Liberal government ‘undermines’ financial transparency with delays in disclosing spending details, PBO says

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Parliamentary Budget Officer Yves Giroux says the Liberal government “undermines” accountability when it comes to the timely disclosure of federal spending and is recommending legislative changes to limit Ottawa’s ability to delay the release of key accountability reports.

In a report released Wednesday, the PBO also states about a third of the $541.9-billion allocated for new spending through to 2026-27 is not part of the government’s formal COVID-19 response plan. The PBO’s assessment is at odds with the government’s own announcements, which have characterized at least some of that spending as pandemic-related.

The focus of the PBO report is to highlight issues that members of Parliament should consider in light of information provided in Finance Minister Chrystia Freeland’s economic and fiscal update, which was released on Dec. 14. The government opted to wait until that same day to also release the Annual Financial Report and Public Accounts for the fiscal year that ended March 31, 2021.

While the timing was within the legislated deadline of Dec. 31, the PBO points out the public accounts were released much later than usual and Ottawa is much slower than its international counterparts when it comes to revealing how money was spent after a fiscal year has ended.

The PBO is calling on Parliament to consider amending the Financial Administration Act so the current Dec. 31 filing deadline is moved up to Sept. 30.

The government’s Dec. 14 tabling of the public accounts was the latest federal tabling since the release of the 1993-94 books.

In an interview, Mr. Giroux said the close-to-nine-month gap in reporting what was spent hinders the ability of MPs to make informed decisions when it comes to requests for new spending.

“It makes it very difficult for them to assess whether the government needs all that money, how it would be used, whether the previous year’s money was effectively used and so on,” he said. “It undermines their ability to meaningfully scrutinize government spending.”

The December tabling was particularly unusual because of the fact the government had originally signed off on the public accounts on Sept. 9 and then reopened the books to include a change on Nov. 19. The change added nearly $10-billion in spending to the 2020-21 fiscal year for compensation related to Canada’s First Nations child-welfare system.

The Auditor-General’s office, which signs off on the public accounts, told The Globe and Mail last month it was the first time the office had provided a “dual-dated” audit opinion under current accounting rules.

Mr. Giroux said he has concerns with the reopening of the public accounts, noting that adding more spending onto last year’s books will give the government the benefit of being able to say in the future that the books have improved more dramatically than would have otherwise been the case.

“It works to the government’s advantage to do that because it makes the improvement in the deficit so much better,” he said.

The Globe relied in part on data released through the public accounts to report this week that federal spending on outsourcing contracts has increased by more than 40 per cent since the Liberals formed government in 2015. Public accounts information also revealed federal spending on outsourcing contracts with McKinsey & Co., a global consulting firm, have increased sharply since 2015 from nearly zero in the final years of the former Conservative government.

The three main opposition parties are calling on Auditor-General Karen Hogan to review the government’s approach to outsourcing.

While federal budgets and economic updates are forward-looking documents that estimate future spending and revenue trends, including projections for Ottawa’s bottom line, the public accounts and the annual financial report reveal the hard numbers of what was actually spent in the previous fiscal year.

The 2021 public accounts were particularly anticipated by government observers because they cover the height of emergency government spending in response to the COVID-19 pandemic.

Total federal program spending prior to the pandemic was just more than $300-billion a year. That jumped to $608.5-billion in 2020-21. The increased spending and lower tax revenue resulted in a final deficit number of $327.7-billion, up from $39.4-billion the previous year.

Wednesday’s PBO report states that since the start of the pandemic, the government has spent, or has planned to spend, $541.9-billion in new measures over the fiscal years 2019-20 through to 2026-27. The PBO says about one-third of that, or $176.6-billion, is not part of the government’s COVID-19 response plan.

The PBO breakdown of what it calls “non-pandemic” spending includes $69.2-billion in stimulus spending, $49.9-billion related to “building a better economy,” $24.2-billion in compensation to First Nations children and other policy measures.

Prime Minister Justin Trudeau was asked at a news conference Wednesday whether his government’s spending risks worsening inflation, which hit a three-decade high in December. He responded inflation is part of a global challenge related to supply chain disruptions and his government has plans in place to reduce the cost of living in areas such as child care and housing.

He was also asked to explain the increase in outsourcing, given the Liberals promised in 2015 to reduce spending on external consultants.

Mr. Trudeau said “there is tremendous capacity within the public service, but it is normal and to be expected that we would also need to turn to outside experts for further help on improving the efficiency and the delivery of services to Canadians.”

NDP MP Gord Johns planned to send a letter Wednesday to Treasury Board President Mona Fortier, asking the minister “to stop this government’s increasing drive to outsource and privatize public services.”

Conservative finance critic Pierre Poilievre highlighted the PBO’s finding that about one-third of the government’s increased spending is unrelated to the pandemic.

“The government is getting too big, and that’s why we have a large deficit with high inflation,” he said.

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