That's exactly the opposite of promises made by Finance Minister Jim Flaherty, who said last year that the majority of Ottawa's $5.2-billion austerity program would target administrative and support costs without impacting service to the public.
The PBO reviewed actual government spending from April to September 2012, along with main and supplementary spending estimates, to arrive at its calculations.
Overall, the independent budget office found that Ottawa's spending was down $800 million, or 0.6 per cent, through the first six months of the current fiscal year, which ends March 31.
Direct program spending fell four per cent, mostly because almost 11,000 civil service jobs were eliminated in the first half of the year.
But spending on internal services — such as communications, information technology, human resources and financial management — rose by eight per cent to $5.3 billion, according to the PBO.
"The continued increase in Internal Services expenditure suggests that spending growth on overhead has not been curtailed, as suggested in Budgets 2010 through 2012, and the focus of restraint exercises has instead been on reduced spending to front line services," said the report.
The PBO notes that capital expenditures, in large part driven by Defence spending, also climbed in the first half of 2012-13, up almost seven per cent.
The Conservative budget, delivered last March, promised to cut $5.2 billion in spending over five years, but asserted that 70 per cent of the austerity would come from internal efficiencies.
"The majority of the spending review reductions relate to back-office operations of government," Flaherty said in his 2012 budget speech. "They don't relate to service delivery by government."
Kevin Page, the parliamentary budget officer whose five-year term is almost over, undermined that claim in November when he reported that departmental reports indicated just 15 per cent of planned savings would come from internal services.
Treasury Board President Tony Clement, who is overseeing the government's austerity measures, insisted at the time that Page was wrong, and did so again Thursday.
"This report underestimates the savings from operational efficiencies because it does not include all back-office savings measures," Clement spokesman Matthew Conway said in an email.
"These savings will be implemented over a three-year period, and so full savings will not be realized in spending estimates until 2014-2015."
Clement's office said internal savings not recognized by the PBO "run the gamut from consolidating corporate services across government departments and introducing new productivity-enhancing technology solutions, to increasing the use of video-conferencing over travel and replacing paper publications with online content."
Treasury Board's own definition of "internal services" was used by the PBO to track government spending, Page responded in an email.
"The current high (actual) growth rates for 'internal services' likely represent an inconvenient truth," Page wrote.
It remains unclear where all the government's planned cuts will be made, and how much each cut will save, he added. "There are no spending plans by departments consistent with Budget 2012 restraint measures."
Page's office has been attempting to get that information in order to put it in front of parliamentarians for their consideration.
The latest PBO report, which is based on actual spending to date, ends with a note on the lack of transparency:
"As such, it is difficult to determine whether the substantial changes in year-over-year spending are a result of planned spending reductions/program eliminations or some other factor."
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