Proceedings of the Standing Senate Committee on
National Finance
Issue 11 - Twelfth Report of the Committee
Wednesday, March 21, 2007
The Standing Senate Committee on National Finance has the honour to present its
TWELFTH REPORT
Your Committee, to which were referred the 2006-2007 Estimates, has, in obedience to the Order of Reference of Wednesday, April 26, 2006, examined the said Estimates and herewith presents its final report.
Respectfully submitted,
FINAL REPORT ON THE 2006-2007 ESTIMATES
INTRODUCTION
As is customary, the Standing Senate Committee on National Finance held several meetings to examine various aspects of the Government's planned expenditures over the fiscal year 2006-2007. In all, five hearings were held, including two for the 2006-2007 Estimates and one each for the Supplementary Estimates (A) and Supplementary Estimates (B). Senior officials from the Treasury Board Secretariat appeared before the Committee on four occasions. Also appearing were the Honourable John Baird, President of the Treasury Board and the Honourable Vic Toews, Minister of Justice. In addition, the Honourable Vic Toews appeared as the President of the Treasury Board, following his replacement of the Honourable John Baird in this position. The Committee also heard from senior officials from the Office of the Commissioner of Judicial Affairs and the Department of Justice.
PREVIOUS REPORTS
As a result of these meetings, the Committee submitted three reports to the Senate:
1. First Interim Report on the 2006-2007 Estimates (May 2006);
2. Report on the Supplementary Estimates (A), 2006-2007 (November 2006);
3. Second Interim Report on the 2006-2007 Estimates — Provisions to Safeguard the Independence of the Judiciary and the Determination of Judicial Compensation and Benefits (November 2006).
The Committee has also prepared its Report on the Supplementary Estimates (B), 2006-2007, which the Committee is submitting concurrently with this final report.
CONTINUING INTERESTS
Several issues that were discussed during the hearings on the 2006-2007 Estimates remain as matters of continuing interest to the Committee.
A. Horizontal Information Display
An ongoing matter of concern to the Committee has been how information on horizontal programs is displayed in the Estimates documents. Some Senators were concerned that the full cost of some horizontal programs, such as the Lebanon evacuation in July 2006, may not be displayed in future Estimates documents. The Committee noted in its examination of the Supplementary Estimates (A) that it would be useful if information on horizontal programs that receive funding throughout the year could be displayed in a cumulative manner. The Committee found that some improvements had been made to the level of information provided in the Supplementary Estimates (B) in that some horizontal initiative spending was, to a limited extent, presented in a cumulative manner over the fiscal year. However, the document does not follow-up on the other horizontal initiatives for which funding was requested through previous Supplementary Estimates within the same fiscal year.
In addition, during hearings on the Main Estimates, 2006-2007 some Senators expressed a desire that the Main Estimates also contain information on horizontal programs. Officials from the Treasury Board Secretariat indicated that they would look into implementing this change. The Committee anticipates seeing progress on this issue in future Estimates documents.
B. Reliance on Supplementary Estimates
The Committee has a long-standing interest in the use of Supplementary Estimates by departments. In its hearings on the Supplementary Estimates (B), Senators noted that the November 2006 Auditor General's report found that between the fiscal years 1989-1990 and 1996-1997, years in which there were deficits, Supplementary Estimates made up an average of 4.5% of the total Estimates submitted to Parliament. Between the fiscal years 1997-1998 and 2005- 2006, years in which there were surpluses, the percentage more than doubled to 10.4%.(1) The Committee understands that due to timing constraints related to secrecy issues surrounding the Budget and the production schedule, new government spending announced in late-winter budgets cannot be included in Main Estimates. However, it remains concerned over this trend and will continue to examine this issue.
C. Expenditure Management System
During hearings on the Supplementary Estimates (B), the Committee noted that the Treasury Board Secretariat is implementing new directions for the Expenditure Management System to ensure that government programs are effective, efficient, focus on results, and provide value for money. The new approach to expenditure management will support managing for results, decision-making for results, and reporting for results. Senators were very interested in this initiative and look forward to seeing how the new system will follow through on its anticipated goals in the near future.
D. Expenditure Restraint
In Budget 2006, the federal government committed to identifying $1 billion in savings in this fiscal year and the next from programs and activities that are no longer effective. The Committee heard testimony that the Supplementary Estimates (A) included $223 million of those estimated savings and that the Supplementary Estimates (B) identified only $875,000. The balance of the savings achieved by the two-year spending restraint exercise — around $776 million — is to be reflected in future Estimates, or in reductions to planned spending not in departmental reference levels. The Committee is concerned about the lack of transparency created by burying the remainder of the reductions in future Estimates and looks forward to seeing more details, such as an item-by-item break-out of the sources of the $776 million and a status report on savings actually achieved provided in future Estimates documents.
E. Vancouver Olympics
The federal government's total financial exposure to the Vancouver Olympics has been of interest to the Committee for some time. During hearings on the Main Estimates, the Committee heard that the total federal commitment to the Vancouver Olympics is $497 million to date; approximately $235 million in additional funding will be sought for the Vancouver games in future Estimates.
Senators were also interested in the processes in place to monitor and control government expenditures in relation to the winter games. The Committee learned that this is the responsibility of the Federal Games Secretariat, an organization housed within Canadian Heritage. The Committee looks forward to an update on the allotment of funding for these Games.
F. National Defence, Accrual Budgeting and Accrual Accounting
In hearings on the Supplementary Estimates (A), Senators noted that $18.1 billion in funding had been committed to the Department of National Defence through the last two budgets. An attempt to reconcile actual spending with the budget announcements highlighted the need for a consistent method of accounting in the budgetary and financial information that is provided to Parliament. As explained by officials from the Treasury Board Secretariat, the government uses accrual accounting for the purposes of the overall fiscal framework and budget whereas parliamentary appropriations are based on a near-cash method of accounting. With respect to the Department of National Defence, this means that determining exactly how much of the total funding committed by the government has been provided to the department is a difficult task. Senators noted that several interested parties, including the Auditor General of Canada, have renewed their calls for the government to move fully to accrual accounting. The Committee is also concerned that departments and agencies are not using accrual financial information effectively, primarily because their budgets and appropriations are largely based on the cash method. The Committee would welcome a firm commitment by the government on the implementation of accrual accounting for budgeting and appropriations.
CONCLUSION
During its hearings on the 2006-2007 Estimates, the Committee considered these and other matters, including: the effects of environmental policies on existing climate change funding; the removal of geographic barriers for public service jobs; and the implementation of sections of the Federal Accountability Act.
The Standing Senate Committee on National Finance respectfully presents its final report on the 2006-2007 Estimates.
(1) Office of the Auditor General, "Chapter 1 — Expenditure Management System at the Government Centre,'' 2006 Report of the Auditor General, November 2006, Exhibit 1.1, http://www.oag-bvg.gc.ca/domino/reports.nsf/html/ 20061101ce.html/$file/20061101ce.pdf.