Manitoba Fiscal Performance Review - gov.mb.ca Manitoba Fiscal Performance Review . Phase 2 Report

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  • CONFIDENTIAL

    Manitoba Fiscal Performance Review

    Phase 2 Report Summary January 2017

  • © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 2

    CONFIDENTIAL

    Notice

    This Phase 2 report (the “Report”) by KPMG LLP (“KPMG”) is provided to The Province of Manitoba’s Treasury Board represented by the Minister of Finance (“Manitoba”) pursuant to the consulting service agreement dated July 14, 2016 to conduct an independent fiscal performance review (the “Review”) of Core Government spending (except the Department of Health) for Manitoba.

    If this Report is received by anyone other than Manitoba, the recipient is placed on notice that the attached Report has been prepared solely for Manitoba for its own internal use and this Report and its contents may not be shared with or disclosed to anyone by the recipient without the express written consent of KPMG and Manitoba. KPMG does not accept any liability or responsibility to any third party who may use or place reliance on our Report.

    Our scope was limited to a review and observations over a relatively short timeframe. The intention of the Report is to develop business cases for select areas of opportunity. The procedures we performed were limited in nature and extent, and those procedures will not necessarily disclose all matters about departmental functions, policies and operations, or reveal errors in the underlying information.

    Our procedures consisted of inquiry, observation, comparison and analysis of Manitoba-provided information. In addition, we considered leading practices. Readers are cautioned that the potential cost improvements outlined in this Report are order of magnitude estimates only. Actual results achieved as a result of implementing opportunities are dependent upon Manitoba and department actions and variations may be material.

    The procedures we performed do not constitute an audit, examination or review in accordance with standards established by the Chartered Professional Accountants of Canada, and we have not otherwise verified the information we obtained or presented in this Report. We express no opinion or any form of assurance on the information presented in our Report, and make no representations concerning its accuracy or completeness. We also express no opinion or any form of assurance on potential cost improvements that Manitoba may realize should it decide to implement the options and considerations contained within this Report. Manitoba is responsible for the decisions to implement any options and for considering their impact. Implementation will require Manitoba to plan and test any changes to ensure that Manitoba will realize satisfactory results.

  • © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 3

    CONFIDENTIAL

    Project Objectives and Scope Summary

    Our approach is based on collaboration between the KPMG team and the Manitoba team. We bring leading practices and lessons learned elsewhere, and are working with you in building a practical, made-in-Manitoba framework and identifying transformational cost improvement opportunities.

    “Manitobans have a right to expect that their government uses public revenues effectively and efficiently to deliver high quality government programs and services at a reasonable and sustainable cost. Manitoba’s New Government is working to fulfill that expectation by restoring fiscal discipline with a common sense approach to financial management. Common sense respects the value of taxpayers’ money.”

    “A large part of restoring fiscal discipline is restraining the growth of spending – bending the cost curve – to ensure that spending does not outpace revenue growth. Manitoba’s New Government is committed to ensuring that government programs and services become more effective and efficient.”

    Manitoba Budget 2016

    Manitoba’s objective:

    To gain better control over the growth in Core Government spending, Manitoba requires the services of an independent Advisor to design and execute a comprehensive Fiscal Performance Review to identify opportunities to eliminate waste and inefficiency and improve the effectiveness with which government delivers results for Manitobans.

    The 2016/17 Budget for Core Government is $13.3 billion (excluding debt servicing costs). Removing Health from this spending leaves $7.3 billion in program spending for this Review. We understand that Manitoba’s intent is reducing the growth of Core Government spending, with better value for money and allocation of fiscal resources without adversely impacting front line services. This is a Review, not an audit, to provide confidential advice to Manitoba in identifying potential opportunities for Manitoba’s consideration in its fiscal decision-making.

    Phase 1 Scoping Report completed in early October provided several areas of opportunity for cost improvement. Phase 2 is further investigation into selected areas.

  • © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 4

    CONFIDENTIAL

    Fiscal Performance Review – Overview of Timelines Summary

    Phase 1 Scoping Report – Timeline

    Key Milestones and Timing

    Steering Committee review and confirm work plan July 18 (kick-off)

    Current State – data collection, analysis, interviews Mid-July through August

    Fiscal Performance Review Framework Delivered September 1

    Future State – areas of opportunity Through September

    Delivery of Phase 1 Scoping Report Delivered October 3

    * Subject to adjustment due to holiday season availability and timing of feedback received.

    Phase 2 Timeline Targets

    Key Milestones and Timing

    Steering Committee review and confirm work plan October 14 (kick-off)

    Data collection and analysis Mid-October through November

    Business case development November to Mid-December

    Draft Business Cases Mid-December (with Phase 2 Draft Report)

    Final Business Cases End of December/January*

  • © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 5

    CONFIDENTIAL

    Context Summary

    The following table compares the Province of Manitoba’s budget projections and actual net results.

    The Province of Manitoba has consistently missed its projected deficit in each budget from 2011/12 to 2015/16, with exceptionally large deficits in 2011/12 and 2015/16.

    In the 2013 Budget, the previous government outlined a Deficit Reduction Plan towards a balanced budget in 2016/17. The 2013 Budget projected a deficit of $164 million in 2015/16.

    The Province of Manitoba’s net debt position was relatively steady through the 2000s, and has doubled since 2007/08 as a result of significant annual deficits and increased borrowings.Source: Province of Manitoba Public Accounts.

    96 48

    (545)

    (438) (460) (515)

    (357) (422)

    451

    (200) (179)

    (1,001)

    (580) (522)

    (452)

    (846)

    (1,200)

    (1,000)

    (800)

    (600)

    (400)

    (200)

    -

    200

    400

    600

    2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

    Province of Manitoba, Budget Surplus (Deficit) Projections and Actuals, 2008/09 to 2015/16

    ($ millions)

    Projection Actual

  • © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 6

    CONFIDENTIAL

    Context Summary

    The following chart illustrates the growth of net debt, nominal GDP growth, growth in revenues and program expenditures, and growth in population and inflation, for the Province of Manitoba in the past 10 years.

    In Manitoba, net debt has increased sharply since the global recession and growth in net debt has far outpaced growth in other measures.

    Up to 2008/09, revenues and program spending were generally correlated with nominal GDP growth. Program spending diverged away from nominal GDP growth in 2009/10 albeit in more recent years it has generally began to keep pace with nominal GDP growth again. Since 2005/06, revenues have grown slower than program spending and nominal GDP growth.

    Over this time period, inflation has grown by approximately 19%, population by 10%, nominal GDP by approximately 60%

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