Supply Approved to Date:
Appropriation Act No. 1, 2001-2002
Granted Interim Supply for the 2001-2002 Main Estimates equal to an initial allocation of 3/12ths for all votes and 43 votes received additional proportions
	$16,343,875,327.99
Appropriation Act No. 2,2001-2002
Granted Full supply for the 2001-2002 Main Estimates	$36,067,113,419.01
Total Approved to Date	$52,410,988,747.00
Supply Awaiting Approval:
For the whole of Supplementary Estimates (A) 2001-2002
	$4,756,446,373.00
Total for 2001-2002	$57,371,546,682.00

 

Supplementary Estimates “A” 2001-2002 forecast the spending requirements for departments or agencies of the federal government, and as usual, Senators showed interest in both the general spending plans and specific items in these new estimates.

Mr. Rick Neville and Mr. David Bickerton, officials from the Treasury Board of Canada, outlined some of the significant changes in the Estimates and responded to questions from the Members of the Committee.  They noted that items included in these Supplementary Estimates serve two purposes.  They seek Parliament’s authority to spend monies, which were provided for in the fiscal plan set out in the October 2000 Economic Statement and Budget Update and which were adjusted to include the impact of the policy initiatives announced in the May 2001 Economic Update.  These Estimates were not included in the 2001-2002 Main Estimates.

The second purpose of these estimates is to provide Parliament with information about changes in projections of statutory spending it has already approved in legislation.  These changes amounting to $2.1 billion include a $1.25 billion grant to the Canadian Foundation for Innovation and an increase of $ 616.0 million in fiscal equalization payments to provinces.

The larger, government-wide items include:

 

• $425.9 million for 69 departments and agencies under the carry-forward provision to meet operational requirements originally provided for in 2000-2001.  This provision is designed to improve cash management by allowing managers to carry forward, from one fiscal year to the next, an amount of up to 5% of their operating budget of the previous fiscal year;

 

• $382.3 million for compensation for collective bargaining;

 

• $216.5 million to 27 departments and agencies for incremental funding to address core operational and capita requirements;

 

• $164.6 million to 10 departments and agencies for incremental information management and technology infrastructure requirements;

 

• $114.4 million for the Canadian Firearms Program; and

 

• $100.0 million for the Sustainable Development Technology Fund.

 

Large requests by single organizations include:

 

• $550.0 million to Agriculture and Agri-Food Canada under the Farm Income Protection Act for contributions to farmers to provide immediate assistance to help them deal with hardships experienced last year;

 

• $225.3 million to the Canada Customs and Revenue Agency to address operational workload pressures and pursue revenue generation initiatives;

 

• $221.9 million to Transport Canada to provide assistance to air carriers ($160.0 million) for losses incurred due to the temporary closure of Canadian air space and additional payments to VIA Rail in support of an expanded capital investment program ($61.9 million);

 

• $152 to National Defence for additional costs associated with training and with compensation;

 

• $114.8 million to Fisheries and Oceans Canada for the Fisheries Access program; and

 

• $109.7 million to the Canadian Institutes of Health Research for program enhancements.

 

 

In its review of the estimates, the Committee expressed an interest in a number of spending items.  For instance, it noted that the Canada Custom and Revenue Agency is seeking an additional $287.9 million increase over its original appropriation of $2.4 billion.  This new request represents a 12.2% increase in the Agency’s original budget.  Most of the requested funding is to address operational workload pressures and to pursue revenue generation initiatives.  Mr. Neville assured the Committee that these “operational workload pressures” are not related to the events of 11 September.  Government expenditure items related to measures being taken as result of the events of 11 September are more likely to appear in subsequent estimates.

The budget of the Department of Finance is usually quite large relative to other departments, and its supplementary funding requirements are also usually significant.  These supplementary estimates of the Department are no different.  Two pairs of estimates attracted the Committee’s interest.  Under Vote 2a, the Department requests appropriations for the forgiveness of certain debts and obligations amounting to $17.9 million owed by the Government of Jamaica. Further on in the estimates of the Canada International Development Agency (CIDA), there is a request for an appropriation under Vote 25 to provide a $20.0 million grant to Jamaica.  A second pair of transactions involves a reduction of $40.5 million in Canada’s payments to the International Monetary Fund’s Poverty Reduction and Growth Facility and a statutory advance of $172.0 million to the same program.  While such transactions might give the impression that one part of the government is not aware of activities in the other, Mr. Neville assured the Committee that the Government is fully aware of these apparently offsetting transactions.  He explained that as these items involve different types of transactions (i.e. loans versus grant or payments versus loans) it is necessary that each transaction be itemized.

The Committee noted that additional funding in the order of $158.6 million (an increase of 51.5%) is required by the Department of Justice to cover its operating expenditures.  The largest proportion of the increase ($90.5 million) is dedicated to the Canadian Firearms Program.  A smaller but significant amount of $26.6 million is allocated to cover the additional cost for unique legal cases.  The costs surrounding the Firearms Control Program continue to be of concern to Senators.  Since inception, the overall cost of implementing the program, including current planned spending, will reach $689.67 million.  This amount is well in excess of the original forecasted implementation costs provided at the time that the program was being considered in Parliament.  Mr. Neville suggests that the original cost estimates were valid, but that numerous changes in the program, as it was being implemented, are at the root of the cost increases.

Under Vote 10a, the Department of Agriculture and Agri-Food is requesting appropriations of $550.0 million to cover contributions for agricultural risk management-payments in connection with the Farm Income Protection Act.  The Treasury Board officials explained that this amount was over and above the amounts set aside for the usual programs under this Act.  The amount consists of a one-time injection of funds to provide immediate assistance to help farmers with hardships experienced last year.  According to Mr. Neville, the provinces, usually in a 60/40-federal/provincial ratio, matched these contributions.

Senators are becoming concerned about the supplementary requests of the new agencies recently created by the government.  These agencies, which include the Canada Custom and Revenue Agency, Parks Canada, and the Canadian Food Inspection Agency (CFIA) were created in the belief that removing them from the public service would result in operational savings.  This does not appear to be the case.  For instance, CFIA is seeking an additional $85.8 million under Vote 25a, an increase of 33% over its original estimate for this fiscal period.  The Agency represents a consolidation of all federal food inspection and quarantine services into a single food inspection agency.  It began operations in April 1997 and reports to Parliament through the Minister of Agriculture and Agri-Food.  The Agency enhances food safety systems by integrating the delivery of inspection and quarantine services previously provided by Agriculture and Agri-Food Canada, Health Canada, Industry Canada and the Department of Fisheries and Oceans Canada.  It provides all inspection services related to food safety, economic fraud, trade-related requirements, and animal and plant health programs.  The Committee reminded the officials that the Agency was created to reduce costs and yet it has returned to obtain relatively large additional appropriations.  The impression is that removing the agency from the public service has not provided the anticipated economies.  Mr. Neville explained that when these Agencies were set up, careful analysis by third parties was conducted to establish their A-base funding levels.  He reminded the Committee, that these agencies were also created to address a host of other concerns besides cost savings.  As these other objectives of the Agencies are addressed, their funding requirements may increase.  Mr. Neville feels that the current request by the agencies for additional appropriations has been substantiated.

The supplementary estimates for the Department of Transport lists new appropriations totalling $315.7 million.  This represents an increase of 33.8% over the March appropriations of $934.8 million.  In the Explanation of Requirements section, the Department seeks $1.2 million under Vote 1a – operations and $55.8 under Vote 5a – capital expenses, for Public security and anti-terrorism initiatives.  Under the heading of grants the Department is asking for $152.0 million to provide grants to Canadian airlines and specialty air operators, as payments of financial assistance in respect to losses incurred due to the temporary closure of Canadian air space following September 11, 2001.  Mr. Neville explained that this money was available only to Canadian carriers and only for itemized expenses that could be clearly related to the closing of Canadian air space.

Finally, the Committee had lengthy discussions with the Officials about the decision to advance $100 million to a private corporation to establish the Sustainable Development Technology Fund.  Mr. Neville recounted the sequence of events and transactions that led to the creation of the Fund.  Briefly, the intention of the government to create a sustainable development technology fund was announced in the budget speech in February 2000.  Legislation was initially introduced in the House in October 2000.  With the call of the election, Bill C-46 died on the Order Paper and was tabled again in February 2001, as Bill C-4.  Royal Assent to Bill C-4 was given on June 14, 2001.  The Act created the Canada Foundation for Sustainable Development Technology.  Between the call of the election and the granting of Royal Assent to Bill C-4, Treasury Board entered into a funding agreement with a company, created under the Canada Corporations Act, on the terms and conditions for the use of a $100 million grant.  As these transaction transpired too late for inclusion in earlier estimates, they were listed in the 2001-2002 Supplementary Estimates.  The funding was possible through access to Treasury Board Contingencies Vote 5.  The officials of the Treasury Board claimed that these transactions were acceptable because they were entirely legal.  They reminded the Committee that even the Auditor General agreed that they were legal.  However, the Auditor General also had reservations about the appropriateness of the procedures employed to create this Fund.

In its Eighth Report-The Interim Report on Estimates 2001-2002, the Committee commented on this series of events when it stated that:

 

“Senators wondered if this was an appropriate way to create such agencies and crown corporations.  They questioned whether the government should have passed the bill before it advanced the funding.  The members of the Committee condemn this process, which creates and funds a $100 million agency without prior Parliamentary approval.”

 

Although the Committee recognises that these transactions are legal, it continues to question whether it is advisable to use monies from the Treasury Board Contingencies Vote to fund new initiatives before the matter has been considered by Parliament.  In spite of repeated claims that the series of actions were legal, Senators remained unsatisfied with the overall explanation provided by the officials.  Nor are they alone in this assessment.  On November 22, 2001, the Speaker of the House of Commons ruled that while he did not find these actions of the government to be illegal, he nonetheless concluded that:

 

“…no authority has ever been sought from parliament for grants totalling $50 million made to the corporation in April of this year and does not consider that the notes in the supplementary estimates (A) concerning the disbursement of these earlier monies are sufficient to be considered as a request for approval of those grants.  In other words, the approval that is being sought in supplementary estimates (A) cannot be deemed to include tacit approval for the earlier $50 million grant.”

 

The Speaker added that the government could clear up the matter when he stated:

 

“However, as there remains ample time for the government to take corrective action by making the appropriate request of parliament through the supplementary estimates process, the Chair need not comment further at this time. The supplementary estimates (A) for 2001-2002 can therefore proceed.

In light of this ruling the Committee awaits the Government’s corrective action.

 

The Committee believes that Parliamentarians are not solely interested in the legality of actions, but are equally concerned about the accountability of government to Parliament.   A  “done deal” presents Parliamentarians with very little opportunity to provide thoughtful reflection on the advisability of the actions being considered.  In a broader context, the Committee continues to have serious reservations about the way in which the Treasury Board Contingencies Vote 5 is used by the government to fund various initiatives.  Consequently, the Committee shall examine this practice in greater detail at a later date.

---