THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, June 6, 2018
The Standing Senate Committee on National Finance met this day at 3:30 p.m., to continue its consideration of the Main Estimates for the fiscal year ending March 31, 2019.
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on National Finance.
[English]
My name is Percy Mockler, Senator from New Brunswick and chair of the committee. I welcome those in the room and viewers across Canada who may be watching on television on online. As a reminder to those watching, the committee hearings are open to the public and also available online at sencanada.ca.
I ask the senators to introduce themselves.
[Translation]
Senator Jaffer: Mobina Jaffer from British Columbia.
Senator Forest: Éric Forest from the Gulf region of Quebec. I am happy to be back.
Some Hon. Senators: Bravo!
Senator Moncion: Lucie Moncion from Ontario.
[English]
Senator Deacon: Marty Deacon, Ontario.
Senator Andreychuk: Senator Andreychuk, Saskatchewan.
Senator Neufeld: Senator Richard Neufeld, British Columbia.
Senator Marshall: Senator Marshall, Newfoundland and Labrador.
Senator Eaton: Senator Nicky Eaton, Ontario.
The Chair: Thank you, senators.
[Translation]
I would like to recognize the clerk of the committee, Gaëtane Lemay, and our two analysts, Alex Smith and Shaowei Pu, who team up to support the work of this committee.
[English]
Today we continue our consideration of the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2019 for the budget of Canada.
We have invited the Parliamentary Budget Officer to appear mainly to comment on his May 1 report on the Main Estimates.
[Translation]
Mr. Fréchette, on behalf of the committee, I want to thank you for making yourself available at all times to appear before the committee and for presenting the figures in the budget.
[English]
Mr. Fréchette, of the Parliamentary Budget Office, is also accompanied by Mostafa Askari, Deputy Parliamentary Budget Officer; and Jason Jacques, Senior Director, Costing and Budgetary Analysis.
Mr. Fréchette, you have opening remarks. Immediately we will follow them with questions from the senators.
[Translation]
Mr. Fréchette, please go ahead.
Jean-Denis Fréchette, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Chair, Deputy Chair and honourable senators, thank you for this invitation. The entire team from the Office of the Parliamentary Budget Officer is pleased to attend this committee. It is one of the four committees specifically mentioned in the Parliament of Canada Act with respect to the Parliamentary Budget Officer’s mandate. So it is a great pleasure to appear before your committee.
That said, as per the PBO’s statutory mandate to provide independent and non-partisan analysis to help parliamentarians fulfill their constitutional role of holding the government to account, we published on May 1, 2018, a report on the 2018-19 Main Estimates, which supports the second appropriation bill for the current fiscal year.
The 2018-19 Main Estimates follow the 2018-19 Interim Estimates, tabled in Parliament on February 12, 2018, to ensure sufficient spending authorities are available for the start of the fiscal year.
The Government’s Expenditure Plan and Main Estimates for 2018-19 outline $276 billion in total budgetary spending authorities. This represents an increase of approximately $18.1 billion compared to the total budgetary authorities identified in the 2017-18 Main Estimates. Parliament is responsible for voting on $112.9 billion of these budgetary authorities.
Budgetary statutory authorities are projected to be $163.1 billion in 2018-19, which is an increase of $7.2 billion compared to the total estimated statutory spending in 2017-18. Elderly Benefits and the Canada Health Transfer (CHT) are two of the largest contributors to this increase, and are set to rise by $2.6 billion and $1.4 billion respectively.
[English]
The federal organizations with the largest increase in their total budgetary authorities from the Main Estimates 2017-18 are the Treasury Board of Canada Secretariat, with $7.1 billion; Finance, with $3.8 billion; Employment and Social Development Canada, with $3.5 billion; and National Defence, $1.7 billion; and finally, Immigration, Refugees and Citizenship Canada with $709 million.
In November, 2016, the PBO found the government’s objective to enhance Parliament’s role in upfront financial security to be laudable. More recently, in our May 1 report, we said the changes “reflect an effort on the part of the government to improve alignment between the budget and the Estimates.” However, full reform at the executive level must be accompanied by an alignment with parliamentary procedures, which means providing clear, specific and transparent information to members of Parliament in the object of the vote itself, which we haven’t seen and therefore reported. As of May 9, 2018, Treasury Board allocated $221 million spread across 13 unique measures of the total $7 billion mentioned in Budget 2018. As of yesterday, TBA has updated its allocation which has now reached $1.2 billion.
[Translation]
Thank you, Mr. Chair. We will be pleased to answer your questions.
[English]
The Chair: Thank you, Mr. Fréchette.
Senator Marshall: Thank you very much for being here today.
I had some questions on both forty but I didn’t want to start with that because there was another issue I wanted to raise with you. It is more of a general nature in that quite often it is difficult to access or find certain types of financial information from the government. I know we have spoken before about financial information relating to the Department of National Defence. You were looking for some and I was looking for some. I didn’t get anything from them. The infrastructure program, I have been having trouble getting information about that. We had representatives from Aboriginal Affairs here talking about the creation of the two new departments. I was trying to link the budget for one department last year to the two new departments this year to find out if the funding has increased or decreased. I was having trouble with that and I was having difficulty linking up those numbers with performance indicators. I had looked at performance indicators with some of the departments that had testified before us. Some of the indicators are either questionable, don’t exist, are dated or they might provide performance indicators on just part of the program.
Does the PBO do any linking up work in that regard? I know you were having trouble with financial information. You referenced in your recent report you were unable to identify any plans, spending and results tied to the budget initiatives.
What kind of work have you done and what kind of work can you do in that regard? I think it is a major issue.
Mr. Fréchette: Thank you for the question. Let me start with the three usual suspects you mentioned in terms of having difficulties to access information.
Let me start with Infrastructure Canada. My colleague Jason here worked hard and I personally met with the deputy minister a couple of times. We developed an approach with Infrastructure Canada. We have a template we circulate to the 12 departments under Infrastructure Canada. It seems our relationship and the access to information has improved a lot. Let us put that aside with Infrastructure Canada and say we now have an excellent relationship. Let us hope it will say that way.
With INAC, or Aboriginal Affairs, as you know the Auditor General made a good report on the problem of having access to that kind of information. We still have an access problem with the information regarding INAC.
As for National Defence, we are working on a protocol with them. It is still problematic in terms of the information we can get.
Jason, do you want to talk about the performance indicators?
Jason Jacques, Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer: With respect to the performance indicators, that is something our office worked on a fair bit over the past 10 years. In particular, feedback we consistently received from parliamentarians is there seems to be a broad interest in ensuring there is more of an explicit linkage between the dollars upon which they are asking for approval and, effectively, the results the government intends to achieve.
We published papers, off the top of my head, in 2011, 2012, 2013 and 2014 specifically on those topics. Some of the observations you made, senator, we also made within our reports in terms of the occasional difficulty in linking the dollars to specific results, primarily stemming from the fact the performance indicators in many situations were missing, they would change over time or they were just poor performance indicators. It was difficult to assess what parliamentarians were getting for the money they were giving back to the government to spend on their behalf.
It is something we have done in the past. If there is interest from parliamentarians, it is something we could circle back and look at doing again.
Senator Marshall: Is that something that could be done? I am going back to the Parliamentary Budget Officer now.
Mr. Fréchette, do we need to make a formal request if you are able to fill that void?
Mr. Fréchette: You don’t have to make it official. This is an official request -- your word and your request at this meeting. We collaborate a lot with this committee on many topics but we took note of this one and we can follow up in our reports.
Senator Marshall: I would appreciate that very much.
You are familiar with vote 40. Since Minister Brison was in charge of Treasury Board, I think I attended all of the briefings on estimates reform. The solution I see in this year’s budget or Main Estimates isn’t what I was expecting to see. I was really disappointed in the way the new budget initiatives are presented in the Main Estimates.
I know you also had some comments on that. He did send a letter to the chair of our committee that said:
“I assure you that the legal authority for the budget implementation vote as set out in the vote wording in the forthcoming Appropriation Act specifically limits funding allocations to measures and amounts presented in the detailed table of the budget.”
Have you seen the wording in the Appropriations Act?
Mr. Fréchette: In the Appropriations Act, yes, but not in the allocation of the vote. That is the problem. That is what I meant when I mentioned the alignment with parliamentary procedures.
When I appeared before a committee in the other place I said that yes, the minister says the table is aligned with vote 40, which is $7 billion. There is no guarantee, no link in the wording of that table in annex 2.11 of the budget and in the annex of the Main Estimates. That is exactly the table you are voting on. There is no alignment.
I said something in French that Senator Forest will understand.
[Translation]
We don’t want to know; we want to see it.
[English]
Parliamentarians do not want to know about it. They want to see it when they vote on it. You want to see the table. That was a recommendation of my office. We said if the President of Treasury Board can include the table in the wording of the vote and in the procedure of the House of Commons so that the vote on $7 billion is there, we will say it was a huge improvement. It would be an improvement.
Senator Marshall: I was expecting to see all of the budget initiatives integrated into each of the individual departments’ budgets. Is that what you were anticipating? I wonder now if I misinterpreted what the minister said during his briefing. What did you expect to see?
Mostafa Askari, Deputy Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: That was sort of the ideal plan, that all the budget measures would be included in the Main Estimates. I think that was the aspiration of the Treasury Board Secretariat at the time.
This is what we found as another way dealing with that issue. The problem is, as Mr. Fréchette said, the language they have used in the vote as it stands does not guarantee that allocation.
The President of the Treasury Board has said publicly they will change the language of that vote before they present it for voting in the House of Commons. We will have to see that language before we know.
Senator Marshall: You haven’t seen it yet?
Mr. Askari: We haven’t seen officially what will be in the final Appropriations Bill.
Senator Marshall: Thank you.
[Translation]
Senator Moncion: My question pertains to exactly what Senator Marshall just mentioned: estimates reform. Can you outline what is entailed in the reform of the estimates process?
Mr. Fréchette: Essentially, the plan set out in the mandate letter from the President of the Treasury Board is to promote greater consistency between the federal budget and the Main Estimates. The model that is often used is the Australian model, where both documents are tabled at the same time and parliamentarians can decide exactly which amount they will vote on because it is in the federal budget and the Main Estimates.
As Senator Marshall said, they are perfectly aligned. There have been consultations, as you know. This year marks the government’s first attempt to align them. As to estimates reform, there was a table at the end of the budget in February that showed all the planned measures in the budget, at least those measures that come under the $7 billion. Amounts were indicated for each initiative in the budget.
When the Main Estimates were tabled, that table was in provided as an annex. While there are certain differences, the information is similar. No votes are attached to it, however, such as vote 40, which is in the annex to the Main Estimates only.
The table that sets out the $7 billion for the various initiatives is not provided there, hence the expression “we don’t want to know; we want to see it”. It was not there. So we prepared a report which indicated that the alignment had not followed the parliamentary vote procedure.
This is not the first time. I would point out that your committee — in 1986, a long time ago, following a report, which was followed by a report in 2002 by the auditor general of the day, Ms. Fraser — raised the problem that this kind of vote creates. A blind vote causes problems because vote 40 refers to any grants that could be used for different legislative programs, without any details.
[English]
In English, we say, “any grants that could be used for.”
[Translation]
Clearly, there is this discrepancy. I would go back to what this committee said in 1986: that Treasury Board should not have the freedom to ask for a total amount, which is a slush fund, and have it approved without necessarily knowing how that amount will be used.
Senator Moncion: I understand.
I would like to go back to the issue of performance indicators. Are they associated with the $7.1 billion? You are saying that, right now, that amount is not necessarily distributed or designated. Are there performance indicators for those amounts at present?
Mr. Fréchette: They are not there. Treasury Board has to validate these amounts. If $500 million is to be allocated to a department, Treasury Board has to do its job, just as Mr. Jacques does in my office, which is to authorize an expenditure or not. The department did not do that. It said it would provide an update every month. One month ago, $221 million of the $7 billion had been spent, validated and allotted. Now there are $1.2 billion left. So there is still a lot left.
Senator Moncion: A huge amount.
Mr. Fréchette: There are no indicators for the rest.
Senator Moncion: Thank you.
Senator Forest: Thank you for being here. It is always very interesting. I called upon Mr. Jacques during the budget process. We are trying to improve the budget process, but upstream. Performance indicators are downstream, but upstream, as far as I know, no budget target is set. If for example a smaller organization or a family business decides to grant an increase of 5 per cent or 2.1 per cent, but the budget exercise is not done… It is like awarding a contract with a budget with 15 per cent discretion.
In the end, there is nothing to ensure sound management. First, there are no objectives or budget target. Second, it is not allotted as an overall amount, but rather bit by bit. It is quite ironic for Treasury Board to give itself $7.1 billion, an increase of 108.2 per cent, while its mandate it to ensure the sound and transparent management of public funds. It is that department’s responsibility. This is understandable, because it is the total of various amounts for projects that will be allotted over time. It has full flexibility, but in terms of the budget exercise, it is not the best planned, because no budget target is set in advance. All the votes are in the same basket. Then you have to sort through the basket to take out one amount at a time.
[English]
Mr. Jacques: Broadly speaking, I think the observations you made we have also made in the past, in various PBO reports. It is interesting, when you look at the government’s overall budget, there is a fiscal anchor in terms of the debt to GDP target at a very high macro level. At the micro level, it is harder overall to track those types of performance indicators.
Going back in the research we have conducted, it raises questions with respect to the utility of those performance indicators vis-à-vis the government’s ability to manage. One of the key findings we identified in 2013 and 2014 was there didn’t seem to be any meaningful relationship between a department’s ability to achieve their performance indicators and a change in that program budget. There seemed to be no correlation whatsoever.
Again, more broadly speaking, the finding we made is echoed across the OECD. Across modern Western countries, most public services have challenges when it comes to identifying good performance indicators and using them as management tools across the system. That is based upon surveys of other Western jurisdictions.
If there was a best or a good practice, I presume the Government of Canada would have either developed or adopted it by now.
[Translation]
Senator Forest: Suppose inflation is at 1.8 — the 2.5 increase for 2018-19. Do you think that will in turn facilitate the evaluation of the performance criteria? Because upstream there would be a target for the budget exercise. Currently, we are faced with a fait accompli. It could be an increase of 15 per cent or 108 per cent in the case of the Treasury Board. It is a fait accompli. As the Parliamentary Budget Officer, you no doubt have a target in order to calibrate the effort of the budget exercise to the targeted objectives.
Mr. Fréchette: You make reference to two points in your argument. The target is not set for each department. For example, if there is a 2 per cent increase, it is for the government as a whole. Each manager in the departments will receive different amounts for different reasons. Health Canada always receives greater amounts, but that means that it is offset by other departments that perhaps have different targets.
You are quite right, and it is indicated in the report. Regardless of the government’s overall target, departments have their own targets, so that the balance in the budget is maintained. In each department, it is very difficult if their allocations have not been previously made by the Treasury Board. Moreover, I believe that officials have appeared before committees in the other place to state that they do not know the amounts, because they cannot talk about them. Perhaps they know them internally, but they cannot disclose them publicly because table 2.11 has not yet been validated. A number of departments know that they could spend $100 million in total, for example, but they cannot guarantee that they are going to spend $100 million. It comes back to your argument, that it is difficult to have performance indicators for that amount.
[English]
Senator Andreychuk: To follow on what my colleagues have said, Mr. Jacques, I think you were before us previously and said this whole exercise of accountability comes back to parliamentarians understanding the taxpayers’ money, how it is spent and if it was efficient so we can make some analysis back to say it was worthwhile doing this or that program.
I keep hearing this — and I thought it was just because I was newer and I didn’t have my accounting degree — but I thought I was your average parliamentarian. You come here and you should be able to have some guidelines, maybe not the perfect ones but some to be able to figure out who the money is spent. Is that the best use of the money?
Interestingly, Mr. Fréchette, you said perhaps they know inside the department. Having been inside some departments, yes, I would think there is a really good possibility people know approximately how much they are getting and what targets they have.
There are performance measurements and appraisals that go on internally. That’s not what I’m after. I’m after: How can I sit here and judge whether that’s money well spent?
How can the Office of the PBO help us in formulating some of these guidelines, whether they’re upstream or downstream? Is there a model we can start working on collectively and rely on you to be able to substantiate and help us dig out these figures?
We’ve been doing it over years and years. Is that the best we can do, or is there something more with some increased capacity you can start framing what the government says it wants to do in this new model and have it happen?
Mr. Askari: If I understand correctly, you are trying to see is a value-for-money analysis, essentially.
Senator Andreychuk: And targets and the program. I understand, being inside some of these departments, you can target and get dollars. Then there are all these factors that come in as to why you couldn’t spend it and why the target, perhaps, was not the correct one.
It shouldn’t be a culture of defence inside the departments; it should be an openness. The Auditor General shouldn’t be risk-averse. We should be accountable to the public in a more credible way.
Mr. Askari: You’re absolutely correct. The purpose of those performance indicators is to give you that kind of information — whether those programs are achieving 90, 80 or 60 per cent of their objectives.
Unfortunately, as Mr. Jacques said, it is a challenge for all OECD countries to find indicators that are easy to quantify, to follow and figure out whether these programs function. For a lot of these programs, achievements are not very easy to quantify. That’s the problem; it is a major issue.
The performance budgeting is a major issue across OECD countries. The OECD itself has done a lot of work in this area. It is a challenge.
I know some of the people at the Treasury Board are working on finding a better way of putting those indicators together — something people can actually look at and understand. But it is a major challenge.
Senator Andreychuk: You’ve been helpful through the years in helping us through your reports. What more can you do to help us, do you think, in the way you analyze and bring forward to identify the issues for us?
You have a new mandate and a little more money.
Mr. Askari: One thing, senator, which we normally don’t do that the Auditor General does is the value-for-money analysis. This is something the AG does often — look at the programs and figure out whether they actually achieve the objectives and the money spent is actually worth spending.
We haven’t done that. It’s sort of the area we have separated. We don’t do that kind of analysis; the AG does that.
in terms of looking at the indicators, as Mr. Jacques said earlier, we have done some work in terms of how those indicators are being used in the departments as a management tool and whether the allocation of budget has any relationship with those indicators. If a program is doing well and achieving its target, and you see the cut in that program, then you ask why would it be the case, since because the program is actually doing well.
Those kinds of things we can look at. We did it in 2013-14. We can update that again based on the information we have right now.
Senator Andreychuk: It’s also the consistency. We’ve looked at targets. The targets are going to be set, in some cases, in the coming years — not now — and we had a different program. There is no continuity and consistency, which is what I think we need. We have to be able to look back at how much money, how it was spent and what is going to be done in the future.
Somehow, we have to break this idea they don’t have to achieve the targets, because they’re like estimates. I need to know as much when I get into preventive services why it wasn’t achievable. Is it some community dynamic? Is it some other prerequisite? If you understand spending money isn’t just about doling it out. There are other factors. We just need the explanations, and we need the consistency.
That’s what I found rather frustrating coming on this committee.
Mr. Askari: The consistency is an issue, because as was mentioned earlier, those indicators keep changing from year to year. It’s very hard to follow up and see how exactly they monitor those achievements.
That’s an ongoing issue. They are trying to improve the indicators, but that means the indicators are changing. It becomes a problem.
Senator Andreychuk: Since coming on this committee — just a little comment — people have approached me about why the government is spending money on this and that, which I didn’t have information about until I got to the Finance Committee. The pressing question, when I go home this weekend, will be the unspent money in DND and the recycling of boots and rucksacks. That will be as implausible to them as it is to me.
It’s those kinds of things that parliamentarians —
Mr. Jacques, you said to us we should ask the questions we want so we get the answers, and we should oblige the government to provide it. You’ve given me a bit of frustration today saying it’s kind of impossible with OECD. I’m back to square one. I want the Office of the PBO to think about your role in helping us go through this maze. That reinforces what Senator Marshall said.
Senator Neufeld: Thank you, gentlemen, for being here. I understand you need to have targets and review those targets. I wonder if sometimes we don’t get so fixated on targets and how we’re going to do it that we spend more time and money on doing that than what we do to make it happen. On that part, I think there can be an overspend.
I’ll relate that to you, although on a much smaller scale, obviously, from a province. I was a minister of what we call the “dirt ministries,” the ones that provide the money so everybody else can spend it. You develop an idea, and from there, you brought it to a committee of MLAs of the government side. You would then have to take that procedure to Treasury Board and explain it all. You’d have to take that procedure to cabinet and explain it all. Then you put it in a piece of legislation, and you explain it to the whole legislature. Then you sit there until they’re done questioning you about how you’re going to spend the money, why you’re going to spend it and how you’re going to actually increase the revenue to the government.
To me, that was a good check and balance. I don’t ever remember, in the time I was there, having a target that was public. I can tell you, internally, if I didn’t meet my targets, Treasury Board took my money away, because that’s how it worked. Treasury Board was the guard. If you didn’t meet and do what you were going to do, Treasury Board would just remove it from you, and you didn’t have that funding anymore.
Do you think sometimes we spend too much time and effort in trying to pinpoint and over-manage exactly how each department is going to spend every dollar so that every MP or every senator can go home and say, “Hey, I know what happened here”?
Do you think that’s a bit of a problem?
Mr. Fréchette: Nobody wants to answer from the Treasury Board.
I’ll come back to your question as to what you describe at the provincial level is also the example we can use in other provinces. The process seems to be better aligned with targets. When you said you had to answer all the questions, implicitly you have something in mind, and you answer the question about your own target.
Is the process losing sight of the objective? I think targets are important. It’s certainly something that helps to better focus during your year. If you lose sight over the course of the year of what you have to do in terms of your mandate -- that’s why ministers have mandate letters from the beginning to meet all these points.
Senator Neufeld: I had one too.
Mr. Fréchette: There you go. Those were your objectives on a yearly basis. It’s important for some programs. We mentioned lapses in National Defence or other departments, infrastructure is a very good example of where it is important to have targets. With this committee, we mentioned it before, otherwise at one point, six months before the end of the fiscal year, if you have spent 20 per cent of your budget, what will happen? It means someone somewhere did not deliver either contract or negotiation with provinces and municipalities.
I think it is important. How to follow these targets? As Mostafa said, it’s a challenge for many other countries under the OECD.
Senator Marshall: Yesterday, the Minister of Finance was at the National Finance Committee. There was some discussion about the Trans Mountain Pipeline and the agreement with Kinder Morgan. Are you doing any work on that? If that goes ahead, it looks like it’s going to have a big impact on the fiscal framework. Is that something you would be doing any work on? What kind of involvement have you had, or are you staying away from that?
Mr. Askari: We don’t have any project right now doing any work on that. My understanding is if that’s the purchase by the government, it’s an asset, an investment. It’s not going to affect the budget in that sense. It’s going to affect the amount of money they have to borrow but it doesn’t affect the budget.
Senator Marshall: If they buy the existing pipeline, and they pay more for it than it’s worth, it could be a write down. It could have a significant impact on the government’s bottom line. You’re not doing anything with that right now?
Mr. Askari: We are not. We are not working on that.
Senator Marshall: My next question is on the statutory items, the value of the statutory items now seems to be creeping up. I think now it’s almost at 60 per cent of the budget.
Do you have any concerns with regard to that?
Mr. Jacques: I think, going back to observations we made in previous reports, there is no regular mechanism through which Parliament will review these statutory items.
The legislation is in place, money can be spent. Unless there’s proactive effort on the part of parliamentarians to convene a committee, get that committee a mandate to examine those areas of statutory spending, it ends up being a risk where spending will go on without anyone necessarily looking at it.
In comparison to the voted items where, of course, for this year there’s $112 billion which parliamentarians vote on. Witnesses are called, testimony has to be provided, and people have to stand up and be counted.
That’s an observation we made in the past. There have been several reports, over the past 20 years or so, pointing out this single issue around statutory items and the lack of a standard parliamentary mechanism to automatically review these areas of statutory spending.
A key and common recommendation was that, from a governance perspective, something should be put in place by Parliament and by the committee system, wherein items for which legislation is in place, money is being spent, even if parliamentarians aren’t asked to vote on it annually, there should be some sort of mechanism whereby parliamentarians automatically circle back and take a look at them.
Senator Marshall: I agree. The Treasury Board does disclose it on their website, the statutory items. It’s a significant amount of money. When you look at the items, there are a lot of statutory items in the list and it’s actually quite surprising, the type of items there that are statutory in nature.
My next question. There was a pilot project under way with the Department of Transport. Are you monitoring that? When officials came from the Department of Transport, I asked them about the project. I think the project has been ongoing now for two or three years. They didn’t really answer my questions.
Are you following that project? If so, do you have any comments?
Mr. Jacques: We are following the project and the progress that’s been made. One of the things we followed — and circling back to a question asked earlier with respect to what the current government committed to in terms of estimates renewal — this was an area Minister Brison highlighted in his white paper in the winter of 2016, where he would push on with a plan to potentially roll it out across other departments and agencies.
From my own interactions with parliamentarians there seems to be very strong and positive feedback with respect to the pilot-based, purpose-based appropriation pilot program. That’s a lot of Ps in there.
As well, a question we’ve asked, and I think a question other parliamentarians including yourself have asked, is if it seems to be working well, then why isn’t it being rolled out across other departments and agencies?
A constant piece of feedback from parliamentarians is it’s a heck of a lot easier to vote on a program basis where you have a clear sense of the linkage between the money and the program. Thematically what it’s supposed to do and the results as opposed to sitting down and voting on a billion dollars for Fisheries and Oceans for operating expenses which might be salaries, overtime, fuel or a new paint job for the boats. You don’t have that level of detail. As well, that’s not explicitly linked to any meaningful results that are going to be achieved. That’s something we’ve highlighted in the past as being a positive development. For us, we would ask the question, potentially, why it isn’t being rolled out to other departments and agencies at this point?
Senator Marshall: The concern I have is with the reform of the estimates process — and now we have a vote 40 — it didn’t really materialize as I thought it was going to. Now if they do something with the grants, are we going to get what we think we’re going to get? Or are we going to get something that’s not so good? Thank you for your comments.
Mr. Fréchette: Can I add two quick points here. Jason Jacques mentioned something on pilot project on purpose-based vote structure. Next week, the Transport Committee in the other place will publish its report on specifically that pilot project. It’s going to be interesting and it’s certainly something that we will look at in terms of, is it a better report and did they have better information on the grants and contributions? That specific committee, standing committee, had a mandate to review this pilot project.
I want to go back to your statutory program. There’s an interesting point right now in the other place. The speaker will have to rule on a decision on EI, because in vote 40 there was a new amount of money asked to be funded through vote 40. Nobody is sure if it’s under a statutory program because it was some kind of a temporary pilot project that was funded under a statutory program. Now they have to make some legislative changes to the EI and a question of privilege was asked in the House of Commons. We are waiting to see the ruling of the speaker to know whether the administration of the House of Commons understands what is going on with that vote.
[Translation]
Senator Moncion: Going back to the pilot project, what was the government’s objective in putting it in place?
Mr. Fréchette: Essentially, it was kind of to allow what was mentioned previously, what Senator Andreychuk mentioned. This was to assign a credit, an amount, to each of the objectives, instead of presenting an overall amount, as Jason said, for each of the programs we examine. You can see that. They line up, so you can see. It lets people examine and identify the amounts, together with the officials. The Treasury Board provides those amounts and, instead of seeing a total amount on one line, like capital, expenditures or operations, and so on, the committee sees the real amount for each of the grants and —
Senator Moncion: And the proposed projects. That leads me to talk to you about the infrastructure. How does the government explain the discrepancies between your observations and the amounts that have been spent? Especially with regard to Phase I, because it still has unspent funds.
How serious is the fact that amounts of money have not yet been spent? What factors contribute to the objectives not being reached? Are they to do with the federal government alone or are they related to the provinces and municipalities involved in the various projects? My question has three or four parts. I apologize.
Mr. Fréchette: You are thinking in critical terms, in terms of seriousness, as I understand it. As we told the committee before, there are many factors. Why are some sums of money or some infrastructure programs not delivered on time or just not delivered at all? There are many factors; it depends on federal-provincial agreements and so on.
To answer your other question, the difference between our data and the data from Infrastructure Canada is that we report the figures they give us and we compare them with the total amount of $14 billion in Phase 1, basically. What has happened is that Infrastructure Canada did not give us figures if they had not been announced — and I cannot say this any other way — announced or validated. They knew that an announcement would be made eventually. But for them, the program was not in effect. We see the figures differently and we compare them with the $14-billion denominator and with the programs that may not have been announced, but that have been approved and validated. That was the difference.
Now we have a template. We have worked with Infrastructure Canada. I should actually congratulate Jason for that fine work. They came to an understanding with the deputy minister of Infrastructure Canada and made them understand the needs. Perhaps there was a communication problem, and it was done on the committee’s behalf. You will remember that data are always provided to this committee — data from the database, not confidential data. So the committee can actually use the data in its work. The data are now harmonized and the department understands the importance of doing so. At that point, I met with the 12 deputy ministers. I stressed the importance of providing up-to-date data, not just data linked to the programs that will be announced shortly, because the effect of that is to skew the results. That was the work we did. We have received most of the data and we are now hopeful that we can prepare a report by the fall.
Senator Moncion: The fact that the money has not been spent is not critical in the sense that the money is not there, but it is critical in the sense that the money has not spent on projects that should normally be under way.
Mr. Fréchette: There is also a delay that will have an impact on the economic activity in certain regions; that is quite true. However, the issue is not just about a person, an organization or a government entity: there are many factors.
Senator Moncion: When estimates are established, we know that, year after year, if a department needs, say, $2.3 million this year, $2.3 million will already be in the budget next year, and other amounts will be added in. Am I mistaken?
Mr. Fréchette: I am not sure I fully understand your question.
Senator Moncion: When people establish their budgets and their needs for a subsequent year, if they need $2.3 billion to operate, for example, they will start the next year with the $2.3 billion, whether they spent it or not, and then they add the amounts they require to meet the needs of the current year.
Mr. Fréchette: It all depends whether they have ongoing programs, meaning the statutory programs that are funded year after year, like employment insurance and old age security. It could vary, depending on decreasing operational needs or simply because of cuts made to attain certain objectives, such as in staff or in capital investment. You do not necessarily start again on the same basis unless you have programs that are permanent over time, and are therefore legislated, and always require growth. That is mentioned in the report, actually: because of the aging population, old age security starts over with its base funding, which, from that point, grows over time. In other cases, they are votes presented in Parliament.
[English]
Senator Andreychuk: I hope this is a quick question, in light of the time.
I’ve been preoccupied with the amount of money the original — it was called Indian and Northern Affairs. How much money actually went into the administration bureaucracy and didn’t get down to the programming? I’ve been tracking that over decades. It seems there is too much bureaucracy. I don’t know if you can do it otherwise. That’s not my point.
My point now is those departments have been renewed over and over and now we have two departments. My tracking is preoccupied with whether we’ve now created two administrations, two more bureaucracies that will grow, and less money will go down to the program where it is and has been desperately needed. We need to make some assessment on whether that’s the way it should have gone. Ultimately, it was supposed to be for the changes that are necessary within the Aboriginal communities, whether it’s water, health, mental health, what have you. That’s how it was sold to split it, that it would be more appropriate and would create the results that we want. I’m concerned about the growth of two departments. Are you doing any work on that?
Mr. Askari: We are not doing any work on that right now specifically. It’s something that, in doing the estimates and expenditure work, we can look at. Those numbers should be available.
Senator Andreychuk: Thank you.
[Translation]
Senator Forest: In terms of the infrastructure program, I find it very reassuring that you have managed to make yourself heard. This is the economic centrepiece of the strategy of a government that is plunging us back into a period of budget deficits through massive investments in infrastructure. One part of the $14 billion is being invested in infrastructure projects that belong to the government or to Crown corporations, and another major part is being invested with partners. As was mentioned previously, the delays could be related to the fact that municipalities have not come up with enough projects, for example, or to the fact that the provinces have been tardy in concluding agreements. There is a significant leverage effect.
Take Rimouski as an example, which I know well. The two levels of government invested $30 million in a $41 million project. There is a leverage effect. The federal government invested $12 million but there is a leverage effect. Will we be able to have performance indicators that show the extent of the leverage effect that this huge infrastructure investment might have given to phases I and II of the infrastructure program?
Mr. Fréchette: You are not the first to ask for that.
Senator Forest: Nor is it the first time that I have asked for it.
Mr. Fréchette: You are back on the same war footing, I gather.
Senator Forest: I am a little rusty.
Mr. Fréchette: The template I mentioned earlier is used to follow the money. Our principal mandate is to find out where the money has gone. Monitoring is not really part of our mandate to calculate the leverage effect. We do it indirectly when we do an economic and financial analysis twice a year. We take note of it because it has an impact. Our last report, last spring, indicated that only two or three billion dollars were left from the $14-billion envelope. We do it indirectly. Do we do it in a microeconomic way on a regional scale? No. However, we take note of it from a macroeconomic perspective.
Senator Forest: The Trans Mountain Expansion Project involves a purchase of assets. Given the delay, could the government not pay for it in cash from the overall infrastructure envelope?
Senator Moncion: No, that will go to the bank.
Senator Forest: The government has already decided that it will go to the bank.
Mr. Fréchette: I would like to make one last comment. We will monitor the file if there is a sale. As for the purchase, we will see. When there is a sale, will there be an impact on revenue or is it just a matter of a transfer? At the moment, we do not know whether the pipeline will be sold back to the private sector. Will there be a deal? Does someone want to buy it? Will it be part of the Canada Infrastructure Bank, which eventually will be in operation? At the moment, we do not know. Will it be a project similar to the Réseau électrique métropolitain (REM) with the Caisse de dépôt et placement du Québec in Montreal? Reviewing the project at that point will be more the responsibility of the Parliamentary Budget Officer when there is a transaction, meaning the sale of assets and income in the government’s overall financial picture.
Senator Forest: Given the size of that investment, there is certainly a need for light to be shed on the way the decision is put together financially.
The Chair: With that, Mr. Fréchette, on behalf of the Standing Senate Committee on National Finance, I would like to thank you for making yourself available and for your testimony.
[English]
Senators, I remind you our next meeting will take place in Room 2, Victoria Building, tomorrow at 12:15. We will have the President of the Treasury Board, Minister Scott Brison, at that meeting.
(The committee adjourned.)