NO TRANSPARENCY OR ACCOUNTABILITY: A MISSED OPPORTUNITY
When Budget 2014 was tabled before Main Estimates 2014-15, we were naively hoping that the President of the Treasury Board would provide a detailed reconciliation between spending in the Main Estimates and spending in the Budget for 2014-15. No such luck. No reconciliation was provided.
Ask the President of the Treasury Board about how much the government will spend in 2014-15, and he’ll say it’s $239.1 billion. Ask the Minister of Finance and he’ll say it’s $279.2 billion. Who is right and why the conflicting answers? The Minister of Finance will likely be more accurate than the President of the Treasury Board. But why the confusion and why can’t Canadians and Parliamentarians get a straight answer?
As in previous years, the Main Estimates were again based on the economic assumptions and spending projections in the fall update and not those in the Budget. As a result, Parliamentarians and Canadians will again be kept in the dark about how much the Government intends to spend in 2014-15.
In addition, to make the confusion even worse, the Main Estimates for 2014-15 exclude employment insurance benefits, one of the largest spending programs of the Government. In previous years these benefits had been included. No reason was given for this exclusion.
Parliament’s fundamental role to review and approve government spending will continue to be undermined. Parliament will be asked to approve billions of dollars of spending, with little information as to what is included in the Estimates and how they are linked to the Budget. The last time the Government provided a reconciliation was in Budget 2007. The Parliamentary Committee on Government Estimates and Operations, along with others, have raised this disconnect between the Estimates and the Budget on numerous occasions, with no success. The Government’s response as to why the Main Estimates should not be on the same basis of accounting as the Budget lacks substance and credibility.
Total government spending in the Main Estimates for 2014-15 is nearly $44 billion lower than what Mr. Flaherty has indicated that the Government will spend in 2014-15. This difference reflects a number of factors, including coverage, the netting of spending in the Estimates and the use of different accounting concepts.
Most of the difference is attributable to coverage. The Main Estimates exclude employment insurance benefits and administration costs ($19 billion), child benefits ($10 billion), and refundable tax credits ($3.7 billion). This accounts for about $33 billion of the difference. The budget reports expenses on a gross basis while the Main Estimates report spending on a net basis ($8.5 billion).
The budget reports expenses on an accrual basis of accounting, which recognizes liabilities when they are incurred, not when the cash is paid out. In contrast, the Estimates are on a near-cash basis of accounting, recognizing most expenditure when the cash payment is made.
The difference between accrual and cash varies significantly from year-to-year. For example, Budget 2014 includes a liability of $2.9 billion in 2013-14 for the potential costs associated with the Alberta floods and the Lac Megantic rail disaster. However, the cash disbursements for these disasters will be made out over a number of years and will only be included in the Main Estimates when Parliamentary approval is granted.
It is difficult for an outsider to estimate the impact of the difference between accrual and cash accounting. However, this number should be readily available from the Treasury Board Secretariat and the Department of Finance. They don’t seem to be interested in providing this reconciliation.
The Main Estimates will not include any of the new spending initiatives or reductions proposed in the Budget. However, for 2014-15, this is not expected to be very large. The savings identified in Budget 2014 for the proposed 50:50 cost-sharing of the Public Service Health Care Plan are on an accrual basis of accounting. In contrast, the savings in the Main Estimates will be on a cash basis and will be significantly smaller. The savings associated with the re-profiling of defence spending should offset the costs associated with the introduction of the new spending initiatives.
The Estimates consist of the Main Estimates, tabled before March 1st, and up to three Supplementary Estimates, tabled during the course of the fiscal year. Supplementary Estimates present information on spending requirements that were either not sufficiently developed in time for inclusion in the Main Estimates, primarily new initiatives proposed in the budget, or have subsequently been refined to account for adjustments to particular programs. In 2013-14, the spending requests in the three Supplementary Estimates amounted $6.5 billion. This was roughly comparable to what was requested in previous years. We would expect roughly a similar amount in 2014-15.
Finally, as witnessed in previous years, not all of the monies appropriated by Parliament will be spent. In previous years, this lapse has amounted to about $11 billion. No estimate of how large this lapse could be is provided in the Main Estimates. However, the Budget forecast does include an estimate of this potential under spending or lapse, but it is not reported. Only the Department of Finance can provide us with this estimate.
The tabling of the Main Estimates represents a missed opportunity for Parliament. We were hoping it would be different this year, given that the Budget was tabled before the Main Estimates. Once again, the government has shown its disrespect for Parliament and transparency and accountability. This should not be a surprise to anyone.