the federal government do more. I made a quick reference in passing in my opening remarks to the aborted attempt. It was part of the 2015 election platform, and for a fiscal policy wonk like me, my heart beat faster when I saw the commitment to release the estimates along with the budget. Even after having spoken at some length to Scott Brison about what happened then, I don't understand it.

As you can see, if you have the table in front of you and scan down, there's really no reason not to be able to do it. The Maritime provinces all do this. Clearly, if you release your budget well in advance of the fiscal year with the main estimates, then the work of the parliamentarians in understanding the fiscal framework and being able to scrutinize it before money starts getting spent at the beginning of the fiscal year is greater.

In the case of the federal government, since I'm on the topic of timeliness, I will also add the importance of federal transfers and other federal programs to the finances of other governments in the country, particularly the provincial and territorial governments. It really is incumbent on the federal government to get their numbers out early so that other governments have a chance to see them before they put their own plans in place.

It's kind of silly, if you look at the recent budget cycles, that we have a number of governments in the country.... New Brunswick is a standout. It always produces its budget well in advance at the beginning of the fiscal year. New Brunswick gets a lot of federal transfers. It's not easy for them, and it should be a lot easier. The federal budget should precede the New Brunswick budget so that they have a firmer basis for planning.

There are all kinds of reasons for the federal government to produce its budget and its estimates in a more timely way, and I'm not clear on why that isn't happening.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Robson. I agree with your comments regarding Mr. Brison. My understanding is that he attempted to significantly change the public accounts but was prohibited from doing so. I'd like to know why, and I'd like to know what he would have done.

Thank you very much, Mr. Robson.