:
We will leave that because we're going to ask for five or ten minutes at the end of meeting to discuss planning anyway.
Carrying on then, I'm going to introduce our guests. Our witnesses today are from the Treasury Board Secretariat. We appreciate their being with us again today. I believe that Mr. Bill Matthews will be leading the delegation. I'll let him introduce the officials he has brought with him.
I would say at the outset that today's meeting is the culmination of a great deal of work that was triggered by the report this committee tabled called “Strengthening Parliamentary Scrutiny of Estimates and Supply”. I think committee members will agree that this is one of the most important pieces of work to come out of the 41st Parliament. We were gratified that in the government's response to the report they did see fit to agree with many of the recommendations.
Today we will be dealing with recommendations 1 and 2, which were answered by letter by the minister, I believe, on April 13. We received two letters from the minister dealing with these subjects. On recommendation 1, they find no compelling evidence to support a move to accrual appropriations, but recommendation number 2, that we deal with the program activity model of government departments, has led to the presentation that we're about to hear today.
We've had one in camera session dealing with some of these issues, which the analysts advised they were unable to put into the paper they produced for us, but committee members will probably remember some of the presentation. Mr. Matthews has advised that he won't be giving a full presentation to repeat much of that information, but he will make some opening remarks, and we'll have the luxury of time to ask any questions we like.
Having said that, by way of introduction, Mr. Matthews, please take the floor and give your opening remarks.
:
Thank you, Mr. Chair, for inviting us here today.
As you mentioned, we believe that after many months of study, the committee members are very familiar with this material, so we didn't want to waste members' time redoing an old presentation, but we will be happy to answer any questions.
In particular, we're here to speak to recommendations 1 and 2 of the government's response to the seventh report of the Standing Committee on Government Operations and Estimates.
[Translation]
As you already mentioned, I am accompanied by a few colleagues today. The members of the committee already know Ms. Thornton, but I am also joined by Mr. George Samiotis, a new member of my team, and Mr. Sylvain Michaud, from the Office of the Comptroller General, where he is responsible for government accounting policy and reporting.
[English]
There has been substantial progress in delivering on the government's commitments in the response to the committee's report, but as you know, when the government response was tabled in October 2012, the government did commit to provide additional information on recommendations 1 and 2.
Recommendation 1 was that the Treasury Board Secretariat complete its study of accrual appropriations and report back to the committee. That study has now been completed, and in short, for reasons outlined in the response in a study which has been tabled with the committee, the government is going to continue using the cash basis as its model for appropriations.
[Translation]
The second recommendation was that the estimates and related appropriation acts be transitioned to a program activity model. The government response committed to providing such a model, including cost estimates for these changes.
[English]
The government has provided an example of such a model for three departments to the committee, if I recall correctly, as well as the estimated costs for implementing such a change, along with the estimated timeline. Those numbers and timelines are based on consultations with departments.
We'd be happy to speak to both sets of material, either on accrual appropriations or on a potential change to the vote structure, as the committee sees fit. As well, if the committee members do have questions on the other aspects of the committee report on government progress that are related to those recommendations, we would be happy to take those questions as well.
With that, I'll turn it back to you, Mr. Chair.
:
Thank you for that question.
There are two points I would like to mention in that regard.
[English]
The notion of a new vote structure based on some sort of program hierarchy is an interesting question, and it is a hierarchy we have to think about.
The top level of our program structure is strategic outcome. Below that you get into program activities and then you get into programs themselves.
One of the key considerations in deciding what a potential new model would look like is the number of votes themselves. By way of reference, under the current system, we have roughly 200 different votes in terms of categories of expenditure. We have under the current system of strategic outcomes about 290 strategic outcomes. So, it's roughly the same number of votes, but some more. If you go down below strategic outcome, you're dealing with a substantially large increase in the number of votes. That's one of the things we would have to think about if we were to propose a new model, that is, at what level do we get too detailed?
If you go one level below strategic outcome, you're into program activities. There are roughly 550 of those, so almost double the current number of votes. You go below that into programs. There are almost 2,000 programs—1,900—so again it's very detailed in terms of the number of votes on which parliamentarians would be asked to vote, and that has implications in terms of how departments manage.
The question of level of detail of vote and control is a key question. We have furnished today a model based on strategic outcomes, which we think is an appropriate level for consideration, but it's an interesting discussion to have as to what is the right level.
The second part of the question about accrual is a separate question. Regardless of whether you vote, as we currently do, on capital operating transfer payments or another model based on strategic outcomes, the other question is whether it is cash or is it accrual. The government has been asked to study this question of accrual appropriations for a number of years. We have now concluded that. Largely for reasons of understandability and some experience of other countries that went to accrual, we don't feel the accrual model for appropriations offers any value. We do feel quite strongly that with accrual numbers for the budgets and the financial statements of the Government of Canada, there's certainly good value there, but to change the appropriation model to that number doesn't help you.
:
The structure that's put in place now is quite easy to do because the programs, by nature, have to add up to the level above, which is program activities, which then add up to strategic outcomes. You will see the detail.
It is acknowledged that during the year there may be changes in terms of what was forecasted at the program level to what actually gets spent. We're now using the reports on plans and priorities to articulate what a department plans to spend by program, as well as a historical analysis of what they have spent—that was a recommendation of this committee—as well as what they plan on spending in the future.
The key part of that story—again, a recommendation from this committee—is for the department to provide an analysis in writing, a narrative, about what's changed so that you can actually track how the planned spending has changed.
Parliamentarians now get information by program. That doesn't necessarily mean they have to vote by program. There certainly is a lot of detailed information to support the vote, if we were to go to a strategic outcome vote. That is an “if”. This is a model that's been put forward for discussion.
Thank you, guests, for being here once again.
To follow through, as the chair mentioned, I think it's one of the more important studies we've taken on as a committee. It's been studied in the past, and it's actually encouraging to see there is finally some action being taken on some recommendations that were made in some previous studies from 10 and 20 years ago.
I have two sets of questions.
First of all, on cash versus accrual, you've given a reasonable explanation. Maybe for the benefit of other committee members and others who might be watching on television, could you explain the reason for cash when it comes to the estimates and supply process? For some people it's still jarring to think that when it comes to budgeting and reporting, it's on an accrual basis. For this other process of estimates and supply, why is it on a cash basis? What are the benefits of cash accounting?
:
I'll start by saying that it's not a question of accrual or cash. To have any sort of comprehensive financial reporting picture there are places for both.
As I've mentioned, accrual for the budget and financial statements makes perfect sense. The government has done it since 2003. When you're into the appropriations, one of the key questions is, does Parliament understand what is being spent? There's a lot of history as well as discussion.
The Australian government was the first national government I'm aware of that went to an accrual model. They went back to cash recently because they found that parliamentarians weren't understanding what they were approving.
Given the nature of the study this committee undertook, which was all about improving Parliament's scrutiny of the estimates, as well as understanding what members were approving, based on the experience of Australia and a few other countries, as well as some discussions with the OECD, there was enough evidence to say that accrual would further muddy the picture rather than clarify it. There is still a place for accrual information, absolutely.
When you are looking at the spending plans of a department, understanding the cash that will effectively go out the door is a good way to look at it. It's understandable; there's less judgment involved. Cash is cash; it goes out the door. When you're into accrual there's a lot of assumptions and projections. There is nothing wrong with that. But when you're asking Parliament to approve something, it was thought that the certainty cash provided both in terms of less judgment—cash is cash—as well as clarity for parliamentarians because they're not all accountants, and it's not reasonable to assume they will all be accountants, offered a greater benefit.
:
All of the appropriation documents, including the estimates as well as the bills themselves, are cash-based.
When you're getting into the reports on plans and priorities and the departmental performance reports, you will see a mix. They will get back and show what they spent against their authorities, which is the vote, but in the departmental performance reports, for example, there is a link to accrual-based financial statements for each department.
You see both sets of numbers there, so you can see that depending on what your preference is and what the reason for your query is, you will get both sets.
:
I would say two things. From a parliamentarian perspective and potentially even the media, although I shouldn't speak for them, when they think of departmental spending, they typically think in terms of programs in the strategic outcome structure. There's a stronger link to what would be voted on in terms of how they think of departments. Very few people think of departments in terms of capital upgrading and grants and contributions.
There's a stronger link there. There are reasons for wanting to know what departments spend in capital, operating, and grants and contributions, but you've strengthened the link between how people think of departmental spending and programs and what Parliament is voting.
The change in behaviour on the departmental side would be a change in how they actually control their spending, because we would now be asking them to basically control on a different basis. They would have to rethink their control structures. Instead of asking if they have the capital budget for that, because they can't exceed their capital vote, they would be asking what their spending looks like under the strategic outcome. They would have to change the way they think, plan, and budget. That was one of the key aspects of the discussions we had with departments.
I should say that when we surveyed departments, I believe 80 of them responded. They came back with information but also a lot of questions. They still have many questions as to what this might look like, with a lot of detailed questions that we haven't answered just yet. There's still some work to be done.
My first question is on the cash versus accrual. The argument is that this is going to be simpler for MPs. There was a lot of discussion when our committee reviewed this whole subject of improving the estimates process and the capacity of members of Parliament to deliver on the constitutional responsibility to scrutinize spending that we need a lot more support for MPs.
Regrettably, the consensus report did not include strong recommendations on building capacity. The New Democrats' supplementary report recommended that the role of the Parliamentary Budget Office be expanded, and a big part of that be more training and support for committees and also for individual members of Parliament.
Your argument has been that it's fine to do it by cash because eventually you get all this information. One of our strong recommendations was that these documents should come out more simultaneously, as they do in a lot of other jurisdictions. In other words, when you bring forward the budget and the main estimates and so forth, we should have the plans and priorities. The performance reports, as I understand it, don't come out until the fall. Yes, some of this information may be in there, but you're not seeing it when, as a member of Parliament, you're required to vote.
I wonder if you could speak to that. Maybe you're putting this information in all these various documents and reports, but they aren't necessarily appearing at a moment in time when they would actually help us to look at things; for example, consider liabilities and how those are being addressed, in addition to the spending of cash.
:
There are a couple of comments I would make on that.
On the notion of offering up additional training or education to members of Parliament, I believe there's a standing offer from Treasury Board Secretariat officials to educate, as best we can, new members in terms of the estimates and the process, and what that means. We're happy to continue to do that as requested.
On the notion of RPPs and estimates, they are there to support the appropriation bills for supply. It's clear that the closer those documents come together, the more helpful they are. Most of the time RPPs follow the main estimates within about a month or so. I think that's a reasonable timeframe to allow committees to do their studies.
On the notion of departmental performance reports, they're a backward-looking document. If you think about the public accounts, and I do have my public accounts colleague with me here, they come out in the fall. Departmental performance reports for each department come out closely on their heels. That's looking backwards to actually get the history of how departments spent their money and all those things.
What drives that process and the time lag, because it is fairly significant after year end, is that we can't issue departmental performance reports until the public accounts are tabled, which means that the audited financial statements of the Government of Canada are done. There's a whole hierarchy that goes there.
I would say that when you're studying RPPs and main estimates and appropriation bills, you do have access to the DPRs for the last completed fiscal year to help inform that study. You can look backwards and see what happened in the last fiscal year that was completed. You have that information.
The other improvement that's been made recently that's helpful is the quarterly financial reports from departments. They now fill a gap. If you're waiting for the current year to end, you can actually look at the first three quarters of the year to inform you about how departments are doing. That, I think, is a helpful thing to look at when you're studying RPPs, main estimates, and the relevant appropriation act.
Sylvain, did you want to add anything on public accounts?
:
Our committee recommended program-based estimates, and you have said strategic outcomes. In the environmental field, I've been through the situation in which increasingly agencies are going to these, saying that they are going to measure things by performance and what they deliver.
The problem with basing the estimates on that is it's really all just conjecture. You're not going to know until quite some time forward that this is going to be the strategic outcome.
You're saying that you can look online to see what all the spending, I presume, is for the individual programs and projects.
Mr. Bill Matthews: That's right.
Ms. Linda Duncan: When MPs are voting, they're voting both on the actions the government has put forward in order to reach that strategic outcome and the amount of money it takes to get there.
I'm still not convinced that the direction you're going in is really going to give me the information, unless I do the extra work. Given how busy members of Parliament are and the speed at which the supplementaries sometimes go through, I'm a little concerned about whether people have the time to look through the information. I'm open to being convinced.
:
I have one quick comment on that.
It's a matter of finding the right balance between what has to go in the estimates books themselves versus what is online. There is lots more information available online. It is an interesting discussion.
This is headed, though, in the direction of the database. The database has been set up. It has historical information and is very easy to use to query on specific departments or government-wide. We will supplement it with in-year information, which is the next step in that database. The eventual intent is to put the future planned spending on it as well. That tool will be far easier to use than thumbing through any book to answer the questions of members of Parliament.
That is where this is going. That database needs to be easy to use, and it is very easy to use. As we build it, I think it will answer the question.
:
Thank you, Mr. Chair, and thank you, committee members, for indulging in a few minutes of questions from me.
I have the book from 2007-08—I keep them all, I'm sorry—and 2013-14. You have made a significant improvement from where we were.
Just for clarification, you are recommending that we still stand up in the House and vote for the appropriations bill for the strategic outcomes. What is the difference between what you provided this year, which was excellent, by the way, and what you're providing in this model? The only difference I can see thus far is that there's one more column.
Am I right about that, or are there still more things in your model that I'm not seeing, beyond what you provided in the 2013-14 main estimates?
:
I have a couple of comments. The first is that the model that has been put forward is a model for discussion. The government has gone out, and we have dealt with departments and we have come back with an estimate for what it might cost. There's no commitment yet to actually do it; this is a discussion model.
One of the things the asked officials to do was to work with departments to see whether that cost could be lowered. What is driving a substantial piece of the cost is systems cost. You may be aware, Mr. Chair, that most departments operate their own financial system. So we're not dealing with changing one financial system; we're dealing with changing a hundred financial systems.
There's been a lot of discussion and a lot of work done through the Office of the Comptroller General on standardizing financial systems. If you got departments all on one, or on two or three systems, the cost to change their systems would go down drastically. That's one thing we're playing with.
The other bit is that this is parliamentary control we're talking about. It's important for parliamentarians, but it's also important for departments. We need to give them time to make sure they understand the rules and put the right processes and controls in place. The existing control structure works very well, and we want to give departments time to think this through and make sure they get the right control structure.
:
It's a question of two things. It's a question of information provided to Parliament versus the vote structure. You now have a world where planned spending by program in 2013-14 is available and departments must explain in a narrative any changes in plans versus actual. That exists regardless of what you base your vote structure on. So you have that in play.
If the question is whether a program-based vote would have solved this problem, the answer is no, it would not have, because in that particular case you are taking some existing programs and adding money to them.
The best example I can give you is if you had stand-alone programs for that, it would have stood out, but where you are adding money to existing programs, that money wouldn't necessarily be tracked. Moving to a program-based model would not have solved that problem. What you need is better tracking of horizontal spending.
If the question is whether the program-based model would have prevented the $3.1 billion, the answer is no, it wouldn't have.
:
If you go down one level, certainly the degree of parliamentary control increases.
I believe I mentioned earlier that if you look at strategic outcome, you're looking at roughly 290 strategic outcomes, and if you go one level down, you're at about 550. You're quite right that from a parliamentary control perspective it puts greater control at that level.
From a departmental perspective, that would cause a fundamental shift in how they actually do their planning and spending. When departments got back to us about what the cost to implement such a structure might be, they said the cost would go up by about half.
There were some concerns about what it would do from a management perspective. To actually control at that next level down would cause them some issues. That's not to say it's not the right thing to do, but understand there is a significant impact on departmental operations the greater the degree of control by Parliament.
That's the trade-off. Departments right now plan at a very high level where their controls are. The further down you go, the more process you add at the departmental level.
:
In terms of changing legislation if we went to a lower level of granularity, it may be that we would have to modify some departmental legislation where they have specific authorities.
The other side, though, is there are a number of government-wide policies having to do with expenditure management that would have to be revisited. Right now we have some policies based on having votes on operating, votes on capital, and we'd want to modify those and see how to implement them. They're in place for a good reason: to help good management and to promote desired behaviours. We'd have to reassess and redo those in a different context. We would still need to maintain some way of managing that information to promote those policies, but they would have to be amended.
At the strategic outcome level, there is probably no need to change departmental legislation. At the program level it's possible that certain departmental legislation would need to be changed, but our policies would have to be adjusted regardless.
That concludes the first round.
Out of interest, I'd like to hearken back to Bill's opening remarks when he said that the number of votes would grow exponentially in certain models, etc.
With the examples you gave, and perhaps we could flip to Fisheries and Oceans, which is a relatively small and straightforward one. There's no doubt in my mind that in looking at strategic outcome and program, it's so much easier to understand and to see, line by line, what you'd be doing in each of those categories.
In your opening remarks, did you mean that this is not just for the knowledge of the members, but for Parliament to give consent and you would have to vote on each one of those?
In this model you're voting at the SO level, which is strategic outcome, and there are three, if I count correctly, and then internal services at the end. The strategic outcomes for Fisheries and Oceans are safe and secure waters, economically prosperous maritime sectors and fisheries, and sustainable aquatic ecosystems. Then you have internal services at the end.
What is here for information is program activity information for each of those, and a breakdown of where the spending is proposed. Again, the control for Parliament would be on the strategic outcome.
:
There are a couple of things I would speak to.
One, there is greater information by program available right now without any changes. We've been augmenting what parliamentarians get, both in documents and online, in terms of strategic outcomes and program activities by program.
The other thing I will say is there is a horizontal database that is now used to track horizontal initiatives, and we do report on those horizontal initiatives. So there are improvements that have been made in that aspect as well.
There are other potential things that could be improved upon in terms of how we track spending across departments. You need to see all three together to get the whole picture, but the horizontal initiatives database is a key one.
:
I'm not convinced there's an increased need if we go to strategic outcomes. That need exists already. We're actually tracking information by strategic outcome and program activity.
What I will say with the database, where you've got something that is common across departments—and it's a fairly innocuous example, but internal services is a really good example as every department has internal services, and that's things like finance, human resources, IT—is if you go to the database and click internal services, because it's common across all departments, you can see internal services spending for every single department with one click. That, to me, is a great example of how to report on something that's common across departments. Again, as the database gets additional information added to it, it becomes a useful tool.
:
Thank you Mr. Chair. I want to thank our witnesses for their testimony. As a relatively new parliamentarian—I was elected in 2011—one of the things my colleague, Linda Duncan, mentioned earlier is that for a new member of Parliament it can be rather vexing to be able to understand the scope.
One of the things I did informally was speak to people like Mr. Wallace and Mr. Braid and asked Mr. Cannan as well how best to read the estimates.
First of all I should point out that I really like the graphics that are starting to be included in the estimates process. You quickly find out 60% of the money that comes in to the federal government goes out in transfers to provinces and people. Fifty per cent of the money that comes in comes from income taxes. Those kinds of things I think are very helpful for the average person to understand.
I'm going to follow up on the line of thinking of that of my colleague Mr. Wallace. In fact, I like to call Mr. Wallace “Mr. Wow Us” because sometimes he wows us with his knowledge on the estimates.
Year one on your implementation plan you highlight a number of different things. Before I get to the implementation plan, it says that you surveyed and received a response from 80 out of 130 different agencies that are on the appropriations list. Is that correct?
Were there any informal discussions with the other remaining ones that had not included a response?
:
Your first question was if we actually talked to the ones who didn't respond. We did a bit of an outreach to make sure we had significant input from each cluster, or each set of similar organizations. It was probably the smaller organizations in some instances that we didn't hear from.
We did have some discussions with them in the context of the chief financial officers in different meetings. It was very informal.
It's very interesting that everybody gets the intuitive nature of having something, a vote structure along the lines of a strategic outcome to tell the story, to understand the vision, the mandate, what the organization does, and how to explain it. By and large, the people I am dealing with are accountants who are very comfortable with operating capital. They really understand intuitively the value in communicating and understanding, and are a bit overwhelmed by the prospect of having to manage that way, but they are able to go there.
About a third of the organizations are there. They're very small organizations. They have one vote anyway. They would only have one strategic outcome. An organization that only has $100 million, you probably wouldn't want to have multiple votes anyway.
About a third of the organizations are faced with serious systems and operations issues because they're anticipating a lot of change in how they manage financially and are really concerned about that.
There's another third where it's trying to understand the policies and the practices and what this means in terms of their internal practices, particularly if we start changing our definitions in how we approach.
Mr. Matthews did talk about the operations element. That is key for about a third of the organizations, but for many of the organizations it's actually the change in the policies: how they will have to do their practice, how they will have to train their people, and internal. They need some time, but they were very keen.
:
I'm glad we're having this discussion because it really is a two-way street. I understand what Mr. McCallum is saying, that if we go from the high level authority down to another level, we are actually opening up where it does affect other groups. A simple response would be going back to Ms. Duncan's example, that parliamentarians don't feel—I think I even heard from the chair that there seems to be an attitude of disconnect from the estimates process itself.
So to me, the logical choice would be rather than giving more information that people at some point are not engaged in, you focus that information so that it's in easier to understand, easier to access terms.
Again, I think, after reading it, that's what the spirit of the report from this committee was. There have been multiple reports through the last century. I think there are about six different swings at it. For me, I think about how we use what we already have and use technology to leverage that. That's why I appreciate that.
Getting back to the implementation plan, I can understand it's a five-year process because there are a lot of operational changes that are required. On this letter we have from the President of the Treasury Board, it said year one parties would include establishing a small project office to manage the implementation of this initiative, communicate the decision, review and identify legislative policy and definitional issues.
Have you started with establishing an office yet?
:
That was several years back. When an investment decision is being made, like a business case, for instance, there are times when you want to understand both the accrual and cash bases. Because the budget is on accrual, finance needs to understand those planning numbers on accrual. There's a much greater use of accrual information than there was at that time. Since that recommendation, as I mentioned earlier, Australia has come full circle. They went back to cash because they had some issues with Parliament not understanding what they were approving.
We have shared with the Office of the Auditor General the study that the committee has done. There have been ongoing discussions on that issue. They're aware of our position.
Going from memory, which is dangerous for me, I think that of the witnesses you had here as part of this study on the question of cash versus accrual, all were in favour of cash, except the Auditor General, I believe, who was still on side with the accrual.
:
I'm not sure there's a quick answer, but I'll try.
When you're looking at the narrative in the RPPs about changes in planned spending versus actuals, if a department had been planning to spend $10 on a program on which they spent $8, and they're supposed to spend $10 every year, but all of a sudden you notice they're spending $12 next year, the explanation is key. One of the explanations could be that they didn't get their ducks lined up that year. They couldn't spend what they thought they were going to spend and they reprofiled it to another year. It happens a lot with infrastructure programming.
The explanation in the narrative is key to understanding why that is. If you see a bump in program spending, up or down, it could be because there's been new money added, or it could simply be because a department was unable to spend or realize their plans and they've got permission to move that money to a new fiscal year, which requires Parliament's approval every year. The narrative is the key.
:
Thank you very much, Mr. Chair.
I echo the comments of my colleagues in terms of thanking you for being here. It's always good to hear from you folks. I do appreciate all of the effort and work that has gone into getting us to this place.
I think I'm onside with you in terms of the need to know versus the right to act. Obviously, more information is key for us, and stewarding that information in a way that makes sense is really what we have been trying to get at through this study.
You provided a good segue into a question I have. It follows up on what you've indicated is the time that's needed to determine if there are savings that can be achieved by getting down the number that was proposed and working with departments to create a better level of confidence in terms of moving in a different direction.
I want to ask whether any of this work that you would do within the departments with their financial data dovetails at all with Shared Services Canada and some of the work that's going on to bring all of that IT under that organization.
:
Thank you for being here.
I'm on both sides, that is, information and democratic control. I like both of those.
I want to ask you a question about the $3.1 billion. It is alarming and troubling that it wasn't caught earlier. I think that should cause the secretariat, and the entire public service, to do some major thinking and reflecting. It's a lot of money and it's a question of respect for taxpayers. In your answer, you said it was about the narrative, that you'd give a better narrative or you'd ensure a narrative in the RPP. What obligates departments and ministries to ensure the narrative is present in the RPPs?
:
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?
:
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.
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?
:
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?
:
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.
:
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.
:
I just want to make two brief comments.
I hadn't mentioned the accrued versus cash, but I'm in favour of accrued. I'm convinced by the Auditor General's arguments and also experts like Pete DeVries, who used to work for Finance. It's just a statement.
When we did our report we were unanimous on this vote by program. I think most of us agree that it was the most important recommendation. I said earlier we might be on the cusp of success, but having heard Mike Wallace and Mr. Matthews, I'm starting to think we're on the cusp of failure because Mike is downplaying the importance of voting by program, but we may still be okay because he's no longer a committee member.
Voices: Oh, oh!
:
I just wanted to make one final comment.
It's important to keep in perspective that the premise of this committee's report is to enhance the capacity of members of Parliament to scrutinize spending. When we're making our comments, it's all very fine to say that this would be better for Treasury Board, and that isn't it the role of the assistant deputies, directors, and so forth to manage the funds appropriately and report up to the ministers, but that's not what our report was about. Our report was about what the mandate of our committee is, and that is to assist members of Parliament in scrutinizing spending and to make sure the estimates process remains open, transparent, and effective.
There are still some questions up in the air. Treasury Board has made some recommendations. Most of those decisions seem to be appropriate to retaining control by the government and within the bureaucracy, and to keeping costs down. When I look at the hundreds of millions of dollars increasingly spent on outside consultants, I see the spending argument as a fairly weak one.
That's my final comment.
On that note, we're going to thank Mr. Matthews and the panellists for all the work they've done in response to our request. On behalf of the minister, it's been very useful and very helpful. I know a great deal of work went into it. So thank you for your time and your presentation. I'm sure we'll be asking to speak to you again once we have given this some more consideration. Thank you, Mr. Matthews, and panel.
We're going to suspend the meeting very briefly and ask the witnesses and anyone else to leave the room as we'll be going in camera for committee planning.
[Proceedings continue in camera]