Proceedings of the Standing Senate Committee on
National Finance
Issue 16 - Evidence - September 17, 2014
OTTAWA, Wednesday, September 17, 2014
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to examine the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2015.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: I'd like to welcome all honourable senators back from our summer break, particularly welcoming back anybody with a new hip. It's always good to be back in full harness.
Honourable senators, before we begin with tonight's business, as you all know, the third member of steering, Senator Buth, has resigned to pursue new challenges. We'll miss her. She was a good member of this very fine committee, and I'm sure the training she got here will help her in whatever else she pursues.
Accordingly, it's in order, and I will call upon the deputy chair to present a motion to fill that vacancy.
Senator L. Smith: Thank you, chair. Members of both sides of our committee, honourable committee members, we all know that our third member of steering, Senator Buth, resigned this summer to pursue new challenges, which everyone knows is the Canadian International Grains Institute. Accordingly, we need now to designate a new third member of steering. I'd like to move that Senator Eaton be designated as the third member of the subcommittee for the Finance Committee.
The Chair: Thank you. It has been moved by Senator Smith — and we don't need a seconder in committee — that Senator Eaton be designated as the third member of the steering committee. All those in favour? Contrary minded, if any? Motion carried. We will inform Senator Eaton that she is now the new number three on our steering committee. The steering committee, as honourable senators know, is the committee that helps with the agenda, planning of what work we're going to be doing. We've already started doing some planning as we move into the fall, from now until Christmas, and I expect that steering will be meeting probably early next week now. We could possibly be meeting before that, but we should have further information for you at the meeting next Tuesday morning.
I can tell you that we've already agreed for next week. Basically, on Tuesday morning, we'll be dealing with the international bridge authorities. You'll recall that subject came up a number of times when we were dealing with the Main Estimates and the budget implementation in the spring, and there was a request by one of our senators to try to follow up on that to get the full and total picture of the international bridges and how the federal government aspect of that is managed. That's Tuesday.
Wednesday, we'll be continuing with the Main Estimates — just a number of departments — which is our continuing mandate leading up to whenever we might receive Supplementary Estimates (B) and budget implementation number two. They will be our two preoccupations once they're received.
Tonight, as a warm-up — and this is under the general authority that we have of dealing with the Main Estimates — we're very pleased to congratulate the new Comptroller General of Canada, our good friend Mr. Bill Matthews, who, along with others, has been appearing before this committee for the last number of years, representing Treasury Board of Canada Secretariat. On July 17 this year, he received his elevation to Comptroller General of Canada. We've asked Mr. Matthews as our first witness for the fall session.
Out of respect and honour for you and the work that you've done for us, Mr. Matthews, we'd appreciate hearing from you as to the role of the Comptroller General of Canada. This committee is interested in fiscal management in all of the various departments and how your role as Comptroller General of Canada fits in with your previous role in the Treasury Board of Canada Secretariat.
Senator L. Smith: Mr. Chair, may I interject? We should give a round of applause for the great promotion of a great person.
The Chair: Absolutely.
Hon. Members: Hear, hear!
The Chair: That was a fine interjection. Thank you for that.
I should also indicate that Mr. Matthews is accompanied by his colleague Mr. Hugo Pagé.
Bill Matthews, Comptroller General of Canada, Treasury Board of Canada Secretariat — Office of the Comptroller General of Canada: Thank you, Mr. Chair, for your kind words. That's quite touching. It's always been a pleasure to be here, and it's a pleasure yet again, senators, to be with you here tonight.
[Translation]
It is always an honour to testify before the Standing Senate Committee on National Finance and provide it with information on the work done on the Main Estimates for the fiscal year ending March 31, 2015. It will also be our pleasure to reply to your questions after our brief presentation, which contains information concerning the role of the Office of the Comptroller General of Canada.
[English]
It's always a bit of a challenge to figure out exactly what might be of interest and what level of detail to share with you, so I do have a brief presentation. I think it's just five short slides. You will recognize one of them, senators.
I thought I might give you a quick history of the role of the Office of the Comptroller General and then maybe walk you through the various sectors of the Office of the Comptroller General, because there are really four main functions there. That might be a good way to explain what the roles and responsibilities are. I will end with some financial reporting to Parliament.
[Translation]
As the chair of the committee already mentioned, tonight I am accompanied by my colleague Hugo Pagé, Acting Assistant Comptroller General, Internal Audit Sector, Office of the Comptroller General of Canada.
[English]
I will start on slide 3 and give you a quick history and some context. If you are interested in the history, the comptroller function in Canada dates back to 1933, but it was 11 years ago, in 2003, that the Office of the Comptroller General was re-established as a distinct office.
You may wonder how that fits into Treasury Board of Canada Secretariat. The first important point is that the Office of the Comptroller General is part of the Treasury Board, so it is not a distinct department — it is part of the Treasury Board — but it does sit in there as a distinct office.
If you're curious about the resources the OCG has, we have 204 full-time equivalents and a rough budget of about $30 million. That will line up roughly with what you'll see in the Main Estimates. Obviously, as this committee well knows, that could change throughout the year with supplementary estimates, but, roughly speaking, that's what we deal with.
I would sort of divide roles and responsibilities into five key functions. The first is around policy, which is functional direction and monitoring. That is around policies in a number of areas. I will go through those in detail with you later. The broad strokes are the areas of financial management, which would not be a surprise; acquired services or procurements and asset management is a second group; and internal audits and all things related to that. Those are the policy areas.
We are responsible for establishing policies in those areas, working with departments to make sure policies are clear and then, to the extent necessary, monitoring those policies to make sure they are well understood and complied with and if they need to be changed. Our policies often are undergoing reviews to make sure they're the right policies, so we do that on a regular basis.
The next bit is building and developing capacity. I did mention the full-time equivalents that the OCG has, but it goes much broader than that. If you think about the finance function and internal audit throughout government, and assets and acquired services as well, we're responsible for the community development in those areas. If you think about departments — you may have heard from the chief financial officer of various departments as part of your studies, and there is a whole supporting structure underneath them — the ongoing development of the finance community in terms of bringing in young professionals, making sure they get the professional development they need and figuring out who the next chief financial officers will be in various departments, we have a role in that. That's the finance function as well as internal audit; we have an active role in the development of those communities.
So if a department, for instance, had their chief financial officer retire, I would likely be on the board that would run the competition to replace that individual, along with some representatives from the department. We're always keeping an eye out and trying to develop the next generation of our chief financial officers. So there is a role there. Those people don't report directly to me; they're not part of the numbers. But the ongoing development of those communities is a big part of that role.
The third bullet on this list is maintaining and improving the government's financial machinery, accounts systems and practices. That's very much around the financial systems we have in place, internal controls and working with our colleagues and the Receiver General and the Department of Finance to produce the government's financial statements or Public Accounts of Canada on an annual basis. That's the supporting structure there.
There is an oversight role, as I've mentioned. In terms of our policies, we do like to make sure they're being complied with to the extent necessary and are well understood.
The last one, which is a really interesting one, is the Government of Canada's Financial Management Transformation Program. That really speaks to how we organize the finance function in government. It might surprise you to learn that most departments run their own financial system; it's not one giant financial system for the Government of Canada. SAP is a common financial system. There is also Oracle Financials and a few others. But it's more complicated than that. Even departments that have SAP as their financial system don't have the same version. They might have configured it differently or they might have different modules.
This Financial Management Transformation Program is about moving toward a lower number of systems, combining systems where we can and standardizing business processes and data. But it's quite an interesting project, because the deputy minister in each department is responsible for the financial management function in their department, as the accounting officer. So it's very much an ongoing discussion about how we take small steps to harmonize our data practices and systems. That's the Financial Management Transformation Program, and we are leading that program.
If I could take you to slide 4, it is an organizational view of the OCG. It's just the way I think of my new responsibilities, and I am still getting settled in.
Financial management would be the first group I would speak to. That's where we have all our policies in the areas of accounting, and transfer payments would be another one. The FTEs and dollars around that sector: about 90 people and around $10.6 million. That group would have the key role in helping produce the Public Accounts of Canada, or the financial statements. In terms of other things that are priorities for the upcoming year, I mentioned that we look at our policies on a regular basis. The transfer payment policy is a very important one in government, and it is due for a five-year review. We go through a policy review every five years, so it's on our radar, as is updating some of our accounting guidance. The other thing I will highlight for this group is the ongoing community development of the financial function and our finance people in government.
The second bit here is the financial management transformation group, which is the one I previously spoke about regarding moving toward an enterprise-wide financial system to support more efficient financial management services and standardize process and controls. That is roughly about 30 people and $6.6 million, and that's an ongoing project.
The third group is internal audit, and I have my colleague Hugo here with me. The internal audit policy is the one that's important here. This is a really interesting one. I mentioned that every department has its own chief financial officer and a structure below that. Our large departments also have a chief audit executive, so this is internal audit, not to be confused with the Office of the Auditor General. That's our external provider. For the role there, there are a couple of things. We do policy guidance and practice guidance on to how to do internal audit for the community. There is a role for community development in terms of our internal auditors, writ large.
We also conduct internal audits on a horizontal basis across government, so we may look at themes and do audits on a horizontal basis. The other thing is that we do audits for the small departments and agencies not big enough to have their own proper audit function. The Office of the Comptroller General will do internal audits in those areas.
If you go back a few years, we established something called departmental audit committees. I'm not sure if this committee has ever heard about those. It's worth spending a few moments on because they are different than audit committees in the private sector. They're external, but they are advisory in nature. Your audit committee in the private sector would approve the financial statements of the organization. The audit committees in government — the large departments have one — would be responsible for advising the deputy minister on everything from financial management, risk management. They would discuss the financial statements of the government, but they don't actually approve them. It is an advisory role, and that's a key difference.
We are responsible for staffing those audit committees. If there is any turnover — people stepping down and what have you — we would propose new members, and those members are approved by Treasury Board before they are put in place.
Lastly, the Acquired Services and Assets Sector. This is policies around real property, contracting, management of materiel, investment planning, so it is a fairly busy area there as well. There are lots of folks in departments working on those functions as well, so this is the policy centre. You're looking at about 45 FTEs there, and $5.5 million is the rough budget. That's the sector view, and I'm happy to go into details as needed based on any questions you may have.
I don't think I'm capable of appearing at this committee without showing you this last slide, so I thought you'd recognize it.
The Chair: It's ingrained.
Mr. Matthews: Yes, I'm glad. The OCG does have a role in part of this so I thought I might touch on the financial reports that the OCG plays a part in. This will get back to your question, Mr. Chair, about how my current role relates to my old role, and my old colleagues are with you for the second hour.
The estimates and the appropriations are very much the planning figures, as we've often said. That's the up-to amounts. The OCG is more involved in the actuals. What you will see the OCG playing on are the Public Accounts of Canada, which has three volumes. I brought them with me here. The three volumes typically get tabled in or around late September, early October, depending on the parliamentary calendar.
The first volume is the government's financial statements. That's a regular set of financial statements just like you would see anywhere else, including the audit opinion from the Office of the Auditor General that would indicate whether the financial statements are presented fairly or not. That's Volume I, and it has a lot of details about the assets, liabilities, revenues and expenses.
Volume II is the companion piece to the estimates. It's important for Parliament to know that appropriations were approved for up-to amounts. How much did departments actually spend, because they don't have to spend everything. Volume II of the Public Accounts of Canada is a source where you can see what each department was authorized to spend, the up-to amount, and how much they actually spent.
Volume III of the Public Accounts of Canada is the one that gets the most attention. It's a series of information that you would not see anywhere else but in government. It's things like ministers' office budgets, travel expenses, a lot of detail about revolving funds or certain distinct entities, bad debts written off, settlements against the Crown. It's a real mishmash of things that have been requested over the years. They don't fit into financial statements proper, but from a public disclosure perspective it's deemed of enough interest to be produced. That's Volume III. That's the big part of our role in financial reporting, but I will highlight the other ones for you. You would be familiar, Mr. Chair, with the Reports on Plans and Priorities. Attached to that, departments produce a forecast of their spending. We help with the guidance on what that looks like. Departments do the work; we just do the guidance.
The same would go for the Departmental Performance Reports. At the end of the year, each department must produce its own financial statements. So the public accounts are whole-of-government, but each department produces its own balance sheets and statements of revenues and expenses. We would be responsible for the guidance in that area and answering any questions they might have in preparing those.
The other bits we play on are on the far right-hand side of this slide. For the quarterly financial reports, senators may recall the idea first came up at this committee, which was Senator Segal's private member's bill way back when, which the government picked up. That's a quarterly report done by each department against their appropriations, what have they spent against their appropriations each quarter, along with a narrative explaining why it is, what it is. We would issue departments guidance on that.
The last bit would be the monthly Fiscal Monitor, the second item on that list. It is a Department of Finance publication that is done monthly, which is whole of government. It shows you how the government revenues and spending are lining up. We would play a small role in reviewing those numbers just to make sure they are in line with what we are expecting. We would question departments on any significant variances to help the Department of Finance prepare that document.
That's what I thought I would start you with, Mr. Chair, and I'm happy to go into as much detail as you like on any of those pieces or anything else that might be top of mind.
The Chair: Thank you. It sounds like you have a significant role in providing guidance and perhaps in trying to see that each department is reporting in a manner where everybody can read it.
Mr. Matthews: We have a minimum level of requirements. That is one thing, and we're always looking to improve internal controls. One of the most interesting developments we've had in the public sector financial area in the last few years is the policy on internal control. We know in government that controls aren't perfect. We have many departments, big and small, and controls are something we're always striving to improve. Under the policy on internal control, departments have to publish their assessment of the internal control environment every year. We know it's not perfect. They will say we know we have weaknesses in these areas. Here's the work we did to basically arrive at that assessment.
What is interesting for me on those statements are the improvements you see. It's one thing to acknowledge there are weaknesses. It's important to know how the department went about doing its assessment. Then you look at whether those control weaknesses are significant and if they are improving from year to year. The general environment is one of improvement. The Auditor General has done reports over the past few years on internal controls, but it's an interesting policy requirement where we've seen significant improvements over the years.
The Chair: Before I go to my list, you have indicated that the total budget is about $30 million for your role as comptroller and the number of people you have employed, but I don't see $30 million under Treasury Board Secretariat as a separate item.
Mr. Matthews: Just bear with me for a moment —
The Chair: I'm at page II-323.
Mr. Matthews: Right, so if I could flip you to page II-324.
There is an item, and that's how we split the expenditures by strategic outcome. You'll see a line there called "Financial Management" about halfway down the page. That's the Office of the Comptroller General, more or less. It's about $30.8 million sitting in there. When I said $30 million, it was a rough figure, but that's where we sit.
The Chair: Okay, $30.8 million in 2012-13, $32.6 million in 2013-14. That's helpful.
Senator L. Smith: It looks like you have a fascinating job. You have technicals all over the place with other departments.
I have a couple of questions. What do you see as your biggest challenge at this particular time from your new experience? Please don't tell me, "It is to try to understand my job."
Mr. Matthews: No, I wasn't.
Senator L. Smith: You have been pretty good at explaining it, but what do you see as the biggest challenge?
Mr. Matthews: I might give you two, if I may. The first one is not unique to the Comptroller General of Canada or the finance function. If you look at the public service, you have a lot of people who are close to the retirement age or are eligible to retire. If you look at the chief financial officer community and chief audit executive community, you see a fair number of them are either eligible to retire or soon will be. When I am talking to deputy ministers, one of their questions is, "Where is my next chief financial officer coming from?" It is an important question. They ask the same one about chief audit executives. As this committee would well appreciate, the rules on government financial management are not the same as in the private sector. These things, like appropriations and all the additional reporting, are over and above. Yes, we do regular financial statements like the private sector, but we have a whole slew of other requirements.
So you can't pull in a chief financial officer off the street; you have to build them. Is the next group ready? We have some programs in place to identify high-potential people and make sure they get the appropriate training to get them ready and the appropriate experience. That would be one.
The second one I have already touched on. It is not the fact that we have so many financial systems run by different departments that is necessarily the issue, but the business processes and controls are all different. If you are looking at improving controls, or even if you are a junior finance officer and you switch departments, you have to learn a whole new set of business processes.
I think this project of trying to standardize, to the extent we can, the financial management systems and get consistent data and processes at a detailed level would be the secondary challenge.
Senator L. Smith: You led me into my second question. When I saw that consolidation of systems, it brought me back. I spent nine years of my career with Labatt running a flour milling business, and the biggest challenge we had at the time was that in the different plants and the different facilities the systems didn't talk to each other; we had different software and boxes. I know it is much different now with microcomputers, but is it an issue that the compatibility and the difference of systems create a problem in terms of trying to streamline the operation?
That leads me back to my first question: To put it into perspective for our group, how many financial officers and chief audit officers would there be in the government? It sounds like there is a vast pool. When you look at the numbers and then talk about system consolidation, there is a linkage because they have to run the systems, and each of them has to have a broad knowledge of the different systems within the different departments.
Mr. Matthews: There are a couple of points there. That is a tough question to answer. In terms of numbers, in the finance community itself, there are about 5,000 people government-wide who are financial officers or executives. On the internal audit side, we are about 550 people, so 550 auditors.
Senator L. Smith: You would have 5,000 financial officers, like CFO types?
Mr. Matthews: No. We would have one CFO in each department, one chief financial officer, but then they would have analysts and people processing transactions.
Senator L. Smith: But is it the CFOs you are talking about for your succession planning?
Mr. Matthews: It's the CFOs I'm talking about, yes.
Senator L. Smith: And how many CFOs, approximately?
Mr. Matthews: There's roughly one per department, so that puts us at a hundred and change. The CFO of a smaller department is a very different level than the CFO of National Defence.
Senator L. Smith: That is understood.
Mr. Matthews: Of the major departments, there are probably 30 big departments that are assistant deputy minister level-type CFOs.
Senator L. Smith: You are talking 150 people?
Mr. Matthews: Yes, chief financial officers.
Senator L. Smith: Wow.
Mr. Matthews: Now, the ones for the smaller organizations can be easier to find because you have more people at that level. It might be a junior executive, but the ones at the more senior departments, they are the ones that are tougher to find, and you have to grow them yourself.
Senator L. Smith: Your chief audit officers?
Mr. Matthews: For the chief audit executives, I will turn to Mr. Pagé.
Hugo Pagé, Acting Assistant Comptroller General, Internal Audit Sector, Treasury Board of Canada Secretariat — Office of the Comptroller General of Canada: There are 37 chief audit executives in large departments.
Senator L. Smith: And in smaller departments, how many would there be?
Mr. Pagé: We provide the services to small departments, but there are some that have their own audit functions; roughly six departments have kept their audit functions.
Senator L. Smith: You are saying 45?
Mr. Pagé: Yes.
Senator L. Smith: So you are talking about 200 people?
Mr. Pagé: On the finance side, among a community of 5,000, not all have the potential to be the chief financial officer.
Senator L. Smith: To streamline the systems, you mentioned a number of $6.6 million.
Mr. Matthews: That is the project we have going —
Senator L. Smith: And 30 people would be put on that project, is that what we are talking about?
Mr. Matthews: That is looking at the project in terms of what the requirements are or what's the best way to do this. If we ever actually got to the point of saying let's implement one financial statement across the board —
Senator L. Smith: That was my question because —
Mr. Matthews: That has a lot bigger price tag than —
Senator L. Smith: Any idea, if you had to guess, what that would be?
Mr. Matthews: I wouldn't be comfortable guessing.
Senator L. Smith: So the $30 million is basically an internal study to do a needs analysis; is that correct?
Mr. Matthews: A needs analysis, working with the departments where they are making changes, because there are ongoing upgrades to make sure those changes line up with where we're headed. The government has indicated that its preference is to move to a system called SAP, so that's where we're headed. It is being done on an ongoing basis.
Senator L. Smith: If you had to visualize the timetable to do something like that between the initial study to define your needs and the execution, are we talking about five or ten years?
Mr. Matthews: It could be either one. This has been going on for a while. This idea has been around for at least five or six years.
The pace will depend on two things: One, what is the budget? If we are making departments fund it themselves, that would put us on a slower time track. Also, how quickly can they adopt those changes? You can't just unplug a financial system.
Aspects of the financial system are working very well right now. No one has blown their vote, exceeded their spending; cheques go out the door. It is a gradual approach. As departments make changes, we want to make sure those changes line up with where we are headed.
You mentioned the connectivity issue between systems. That is better than it used to be. It is improving. This committee, I believe, Mr. Chair, has had Shared Services Canada in here from time to time.
The Chair: Yes.
Mr. Matthews: We get very good data at a high level to produce our financial statements, but when we are undertaking something like Shared Services Canada, so when that was first discussed, to find out what each department spends on email, servers, data systems, we don't have that level of data at a common level. It is a real challenge.
If you could ever get to a lower number of systems, we would have more common data and we could do better analysis on those ideas and bring them forward.
Right now, if I wanted to know, going back to see how much each department spent on those things, I would have to pick up the phone or write an email and say, "Mr. CFO, can you please look into this and let me know?" He can't press a button on his system and get a number. That's where we would like to get to in terms of common data.
[Translation]
Senator Bellemare: I have another question concerning the relationships among various people. The Receiver General publishes the public accounts, is that correct?
Mr. Matthews: Yes.
Senator Bellemare: You are the Comptroller General, and there is also the Auditor General. In Quebec, generally, public accounts are signed by the Auditor General. Can you explain the links between those three mandates, those three people, and their relationships on a daily basis? You probably have a lot of contact with the Auditor General; this will allow us to better understand how public accounts are presented.
Mr. Matthews: Thank you for your question. It is true that the Receiver General prepares the public accounts and is responsible for their publication, the preparation of documents, and things like that. At the same time, the Office of the Comptroller General prepares all of the accounting policies on which the regulations are based, and so on. To prepare the financial statements, there are a lot of memoranda and complex accounting challenges.
[English]
It's the job of the Office of the Comptroller General to make the policy interpretations to properly prepare those financial statements.
The Receiver General has all the systems. They would produce the drafts of the financial statements based on those inputs, but if we hit a very complex accounting issue — departments do the day-to-day stuff very well, but you hit things like pension accounting, environmental liabilities, estimates around lawsuits, any of those other types of liabilities, and it is the Office of the Comptroller General that will actually make the accounting determination on those things. The day-to-day stuff departments do very well. We work hand in hand with the Receiver General to actually finalize those financial statements.
At the end of the day, four people, if I recall correctly, sign our financial statements, but I should check this. You would have the Deputy Minister of Finance because they have a role in this; the Receiver General, who obviously prepares it; the Comptroller General would be number three; and the Secretary of the Treasury Board Secretariat is the fourth, and that's because OCG is part of the Treasury Board Secretariat.
The last piece is the Auditor General. In most organizations now what I would call normal practice is you ask the Auditor General for an independent opinion on the financial statements. If they are offering an independent opinion, they can't prepare them. It is management that prepares them, and then we present them to the Auditor General to actually audit them, and they say yes or no and ask for a few adjustments. That is the norm.
There are some countries where the Auditor General actually does prepare the financial statements, but that is kind of passé, I would say. If you are in countries like the Philippines, I know their Auditor General prepares their financial statements; but in North America, England, Australia, private or public sector, you have management responsible for the financial statements; they prepare them. They attest to their accuracy, and then the auditor says yes or no.
During the course of an audit, the auditors always find something and they come to management and say, "We found this; do you agree?" If we agree, we adjust the financial statements.
[Translation]
Senator Bellemare: I have another question on the accounting involved in pensions and the pension plans of employees and parliamentarians. Who is responsible for the accounting around assets and funds, when there are any?
Mr. Matthews: The accounting is the responsibility of the Office of the Comptroller General, because of the large liabilities involved.
[English]
It's a big number in our financial statements. That being said, there is another part of Treasury Board Secretariat, pensions and benefits, that actually does the day-to-day work. But when it comes to actually preparing the financial statements, we would work with our pensions and benefits group. Also, pensions are so complex that we involve actuaries to help us estimate that liability.
Just to add another layer of complexity, when the auditors audit the pension liabilities, they bring in their own actuaries. So it gets quite a review because it is a very large number on our financial statements.
[Translation]
Senator Bellemare: The Chief Actuary participates, but he is not the one who does the accounting?
Mr. Matthews: He provides us with some necessary information in order to determine what the liabilities are, but we are the ones who do the accounting.
Senator Bellemare: Does the Chief Actuary work with the Auditor General, or with Treasury Board?
[English]
Mr. Matthews: The OSFI, the Office of the Chief Actuary, is an independent group, but the Auditor General will bring in their own actuary as part of that audit.
[Translation]
Senator Bellemare: I have one last question. In the table showing your expenses, there is a total of $2,260 million under the heading "Public Service Insurance." Could you explain this a little? It is a large amount, in relation to the $7 billion in budgetary expenditures. That is Vote 20, "Public Service Insurance" for 2014-15.
[English]
Mr. Matthews: Treasury Board of Canada Secretariat is the employer of the Government of Canada, so that is the public service health insurance.
Senator Bellemare: That is together?
Mr. Matthews: Yes.
Senator Bellemare: Okay.
The Chair: Next is a new member of the committee, Senator Wells from Newfoundland. Welcome.
Senator Wells: Thank you very much, chair, and thank you, Mr. Matthews, for your presentation so far. I have a follow-up to Senator Smith's line of questioning and thought on the time frame for integration. I understand there is no fixed time frame but the need for it to be done eventually has been recognized.
Mr. Matthews: Right.
Senator Wells: It all fits into all the various systems, and I note in the estimates that 133 organizations are represented in the 2014-15 estimates with no time frame, but essentially it feeds into one system called the budget.
When new organizations are brought online, are they directed by your office or another office to use SAP?
Mr. Matthews: If we had a new organization, we would not want them standing up. That is a great example of something we could actually do to keep us from making the situation more complex. We would sit down and say, "Here is your choice of systems." If it is a smaller organization, we would probably encourage them to work with another department to share it.
We have lots of examples. The Canadian Food Inspection Agency and Agriculture Canada now have the same system; Health Canada is partnering with Aboriginal Affairs and Northern Development, so they now share the same system. If we had a new organization, we wouldn't say, "Use this one," but we would say, "Here is the software you should be using and here are some options around who we think you should be speaking with about partnering up," just to make it more efficient.
Senator Wells: Should your office be able to say, "Here is the one you should use" if there is a question of integration in the future?
Mr. Matthews: We have so many choices now I think it is nice to give departments an option. At the end of the day, deputy ministers are the accounting officer. I am more comfortable saying, "Look, here are some good choices for you."
The question you have asked is one that many people have said, if you are more aggressive in directing, you could make this problem go away a lot sooner; but given our current environment, I am comfortable presenting options. Could we force it? Yes, we could, but given the options we have, I think both approaches are workable.
I don't want to alarm you with these comments. The government does have a clean audit opinion on its financial statements; things work quite well, but this is just in terms of challenges we face.
Senator Wells: With any integration of systems, would it be run parallel for a year or two years? Would there be a switchover? How does that work in the real sense?
Mr. Matthews: That would depend on what the approach is. If we were operating going to a brand new system, clean slate, here is the new system for everybody, you would in all likelihood see a parallel run. That would be a discussion I would have to have with our chief information officer about just how that would work.
If we were saying departments and saying — and I'm making up this example — "Health Canada, we now want you to go onto Public Works' system," that is an existing system that is already running, and the requirement for a parallel run would be much lessened because you are taking something that is already working.
Senator Wells: One final question, which should be a yes or no: You mentioned that the Office of the Auditor General is separate from your office and that relationship.
You mentioned that your acquired services and assets includes investment planning, management of projects, procurement and real property. Is there any overlap or duplication with Canada Lands, or does that fall under your purview as well?
Mr. Matthews: No, we very much have policy there. The policies would set out the transaction limit for each department in terms of what dollar value of land or real estate they can buy or sell. Canada Lands actually is one of the organizations that execute that. To give you a policy example, if you can bear with me for two seconds, if departments are in the business of trying to sell land, their limit is lower in terms of what they can sell. If they are selling it to Canada Lands, they have a higher limit because we know what they can do with it.
Senator Wells: It's internal.
Mr. Matthews: But we are not in the business of buying and selling property.
The Chair: As a follow-up, we know that Foreign Affairs has been selling a number of properties around the world. Does that fit within this procedure you have just described to Senator Wells?
Mr. Matthews: The way that would work is that the value of what they were selling would dictate whether they could do it on their own or they would have to come in and get Treasury Board — the cabinet committee, not the secretariat — permission to sell it.
In the case of Foreign Affairs, those big transactions they were contemplating were over and above their regular limit, so they would have to come in as a matter of course to get Treasury Board approval to execute those transactions.
The Chair: Thank you. That is helpful.
[Translation]
Senator Chaput: Mr. Matthews, you talked about the main challenges and you listed two. In your new position, is your role mainly to guide the employees around you, to present them with options and advise them, and afterwards, others are in charge of the execution?
Mr. Matthews: Well, both really, because I am responsible for a few programs, including the professional development one.
[English]
Basically, we had programs to bring in and train CA students. We had a separate program to bring in and train certified management accountants and CGAs.
Just as an aside, the accounting profession in Canada is now merging whereby chartered accountants are now CPAs. Those programs have to be tweaked to respect the new professional development requirements. My office's job is to establish that program and make sure it respects the professional development rules.
As a secondary duty, I would often meet with people to give them career advice. That's a two-way thing. I'd like to find out what their intentions are as well as make an assessment of where I think they would fit best. If I receive a call from a deputy minister or even someone lower down, say a director of finance, asking if I'm aware of any good analysts looking for a change, my staff can help them make that match. I think we have both.
It's my job to ensure that on an ongoing basis we have the right number of people ready to step into those CFO roles. Careers change and people don't come into the government now and stay forever. We have people coming in and going out. It's about the best way to get them the experience they need and to match up the skill sets with the openings.
The interesting part for me when I've spoken to deputy ministers about chief financial officers and the next one is that it's not the accounting and finance skills they're missing but the communication, strategic planning and other softer things that are not necessarily hard finance functions. What's the best way to get our people those skills? Some of them have rotated out and taken on other non-financial roles to build up that capacity; but that's an ongoing challenge.
[Translation]
Senator Chaput: You gave the example of a policy that must be reviewed after five years, the income transfer policy. How many policies must you follow, review or amend, if need be?
Mr. Matthews: Almost 20 policies, but it is difficult to say because it has been a few years since the decision was made to review all of the policies.
[English]
I can give you a little history. We had a situation where we had policies, directives, guidelines, and letters of instructions sent out by previous comptroller generals going back 20 years. A new deputy minister wondering how to find out about the rules would find that they were everywhere. So, we went through a process to consolidate the policies. Basically, the number of Treasury Board policies was consolidated — the ones I have responsibility for, give or take 20. A policy is supposed to be very high level and it's supposed to tell a deputy minister what they're responsible for. We have some accounting policies, transfer payments and contracting. There are about 20.
Beneath the policies are the detailed requirements. Every five years, Treasury Board policies have to be reviewed. That also means the supporting structure underneath has to be kept current as well. We say it's 20, yes, but it's more detailed than that.
The interesting bit I should share with you, though, is that Treasury Board approves Treasury Board policies. That means if a department can't meet a Treasury Board policy, say in individual circumstances they think it doesn't fit, they can make a case to Treasury Board to be exempted because it's a Treasury Board policy. That means they have to come into Treasury Board to actually get that exemption. When you're reviewing policies, a really good source is to actually look at whether there have been any requests for exemptions and if they have merit. That might be a good clue as to what might need to change by way of policy.
By way of example, the most common exemption is when we have a new policy rolling out, such as the policy on internal control a few years back when a few departments weren't ready to implement it. They asked for a one-year exemption to give them more time to implement. It's very common.
[Translation]
Senator Chaput: You also mentioned that you have another role, community development. Could you explain what that consists of?
Mr. Matthews: That is the term we use to explain the professional development of all of the financial officers and internal auditors.
[English]
When we talk about the community, we mean the people who are actually in departments doing internal audits in real property or procurement or financial management. Whether you call it "professional development" or "community development," that's the role.
Senator Chaput: That's what it means. Thank you.
The Chair: Your community is all government departments.
Mr. Matthews: The various finance functions and internal audit functions within those departments, yes, but not Crowns. We draw the line at the core public service.
[Translation]
Senator Rivard: We know that the supervision of acquisitions and assets was added in 2010. In your transparency on page 4, last paragraph, you state that this includes the planning of investments, project management, supply, real property, material management and common services. I would like to know when you intervene. If for example, a department decides to acquire a building, do you provide advice before so that it can justify the relevancy, the cost and the way in which this will be done? Or do you, after the acquisition, see to it that everything goes as you would hope?
Mr. Matthews: Our role is more to develop policies, and not to stop certain types of transactions.
[English]
It varies by area; and you rhymed off a long list of areas. Investment plans for each department have to come to Treasury Board to get approved. My group would establish the policies around what an investment plan has to include. They would review it, and there would be a back and forth.
Around project management is a very interesting policy. We have a requirement whereby departments have to assess their ability to manage projects and they get a rating with us involved. Then, every time they do a project that has a higher risk rating than they are rated at, they have to come to Treasury Board for approval. That's another type of intervention.
In the world of contracting, Public Works has the legal authority to basically acquire all goods. They can delegate that to departments, but legally speaking, Public Works is the legal authority for acquiring goods. Departments have the authority to acquire services; and there are dollar limits. Again, if they are below the dollar threshold, they're okay. If they want to go above it, they have to come to Treasury Board to get approval.
Just to give you, by nature, a traditional competitive project, most departments can contract for up to $400,000. Public Works would be for $10 million. If a department wants to buy goods for more than $400,000, they have to work with Public Works or come to Treasury Board to explain why they aren't doing that. For services in all departments, it is $400,000, while PWGSC is traditionally for $10 million; but that varies. Do we look at invoices when they come in to see if a department really needs those goods? No, that's more of a policy function.
The last one you mentioned was real property. Again, we would establish transaction limits, and if departments want to go above that, they would have to come to Treasury Board for approval. The actual business of real property — buying, selling and negotiating leases — is under Public Works.
[Translation]
Senator Rivard: I have one last question, as that was my preamble. I would like to know what role you played or did not play in the acquisition of the former Nortel Company building, the cost of which exploded. It cost twice as much as anticipated, and the work has gone past deadlines by about two years. Do you have enough knowledge of the file to explain where there were shortcomings?
I am sure that everyone did their work with goodwill, but on the face of it, this seems to be a mess.
Mr. Matthews: For my part, I am not aware of the file but I can perhaps explain the political process.
[English]
In that case, you would have National Defence who wanted to undertake a real property transaction; they wanted to buy something. That building would have been outside of their limits in all likelihood, so they would have worked with Public Works and come in for Treasury Board approval on that transaction, with their estimate of costs.
That would capture that type of transaction, so there would be interaction with Treasury Board. That should have been captured in an investment plan, and it's a complex project so you would have seen regular reporting on the project itself.
I apologize that I'm not up to speed on how the project is going. That's probably a better question for Public Works and National Defence, but it would have been captured by the policy requirements in place now.
[Translation]
Senator Rivard: In other words, you did not have to provide an opinion before the acquisition took place. You were put before the fait accompli, and when the project is complete, your role will be to determine why there were cost overruns, and why the move also took longer than anticipated.
[English]
Mr. Matthews: I wasn't in this role at the time, but given the size of the transaction, that would have come to Treasury Board for approval; my office would have had a chance to advise on the transaction and say, "Yes, we agree," or, "No, we don't." That's the way the policy works now, but I can't speak to the past.
The Chair: Just as a supplement, what factors would you consider in saying, "Yes, we agree," or "No, we don't"? It costs too much or you're prepared to pay too much for it?
Mr. Matthews: We would rarely say it costs too much unless we had evidence that there was something else on the market that was cheaper.
We would look at the organization's capacity to manage a project, and we might make recommendations on, "You know what, you don't have the governance right; this is complex; you've never undertaken something like this; we're worried about the governance." We might challenge the costing and say, "We don't think you factored in X, Y and Z. This is a complex project; you should be building in more contingency than you have." Or, conversely, we could say, "We think you've inflated the numbers." There would be that back and forth as well, so it's really about the cost, the capacity of the organization, based on history, and then our view of the complexity of the project.
The Chair: You don't perform that role, which the Auditor General would, of value for money and say, "I don't think you should invest in that at all"?
Mr. Matthews: The Auditor General's role is typically after the fact, a hindsight thing. The big part of the role would be, as I explained, up front. However, my colleagues in internal audit, in the past have sometimes done those types of value-for-money audits at the request of their deputy. More often we focus on internal controls, but there have been some engagements where we've looked at almost a consulting-type study.
Mr. Pagé: When departments develop their risk-based audit plan, this is where they assess the risk to the organization. Occasionally when there are large transactions like that, an audit could be included in the audit plan, and the audit function could look at those transactions.
Some of the audits that have been done have looked at transactions as they were progressing. This is the case often with implementation of large systems, for instance. Internal auditors would go in at the beginning of the project, look at the project management office and make sure all the right functions are in place. As the project progresses, follow-up audits could be done to make sure that if there is a need for corrective action it is taken, and provide assurance to the deputy head on how the project is progressing and making sure all the right controls have been put in place.
Senator Gerstein: Thank you very much. Mr. Matthews, I listened to you and read with great interest the roles and responsibility that you outlined on page 3 for the Comptroller General.
I would be most interested to know, in your new capacity as the Comptroller General of Canada, whether your perspective or view has changed on the somewhat unusual and if not somewhat complicated concept of reprofiling of funds and the ability to transfer between operating and capital funds and from one year to the next. Now that you're the Comptroller General, perhaps there is another view you have of this rather interesting concept.
Senator L. Smith: The tank in his front yard.
Mr. Matthews: I'm afraid I might disappoint you, senator. In terms of the rules around reprofiling and coming back to Parliament for approval, that is very much the responsibility of my old colleagues at my old job. Do I have a role on the rules around reprofiling? I would say no. Do I have a different opinion now that I'm here? No.
For me, it has always been that Parliament has to approve transfers between votes. Call it what you will, and when you have money that is moving during the year, whether it's from capital to operating or vice versa, Parliament has to approve that transfer. If you have money that a department doesn't spend and wants to spend in a different year, it comes back to Parliament for approval. Yes, we call it a reprofile, but basically Parliament has to reapprove that money. That, to me, is a fundamental control in the system, and I wouldn't want to see anything change there.
Senator Gerstein: My second question is to Mr. Pagé in his capacity as assistant comptroller of the audit sector. I'd be interested to know what you have in your department with regard to the whole area of whistle-blowing. Are there written policies? What experience have you had as an auditor with regard to whistle-blowing?
Mr. Pagé: The whistle-blowing policy doesn't fall under our portfolio. It's a different portfolio, although some CEs are responsible for that function in some departments. I would say, from my perspective, most CEs would focus on internal audits, and it's rare to have those two functions combined.
Senator Gerstein: So where would whistle-blowing end up? If there was an issue, who would you call? Who sets the policy?
Mr. Matthews: I think it depends on the nature of the issue. You'll see whistle-blowing oftentimes in the values and ethics areas of certain departments.
There's certainly a link in that if you have whistle-blowing formally or informally, someone's saying, "I've got a concern here; what should I do?" That could lead to an internal audit, depending on whether it got the deputy's attention and they had enough concern. Internal audit is a tool a deputy could use to further investigate. That's not formal whistle-blowing. But you'll often have discussions about, "I've got concerns in a certain area." Internal audit is a tool you can use to investigate that.
Depending on what you see, you may find the RCMP is another option if you think you have fraudulent activity. But the actual whistle-blowing, in most departments, to my knowledge — and I'm speculating here — is part of the ethics and values function. If it's significant enough, the employee can always contact the — I'm forgetting the exact name of the organization, but the disclosures organization — to launch an investigation into inappropriate behaviour. That's the other tool.
From my part, what I would have is if chief financial officers are being asked or pressured to do something they feel is inappropriate, they do have a dotted-line relationship to my department, and that's exactly why that is. If they're getting pressured, for whatever reason, in their department, they have an open line to raise a red flag with me. That link is important as well.
Senator Gerstein: Would you view the concept as being what I might call user-friendly? Do they have to jump through hoops to be able to convey to you that they have a concern about a particular issue?
Mr. Matthews: No, it's quite mature. You will often see that it may point to areas where our policies aren't clear if they're in a good discussion about what their role is. If they're not supported by a clear policy, that doesn't help anybody. Where the policy is clear and you can say, "No, this is the policy interpretation; you're on solid ground," sometimes that's the end of the discussion. It's not one that is used often, because our CFOs are quite capable.
Senator Gerstein: Thank you.
Senator L. Smith: On page 3, Mr. Matthews, leading the Government of Canada's Financial Management Transformation Program, which is trying to streamline your systems, if I understand correctly — it goes back to last year when we had Shared Services in, and I know we talked more than about just consolidating emails. I remember Senator Chaput was very interested in asking questions.
What is your relationship with IT? Most financial people have to have some knowledge of IT. Are there IT managers who report to CFOs? How does that work in terms of relationship with IT? Whom do they report to? Do you have influence on them?
The other question I have is whether this Shared Services concept is like a CGI? They give you shared services with big boxes in terms of all the storage of your data? What role is Shared Services playing with you folks? Do they provide all the computing capabilities and all your servers? I'm trying to understand that relationship. They came in and talked huge numbers to us, if you will remember.
The Chair: And personnel.
Senator L. Smith: Yes, and personnel. How does that all fit in with your job in terms of interrelationships?
Mr. Matthews: To answer your question about the link to the IT folks, the Chief Information Officer for the Government of Canada is Corinne Charette, who is part of Treasury Board Secretariat, and she's her own distinct office in TBS just like I am. Obviously, we have to be very lined up. She or the CIO would have views on what system we should go with, how quickly we roll it out and what technology. I would view our role as more around the business process, the data requirements, those types of things, but it's very much joint. In some departments, the CIO function in the department actually reports to the CFO — though not all. There is no firm guidance out there.
Senator L. Smith: So would it be the bigger departments where the chief information officer —
Mr. Matthews: The ones I know are the bigger ones, but not all the bigger ones. In some of them, the CIO might report directly to the deputy minister, depending on the department, so there's no hard and fast rule on that front. The role for Shared Services Canada is that they would be managing the backbone for our financial system — all the data servers, the email systems, all those things. They would be managing the technology once it's ready to be implemented. They would run it.
Senator L. Smith: Are they now in a big building with all of their servers, or has that started? How far along the way are you? That's part of your streamlining system, correct? The software is going to be your equipment, right?
Mr. Matthews: The software has to happen first. We're under way. Shared Services Canada is consolidating data centres and servers. That work is ongoing. I can't tell you how far along they are, but that's going to be a multi-year effort as well, moving the data centres and servers. This all, you're quite right, has to line up when it's time, but we have to figure out what our plan is first in terms of consolidating the number of systems, which departments can share with each other, those types of things.
Senator L. Smith: Where does your relationship with Shared Services interface? Where do you interface with these people, if at all?
Mr. Matthews: When we nail down our plan about whether we're actually consolidating systems, if we're moving one department onto another department's system, Shared Services Canada would have a role to play there. Once we actually have our plans nailed down or close to nailed down, we would be engaging them. They're typically more engaged through the CIO than through us.
The Chair: Thank you, Senator Smith.
Mr. Pagé, I have just one follow-up question with you, in relation to the audit committee, and I think the audit committees were created by the Public Service Modernization Act a number of years ago. Regarding the audit committee of a larger department, you indicated earlier that you had a role to play in seeing who is on that and making sure they have individuals on that internal audit committee presumably capable of doing the job you want done. Who are they? Are they outside of the civil service? Are they all public servants? Who is on this internal audit committee?
Mr. Pagé: The internal audit committees are composed of a majority of external members. That means that more than 50 per cent are external. These members are academics, people who have worked in the private sector, former CEOs. Some of them are former public servants.
We have 135 audit committee members across the federal public service, mostly in large departments, as we explained earlier. Roughly 55 per cent of those are external to the public service; 45 per cent are external to the public service but former public servants. It could be public servants at the federal level as well as municipal and provincial levels.
The way they are selected is a combination. Deputy heads are involved in the process because these committee members are there to provide advice to them. Certain departments will have specific needs depending on the mandate of the organization. These members are appointed to Treasury Board, so it's a Treasury Board decision ultimately. Once they're appointed, normally they're appointed for terms ranging from two to four years and they are appointed for only two terms maximum.
The Chair: Are they independent contractors of the department or of Treasury Board?
Mr. Pagé: They are paid by the department but they are appointed by Treasury Board.
The Chair: Appointed by Treasury Board but paid by the department, and they presumably have some dotted line to the deputy of that department?
Mr. Pagé: They're not formally part of the governing structure. They are there to advise the deputy head. In terms of where they sit in the organization, either the audit committee will involve the deputy head as the participating member or the committee will report back to the deputy head after they've had meetings and discussions to provide the advice.
The Chair: Does anything flow from that question, honourable senators? We might think about bringing an internal audit committee group in to talk to us one of these days and see what role they have to play and what they think about their roles.
Mr. Matthews, Mr. Pagé, thank you very much. Good luck to you as you continue to improve the public service for us. I'm sure we'll have the opportunity to see you again along the way.
Mr. Matthews: Thank you again.
[Translation]
The Chair: Honourable senators, for the second part of our meeting tonight we are going to resume our study of the Main Estimates for the fiscal year ending March 31, 2015.
[English]
We are pleased to welcome back officials from the Expenditure Management Sector of the Treasury Board of Canada Secretariat, who will provide us with an overview of the supply process. It's in part a review of what we've seen in the past, but it's important for us to maintain that overview and understand, when we do get supplementary estimates or some other document that's in that fiscal circle, just how it fits in. That's why we've asked our colleagues to come back, Sally Thornton and Marcia Santiago.
We expect we will be seeing you when supplementary estimates come along as well, but this is intended as just an overview session, so I give the floor to Ms. Thornton.
[Translation]
Sally Thornton, Deputy Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Good evening, Mr. Chair. We thank you for the opportunity to be here tonight to give you a brief overview of the supply process.
As you can see, I am accompanied by my colleague Marcia Santiago. She is executive director of the Expenditure Management Sector in the Treasury Board Secretariat.
You should have in your hands copies of the presentation that we have provided, in English and French. I would like to take you through those documents, focusing on the parliamentary reporting and the supply cycle. The essential elements are the votes, the periods of the supply cycle, the information available, and the role of the committee.
We could then deal with the Main Estimates and the supplementary estimates, explain the differences between the two, and look at the proposed calendar.
If you wish, we could also provide you with more information on Treasury Board votes and Governor General's warrants. We would like to start on page 3.
[English]
It's the same circle that Bill had provided. While we talk, if you would like to circulate these, they are estimates and supplementary estimates from 1890. They are often of interest.
Senator Chaput: From 1890?
Ms. Santiago: They are from 1890 and 1877.
The Chair: Anybody around that worked on those?
Ms. Thornton: What is interesting, you will note in the front, in Bill Matthews' former position, it would have been his predecessor's signature on the front, after the approval from Parliament. It gives you a sense of the tradition that we have been bearing with.
If I could you bring your attention to slide 3, which is the parliamentary cycle, I would like to start at the bottom with September to December because that is what you are facing over the next couple of months, and it is a busy cycle in terms of supply. Mr. Matthews spoke already to the public accounts, which will be coming out, but you will also be seeing Supplementary Estimates (B), and we anticipate tabling that probably the week of November 3. You will be seeing Departmental Performance Reports. Again, we anticipate tabling the week of November 3. Those are the individual reports from each organization.
The Chair: Are they performance reports?
Ms. Thornton: They are, and they will be performance reports from the last fiscal year. I will walk through the cycle to situate them, although Mr. Matthews took my first 20 minutes.
We also expect the Economic and Fiscal Update, which typically comes in November or October of each year, and then you will have the approval of the supplementary estimates bill, which is usually just before Christmas, in December.
If I could just walk you through the cycle, starting on the right-hand side, April 1, you will already have seen the Main Estimates and Supplementary Estimates (A). We are now going further into the cycle in (B), and then in the first quarter of next year, January to March, you will see Supplementary Estimates (C), and we anticipate the three supplementary estimates, budget presentation, typically in that time. Main Estimates have to be tabled before and no later than March 1; and you'll see the departmental Reports on Plans and Priorities.
I wanted to remind you that for every planning document there is a document that talks about the results. Typically, from the expenditure management group, we talk about Main Estimates, and that is the plan for spending. We are seeking parliamentary approval for a plan. There is always a follow-up in terms of the actuals, in this case, public accounts. Departments have their Reports on Plans and Priorities, and that is their plan for the upcoming fiscal year. You will see that in the spring.
Then, in the fall, you see the Departmental Performance Report, which is their actuals. They tell you what they are planning to do, and then about 18 months later, you see the report on what they have actually done.
Just remember that for every single document on plans in government, there is one on actuals.
If I could turn to page 4, this is a quick refresher. Absolutely no money can be spent by the federal government without having parliamentary approval pursuant to the Financial Administration Act.
Authority is provided typically in one of two ways. One is through specific legislation, and by that I am talking about statutory authority. That is legislation such as Employment Insurance or Canada Health Transfer; there is a piece of legislation that Parliament has at some point seen and said they will authorize payments provided they follow the methodology there or people.
The other, which is what we come forward to every year, is the appropriated or the voted amounts. Roughly, that is about one third of government expenditures; so two thirds are statutory, one third are in terms of voted appropriations. We provide information on a broader range, but what we are actually seeking approval for in Main Estimates is about one third of government expenditures.
Supply is the whole process through which we get the authority.
A supply bill, and the appropriation act it becomes, consists of a preamble and schedules. You would have seen this in Supplementary Estimates (A); you will see it in Supplementary Estimates (B). When we table it, it states the total amount of funds sought and for which fiscal year. It limits the amounts and purposes for which those funds can be spent. It also has schedules that list the organizations alphabetically and their votes.
A vote basically consists of the number that identifies that vote, for example, vote 1, 5, 10; wording that describes the purposes for which that money can be spent, which is usually by type of expenditure, operating, capital, grants and contributions; and the maximum amount that can be spent.
As a reminder, in approving an appropriation act, Parliament approves an up-to amount for an organization. Departments do not have to spend that amount, but they cannot spend more than that amount. Mr. Matthews referred to blowing a vote. If an organization spends more than what has been approved by Parliament, that is what he is referring to, but they may spend less. They are not obligated to spend all that is approved, but that is the ceiling.
On slide 6, we talk a bit about votes. We often get questions about vote wording and vote numbering and why votes are numbered 1, 5, 10. It is a tradition. The numbering is entrenched in bureaucracy. It was to aid in identification. If you really want to know what the vote is for, you need to look at the text beside the vote. It will say "Vote 1, program expenditures," or "Vote 1, operating expenditures." It is that language that will help you. It is not going to be the number. We do try to be a bit consistent. If anyone is interested in why we alternate and go 1, 5, 10, I am happy to explain that at a later time.
Other types of votes include payments to Crown corporations, Treasury Board central votes — and I will touch on that because there was a question earlier — and authorities to issue loans, investments and advances.
On page 7, I am setting out the supply periods. These are prescribed by standing orders. The standing orders divide the parliamentary calendar into three supply periods: April 1 to June 23, which is when you see approval of your full Main Estimates as well as Supplementary Estimates (A); September to December, which is when we will be coming in with Supplementary Estimates (B); and January to March 26, which is when you would see Supplementary Estimates (C).
Under the standing orders, Parliament considers the supply bills on the last opposition day in each period. If the house approves the supply bill, the bill is then forwarded to the Senate and subsequently to the Governor General for Royal Assent.
Supply is a matter of confidence. It is a money bill. If it is defeated, Parliament may be dissolved for a general election.
The Chair: In the House of Commons.
Ms. Thornton: Yes.
The Chair: If it is defeated in the Senate, that doesn't trigger an election.
Ms. Thornton: No, I believe it is the House of Commons vote.
I did want to touch on some of the information that is readily available to you to help in your consideration of supply.
We talk about the preamble in the schedules to the supply bill. The information in that is a very high level. It really is the organization, the vote and the amount, with a brief description.
We actually provide a number of documents; they used to be the blue books. They are now mostly online, but we do have some hard copies. They consist of various documents. At the beginning of the fiscal year, you would have seen the Main Estimates as well as the Reports on Plans and Priorities from each department. During the fiscal year, we provide further information in a document on each of the supplementary estimates that gives you more flavour on what is in those supplementary estimates. It has a different level of detail than the Main Estimates. The amounts are smaller; they are incremental amounts, and there is more detail in those. At the end of the fiscal year, you see the Departmental Performance Reports.
I would also like to flag to your attention that we have a Treasury Board Secretariat InfoBase. It's an online tool that pulls together a number of pieces of information for you. It includes planned expenditures, Main Estimates and public accounts. We are increasingly adding to it, and we now have some information about HR FTEs by department. It is available. It's just a Google, TBS InfoBase. I think you've had presentations on that in the past. This is just a reminder in case you want to see the numbers consolidated in terms of authorities, expenditures, reports, plans and priorities, strategic outcomes, which are coming in more detail. It's a great source for a quick perspective on the organization and its historical spending, as well as its planned, in one location. You can go on that InfoBase and look at any of the particular organizations.
The Chair: What is that called?
Ms. Thornton: It's called the TBS InfoBase and Google. It is great. It has all the core data. It does not have the qualitative information that you may want, but for a quick overview of numbers it's there, and we are constantly adding to it to meet some of our commitments to parliamentarians for better information. It is a great tool.
The Chair: Is that fairly new?
Ms. Thornton: The InfoBase used to be called the Treasury Board Secretariat expenditure database. I think we brought that to you this time last year. It was largely in response to some of the commitments we made to the Government Operations and Estimates Committee to have information more readily available, more accessible and over a longer period of time so that you could look three years back and three years forward rather than a single year. We have since added some information that is not solely expenditure, so we've renamed it. So it is not new, but some of the content is new. It's just great. If you have a chance to look at it and find it useful, we also always appreciate comments.
Back to the blue books and a reminder of what's in there: The Main Estimates have three parts. Part I was the overview of the government's projected expenditures for the fiscal year. Part II is the actual departmental and agency breakdowns, including forecasts of statutory expenditures already approved by Parliament, and their spending plans for that year. Part III is the Reports on Plans and Priorities. Those are in much greater detail for each organization looking forward. Part III also includes the later Departmental Performance Reports that talk about the actuals.
Supplementary estimates have the information on incremental funds for initiatives that were not sufficiently developed to be included in Main Estimates and things that come up during the year that have gone through the Treasury Board and the necessary authorities and then come into Parliament for in-year incremental spending.
A reminder: Committees review each item or vote. Upon tabling of the estimates document they go to government operations and estimates in the house and this committee. The committees can review each item or vote, inviting people in. Committees can approve, reduce or negative a vote. I would simply flag that. That's a yes, a no or a reduction basically, but you can't add to an amount so you can't increase an amount or introduce a new transfer. Committees report back, and on the last opposition day in the supply period we have the house vote.
You may recall the Main Estimates were tabled on or before March 1. I think it was the end of February this year. Reports on Plans and Priorities typically come out in short order after that to give you more detail for your consideration. At that point, you would have voted on interim supply. What happens is that Main Estimates are tabled no later than March 1, but the fiscal year begins April 1. The government requires some funds to operate in the very short term, so we have what is called interim supply. There is a very quick vote on interim — a portion of the Main Estimates — that gets organizations until the end of June. That also gives committees a longer period of time to study the Main Estimates before they vote on full supply. That's the intent behind that timeline.
I have already talked about the supplementary estimates and what is in there. Again, Supplementary Estimates (B) we are anticipating November 3. We are anticipating Supplementary Estimates (C) probably mid-February for tabling.
I did want to touch on Treasury Board central votes on slide 13, only because they are a bit of an anomaly. Treasury Board Secretariat has a small budget, other than the central votes. Central votes are typically things with which we go to Parliament and get approval for these expenditures on behalf of the Government of Canada. The monies sit in a Treasury Board central vote and then are allocated throughout the year. As they are allocated, we either have to come back to Parliament for approval or we report back to Parliament. The purpose is to make sure that the monies are available throughout the year but also that that transaction is fully transparent.
Senator L. Smith: Can you give us an example of some of those?
Ms. Thornton: I can. One very straightforward one is the government contingencies vote. That's where we would use it for something that was urgent or unforeseen. Think, for example, of the Haiti situation. Because we have supply periods that are quite fixed, it may be that an organization needs money for those purposes before the supply period and before we can come in and get the vote. We have $750 million in that Treasury Board central vote that has already been approved by Parliament to use for things like that. We would actually disburse that, give it to the organization with the authority to expend, and we would come in at the very next supply period to inform you of how we have done that and what has been done, the amount and where it is going. It's pre-approved, with some very stringent guidance around it, and we always come back to report how those have been allocated.
Senator L. Smith: Is that how it is done for natural disasters too, or is that just through the natural disaster fund of the $100 million that, for years, we have all asked why it isn't more?
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: It is a different mechanism. The crisis pool funding, the quick release mechanism in Foreign Affairs, is funding that's held in a Foreign Affairs vote. It becomes available, again, under specially prescribed situations to a situation that the Minister of Foreign Affairs cares to respond to with that funding. It's a different situation.
Senator L. Smith: Where does the Calgary disaster of last year fit?
Ms. Santiago: That's a different thing. The crisis pool funding is for international situations, and that's why it's in Foreign Affairs. The response for things like Calgary would be under the Disaster Financial Assistance Arrangements that are administered primarily through Public Safety.
The Chair: I think the concern is that you are asking for front-end approval without our knowing where the money is going and then we don't have a say. We, as parliamentarians, are informed after the fact what you've done with it. At least we get that information.
Ms. Santiago: Actually, you are informed that we've used the government contingencies vote, Treasury Board vote 5. You actually do have a say because what happens is in the next available supply period, the department that used the authority of the contingencies vote in that moment actually has to come in and ask for their own authority. For example, if a department came to Treasury Board and said it has a situation and needs $10 million right now and can't wait for the next supplementary estimates supply and fulfills the criteria for access to the government contingencies vote, and Treasury Board agrees, the department will get the cash immediately from the government contingencies vote, but the department is also obliged to come in the next supplementary estimates to ask for parliamentary authority for that $10 million.
The Chair: Have they already spent the money by this time?
Ms. Santiago: They've already spent the money, so when the department asks Parliament for it, and Parliament approves it, what they receive in supply is used to reimburse the contingencies fund.
The Chair: It goes back and tops up the pot again, so to speak.
Ms. Santiago: In principle it could happen. I don't know if it has ever happened, but it could happen that Parliament refuses that vote, in which case it is the department's cost. They have to find another way of filling that hole, but they still have to pay back the contingencies fund.
The Chair: They have to pay it back so the contingency fund held by Treasury Board keeps getting topped up. Come the end of the year, you have it topped back up again to the full amount, and that will just lapse.
Ms. Santiago: In principle, the full $750 million will lapse to the fiscal framework. There are some situations where allocations are made too late to be reimbursed. They are exceptional, but there is still a reimbursement that is made within the fiscal framework. There has to be a separately approved funding decision to fill in that gap.
The Chair: Thank you. That is helpful. We struggled with that in the spring, trying to figure out what was happening there.
Ms. Thornton: I may have misspoken about whether Haiti was from vote 5 or from the disaster fund. It is not clear in hindsight, with Haiti, if it came from Treasury Board contingency vote 5 or one of the other crisis pools, a similar operation.
Senator L. Smith: Do you know how many crisis pools there would be? Was that your question, chair?
The Chair: That is a good question.
Ms. Santiago: Only one crisis pool is funded from the international affairs envelope held by Foreign Affairs. It used to be Foreign Affairs and CIDA, but now Foreign Affairs has primary responsibility for it. As I said, those are where the federal funding flows through an international arrangement.
Senator L. Smith: But there are no other crisis pools out there?
Ms. Santiago: There are things for responding to other kinds of crises, like the question about Calgary, but it is a different kind of mechanism. They are not called crisis pools.
The Chair: Are they not topped up or not reported to us?
Senator L. Smith: Yes, that is a good question. What are they called?
Ms. Santiago: One of them is the Disaster Financial Assistance Arrangements. It is voted separately. It has a separate set of authorities, which is different, again, from the government contingencies, which is a cash measure that is available centrally. It is managed by the Treasury Board. Departments can't just use it willy-nilly. It does have to go through a formal approval process.
The Chair: Let's talk more about this.
Senator Wells: With the disaster relief, that is really a reimbursement because the provinces would be paying the initial. There would be that time lag that would allow it to be approved in the next quarter or third.
Ms. Santiago: When you see items come through the estimates for the Disaster Financial Assistance Arrangements, we get asked: "What is this money for?" We will say it is for Manitoba floods or something, and the question is, "But didn't those happen four years ago?" Yes, but it's because, as you say, it is normally done on a reimbursement basis.
Senator Wells: There's a lag.
On whose authority is the $750-million pot dispersed? Would that be under the minister's?
Ms. Santiago: The government contingencies vote?
Senator Wells: Yes.
Ms. Santiago: The ones that we call Treasury Board central votes are voted to the Treasury Board Secretariat, but, if you read the full vote wording in the Appropriation Act, they are all prefaced with "subject to the approval of the Treasury Board." So they all require decisions of ministers.
Senator Wells: Okay; thank you.
The Chair: And we would find that wording in the Main Estimates?
Ms. Santiago: In the Main Estimates there is an annex called the proposed schedule to the appropriation bill. That is an indication of what the full vote wording will be, but the formal vote wording is actually in every single Appropriation Act that is introduced. So it is in two places.
The Chair: It is in every Appropriation Act, and we get appropriation with each supplementary as well.
Ms. Santiago: For every vote that we increase in the supplementary estimates, the full vote wording is always included in the supply bill.
The Chair: Okay. Whenever you top it up again?
Ms. Santiago: That's right.
The Chair: Anything else on these contingencies? I have some names, but I wouldn't go to the names until you've finished your presentation. However, on these contingency funds, this has been hanging around with all of us. We didn't rest all summer worrying about this.
Ms. Santiago: I'm so sorry.
Senator Wells: How long has this been $750 million?
Ms. Santiago: As long as I can remember. At least in my memory. I'd have to go back and check.
Senator Wells: So for many years.
Ms. Santiago: For many years, yes.
Senator Wells: It doesn't have an increase yearly?
Ms. Santiago: No.
Senator Wells: In your experience — I don't know how many years you've had this experience — do you foresee it going up to $1 billion, or is $750 million sufficient? Do we always expend that amount on a yearly basis?
Ms. Santiago: Like I said, the principle of the contingencies fund is that it should finish by the end of the year with the same amount of money that it started with. To the question of whether we would expect it to go higher, at this point, the only reason I would expect it to be increased is if we see a need to expand the use of that vote. Right now, there isn't anything specific that is expected. So, in the immediate, no.
Senator Wells: Of course the whole premise is that it is unexpected.
Ms. Santiago: That's right, but it is also the nature of what we expect to see in terms of Treasury Board business. The closest comparison I can think of is when the economic action plan was first released. We did create a special central vote for that because we thought that it would be inappropriate to use the contingencies vote for things of that nature and that magnitude. Every time a new expectation comes up of things that might be needed, there is a consideration of whether it is appropriate to send it to the contingencies vote or to do something else.
Senator Wells: Okay.
[Translation]
Senator Bellemare: Do these votes also include the risks connected with environmental or natural disasters or with tragedies like the one in Lac-Mégantic?
[English]
Ms. Santiago: Again, the central vote that is held by Treasury Board is a cash measure or an authority measure that ministers would agree to invoke only if there was no other way of doing it.
[Translation]
Senator Bellemare: I know that there are programs.
[English]
Ms. Santiago: Yes.
[Translation]
Senator Bellemare: When some departments appear before us, they tell us, as they do their risk assessments, that risks are greater today than they were in the past. The risks take all kinds of forms and are unforeseeable. Which programs provide funding for new risks like those?
[English]
Ms. Santiago: In most cases, departments have enough notice of the specific cash requirement that they can actually go through cabinet and Treasury Board and the supply process before they actually need the cash in hand. For example, for Lac-Mégantic, we actually did do most of that through the normal vote structure, not through the contingencies fund.
[Translation]
Senator Chaput: Suppose an epidemic breaks out in another country and, all of a sudden, it spreads to Canada. It is an unforeseen disaster. Where do those funds come from?
[English]
Ms. Santiago: It would depend on which organization is responding and with what instruments. For example, if there was something that the Public Health Agency of Canada had to do immediately, the first question would be, "Do you have the authority and the money?" A lot of the time, it really depends on when in the fiscal year this happens. If an urgent requirement is identified early in the fiscal year and the organization has to respond right away, sometimes we are fortunate that it happens at a point in the year where there is enough uncommitted cash so that we don't have to go to the contingencies fund.
Senator Chaput: But if they did not have the money, where would they get the money from?
Ms. Santiago: The first thing you would have to do is establish a source. Normally, that is a request to the Minister of Finance and the Prime Minister for an off-cycle funding decision. Then, if they don't have enough cash on hand to respond to it, we would look at things like the contingencies vote and transfers from other organizations.
Senator Chaput: So it wouldn't come from the crisis pool necessarily?
Ms. Santiago: Not necessarily.
Senator Chaput: It could but not necessarily?
Ms. Santiago: Exactly.
Senator L. Smith: So where does the Ukraine money come from? We have made a commitment to Ukraine. The Prime Minister of Ukraine talked to our Parliament. We are going to give them some dough, and they are going to pay it back, if I understand correctly, over five years. Where does that money come from?
Ms. Santiago: It would depend on the nature of what that financial commitment is. It could be in the form of a contribution, in which case it would be handled with an organization like Foreign Affairs. If it is an arrangement for a direct partnership, it might be a funding arrangement through National Defence. I couldn't speak to the details of that at this point, but it really depends on what we get in Treasury Board in terms of requests from departments. Our advice to departments about what instruments to use and how to go about it would depend on the requests that come in.
The Chair: Thank you.
Ms. Thornton, we took you off your script.
Ms. Thornton: And a very interesting dialogue. There are many tools available, and I just wanted to make sure you were comfortable with what the Treasury Board Secretariat has within its purview.
The other thing I wanted to touch on is Governor General's Special Warrants. These are used when Parliament is dissolved for the purposes of a general election only. So if there are requirements for supply and Parliament has been dissolved for the purposes of a general election, there is a process available by which we can actually get approval for expenditures. Basically, it requires that the minister responsible attests that these monies are required for their business. It can't be new business. It can't be something that has not been through the system before.
The President of the Treasury Board has to attest that there are no other sources of funds, which means that we have to deplete any of our sources of funds, whether they are allotments; we have to release them. If a central vote would do it, we have to use that money.
If, at the end of the day, there is still a financial requirement, we seek the Governor General's authority for those sums. It depends on when in the financial year or the fiscal year that would happen, but there is a tool available in that instance.
Senator L. Smith: Is there an amount of money in there that the Governor General has for special requests?
Ms. Thornton: No. The amount is basically, one, the minister has attested that that is the amount he or she needs; the Treasury Board president has said there is no other source; and then that's the amount that goes. What happens is that is reported shortly after Parliament resumes. It is also deducted. If it happens that this comes in at the beginning of a fiscal year and we're using this, then you would see that taken out of the Main Estimates. So nobody gets to be paid twice for the same thing. That's basically the check and balance there.
The Chair: That's interesting. Ms. Thornton, we could spend a day talking about those warrants. They're a very interesting mechanism, but it's a fail-safe type of situation. Do you have anything further? I have two names on my list on other points that you made, presumably earlier.
Ms. Thornton: We'd be pleased to take questions.
[Translation]
Senator Bellemare: First of all, let me thank you. It is always interesting to see the cycle. It is complex. We have done it two or three times and, each time, we learn more and other questions come up. This is a useful review after the summer break.
I have two questions. The first one is historical in nature and is about translation and semantics. It took me some time to get the hang of the English word "vote." It is so clear in French: we talk about "crédits." But then we say "vote": "we are going to vote on a vote."
What is the historical reason for calling it a "vote" in English? Does it have some significance I am not aware of?
Ms. Thornton: It really is to do with history. At the start of Confederation, there were votes for each department.
[English]
So we had a vote in English, and it was the envelope of funding for that organization. In the house, they would go — I don't remember the old names, but for every department and every envelope, they would have a single vote.
Today, for example, you would have 135 organizations. Say each organization has at least two votes. You would actually be standing up and doing the yeas or nays 270 times. Then what happened over a period of time is they agreed to approach it by exception. So, basically, it's only if there is a move to reduce or negative that you deal with it. Otherwise, it's a single vote on all.
But the term in English is still a "vote," because it was Agriculture Canada, vote 1, yea or nay, for every single piece. But really, think of them as an envelope of funds.
[Translation]
That is why we talk about "votes" and not "credits."
Senator Bellemare: That brings me to my second question, which is somewhat related.
On page 7 of your presentation, you say that the House approves the supply bill. Then it is forwarded to the Senate and then to the Governor General. In the last point, you say that, since supply is a matter of confidence, if the bill is defeated, Parliament is dissolved. My colleagues have pointed out the distinction between the Senate and the House of Commons.
Does that mean that, if the Senate does not pass the supply bill, but the House of Commons has passed it, it passes anyway?
The Chair: No. The bill will be sent back to the Commons for discussion, but that is not a matter of confidence.
Senator Bellemare: It is not a matter of confidence. That is the point you were making. So the government does not fall. I understand. The same goes for the budget implementation bill.
The Chair: Yes.
Senator Bellemare: The same principle applies.
The Chair: Right now, we do not vote on the budget itself in the Senate; we vote on the budget implementation bill. The House of Commons votes on the budget as well.
Senator Bellemare: However, if the bill does not pass in the House of Commons, Parliament is automatically dissolved.
The Chair: That is correct, because the House of Commons is a chamber of confidence.
Senator Bellemare: And we are not!
Senator Rivard: Ms. Thornton, just now you did a good thing by providing us with old budgets, including one from 137 years ago: June 30, 1877. If we look at that document, we immediately find the answer to a question we ask every year and to which we never find the answer in current budgets. I am referring to the amount of the country's consolidated debt. Can you find it for me in the budget? I have never seen it, because the budget deals with expenditures and revenue. We see the amount for servicing the debt, but we do not see Canada's consolidated debt. However, in 1877, the first item, "Public Debt Including Sinking Funds," came to $6.81 billion. Today, my impression is that our debt is somewhere between $500 billion and $600 billion, but we cannot see it anywhere. I even called the Department of Finance and no one was able to tell me what it is, including the crown corporations that make up the country's debt. In 1877, we were further ahead than we are today.
Ms. Thornton: We were also smaller. I think the consolidated debt in the budget itself is over $600 billion right now.
Senator Rivard: You will agree that we do not see the amount of the consolidated debt in the budget. We see the amount for servicing the debt, the interest that we pay, but I have never seen the amount for what we call the consolidated debt in any material.
Ms. Thornton: In the Main Estimates or in the Department of Finance estimates?
Senator Rivard: There should be a reference in the Main Estimates. I have never seen a statement of the government's assets and liabilities. What is the consolidated debt for the most recent fiscal year?
Ms. Thornton: It would be better to ask the Department of Finance, but I think it is more than $620 billion.
Senator Rivard: That is a good estimate. You will not find the country's consolidated debt for the last fiscal year recorded anywhere. So long live 1877!
Thank you very much.
The Chair: Thank you, senator. I see no other senators wanting to ask questions. I would therefore like to thank Ms. Thornton and Ms. Santiago.
[English]
No doubt we will see you when we have Supplementary Estimates (B). This has been very helpful.
Colleagues, we will meet again next Tuesday morning at our normal time, and we will be dealing with bridge authorities.
(The committee adjourned.)