Public Accounts Committee on Nov. 2nd, 2006

[The Chair, Liberal, Shawn Murphy]

Okay, colleagues, I'd like to start the meeting. Welcome. Bienvenue à tous.

At this meeting, according to the agenda, we're going to continue with our study into the roles and responsibilities of the Treasury Board Secretariat. Again, this meeting, as was the last meeting on Tuesday, will be a little disjointed because of witness availability, in that we're going to spend the first hour talking with the Comptroller General and his staff, and spend the last 45 minutes discussing concluding reports. Of course, we'll start right in with the tenth report.

Colleagues, with us today is Mr. Charles-Antoine St-Jean. He is, of course, the Comptroller General, as everyone's aware. He's accompanied by Robert Fonberg, assistant associate secretary; and Mr. David Moloney, senior assistant secretary, expenditure management sector. I see Mr. John Morgan in the back.

Mr. Morgan, you're just a spectator, are you?

[John Morgan, Acting Assistant Comptroller General, Financial Management and Analysis Sector, Office of the Comptroller General, Treasury Board of Canada Secretariat]

I'm an observer today.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Invite him up to the table.

[The Chair, Liberal, Shawn Murphy]

Well, you're certainly welcome to join us if you wish.

John Morgan's familiar with us all, I would hope.

Monsieur St-Jean has the opening remarks, so I'm going to turn the floor over to him. Again, I want to thank each and every one of you for being here today, and thank you for assisting us in this issue.

[Charles-Antoine St-Jean, Comptroller General of Canada, Treasury Board of Canada Secretariat]

Thank you very much, Mr. Chair.

My colleague, the associate secretary Robert Fonberg, is here with me. He will be making the opening remarks. He's here for our colleague, the secretary.

Go ahead, Rob.

[Robert Fonberg, Senior Associate Secretary, Treasury Board of Canada Secretariat]

Is that all right with you, Mr. Chairman?

Merci beaucoup.

Let me thank you for the invitation to be here. As you noted, this will be a little disjointed; we're a little bit out of phase. The secretary was not able to be here today. I believe he is scheduled, Mr. Chairman, to be here next week, and he'll give you a good overall sense of the roles and responsibilities of the Treasury Board Secretariat as he sees them.

Only at the Treasury Board Secretariat could you have enough seniors, assistants, secretaries, and associate secretaries to actually confuse the entire table. I am the senior associate secretary. David is the senior assistant secretary. And everybody knows the Comptroller General, Monsieur Charles-Antoine St-Jean.

I would like to take a few minutes to talk about the roles and responsibilities of the secretariat as they pertain to the expenditure management system; as I said, the secretary will be here next week to talk about overall roles and responsibilities. Obviously we'll be pleased to take any questions you have after we make our remarks.

As the government's budget office, we at the Treasury Board Secretariat play a very important role in the government's expenditure management system. That system is the framework—a series of processes, rules, reports, and decisions—used to identify and implement the government's spending plans and priorities. It integrates departmental programs and resources, government fiscal and budgetary decisions, Parliamentary scrutiny and approval, through a series of planning and decision-making processes. All three central agencies—we at the secretariat, the Department of Finance, and the Privy Council Office—play very important roles in that system, albeit with different emphases at different points in the supply cycle.

I'd like to walk you through those aspects for which the secretariat has lead responsibility.

It starts with the planning stage. It is at this stage that the Department of Finance and the Privy Council Office take the lead in supporting cabinet. The secretariat in many ways plays a supporting role at this point.

Planning starts in the fall, right about now, with the pre-budget consultation process and the tabling of the economic and fiscal update by the Minister of Finance, which provides an annual update on the national economic and federal fiscal situation leading to the budget planning process. The update reflects the ongoing spending requirements of existing programs, information that the secretariat provides to the Department of Finance.

The budget outlines the government's annual revenue and expenditure plans, as you all know. All of that spending has to be authorized by Parliament. The budget's fiscal framework provides the overall guidance to the secretariat's work in preparing the government's request to Parliament for the spending authorization.

Treasury Board then approves the adjustment of departmental funding to implement the budget's allocation and re-allocation decisions. In particular, to give effect to those decisions, the secretariat supports Treasury Board in seeking Parliamentary approval of detailed spending plans through the preparation of the estimates documents and appropriation bills. The main estimates identify the spending authorities, called votes, and the amounts to be included in subsequent appropriation bills.

Parliament is asked to approve those votes to enable the government to proceed with its spending plans. That request is formalized through the tabling of appropriation bills in Parliament, typically in March and again in December.

Since the mains are prepared well in advance of the beginning of a fiscal year, they do not always include the total expenses that are provided for in the most recent budget. To address this, the secretariat prepares the supplementary estimates to obtain the authority of Parliament to adjust the government's expenditure plan as reflected in the estimates for that fiscal year. Parliament is also asked to approve these in an appropriation act.

The cycle I have just summarized focuses on implementing budget decisions on new spending initiatives. The vast majority of the spending the government seeks approval for through the estimates documents is carried out through the ongoing programs of the government. The secretariat plays a central role in respect of this annual approval process, through what we refer to as the annual reference level update.

The secretariat works with departments to confirm the detailed spending plans, for which they have prior policy and funding approval from cabinet, and program operation approval from the Treasury Board. The secretariat then seeks Treasury Board approval for the ongoing spending, which in turn is proposed to Parliament through the detailed votes in the estimates and appropriation bills.

The final stage in the process is reporting and accountability. Every March, departments set out the objectives they plan to achieve with the funding proposed to Parliament through the estimates and the reports on plans and priorities. A year and a half after that, in the fall, departments return to table their departmental performance reports, which detail what it was they accomplished with that funding.

The secretariat also prepares Canada's performance report, which is tabled at the same time as the departmental performance reports; and provides parliamentarians with a whole-of-government perspective from which to assess the performance of federal programs and initiatives.

Along with the reporting of financial results and the public accounts, these reports help Parliament to hold the government to account for the allocation and management of public funds. The secretary, when he is here next week, will give you an overview of the secretariat's roles as a management board and as a budget office, and he'll bring the two of those things together.

I would like to draw your attention to two key aspects of the management board or policy-making role of the Treasury Board and the Treasury Board Secretariat that directly support expenditure management.

The first of these aspects is the work that the secretariat does with departments regarding how they structure their reporting. As members are likely aware, starting with the 2005-06 estimates and public accounts, departments display their overall spending in support of a small number of strategic outcomes and program activities designed to deliver on those outcomes. This change reflects a Treasury Board policy known as the management, resources and results structure policy. The policy was intended to both increase departmental focus on results to be achieved with approved funding, and to enhance accountability to Parliament and the public for the use of that funding. The secretariat is working actively with departments to progressively improve our collective implementation of that policy.

The second area of secretariat responsibility is closely related to accountability and results, and that's the Treasury Board evaluation policy, which sets out requirements for departments to evaluate the outcomes actually achieved by their programs. These outcomes are part of the information Parliament receives through the departmental performance report.

Let me just spend one final minute looking forward, Mr. Chairman. Budget 2006 pointed to the need for a new, ongoing approach to managing overall spending in order to ensure that all government programs are effective and efficient; that they're focused on results and provide value for taxpayers' money; and that they are aligned with the government's priorities and responsibilities. To that end, the budget launched a review of the expenditure management system, led by the President of the Treasury Board, and we are currently working with the Privy Council Office and the Department of Finance on a renewed system that respects the following principles enunciated in the budget: that government programs should focus on results and value for money; that those programs should be consistent with federal responsibilities; and that programs that no longer serve the purpose for which they are created should be eliminated.

As part of the review, we're looking at the approach that the secretariat and the board take to the approval of ongoing spending and our evaluation policy requirements. The president, as per the budget commitment, will be back to report on this work sometime this fall.

Thank you very much, Mr. Chairman.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Fonberg.

There's one issue I want to clarify here for my own purpose. You gave us a good review of the estimates process and some of the roles of the Treasury Board Secretariat, but when I came to the meeting, I was expecting some comments from Monsieur St-Jean.

I view this review as your role that is very vital to the study of the committee. We have the whole issue of internal audit, where we're going with that, and what some of the emerging issues are. We have the expected enactment of the Federal Accountability Act, and the deputy ministers will be appearing before this committee as accounting officers. There has to be a development of a protocol in terms of what is expected of the deputy ministers and the whole issue of accrual accounting. There is the whole issue of the qualifications, roles, and duties of the chief financial officers in all the departments and crown agencies here in Ottawa.

When I came to this meeting, I thought this was going to be your show, yet you're quiet. I really think the committee will want to hear from you.

I'll turn the floor over to you, Mr. Williams, if you have a comment.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you, Mr. Chairman.

As you know, we normally just work with the Auditor General. I believe she's going to be bringing in a couple of chapters on expenditure management in the next few weeks.

[The Chair, Liberal, Shawn Murphy]

November 28, Mr. Williams.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Yes, November 28.

If we're just doing an analysis of expenditure management review, it's pointless and it's ahead of its time. Like you, I thought we were dealing with roles and responsibilities of the Treasury Board so that we could actually make some recommendations to Parliament about how the senior levels of government actually go through their decision-making. But this seems to be fairly picayune stuff that we have here, in advance of the Auditor General. We don't have her comments, so we can't ask those intelligent, searching questions. I'm therefore trying to come to grips with why we're actually here today.

[The Chair, Liberal, Shawn Murphy]

Well, I think we're here.... I was half-expecting to hear more from Monsieur St-Jean. We have a lot of issues, and I have mentioned about four of them that I think this committee is very interested in exploring. Mr. Fonberg gave an excellent presentation on the estimates process; I didn't detect anything new in that. All of that, of course, is important.

Mr. St-Jean, we just concluded a very important chapter on what I consider to be a dispute as to the treatment of an accounting issue. There didn't seem to be any protocol in government as to how this was to be handled. It was done in a very ad hoc way; it was not the way you would expect any kind of organized system to deal with this issue. We've tabled our report; it's well-known that this committee is not pleased with the way it was handled.

These are some of the issues. Of course one of the outcomes of this study, one of the most important items, is related to our expectation that the Federal Accountability Act will eventually become law. The day it becomes law, the deputy ministers and the agency heads of the crown corporations will all become accounting officers before this committee.

There are some in government who think that won't change anything--it'll just be business as usual. It won't mean anything. There are some of us actually around this table who think it will mean a fundamental change; that is one of the very important vital issues we want to get at. With that, there has to be the establishment of a protocol as to the duties of the deputies, the manner in which they come here, and what is expected of them. I would have thought that would be coming from the leadership of the Comptroller General. Of course, the committee has had all kinds of concerns over the years about the internal audit function; that's been a bone in our saddle for years.

These are some of the issues that we want to flesh out going forward in this particular study.

I turn it over to you before we go to the questions, Monsieur St-Jean.

[Charles-Antoine St-Jean]

Thank you very much, Mr. Chair.

We're a bit disjointed, as my colleague said, because of some of the changes, but also the agenda we were provided with was more for TBS and expenditure management, so there was a bit of confusion in terms of the role. I'm absolutely prepared to talk about all those issues and have the dialogue with the committee today on those points.

Maybe I could start by saying that as you know, the Office of the Comptroller General was reinstated two years ago; in fact, it was in June 2004, when I took the position. It's also true that there's no common definition of what an office of a comptroller general is in Canada. I had the same discussion with all my colleagues across the provinces; there's no single definition of the scope and responsibilities of an office of a comptroller general.

The same can also be said of my colleagues.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

On a point of order, I have a concern. Do we have some kind of misunderstanding of what the agenda was today? I thought it was clear--it was to be the roles and responsibilities, not expenditure management.

[The Chair, Liberal, Shawn Murphy]

I'm going to ask the analyst to speak on this.

[Brian O'Neal, Committee Researcher]

Mr. Chairman, I was just explaining that last week I received a phone call from parliamentary liaison people at Treasury Board Secretariat. At that time I made it very clear to them that this meeting was about the Comptroller General--his role in issues like expenditure management, but particularly with an emphasis on this change in status of deputy ministers that will come after the Federal Accountability Act has been adopted. It was made very clear to them over the phone. I suppose that perhaps information was not conveyed properly to other people at the secretariat.

[The Chair, Liberal, Shawn Murphy]

Mr. Fonberg, go ahead.

[Robert Fonberg]

We're working from your document, which for the meeting of November 2 says “Treasury Board Secretariat and expenditure management”, so there must have been a misunderstanding, because for us expenditure management and the expenditure management system mean something quite distinct from financial management. The Comptroller General has a heavy emphasis--a leadership role--on financial management; another part of the Treasury Board Secretariat has a leadership role and a heavy emphasis on expenditure management.

I apologize for any misunderstanding. I'm sure the Comptroller General's prepared to step in and handle whatever questions you want to take on the financial management side. I apologize for the misunderstanding.

[The Chair, Liberal, Shawn Murphy]

I'll let you conclude, Mr. St-Jean.

[Charles-Antoine St-Jean]

The same goes also with the roles of the comptroller generals in various Westminster-based systems. There is no one common definition of what the role of a comptroller general is and what the role of the office of a comptroller general is.

Also, the office was first created back, I believe, in 1918, and over the years there have been different profiles of the office. What's important is that the role and responsibility of the Office of the Comptroller General be clearly defined in the DPR, as was reported in the report of your committee on firearms. You made reference to what the roles and responsibility are, as stated in the DPR.

Essentially, there are three major responsibilities. To give some flesh to those three responsibilities as they are explained in the DPR, as you will recall, the President of the Treasury Board announced in June—on June 20, if I recall—the creation of a task force of senior deputy ministers and two private sector CFOs to review the financial management policy framework. This committee will be reporting to the president in early December.

Since that time and before it, all of the actual policy framework of what the Office of the Comptroller General is and what it should be, and also of what the responsibilities should be of the various actors, is being developed. This will be ready very shortly, to be reviewed with the president in December.

The report of the committee that you tabled this week will be very helpful in shaping those recommendations. In fact, it will to a very large extent shape the direction being contemplated, but the consultation within the government is not completed yet. I think it's fair to say there's some robust discussion going on at the moment about what the roles and responsibilities of the various players should be. We are, as I say, having those discussions at this point in time.

I'll say a few words about the policy framework being developed. I cannot go into the various details, because the president has not been formally apprised of it, but directionally it seems to be appropriate. That is to say that there will be very clear roles and responsibilities for the major players. Of course, the roles and responsibilities of deputy heads is a question of machinery, on which the Privy Council Office should be the one making the final presentation. But the interaction among these various players, between deputy heads, CFOs and departments, program ADMs, financial officers, the Comptroller General—all these—are clearly looked into and spelled out in terms of expectations.

One of the difficulties you've mentioned very often was a lack of clarity about roles and responsibilities. This will attempt to address that issue. It is not completed yet, but your recommendations—and thank you very much for those recommendations—go very much along the idea of what is being contemplated.

Maybe on that note, I could take some questions, if you would like.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. St-Jean.

Just before I turn it over to Mr. Pacetti for the first round, a lot of what you said talks about organizations and robust discussions within government. But this is Parliament, and the interface between the executive and Parliament for a lot of these matters is the public accounts committee. We have to determine our own protocol here, and we can't wait until some blue ribbon committee or some group of deputy ministers decides.

I think there has to be some work done by the Treasury Board Secretariat or by your office on these issues, and hopefully, during the course of the study we're doing, the robust discussions will conclude and we'll get to some meat on the bones and formulate some of the issues we want to formulate.

There's a big difference. I'm not sure you really equate.... This is Parliament right here, now. A lot of the discussions you've talked about are within the executive branch of government.

Mr. Pacetti, you'll have eight minutes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Thank you for appearing, witnesses.

I have a concern when it comes to overlapping. In your first or second paragraph, you talk about the planning stage and what the Treasury Board's responsibilities are when it comes to the supporting role that I think the Treasury Board plays. There has to be an overlap somewhere, because I know the finance committee, of which I'm a member, is conducting its pre-budget consultations. There's going to be a fiscal update, but then there will be a budget.

If the Treasury Board is going to rely on the Department of Finance, then we all know the finance department has not been doing a great job in terms of giving us the proper estimates. They've been overestimating. The Treasury Board must have its own estimates. Or does it just follow whatever the finance department comes up with? There has to be either some type of overlap or some kind of coordination. At what point does that coordination happen? Is it repetitive? Could you expand on that? I'm having a bit of trouble understanding the level at which that happens.

If you're having trouble just in terms of coordinating the secretariat and the comptroller's office in the secretariat, I can imagine how it could be a challenge between departments.

[Charles-Antoine St-Jean]

If I may, as my colleague explained, the role is in the expenditure management system, which is the actual decisions in terms of where the money will be spent. It's in a big envelope, based on the priorities and so on. That system must rely on a very robust financial management capability to make sure that proper analysis of information is provided to departments and to deputy heads, and that it is rolled up in the documentation that is provided to departments to hold the government to account. There is a very close interlink in terms of the role of responsibility for financial management.

We define “financial management” as a spectrum of different activities, starting with the planning, the budgeting, the accounting, and the reporting. All of these activities are done in such a way as to provide the right information. Financial management also includes the challenge function, internal to the department, but also within the TBS. All these players must work together to provide the right number.

In terms of the accuracy of the forecasts, I would probably ask my colleague to elaborate on the relationship between the Department of Finance and TBS.

[David Moloney, Senior Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat]

Perhaps I could speak to that, just to clarify.

When the Department of Finance brings forward its fiscal framework, it is informing Parliament of its expectations for revenues, its plans for the total degree of spending. What Mr. Fonberg was trying to explain in his statement was that the Department of Finance has to rely on us—Treasury Board Secretariat, and specifically my sector—to provide them with information on the existing programs of government that have authority to continue. The Department of Finance needs to know the total amount of spending that they need to factor into their overall fiscal framework going forward into the next year and the year after that.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I don't mean to interrupt, but time is limited.

I understand you don't necessarily get involved on the revenue side, so we can understand why some of the numbers sometimes don't get fully disclosed until the end. So let's talk about expenditure.

The Department of Finance decides, through their budget, that they're going to spend x number of dollars. Let's take an example. With the Department of National Defence, let's say, it's going to be $10 billion. At what point does Treasury Board get involved and say the defence department might actually be spending $9 billion or $11 billion, or that they need to spend $11 billion but you've only authorized $10 billion? The Department of Finance doesn't touch that any more, does it? Correct me if I'm wrong. Doesn't Treasury Board get involved at that point?

The the Department of Finance still oversees, from what I understand, and then Treasury Board puts in its two cents, for lack of a better expression. And then the finance department within the Department of National Defence also gets involved. I think that's what we're talking about: the roles and responsibilities of each department. Everything seems to be interlinked, but nobody can give you a proper answer.

[David Moloney]

Perhaps I can try it.

It's Treasury Board Secretariat's job to know how much spending is authorized for defence, and to work with Parliament to get Parliament's votes in support of those plans.

The Department of Finance takes from Treasury Board Secretariat the amount that the Department of Finance currently, with current cabinet approvals and Treasury Board approvals, has approval for, for next year. That includes things like policy approvals, but also other adjustments, like, for example, compensation. So the Department of Finance takes it from us for that department.

As for all other departments, they look at that overall. One of their jobs is to decide if that is affordable for the government when we add it all up. It then comes back through to cabinet that we can afford all that plus more, or that we can't afford all that, and then further decisions are taken.

When the budget is made, we go back to the Department of National Defence, in this case, and say they have authorization to continue—