Ask the President of the Treasury Board about whether spending will be going up or down in 2013-14 and he’ll tell you that it’s going down.  Ask the Minister of Finance and he’ll say it’s going up.  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?

There is considerable dissatisfaction with Parliament’s role in the scrutiny of government spending, both among parliamentarians and outside observers. They are asked to approve billions of dollars of spending, without much detail as to what is included in the Estimates.  There is a delink between what the Minister of Finance’s spending track set out in the Budge and the Estimates. We have raised this disconnect between the Estimates and the Budget on numerous occasions.  The Auditor General of Canada has also raised the issue but with no success. There have been three reviews of the estimates process (1), containing over 90 recommendations, but few changes have been made. 

It is time for a major rethinking of the purpose and scope of the Estimates. They remain entrenched in the dark ages. 
Although the government, as a sovereign entity, can set its own accounting policies, for the budget and the Public Accounts, it has nevertheless adopted the accounting standards set by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA).  These are the accounting standards upon which the Auditor General expresses his opinion as to whether the government’s financial statements are presented “fairly” and on a “consistent basis”.  The Public Accounts contain a detailed reconciliation between the budget forecast and the final audited financial results for that fiscal year in a section entitled “Financial Discussion and Analysis”. Changes in accounting standards issued by the PSAB have been adopted over time to make the financial statements more comprehensive and relevant.

There is no independent outside body that recommends accounting standards for the Estimates.  These are decided by the Treasury Board and Parliament. Unlike the Public Accounts, the Estimates have changed very little over time, even though the Estimates provide the details of the spending requests by departments and agencies, which parliamentary committees review and Parliament votes on.  To be relevant, they need to be linked directly to the Budget of that year, which sets the overall economic and fiscal context and the aggregate expending level for the upcoming fiscal year. 
In order to be linked to the Budget, the Estimates should be on the same accounting basis and coverage.  But they are not.  The Estimates are on a cash basis of accounting whereas the Budget is on an accrual basis. Accrual accounting recognizes revenues when they are earned not when the cash is received and expenses when a liability is incurred and not when the cheque is issued.  The Estimates ignore large components of spending, which are included as expenses in the Budget.  There are inconsistencies in the treatment of what constitutes spending for the Estimates.

To be relevant, the Estimates should be tabled after the Budget, not before.  Yet in six of the last eight years, the Estimates have been tabled before the budget.  As a result, they do not reflect the most latest economic assumptions and policy decisions.  They are out-of-date the moment the Budget is tabled. 

We believe that some of the differences can be resolved quite quickly and would eliminate much of the confusion between the Estimates and the Budget.  There is one contentious issue – the adoption of accrual accounting for appropriations (the spending requests voted by Parliament). According to the Auditor General, accrual appropriations would provide Parliament with the same basis and approval over voted spending as the government’s overall financial plan and summary financial statements.   Treasury Board has been examining this issue for many years.  The Auditor General, on numerous occasions, has stated that the government’s progress in implementing accrual appropriations has been unsatisfactory.  The Auditor General has encouraged the government to complete its studies of accrual-based budgeting and appropriations and determine whether or not it will implement accrual appropriations in the future (2).  This was also the first recommendation of the Standing Committee on Government Operations and Estimates latest review of the estimates process.

Reconciliation of the Sources of Authorities to Authorities Used

Before attempting to reconcile the Estimates to Budget, there needs to be a reconciliation between the Estimates granted during the fiscal year to what was actually used.  The Table 1 reconciles the “Sources of Authorities” to the “Uses of those Authorities” (3).  The “Authorities” include the Main and Supplementary Estimates tabled by the President of the Treasury Board, plus authorities carried over from previous years and adjustments, warrants, transfers and other.

To date, no Supplementary Estimates have been tabled for 2013-14.  This will occur during the course of 2013-14, thereby increasing the Total Estimates tabled for the fiscal year.   The amount included for “Available from previous years” for 2013-14 comes from the Public Accounts 2012. 

Table 1: Estimates: Authorities and Uses             Actual               Forecast

$ billions     2010-11 2011-12 2012-13   2013-14
Sources of Authorities        
    Main Estimates          261.2      250.8       252.9      252.5
    Supplementary Estimates              5.7          9.1           7.1            ?
    Total Estimates          266.9      259.9       260.0      252.5
    Available from previous years             1.9         1.9          2.0         2.0
    Adjustments, warrants, transfers, etc.            -1.6        -0.6            ?           ?
    Reconciliation             2.2        -0.9            ?           ?
    Total             2.5         0.4          2.0         2.0
  Total Authorities         269.4     260.3      262.0      254.5
Not Used        
  TB Vote 5            -0.2       -0.8         -0.8        -0.8
   Lapse          -11.1       -8.8         -4.5        -4.5
   Available for use in future years            -1.9       -2.0         -2.0        -2.0
   Total          -13.2     -11.6         -7.3        -7.3
Used in Current Year         256.2     248.7       254.7      247.3

In addition, there is a difference between Total Estimates, tabled by the President of Treasury Board, and those in The Public Accounts.  In order to compare the Authorities Used to the final audited results, this difference needs to be accounted for.  No estimate was made for 2012-13 and 2013-14, given the volatility in previous years.

This results in total authorities available for use of $269.4 billion for 2010-11, $260.3 billion for 2011-12, $262.0 billion for 2012-13, and $254.5 billion for 2013-14.

During the course of the fiscal year, some of these authorities are not used.  These include the Contingency Reserve (TB Vote 5), the “lapse” and authorities to be used in subsequent years.

The Treasury Board Secretariat includes a Contingency Reserve in the Estimates to fund in-year requests approved by the Treasury Board, but awaiting formal Parliamentary approval. Once the latter is received, departments/agencies are required to repay the Contingency Reserve.  The Contingency Reserve is not included in the Budget on the assumption that it will repaid in full by the end of the year.

Departments/agencies can only spend funds appropriated by Parliament.  They are not allowed to exceed their appropriations.  To ensure that they do not exceed their appropriated limits, they usually wind up spending less.  New policy initiatives usually take more time to be implemented than assumed in the Budget, therefore resulting in less spending that originally assumed.  As a result, they usually do not use all of their authorities.  This is called the lapse. 

The “under” spending or lapse for 2010-11 and 2011-12  was usually large given that the funds earmarked for the various stimulus programs under the Economic Action Plan were not all required in that year. A normal profile is estimated for 2012-13 and 2013-14.

This lapse refers to under spending in the Estimates, not what may be included in the Budget projections. As the Estimates do not play a major role in setting the Budget spending forecast, the Estimates “Lapse” is not applicable for Budget planning purposes. 

Finally, some of the authorities not used are earmarked for use in subsequent years.

The above adjustments from the “Source of Authorities” result in the Authorities used in the current year.

Reconciliation of the Authorities Used to the Public Accounts and Budget

The Authorities used are on a different coverage and accounting basis than the spending projections in the Budget or in the final audited results in the Public Accounts.  Table 2 attempts to reconcile the difference between the two set of spending numbers.  For the period 2010-11 to 2011-12, the reconciliation of the authorities used is compared to the final audited financial results in the Public Accounts .  These results are then used to reconcile the differences between the authorities used and the forecasts of spending presented in Budget 2013.

The net difference in 2010-11was $17.8 billion and in 2011-12, it was $26.3 billion.  It is estimated at $25.4 billion in 2012-13 and $35.4 billion in 2013-14.  Estimates for the latter two years will change as more updates and final results become available.  As noted above, the Estimates for 2013-14 do not include any Supplementary Estimates, which should reduce the difference between the Budget/final results and Estimates for that fiscal year.

The following attempts to reconcile these differences, by the source of the difference.

Table 2: Reconciliation between Authorities Used and Budget/Public Accounts

                                                                           Actual                  Forecast                

$ billions  2010-11  2011-12  2012-13  2013-14
Authorities Used      256.2      248.7      254.7      247.3
  Net to gross        
    Crown corporations         3.3         4.1         4.1          4.2
    External revenues         3.9         4.1         4.1          4.2
  Change in Statutory Programs        
    Major transfers to persons         0.0         0.0       -1.3         -1.2
    Major transfers to other levles of gov't          0.0         4.3        3.0          3.9
  Tax Credits/Expenditures        
    Canada Child Tax Benefit       10.1       10.0      10.2        10.3
    Other         3.5         3.6        3.7          3.9
  Consolidated Specified Purpose Accounts        
    EI Operating Account: Administrative costs            1.7          1.7
  Accrual Adjustments        
    Public debt charges         3.0          3.2        2.1          2.6
    Veterans' pensions and allowances        -2.5        -2.4       -2.5         -2.5
    HST harmonization liabilities        -3.8        -0.9    
    AECL environmental liabilities            2.4  

    Tangible Capital Assets

       Capital spending        -6.4        -4.4       -4.4         -4.6
       Amortization of capital         4.8         4.9        4.9          5.3
       Loss on disposal of capital         0.1         0.2    
    Personnel         4.9         4.2        4.3          4.4
    Other        -1.3        -2.2       -2.2         -2.2
    Budget measures           -2.3          0.7
    Unallocated        -1.8        -1.2       -1.2          7.4
    Total       17.8       26.3      25.4        35.4
Public Accounts/Budget 2013     274.0     275.0     280.1      282.6

Net to Gross Adjustment

The budget presents expenses on a gross basis, while the Estimates are presented on a net basis. In other words, certain revenues are netted against related spending in the Estimates, thereby reducing spending accordingly.  For example,  revenues received by the RCMP for policing services in provinces and external revenues received by consolidated Crown corporations are included as revenues in the Budget but are netted against spending in the Estimates. To obtain a more comprehensive picture of total spending, the PSAB recommends that these revenues be included as part of budgetary revenues and not netted against spending.  This amounts to over $8 billion a year.

Change in Estimates of Statutory Programs

The spending estimates for statutory programs, such as major transfers to persons and other levels of government, should be based on the latest economic data contained in the Budget for that year.  If the Estimates are tabled before the Budget, the Estimates’ projections for statutory programs will need to be adjusted to reflect what is in the Budget.  This adjustment various significantly from year to year. It could easily be avoided if the Budget is tabled before the Main Estimates.

Refundable Tax Expenditures

Eligibility and amount of the benefit for a number of programs are determined through the tax system.  However, they do not affect an individual’s tax liability.  PSAB considers such programs as part of spending and recommends that they should not be netted against budgetary revenues.  As a result, they are included as part of spending in the Budget.  However, they are not included as part of spending in the Estimates.  These include the Canada Child Tax Credit, the Working Income Tax Benefit, Refundable Medical Expense Supplement, Canadian Film/Video Production Tax Credit, among others. Their value is estimated at over $14 billion in 2013-14.  There is also an inconsistency in the Estimates.  The Estimates exclude the Canada Child Tax Credit but include the Guaranteed Income Supplement, even though eligibility and the amount of the Guaranteed Income Supplement are determined through the tax system.

The latest review by the Standing Committee on Government Operations and Estimates recommended that departments and agencies include tax expenditures in their reports and that standing committees review tax expenditures on a cyclical basis (recommendations 12 and 13).

EI Operating Account

Prior to 2012-13, the Estimates, tabled by the President of the Treasury Board included both employment insurance benefits and the administrative associated with operating the program.  However, since 2012-13, the Estimates only include employment insurance benefits but exclude the administrative costs associated with the program.  Administrative costs are included in the Budget as spending. To be consistent, these costs should again be included in the Estimates.
Accrual Adjustments

In 2003, the Government adopted full accrual accounting as its accounting standard for the Budget and the Public Accounts.  Accrual accounting recognizes revenues when they are earned, not when the cash is received.  Accrual adjustments include the value of liabilities incurred during the course of the fiscal year for which no settlement has been made.  They include the amortization of interest on public debt, liabilities with respect to federal employee pension plans and other future benefits, liabilities with respect to outstanding court claims, guarantees, loans, receivables/payables, etc. In contrast, the Estimates present appropriations on a cash basis. 

The Estimates include payments to current veterans whereas the Budget only includes the future costs of the benefits. In the Budget, capital is amortized over its economic life, whereas the Estimates include the costs of capital acquired in that year. 
As noted above, Treasury Board is examining whether appropriations should be put on an accruals basis.  A reconciliation should be provided until such time this issue is resolved.

Budget Measures

When the Main Estimates are tabled before a Budget, they do not include any of the policy initiatives and restraint measures proposed in that Budget.  Even Supplementary Estimates tabled during the year rarely include the impact of the restraint measures as Estimates primarily only seek Parliamentary approval for increases in spending, not decreases.    


After taking the above adjustments into account, there is still a difference, especially in the forecast years.  The adjustments are relatively small for the period 2010-11 to 2012-13, possibly reflecting under-estimation by the Department of Finance of the difference between the final outcome and the Authorities actually used.  For 2013-14, the adjustment amounts to $7.4 billion. This is not surprising as no Supplementary Estimates are included for 2013-14. Also, the Budget 2013 forecasts of total expenses for 2012-13 and 2013-14 are subject to change, once final audited financial results become available. 


We can think of no reason why, at a minimum, the Estimates cannot be adjusted to include the grossing of spending, refundable tax credits, and the EI Operating Account.  In addition, if the statutory programs and/or new policy initiatives are not consistent with the budget projections, this should be documented.  We are not optimistic that appropriations will ever be on an accrual basis or that the Estimates will again be tabled consistently before the Budget. However, regardless of any changes made, a detailed reconciliation of the differences between the Estimates and the Budget is essential.  This would greatly improve transparency and credibility of the Estimates.    


1. House of Commons Standing Committee on Procedure and House Affairss: "The Business of Suplly, Completing the Circle of Control", Fifty-First Report, 1st Session 36th Parliament December 1998

House of Commons, Standing committee on Government Operations and Estimates, "Meaningful Scrutiny Practical Improvements in the Estimates Process" Sixth Report, 2nd Session of 37th Parliament September 2003

House of Commons Standing Standing on Government Operations and Estimates, "Strengtening Parliamentary Scruting of Estimates and Supply", 1session of 41st Parliament June 2012.  

2. For more information see Public Accounts of Canada 2012 Section 2 page 2.41

3. Public Accounts of CAnada Volume II Table 5.

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