OGGO Committee Meeting

    Welcome, everyone, to meeting number 43 of the House of Commons Standing Committee on Government Operations and Estimates, also known as the PBO's favourite committee, OGGO.

    Some hon. members: Oh, oh!

    The Chair: We're going to 5:30. We have a hard stop at that time, so I'm going to reserve the last five minutes, hopefully, to confirm the issue on the GG, as well as the letter to the CBSA. I know we have lots of questions, so I'm hoping we can just leave that to the end and get going right now.

    We have Mr. Giroux. Welcome back. It is always a pleasure to have you with us.

    Do you have an opening statement for us, sir?

     Good afternoon, Mr. Chair and members of the committee.

    Thank you for the invitation to appear before you to discuss our analysis of the supplementary estimates (B) for the 2022-23 fiscal year.

    I am joined today by my lead analyst on the estimates, Kaitlyn Vanderwees.

    These supplementary estimates outline $25.8 billion in spending, $20.8 billion of which requires approval by Parliament. Of note, the proposed spending related to budget 2022 will total $7.8 billion in these estimates, which brings the projected total for budget 2022 expenditures in 2022-23 to around $11.7 billion.

    Additionally, federal spending on the resolution of indigenous legal claims is set to increase by roughly $5.4 billion, given the government’s continued focus on identifying and resolving claims. The balance pertains to other new policy measures the government identified outside its standard financial cycle, that is, the budget or fall economic statement.

    A concern that I would like to point out is that the departmental results reports for fiscal year 2021‑22 have yet to be released. This means the government is asking parliamentarians to consider and approve all new spending in 2022‑23 without knowing what results were achieved in the previous fiscal year. Parliamentarians may wish to request that the government publish the departmental results reports no later than six months after the close of the fiscal year. This would provide parliamentarians with more time for ex‑post financial scrutiny and better information for assessing the government’s budget plans and estimates.

    Ms. Vanderwees and I would be pleased to answer any questions you may have regarding our analysis of the supplementary estimates (B) or other reports of my office.

    Thank you, Mr. Giroux.

    We'll start off for six minutes with Ms. Kusie, please.

    Thank you very much, Mr. Chair.

    Mr. Giroux and Ms. Vanderwees, thank you for being here.

    Monsieur Giroux, in your report on the supplementary estimates you said that from 2015-16 to 2020-21 the number of FTEs grew by an average of 2.3% annually, roughly from 342,000 to 391,000.

    I also have here a quote from The Hill Times saying that you estimate that “$2.3 billion of this additional spending is needed for the salaries and benefits of an expanding bureaucracy”, which would see the size of the workforce grow to around 409,000 jobs within five years.

    That $2.3 billion is quite a number. What is the guiding factor for the significant increases in the public service?

    It's mostly the recent and ongoing investments in various areas of government spending. For example, in the fall economic statement there were additional monies allocated to processing immigrant applications and additional funding for the CRA, so it's difficult to pinpoint one area specifically that's responsible for that growth. It seems to be rather widespread in the public service as the government increases its spending in various areas.

    I'm sure you are aware that external outsourcing is also growing significantly, with a 75% increase from 2015. Do you think the government is overpaying for services or projects as it increases spending on both personnel and outsourcing contracts?

     It's an interesting question for which I unfortunately don't have any answer, because we have not looked at the issue of outsourcing of contracts in the public service. Sadly, I cannot provide you an answer on that question.

    I mentioned that large number of $2.3 billion. To what extent are projected expenditure increases linked to inflation?

    They are to a certain extent linked to inflation, but they are mostly driven by the growth in the number of full-time equivalents. Inflation plays a role, of course, but that will probably be reflected later on as wage negotiations get to their conclusion, which could be compensating public servants for inflation or for slightly less than inflation. It's something that we'll be watching closely because it will have an impact on the overall personnel expenditures of the government.

    In your opinion, do you believe the personnel costs for the public service are in line with what is seen in the private sector in Canada?

    I think the growth has been faster in the public sector, generally speaking, than in the private sector, if memory serves me well. I'm saying that based on various Statistics Canada reports over the last few years, but I'd have to look at the numbers in more detail to provide you with a more detailed answer.

    Previously I mentioned growth from 2015-16 to 2020-21. In your report, you predict that the public service will go from 391,000 full-time employees to 409,000. As I mentioned previously with the link to the $2.3 billion dollars, do you think the government is allocating enough funds for these drastic increases to personnel in the public service?

    I think so, because we have arrived at that projection based on government plans that have been outlined in various budgets as well as updates or economic statements in the fall. That being said, should there be additional government initiatives announced in the coming months, then this number will probably have to rise, depending, of course, on the areas in which the government announces spending.

    Further to that, can you provide more information on how you are able to predict the growth of the public service?

    Yes.

    We look at various expenditures that are announced in the budget in the fall economic statement or in the most recent government documents and, using the nature of these government expenditures, we are in a position to determine how many public servants or FTEs that will translate into.

    For some measures, it's pretty straightforward—the government announces itself how many additional public servants will be hired—but for others we have to use rule of thumb or formulas that are pretty well known to us.

    In your report on the supplementary estimates, section 1 is titled “Why the Government Wants Another $21 billion”. Do you think the funds requested in the supplementary estimates could have been forecasted in either the supplementary estimates (A) or the main estimates?

    I personally think that some of them could have been, but the issue was probably one of readiness for supplementary estimates. It's quite possible that some of these expenditures were known but were not fully ready—for example, had not gone through the process of the Treasury Board, the group of ministers that oversees or scrutinizes expenditures—or they were not sufficiently developed by departments so that Treasury Board Secretariat did not deem them ready enough for inclusion in the mains or in supplementary estimates (A).

    Mrs. Stephanie Kusie: Thank you, Mr. Giroux.

    Thank you, Mr. Giroux.

    Thanks, Ms. Kusie.

    Mr. Kusmierczyk, you have six minutes.

    Thank you very much, Mr. Chair.

    Thank you very much, Mr. Giroux, for being here with us at OGGO once again.

    Just picking up on the conversation about the growth in the public service, in looking at the period from 2018 roughly to 2021 and looking at the information on GC InfoBase, we see, for example, an increase in full-time employees of about 3,000 for employment insurance. We see an additional 3,000 for tax services and processing at CRA. We see, for example, 500 additional FTEs for the Canada pension plan.

    At the same time, when you look at the total federal public service, it still represents, even with the increases, about 0.84% of the population, which is the same percentage proportion as back in 2010. In your opinion, is that a helpful number to look at to say that, yes, even though in real numbers it has increased, it's still relatively the same percentage of the Canadian population?

     I would say it is, indeed, a helpful number to put that into perspective. It's one thing to look at the absolute number. Compared to the average or to the Canadian population as a whole or compared to the labour force as a whole, it is, indeed, a good metric by which to look at the science of the public service.

    I would imagine that more Canadians means more, for example, inquiries about CPP, more inquiries regarding employment insurance and whatnot, so naturally, I would imagine that you would need more full-time employees to handle that.

    Is that one way of looking at it?

    It's one potential way of looking at it. By the same token, you also would expect that with more services moving online as opposed to in-person—as has been the case with the CRA, notably—there would be efficiency gains, especially with answers to questions from Canadians. The number of FTEs per million population would not necessarily be the same in 2022 as it was in 2010, but there may very well be other factors at play. So, yes, that's potentially one good explanation, but there are other factors to consider as well.

    Fair enough. That's a good answer.

    In your opinion, comparing, for example, the federal public service in 2010 to the federal public service today, are we asking our federal public servants to do more, would you say?

    I mean, we live in a much more complicated world. There are a lot more programs out there that this government has introduced. Are we asking, as well, the staff to do more, would you say? Is it fair to say that?

    That's a broad question. I don't think I am the best-placed person to answer that question.

    Okay, got you.

    Taking that into consideration, under the Conservative government, we saw dramatic cuts to the federal public service. I've heard the word “gutted” being used in terms of the cuts to full-time public servants.

    Does that have an impact on the level of service that the government is able to provide to Canadians—when you see dramatic cuts as we saw under the Conservative leadership?

    I wouldn't say dramatic cuts. It's true that the number of full-time equivalents went down from 2012-13 to, I think, 2014-15. It went down by a few percentage points. That doesn't necessarily have to translate into cuts to Canadians if the government, in reducing the number of FTEs, decides to reduce its operations in some very specific areas—for example, letting some programs sunset. It doesn't necessarily mean that services to the population that we expect to get as Canadians will themselves be cut. However, it's sure that if you reduce the number of FTEs, something has to give at some point. It may not be direct services to Canadians. It might be grants and contributions to some groups or some sectors. It can be internal services that the public service provides to itself. However, it's obvious that something has to give.

    Gotcha.

    Okay.

    I want to ask you as well.... We've heard, as well, concerns from some areas regarding the strategic policy review that the government has indicated that it will be taking up. There are some who are concerned that it might cause some job losses and whatnot.

     In talking about the fact that we've seen growth in the public service, are you able to speak about how you understand the goal of the strategic policy review?

    It's difficult for me to answer that because there haven't been that many details regarding the strategic policy review. That was mentioned in the budget. It was barely mentioned, if at all, I think, in the fall economic statement. We were told to wait for more details to be announced in the coming months, probably in budget 2023.

    It's hard for me to say more than that because I don't have any more information.

    Fair enough, Mr. Giroux.

    How much time do I have Mr. Chair?

    You have 16 seconds.

    I will yield all 16 seconds.

    Some hon. members: Oh, oh!

    Thanks, Mr. Kusmierczyk.

    Next we have Ms. Vignola, please, for six minutes.

    Thank you, Mr. Chair.

    Mr. Giroux, thank you for being here.

    In your report, it is noted that lapses in budgetary spending authorities have more than doubled compared with previous years. You also point out in the report that not receiving departmental results reports somewhat undermines the analytical work.

    My question will be simple for you, but it is more complicated for me.

    We know that lapsed funding has more than doubled. How does not having the departmental results reports impact our work? Departments have not tabled their reports. Is this a lack of transparency on their part? Is it common for those reports not to be tabled on time? Should there be legislation to impose a deadline for the tabling of these reports?

    Those are very valid questions.

    Such a delay in the tabling of the departmental results reports is unusual. To my knowledge, they have not yet been tabled, even though the fiscal year ended on March 31. By April 1, departments should have already prepared a good draft, with missing numbers, of course, since the year is not over. One would expect these reports to be released a few months after the end of the fiscal year, allowing time for translation and quality assurance measures.

    But you don't have these reports; no one does. This deprives you of information that could be important. If, for example, a department is asking for a lot more money each year, but is not meeting its own result targets, you would be entitled to rigorously question the officials and ministers involved about why they are asking for more money when they are failing repeatedly. This deprives you of critical information about departmental results when the government is asking you to approve funding for these entities. So there is a glaring information asymmetry.

    The government has the information and has access to it, of course. As parliamentarians, you don't have that access, but you are the ones who have to approve the funding. There is a significant information imbalance.

    As for legislating a deadline for releasing departmental reports, I would say that is a great idea. It would prevent departments from stretching the rubber band, every year, for the release of this information. There's nothing like a firm deadline to get people to work.

    One of the responsibilities of the members of this committee is to approve appropriations, and we can also request that they be reduced.

    Is it possible that departments are not submitting departmental reports on time so that we can't reduce their appropriations, given that they haven't used them all in the past? We could find that a particular department does not need new appropriations and should use its lapsed funding.

    Could this be a more or less unconscious tactic to divert the committee from its duties and responsibilities?

    That is an assumption, and I believe it will likely prove true over time.

    It is important to remember that departmental results reports are for parliamentarians, and they are approved by the ministers responsible for government organizations. So it should be fairly straightforward to get these documents approved.

    Are you knowingly being deprived of information that may be useful to you in asking departments uncomfortable questions? That's possible. Is it just nonchalance or laziness? That's also possible. Is it a combination of all three? It is quite possible. Either way, these concerns are entirely legitimate.

    Departmental reports are nothing new. As far as I know, they have had to be produced for decades. They are normal accounting reports that are part of a completely normal process.

    Is it understandable that a government that has been in place for seven years is still not able, at least this year, to deliver departmental reports in a timely manner?

    Absolutely not—

     I'm afraid I need about a 14-second answer.

    This is absolutely not normal, Mrs. Vignola, because the government is used to publishing these reports. Even if this was the government's first year in office, it would not be normal, as it's a pretty straightforward process for any government. In fact, I can give you an exclusive: there are going to be departmental performance reports to be published next year. So public servants can start preparing them.

    Mr. Johns, you have six minutes, please.

    Thank you.

    First, thank you for your important work, Mr. Giroux and Ms. Vanderwees. We really appreciate your being here.

    One of the votes being referred to this committee relates to the Department of Public Works and Government Services, which is seeking just under $136 million for supplies for the health care system.

    Can you speak about the economic benefits that can be generated by spending if the focus is placed on procuring supplies from domestic manufacturers?

    It can certainly generate and support a domestic industry, which, as we saw in March and April 2020, can be desperately needed at some critical periods in Canadian history. There are clear benefits to the economy, but also to the security of the country, in having these supplies produced domestically.

    From that perspective, that's one aspect in which I could answer your question.

    It's an important answer.

    We had a supplier in my riding, Wayward Distillery, that pivoted and supplied PPE to first responders and health care workers, and then the government had a flood of foreign hand sanitizer come in and it stepped in. They ended up losing $400,000 at the end of the day, because they got wiped out there. They were trying to help, and it was pretty sad.

    The PBO had a framework for monitoring COVD-19 spending, which seems to have been last updated in June 2021. From the beginning of the pandemic until now, do you know how much has been spent on procuring personal protective equipment?

    Do you have any sense of what portion of that spending benefited Canadian companies?

    No, I don't. I don't have that information.

    Okay. Thanks.

    I think it's important for us to try to figure that out in terms of economic leakages.

    Again, you talked about safety and security, and the importance of that. I hope that our committee will take time to study it. I'll be bringing forward a motion next week in that regard. I'll give some time to my colleagues to look at that.

    Earlier this fall, I tabled a motion that was adopted by this committee, which recommended the Auditor General conduct a performance audit to assess whether the Treasury Board provides adequate guidance to departments on developing credible cost estimates in make-or-buy decisions. In situations like the ArriveCAN app, we've seen that the cost of a project can balloon over time, and this has ballooned over time.

    Can you share your thoughts on whether you believe departments are currently able to generate credible cost estimates?

     It varies widely, and it depends on the specific sector and on the project. I haven't looked at ArriveCAN, so I can't comment specifically on that case.

    However, as you may be aware, I've done cost estimates in a variety of sectors, including National Defence procurement, which I think I talked about at this committee. The cost estimates vary widely when comparing our institution's and some government departments'.

    I'd say the capacity of government departments to provide accurate cost estimates is uneven, to be polite, and it varies widely, to be talking in plainer language.

     Where do you think the difficulties arise in developing credible estimates? Do you think there's a link with the increase in lapsed spending that we're seeing as well?

    It's difficult to determine why some government departments seem to have such a hard time coming up with reasonable cost estimates.

    Most of the time they're experts in their own area and they should have access to data more easily than we do in our office. They have the expertise. They have the means to get access to data that sometimes we don't, so maybe it's a question of interest or a question of willingness to develop these cost estimates. Maybe these public servants who are asked to do these cost estimates—I don't know—don't have the desire to have substantial or credible cost estimates.

    To be honest, it bedazzles me.

    Is it possible the departments are basically seeking more than they need because they're struggling to accurately estimate costs?

    There's a structural element to that. By legislation, the department cannot spend more than its authorities. If you are a chief financial officer, a deputy minister or an assistant deputy minister, the last thing you want is to “blow your vote”, as public servants call it, which means spending more than you are budgeted for.

    Therefore, there's a natural bias towards asking for slightly more to ensure that you will be able to deliver on your mandate without spending more than what you're authorized to spend.

    The system—

    I'm afraid I'll have to cut you off there, Monsieur Giroux.

    Mr. Chambers, welcome to OGGO.

    You have five minutes, please.

    Thank you, Mr. Chair.

    It's wonderful to see you again, sir.

    An welcome, ma'am.

    My colleague, Ms. Kusie, started talking about FTEs. Obviously, it's a large and growing expense of the federal government. That's a resource that the government uses to deploy its services to Canadians.

    One item I don't hear talked about a lot is productivity metrics. We spend a lot of time talking about how to encourage the private sector to become more productive. When we're constantly asked for additional resources in spending to increase the size of the public sector, often we're not also asking how we are holding ourselves accountable to ensure, from a productivity perspective, whether we're using new digital tools to help manage some of those costs, that we are delivering the services in the time frames and service standards that we set out for ourselves.

    GC InfoBase does not seem to provide a lot of comfort, at least in the recent time, that we are meeting a lot of those service standards across many departments. We don't have to get into each of those issues here, but how would you recommend parliamentarians think about metrics and productivity with respect to a growing public service?

    That's a broad-ranging question.

    We looked at one department in particular, which was the Canada Revenue Agency. They strive to be a world-class tax agency—or “strived”; maybe they changed internally. We found that they're average, roughly speaking. However, there doesn't seem to be any productivity metrics or measurements that I'm aware of or that I encountered. That seems to be in good part due to a taboo within the public service that if you try to measure productivity of public servants, it's seen as imposing a quota, like they have to go after that many taxpayers in a given day or week.

    Whereas, I think from a manager's perspective, it makes sense to have a sense as to who your good performers are and who you need to work with.

    That seems to be absent in the public service. Maybe it exists in some areas, but it doesn't seem to be closely tracked.

    Another issue that we looked at was the Indigenous Services Canada and Crown-Indigenous Relations performance metrics—their own metrics. They change them frequently and they don't meet them about half of the time.

    The public service seems to have a big problem or taboo about measuring its own progress or success. There are successes, but they seem to be sorely lacking.

     Thank you.

    I think Canadians would be okay with some of these issues if the service standards were being met within the service standards that the governments have publicly said they would hold themselves accountable to, but since we've seen operational challenges across many departments, I think this is now forcing parliamentarians to start asking what the productivity metrics are that we ought to be asking the public service to hold themselves to. That's in addition to the Treasury Board now publicly declaring that the new hybrid working environment is here to stay. That's a discussion they're having, obviously, with their employees.

    If this is the new way of working, I'm hearing from you that it would be a good idea to start focusing on the output of some of these departments to ensure that we're within the service standard. Is that fair? Should we be asking more questions about productivity? Should we be studying that? Is that something your office would look at, or is that something we should ask another officer?

    That's certainly something that you'd be fully entitled to ask. I would hope that you'd be able to get answers to these questions relatively easily. That's something that as managers in the public service they should be tracking fairly regularly.

    As to whether it would be through my office or the Auditor General's office, it would depend on the exact points you have in mind. I think the Auditor General or her office would probably be in a better position. She may not like me for saying that, but I think it's something that would probably fall better within the bailiwick of the AG.

    You just got off her Christmas card list, perhaps.

    Voices: Oh, oh!

    Mr. Adam Chambers: Thank you, sir.

    That's five minutes on the dot.

    Mr. Jowhari, you have five minutes, please.

    Thank you, Mr. Chair.

    Once again, Mr. Giroux and Madam Vanderwees, welcome to our committee.

    Mr. Giroux, you expressed some concern about the increase in lapsed spending. Can you unpack that by specific area? What are your thoughts around what you think the driver is for this lapsed spending?

    Thank you for your question.

    We see increases in lapses in public health due to COVID spending. We also see increases in lapsed funds in the indigenous portfolio due to the government's increased desire for reconciliation. These are usually related to claims and settlements. In the other areas, such as transport and infrastructure, this could be due to supply chain issues as a result of the pandemic. There were also strong weather events in the north, as mentioned by TBS at a previous OGGO meeting. Outside of that, it's hard to say without departmental results reports.

    I'll let Mr. Giroux continue.

    The implications of these lapses can lead to departments not being able to fully deliver on mandates that the ministers and the Prime Minister have given them. For example, if they are not able to fully spend in some specific areas, it may mean fewer land claims that get settled, or it can have impacts on the delivery of health care services to some communities. These are all hypothetical, of course.

    Lapses may also mean that departments asked for more than what they really needed, so it does not necessarily mean that it's a bad thing. Personally, as a taxpayer, I'd rather have government departments not spend just for the sake of spending if they don't need all the funds that have been allocated to them. However, it may indicate a mismatch between what government departments planned on spending and what was realistically achievable.

    Thank you.

    It was interesting that the notion of challenges within the supply chain and specifically labour shortages were highlighted in your response. Can you spend a little bit of time unpacking that for us and the impact on the lapse?

     Thank you.

    That was a response from TBS. I could go back and ask them further and get back to you in writing if you would like.

    Yes. I would appreciate it if you could do that.

    Next, the PBO recently reported that the CPI inflation is solidly on track to return to its 2% target. Can you elaborate on that? We are at 6.8% or 6.9%, I believe, and everybody is anxiously waiting for the next round of results as to inflation. When I read that, I said, “Oh, my God.”

     I welcome you here, and I ask that question: Can you shed some light into how we are tracking on the 2%?

    That's an interesting question. I've been asked that a few times in the last several weeks.

    We believe that the Bank of Canada probably will continue increasing its rate a little more. That, together with a marked slowdown that we have already seen happening in the world economy, will be contributing to reducing inflationary pressures, together with the supply chain disruptions that are being fixed across the world and energy prices hopefully stabilizing. Those are all the reasons why we think inflation will slowly and gradually return to within the 1% to 3% target range that the Bank of Canada has in mind.

    You said “gradually”. Do you have any idea around the length of time that is going to take?

    I'm afraid we're not going to have the length of time necessary to answer that.

    Perhaps you could submit it in writing, because that's our five minutes.

    Some hon. members: Oh, oh!

    The Chair: I'll allow Mr. Giroux three more seconds the next time around.

    We have Ms. Vignola. I am going to combine this two and a half minutes and the next. You'll lose your second two and a half minutes.

     It will be the same for Mr. Johns.

    You get one more at five minutes, and that will be it.

    You have five minutes, please, Ms. Vignola.

    Thank you very much, Mr. Chair.

    Mr. Giroux, the carryover of lapsed funds from one year to the next is currently limited to 5%. Is that a reasonable number? Should we increase it?

    Also, is there any point in carrying over these funds, when we see that the appropriations are not necessarily used, whether they are carried over or not?

    There is a carryover of 5% of lapsed funds for operating expenditures and 20% of lapsed funds for capital expenditures, but the 5% limit is the one that is most talked about. I think that's appropriate for a number of reasons, one of which is that it allows for some sort of reward for departments that manage their affairs well and don't spend all of their funds. So there is a small portion of funds that can be carried over to the next year. It also avoids what has often been referred to as “March madness”, where departments spend money only to use their entire budget. Much of this is myth, but there are also instances where it did happen.

    So I think this is a good practice. You could increase the limit on the carryover of lapsed funds from one year to the next to 10%, but if you increased it much more than that—for example, if there was no limit—it would bring instability and make forecasting government spending more difficult. That's the argument against it. If, for example, a department could carry over hundreds of millions of unused dollars from year to year, it would make budget forecasting much more difficult.

    I'll go back to the departmental reports.

    Normally, by April, departments should have completed them or be well on their way to doing so, where translation remains to be completed, in particular.

     If departments were required to table their departmental reports four to six months after the end of the fiscal year, would this have any particular effect on the parliamentary financial cycle, on the tabling of supplementary estimates (A), (B) and (C), and so on?

    If it had no effect on the cycle, which remained the same, would it make the cycle more efficient because the analyses would be more complete?

    I think that the same budget cycle could be maintained. It would be eminently more efficient for you, insofar as the departmental reports are useful to you—and I believe they are—if the departments that submit them take steps to ensure that the information in those reports is useful to you. I don't think that tabling these reports at the same time as the public accounts or by September 30 would make any difference to the rest of the budget cycle.

    I will ask you a more general question about lapsed funds.

    Over the years, have you noticed any patterns that repeat from year to year that would be important for us to know about?

    If so, to what extent are they related or unrelated to the COVID‑19 pandemic?

    The general trend that emerges is that, when the government increases spending, as it has since 2015‑16, the bureaucratic machine often has difficulty keeping up. When the government is in a period of expansion, it is difficult for the bureaucratic machine to spend to the same extent. Typically, it is during these times that we see an increase in lapsed funds. Conversely, when times are tougher, government spending growth is lower and lapsed funds tend to decrease. This seems to be consistent with the size of government.

    I will refer to the brief the committee received from Dr. Amanda Clarke of Carleton University. The brief states that spending on consulting services, specifically for information technology, has increased by 54% over the past five years, or an average of 10.8% per year. Contractors do not have the same conditions as public servants: pensions—

     I'm sorry, Ms. Vignola, but that's the time.

    Do you have a very quick question that perhaps Mr. Giroux can get back to us on? No. Okay, thanks.

    We'll go to Mr. Johns for five minutes.

    In your report on the fall economic statement, you noted that the federal public accounts are published later than most provincial public accounts and that the government continually falls short of the standard for advanced practice in the International Monetary Fund's financial reporting guidelines. Those guidelines recommend that governments publish their annual financial statements within six months of the fiscal year end.

    Do you have a sense of why the federal government continues to have issues with timely financial reporting, and can you maybe explain why six months is considered a best practice?

    There are probably two ways to answer the question.

    First, in response to your question of why, I'd say it's because they can; it's just because they can. The more honest answer would probably be because there's no hard deadline for government departments, the Treasury Board Secretariat or the government to be timely in their tabling of the public accounts. There's no deadline other than December 31, so work expands to fill the time available. They do that relatively well, and they've done that over the last several months. By saying that, I think I'm off the Christmas card list of many more people, but that's okay.

    Some hon. members: Oh, oh!

    Mr. Yves Giroux: Six months is a good practice, because it's seen not only as fully sufficient to provide accurate public accounts, but also to be meaningfully within a period of time when, if there's a need to course correct, it is still possible. When you have public accounts that are tabled in November or December, the fiscal year is already two-thirds of the way over, so, if you as parliamentarians see that there's a major issue with an area of spending—which has not been the case in Canada, but should that ever be the case—it's very likely too late to make any corrections to that wrong trajectory.

     Can you cite any jurisdictions where they are doing it much better?

    I want to say Australia, but I'd have to get back to you on specific examples that are appropriate and have relatively the same or comparable system of government, or are comparable.

    Thank you.

    In the PBO report on the 2021 supplementary estimates (B), it was noted that the PBO was collecting performance data from numerous federal departments and agencies. Is the PBO continuing to collect performance data? Is so, can you please provide details on the type of information being collected and from where.

    We regularly look at performance indicators of various departments, especially in areas that we know are of interest to parliamentarians. We do that on an ongoing basis when that information is available. For more details, I'll probably have to get back to you.

    Do you think the federal spending can be leveraged to better support the domestic PPE industry and generate both economic and national security benefits? Can you speak a bit on that.

    As one of the main purchasers of good and services in the country, it's clear that if the government wants to leverage its spending power and its contractual capacity, it can indeed contribute to the support, and even the development, of significant industries if it wishes to do so. It has clearly stated its intention to do that with the naval strategy, and it could certainly do the same thing with PPE.

    This month you published a report analyzing the fall economic statement. In it you compared economic risk scenarios put forward by the PBO and the Department of Finance.

    The PBO scenario depicts the possible implications of over-tightening of monetary policy, whereas the Department of Finance scenario depicts the consequences of persistent inflationary pressures that require tighter monetary policy.

    Which scenario do you believe is more likely and are we past the point where a soft landing is possible?

    I'm afraid I have to interrupt. I think I'll be off your Christmas card list.

    Would you be able to provide that in writing to the committee, please?

    We now have Ms. Block for five minutes.

    Happy birthday, Ms. Block.

    Some hon. members: Oh, oh!

    Thank you very much, Mr. Chair.

    Thank you to our witnesses for being with us here today. I was looking forward to having you here and being able to ask some questions about the supplementary estimates (B) and the report you put forward.

    First I want to go to something you mentioned in your opening statement. You said: “The balance pertains to other new policy measures that the government identified outside its standard financial cycle.” You identified the fall economic statement as being outside the standard financial cycle.

    What is the impact of introducing something new into the standard financial cycle on the information that we receive and all of the processes within our budgetary cycle?

    It's something that all governments, to my recollection, have done. It's nothing new.

    What was surprising in the fall economic statement was the number of spending items that were contained in one of the annexes. This annex listed all the spending items that had been taken or decisions made after the budget and before the fall economic statement. The list was quite long. For me, who follows government spending rather closely, I saw items there that I had never heard about. There were items there from decisions that were made on spending outside of the budget and fall statement normal cycle.

    It's not an issue in and of itself. Governments need to have that flexibility to make government announcements or funding decisions as they see fit. But the number of these measures suggests that the budget was not a firm, solid government spending plan if a couple of weeks or very few months after there were already a number of additional spending decisions that had to be made.

    It begs the question as to what the purpose of a budget is if a couple of weeks afterwards there are already new items appearing on the radar screen for new government expenditures.

     Thank you very much. I appreciate your pointing that out and providing that explanation.

    On page 6 of your report you highlight lapsed funding, and we've had a fair bit of discussion around that. You highlighted that lapsed funding has doubled. We don't know why that funding has lapsed, because the government has failed to release the departmental results reports and we don't have a commitment from the President of the Treasury Board as to when they will be tabled or made public.

    You've potentially described what the impact is on our ability to do the work that we need to do as parliamentarians, but in particular for this committee where we are mandated to scrutinize public spending, I want to ask you if the work of parliamentarians is being impeded by the fact that these reports are not being tabled in a timely manner.

    I think you're collectively in a better position to determine that than I am. I would think your work is negatively impacted if you don't know what the performance of government departments has been for the year that ended in March 2022. Here we are on December 1 and we still don't know how government departments did, yet you're on the point of approving almost the final numbers or the final spending items. Next time you'll have a serious opportunity to scrutinize spending. If you find that something went amiss in 2021-22, you'll see that it will be for the 2023-24 spending cycle. There will be a full year where if government departments have failed, they'll have had a free pass. I think that's detrimental to proper government accountability and scrutiny.

    Thank you very much.

    How much time do I have left?

    You have 10 seconds.

    Thank you.

    Thanks, Ms. Block.

    We have Mr. Bains for five minutes, please.

    Thank you, Mr. Chair, and thank you to our witnesses for joining us today.

    My first question is that the PBO's June Inflation Monitor found “that supply or sector-specific issues are a key driver of high inflation.” Can you please elaborate on that?

    We released a report a couple of months ago—I think maybe in June—where we looked at the main sources of inflation, and we found that a good part of inflation was due to supply chain disruptions. Domestic demand is of course one important factor, but it's not the only factor. That's what that sentence that you quoted refers to—foreign or even domestic, but mostly worldwide supply chain disruptions that are constraining supply and therefore contributing to upward price pressures.

    There was another statement in there that said, “rising energy and food prices are a global phenomenon”. Can you please elaborate on that as well?

    We also noticed, as is widely acknowledged, that energy prices have been under pressure worldwide in good part as a result of the invasion of Ukraine by Russia, and also due to strong demand in many countries for energy. Energy prices had increased significantly at the time we released that report, and food prices also shot up when there were significant concerns about supply related to the war in Ukraine and also some more localized issues related to food production. That's what we meant by that sentence. It's not a Canadian phenomenon; it's not a purely domestic phenomenon, but it's something that's affecting countries around the world.

    Thank you for clarifying that.

    Part of the green movement goals for PSPC includes the work that has been done to help green buildings and reduce GHG emissions by using sustainable resources. Do you believe that funding for these green solutions is a sound investment for the future?

     That's a good question, but it's a policy decision much more than something within my own bailiwick. I don't think I am the best placed to determine whether investments in greening government buildings are appropriate or inappropriate. That's up to you to determine as decision-makers.

    Sure, I'll move on.

    You mentioned that you had appeared before the committee previously to talk about the shipbuilding strategy. Can you please share with us your thoughts on the national shipbuilding strategy and how you believe resource allocation could be improved?

    On the national shipbuilding strategy, we looked at specific procurement projects, notably the Canadian surface combatants, and we found that the cost of procuring these 15 warships is expected to be significantly higher than was initially anticipated. Our last estimate for the development and procurement phase estimates the cost to be about $81 billion, if I'm not mistaken, whereas the initial estimates by the government were about $26 billion.

    There's a big discrepancy, which is in good part due to the time that has passed since the initial government estimate, and also due to design changes and many other decisions related to the design of the ships.

    I could elaborate a little bit more on that, but I think your question was broader and related to the national shipbuilding strategy, which I cannot comment on in its entirety because we haven't looked at the strategy in its totality.

    Thank you.

    How has the Parliamentary Budget Office incorporated gender-based analysis plus, GBA+, into this report?

    Give a brief answer, please.

    It's a Government of Canada policy. It's not something that we necessarily consider in each and every one of our reports.

    Thank you.

    Thank you, Mr. Giroux.

    Thank you, Mr. Bains.

    We have Ms. Kusie for five minutes, please.

    Thank you, Chair.

    I ended my last round of questioning on section 1 of your report on the supplementary estimates titled “Why the Government Wants Another $21 billion”, and my previous question was whether you think the funds requested in the supplementary estimates could have been forecast in either the supplementary estimates (A) or the main estimates.

    This is my follow-up question to that. Do you think the funds requested are going toward new programs or toward operational costs that should have been predicted at a much earlier time?

    It varies depending on the specific items. For example, there is significant money allocated to indigenous issues, notably claims settlements. On this one, it is much more difficult to predict the exact timing when funds will need to be disbursed, because it depends not only on the government's settling these claims but also on the aggrieved parties accepting the proposed settlement. It would probably have been very difficult for the government to anticipate that before.

    The same probably goes for additional support for Ukraine. It is difficult to determine exactly when the funds will be necessary.

    For other things such as the request by the Department of Finance for $2 billion to reduce backlogs of surgeries and procedures, this one could probably have been anticipated a bit sooner; but, again, others can debate that.

    On leveraging transit funding by the Department of Finance to build more homes, this was a budget measure. It could probably have made its way into supplementary estimates (A), but officials will probably say that it would not have been possible.

    We need to scrutinize each and every one of these big-ticket items to determine more precisely whether they would have been ready on time for main estimates or more likely supplementary estimates (A).

    That's very analytical. That's great. Thank you so much.

    I'm going to switch to another topic now.

    We are seeing the continuation of virtual work within the public service and the working model being redesigned both for more out of the NCR-type of rotational workplaces in addition to more working from home—virtual work, I should say. I shouldn't specify that it would be at home.

    On virtual work, has your office done any estimates of the percentile of the federal service that has migrated to virtual work and the impact of that on existing vacancy rates, both rented and owned properties, within the national capital region? Have you taken a look at any of that?

     No, we have not looked at that—not yet.

    Do you anticipate that you will look at that in the future given that when the Minister of Public Services and Procurement was here, she indicated that departments were beginning to evaluate their current or emerging work models and the number of employees who will be working virtually?

    Do you anticipate that you would get an idea as to what this potentially would look like in the future in terms of cost savings?

    Actually, this would be a good question: Would you know offhand the current rent for all buildings within the national capital region?

    To answer your last question, no.

    With regard to whether we have any study of vacancy rates and the impact of migrating to hybrid work arrangements, that's not currently on our work plan. However, should the committee wish us to do so, I would be happy to oblige.

    Okay. That's very encouraging. It almost sounds like a request for us to put a motion forward to evaluate this. Thank you so much.

    I have some more questions on the public accounts and how we can make them easier for Canadians to read and understand, but I will save that for a further meeting, Mr. Giroux.

    Thank you for being here today.

    Again, thank you for your work as well.

    Thank you, Ms. Kusie.

    We'll go back to Mr. Jowhari for five minutes, please.

    Thank you, Mr. Giroux.

    I'm going to go back to the question that was left unanswered.

    You indicated that you believe that, over time, we are heading in the right direction, between 1% to 3% of inflation.

    I was asking if you could give a guesstimate around the timing and how long it would take. What would your estimate be as far as the timing?

    In the current situation with the economic picture that we have right now, we anticipate inflation to gradually decrease over the course of next year. We estimate that probably by the middle to the end of 2024 we'll be in the 1% to 3% range. It will probably be at the upper end of that range, but it will be sometime by the end of 2024, assuming that there are no other unforeseen events that hit us as the war in Ukraine has.

    Thank you for that.

    Over the last while during the question period and often in the media, we hear our colleagues across the aisle talk about this being a homemade—our government—policy-driven inflation. Can you shed some light on that? What are your thoughts on it? Do you think it's all about the policies that we rolled out during COVID-19?

    I think government spending and government supports have, without question, contributed to inflation, and the Governor of the Bank of Canada has hinted at that. It's clear that when you inject money massively in an economy, it is bound to support prices; it supports demand. That was the intention, supporting—

     But it's solely their own doing.

    Absolutely not.

    There are supply chain issues, and we've seen that. People have talked extensively about the various supply chain issues with shops or factories shutting down in China, for example, or with the shipping of goods across the globe being interrupted by various events.

    Energy is.... Many energy commodities are traded globally, so the price of a barrel of oil, whether we produce it domestically or buy it from abroad, is influenced by external events.

    These are two very easy examples to understand that inflation has domestic but also external components. Food is also affected by energy prices, but it is also affected by shortages or lack of supply and increased demand in many parts of the world. There are a lot of factors that come into play when determining overall inflation, some of which are domestic and some of which are global.

    Thank you.

    In Richmond Hill, I have five community councils. One of the community councils is on affordability. A lot of my constituents were quite happy when we announced the $500 one-time top up on the rent and the $640 for dental care that went into effect today for those low-income families.

    These are the expenditures that our government has put on the table during this time that we say we need to make sure that we keep our powder dry, as you said, or need to be fiscally prudent. Some of the concern was around whether and to what extent it will impact inflation.

    If you could shed some light on that, it would be appreciated.

     That's a question that was asked of our office a few times, especially related to the affordability measures announced by the government in September on dental care, housing and the doubling of the GST credit. We call that “dental, rental and GST”.

     The total cost in one year is about, I think, $4.5 billion. We looked at the inflationary impact of that, and it's to the second decimal, so there's a very marginal upward impact on inflation, because it's a relatively small amount in the grand scheme of the national economy, and it's temporary.

    And our national economy is in what range?

    It's $2,700 billion.

    That's $2.7 trillion.

    It's $2.6 trillion or $2.7 trillion.

    Thank you very much.

    Thank you, Mr. Jowhari.

    Mr. Chambers, it's over to you, please, for five minutes.

    Thank you, Mr. Chair.

    Regarding the fall economic statement, in a summary your office put out, the government has claimed that it exceeded its savings target for last year by about $800 million because there were unspent COVID supports. How do you characterize that spending target achievement? Would you consider that a spending target achieved?

    “No” is the short answer. When that review was announced in budget 2022, it was supposed to be in this year or next. The budget was tabled in April, but the government in the fall statement claimed victory for something that happened before the budget. So to me that sounds like claiming that what you did in the past before the budget is sufficient to deliver on something you said you would do in the future. The time zones don't intersect at all when it comes to that specific review.

    Thank you.

    I'd also make the point that it's not run rate savings being achieved. That's a one-time spending that was not spent. So if the government has an objective of saving money over the long term, they have to find that money again every year in other programs.

    Next year we're projected to spend about $43 billion in interest payments on the debt. I think the Canada health transfer for next year is about $45 billion, and it is far exceeding, say, what we spend on national defence, for example, and some other large government programs.

     Is there a level of debt interest servicing costs as a percentage of expenditures that you think we should be paying attention to? I think the previous governor of the Bank of Canada, David Dodge, says he has in his mind about 10 cents of every dollar. I think we're close to nine and maybe pushing the 10 now. What are your thoughts on that?

    That's a difficult question to answer, because I think it boils down to policy preferences. Keeping that “debt servicing costs”, as we call them, lower as a proportion of tax revenues implies that decisions need to be made on areas of spending.

    All of that is to say that there is no magical number or line in the sand where things get out of hand or become catastrophically expensive, so there's no clear point where things are deemed to be unviable or too expensive.

     But it's true that if you compare the debt servicing costs with other government expenditures, they can seem to be very expensive and they can lead to difficult trade-offs if, for example, you have to spend more on debt servicing costs than you spend on transfers to persons and provinces, if we get there.

    I'll stop there.

    Thank you.

    At the finance committee earlier this week, you had an exchange with a colleague about the fundamental policy change on the workers benefit. I'm not sure we explored that fully, because we ended the exchange with your suggesting that there could be circumstances in which someone could be making a significant amount of money in a future year but still have a government benefit. You expressed some concerns about that.

     Could you just outline for us here what that policy change could mean and the results it could lead to?

     Sure.

    Quickly, the policy change you're referring to is the decision to provide the Canada workers benefit in anticipation to lower-income workers and middle-income workers, but to also not recoup these advance payments should these workers earn more than the maximum threshold. That last part was not announced in the fall economic statement.

    I took issue with the fact that that part was not transparently announced in the fall statement, and also with the fact that this change would mean that we could well end up with a situation where somebody who earns $20,000 in a year gets advance payments for the Canada workers benefit the next year, which I think is not a bad thing at all, but in that year for which he or she gets the advance payments, they make $100,000—because they've improved their own situation—and the government decides not to recoup these advance payments.

    My question is whether this is the best use of these funds to allocate money to those who earn more than the maximum under the Canada workers benefit.

    Thank you, Mr. Chair.

    Thank you very much.

    We're going to go to Mr. Bains for five minutes. Then, we'll finish off with Ms. Block. Then I need about one minute for some committee work.

    Mr. Bains.

    Thank you, Mr. Chair.

    Can you comment on how the estimates support Canada's immigration strategy?

    I can talk about the amount that's in the estimates for the immigration strategy. If my recollection is accurate, there is about $1.2 billion in voted authorities for Immigration, Refugees and Citizenship Canada to help the government deliver on its new immigration plan in which it seeks to increase the number of immigrants in the country to—I don't have the numbers in front of me—about 400,000 per year, if I'm not mistaken.

    Sure.

    Then, on your own analysis of the supplementary estimates, billions are for the resolution of indigenous legal claims. Are those discretionary?

    They are discretionary to a certain extent, in the sense that the government could decide not to settle these claims for a number of years. But at one point, it will likely become unavoidable to settle these claims, either by negotiations or—more likely, if the government were to not want to address these issues—through the courts.

    There's some element of discretion when it comes to the timing of these claims, but not that much discretion for the settlement of the claims themselves. The discretion is with timing.

    Thank you

    On a similar type of question, you have $4.8 billion for fighting the pandemic. Is that discretionary?

    I think this aspect is more discretionary. For example, there's funding of $1.8 billion to buy more COVID-19 rapid tests. The government could have decided to buy less or buy none at all, and leave that to other jurisdictions.

    There's also funding for Global Affairs to support public health measures in developing countries, which is, I think, discretionary. Similarly, there's funding for the Public Health Agency of Canada to provide $700 million to fund medical research and vaccine development, which is discretionary. Whether it would be a good decision to abandon that or not, I leave others to determine. There are other funding decisions that are discretionary, and they're under the COVID-19 funding rubric.

    As a final one, on $2.5 billion to help Ukraine, a western democracy fighting for its very existence, are those funds discretionary?

    I think they are, by definition, discretionary because my understanding is that there is no legal obligation for the Government of Canada to provide this funding. Again, “discretionary” does not mean that it's inappropriate. It's just that there's no legal obligation for the government to provide this funding.

     Thank you for your time.

    Thanks, Mr. Bains.

    We'll go over to Mrs. Block, please.

    Thank you very much, Mr. Chair.

    My question is perhaps a short one.

     In March of 2020, this government tried to pass legislation that would have given it the authority to spend money for almost two years with no scrutiny and no ability to hold it to account. As we talk about the situation we're in right now, without a hard deadline for the release of departmental results reports but yet a very tight timeline for parliamentarians to approve additional spending, the government may in part be accomplishing that goal of spending money with very little scrutiny and an inability to hold them to account.

     We've talked about the fact that there is no hard deadline for the release of these reports. As parliamentarians, what could we or should we be doing to rectify this situation and to change the current circumstances that we find ourselves in? How do we get a hard deadline put into our budgeting process?

    I think that with respect to having timely departmental results reports, one obvious solution that comes to mind is legislating a deadline of, for example, September 30, or six months after the end of the fiscal year and no later than, and inserting that into the Financial Administration Act. I think that would be the best solution to this so that you as parliamentarians get the departmental results reports in a more timely manner. Legislative amendments would be the way to go.

    Thank you very much.

    Thanks very much, Ms. Block.

    Mr. Giroux and Ms. Vanderwees, thanks for joining us today.

    Before you go, though, I have just a couple of questions, if you don't mind. As chair, I'd like to exercise my prerogative.

    I'm wondering if the PBO could get back to the committee on the following if you can't answer it now. I'm curious about the impact of higher energy prices and energy exports on federal revenues. We received a note back from Finance Canada saying that this didn't necessarily have a positive impact on revenues, which I find very odd. I wonder if you could get back to us on that.

    Then, if you don't mind, I'm wondering if have the administrative costing of the dental program, both as a lump sum and also as a percentage of the overall cost, and if you have that available now.

    I'd have to get back to you on that so I do not give you inaccurate numbers.

     I've heard rumours floating around that it's quite excessive, so I'm quite curious to see how much we're actually spending on administration rather than actual delivering to folks.

    That said, thank you very much to the two of you for joining us.

    Committee, I just have a couple of very quick items before we see if we can adjourn.

    We've sent around the information regarding the GG study. It's the years that we're going to choose, which were chosen by the analysts. I have to ask if the committee approves these time periods.

    Some hon. members: Agreed.

    The Chair: Perfect.

    The second one is a letter that was prepared regarding CBSA. Can we get approval for that?

    Some hon. members: Agreed.

    The Chair: Wonderful. Thank you very much.

    Mr. Baker, thanks for joining us today. I'm sorry you weren't able to join in.

    Mr. Collins and Mr. Chambers, thanks for joining us.

    For the PBO, again, it's always an absolute pleasure to have you with us. Thank you very much. I appreciate it.

    We are adjourned.