1. Management, Resources and Results Structure (MRRS) Policy: Its critical role in expenditure management
Presentation to Financial Management Institute
Rohit Samaroo, Acting Senior Director, Results Management Strategies Division
November 25, 2008

2. Outline Historical Context Expenditure Management System (EMS) Renewal
MRRS – Progress and Challenges
Observations and next steps
Permanent Reforms have been difficult to implement; As budgetary objectives changed, new reform initiatives were introduced;
Incorporating reallocations and review into the EMS is politically and technically difficult:
The budgetary process is to resolve conflicts for example between, Cabinet Ministers, different intererest groups, alternative policy options;
Yet re-allocation based on program review requires elected government to continually re-open policy questions that were thought resolved = conflict, by reward;
Program Review ( )
Review was implemented when economic conditions were worsening;
IMF was criticizing Canada and Moddy’s rating was to be scaled down
Cabinet was forced to consider a more comprehensive program review, one that delivered cuts sufficient to achieve the deficit target (deficit reduced to 3% of GDP by , 2% gy )
It includes a re-examination of government programs that was intended to achieve a specific expenditure reduction targets:
- It was done over 6 months (june-Nov. 1994) – 1995 Budget announced $16.9 B in savings over 3 years, further $2B in savings over 3-year announced in 1996 Budget – Overall spending fell by 10% from March 95 to March 99, capital spending fell by 35%;
- Changes to programs and machinery were implemented over the four years to 1999;
- Affected most governments;
- Up to 45,000 jobs were lost;
- It was a one-off exercise – impression was that the exercise got ‘the government right’ and there was not a need for a ‘machinery for ongoing review’ (actually, the cabinet structure supporting the exercise was disbanded even before the Minister of Finance announced the results of Program Review in the 1995 Budget)
EMS (1995)
President of the Treasury Board announced reforms designed to permanently incorporate the practices of review and reallocation through the EMS
- 7 principles underpinning the EMS were established to set an environment conducive to ongoing expenditure review and reallocations at 3 levels
- Asked Ministers to operate within existing resource levels (total spending level for each department would be decided during an annual budget cycle and fixed)
- incurred elimination of the policy reserve = in-year source of funds
- new policy or cost increase throughout the year to be funded by re-allocation of funds from lower priority
- Departments delegated the responsibility for conducting review and identifying reallocation options and TBS responsible for government- wide program reviews, using departmental information to identify reallocation across departments
- Introducing departmental Business Plans and increasing managerial flexibility to pursue internal reallocation as seen fit, without central
control. Also allowed TB to track changes and to ensure that budget decisions were implemented, not deferred.
These rules were meant to create the incentives and the means for reallocation, to identify source for new policies.
However, without the binding effect of a fiscal crisis, commitment to annual integrated budget planning cycle underpinning EMS began to collapse and abandoned once Surplus was achieved (i.e. more money to fund new policies – ‘money from ‘prudent factor’ was made available’ as early as 98) – Ministers could come with ‘unfunded MC’ to propose new policies, i.e. without identifying a new sources of funds – therefore, a primary driver for program reviews was gone.
Business Plans
The primary intent was to ensure that departments implemented reallocation decisions taken in the 1995 Budget – BP were to be submitted to TBS
BP were to form the basis of discussion between TB and departments first at level of officials, then btw TBS and TB ministers.
BP were to shift discussion at a more strategic levels, to identify TB authorizations required by each department for the upcoming year, to reduce TB transactions – department were also to link it to planning cycle and to parliamentary reporting documents;
Once approved, departmental managers could, in theory, implement without TBS interference; TB was to have performance information required to identify new reallocation options and areas;
However, the operalisation of this practice failed as its full integration was not realized in an annual cycle – it could not support its original objective of facilitating ongoing reovew of programs and resource reallocation.
Program Integrity and Dept. Assessments
- Both assumed the continuity of the broader EMS, encouraged departments to review ongoing programs and to reallocated from their existing resource base.
Were discrete initiatives to address specific problems of expenditure management, rather than to attempt at system-wide reform
They were focused on public sector management vs. delivering expenditure cuts (as in period of budget surpluses)
Program Integrity: series of reviews designed to resolve critical risks to the sustainability of government programs (e.g. capital and asset holdings that need repairs, funding shortfall in programs could represent a legal risk
TBS identify an agenda for review items (could not be ignored of post-poned)
Focused on specific departments
Focused on horizontal issues – program management problems common to a number of departments, with TBS analysts acting as review co-ordinators and advisors;
TBS and department analysts worked together to review and find solutions for the problem;
TBS assessed departments’ capacity to fund the solution through re-allocation or recommended more new funding (new)
The LT objective was to make access to new policy funds conditional on resolving program integrity, and therefore to force departments to reallocate from within their own funds.
Finance criticized the Program Integrity exercise as generating additional pressures on the public purse
Program Review did little to alter the practice around expenditure management in general, i.e.
Most new governments use their early years in office to cut some programs established by their predecessors and then use the resultant cash to fund new programs and policies.
EMS Renewal and Strategic Reviews ( ) is leading to on-going approach to manage the core funding of the spending budget (expenditure review and reallocation)

3. Mid-to late 1990’s: Canada achieved an enviable fiscal position (1-2)
In , Canada was dealing with a large fiscal deficit
Program Review ( ) solved the fiscal crisis through major expenditure cuts
1995 Budget announced $16.9B in savings over 3 years, further $2B in savings announced in 1996 Budget
Overall spending fell by 10% from 1995 to1999, capital spending fell by 35%
By the surplus was $3.5B - and the budget has been in surplus since
Permanent Reforms have been difficult to implement; As budgetary objectives changed, new reform initiatives were introduced;
Incorporating reallocations and review into the EMS is politically and technically difficult:
The budgetary process is to resolve conflicts for example between, Cabinet Ministers, different intererest groups, alternative policy options;
Yet re-allocation based on program review requires elected government to continually re-open policy questions that were thought resolved = conflict, by reward;
Program Review ( )
Review was implemented when economic conditions were worsening;
IMF was criticizing Canada and Moddy’s rating was to be scaled down
Cabinet was forced to consider a more comprehensive program review, one that delivered cuts sufficient to achieve the deficit target (deficit reduced to 3% of GDP by , 2% gy )
It includes a re-examination of government programs that was intended to achieve a specific expenditure reduction targets:
- It was done over 6 months (june-Nov. 1994) – 1995 Budget announced $16.9 B in savings over 3 years, further $2B in savings over 3-year announced in 1996 Budget – Overall spending fell by 10% from March 95 to March 99, capital spending fell by 35%;
- Changes to programs and machinery were implemented over the four years to 1999;
- Affected most governments;
- Up to 45,000 jobs were lost;
- It was a one-off exercise – impression was that the exercise got ‘the government right’ and there was not a need for a ‘machinery for ongoing review’ (actually, the cabinet structure supporting the exercise was disbanded even before the Minister of Finance announced the results of Program Review in the 1995 Budget)
EMS (1995)
President of the Treasury Board announced reforms designed to permanently incorporate the practices of review and reallocation through the EMS
- 7 principles underpinning the EMS were established to set an environment conducive to ongoing expenditure review and reallocations at 3 levels
- Asked Ministers to operate within existing resource levels (total spending level for each department would be decided during an annual budget cycle and fixed)
- incurred elimination of the policy reserve = in-year source of funds
- new policy or cost increase throughout the year to be funded by re-allocation of funds from lower priority
- Departments delegated the responsibility for conducting review and identifying reallocation options and TBS responsible for government- wide program reviews, using departmental information to identify reallocation across departments
- Introducing departmental Business Plans and increasing managerial flexibility to pursue internal reallocation as seen fit, without central
control. Also allowed TB to track changes and to ensure that budget decisions were implemented, not deferred.
These rules were meant to create the incentives and the means for reallocation, to identify source for new policies.
However, without the binding effect of a fiscal crisis, commitment to annual integrated budget planning cycle underpinning EMS began to collapse and abandoned once Surplus was achieved (i.e. more money to fund new policies – ‘money from ‘prudent factor’ was made available’ as early as 98) – Ministers could come with ‘unfunded MC’ to propose new policies, i.e. without identifying a new sources of funds – therefore, a primary driver for program reviews was gone.
Business Plans
The primary intent was to ensure that departments implemented reallocation decisions taken in the 1995 Budget – BP were to be submitted to TBS
BP were to form the basis of discussion between TB and departments first at level of officials, then btw TBS and TB ministers.
BP were to shift discussion at a more strategic levels, to identify TB authorizations required by each department for the upcoming year, to reduce TB transactions – department were also to link it to planning cycle and to parliamentary reporting documents;
Once approved, departmental managers could, in theory, implement without TBS interference; TB was to have performance information required to identify new reallocation options and areas;
However, the operalisation of this practice failed as its full integration was not realized in an annual cycle – it could not support its original objective of facilitating ongoing reovew of programs and resource reallocation.
Program Integrity and Dept. Assessments
- Both assumed the continuity of the broader EMS, encouraged departments to review ongoing programs and to reallocated from their existing resource base.
Were discrete initiatives to address specific problems of expenditure management, rather than to attempt at system-wide reform
They were focused on public sector management vs. delivering expenditure cuts (as in period of budget surpluses)
Program Integrity: series of reviews designed to resolve critical risks to the sustainability of government programs (e.g. capital and asset holdings that need repairs, funding shortfall in programs could represent a legal risk
TBS identify an agenda for review items (could not be ignored of post-poned)
Focused on specific departments
Focused on horizontal issues – program management problems common to a number of departments, with TBS analysts acting as review co-ordinators and advisors;
TBS and department analysts worked together to review and find solutions for the problem;
TBS assessed departments’ capacity to fund the solution through re-allocation or recommended more new funding (new)
The LT objective was to make access to new policy funds conditional on resolving program integrity, and therefore to force departments to reallocate from within their own funds.
Finance criticized the Program Integrity exercise as generating additional pressures on the public purse
Program Review did little to alter the practice around expenditure management in general, i.e.
Most new governments use their early years in office to cut some programs established by their predecessors and then use the resultant cash to fund new programs and policies.
EMS Renewal and Strategic Reviews ( ) is leading to on-going approach to manage the core funding of the spending budget (expenditure review and reallocation)

4. Mid-to late 1990’s: Canada achieved an enviable fiscal position (2-2)
Program Review left a few issues:
Reduced capacity in important oversight areas: audit, evaluation, financial management
Cabinet time focused almost exclusively on new spending
By late 1990s, budget surpluses led to new spending without any systematic assessment of direct program spending and whether reallocation was needed
Continued use of ad hoc restraint exercises to control spending as need arises, eg:
Expenditure Review Committee
Expenditure and Management Reviews
Permanent Reforms have been difficult to implement; As budgetary objectives changed, new reform initiatives were introduced;
Incorporating reallocations and review into the EMS is politically and technically difficult:
The budgetary process is to resolve conflicts for example between, Cabinet Ministers, different intererest groups, alternative policy options;
Yet re-allocation based on program review requires elected government to continually re-open policy questions that were thought resolved = conflict, by reward;
Program Review ( )
Review was implemented when economic conditions were worsening;
IMF was criticizing Canada and Moddy’s rating was to be scaled down
Cabinet was forced to consider a more comprehensive program review, one that delivered cuts sufficient to achieve the deficit target (deficit reduced to 3% of GDP by , 2% gy )
It includes a re-examination of government programs that was intended to achieve a specific expenditure reduction targets:
- It was done over 6 months (june-Nov. 1994) – 1995 Budget announced $16.9 B in savings over 3 years, further $2B in savings over 3-year announced in 1996 Budget – Overall spending fell by 10% from March 95 to March 99, capital spending fell by 35%;
- Changes to programs and machinery were implemented over the four years to 1999;
- Affected most governments;
- Up to 45,000 jobs were lost;
- It was a one-off exercise – impression was that the exercise got ‘the government right’ and there was not a need for a ‘machinery for ongoing review’ (actually, the cabinet structure supporting the exercise was disbanded even before the Minister of Finance announced the results of Program Review in the 1995 Budget)
EMS (1995)
President of the Treasury Board announced reforms designed to permanently incorporate the practices of review and reallocation through the EMS
- 7 principles underpinning the EMS were established to set an environment conducive to ongoing expenditure review and reallocations at 3 levels
- Asked Ministers to operate within existing resource levels (total spending level for each department would be decided during an annual budget cycle and fixed)
- incurred elimination of the policy reserve = in-year source of funds
- new policy or cost increase throughout the year to be funded by re-allocation of funds from lower priority
- Departments delegated the responsibility for conducting review and identifying reallocation options and TBS responsible for government- wide program reviews, using departmental information to identify reallocation across departments
- Introducing departmental Business Plans and increasing managerial flexibility to pursue internal reallocation as seen fit, without central
control. Also allowed TB to track changes and to ensure that budget decisions were implemented, not deferred.
These rules were meant to create the incentives and the means for reallocation, to identify source for new policies.
However, without the binding effect of a fiscal crisis, commitment to annual integrated budget planning cycle underpinning EMS began to collapse and abandoned once Surplus was achieved (i.e. more money to fund new policies – ‘money from ‘prudent factor’ was made available’ as early as 98) – Ministers could come with ‘unfunded MC’ to propose new policies, i.e. without identifying a new sources of funds – therefore, a primary driver for program reviews was gone.
Business Plans
The primary intent was to ensure that departments implemented reallocation decisions taken in the 1995 Budget – BP were to be submitted to TBS
BP were to form the basis of discussion between TB and departments first at level of officials, then btw TBS and TB ministers.
BP were to shift discussion at a more strategic levels, to identify TB authorizations required by each department for the upcoming year, to reduce TB transactions – department were also to link it to planning cycle and to parliamentary reporting documents;
Once approved, departmental managers could, in theory, implement without TBS interference; TB was to have performance information required to identify new reallocation options and areas;
However, the operalisation of this practice failed as its full integration was not realized in an annual cycle – it could not support its original objective of facilitating ongoing reovew of programs and resource reallocation.
Program Integrity and Dept. Assessments
- Both assumed the continuity of the broader EMS, encouraged departments to review ongoing programs and to reallocated from their existing resource base.
Were discrete initiatives to address specific problems of expenditure management, rather than to attempt at system-wide reform
They were focused on public sector management vs. delivering expenditure cuts (as in period of budget surpluses)
Program Integrity: series of reviews designed to resolve critical risks to the sustainability of government programs (e.g. capital and asset holdings that need repairs, funding shortfall in programs could represent a legal risk
TBS identify an agenda for review items (could not be ignored of post-poned)
Focused on specific departments
Focused on horizontal issues – program management problems common to a number of departments, with TBS analysts acting as review co-ordinators and advisors;
TBS and department analysts worked together to review and find solutions for the problem;
TBS assessed departments’ capacity to fund the solution through re-allocation or recommended more new funding (new)
The LT objective was to make access to new policy funds conditional on resolving program integrity, and therefore to force departments to reallocate from within their own funds.
Finance criticized the Program Integrity exercise as generating additional pressures on the public purse
Program Review did little to alter the practice around expenditure management in general, i.e.
Most new governments use their early years in office to cut some programs established by their predecessors and then use the resultant cash to fund new programs and policies.
EMS Renewal and Strategic Reviews ( ) is leading to on-going approach to manage the core funding of the spending budget (expenditure review and reallocation)

5. The Expenditure Management System became the focus of an OAG audit
Auditor General Report pointed out a number of significant areas for improvements:
Spending on existing and new programs were being approved on two separate tracks making comparisons between existing and new spending difficult
EMS was not fully integrated with program results.
The current EMS does not require that departments submit data to demonstrate that they have used their funding effectively
And recommended…
regular expenditure reviews of reference levels to ensure that existing programs are relevant and represent value-for-money,
access to and use of performance information in the spending decision process,
adequate systems and procedures for central agencies to assess new spending proposals and relate them to existing programs

6. Budget 2006 set framework for the implementation of EMS renewal
The budget articulated a set of criteria for management and oversight of federal programs:
Government programs need to focus on results and value for money
Government programs must be consistent with federal responsibilities
Government programs that no longer serve the purpose for which they were created need to be eliminated

7. Expenditure Management System Renewal

8. EMS Renewal – Overarching Objectives
Approved by the government in June 2007
Management Excellence – Allocation and Operational Efficiency
Meet government priorities
Ensure value for money in government spending
Deliver high-performing programs and services to Canadians
Fiscal Credibility – Aggregate Fiscal Discipline
Control of overall growth of program spending

9. Three Pillars Supporting EMS Renewal
1. Up-front Discipline
Critical information for Cabinet decisions
New Spending
2. Strategic Reviews
Ongoing advice to Cabinet to align spending to government priorities and ensure performance and value for money
Existing Spending
3. Managing for Results
Measuring and benchmarking our programs to demonstrate results for Canadians
All Spending

10. 1. Up-Front Discipline (new spending)
Refers to how new spending proposals are approved
Emphasizes a more disciplined approach to managing new spending by ensuring all new proposals have:
Clear measures of success
Solid information about how a proposal fits with existing spending
What results are being achieved in related areas?
How does the new proposal relate to existing spending?
Are there opportunities for realignment?
Provide reallocation options for funding
More upfront discipline on spending means more up-front work by analysts at the Memorandum to Cabinet (MC) stage

11. 2. Strategic Reviews – Review of the effectiveness of all existing program spending
Comprehensive review of each department’s programs
Ensure all programs are:
Aligned to government priorities
Are clearly within federal responsibilities
Relevant
Effective and efficient
Managed well
Are considered by Cabinet as part of Budget preparation
Identify the lowest-performing 5 per cent of programs and reallocate that funding to higher priorities
Involve external expert advice on each Review to ensure consistency and objectivity
TBS: renewed focus on program performance and advice to TB on integrated budget decision-making on new and existing spending

12. 3. Managing for Results (all spending)
All departments must strive for excellence in the management of all of their programs and spending in order to concrete results for Canadians
This means all programs must:
Have clear expected results and measures of success
Have full program costs
Be formally assessed and evaluated on a regular basis
Report on results expected and achieved
Use performance measures and evaluations to adjust resources and strategies based on insights gained
Develop a culture of focussing on results
Requires focus on program performance, relevance and efficiency, not just dollars spent

13. Management, Resources and Results Structure (MRRS)

14. MRRS is the foundation of the renewed EMS
Represents a common approach to the collection, management, and reporting of performance information
Establishes an inventory of all federal programs
Links resources to results for each program - planned and actual
Establishes the same structure for both internal decision-making and external reporting and accountability
Demonstration of how programs align to each other (relationships);
Full program costing; and
eventually,…permits efficient communication between departments, central agencies & Parliament through the use of the common systems and evidence

15. All information is based on similar program structures – the PAA
Program Activity Architecture Financial and non-financial information
Program Activity Architecture
Parliamentary Vote Control Level – unchanged
Department
Planned and Actual Results-all programs
Planned & Actual Financial information
Governance Structure-decision making around program results info
Strategic Outcome(s)
Accountable Level to TB & Parliament – unchanged
Required for all
elements and
all levels
of the PAA
Program Activity(ies)
Sub – Program Activity(ies)
Program Information levels – much more detail
Sub - Sub – Program Activity(ies)
IT Support: Expenditure Management Information System

16. Well structured information helps communication and decision-making …
DEPARTMENTS
Management Tool
Reflects full mapping of programs
Better alignment of resources & priorities
More evidence-based reporting
Improve program performance
More logical and consistent basis for interaction
PARLIAMENT
Reporting Tool
Stronger accountability
for spending and results
Common basis for planning and reporting inside and outside
Finance
PCO
Budget
Plan
TBS
Informed decisions on investment choices based on priorities and
value for money
MRRS
Policy Objective:
Development of a common, government-wide approach to the collection, management, and reporting of financial and non-financial performance information - to provide an integrated and modern expenditures management framework

17. Implementation of MRRS consists of five steps
Departments develop fully articulated structures for their Program Activity Architectures (PAA)
(December 2006 to May 2007)
Departments identify/define Performance Measurement Frameworks & Governance Structures for their entire PAAs
(June Fall 2007)
Departments create, capture and use MRRS information systematically
(Jan and onwards)
TBS develops and rolls out a system to capture the standardized departmental performance information
( 2009 and onwards)
Embed MRRS information in all expenditure management processes

18. Step 1: Launched December 06 – Fully articulated PAAs
98 departments and agencies modified their PAAs as part of Step 1
Step 1 has generated an inventory of the majority of government programs (approximately 2500 programs)
TBS continues to work with departments to further refine their Strategic Outcomes and PAAs
Stability is an issue: For change process:
46 departments and agencies came forward with proposed changes to their Strategic Outcomes and/or PAAs

19. All departments now have PMFs, however quality varies substantially
Step 2: Launched June 07 – Development of Performance Measurement Frameworks (PMF)
PMFs set out the Strategic Outcome(s) and expected results and outputs associated with PAA programs, including:
Performance indicators
Data sources
Frequency of data collection
Target(s)
Planned program spending
All departments now have PMFs, however quality varies substantially
Currently in Step 3

20. PMF Quality to date shows the need to improve
PMF Four Point Scale: 1= Poor ( major adjustment required), 2= Weak ( needs substantial improvement), 3 = Satisfactory, (requires some improvement), 4= Very Good (may require some refinement)

21. MRRS has become the the foundation of the renewed EMS

22. Internal Services
We need to be able to capture the true cost for internal services
The Profile of GC Internal Services established standard categories for internal services within PAAs
Developed with a Senior Financial Officer working group
Consists of 1 Program Activity, 3 Sub-Activity and 11 Sub-Sub-A categories for Internal Services
Different reporting requirements established for different size organizations
Micro, small and large

23. Revised Profile of GC Internal Services and associated PAA levels
Program Activity
Sub-Activity
Sub-Sub Activity
Internal Services
Governance & Management Support
Management & Oversight
Communications
Legal
Resource Management Services
Human Resource Management
Financial Management
Information Management
Information Technology
Travel and Other Administrative Services
Asset Management Services
Real Property
Materiel
Acquisition

24. MRRS: Status and some key observations
MRRS has become critical to departmental management
The federal government has the best inventory of programs it has ever had
MRRS is increasingly enabling the operationalisation of EMS renewal in:
Upfront discipline – review of MCs
Strategic Reviews and
Managing for results, however…
Challenges still exist
Substantial level of effort and capacity is still required to improve PMF quality
Aligning financial systems to capture relevant planned and actual expenditures for each program still to be done in all departments
Fundamental cultural change requiring persistence, patience and commitment
Ultimately, an iterative process
In general, however, significant progress has been made

25. Moving Forward…
Step up the implementation of Step 3: Departments create,capture and use MRRS information systematically
Strengthen the review of MCs in context of on-going spending
Significantly strengthen the quality of departmental PMFs
Ensure data collection and use of performance information in departments
Embed performance information in all EMS processes (e.g. Memorandums to Cabinet, Treasury Board Submissions, Strategic Reviews, program renewals)

26. Contact us
For more information or assistance on MRRS, do not hesitate to contact:
Rohit Samaroo, A/Senior Director, Results Management Strategies at (613) , or
By sending an to
MRRS website at: