Budget watchdog cautions MPs on $5.4B sought in new spending

The amount of money the federal government is seeking in new spending from Parliament may require more detailed scrutiny by MPs, says Canada's budget watchdog.

Treasury Board president Tony Clement is now seeking, through the latest supplementary estimates tabled on Nov. 7, an additional $5.4 billion in spending from Parliament.

But parliamentary budget officer Jean-Denis Fréchette is telling MPs it is unclear whether all of the $5.4 billion is actually needed given the fact the government has been unable to spend approximately $10 billion it sought from Parliament each year for the last three years.

"Parliamentarians may wish to seek clarification regarding why this level of unspent money remains so high, what measures will be undertaken by departments and agencies to ensure that spending directed by Parliament occurs, and whether all of the $5.4 billion sought in these supplementary estimates is actually required," a report by Fréchette concludes.

The additional $5.4 billion in spending sought from Parliament would bring the amount of money Ottawa is authorized to spend in 2013-14 to approximately $259.9 billion, 0.3 per cent higher than what the government was allowed to spend last year.

Budget transparency

While it is not unusual for departments not to spend all of the money authorized by Parliament for fear of exceeding their limits — what is unusual here, according to Fréchette, is that the amount of money approved by Parliament but going unspent has been increasing over the past few years. This is generally referred to as "lapsing authorities."

In an email to CBC News, Fréchette said, "What is unusual in this instance is the size of the lapses and the consistent upward trend that we’ve seen over the past few years."

In the interests of budget transparency, and in keeping with OECD guidelines on budgeting, the government needs to provide Parliament with an explanation.-  Jean-Denis Fréchette, parliamentary budget officer

The budget officer's report indicates that "lapses have consistently grown over the past decade, rising to a high of $11.2 billion or 12.1 per cent of the budgetary authorities in 2010-11."

While departments are allowed to carry forward unspent funds from one year to the next with Parliament's approval, that still does not account for the majority of the money the government has been unable to spend over the last three years.

To date, the federal government has not provided Fréchette​ with an explanation for why it is asking Parliament for more money than it spends.

Fréchette told CBC News "in the interests of budget transparency, and in keeping with OECD [Organization for Economic Co-operation and Development] guidelines on budgeting, the government needs to provide Parliament with an explanation."

The parliamentary budget officer noted: "I continue working on a parliamentary approach to see if we could find a mechanism whereby the government can provide the information that PBO requires in order to fulfil our legislated mandate."

Deficit slashing?

The federal government is seeking an additional $5.4 billion for transfer payments and subsidies to third parties, increases in the operating budgets of certain departments and agencies, as well as new spending measures announced in the March budget, according to Fréchette​'s report.

The government is proposing that a large part of the $5.4 billion go towards spending for programs managed by Public Works and Government Services Canada, Public Safety and Emergency Preparedness Canada, Aboriginal Affairs and Northern Development Canada and the Treasury Board of Canada.

Fréchette says over half of the additional funds the government seeks is aimed at increased transfer payments, including for negotiating First Nations' claims, and to reimburse costs for natural disasters, such as the $2 billion the federal government promised Alberta in flood relief.

The report makes it a point to note the amount the federal government is giving Alberta through the Disaster Financial Assistance Arrangements fund is approximately the same as the fund has paid out to provinces over the last 40 years.

The remainder is earmarked for departmental operating budgets, including almost $1 billion to cover accumulated severance benefits for public servants. The government's cost-cutting measures have eliminated approximately 20,000 positions over the past two years.

As well, the estimates contain $925 million in new spending initiatives, including funding for enhanced funeral benefits for veterans.

In July, the data on quarterly expenditures in the federal government showed that by the end of the last fiscal year in March, the department of national defence had spent $2.3 billion less than what was allocated by Parliament in a trend described as deficit slashing by stealth.

According to Kevin Page, the former budget watchdog, the primary reason for the lower than anticipated federal deficit announced earlier this year is that "departments like the Department of National Defence and Infrastructure Canada were not spending the monies they were authorized to spend."

In an email to CBC News on Monday, Page said, "Parliament needs to see the departmental spending plans consistent with the budget that show where the cuts are taking place and what is the strategy to maintain service levels. Without these plans, there is no accountability. Confusion continues."

Last month, Ottawa reported the deficit in the year 2012-13 was about $7 billion less than it calculated, with the majority of the savings due to cost cutting.

Finance Minister Jim Flaherty's latest economic update said the federal government is on track to balance the budget by 2014-15 with a projected $3.7 billion surplus in 2015-16.

The government announced in the last throne speech that it will reintroduce an operating freeze on departmental spending for two years beginning in March 2014.

The operating budget freeze is expected to generate savings of approximately $500 million in 2014-15 and $1.1 billion in 2015-16.

Treasury Board was not immediately available for comment.