CCA Bulletin 17/09

June 11 , 2009

CCA Covers Federal Review Processes

Just the Facts

The recent announcement of strategic reviews including the CBC, the National Film Board and the Canada Council for the Arts has triggered some understandable concerns within the arts and culture sector.  To help understand this process and its possible consequences, this bulletin will aim to clarify the types of expenditure review processes underway across the full range of federal departments and agencies. If there is any question about how carefully government spending is monitored, the review process outlined in this backgrounder should allay any fears of abuse or lack of accountability!

The Expenditure Management Information System

The Expenditure Management System was first introduced by the Liberal government of Prime Minister Jean Chrétien in the 1990s as a good management tool. This annual process requires every department and agency to identify areas of lower priority which can then be allocated to higher ones. The funds identified can be reallocated within the department or agency in question or, in theory at least, be sent back to Treasury Board for other governmental priorities.

The rationale for the Expenditure Management Information System (EMIS) is described by the Treasury Board.

“The core mechanism is the Budget planning process. Ministers and Cabinet committees play integral roles in this process. Ministers have opportunities to bring their priorities forward in consultation with their colleagues. They will identify significant new spending initiatives, which generally reflect major policy themes, and fund these initiatives at Budget time through concurrent reductions to, or the elimination of, lower priority programs. Cabinet will drive an integrated Budget process, drawing on the advice and recommendations of the key stakeholders who include Members of Parliament and the public. (…)

There will be no central policy reserves to fund new initiatives. Departments will have to operate within their existing resource levels. The funding of new priority initiatives through reallocations from programs considered a low priority will have to take place during Budget preparations.”

The Strategic Review of Expenditures

A further process referred to as a Strategic Review of expenditures has been introduced by the present government in 2007. The Strategic Review process is described in terms remarkably similar to the EMIS:

“Strategic reviews are assessments of all direct program spending to ensure programs are managed effectively and efficiently. These reviews support a more rigorous results-based approach to managing taxpayer dollars responsibly and delivering effective and efficient programs that can better meet the priorities of Canadians.

As part of the strategic review process, departments will review their direct program spending and the operating costs of their major statutory programs on a four-year cycle to assess how and whether these programs:

Through the strategic review process, departments will also determine whether there are any lower priority, lower performing programs for possible reallocation of funding to higher priority, higher performing programs within the department or government.”

The main difference with EMIS resides in the frequency and the transparency. The Strategic Review happens on a four-year cycle and has a target figure of 5% of the budgets for reallocation to higher priorities, within the Department or agency or else, to other government priorities. A list of departments and agencies is selected for inclusion in the strategic review exercise for each year. The results of strategic review process are reflected in the next federal budget and the Main Estimates.

This new review has been characterized as part of the federal budget process and therefore protected from public disclosure as to how the decisions to reallocate or eliminate programs or areas of activity are identified. This was the case the members of the Standing Committee on Heritage discovered when they asked for the rationale behind the spate of cultural program cuts announced last summer at the Department of Canadian Heritage and at the Department of Foreign Affairs. In the case of Heritage, the money has stayed within the Department but has been moved from arts and culture programs to other priorities, namely Official Languages, the permanent increase of $30 million to the base budget of the Canada Council and the Olympic Torch relay. The secrecy surrounding the Strategic Review has given rise to the suspicion that this is a politically driven exercise rather than a pure “value for money” process.

As mentioned above, the CBC, the National Film Board and the Canada Council for the Arts are scheduled to be part of the 2010 exercise, currently underway, a fact that has raised concerns within the arts and culture sector as each organization risks losing respectively $50 million and $9 million to its Parliamentary appropriations. It will be the Cabinet’s decision when it deals with next year’s budget whether those agencies can keep the funds and redirect them to higher priorities or new activities. The Standing Committee on Canadian Heritage has recommended that the cultural programs and services be exempted from the strategic review process; however, there has been no indication that this is likely to happen.

Program Evaluation Process

Each spending program within the federal government undergoes a number of evaluations at various stages of its development and renewal. Typically spending programs are approved for a four or five year period following the preparation of a formative evaluation which establishes why the program is needed, its expected outcomes, terms and conditions and other such considerations.

Once the program is approved by Treasury Board and Cabinet, the responsible department or agency must conduct a summative evaluation before seeking a renewal or extension of the program. The purpose of this evaluation is to determine how effective the program has been in meeting its objectives and to identify any adjustments that will improve the efficacy of the program in meeting its goals and in serving the target clientele.

The decision to renew or extend a program is made by the Treasury Board and Cabinet Committee responsible for the nature of the program in question.

Reviews by the Auditor General

Some of these reviews are ongoing, such as the annual review by the Auditor General of Canada, and periodic special audits which delve more deeply into the management practices and expenditures of the Crown Corporation in question. Special audits happen at least every five years, or can be conducted more frequently should the Office of the Auditor General deem the need for a more rigorous examination of the activities of a department or agency. The Canada Council underwent a special audit last year: the conclusions were overwhelmingly favorable.

The Auditor General can also undertake performance audits of government departments and agencies. These are defined as follows:

“A performance audit is a systematic, purposeful, organized and objective examination of government activities. It provides Parliament with an assessment on the performance of these activities; with information, observations and recommendations designed to promote accountable government, an ethical and effective public service, good governance, sustainable development and the protection of Canada's legacy and heritage.

Its scope includes the examination of economy, efficiency, cost-effectiveness and environmental effects of government activities; procedures to measure effectiveness; accountability relationships; protection of public assets; and compliance with authorities. The subject of the audit can be a government entity or activity (business line), a sectoral activity, or a government-wide functional area.”

The results of reviews by the Auditor General are made public and are often the focus of discussions at various Standing Committees of the House where MPs can ask questions about the findings contained in the report.