Proceedings of the Standing Senate Committee on National Finance
Issue 4 - Evidence
Ottawa, Thursday, April 25, 1996
The Standing Senate Committee on National Finance, met this day, at 11 a.m., to examine the Main Estimates laid before Parliament for the fiscal year ending 1996-97.
Senator David Tkachuk (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, first, I should like to thank Senator De Bané for handling the affairs of the committee last week. I understand everything went perfectly, as I knew it would. Thank you very much, Senator De Bané.
I should like to introduce from the Treasury Board of Canada Mr. David Miller, Assistant Secretary, Expenditure Management Sector, Program Branch. With Mr. Miller is Ms Larose, Director, Human Resources Strategy Development and Mr. Mike Joyce, Director, Estimates Division.
Yesterday, a senator raised the concern that a predominance of senators on the Conservative side were asking questions. I would make it clear that that was not my intention. I would ask honourable senators to let me know if they wish to ask a question. I will try to go back and forth.
Mr. Miller, do you have an opening statement to make?
Mr. David Miller, Assistant Secretary, Expenditure Management Sector, Program Branch, Treasury Board of Canada: No, Mr. Chairman. To begin with questions from members of the committee would be fine.
Senator Bolduc: Mr. Chairman, I participated on a workforce that was carried out in the House of Commons. It dealt with the new management expenditure program. Perhaps the witnesses could provide us with a basic introduction on that topic before we start which would give us a basic understanding so our questions may be more pertinent.
Mr. Miller: The chairman of the committee has asked that I come back in two weeks' time to give you a detailed presentation of how that will all fit together with what we call the "Improved Reporting to Parliament Project" and how things are progressing, thanks to your efforts on that working group, senator.
The Chairman: I asked for that, Senator Bolduc, so that we could spend some quality time on this topic rather than just a few minutes, and in order to have a better understanding of the issues. We will do that on May 9.
Senator Kelly: Mr. Chairman, I would like to make two preliminary remarks. First, in response to your suggestion on the question of which hyphenated senators ask questions, I hope that the great tradition in this committee, and in most committees in the Senate in my experience over 14 years, has been that we sit as senators, not as hyphenated senators. I do not view Senator Rizzuto as a Liberal senator and myself as a Conservative senator - we are all senators.
The Chairman: I will believe that when senators from the different parties do not sit on opposite sides of the room.
Senator Kelly: Second, I want to say how very impressive I think these documents are in laying out what is going on. Everyone who has been involved in this review deserves a lot of credit.
The few questions I want to ask are relate to the materials contained in pages 8-8 and 8-9 of Part II of the Main Estimates, as well as page 32 of Part I. My questions have to do with the grants and contributions, transfer payments.
On page 32, you refer to a major change of $108 million for the program for countries in transition in Central and Eastern Europe and the former Soviet Union. Could you give us some background information on what that is all about? For example, I notice under "Grants, Partnership Program" that if you look at the item that numbers $123,952,000 and you then look under "Contributions, Partnership Program" you have almost the same wording with another $83 million being allocated. Could you give us some detail as to what that represents?
I notice a great similarity in wording where you start at the top under "Grants - Grant to North South Institute, "Grant to International Centre for Human Rights and Democratic Development", and "Programming against hunger...", and you then come to "Grants to Canadian international, regional and developing country institutions" where there is a total estimate of almost $124 million. If you look down under the grants heading, "Contributions, Partnership Program" you have an additional $83 million which seems to be aiming in the same direction.
Mr. Miller: That is true, senator. In fact, the difference that is important to understand is how we deliver these particular items. Grants are unconditional transfer payments which, therefore, have to be approved by Parliament on an annual basis. These are areas in which we will be giving money to someone and not expecting anything in return. It is just recognition that the money is going out and, because of that and the nature of those particular transactions, Parliament approves these on an annual basis.
Under "Contributions," it is more of a contract. We entered into an agreement where, in exchange for money, we would receive something in return.
Fundamentally, in many cases throughout the Estimates, there could be situations where there would be a grant, in which case we are just giving the money away as opposed to a contribution where there is something more specific in relation to that.
Senator Bolduc: Could you give us an example of that?
Senator Kelly: You scare me when you say that we are giving $124 million away. You do not really mean that, do you?
Mr. Miller: By its very nature, a grant is an unconditional transfer payment. Perhaps I can give another example rather than using the international forum.
For example, we give a small amount of money to the Red Cross Society, and we do so with the intent of assisting that society. We do not expect them to come back and demonstrate the impact of that $60,000 or $80,000 on their balance sheet. In recognition of the kind of work they do we give them a certain amount of money.
This case recognizes our international obligations in terms of the kinds of agreements that we have entered into and the kinds of development agreements we have in recognition of our status within the world. In many cases, it is money given to directly assist developing nations or in recognition of other arrangements.
Senator Kelly: I understand what a grant is. I understand there being no conditions, if by "conditions" you mean you do not have to pay it back. What do you do to follow up on, say, $124 million to assess whether those recipients are functioning in a way that causes you to feel you should continue to make that grant?
Mr. Miller: I should make it clear that, when we talk about grants being unconditional, that does not mean we simply write a cheque. There are agreements and preconditions in order for organizations or, in this case, international arrangements to ensure that the money is being used for the purpose intended. On the other hand, when we give money away, for example, to the North-South Institute, which is one of the smaller items, there is an understanding as to how it will be used. Having received the money, they do not have to come back to us and say that they have applied it according to the agreement against a particular expenditure, or that it has allowed them to balance their balance sheet.
The stipulations in applying and approving a grant are clear and are normally laid out by arrangement. Once they have the money and we have assured ourselves that it is being used for the purpose we have given it to them for, there is no follow up as to the performance or output expected from that arrangement.
Senator Kelly: That satisfies me. I was seeking the answer you finally gave: that you are monitoring the extent to which the organization is carrying on the way you anticipated it would, given the assistance it has been given.
Mr. Miller: That is why in some cases the wording is similar. When we are analyzing it and we realize that this money is for general aid and, therefore, we will not get anything back, we recognize that it is a grant and that it must be listed in this way. If we expect to receive the money back, then it becomes a "contribution." That is part of the line in deciding within these programs which become grants and which become contributions. Our review determines exactly what output or performance will be expected from that payment.
Senator Kelly: Among the statutory payments to international financial institutions to which you refer, is the European Bank for Reconstruction and Development included?
Mr. Mike Joyce, Director, Estimates Division, Treasury Board of Canada: I do not know, senator. I would have to get back to you in that regard.
Senator Kelly: I was part of a delegation which met with officials from the EBRD in London within the last month. I spent a lot of time reviewing developments in Eastern Europe. I know that the EBRD is asking for a doubling of its capitalization. The countries that are currently contributing are being asked to consider that proposal. Has Canada arrived at its own conclusion as to whether it intends to increase the capital made available to the EBRD?
Mr. Joyce: We will have to get that information from the department, and we will do that.
Senator Kelly: I suppose the same would apply to the IMF.
Senator Bolduc: Are those two types of contributions handled directly by the Minister of Finance?
Mr. Miller: Amounts are included in both Foreign Affairs and the Department of Finance. If I had to characterize it, I would say that they are administered jointly. Again, it be depends on the actual type of payment. There is a joint accountability for the international financial institution payments.
Senator Kelly: At the bottom of the grant program there is an amount of $250,000 for "Countries in Transition". That is unconditional. Is that a figure to encourage them to, if I may say, "stand up to be counted"?
Mr. Miller: Without having the specifics, but given the amount of $250,000, I would assume what it is attempting to do is to allow those countries to organize in a way that will facilitate the other delivery mechanisms of our program. It provides them with a little seed money to get their operations in order so that we can do things like make contribution arrangements with the full understanding that they will be able to manage that.
Senator Kelly: The dilemma I always find myself in in this committee is that you fellows deal with such big figures that I know it is almost demeaning to you to have to discuss a small amount like $250,000. I happen to think it is still a lot of money.
Mr. Miller: All of us feel that $250,000 is very important.
The Chairman: What is a country in transition?
Mr. Miller: I believe we had a discussion on this, senator, when we met to consider the Supplementary Estimates for 1995-96. We hope that these programs for countries in this particular case moving from the previous Soviet-based economy to more of a democratic process will assist them in making that transition. For developing nations we use a slightly different title.
We feel that the mid-European countries are undergoing a transition process. Therefore, it relates to the wording of those particular items.
Senator Kelly: Would that $250,000 be the cost of advice as much as anything else we are giving them? It is not just dollars, is it? Clearly, countries in transition are moving from a command economy to a market-based economy. Is the technical assistance we are giving contained in any way in that $250,000, or is it only dollars?
Mr. Miller: Normally, it would be only dollars. If we wanted to get into technical advice, it would be under a contribution arrangement where there is a clear understanding. In fact, there is a significant item in the Estimates to deal with the contribution arrangements for those types of nations.
Senator Poulin: Mr. Chairman, first, I should like the senior officials to pass on our congratulations for the excellent presentations made by the Minister and Deputy Minister yesterday. The discussion that ensued was also excellent.
My question today is on the third point raised by Minister Massé yesterday, a matter which was discussed at some length with my colleague Senator Bolduc. It had to do with executive agencies, the objective being that the structures that we have in governments are to ensure the maximum efficiency in the delivery of service. Could you speak at greater length as to where we are currently in our thinking of executive agencies at the federal level?
Mr. Miller: I would be happy to do that. As the minister mentioned last night, if one is to look at the impact on those three organizations, whether it be the parks agency, the revenue commission or the single food inspection agency, we are not yet in a position to identify characteristics. How we have approached this is to go out and say, "You have a job to do. You should be able to do it more efficiently. You tell the Treasury Board what kinds of things you require in order to do that on a more efficient or effective basis." We have opened the door, and measures such as the budget implementation bill, which was introduced in the house recently, provide some flexibility in different areas.
I can use a concrete example to illustrate that point. Presently we have in place arrangements in some cities for what we call "Canada Business Service Centres." These are operated by one federal department. However, the intention is for other federal departments to use them as a single source of information. When citizens go into one of these centres, they can find out about Agriculture programs as well as what is going on in Industry.
Because of the controls and the regime that we have established, it is almost impossible for employees of two departments, although they are both federal employees, to operate in an accountability kind of way. An Agriculture employee, for example, cannot buy a box of pencils out of that departmental budget that will be used by someone in Industry Canada or, heaven forbid, by someone at the provincial level. Even though the other department may pay for it, that employee of Agriculture does not have the authority to place an order for those pencils.
As a further example, in the human resource context, it is difficult for an employee of one organization to be supervised by an employee of another. That has led to a fragmented approach. One of our fundamental principles is to facilitate arrangements between federal departments and between the federal government and other levels of government that would assist us in meeting those citizen-centred service deliveries. As part of creating those three agencies, we will look at those regulations which were created several years ago, probably for very good reasons of accountability and control but which no longer make sense simply because of the objectives and what we are trying to do.
We will be coming back to Parliament with individual pieces of legislation on each of those three entities to determine the parameters under which they will work. I am sure that the committee will enjoy discussing the kinds of issues they will raise. We are now opening the door and saying that there are better ways of doing these things.
Yesterday, the president mentioned that, in the United Kingdom, they went a different way and simply said, "These are the executive agencies and this is how you will work." They put everyone into a different category. However, they were having similar problems in dealing with being flexible enough that made sense to the average person in terms of what they expect out of their government, be it at the municipal, provincial or federal level.
Mr. Joyce, do you have anything to add?
Mr. Joyce: As the president said, the approach we are taking is a pragmatic one. It is a case-by-case and step-by-step process, rather than leaping in and going at it whole hog. As Mr. Miller has said, the intent is to consider the individual suggestions, requests and proposals that come forward and to move along gradually. It is a process that will evolve over a number of years as we move in this direction.
The Chairman: How would it work in a national park, for instance? I can visualize the business centre. I am trying to figure out how it would work in a park. Can you explain that for me?
Mr. Miller: We are in discussions with park personnel who have not quite decided on how it will work. In fact, in discussing it within Canadian Heritage, there is a great amount of debate about exactly what kinds of things this park agency should do and what should be centred back in the department.
It is probably premature for me to comment on it. I have seen material from them relating to planning. They have not yet reached the point where it translates into how this will improve the service to visitors to Banff or how it will improve the things they do.
It is very much working up from the bottom in the sense of how they can do these things and assessing which problems can be easily overcome by simply changing they we operate. They must assess which things are structural in nature and may take a different tack and have to be dealt with from the top down, including, of course, decisions by the minister on the accountability and the relationship both to the rest of the department and whoever would be the head of this agency. It is premature. We are hopeful that those discussions will move on through the spring and summer, and that we will be able to come forward with much more concrete material in the fall.
[Traduction]
Senator Poulin: Given the problems that any legislative change can cause and not only in terms of the management of an objective, are there at the present any working groups examining ways of facilitating this transition in the area of service delivery? Are there any pilot projects under way?
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Mr. Miller: In fact, there are several task forces. Earlier this morning, as well as for the remainder of today, I was involved with a group of academics and provincial representatives to talk about this matter. One of the concerns was that, if the federal government moved forward, we would be ready to deal with business in a different way, which would come as a surprise to provinces, municipalities or even private sector groups that we would like to partner with in moving this forward. Virtually, all departments of government are involved with this to one extent or another.
First, at the deputy ministerial level there is a committee chaired by the Secretary of the Treasury Board, Mr. Harder, which meets regularly on these issues. There are probably five or six different groups at the assistant deputy ministerial level which are looking at different aspects of the issue, such as impediments to better management or impediments to more efficient operations.
Presently, our biggest task is to ensure that we are coordinating all of that activity and ensuring that nothing falls between the floor boards.
There is a series of deputy ministerial task forces looking at different elements not directly connected with the service agencies, but which have a clear impact on and implication for them. I refer to things like the future of the public service and the service to the public or, as it is called, citizen-centred service delivery.
There are many things going on now. We are trying to coordinate them with other levels of government.
The Chairman: Are you looking at privatization or is that a public policy issue? From a public policy perspective, I have a strong interest in parks. If this involves policy issues, perhaps parks could be privatized. We have public servants running campgrounds and mowing lawns in what is, frankly, a six-month operation. For example, in Waskesiu where we have a national park, and I think the same situation applies in Manitoba, I do not know what the employees do in the wintertime. They have $6 million to operate a park for about two months. It is pretty slow in Waskesiu in May and June. Most of the operations could be privatized. Is that a hindrance from a public policy level? Are you given the freedom to suggest that we could contract most of those services out and do away with all of the problems created by the agencies?
Mr. Miller: My understanding is that privatization is not an objective in itself. Last night, the president mentioned employee takeovers where a group of employees, similar to what is happening with the NCC, decide that they can do it better, more efficiently and also contract out in those off months with, perhaps, the local municipality for other activities. That would be encouraged as part of the whole approach to this.
Our expectations are a whole series of suggestions will be brought forward within the parks about doing things better. Recently in the press we have read about the concern expressed by park employees who seem to think that this will automatically lead to privatization. That is certainly not the intention of the whole initiative right now.
According to one story, it was the full-time job of one person to go around and paint signs in parks. Every year, that individual was required to travel from park to park to paint the signs. That does not make sense to anyone. Whether or not that story is true, it provides a good bench-mark for the types of things we want to avoid under the new agency.
Senator Bolduc: I have carefully read your document entitled, "Getting Government Right." Is this a product of your organization?
Mr. Miller: That was prepared by the Privy Council Office; but we had a lot of input.
Senator Bolduc: Yesterday, we began asking questions of the minister about various aspects of this document. Some aspects are highly political. They are at a public policy level. I suppose it is always embarrassing for civil servants to discuss such matters. Since, a few years ago, I was in the position in which you now find yourselves, I feel somewhat embarrassed today to ask you that type of question. However, I want you to convey this message to the minister and to the secretary. One day we will have to come back to this document to press a little further on some of the hypotheses or premises that are involved in it. I do not want to go any further than that today because it would inappropriate.
On the issue of privatization, I have noticed that in the last two years the government has placed emphasis on these new ways of doing things in government, particularly in the departments of Agriculture and Transport. I agree with the changes that came about in Transport. In the field of transportation you headed toward privatization.
In Agriculture you have moved in some other direction and have made changes that are appropriate, but which are not necessarily related to privatization. I can understand that. For example, a governmental research organization has to deal with epidemics.
Do you intend to increase governmental agencies with respect to other departments as a way of safeguarding civil service matters? Some could be privatized but am I correct that you prefer to move toward a governmental agency approach?
Did you survey the whole spectrum of governmental activities in those terms according to the criteria established at the end of the report to which I referred earlier, or are you doing it on a case-by-case basis?
Let us take research and development. In Canada, we do not have the same type of research and development as there is in the United States or elsewhere in the world. In Canada, it is mostly conducted by government with the National Research Council and other agencies performing biological and engineering research.
There was a report a few years ago which stated that we should change that because the dynamics of those governmental organizations are such that the specialists, who are physicists and engineers, decide what research they will undertake, instead of someone from the department of trade or health making that decision, and the results then being related to supply and demand.
We have the impression that because some of these are big government agencies with 4,000 to 6,000 employees it is mostly supply-driven research that is done. This has to change. The Lortie report stated that, unless that is changed, the agencies will become so big that they will become less efficient.
Have you begun to look at that matter seriously? This is a costly problem. We are talking about billions of dollars.
Mr. Miller: Perhaps I can start off generally and talk about program review as an exercise. Essentially, all government programs were reviewed. There was some horizontal look at different activities. At the end of the ministers' discussions we were certainly aware that, while research is a priority, it also, in many cases, has to be in the context of being commercially viable, and I will give an example of how that translates into change.
The research budget of the Department of Agriculture and Agri-Food is approximately $350 million. The concern was that some scientist would spend 25 years considering a particular vegetable and, at the end of the time, although the scientist may have had a distinguished career by producing excellent scientific evidence, his results would contribute nothing to the economy.
An initiative was started in that department last year. By the end of next year, some $70 million of their research activity will be jointly funded. In other words, industry will tell the department if there is a demand for an improved genetic material for, say, sweet corn so that it can be grown in more northerly parts of Ontario and Quebec. Agriculture will do the pure research and, once that particular material is developed, it will be sold to seed organizations to develop the product and move it forward. The matching funds from industry will represents a substantial change in the way the Department of Agriculture and Agri-Food will go about its business.
Senator Bolduc: Have any changes been made with respect to communications? I ask because I have friends who are research scientists in communications organizations, one friend is at Northern Telecom, and one is employed by the federal government. Their jobs are vastly different.
Mr. Miller: Research in communications is significantly different from the kind of research undertaken in the natural resources area. The functions are very different. I cannot comment on whether there is duplication between communications and what they do as part of that function in government as opposed to a private company. Certainly, the entire concept of research and development has been a focus of the government.
The president mentioned that we have a program review to look at implications to 1998-99 and that includes any changes to the amounts of money departments receive. More important, it will affect the direction and emphasis based on the six questions you mentioned, senator. As public servants we want to know how we can assist departments in meeting those objectives. How can we help provide them with that kind of information? It is difficult for even two departments to get together and discuss research that may have similar objectives. The question of how to coordinate that and what implications it will have on the overall objectives of government are matters we have discussed in trying to bring a focus to it and to bring it all together for consideration.
Senator Bolduc: Included in my question about departmental research organizations I recognize that organizations such as the National Research Council are, perhaps, more independent than some administrative organizations. Are they still very entrenched research organizations built and managed by scientists? Do you think that, some day, their work will relate to the demand.
Mr. Miller: I can only go by my limited experience which is exposure to the kinds of feedback we get when we try to change something within an organization such as the National Research Council. Every time they are subjected to a reduction or to a focus on their activities that they feel is incompatible with their objectives, they respond by saying that they are no longer able to support the particular industry or the particular function or developments in a certain area. In my discussions with the scientists and the people responsible for these programs - and my experience is mostly in the area of agriculture - it is clear that there are functions the government has to perform because private industry cannot afford to do it. You have to take an idea and bring it along to a point where it has commercial application.
Once you realize there is a light at the end of the tunnel and you know how to apply science, that is the point in time where joint projects can be undertaken. There are many instances of that which we can relate. In other words, it is the commercialization of an idea or concept. It is at that point that we are focusing on bringing in the private sector. International experience is having a major impact on high-technology areas.
We are evolving. It is now a question of the speed, the direction, and the interest in certain areas. In the last number of years, those factors have changed significantly.
Senator Kelly: I understood you to say that, at the point research appears to have some commercial value, that is when you decide to consider where to go from there. That does not respond to the fact that, up until that point, a whole host of inconsequential research projects are being carried on at considerable cost to the government at the NRC and institutions like that. Do you make your objectives known at a reasonably early stage?
I notice under "Industry, Science Development Program" a number of contributions are made. As you said earlier, contributions are made with certain caveats. They are made with certain, ultimate objectives. Do you ask organizations such as the National Research Council to list their research activities, and then do you assess them and decide whether or not to continue funding the cost of their activities? Do you say whether some of their research is, in your opinion, going nowhere and suggest that they carry on with other research? Do you do that at an early stage?
Mr. Miller: I would have to use conjecture on my part to answer that, senator. Certainly, the opinions of senior management and the minister responsible for the National Research Council have a great impact on those kinds of decisions. Generally, the decision as to whether or not it is commercially worth proceeding is made very early. The question finding the solution. Once you have that solution that is when you can enter into a commercial partner-type arrangement.
In fairness, because of the focus and the direction we are taking, not much academic research is being undertaken outside universities. We provide support for what we call the "highest level of general research." Beyond that, most projects are reviewed carefully. Funding is tight. There are always a million different projects that could proceed. Only those with the most promising return, either commercially or in terms of making some kind of leap forward in a particular sector or function, would be pursued.
The Treasury Board and the secretariat do not normally deal with individual project approval. We leave that to the scientific experts. In many cases, that involves consultations with colleagues across Canada or even internationally for a decision on which projects to pursue.
Again, because funding is tight in all governments, a good deal of coordination goes on between the scientific communities. People will pursue something knowing that there is some complementary work going on in another country. That is one of the interesting developments with the computer and the worldwide web. Communication between scientists can occur momentarily rather than at periodic conferences. There have been many changes in that area.
Senator De Bané: If we look to Foreign Affairs on page 8-7, on the fifth line we see "Contribution for Asia Pacific Initiatives," $2.8 million. Further down that page we see "Contributions to promote trade and investment between Canada and the Asia-Pacific Region," zero. It is difficult to understand exactly what contribution is being made by the Departments of Foreign Affairs and Trade per region. I have difficulty understanding this.
As you know, one of the advantages of computers is that data can be broken down and presented from different angles. This is where computers shine. What we have here is only one presentation of the data. The same data can be presented differently. Before computers, it would have been a nightmare to break this information down but, with computers, it takes two seconds.
This data could be presented in many different forms, perhaps by sorting out the items in descending order in the second column. In that case you would not see a first grant of $50 million on one line and the second grant of $100 further down. This is very confusing.
I see somewhere here an item dealing with the Centre québécois des relations internationales, de l'Université Laval. I cannot believe that Laval is the only university in Canada receiving a grant. However, where the others are listed, I do not know.
Have considered that, next year, you could make the same presentation but with a different system of sorting for each department? That may assist us.
Mr. Miller: This is a wonderful opportunity to enter into the discussion which I hope we will have in two weeks on our Improved Reporting to Parliament Project. All the information we produce is found in roughly 80 different books. We produce 12 million pages of print each year for parliamentarians. It is an impossible task to deal with it all. There is too much data and not enough information.
One of the elements of the Improved Reporting to Parliament Project is to use technology to provide details of individual grants and where they may be found. In fact, one of the items you have been discussing, senator, is a contribution arrangement for the Asia-Pacific that has been concluded. We now have a new arrangement with different terms and conditions, which is why it appears as being funded for the first time this year.
To allow parliamentarians to access this information, we are working with the people on the Hill to link up to the Pubnet system. With that system, we will be able classify and characterize our contributions in different ways as they relate to research, universities, and so on. All of this information would be available through that computer system.
The permutations and combinations, as you mention, senator, are too extensive to figure out ahead of time, given the individual interests of parliamentarians. In fact, we tried to do that in our last reform of the Estimates, which is now 15 years old and which has resulted in these 12 million pages every year which, unfortunately, most people cannot use because they contain too much technical information. Since we try to be consistent, National Archives looks an awful lot like National Defence in our presentation of information to Parliament. Somehow that does not make sense.
I think you will be encouraged by the kinds of changes we are trying to introduce in that area. Certainly, for detail, reference can be made to the departmental Part IIIs. Again, whether or not those items will be highlighted, or how they will be characterized, depends very much on the input of parliamentarians when they conduct their review.
As someone who developed those documents in departments for a number of years, I was always happy to get feedback from senators or Members of Parliament telling me that they did not like what they saw and that they would like to see something different. That someone wanted to see better information or see it categorized in a better way, justified our efforts in doing that.
We will be working closely with both the Senate and the House of Commons over the next year or so to encourage your input and feedback on the kinds of details we are proposing. We hope it will be an evolutionary process. We do not plan to have, by next year, all the information in a way that you could access it directly. Certainly, it is our goal to have parliamentarians understand what they can access information and how they can use it.
A difficulty that arises for the government of the day is that you will then have people being able to use this information in ways that were never anticipated. In front of a committee, with a little bit of research, you will be able to come up with angles that no amount of preparation by either the public servants or the government could have prepared you for. That is another joy of living in the information age.
For people like myself who have the opportunity to appear before committees, it will be extremely interesting to see how it evolves.
Senator De Bané: Mr. Miller, I can tell you that, because of the way those items are broken down today, if you were a parliamentarian, you would find it absolutely impossible to understand the information being presented. For instance, I may ask you: What are we doing for the Asia-Pacific area? You may say that, for instance, on page 8-5, grants totalling $273,000 under "Asia Pacific International Business Development" are set out On page 8-7, we see that "Contributions for Asia Pacific Initiatives" amount to $2.8 million, while contribution for "Asia Pacific International Business Development" is $1.6 million. Different terminology is used on different pages.
As you say, there are so many ways of sorting data. That is the first point I would like you to consider.
My second point touches on the issue of our offices abroad. As you know, some are the property of the Crown and others are rented. Can you tell me where I can find how much we pay for capital expenditures, et cetera, to buy properties as offices and how much we spend for rent abroad?
Mr. Miller: Senator, I would refer you first to the Part III for Foreign Affairs which, unfortunately, I do not have with me today. It contains probably 150 pages of information. Certainly, there has been an increased focus in that area. A separate, special operating agency has been created to deal with foreign holdings.
My experience at the Treasury Board in the last year has been that they have a long-term capital plan which clearly identifies priorities for purchasing accommodation, building new accommodation through a tender process, or continuing in a rental arrangement. They carefully assess the implications of that.
When dealing in foreign countries where inflation rates are substantial in some cases, or where property values are astronomical, it is difficult to make a business decision as to whether it makes sense, for instance in Geneva, to build our own consulate rather than to rent because the rental costs can be recovered in a matter of three years. Those kinds of very strange anomalies are included in their planning process.
Although I am not familiar with the details contained in their Part III, because it is such a major focus and because it involves a substantial portion of their budget, I am sure those kinds of considerations are laid out. If not, we will get that information for you from the department itself.
Senator De Bané: I would be interested to know if a study has been done about borrowing money from Canadian financial institutions to buy all those buildings that we rent abroad and using the money that would have been paid in rent to repay those loans, much like a mortgage. In 25 or 30 years we would end up owning those buildings. A country like Brazil will not disappear tomorrow. It will always be there. What is the rationale behind renting when the same amount of money can be put towards the purchase of those buildings? If it makes sense for Canadians to buy their homes, why are we renting and paying these vast sums of money every year?
I understand that countries such as Switzerland and others have come to the conclusion that it is better to borrow from their own financial institutions in order to own their offices and other buildings abroad. After 20 or 30 years, they will own those buildings, so they need not pay rent. Since you are in charge of program evaluation, would you consider that to assess whether it makes sense from an economic point of view?
Mr. Miller: In fact, as I mentioned, Foreign Affairs has established what we call a special operating agency that is tasked with that specific job. One of the decisions that impacts on the foreign properties we lease, rent or own is our presence in a particular area. Certain areas are very stable because of the international environment and it is quite easy to forecast, over the next 25 years, what our space requirements will be. Geneva is a good example of that. However, in other countries our requirements may vary depending upon trade relations or other external factors.
Certainly, the plan that Foreign Affairs puts together for using their capital dollars takes into account implementing those decisions where there is the highest pay back. In other words, where it makes most sense to purchase or, perhaps, construct a new facility rather than leasing as we now do.
The other requirement that makes this a very long-term process is the fact that not all these facilities are available for purchase. Even if we wanted to, we could not buy some of the places we lease. Therefore, alternatives are required. Location, size and specialized facilities in some cases for the protection of our people require many years of advance planning. Certainly, Foreign Affairs is organized to do that. In fact, we can probably obtain documents for you which indicate exactly what their overall priorities are and how they are going about the implementation of them, given whatever restrictions they have in their capital budget. As I said, it is a sizeable portion of the money they have available to them.
Senator De Bané: Our presence, let us say, in Brazil, Argentina or Chile is a permanent one, and those countries are permanent entities. Since the Crown can borrow from Canadian financial institutions at a rate which is more favourable to them than anyone else, perhaps the Crown would consider the option of entering into an agreement with those Canadian financial institutions to borrow money to purchase property abroad. The money that is currently being paid as rent could then be applied to any mortgage. In 25, 30, or 35 years the Crown would own those properties. That would make sense in the private sector.
I have always had difficulty understanding why it is easy to find money to pay for operational expenses but difficult to find money for capital expenditures. Why does our national museum have a large operating budget but not more than $1 million or $2 million a year to buy works of art? Capital expenditure is a difficult subject to understand. Years ago in London, England, we bought approximately 60 residences but in other countries our accommodations are rented.
I just put those ideas forward for your reflection.
Mr. Miller: Thank you, senator. We will get back to the organization which looks after that.
[Translation]
Senator Rizzuto: I would like someone to explain to me how we extend credit to certain underdeveloped countries, in particular certain African countries. For many years, we have been selling to these countries on credit and we are now realizing that we are never reimbursed. We have seen this in the case of eastern European countries. We always end up giving the money to them one way or another. Should we not simply give the money to those countries or industries that we wish to help? Why not make it clear that we are extending $100 million in credit to a particular country by selling them wheat or some other Canadian product? Basically, we never get our money back.
Could someone tell me what the purpose of this exercise is? Are we trying to help our Canadian industries sell their products, knowing full well that they will never receive payment? It amounts to a direct government subsidy. Is the money going to countries that really need it? One thing is certain and that is the process is not an open one. We do not really know whom we are trying to help. Whom are we trying to convince?
[English]
Mr. Miller: Perhaps, senator, I could respond by indicating that we have different programs which, obviously, help countries directly. We do so by providing Canadian goods without them having to pay it back. Our Food Aid Program is a good example of that.
We also use the Export Development Corporation and other Crown agencies to assist in financing those items. We are now in the process of discussing with the Department of Finance how it would be best to characterize these transactions. For example, we would like to increase our exports of wheat to South American countries. Right now, we are at a disadvantage as compared to the United States because of restrictions in how the Export Development Corporation can fund certain items. We could go to the Department of Agriculture and say that we are willing to provide guarantees to the producers so that they will get their $100 million and tell the department that it has to put up a certain portion of that money in case the money is not paid back. The question is: Although a significant portion of the money will be paid back, how do we deal with those specific cases where that may not happen? What sort of insurance can we have in place to deal with that contingency?
In the case of South America, we are also restricted because we can only deal with sovereign governments such as the Government of Brazil. We would like to utilize arrangements that other countries use. For example, we would like to have an arrangement with a group of stable, international banks which are well financed and likely to pay us back. That arrangement would ensure that a larger proportion of that money would be returned to Canada.
We have programs which involve giving money away directly. We have programs to support the international sale of commodities and provide guarantees to producers that they will get their funds. We must also have arrangements to ensure that, as the federal government incurs costs, we try to minimize the incremental dollars.
I believe that the total of outstanding loans which we have guaranteed in that area is in the billions-of-dollars range. Obviously, we expect a portion of that money to come back to the federal treasury.
In every transaction, we ask: Are we likely to get that money back? If the answer is no, then we must ask how we can ensure that the federal government is not liable for a significant portion of that transaction.
[Translation]
Senator Rizzuto: Could we find out how much money these countries owe overall? Could we possibly get some information on the status of all these accounts receivable? I wonder if this would be possible. In many cases, there may be some abuses occurring. I can understand our giving wheat to a country to help people who are starving. In my view, abuses may occur in some instances where we have guaranteed certain products or the services of certain Canadian companies and sent money to certain countries and where we have no way of knowing if the public truly benefits from our assistance. We no longer know what objective the Canadian government is pursuing.
We should proceed with caution. If possible, I would like to be kept informed or at least to have the possibility of verifying how these sums of money are paid out or, in other words, where the money goes. Has this process really been monitored from start to finish, or is it simply that at some point in time, the government decided to extend credit because it would enable a Canadian company to get a contract or make a sale? We do not know what happened. The point is that ultimately payment for these services is not forthcoming.
If the money has to be reimbursed, then it becomes the responsibility of the country in question. However, if payment is not made, as is often the case, then I think we should proceed very carefully. It is our taxpayers' dollars that we are losing.
Some Canadian firms quite possibly received preferential treatment, but this does not mean that we have to pay for it. In my opinion, the money must go where the Canadian public wants us to send it.
[English]
Mr. Miller: Senator, the public accounts which are tabled annually include some detail on those types of transactions. We can certainly get you more details and ask the department to provide further information.
With regard to following up on individual transactions to see whether or not the goods, the food or whatever it happens to be actually gets to those people who we expect to be the recipients, that is certainly a reason why CIDA has people posted abroad. How they do that is part of their ongoing business. If they did not follow what we expected of them this year, then those funds will likely not be available in future years.
I have some experience with the World Food Organization which is a United Nations organization. They have several hundred people effectively trying to deal with that. In other words, when a country such as Canada provides food relief, they literally follow the planes and the trucks to ensure that the food is delivered to the point of contact. Unfortunately, it is extremely difficult for them to then report back through the chain of command to the country that actually supplied the food and confirm that it was delivered to the people in most need.
Senator De Bané: The President of the World Food Organization ultimately uses that budget to promote his own politics to ensure that he will be re-elected in five years by those donor countries.
Mr. Miller: I will not comment on that, senator.
Senator Bolduc: I have travelled to Western Africa a dozen times or so in my activities for the World Bank. Upon my return, I told Madam Landry, the then minister that we should give money to non-governmental organizations in those places. For example, if we want to contribute to education in the Central African Republic, we should try to connect with the Jesuits who will deliver the goods to the students. Otherwise we will never know what happens to our contribution.
I do not want to criticize a federal organization which has an excellent reputation, the Royal Canadian Mounted Police. When we were looking at National Defence more seriously, we found that, for years, the headquarters of the defence establishment employed a fairly large number of people, specifically, 10,000 people. In an force of 100,000 people, that is ridiculous. It reminds me of the Pentagon in Washington. This is Canada, not the United States.
In your serious consideration of this situation, you realized that 50 per cent of the expenditures related to personnel would be cut at headquarters. Have you considered the RCMP in that light? Their operational budget is huge and, when it is that big, there is always some excess. I believe the RCMP has a budget of approximately $1 billion. We pay about $2 million or $3 million towards the officers' pension fund. In the province of New Brunswick, where we have a provincial police force which is funded by the province, the RCMP's only responsibility is law enforcement as it relates to drugs. The other provinces which use the RCMP to a greater extent probably pay the federal government for their services, but are they paying a realistic price?
I realize that the RCMP has a great tradition in the north, but the time has come to seriously review the organization. It is an administrative organization of 10,000 people. They supply municipal services in some cities in the west, provincial services elsewhere, and continental services with the United States, where they act as a kind of CIA in some situations.
The Chairman: They also provide security services for politicians.
Senator De Bané: CSIS is distinct from the RCMP.
Senator Bolduc: I know that. However, it is time to consider the size of their operations. If no one looks at it, it may continue to grow, the result being that, years down the road 50,000 or 60,000 people may be doing clerical work. I saw that happen in Quebec City which had only a few mounted police. It then became necessary for applicants to obtain passports by attending at the offices in person. Passports can no longer be delivered. Those RCMP officers were doing clerical work, and I fail to understand why that should be the case. However, that is simply an observation. I should like you to consider what I have said. I realize it is a delicate situation, but someone must review the whole situation.
The Chairman: You are not asking a question. You are offering advice that they may want pass on to their own people.
Senator Bolduc: Yes.
Senator De Bané: It is advice from a former deputy minister and secretary general of the government of Quebec.
Senator Kelly: I wish to respond to Senator Bolduc's comments on the RCMP. One of the sad facts of life in any society is that, when people feel threatened, they want a reliable police force. When they feel safe, they fail to give the police credit for the fact that they feel safe. They then suggest that the police force should be reduced. In any analysis of potential risk, the police never receive credit for what they prevent from happening because no one knows what that could have been. Predictably, we follow Senator Bolduc's advice and we reduce the police force. However, if something illegal happens then immediately the media will say that the police failed again. They do not suggest that Senator Bolduc is responsible. He will get off scot-free.
The Chairman: Senator Bolduc knows what happens in bureaucracies. He figures that most officers are located in headquarters and not actually doing police work. He may be right.
Mr. Miller: My understanding is that the RCMP recently conducted an internal review. In discussing the implications with several members, I understand that they are considering distributing their headquarters outward to five regions.
Traditionally, the headquarters here has been a focus for the management of all activities, including provincial and municipal policing, but more particularly from the federal perspective. The bulk of the employees in Ottawa dealt with federal policing, but in a policy directive way because many municipalities - and certainly Ontario and Quebec - are also involved in those kinds of issues.
In the last two weeks I have heard a few members griping about the fact that a complete reorganization and restructuring is going on. If you would like them, I am sure we can get you the details.
Senator Bolduc: I want it to be well understood that I am not criticizing the organization. I am merely pointing out that it is a big organization, like Transport Canada and National Defence used to be. National Revenue is also a huge organization with 32,000 people.
The Chairman: I would refer you to page 12 of the Part I estimates, specifically column three entitled "Planned Spending (not in Main Estimates)." For Agriculture and Agri-Food the figure is $332 million, and for industry it is $317 million. What do those figures represent?
Mr. Miller: Mr. Joyce is the author of that table.
Mr. Joyce: This table was introduced this year, not to show something that is new but to demonstrate a situation that exists every year. There are differences between the numbers that form the expenditure plan that is in the Minister of Finance's budget and the numbers that we print in the Main Estimates. This table shows you and highlights the numbers by ministry so that we know what those differences are by particular ministry.
They exist for a number of reasons. In the first category, the internal government approval process had not proceeded to the point of finality at the time we put the Main Estimates together. Therefore, they were not included in the Main Estimates. However, they are planned expenditures and are, therefore, included in the Minister of Finance's budget.
The second category would be where, going back in the approval process, for a variety of reasons, the department in question is still preparing its plans for those expenditures. It may, for example, involve reaching agreements or concluding negotiations and they have not yet reached that stage. Therefore, they are not ready to come forward to seek approval.
The third general category would relate to legislation. The Main Estimates, as senators know, cannot anticipate legislation. However, in planning our expenditures for the budget we must do that.
We introduced this column to try to display in a bit more detail what those differences were. This year, one of the intents of Part I and the new program expenditure detail document was to build a better bridge between the Main Estimates and the budget so that we could try to explain the differences in a little better way than we have done in previous years.
Senator Kelly: Could they be characterized as "contingencies"?
Mr. Joyce: In some cases they are contingencies; in some cases they are more than contingencies because the expenditures are known with some degree of precision.
Senator Kelly: But they are not in the Main Estimates?
Mr. Joyce: They are not in the Main Estimates.
Senator Kelly: So would they come through as Supplementary Estimates?
Mr. Joyce: Yes they would.
Senator Kelly: Why must supplementary estimates always involve increases? A review was suggested and that has led to certain discoveries. Do you ever discover areas where savings can be made as compared to what is in the original estimates?
Mr. Miller: That is one of the situations with which we are grappling. Traditionally, parliamentarians would not show the offsets. It is something both Mr. Joyce and I feel is not correct.
As part of the improved reporting to Parliament, we plan to change that so that you have a good idea, for example, how a new item is being financed, the offset, and the implications of it. That is very much the direction we were considering.
Perhaps I could comment on, for example, Agriculture, and the kinds of elements that we have identified within that total of over $300 million. There is $112 million for the safety net envelope, which covers their payments to producers in order to support problems of both production and value of crops. We were actually working out the details on how some of those programs would work, so it was premature to include them in the estimates.
We also have $72 million of that amount for the adaptation and rural development fund which, again, is a program under development where the details have not been finalized to an extent where we can bring them forward to Parliament. It is certainly something the Minister of Agriculture has been discussing with provinces and producers over the last number of months. It is similar to the adaptation or adjustment fund for the discontinuation of the western grain transportation payments of $95 million. We are working out how best to utilize those funds, but the government has made a commitment that those expenditures will occur.
That is representative of the kinds of items that are included in that list.
The Chairman: Yesterday, I was a little confused when the minister mentioned the reduction of 45,000 jobs. I do not want to put words in his mouth, but I believe he said it was mentioned in the media. I clearly remember it being mentioned by the Minister of Finance in February of last year. He said there would be a reduction of 45,000 jobs. I do not know if that figure involves people or positions. You use different language. Is the actual figure 45,000? Does it refer to positions that may be eliminated, the number or people, or a mixture of both?
Mr. Miller: The dilemma is that the 45,000 was mentioned in the context of saying, "The impact of program review will result in the loss of 45,000 federal jobs." Let us take the first 6,000 off, which is the transfer of the air navigation system to Navigation Canada. No one lost his job. Those people simply moved from a federal government job at a particular salary level and classification to working for a not-for-profit organization. The same services continued but it was no longer part of the federal government.
The Chairman: When they were transferred did they all receive one year's severance?
Mr. Miller: No they did not.
The Chairman: Did some?
Mr. Miller: To my knowledge, no one who took advantage of the transfer received any payment as a result. The requirement states that as long as the pay and benefits are within a reasonable level of what they receive in the federal government - in fact, we have arrangement that we worked out with 14 of our 16 unions that clearly stipulates how that will work - they will not receive any severance or other payments.
I will now address the second point, namely how that 45,000 figure relates to those who will actually be losing their jobs, those who are not transferred, those involved with employee takeovers or other ways of delivering a service, that is, where people are still being paid and the function continues, but somehow the government is either smaller or we have managed to save money.
The difference was calculated by looking at the departmental plans and asking, "How much can you reduce the level of salary?" By taking an estimate - and, in government now the average salary is about $46,000 - you can say that, if departments are reducing the amount of salary level by "X" million dollars, dividing that gives us a certain number of what I refer to as "body bags".
Senator Bolduc: Those are budgetary jobs. We are not talking about the incumbents?
Mr. Miller: No. I will give you an example of how that can be misleading. Even in my own small organization, I restructured it in such a way that I eliminated one of my senior executives who I felt was not required. That meant a savings of approximately $100,000. However, at the same time, I hired two more junior economists to do the dog work, put all the papers together and deal with that type of thing. It was an opportunity to bring in two young economists to do this work, thus eliminating an executive position. I actually increased the number of people I had working for me but still managed to save $40,000 a year in salaries as a result.
I cannot explain to my own organization that it makes sense to do that. They expect that, somehow, the number of people will reduce along with my salary requirements. Yesterday, when the president was discussing this, one of the things we did not want you to focus on was the particular numbers because they can be misleading. The only certainty is that the departmental budgets have been reduced. The amount of money they have been reduced by is very clear in how these estimates are brought forward and will be in future years. The exact impact of that on jobs will unfold as our programs develop. Clearly, the 45,000 figure was not a target. It was being used as an indication of the magnitude.
The Chairman: I need your help on this, Mr. Miller. The Minister of Finance did mention 45,000 jobs. Since most Canadians speak English - I do not know how to say it in French - that means 45,000 less jobs. It does not mean one person here, two here, and so on. Will it be 45,000 jobs or not? If so, where would are those jobs? If we have 6,000 going to Navigation Canada, they would be contracted out by the federal government. Who pays for the services provided by Navigation Canada?
Mr. Miller: The people who take advantage of flying in airplanes pay that through the air transportation tax and other incentives.
There is a quarterly report, which I believe some of the senators had last night. It indicates our progress toward that target of 45,000. Certainly, we are well within our expectations of meeting that 45,000. Is that a good thing?
The Chairman: I do not know. He said it; I did not.
Mr. Miller: I appreciate that. It looks like there will be a reduction of that number of jobs within the federal sector. There may be a large number of people who leave, for example, as a result of an employee takeover, which we are encouraging as a better way to do business. When they leave the federal government, they will be entitled to severance packages. The way the employee takeover policy works is that they will have a contract for a maximum of three years back at probably less money than was the total cost of that program to begin with. But, at the end of three years, they must compete with the private sector in order to renew that contract. That provides the bridge that allows our existing employees to make the transition to the private sector. They do receive the benefits of the departure programs, whether it be early retirement or early departure. Those count as a reduction from the 45,000. In that case, the federal government is paying to continue those services. We just hope they will do it at a lower rate.
The Chairman: Will those people who will be transferred to the Greater Toronto Airport Authority also be part of that 45,000?
Mr. Miller: My understanding is that they will because that is basically what has happened with the three or four airports that have already made the transition.
The Chairman: Does the federal government currently fund the Greater Toronto Airport Authority? Are you lending them money or giving them money?
Mr. Miller: I am honestly not sure. My assumption is that they do not because there are no authorities under which to do that unless it appears in these estimates, especially with respect to making loans.
The Chairman: Do you lend them money, or did you lend them money last year?
Mr. Miller: We would have to find that out, senator. I am not aware of any situation where we did.
The Chairman: I should like to know: Since this government came to power, has it lent money or given money to the Greater Toronto Airport Authority; what legal entity did the government give the money to; and under what conditions was that grant or loan made?
Senator Maheu: Perhaps I could ask a question with respect to the jobs Mr. Miller was speaking about. You said you replaced a senior official who had a salary of $100,000 with two individuals at a salary of $30,000 each, roughly. How long will that remain $30,000? How long will it remain a saving? Was not the intent of cutting high-level, civil service positions to save the government money? In the long term, I think this will end up costing more than you think you will save. You might save for a couple of years. How would you respond to those comments?
Mr. Miller: The tradition has been that the payments to senior executives, in terms of increases, have followed those of the rest of the public service. Senior executive salaries have been frozen since 1991. The rest of the public service has only been frozen for the last two years, not in the sense of actually receiving an economic increase, but in terms of getting any kind of increase in what we call "in range," which is moving through from a learning position to what would be a job rate for a particular function.
However, in my situation, if I have taken someone making $100,000 and substituted that position with two people making $30,000, presumably, at the end of the Public Service Compensation Act in 1997, if any increases are reinstated, it would be a similar increase for the senior executive as it would be for my two junior economists. That would balance off.
Unfortunately, as a manager, I am accountable for staying within the salary level that I have provided. I have no choice, no matter how much work we have to do. I am accountable for ensuring that the difference is maintained. As of next year, in my example, I will pay $40,000 less in salaries. We must manage within the resources we are given.
Senator De Bané: An added advantage is that, by doing what you are doing, you offer an opportunity to young graduates. The last report of the Clerk of the Privy Council regarding the public service indicated that one of the larger problems looming on the horizon is that the public service of Canada is getting older and that it has not hired anyone for many years.
Ms Larose, are you in charge of human resources?
Ms Jill Larose, Director, Human Resources Strategy Development, Treasury Board of Canada: Not personally, no.
Senator De Bané: I recently read a fascinating book entitled "Maximum Leadership" in which the authors interviewed 160 CEOs of the largest companies in the world. They came to the conclusion that there are five ways of managing large organizations. All companies use these methods, but some emphasize one more than another. One of those five methods of management is the management of human resources, that being the main asset of a corporation. Every evening, a company's assets take to the elevators and leave. I assume that government services are essentially in that category.
Mr. Chairman, perhaps at another session of the committee we could focus on this issue: What systems are in place to remunerate and encourage people who take initiatives? What do we do to signal that we want to promote this type of behaviour, philosophy or strategy? I should like, at some point, to focus on this question.
I was told that we have stopped giving incentives to people who perform; conversely, we have stopped firing people for incompetence. What do we do to motivate our human resources?
The Chairman: We could do that at a university, actually.
If there are no further questions, I would thank the witnesses for being here today.
The committee adjourned.