What we reviewed The Treasury Board Secretariat, the Department of Finance and the Privy Council Office (the "central agencies" of the federal government) have key roles and responsibilities in the government's Expenditure Management System (EMS). The main focus of the audit was the Treasury Board Secretariat, given its central role in the overall management of government resources. The Treasury Board Secretariat, the Finance Department and the Privy Council Office are in general agreement with our recommendations.
The Privy Council Office works closely with departments and agencies, the Office of the Prime Minister, the Treasury Board Secretariat and the Department of Finance. Exhibit 1.1 The average percentage of Supplementary Estimates to total Estimates more than doubled when the budget went into surplus. Funding for existing programs The Treasury Board Secretariat annually updates funding for existing programs without a systematic review.
Reference level - The amount of funding that the Treasury Board has approved for departments and agencies to carry out policies and programs for each year of the planning period.
Recommendation. The Treasury Board Secretariat should collect and use comprehensive information on program costs and
The Secretariat's program analysts perform most of the oversight and rely on limited information provided by departments and agencies. The Expenditure Management System does not use performance reviews as evidence and does not provide the Secretariat with the program information it needs to identify potential problems. Opportunities for trade-offs between new and ongoing spending may be lacking 1.35 There are two spending management processes: one for renewing spending on existing programs and another for reviewing new spending initiatives.
That same year, planned expenditures on existing programs totaled $144 billion - $64 billion in approved program expenditures. Each year, as projected revenues grow, new or enriched spending initiatives are announced, in addition to those already approved in the previous budget or estimates process. It is important that new spending proposals are rigorously assessed and challenged before the Cabinet approves them.
The central agencies and the cabinet need complete and accurate information to thoroughly review the proposals and make sound decisions. The Secretariat noted that memos to government sometimes lack measurable goals and performance commitments, and that information on cost alternatives and evaluation and measurement of results for existing programs is not always sufficient. The Privy Council Office noted that analysis supporting the memos is patchy, that fundamental issues are not always addressed, that savings are not routinely identified and that credible alternatives are not always explored.
These problems limit the ability of central agencies to review new spending initiatives effectively and can affect the quality of government decisions. The Privy Council's Office sets a standard time of two weeks for the Treasury Board Secretariat and the Treasury to review the notes. However, the central agencies told us that they are sometimes forced to complete their reviews within days.
Treasury Board submissions. A Treasury Board submission is an official document that a department or agency submits to seek
Reviews at the Treasury Board submission stage have little impact on resource allocation because funding decisions have already been made. The Ministry of Finance and the Secretariat of the Treasury Board agree with the recommendation: accurate, timely, relevant and reliable financial and non-financial information on program objectives and results is critical to all functions of an effective expenditure management system. The central agencies (the Treasury Board Secretariat, the Treasury and the Privy Council Office, the Treasury and the Privy Council Office) should also clarify their roles – especially the Treasury Board.
The Secretariat of the Finance Council told us that temporary financing can protect the government's fiscal position. The Treasury Board Secretariat does not adequately monitor the terms that the Treasury Board attaches to departmental spending. The Secretariat does not review the use of special purpose allocations to assure the Treasury Department that departments and agencies.
At the end of the year, departments and agencies provide the treasury board with expenditure information showing how they have used the special allocations. This information is published annually in the Public Accounts of Canada - the government's annual report on how it spent the funds granted by Parliament. For example, frozen allocations can be created until a department fulfills outstanding conditions imposed by the Swedish Financial Supervisory Authority.
Compliance with the non-financial conditions by the department or agency is not a condition for the Treasury Board to approve the funds. The Treasury Board Secretariat has limited capacity to monitor compliance with these conditions by departments and agencies. The Treasury Board Secretariat must monitor the conditions that the Treasury Board attaches to its spending decisions to determine whether all of these conditions are met.
Conclusion
The Secretariat is of the view that departments and agencies are responsible for ensuring that special purpose appropriations are used only for their specified purpose. The Secretariat is responsible for ensuring that these conditions are met before recommending a freeze. This functionality, along with improvements in tracking non-financial conditions, will be built into the new Expenditure Management Information System.
The current spending management system, designed when Canada ran a budget deficit, is less effective in a time of surplus. The Annual Reference Level Update (ARLU) is not designed to take into account performance outcomes and does not allow the Treasury Board Secretariat to challenge the allocation of resources using evidence of program effectiveness. Therefore, apart from the ad hoc expenditure revisions, reference levels are not revised at the center of government.
There are two spending management processes: one for recommending reference levels of existing programs and one for reviewing new spending initiatives. In addition, detailed scrutiny of spending proposals at the Treasury Board submission stage has little impact on resource allocation because funding decisions are made earlier. Finally, funding decisions made at the center of government do not always align program funding with long-term financial requirements.
The Secretariat is also limited in its ability to monitor compliance with the conditions and special purpose allocations imposed by the Treasury Board. The government recognizes that a new continuous approach is needed to manage overall spending to ensure, as stated in Budget 2006, “…all government programs are effective and efficient, are focused on results, provide value for. This will ensure that the government only approves funds that are truly needed to achieve measurable results in a way that is efficient and provides value for money on behalf of Canadians.
About the Audit
We expected the Treasury Board Secretariat to use financial and non-financial information to review and analyze existing expenditures to ensure that program needs are met and desired outcomes are achieved. We expected the central bodies involved in the allocation of resources to coordinate their efforts. We expected that the Board of Finance had reasonable assurance that departments and agencies.
We expected the Secretariat to use appropriate and timely departmental information on program expenditures and performance results. We expected management frameworks to support allocation decisions that align funding commitments with long-term funding requirements.
Appendix A Expenditure management practices
In the early 1980s, Australia introduced "advance estimates" to address deficiencies in the annual budget process. It sets the overall fiscal framework for the Australian Federal Government and manages strategic policy making, including policy changes that reflect fiscal realities and changing government priorities. A Cabinet Implementation Unit was recently established to monitor the Government's priority initiatives, and the Ministry of Finance and Administration adopted Gateway Reviews, a systematic review of key stages of large, often horizontal initiatives.
Every spring, the budget office reviews the execution of the previous year's budget and evaluates the implementation of the budget during the current year. The objective of this review is to free up resources to finance new spending initiatives. The second phase of the Chilean spending process focuses on the "bid fund," which is a pool of undistributed resources resulting from the critical review of existing programs and revenues from a growing economy.
The Budget Office reviews the technical quality of the submissions and the compatibility of the offer with the government's priorities and proposes to the Ministry of Finance and the President of Chile a list of new spending initiatives. The Ontario government uses a results-based planning framework to set its reference levels for existing and new spending. The focus of the framework is on achieving specific outcomes in support of government priorities.
This "managing for results" approach combines planning, budgeting and performance measurement and aligns performance with priorities and expected results. This approach to decision making uses zero-based budgeting and continuously improves the delivery of programs and services to clients. Submissions proposing new initiatives must identify the impact the initiative could have on government priorities and outcomes, other stakeholders and sectors, and opportunities for integration.
Appendix B List of recommendations
New or enhanced spending initiatives 1.52 Central agencies (Treasury Board Secretariat, Finance Department and Privy Council Office) should ensure that they are complete and accurate. Accurate, timely, relevant and reliable financial and non-financial information on program objectives and results is essential to all functions of an effective Expenditure Management System. Cabinet documents and supporting processes should provide the necessary cost and output information for all aspects of decision-making and allow the integration of allocation and reallocation decisions between existing and new proposals.
The financing of these programs must be as predictable as possible and coordinated with the program's requirements. Improving the information in cabinet documents so that they better support the decision-making process is a key objective of the new expenditure management system. Clear initial funding decisions, based on comprehensive information in Cabinet Memoranda, should lead to a clear alignment between program funding and objectives.
The need and objectives themselves may be time-limited or may involve innovative programming approaches that need to be assessed to ensure that the program achieves the desired objectives. Responsible and responsible stewardship of taxpayers' dollars requires the continued reassessment of the value of existing programs and the continued search for new, more cost-effective ways to deliver government programs that deliver results for Canadians and maximize value for money.
