ARCHIVED - Government Response to the Fourth Report of the Standing Committee on Public Accounts: The Expenditure Management System at the Government Centre and the Expenditure Management System in Departments

This page has been archived.

A modern, effective and efficient Expenditure Management System (EMS) is fundamental to enhancing accountability to Parliament and Canadians. In each of its Budgets, the Government has underscored its commitment to developing a new approach to managing overall spending to ensure that all government programs are effective and efficient, are focused on results, provide value for taxpayers’ money and are aligned with the Government’s priorities and responsibilities. In June 2007, the key directions for the renewed EMS were established and implementation was launched.

Recommendations 1 And 2

The Treasury Board Secretariat provide the Public Accounts Committee with a detailed plan on the Expenditure Management System.

The Treasury Board Secretariat provide the Public Accounts Committee a detailed implementation plan of the new Expenditure Management System when it received Cabinet approval; and that the Secretariat provide the Committee a status report on the implementation of the new Expenditure Management System by the end of the next budget cycle, 31 March 2009.

The recommendation is accepted and the requested update and implementation plan are presented as follows.

The Government of Canada’s new Expenditure Management System (EMS) is squarely aimed at improving management excellence and fiscal credibility. To achieve this, the new EMS has been built on three key pillars:

1. Managing for Results: benchmarking and evaluating programs and demonstrating results for Canadians;
2. Up-Front Discipline: providing critical information for Cabinet decision-making by ensuring that all new proposals for government spending have clear measures of success and demonstrate how they relate to or complement existing programs; and
3. Ongoing Assessment: reviewing all direct program spending on an ongoing basis to ensure that all programs are efficient, effective and aligned with the priorities of Canadians and with federal responsibilities.

(1) Managing For Results

The Government’s new EMS includes a focus on achieving results for Canadians in a transparent and accountable manner. In this regard, a key pillar of the Government’s new EMS is results-based management (RBM) – an integrated approach to planning, implementation, performance measurement and reporting that is based on the use of financial and non-financial information and that aims to achieve outcomes that are aligned with priorities, while managing resources effectively.

The implementation and improvement of RBM practices are being supported by implementation of the Treasury Board Management, Resources and Results Structure (MRRS) Policy, by implementation of the new Expenditure Management Information System (EMIS), by renewal of the Treasury Board Evaluation Policy and by strengthening reporting to Parliament.

Implementing the Management, Resources and Results Policy (MRRS Policy)

Accurate, timely, relevant, and reliable financial and non-financial information, on programs objectives and results, is a fundamental building block supporting all phases of the RBM life-cycle, from planning, to implementation, performance measurement and reporting. As such, implementation of the MRRS is critical to an effective EMS.

The 2005 MRRS Policy supports the development of a common, government-wide approach to the collection, management, and reporting of financial information and non-financial information on program objectives, performance and results.

Implementation of the MRRS Policy is based on five key steps:

1. Articulation of Program Activity Architectures (PAAs)

As of June 2007, all departments had developed articulated structures for their PAAs. Program Activity Architectures set out departmental program activities in a logical fashion and link them to the strategic outcome(s) to which they contribute, resulting in a fully, structured inventory of government programs.

2. Identification and definition of Performance Measurement Frameworks (PMFs) by departments in support of their PAA

As of December 2007, most federal departments had drafted PMFs for all programs in their PAA, which represents a major step forward in the development of objective program performance information for use in decision-making. The Treasury Board Secretariat is currently reviewing departmental PMFs to ensure consistent quality in accordance with MRRS standards and guidelines.

3. Systematic creation, capture and use of MRRS information by departments

As of December 2007, departments began collecting and using MRRS information as part of overall program management, which includes supporting decisions related to allocation and re-allocation of resources.

4. Design of an information management system

In order to ensure that the appropriate tools are in place to manage and make use of this large volume of data, an information management system is required. As summarized below and detailed in the response to recommendation 8, TBS is implementing the new Expenditure Management Information System (EMIS), which is a critical component of an integrated expenditure management system. When mature, the system will be used to provide a centralized database of financial and non-financial program performance information as articulated in PAAs and PMFs. The new EMIS, managed by TBS and accessible by departments, will assist TBS and other federal departments in decision-making associated with allocation and reallocation of resources.

5. Full use of MRRS information in expenditure management processes by departments and Central Agencies

An objective is to ensure that, in the future, both financial and non-financial performance information can be fully integrated within the EMS. This would permit the use of non-financial performance information by program managers in their decision making, increasing the capacity to interpret results information accurately, and the use of results information in allocation and reallocation decisions. Some aspects of integration are already underway. For example, PAAs provided the framework upon which departments and agencies were required to assess the performance of all of their programs during the first round of Strategic Reviews.

Implementing the new Expenditure Management Information System (EMIS)

Development of the new EMIS supports managing for results by operationalizing the MRRS Policy. When fully developed, this information system will be an integrated and secure budget office system that supports both TBS and departments in their expenditure management roles. Development of the new EMIS is also an effort to integrate several disparate and, in some cases, aging legacy systems to ensure the Government continues to meet its obligations with regard to the preparation and tabling of the Main Estimates and Supplementary Estimates.

As detailed in the response to recommendation 8, the EMIS renewal project is well underway. Phase A, the development of a model that provides a common approach, definitions and a structure for data and business processes, along with a high-level implementation plan, is complete. Phase B, replacing core budget office functionality with a unified, integrated and secure system is nearing completion. Going forward, a planned phase C would develop the functionality to manage priorities by linking them to results and planned budgets through monitoring based on PAAs. Phase D, the planned “actuals” phase, would develop the functionality to monitor actual against planned expenditures.

Renewing the Evaluation Policy

In the Government of Canada, evaluation is the systematic collection and analysis of evidence on the outcomes of policies and programs to make judgments about their relevance, performance and alternative ways to deliver programs or to achieve the same results. Evaluation is the primary source of neutral and systematic information on the ongoing relevance and performance of policies and programs, alternative ways of achieving expected results, and program design improvements. Evaluation helps the Government of Canada to design and deliver programs and services that are accountable, focused on results, and that meet the needs of Canadians.

The Treasury Board Secretariat is in the process of renewing the Treasury Board Policy on Evaluation to help ensure that the renewed EMS is effectively supported by neutral, credible, timely and evidence-based information on the relevance and performance of government policies and programs.

Strengthening Reporting to Parliament

An effective Parliamentary reporting regime is important to ensuring that the EMS is transparent and accountable, and to ensuring Parliamentarians have the information required to ensure Government is managing for results. The Government currently provides many reports to Parliament related to expenditure management, including the Main Estimates, Reports on Plans and Priorities (RPPs), Departmental Performance Reports (DPRs), Supplementary Estimates, the RPP Overview for Parliamentarians, Canada’s Performance and the Public Accounts.

In support of EMS renewal, improvements are being made to both the content and form of departmental reports to Parliament. On content, improvements in the evaluation function along with implementation of the MRRS policy will help ensure that departmental reports are based on valid, neutral and credible performance information. In August 2007, the Performance Reporting: Good Practices Handbook was published to assist departments and agencies in the production of balanced reports. In addition, assessments of departmental reporting through the Management Accountability Framework (MAF) process will help ensure that generally accepted reporting principles are followed.

In terms of form, Program Activity Architectures provide a consistent architecture for all reports. In addition, “layered” reporting that draws distinctions between whole-of-government and departmental level information, coupled with web-based navigational tools, help users better understand the achievements of individual programs as well as the aggregate performance of the government as a whole.

Building on these efforts, concise 2008‑09 RPPs were piloted for four departments and agencies – the Treasury Board Secretariat, Indian and Northern Affairs Canada, Parks Canada and the Atlantic Opportunities Agency – using a design that is easier to read and contains links to more detailed information. Work is also underway to pilot concise 2007‑08 DPRs that will be tabled in fall 2008.

Progress has also been made to strengthen reporting using the whole-of-government framework, which maps the contributions of departments, agencies and Crown corporations that receive appropriations to a set of high-level Government of Canada outcome areas, and which has been applied to help Parliamentarians navigate through the more than 90 RPPs and DPRs. In March 2008, for example, the Planning and Performance Gateway website was launched to provide this information in electronic form. In addition, Canada’s Performance,tabled in November 2007, included a whole-of-government view of actual spending for the Government of Canada for the first time. In February 2008, Part I of the Main Estimates 2008‑09 displayed programs according to the whole-of-government framework. Going forward, Canada’s Performance Report for 2008‑09 will include, for the first time, a comparison of planned and actual spending government wide.

(2) Up-Front Discipline

Central agencies are working to ensure the information content of Cabinet documents is strengthened to provide the information and analysis necessary to support decision making.

In July 2007, TBS published a revised Guide to Preparing Treasury Board Submissions. The new guide incorporates many improvements to enhance the quality of information and strengthen the linkages between policy, program and spending information by requiring that MRRS information be included. The Guide addresses Treasury Board requirements for specific information on risk and on similarities or linkages with other government programs in submissions. It sets the new TBS requirement for a separate breakdown of program evaluation costs, with sign–off by departmental heads of evaluation on the adequacy and source of funding for the "evaluation" resources, as well as the requirement for accrual accounting information. Finally, it provides mandatory costing templates and instructs that they be completed in accordance with the TBS Guide to Costing. The Guide to Preparing Treasury Board Submissions continues to emphasize the role of the Senior Financial Officer/Chief Financial Officer where submissions have financial implications.

Further to these developments, on March 28, 2008, the new TBS Guide to Costing was published. The guide is one of several tools that the Office of the Comptroller General (OCG) has developed to advance stewardship, accountability, and value for money across the Government of Canada. The use of well-prepared, timely cost information contributes to accountability and transparency as well as good decision-making and intelligent risk taking. The guide is for use by financial officers when called upon to perform costing, give costing advice, or attest to the accuracy and relevance of cost information. Further, the guide will inform the development of reliable costing information in Treasury Board submissions and Memoranda to Cabinet.

(3) Ongoing Assessment

The third pillar, reviewing all direct program spending, is supported by the Strategic Review process, which was launched in Spring 2007 further to Budget 2006 and 2007 commitments. Strategic Reviews support the achievement of the two overarching EMS objectives:

• Management Excellence – Strategic Reviews support effective management the government’s resources to achieve results and drive excellence in program performance and services to Canadians.
• Fiscal Credibility – Strategic Reviews assist in ensuring that overall spending growth is controlled, consistent with the Government of Canada’s commitment to keep the rate of spending growth, on average, below the rate of growth of the economy.

As part of the Strategic Review process, organizations are required to review their direct program spending, including minor statutory programs, quasi-statutory spending and the operating costs of major statutory programs every four years to assess how and whether these programs are aligned with priorities and core federal roles, whether they provide value for money, whether they are still relevant in meeting the needs of Canadians, and whether they are achieving intended results.

Strategic Reviews are based on PAAs and draw on multiple lines of objective evidence, including evaluations, audits, special studies, organizational assessments, Management Accountability Framework assessments, Auditor General Reports and follow-ups, and benchmarks based on performance in other jurisdictions (including international) or in the private sector, as available.

Through the first round of Strategic Reviews, organizations identified annual savings reaching $386 million per year by 2010‑11, which were directed to fund new initiatives in those organizations and other Government priorities in Budget 2008.

In March 2008, the second round of Strategic Reviews was launched. Sixteen organizations were directed to undertake a comprehensive assessment of their direct program spending and to provide options for reallocation and reinvestment. The results of these reviews will be presented to Cabinet as an input into Budget 2009 planning.

In addition, drawing on the recent report by the Prime Minister’s Advisory Committee on the Public Service, the six Public service human resource organizations are undertaking a horizontal review to ensure efficiency, effectiveness and value for money in the delivery of all of their programs to strengthen the management of human resources in the Public Service.

Further details on implementation of the new EMS will be provided by TBS officials in a status report by March 31, 2009.

Recommendation 3

The Treasury Board Secretariat provide the Public Accounts Committee with an action plan detailing how it will implement all of the recommendations made in Chapter 1, Expenditure Management System at the Government Centre and Chapter 2, Expenditure Management System in Departments from the November 2006 Auditor General’s report by 30 June 2008.

The recommendation is accepted, with reference to the Government’s action plan for implementation of the new EMS, as detailed in the responses to recommendations 1 and 2.

This action plan outlined in the response to recommendations 1 and 2 addresses the majority of the Auditor General’s (AG) concerns:

• the need for ongoing review of programs (AG recommendation 1.27 and 2.63) is being addressed by the implementation of Strategic Reviews;
• the implementation of Strategic Reviews, in conjunction with the renewal of the Evaluation Policy, will provide the means to continually assess the value and effectiveness of existing programs and, as a result, to identify alignment issues in existing programs (AG recommendation 2.50);
• the access, collection and use of financial and non-financial information by Central Agencies (AG recommendations 1.34 and 1.52) are being improved through the implementation of the Management, Resources and Results Structure (MRRS) Policy, by the recent publication of the revised Guide to Preparing Treasury Board Submissions and the revised Guide to Costing, and by implementation of the EMIS as detailed in the responses to recommendations 8 and 9; and
• the availability of improved information in Cabinet documents will ensure that more effective funding decisions, including those for long-term programs, are made (AG recommendation 1.64).

As detailed in the Government Response and monitoring update to the 2006 Auditor General report, existing features of the EMS or continual improvements to it are aimed at addressing the remaining AG concerns.

Tracking of financial and non-financial conditions attached to spending decisions by Treasury Board (recommendation 1.69) is currently undertaken by TBS and will be improved by implementation of the EMIS, as detailed in the response to recommendation 9. In addition, the Treasury Board submission process allows for alignment risks to be assessed (AG recommendation 2.46), an ability which is strengthened by the new Guide to Preparing Treasury Board Submissions. Should the funding profile require modification due to extenuating circumstances, departments have at their disposal mechanisms such as reprofiling. If significant alignment issues resulting from information gaps during initial requests or unforeseen events persist, these will surface through exercises such as evaluations and Strategic Reviews.

On the consolidation of spending items (AG recommendation 2.88), progress has been made as part of continual improvements to expenditure reporting. As explained in the response to recommendations 11 and 12, the Government has created two new central Votes (an Operating Budget Carry Forward Vote and a Paylist Requirements Vote) that will reduce and even eliminate the use of Supplementary Estimates by some departments.

On ensuring that departments respect the Parliamentary control framework (AG recommendation 2.88), TBS is clear in its guidance to departments that Treasury Board approval does not mean authority to spend, before Parliament has given spending authority. As a further incentive to departments to respect the Parliamentary control framework, sections 31(3) and 33 (3) of the Financial Administration Act are monitored by TBS using the Management Accountability Framework as explained in the response to recommendation 10. In addition, starting in the 2008-09 fiscal year, the Government reintroduced the practice of a spring Supplementary Estimates to provide opportunities to reduce the risk of departments spending in advance of Parliamentary approval by providing program funds on a more timely basis.

Recommendation 4

The Treasury Board Secretariat work with the Privy Council Office and the Department of Finance to clarify their respective roles in the Expenditure Management System; and provide the Public Accounts committee with information on these clarified roles and explain how these clarified roles will improve the effectiveness of the Expenditure Management System by 30 June 2008.

The recommendation is accepted and the requested information is provided as follows.

The three pillars of the renewed Expenditure Management System – Managing for Results, Up-Front Discipline, and Ongoing Assessment (Strategic Reviews) – provide an improved framework for greater clarity of the roles and responsibilities of the Central Agencies. Through a more rigorous, results-based approach to the management of all direct program spending, the renewed EMS entrenches a culture of sound management to deliver programs that achieve results for Canadians.

The roles and responsibilities of Central Agencies are tailored to assist the Government in achieving management excellence and fiscal credibility. Expenditure management requires ongoing collaboration between Central Agencies to, for example, review new spending proposals during the Memorandum to Cabinet process, and assess existing expenditures through the Strategic Review process. At the same time, the respective roles of the Central Agencies in the renewed EMS are clear.

The Department of Finance assists the Government and the Minister of Finance in developing fiscal and other economic policies that support Canada's economic and social goals. The Department manages the fiscal framework, oversees the preparation of the federal budget, and provides advice to the Government on overall federal spending priorities as well as specific areas of responsibility such economic and fiscal policy, taxation policy, borrowing, cash and debt management, federal transfer payments to the provinces and territories and financial sector policy. The Department also provides advice to the Minister of Finance on new policy proposals presented in MCs as well as reallocation proposals developed in the context of Strategic Reviews.

The Privy Council Office (PCO) focuses on overall governmental and Prime-Ministerial priorities and on the integrity and functioning of the system, including the alignment of new spending proposals with government priorities. PCO sets the standards for the information to be included in the Memoranda to Cabinet, including those for financial information. PCO advises the Prime Minister, Cabinet and policy committees of Cabinet on policy issues. PCO also participates in Budget preparation by providing advice to the Prime Minister on Budget decisions. In addition, PCO monitors the Strategic Review process for the Prime Minister and ensures the completion of the appropriate follow-up work to help resolve policy issues raised by the Reviews.

The Treasury Board Secretariat focuses on making recommendations and providing advice to the Treasury Board on policies, directives, regulations, and program expenditure proposals with respect to the management of the government's resources, including oversight of the financial management functions in departments and agencies. The Secretariat is also responsible for the comptrollership function of government, including the provision of advice and direction on the integration and use of financial and non-financial performance information, a sound approach to risk management, appropriate control systems and a shared set of values and ethics. The Secretariat ensures that costing information and elements of program design included in Memoranda to Cabinet are realistic. At the detailed policy development stage, the Secretariat advises the Treasury Board on the costing, design and performance of programs, and on the management of resources within specified constraints. The Secretariat also undertakes government-wide expenditure and performance analysis such as Strategic Reviews, which informs Budget planning, and oversight of estimates and the supply process. On the reporting side, the Secretariat assists the Treasury Board in exercising its statutory responsibility for accounting for expenditures to Parliament as part of the reporting cycle, which includes timely and accurate publication of the Main Estimates, the Reports on Plans and Priorities and Departmental Performance Reports.

Recommendation 5

The Treasury Board Secretariat work with new governments to ensure that the Office of the Auditor General has access to the documents it needs to fully conduct its audits as is stated in the Auditor General Act.

The recommendation is accepted.

The Treasury Board Secretariat supports access to documents by the Office of the Auditor General (OAG), to which it is entitled pursuant to the Auditor General Act, in order to carry out its work. A new Order in Council was put in place just prior to the tabling of the November 2006 Report of the Auditor General of Canada. The Order in Council clarifies the Auditor General’s access to Cabinet documents. The Treasury Board Secretariat has taken joint steps with the OAG and PCO, to ensure that the OAG has access to needed documents. The Secretary of the Treasury Board, jointly with the Auditor General, sent out a communiqué on August 7th, 2007 to all Deputy Ministers and Heads of Agencies reminding them of their obligations under the Auditor General Act to provide timely access to records and personnel.

Recommendation 6

The Treasury Board Secretariat provide the Public Accounts Committee with an action plan to hire and train the evaluators necessary to ensure the new Expenditure Management System functions as planned by 30 June 2008;

The recommendation is accepted and a clarification on roles and responsibilities is provided.

While TBS provides policy direction in evaluation and monitors its implementation, deputy heads are responsible for management of the evaluation function in their organizations, including the hiring of evaluators in conjunction with their overall organizational human resources strategy. Nonetheless, TBS is working with departments and agencies to help increase the capacity of the evaluation function in the federal Public Service.

In 2006 and 2007, the Public Service evaluation community completed two community-wide staffing initiatives resulting in the hiring of an additional qualified 115 evaluators. In 2008-09, TBS will be leading an evaluation community-wide Post-Secondary Recruitment campaign across Canada, with the objective of creating a qualified pool of candidates at the junior evaluator level for hiring by departments and agencies. Because of the positive experience with the community-wide recruitment initiatives to date, it is expected that the evaluation community will be conducting one or more of them each year to ensure that capacity is maintained.

In an effort to build future capacity, TBS is in discussions with Canadian universities to broaden and make more accessible education in evaluation and to develop post-graduate certificate programs in evaluation, which would include the implementation of internship programs to ensure that students gain practical experience.

In order to increase the evaluation capacity through improved effectiveness, TBS is closely monitoring the quality of departmental and agency evaluation to identify opportunities for improvement and shared best practices.

The Treasury Board Secretariat reinforce the importance of evaluation by adding program evaluation as a key requirement in the Expenditure Management System.

The recommendation is accepted.

The Treasury Board Secretariat is reinforcing the importance of evaluation by embedding evaluation into the Expenditure Management System in a number of ways.

As noted in the response to recommendations 1 and 2, at the time of the preparation of this response, the Treasury Board Secretariat is in the process of renewing the Treasury Board Policy on Evaluation to help ensure that the renewed EMS is effectively supported by neutral, credible, timely and evidence-based information on the relevance and performance of government policies and programs.

Evaluations are a key requirement to substantiate program performance as part of the renewed EMS’ Strategic Review process. Strategic Reviews require departments, every four years, to comprehensively assess all of their programs to ensure value for money, effectiveness, efficiency and alignment with government roles and priorities, and present these findings as in input to Budget planning (see response to recommendations 1 and 2). Program assessments undertaken as part of the Strategic Review exercise must provide solid evidence on performance, and as such, evaluations are a key component of the renewed EMS.

Evaluation information is also increasingly being used and required in decision-making. For example, the revised Treasury Board submission guide makes the use of evaluation and performance information a clear requirement.

Lastly, it is worth noting that the quality of evaluation and performance management practices in departments and agencies are assessed and monitored through the Management Accountability Framework, thereby ensuring that these are considered as a key component of sound management.

Recommendation 7

The Treasury Board Secretariat work with the Privy Council Office to allow the funding profile of new programs to be altered at the Treasury Board submission phase to better reflect the needs of these programs.

The concerns raised by this recommendation are being met.

Fiscal credibility and the effective stewardship of taxpayers’ dollars require careful control and scrutiny of overall spending. The current approach to establishing the funding profile of new programs has been designed to ensure proper control and accountability for all spending.

Ministers begin by bringing new spending proposals to the appropriate policy committee of Cabinet. Consideration of the proposal at this stage includes consideration of a full range of options for achieving the objectives of the proposal, including alternative funding profiles. At this stage, the Committee typically gives its approval in principal to a new spending proposal, subject to the proposal receiving funding in the Budget. Final decisions on the funding levels for these new spending proposals are taken in the annual Budget process and reflect consideration of the Government’s priorities and the overall level of funding available to be allocated to new spending proposals.

Following the announcement of a new spending proposal in a Budget, departments are required to seek Treasury Board approval of the detailed elements of the new program, including its implementation and ongoing management within the funding profiles set out in the Budget. At this stage, TBS works with departments to address funding profile issues through reprofiling where warranted, and seeks the concurrence of the Department of Finance.

That being said, reprofiling does not allow for increases in funding at the Treasury Board submission stage. Should funding profiles originally approved by Cabinet be deemed insufficient to fulfill program needs, departments would be required to return to Cabinet with a revised proposal. In the event that policy approval is obtained, the proposal would be considered for inclusion in the Budget based on considerations of overall government priorities and the fiscal situation. To better ensure that funding profiles meet program needs, the renewed EMS aims to strengthen the information basis at the front-end of the decision-making process for new spending proposals. As well, as detailed in the response to recommendations 1 and 2, the Comptroller General has introduced a new Guide to Costing which will assist Ministers in preparing their cost estimates for new spending proposals.

Recommendation 8

The Treasury Board Secretariat provide the Public Accounts Committee with an update on the implementation of the Expenditure Management Information System by 30 June 2008.

The recommendation is accepted and the requested information is provided as follows.

Since 2006, the Expenditure Management Information System (EMIS) has been redesigned and is being implemented in phases. The first phase, Phase A, was the Budget Office Systems Renewal (BOSR) project, for which a new business case was approved by the Treasury Board in October 2006.

The main purpose of BOSR is to replace and integrate several disparate and, for the most part, aging legacy systems to ensure the Government can continue to meet its obligations with regard to the preparation and tabling of Main Estimates and Supplementary Estimates while ensuring it meets the evolving needs of departments and Parliamentarians. The legacy systems were those supporting the Expenditure Status Report, the Annual Reference Level Update on line, the Main Estimates on-line, the Supplementary Estimates System, the Governor General Special Warrants System, the Allotment Control System, the Condition Tracking System and the Program Activity Architecture on-line system.

A significant project milestone was achieved in December 2007, when the new EMIS was launched for the preparation of the 2008-09 Main Estimates. Starting on the planned launched date of November 30, 2007, over 120 departments and agencies, along with their TBS program and expenditure management analysts were provided access to the system in stages. By December 13, 2007, all government organizations had access to the system and were able to begin work on their Main Estimates.

The second phase of the EMIS project, Phase B, was aimed at improving the functionality of EMIS for the production of Estimates and related fiscal information. A number of Phase B tasks are still being completed. These include the conversion of historical data and delivering the full range of operational and client- or publication-ready reports, as well as the functionality to support the production of Treasury Board précis and decision letters, and pressures or reserve allocation monitoring and functions. These elements were originally expected to be completed by March 2008, but were temporarily overtaken by the requirements to produce an early Supplementary Estimates (A) in the Spring of 2008 and to have tools ready should the need for Special Warrants arise. The revised target date for completion of remaining Phase B tasks is Summer 2008.

Looking beyond Phase B, the 2008-09 fiscal year will see further refinement of core EMIS functionality and integration of the new system with other business processes. To ensure continuity, some elements of the legacy systems and their related business processes will be maintained on a parallel basis in 2008‑09 to validate results from the new system. The new system will also be used to support business processes for tracking Treasury Board conditions and other controls, including allotment controls.

The long-term planning for EMIS also anticipates further phases to integrate non-financial performance information and actual spending, with the planning information for the fiscal framework and Estimates.

Recommendation 9

The Treasury Board Secretariat ensure that it has the capacity to monitor departments’ use of special purpose allotments and compliance with non-financial conditions and improve this capacity if necessary; and

The Treasury Board Secretariat monitor departments’ use of special purpose allotments and compliance with non-financial conditions using the Management Accountability Framework beginning with the next round of assessments.

The recommendation is rejected for the reasons below.

Treasury Board Secretariat works with departments on an ongoing basis to ensure that all conditions imposed following consideration of Treasury Board submissions are met. This includes special purpose allotments, which are reported in the Public Accounts of Canada. Responsibility to comply with Treasury Board conditions, however, rests with individual Ministers, who have been previously instructed by Treasury Board to adhere to these conditions.

The new Expenditure Management Information System is designed to provide tools to improve recording and tracking of both financial and non-financial conditions applied to Cabinet and Treasury Board decisions. Implementation of these tools has begun and the full range of related changes in business processes will be phased in.

Management Accountability Framework (MAF) indicators are not intended to assess departments’ use of special purpose allotments and compliance with non-financial conditions, nor are they an effective tool to do so. The MAF is used by the Treasury Board as both a tool of assessment of organizational management performance and as the accountability framework for the management of departments by Deputy Heads. The MAF is designed to provide Treasury Board Ministers with a broad picture of a department’s general state of management capacity, not a detailed analysis of its use of specific fiscal tools.

Recommendation 10

The Treasury Board Secretariat use the Management Accountability Framework to

determine the amount of cash management that happens in departments and report the results of this tracking publicly beginning with the next round of assessments.

The recommendation is rejected for the following reasons.

Two basic fundamentals are required in order for departments to spend money – authority, and funding. Cash management allows organizations to spend against a previously-approved authority when funding has not yet been released through appropriations. Departments need the flexibility to manage cash consistent with prudent risk management to effectively deliver programs in a timely and efficient manner. At the same time, departments must manage their cash within the reference levels approved by Parliament should Parliament reduce the amount of funds requested in Estimates.

The Financial Administration Act stipulates two requirements:

Under Section 31(3)

• The Deputy Head or other person charged with the administration of a service for which a division is required to be prepared pursuant to subsection (1) shall ensure by an adequate system of internal control and audit that the allotments provided in that division are not exceeded; and
• Under Section 33(3)
• No requisition shall be made pursuant to subsection (1) for a payment that:
  • would not be a lawful charge against the appropriation;
  • would result in an expenditure in excess of the appropriation; or
  • would reduce the balance available in the appropriation so that it would not be sufficient to meet commitments charged against it.

Both of these sections are monitored and reported on by TBS via the Management Accountability Framework (MAF) process, which involves the review of departmental internal audit reports related to financial management issues, and the examination of Public Accounts to determine which, if any, departments have exceeded their appropriations.

The MAF is designed to provide Treasury Board Ministers with a broad picture of a department’s general state of management capacity, not a detailed analysis of its use of specific fiscal tools.

Recommendation 11

The Treasury Board Secretariat present departmental Operating Budget Carry Forwards to the House of Commons in a separate Supplementary Estimate and thus have these carry forwards be subject to a separate vote.

The recommendation is rejected for the following reasons.

In the 2007-08 Supplementary Estimates (A), Treasury Board Secretariat received Parliamentary approval for the creation of a new central Vote for the Operating Budget Carry Forward to enable the Government to better manage and account for the disbursement of funds. The authority to carry forward funds from one fiscal year to the next had routinely been requested through individual departmental Supplementary Estimates. The central Operating Budget Carry Forward Vote now consolidates routine departmental transactions for operating budget carry forwards into one Vote which is reported in Main Estimates, thereby reducing the number of line items in Supplementary Estimates and, in many cases, eliminating the requirement for Supplementary Estimates for many small organizations. Going forward, operating budget requirements will be consolidated into a single submission for approval by Treasury Board Ministers and these approved amounts will be allocated directly to departments, usually in September of each year (as opposed to December as was done previously through Supplementary Estimates). These allocations will be transparent in Estimates and will also be reported as a separate table in the Supplementary Estimates for information purposes only – i.e. showing how the aggregate carry forward amount has been allocated across departments and agencies.

Consolidating approval of operating carry forwards into a single Vote and displaying this information in a single table will provide the greater transparency endorsed by the Committee. Considering the additional administrative burden and cost that would be associated with printing a separate Supplementary Estimate for this purpose, the current reforms to improve transparency of the approval process, which account for and display operating budget carry forward items within Supplementary Estimates, are deemed sufficient.

Recommendation 12

The Treasury Board Secretariat improve the transparency and clarity of Supplementary Estimates documents by including an explanation of why the items a department is seeking approval for need to be funded through the Supplementary Estimates rather than the Main Estimates.

The recommendation is being met now.

As outlined in Supplementary Estimates (A) and (B) for 2007‑2008, the purpose of the Supplementary Estimates is to present to Parliament information on the Government of Canada’s spending requirements which were either not sufficiently developed in time for inclusion in the Main Estimates, or which have subsequently been refined to account for developments in particular programs and services. Supplementary Estimates also provide updated information on changes to expenditure forecasts of major statutory items. In addition, they are used to seek parliamentary approval for such items as: transfers of money between Votes; debt deletion; loan guarantees; new or increased grants; and changes to Vote wording.

Each year, usually in February, the government sets out its overall plan to meet its priorities in the Budget. Generally, Budget initiatives are developed in secrecy and represent a statement of the government’s intent. Prudent and responsible implementation of these initiatives often requires extensive program design – including a process of consultation and negotiation with stakeholders, policy approval by Cabinet and approval of the details of the program design and implementation plan by Treasury Board.

In accordance with House of Commons Standing Orders, Main Estimates must be tabled on or before March 1 and the process of compiling these Main Estimates begins the preceding October. Therefore, it is not always possible to include in the Main Estimates the appropriations required in support of Budget initiatives that have been announced a few weeks earlier. In fact, it is not uncommon for the process of program design outlined above, including consultation with private industry, other levels of government and even internationally to take upwards of a calendar year or longer for complex initiatives. Therefore, Supplementary Estimates serve a very useful role in enabling the government to bring forward initiatives for Parliament’s approval once the detailed program design and implementation plan have been finalized, rather than including these in Main Estimates before they are fully developed and ready for Parliament’s approval, or delaying initiatives for Parliament’s approval so that they line up with the next Main Estimates cycle.

Progressive improvements in the transparency of the Supplementary Estimates are aimed at the overarching objective of enhancing accountability to Parliament through improved financial and performance information.

Over the last few years a number of changes have been made to the format of the Supplementary Estimates to improve their transparency. In particular, the Treasury Board Secretariat has worked with departments and agencies to improve the presentation of individual departmental requirements by requiring better information to describe the nature of transactions, as well as the clear identification of instances where funds are available within a department’s existing spending authority to offset new requirements.

In addition, a number of new summary tables have been added to facilitate the review of the Estimates by Parliamentary committees, researchers, and Canadians. These new tables include: an overview of the major items being requested in Supplementary Estimates; a Standard Object of Expenditure summary; a summary of horizontal initiatives; a summary of $1 items included in the Supplementary Estimates; a summary of transfers between organizations; and changes reflected in these Supplementary Estimates since the tabling of Main Estimates.

Further to these efforts, in May 2007, Treasury Board approved the creation of two new central Votes: a departmental Operating Budget Carry Forward Vote (detailed in the response to recommendation 11); and a Paylist Requirements Vote. These Votes were approved by Parliament through Supplementary Estimates (A), 2007-2008 and the enabling Appropriation Act No. 3, 2007-2008. Paylist requirements are legal obligations of the employer for employee benefit items, such as severance pay and parental benefits. The approval by Parliament of a central Vote for paylist items helps support transparency by more clearly showing legal obligations of the employer as well as preserving the central Vote used for government contingencies, Vote 5, for true contingencies.

Concluding Recommendation

The Government appoint a Blue Ribbon Panel to examine the financial information systems that generate management information with the goal of improving the spending decisions of the Government.

The recommendation is rejected, but an alternative is offered with the following rationale.

As detailed throughout this Response, the Government has made significant progress in implementing the new EMS. In so doing, the Government has or is moving to address the Committee’s concerns. For example, the new EMS provides tools to assess new spending against existing spending. In addition, the review of existing program efficiency, effectiveness, performance, value for money and alignment with Government priorities has been implemented through Strategic Reviews and will be strengthened through renewal of the Evaluation policy.

The Government acknowledges the complexity of the issues at hand and agrees that fundamentally, the effectiveness of the EMS relies on the support of a rigorous information management system. When fully implemented, the Expenditure Management Information System (EMIS) will be the financial and non-financial information management system that supports the spending decisions of Government.

As such, it is proposed that there would be greater value in focusing on the EMIS specifically. To this end, the Government proposes that, consistent with good Information Management / Information Technology practices, the Treasury Board Secretariat engage external advisors over the next two years to provide strategic advice on EMIS. In addition to evaluating the development and implementation of EMIS, the advisors would also play a proactive role in giving technical advice on system design going forward. This would provide an opportunity to scrutinize not only financial information as requested by the Committee, but also an opportunity to examine non-financial information, which is fundamental to managing to results. The advisors would be experts in planning and implementation of large information technology initiatives related to large financial information systems to support expenditure management.