Proceedings of the Standing Senate Committee on
National Finance
Issue 39 - Evidence
OTTAWA, Wednesday, May 8, 2002
The Standing Senate Committee on National Finance met this day at 5:48 p.m. to examine the Main Estimates laid before Parliament for the fiscal year ending March 31, 2003, Treasury Board Vote 5 – Government Contingencies.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we have a quorum. As honourable senators know, no large organization, public or private, can foresee, a year ahead of time, every eventuality or emergency that will occur. Prudent organizations, public and private, provide in advance for such contingencies. The federal government has a contingency fund set aside for minor, miscellaneous and unforeseen eventualities. Technically, it is Vote 5 of the Treasury Board Estimates that Parliament votes every year. Like last year, it stands at about $750 million in the current year, which is a lot of money. However, it is still only 1.4 per cent or less of the total spending in the Main Estimates for the year.
From time to time over the past many years, Auditors General have taken some interest in this fund; how it is accessed by the government, the purposes to which it is put, and so forth. Just what is a contingency? Most recently, in a report that she tabled in the House of Commons last month, Ms Fraser raised some serious questions about how the government has used the fund.
As long as 15 years ago, this committee was on that case, and we have been on the case again recently, particularly with regard to the principles of government accountability and transparency. The questions we are struggling with include whether the legal authority for the fund and the process need to be tightened up.
We heard from the Auditor General herself a couple of weeks ago. Last week, we heard from the Deputy Comptroller General, Mr. Neville, who is here again tonight.
We also have the pleasure tonight of welcoming Mr. Frank Claydon. Mr. Claydon is a graduate of the University of British Columbia and spent in excess of 15 years in various positions in the Treasury Board Secretariat before going on to senior posts in the Department of Agriculture, including Deputy Minister of Agriculture and Agrifood. For the past two years, he has served as Secretary to the Treasury Board and Comptroller General of Canada.
Mr. Claydon will be leaving that post next week to become an adviser to the Privy Council, so he can probably be described as the outgoing Secretary of the Treasury Board. I am sure the committee will find him both outgoing and forthcoming.
Mr. Frank Claydon, Secretary of the Treasury Board and Comptroller General of Canada: Mr. Chairman, honourable senators, it is a pleasure to be here with you today.
Last week, my colleague, Richard Neville, appeared before this committee to discuss the various features of Treasury Board Vote 5. Among other things, he went over the intricacies of the wording associated with the vote. He also addressed some of the concerns the Auditor General has raised about how the vote has been used in recent years. Given our limited time together this evening, I do not want to retrace this familiar ground. Instead, I would like to focus a little more broadly, looking at what the vote is and how it works. I would also like to look at the role played by the Treasury Board Secretariat and Treasury Board ministers in the supply process.
I hope this approach will help answer any questions that may not have been satisfactorily answered last week. I also hope it may identify some areas for further discussion.
[Translation]
Let me start by saying that I believe Treasury Board Vote 5 is an essential tool for the government. The current public policy environment in this country is complex. The simple reality is that you need a degree of flexibility in both planning and funding mechanisms to ensure the government operates smoothly and effectively. Vote 5 helps provide that much needed flexibility.
[English]
As you are aware, Vote 5 is intended to provide temporary financing to departments to meet unforeseen and urgent cash requirements. Examples of such eventualities abound. The most obvious one from this year is the extra payroll pressure forced upon departments like National Defence and Justice as a result of the events of September 11. Clearly, these were unavoidable and necessary expenses that simply could not have been budgeted for.
I believe we have developed an effective process to manage access to Vote 5. It ensures due diligence for Canadians and accountability to Parliament while allowing departments access to crucial funding. I welcome the opportunity to discuss this process.
[Translation]
As you are aware, Parliament deals with the issue of supply only three times during the fiscal year. While the government strives to include the vast majority of new resource requirements into the Main Estimates in any given year, as you can imagine, this is not always possible.
Even the most sophisticated planning process cannot foresee every eventuality. That is why Supplementary Estimates are tabled each year. This process provides additional spending for new or revised programs that occur too late for inclusion in the Main Estimates process.
[English]
In many respects, Vote 5 is used to ``fill the gap'' between Main Estimates and Supplementary Estimates. Access to Vote 5 is approved only in those cases where the need for immediate funding is so great that it would not be prudent to wait until the next Supplementary Estimates.
As you are aware, all requests to access Vote 5 are based on submissions coming to the Treasury Board Secretariat from departments. I must stress that, despite the attention they have received, Vote 5 requests are really the exception and not the norm.
[Translation]
The Treasury Board Secretariat assists departments in developing the submissions. There is a rigorous internal review process, and during the development of the submissions, discussions take place on the necessity of requesting access to Vote 5 if the department feels this is required.
If the TBS feels these requests are not warranted, it discourages departmental officials from including them in the formal submission to be signed by their minister.
[English]
Most importantly, there must be clear justification for the request. This is not something that we in the Treasury Board Secretariat take lightly. Departments must demonstrate a clear and compelling argument for accessing funding. We look at requests from an affordability perspective. This means looking at other incremental pressures being managed by the department and how these pressures affect the ability to deliver on program requirements. We need to determine whether the department in question can reasonably absorb the incremental cost, given the relative size of its approved budget.
We also challenge submissions from a timing perspective. There must be clear urgency to the request. It is worth pointing out that we routinely deny access to the contingency vote for payments that can wait until the passage of the next appropriations bill.
If it is a case of a new grant item or an increase to an existing grant, the request is reviewed using the same criteria. If the justification from the department and the judgment of Treasury Board Secretariat officials are that this item must be paid outside the normal supply process, then Vote 5 access and the temporary authority provided through Vote 5 are recommended. Again, this is the exception rather than the norm.
For example, in 2001-02, there were a total of 87 grant items included in the Supplementary Estimates. Of these, only 17, or less than 20 per cent, were granted access to Vote 5.
[Translation]
Once a submission is finalized by the department and approved by the appropriate minister, it is submitted to the Secretariat, where it undergoes an extensive vetting process. Let me state categorically that the Secretariat does not just ``rubber stamp'' submissions, especially requests for access to Vote 5.
[English]
Ultimately, the decision to approve or reject a submission lies with the Treasury Board ministers themselves. In essence, the submission represents a request for contingency funding from one minister to his or her colleagues. The ministers operate as a cabinet committee and weigh the merits of each individual case. It is the responsibility of the Treasury Board Secretariat to oversee the presentation of cases to the Treasury Board and to make recommendations.
As you are aware, concerns have been raised about the latitude that Vote 5 gives to the government. The wording of the vote has been left intentionally broad. That being said, as Mr. Neville pointed out last week, the use of the authority granted through Vote 5 has always been more restrictive than the uses authorized by Parliament. The government is very leery of using the vote beyond allocating temporary financing mechanisms to deal with unforeseen and urgent matters. This is particularly true in the case of grants made in advance of parliamentary approval. I know this is an issue of serious concern for both the Auditor General and you. Let me assure you that we share your concern.
Mr. Chairman, I believe the Treasury Board Secretariat has demonstrated a high level of diligence and prudence in its management of the Vote 5 process. I find it reassuring that in a recent review of three cases, the Auditor General found that the secretariat analysts involved followed all the guidelines diligently.
[Translation]
That being said, I believe we can do an even better job of managing the funding allocation process. That is why we intend to undertake a complete review of the existing guidelines. We will be looking closely at the suggestions we have received from this committee. Ultimately, our goal is to recommend a policy on Treasury Board Vote 5 to Treasury Board Ministers for their consideration and approval.
[English]
Senator Lynch-Staunton: Thank you, Mr. Claydon, for your succinct presentation. We are pretty well heading in the same direction; it is just a question of the last few steps to be taken on this. Nobody questions the need to have this discretion. The dispute, if you can call it that, is how you interpret the authority given. Some of us sympathize with the Auditor General's recent statement that perhaps the interpretation of ``minor, miscellaneous and unforeseen''o has been too broad. If the word ``urgent'' were substituted, that would certainly limit the interpretation. Would that narrow it down? You did use the word ``urgent'' in your statement.
The Chairman: It is not in the vote.
Senator Lynch-Staunton: You talk about immediate funding, and I will get to that in a moment. Senator Bolduc raised this issue last week with Mr. Neville and his colleague, and he almost rewrote the wording for you. The word ``urgent'' keeps surfacing. How do you feel about that?
Mr. Claydon: I would point out to the senators that the Treasury Board has eight guidelines that are meant to assist the board and the departments in the use of Vote 5. In our guidelines, we refer to ``urgent.'' That is one of the things we look at in our interpretation. I would be pleased to take this under advisement. ``Urgent'' is certainly one of the factors that is taken into account; we would need to look at whether that implies that it needs to be part of the vote wording. I can assure you that it is very much part of our deliberations.
Senator Lynch-Staunton: In our briefing book under tab 5, we have a list of some of the major expenditures that qualified under Vote 5. One is the establishment of the Canada Information Office for $15 million. That may be unforeseen, but I certainly do not see the urgency. There was also the creation of the Millennium Bureau of Canada. Senator Murray asked the other day, did you not see the millennium coming? You wonder why these items, instead of being created at the discretion of the executive and financed as such, could not have been brought before Parliament to pass through that ponderous but more open process. I do not want to pick on these two, but what was the urgency at the time?
Mr. Claydon: I did not want to deal with those two specifics either. Perhaps Mr. Neville might be able to shed some light on those particular cases. Yes, everyone knew the millennium was coming. However, in establishing a program to accomplish specific objectives within a certain time frame, one could be faced with an urgency to begin the process so that the mechanism to provide the funding would be in place. In that sense, there was an urgency to get this in place in time to meet the objectives of the program.
It is different from the kind of urgency that results from some totally unforeseen event such as September 11. There are other kinds of situations where the government feels it is very urgent to move something forward and ensure that it fulfils its commitments and provides certain benefits to the Canadian population within a certain time frame.
Senator Lynch-Staunton: I do not want to draw you into a political argument. If we are headed in that direction, please stop me. Deadlines for the two entities I mentioned could just as easily have been met had they been budgetary items initially. They could have been presented as part of a budget and then given authority through a regular supply bill. Somehow, I feel this was the easy way out not to bypass Parliament because the expenditure must eventually be approved by Parliament. However, Parliament had nothing to do with the creation of these two entities.
Mr. Claydon: Perhaps Mr. Neville could comment on the specifics of those cases.
Mr. Richard J. Neville, Deputy Comptroller General, Comptrollership Branch, Treasury Board Secretariat: In both those cases, the department made a case that it was urgent and that they did not have the cash to make the required payments. Therefore, they needed an advance from TB Vote 5 until such time as it could be included in the next Supplementary Estimates. That is the rationale in both of those cases.
Senator Lynch-Staunton: Maybe I am trespassing on confidential information here, but the TBS makes recommendations to the Treasury Board.
Mr. Claydon: Yes.
Senator Lynch-Staunton: Of course, Treasury Board has the final say. Does it sometimes happen that your recommendations are overruled?
Mr. Claydon: I will talk about that for one minute. The process we go through with departments in looking at their needs for access to Vote 5 starts well before the Treasury Board looks at a case. There is a great deal of back and forth between the secretariat and the departments to work out jointly what seems to be the need for access to Vote 5. Many times, departments will say, ``We really need this.'' However, by the time we have done an analysis, looked at other potential sources of funds in their budgets, what their real cash requirements are, et cetera, an agreement will be reached that it is not necessary to ask for Vote 5. In the vast majority of cases, these kinds of things are worked out among officials. It does not happen very often that a department is demanding access to Vote 5 and the Treasury Board is not able to support that demand.
This is an area where departments count heavily on the expertise of the Treasury Board Secretariat to guide them. We avoid almost all of those situations by working out the details amongst officials.
Senator Lynch-Staunton: Just a last question on this round: What is the rationale behind transferring the entire amount of a grant to foundations in the form of capital, rather than funding them annually on the basis of their needs? I know we are not supposed to talk about foundations as such; this is just the policy of funding the foundations for example, the Sustainable Development Fund, which was $50 million, was not needed the first year and so it was not even set up. About six weeks ago, some directors were announced and there are still more to be announced. The government announced its directors and those directors announced other directors. It is still in the formative stage, and yet the money has left the general revenues and gone into a bank account, the interest on which will go to the benefit of the fund. I think that when you add up all these amounts that have been transferred to individual funds at a stage when they are not immediately needed, interest is being lost to the taxpayers of Canada. Why move all the funds out at once when the foundation itself is not ready to operate?
Mr. Claydon: I will ask Mr. Neville to reply to that.
Mr. Neville: There are a few reasons.
First of all, it is government policy to do it that way. The rationale is that transferring the entire amount at the outset, rather than over three or four years, ensures that the funding is secure. There is no chance that a change in government, or a change in priorities of the government of the day, could alter that decision. By transferring it immediately, it is secured.
The second reason is it allows that outside entity to leverage, with the amount of money they have, additional contributions or grants from other parties.
The third component is, in some cases, we will actually treat it as an endowment. We want them to have a certain amount of money so they can earn interest. We only allow them to make payments based on the interest, without touching the capital. There are a number of factors that come into play as to why we transfer the money upfront to the third party as opposed to distributing it over a number of years.
The Chairman: You can pursue the policy question. On May 28, we have John McCallum, one of the finance ministers, and Kevin Lynch, the deputy minister, here.
Senator Lynch-Staunton: I look forward to that. Remember, it is the Treasury Board that ensures these expenditures fit within the guidelines. You are aware that with most of these foundations, should they be wound up, the monies do not return to the government. Except in one case we found, they are distributed to those who received the grants along the way.
Mr. Neville: One must not lose sight of the fact that we are transferring them to a third party. We do not have control over those funds at that point in time.
The Chairman: That is the problem.
Mr. Neville: If we were to have control over those funds, it would no longer be a transfer to a third party. It would still be deemed to be within the government entity. We would have to record it as part of the government's overall assets and as part of a program. It would defeat the purpose of what we are trying to do.
Senator Cools: I would like to welcome the witnesses tonight, especially Mr. Claydon. We do not see you very often. If you were not leaving this post in a few days, I would ask you to return. It was a short relationship.
Senator Lynch-Staunton: We can get to that.
[Translation]
Senator Ferretti Barth: You stated that some concerns have been raised about the latitude that Vote 5 gives to the government. Truly this seems to be a major area of concern.
The government has this ability to allocate funds to areas where it feels they will be needed. Does the government avail itself of this available funding only in very specific cases or are there limits imposed on the use of Vote 5?
[English]
Mr. Claydon: There is only one limit, the overall size of Vote 5, which, as the chairman said, is $750 million. There are no specific limits on specific payments under the vote.
[Translation]
Senator Ferretti Barth: Aside from foundations, you listed other examples of uses of Vote 5.
Mr. Claydon: I did.
Senator Ferretti Barth: What other way is Vote 5 used?
[English]
Mr. Claydon: Vote 5 has a very broad application. It can be used for a number of activities. It certainly can be used for operating and capital expenditures. For example, after September 11, it was used for some operating expenditures of departments that had undertaken activities related to security. It has been used in a large number of departments for other operating expenditures. It is also used for pay list purposes. That is one particular area where Vote 5 is used quite frequently.
[Translation]
Senator Feretti Barth: Guidelines have been developed to ensure a concise and comprehensive review of government funding submissions.
Could you tell us what these guidelines are in the case of funding to cover certain eventualities? You did say that guidelines had been developed.
Mr. Claydon: Yes, Treasury Board has developed guidelines for assessing requests for access to Vote 5. There are eight guidelines in total, but these are not part of the legislation. They are tools to assist Treasury Board analysts and departments as well.
Senator Ferretti Barth: Why has the TBS not responded to the AG's comments?
[English]
Mr. Claydon: We have responded to the recommendations of the Auditor General in the report she tabled recently and we are undertaking a review of our guidelines for the use of Vote 5. After that review, we will present to Treasury Board the possibility of a new policy for how we manage Vote 5 and its application. That was one of the recommendations directed specifically at the Treasury Board Secretariat by the Auditor General.
Mr. Neville: Perhaps I could refer the senator to chapter 8, page 32, where the Treasury Board Secretariat's response is quite specific. It is directly related to the recommendations of the Auditor General.
[Translation]
Senator Ferretti Barth: Summing up, I have to say that I am somewhat distressed by the considerable latitude the government enjoys when it comes to using the taxpayers' money. That is only my personal opinion, but as a citizen, I feel the whole situation makes little sense.
[English]
Mr. Claydon: Just one comment: $750 million seems like a fair amount, but within a budget of $165 billion, it does not present a lot of opportunity for the government. It is a very small proportion. According to some research we have done, it is a lot smaller than what international governments have to work with. Given the huge amount of money that is spent every year, it is not unreasonable, it seems to me, for the government to have a little flexibility to do necessary and urgent things.
Senator Bolduc: The amount is not $165 billion; it is really $50 billion or something, because the rest is statutory expenditure and debt servicing. It is about 1.5 per cent, something like that. It is a fair amount, taking into account the fact we have at least two Supplementary Estimates, sometimes three. Parliament is sitting almost all the time now, at least 10 months a year. The use of Vote 5 really should be an exception. That is my first remark.
Second, you said you do not use it very much, but on 87 grant items, you used it 20 per cent of the time. That means one in five. You said urgency is included in your guidelines.
Mr. Claydon: Yes.
Senator Bolduc: I would like to point out it is the seventh of eight guidelines. The first four are really Treasury Board guidelines; I would say the others are Treasury Board Secretariat directives. I am surprised that ``urgency'' is not in the basic guidelines for the ministers, the Treasury Board itself. In French, at least, we say, ``un sentiment d'urgence.'' The feeling is sometimes particularly urgent before an election.
Senator Cools: Very urgent.
Senator Bolduc: You do not put yourself on the safe side when you do that, having regard to the old theory of parliamentary accountability.
Mr. Claydon: Some of these guidelines have been recent editions, as you know. As I said earlier, we are going to review them. We are going to take the entire set back to the Treasury Board and seek their guidance on an overall policy approach. Certainly we will take the comments that we received previously, and are receiving now, into account when we make our recommendations to the Treasury Board.
Senator Bolduc: Do you intend to follow the advice of the Auditor General about the legal text of credit 5? According to Ms Fraser, that needs clarification too. I think that ``menus, dépenses, imprévues'' has been given a fairly wide interpretation.
Mr. Claydon: The current wording has remained basically unchanged, as I understand it, since the 1950s. We would certainly take under advisement a chance to look at the wording. I would be nervous about changing something that, grosso modo, has worked reasonably well. My sense is there is certainly room for improvement in the way that Vote 5 is interpreted and used on a daily basis.
Senator Bolduc: I can understand that. Vote 5 is an article of law. If the ministers decide to change it and request Parliament's permission, that is okay. I do not blame the civil servants. We are not here to blame anyone.
The Auditor General suggests we should have a look at that. I think we should make a proposal on that aspect.
My second question is on the guidelines themselves. I will not repeat what I said last week. It was registered, and Mr. Neville said he would take care of it. Unfortunately, I had forgotten one aspect of it. It is on guideline number eight, which is not approved by the ministers, but I understand is used by the staff.
[Translation]
The grant must be allocated to a valid, legally constituted entity.
[English]
I would add that, according to the grant rules, you must have some otherwise we do not make the distinction between legislative authority and the power of expenditure, the distinction that the Auditor General made. I would like to have your comment on that.
Mr. Neville: Another good suggestion by the senator. We will definitely take that under advisement. If he is available for consultation outside of this committee, he may wish to consider that.
The Chairman: We will volunteer his services.
Senator Cools: I have a couple of questions. Before I proceed to them, I would like to make sure I understand the eight guidelines. There are four, with an additional four, I guess you call them, ``directives.'' The one you are speaking of I think you describe as ``number seven.'' You were speaking about the question of urgency.
My understanding is that the meaning of ``urgency'' in that particular guideline, directive or instruction, whatever you want to call it, is not the same as ``emergency,'' as in a natural disaster, for example. The urgency has to do with a pressing public policy need or a pressing political need of the government.
I just wanted to put that on the record to clarify that the urgency is not an emergency; it is that government has an urgent need to act. In other words, it is an urgency of public policy.
Mr. Claydon: Yes.
Senator Cools: I wanted to clear that up for the record.
I would like to come to the Auditor General's testimony when she appeared here a couple of weeks ago. The Auditor General has very dramatically — and very publicly and eloquently, I would add — adopted a position that is in sharp contrast to yours on the interpretation of the vote wording, and in particular, the words ``minor, miscellaneous and unforeseen,'' which are the actual words of the vote. I have been very attentive to the nature of this disagreement between Treasury Board and the Auditor General.
I have been concerned that this is a policy disagreement rather than an audit disagreement. I have this niggling, gnawing concern that what we are seeing here is a trenching on jurisdictions.
I will put the same question to you as I put to the Auditor General. My question to her was, essentially, to what extent was her disagreement with Treasury Board, and with you, a substantive policy question, and to what extent an audit question.
Perhaps, Mr. Neville, you could take a shot at this. I wish you would, because you have been here before and have heard me raise this particular concern.
Mr. Neville: It is a valid point, Mr. Chairman, and I appreciate the question.
From our perspective, the wording used in the report indicates that it is a policy disagreement as opposed to an audit disagreement. We have had numerous discussions with officials at the Office of the Auditor General on this. The interpretation, obviously, is made one way from a policy perspective, and we have interpreted it differently at this time.
I believe that there were no issues based on her audit findings. The audit report is clean in that context. We have followed the eight guidelines that we were supposed to follow.
The Chairman: In a nutshell, Mr. Neville, express the policy disagreement in your own words, please.
Mr. Neville: The policy disagreement is that the words ``minor, miscellaneous and unforeseen,'' for the Office of the Auditor General, and for the Auditor General herself, imply a restrictive amount much smaller than the total amount of the vote.
On the other hand, no amount was mentioned in the report. We asked on numerous occasions, what is ``minor, miscellaneous, unforeseen'' from their perspective? No answer was given.
Our understanding is that we have been asked for clarification. We have committed ourselves to that. Again, it is a policy interpretation in the context of what the total amount of the vote would be in terms of its usage, as opposed to how we interpret that use. However, it is not an audit interpretation.
Senator Bolduc: When you say that you have answered, is that what we have read in the minister's budget plan? We have the budgetary plan every year, and there are a couple of pages in there where you give arguments for why you did what you did.
Mr. Neville: No, that is completely different and used for a different purpose.
Senator Cools: I ask some of these questions, colleagues and witnesses, because the attempt on the part of the Office of the Auditor General to enter the policy stream, to enter what the academics call the ``advice stream,'' is very troubling and has been noted by many members and many academics for quite some time.
I will give you an example. In preparing for this committee work, I went to the record of when this committee looked at this same issue, Vote 5, in 1988. I found this quotation, from the testimony of Dr. Sharon Sutherland, on January 28, 1988, in Issue No. 21 of committee proceedings. What this professor said is interesting:
One sees the OAG still pushing on the idea that they have to get into the advice stream, to hold public servants to account. I want to say that I think ministerial responsibility may be an old idea, but it is a very important one, and it is not one to be disposed of by the auditor, or just to be brushed aside.
I want to suggest to committee members that perhaps we should invite Dr. Sutherland to come back before this committee, because when she appeared some years ago, she introduced us to some of her works — for example, ``The Politics of Audit: the Federal Office of the Auditor General in Comparative Perspective.'' The matter of the Auditor General attempting to command public policy and public opinion is not new.
Since I have put that question to her, I thought I should put it to you, in all fairness, so that you can respond. I am hearing you say that you very clearly see the difference as a substantive one, rather than about sets of numbers and probity, et cetera. I wanted to bring that out.
Would you like to comment further on that? You may not even have known of Dr. Sutherland's work. We are dealing with a sharp contest between the Auditor General's office and certain segments of the public service, quite frankly, for public opinion, and that to me is a political and public policy matter.
Mr. Neville: The only comment I could add is the Auditor General does not usually like to comment on policy decisions. In that context, I would leave it to her to express her views.
Senator Cools: I would like to refer to another quotation from Dr. Sutherland in the same paper, published in 1986 in a magazine called Canadian Public Administration. Toward the latter part of her article, she states:
Still, the system must be realigned so that only those who are accountable through the electoral system wield decisive political powers. Otherwise the OAG will unilaterally drive fundamental constitutional change, transmuting us to a flawed semicongressional system where one of the central institutions would be free of democratic controls. In this writer's opinion, the legislative mandate of our OAG must be changed to define a more controlled activity.
Here the author is essentially saying that the Office of the Auditor General should confine itself to audits and leave those other policy areas alone.
She continues:
Potential changes to the legislation could range from adopting some of the limiting mechanisms that are in place in other jurisdictions, to simply returning the office to a more traditional audit role with wide reporting powers. In the absence of action, Canada will surely experience another stage in this strange aggrandizement by its state auditors.
These statements are from an academic who has studied these matters.
I am very much aware that you do not have the same freedoms as, perhaps, the Auditor General in commandeering either public opinion or press coverage. One certainly has to be very aware that the Auditor General is extremely strategic in press statements and commandeering press coverage.
Do you have any comments on this from your position as ``money men''? Is this too sharply political?
Mr. Claydon: It is a little difficult for us to comment on that.
Senator Cools: I bet.
Mr. Claydon: The only comment I would make is that no matter on what the Auditor General is commenting, her job is to survey government activities and look for things that are not running the way that they should. Bad news tends to get more press than the 10 good things that were done the same day.
There is some inevitability to the kind of press coverage that the Auditor General gets. I would not like to comment on her overall role. That is obviously something for the government to look at, if it thought there should be some change.
Senator Cools: I have taken an interest in some of this subject matter. Unquestionably, the Auditor General is the servant of the House of Commons. However, the Auditor General is not the servant of the Senate. The relationship that the Auditor General has to the Senate is completely different from the relationship to the House of Commons. The Auditor General is the ``House of Commons person,'' so to speak. I tend to look at that role from the perspective of the Senate.
The Chairman: What was the date of the article?
Senator Cools: I will try to get a copy. I was reading from the second last page.
The Chairman: 1986?
Senator Cools: She has written many articles on this subject matter. Her testimony before this committee would be very useful in sorting out these large issues.
Senator Stratton: Welcome, gentlemen. For a three-page presentation, it was clear and concise. I thank you for that.
The only thing missing on page 3 is your time line. You stated in your second to last paragraph that you intend to undertake a complete review of the existing guidelines.
Mr. Claydon: We have already started. We will be moving on it quickly. Mr. Neville will be doing all the work, so perhaps I should ask him to answer your question.
My sense is that this is not something that will take years to accomplish. I would expect it to be done in six months or so.
Mr. Neville: We are on the same wavelength. We will commit ourselves to reviewing this by the fall and going back to Treasury Board ministers for ratification immediately.
Senator Stratton: Will we know about that? How will we be informed? If we put the question in the report, hopefully we would expect to hear back.
Mr. Neville: That is a given. Once Treasury Board ministers have decided, we would disseminate that information. That would include to this committee.
Senator Stratton: I would like to go to the briefing book that was prepared in April. I wish to turn to tab 4, a section that was sent to us by the ``expenditure and management secretariat.'' I do not know what that means.
Mr. Neville: Treasury Board has something called ``Expenditure and Management Strategies Sector.''
Senator Stratton: It describes Vote 5. I am interested in the comparison of our system with the British and Ontario systems. It clearly points out that in the British system, a much larger fund is attached to the contingency vote.
The expenditure management secretariat says on page 7:
b) for new programs, the wording of the Contingencies Vote (i.e. miscellaneous minor and unforeseen expenses) specifically prohibits the use of the Vote for funding major new initiatives.
How do you folks interpret that? Funding foundations to the extent that they were required fairly significant dollars, in my humble view.
Were they funded under Vote 5? Can you give me a clearer definition of what that phrase means: ``specifically prohibits the use of the Vote for funding major new initiatives''?
Mr. Neville: We do not have access to your briefing book.
Senator Stratton: I appreciate that.
The Chairman: I think that you do.
Mr. Neville: No, we do not have access to your briefing books. We do not have them here.
The Chairman: We gave them to your staff.
Senator Stratton: Mr. Neville, if you are unable to answer now, could you please look at that and get back to me with a response? It seems rather odd to read, "specifically prohibits the use of the Vote for funding major new initiatives,'' because in our view, that is exactly what has transpired.
Mr. Neville: I would like to look at that in the context in which it was written and gain a better understanding before we respond.
Senator Stratton: I appreciate that. You will get back to us, I know.
Mr. Neville: Thank you, Mr. Chairman. We will.
Senator Tunney: Welcome, gentlemen. I find this fascinating, and the more I hear about it the more fascinating I think it is.
I have a little trouble, as I believe other senators may, in comprehending that limit of $750 million. Is it an accumulated amount, with $750 million being the limit?
If some of this is paid back, does that reduce the amount left to get back up to the $750 million total, or is the $750 million an annualized thing? I would like to understand this a little better.
Mr. Claydon: I will try to explain. If I do not get it right, Mr. Neville will correct me.
We set out an amount of $750 million in Main Estimates as the limit on Vote 5. Between Main Estimates and the first Supplementary Estimates, various draws may be made on Vote 5.
At the first Supplementary Estimates, there is an opportunity to, essentially, reimburse Vote 5. Some of it may be reimbursed and some may not. Vote 5 would go back up again a little, so there would be more money available than if there had been no reimbursement from the Supplementary Estimates.
After the first Supplementary Estimates, the same thing could happen again. You could continue to draw down on Vote 5. It could be replenished again, to some degree, in the second Supplementary Estimates.
There is a limit, in that within any period, it cannot go over that amount. There is an annual overall limit, because you cannot do more than top it up at each Supplementary Estimate. It means that you could spend more than $750 million in a year.
Senator Tunney: Does it work like the line of credit I have at my bank? If I pay off some of the loan and then find a need for further credit, I can borrow more, but I cannot exceed my credit limit.
Mr. Claydon: That is right. Also, you can only repay this line of credit a couple of times a year, not whenever you wish. It is only when the Supplementary Estimates are issued.
Senator Tunney: I have a little trouble measuring the value of $750 million. I suspect that 20 years ago, we would have considered $750 million to be worth far more than we do today. Has this limit moved up over time, since the value of our dollar is less and the need for funds is greater than it would have been 20 years ago?
Mr. Claydon: The limit has increased over the years. I expect that Mr. Neville can tell you exactly how much it has increased and over what time period. It was $300 million or $400 million 20 years ago, and now it is up to $750 million. I am sure we could give you an exact figure.
Senator Tunney: I do not really need that. It is the practice I am interested in.
Mr. Claydon: It has grown to some extent.
Mr. Neville: In 1974-75, Vote 5 was $90 million; in 1975-76, it was $120 million; in 1976-77 it was $140 million; and in 1977-78, it was $360 million. Therefore, it has been growing over time.
The Chairman: It is roughly the same proportion of the Main Estimates?
Mr. Claydon: Yes, give or take.
Senator Tunney: I am fascinated by the discretion, judgment, restrictions and tendency to overlook restrictions, between the cabinet and the Treasury Board Secretariat. Could you comment on that?
Mr. Claydon: I am not sure that I understand the question.
Senator Tunney: I mentioned judgment and restrictions, or the lack of restrictions, on the legitimacy of the project. Can an application be turned down both on the basis of its worth and also the amount?
Mr. Claydon: In the normal course of events, before any project comes to the Treasury Board to be considered for approval, it would go through the cabinet committee process for a determination of whether it is worthwhile.
Treasury Board then scrupulously reviews the terms and conditions of the program and the resources that are being requested to ensure that the department is not asking for too much, and also that it is not asking for too little. Sometimes departments try to run programs on a shoestring, which is not good government either.
The analysis also includes official language requirements and various human resource policies. When all of that has been done, it finally goes to Treasury Board, where ministers do a comprehensive review that includes the source of funds and the use of Vote 5.
Senator Setlakwe: Welcome, gentlemen. I am replacing someone on this committee. I normally sit on the Standing Senate Committee on Banking, Trade and Commerce.
When I first saw the words ``minor, miscellaneous and unforeseen,'' I thought they were rather flippant and frivolous. However, I was comforted by your comments, especially your statement that you need a clear justification for the request and also that there must be urgency involved.
Given what you have said, the amount itself does not bother me. Out of the total budget of the government, $750 million does not sound extraordinary. However, has the Treasury Board Secretariat ever recommended against access to Vote 5?
Mr. Claydon: As I mentioned earlier, we try to work out our differences with departments at the officials level, so that we do not end up recommending that the Treasury Board not approve something. It is a rare event that a department says they absolutely need the money immediately and the Treasury Board says that they must wait until the next Supplementary Estimates. We tend to reach agreement before that.
In most cases, when Treasury Board officials say that they do not think a case has been made, the departments accept our word.
Perhaps Mr. Neville can give you some examples of when that has happened.
Mr. Neville: There are some examples of that. The Treasury Board has recommended against a departmental submission that was then considered by the Treasury Board ministers. As you can appreciate, that is a cabinet committee. Therefore, I cannot go into further disclosure, but it has occurred.
Senator Setlakwe: You are doing your job.
Mr. Neville: We think so, Mr. Chairman.
Senator Callbeck: Welcome, gentlemen. Thank you for coming this evening.
I am not a member of this committee either. I see in the material you have provided that criteria were set and approved by Treasury Board in 1989, and that since that time, further criteria have been added. Why is that?
Mr. Claydon: Some of the criteria were added in response to concerns, such as, for example, those raised by the Auditor General. We have responded by trying to ensure that the Treasury Board Secretariat is as exacting as possible in terms of what departments should do. Several criteria have been added in an effort to clarify what is intended.
As we said, we will do another review of this, then go back to the Treasury Board with the entire of set of criteria and seek their approval for a new overall policy.
Senator Callbeck: In other words, it is fair to say that most of the criteria that have been added have been because of comments by the Auditor General?
Mr. Neville: I would say it is a combination of many factors, including comments of the Auditor General and specific observations by colleagues in central agencies, as well as the analysts who work on these submissions. They are asking for clarification. As a result, we have increased the guidelines.
Senator Callbeck: In your brief, you mentioned that in 2001-02 there were a total of 87 grant items in the Supplementary Estimates, of which 17, representing about 20 per cent, were granted access to Vote 5. Is that 20 per cent fairly consistent with other years?
Mr. David Bickerton, Executive Director, Expenditure Operations & Estimates Directorate, Comptrollership Branch, Treasury Board Secretariat: I think it varies from year to year. I could not give you an answer today. The number is generally low. As the secretary said, it is usually the exception rather than the norm that departments get access to Vote 5.
The Chairman: You are not suggesting in that statement, Mr. Claydon, that 87 of them actually sought access to Vote 5?
Mr. Claydon: No, we are not suggesting that. It may be useful to clarify as well that the large majority of grants are in fact authorized through the Main Estimates. It is just these 87 that were done through Supplementary Estimates. The 17 are a very small percentage of the overall set of grants approved during the year.
Senator Callbeck: How much would that 17 amount to roughly, in dollar terms?
Mr. Bickerton: At this point, I am not sure what the exact amount is. The total amount put forward for grants in Supplementary Estimates was about $220 million. The single biggest one, of course, as this committee knows, was the assistance provided to the airline industry as a result of September 11.
Senator Cools: Chapter 8 of the Auditor General's April 2002 report has a lot to say. I was wondering if these gentlemen would care to respond. For example, at page 32 in the conclusions, Conclusion 8.112, for those have the document in front of them, is a recommendation to the Standing Senate Committee on National Finance and also the House of Commons Standing Committee on Public Accounts. I have never before seen a recommendation from the Auditor General to a Senate committee. I find this extremely unusual and peculiar. I come back again to what I was saying before. The Auditor General is not the Senate's servant. I have the suspicion that you have read many more Auditor General's reports than I have. I am wondering if this is unusual, or if it only seems so to me. Have you encountered this before?
Mr. Neville: I do not recall having seen that kind of recommendation in the reports that I have had the opportunity to read.
The Chairman: Relating to the Senate?
Mr. Neville: Correct.
The Chairman: There is precedent for making recommendations to the House of Commons in reports.
Senator Cools: I am not surprised. I am not concerned about the relationship to the House of Commons. What is preoccupying me is the relationship to the Senate. Perhaps for those who will read it, I should put it on the record.
8.112 Recommendation. Given the evolution of the use of Vote 5, Parliament, through the Senate Standing Committee on National Finance and the House of Commons Standing Committee on Public Accounts, may wish to consider examining the wording of the Government Contingencies Vote to ensure that the use of the Vote for grants reflects Parliament's intent.
I find that very commanding and commanding of attention. In fact, I would submit that this recommendation alone deserves study, because it is certainly unusual. It continues, and says something that I find even more extraordinary. Again, this is page 32 of Chapter 8.
The Treasury Board Secretariat should respond to the committees' recommendations in accordance with parliamentary procedures.
Since this particular recommendation cites you very clearly, do you have any reaction to it? My understanding is that you gentlemen are constantly revising and responding to many concerns. Could you tell me if you have ever seen in a recommendation a statement that you should respond? In addition, if it truly is a precedent, what is your reaction to it?
Mr. Claydon: There are procedures laid down for the government to respond to all recommendations made by committees. I can tell you the Treasury Board Secretariat takes that responsibility extremely solemnly. One of our major concerns is to ensure that we respond appropriately to what committees provide to the government. In a sense, we have a mandate to do that. There is a requirement for us to do that. Asking us again to do it is probably not necessary.
There may be some other intent in the Auditor General's comment. On the face of it, I would say I do not think we have ever not responded to a recommendation from a committee. I would be very surprised if we did not in the future.
Senator Cools: Being a little oldfashioned, I am a great believer in ministerial responsibility. It seems to me it is ministers that respond to Senate committees and their recommendations. I was very curious. I find this recommendation a constitutional peculiarity, because the Auditor General reports to the House of Commons. Here she is saying that the Treasury Board, which is a compilation of many ministries, should respond to committees' recommendations. Should she have said, for example, that the President of the Treasury Board should respond to the Senate committee? It is very questionable. The unusualness of it is elusive unless one reads a little more carefully. It is certainly a constitutional peculiarity.
Mr. Claydon: Maybe I could be a bit clearer.
Senator Cools: Could you? Some of these questions are perhaps better put to your ministers or to the president herself. However, she did not say the President of the Treasury Board should respond or a minister should respond, she said the secretariat should respond. I am very well within the boundaries of probity in asking how you react to this.
Mr. Claydon: In fact it is the government overall that responds to parliamentary committees, not an individual minister, certainly not an official or ministry. All responses to committees go through the cabinet process and are approved by cabinet.
Senator Cools: Precisely. I hope that someone else will pick up this particular question. There are all these, what I consider to be ``constitutional peculiarities,'' floating around.
I would like the committee to continue to examine the peculiar nature of that recommendation. I have another peculiarity in an article from The Hill Times, Monday, April 29, 2002, on page 24 – ``Bureaucrats.'' The headline of the article reads: ``Federal government's accountability to Parliament a hot topic,'' and the sub-heading reads: ``Auditor General Sheila Fraser praises work of Liberal-dominated, influential Senate Finance Committee.'' Bill Curry wrote the article for ``Civil Circles.'' I quote:
But the government's misuse of the $750-million contingencies fund was a key part of Ms. Fraser's recent report, and she told Civil Circles after last week's meeting that it was the Senators' work on the committee that inspired her to look into the issue further.
I am just noting what I consider to be a collection of parliamentary anomalies, almost, and constitutional oddities. I do not know to whom these questions are best put.
The Chairman: We will have the minister here on the Main Estimates.
Senator Cools: These are Ms Fraser's statements. I am noting the constitutional curiosities.
The Chairman: We see the Auditor General from time to time.
[Translation]
Senator Ferretti Barth: I would like to know if the TBS can spend over one million on programs without seeking Parliament's authorization?
Mr. Neville: It is not a matter of numbers, but a matter of principle. As we have already explained several times, the overall amount provided under Vote 5 is the amount requested in the submission, based on the analysis that has been done. There is no question of this being a specific amount, as you suggested.
Senator Ferretti Barth: I understand that. However, I was under the impression that the government could spend money to cover unforeseen eventualities before seeking Parliament's authorization. Is that in fact the case?
Mr. Neville: No. When we receive a submission, we verify that the program for which funding is being sought is covered by legislation and, based on our analysis, we determine if this submission qualifies for funding through Vote 5.
Senator Ferretti Barth: The submission is approved by Parliament after the government has already received the funding to cover the eventualities. Is that not how it works?
Mr. Neville: Either the event in question has already occurred or is about to occur. Each submission must be reviewed and analysed. It is impossible to generalize. Each submission must be considered on a case by case basis.
[English]
The Chairman: Senator Cools was making the point earlier that that which is urgent is not necessarily an emergency. That which is taken into consideration is an urgent public policy reason. I believe that was the phrase the senator used. I just hope she was not suggesting, and that you were not endorsing, the notion that the question of urgency is a totally subjective concept. It is not sufficient, I presume, for a minister, a deputy minister or someone else to come to the secretariat and say, ``This is urgent,'' for it to be regarded as such. Surely you will tell us the secretariat applies objective analysis and criteria, in the first instance, to the declaration of urgency?
Mr. Claydon: I think that is clear. Just because a deputy minister or minister says something is urgent is not adequate grounds for us to simply accept it. It must be something that has a high level of urgency for the government overall.
The Chairman: I asked this question last week and I thought I understood the answer. I will ask again because there was a little ambiguity tonight. The Auditor General makes a distinction between legislative authority and spending authority. Do you accept that there is a distinction to be made there? I thought the answer last week was no, either from Mr. Neville or Mr. Bickerton, or both of them.
Mr. Claydon: Let me try to make that clear for you. There is clear legislative authority for an activity that is to be carried out under Vote 5. There is some difference of opinion between the Auditor General and ourselves, in that the Auditor General would like to see not only the legislative authority, but also a more detailed set of legislated program criteria before we provide access to Vote 5. I am not sure that it is a black and white distinction. It is more a question of shades of grey. Some legislation is relatively clear about program intent, in that it consists of one line that explains certain activities to be carried out. We look for the fact there is legislative authority for the activity undertaken. We are consistent with the Auditor General, but she is looking for more certainty than we might.
The Chairman: You may comment on this point. In her report, the Auditor General deals with grants made to airlines in respect of their financial distress post-September 11. Ms Fraser states, obviously, that it was unforeseen, and she may even agree that it was urgent, but she mentions precedents. There was an agricultural crisis a few years ago, and the government went to Parliament and said, ``Here is an appropriation bill; here is the amount of money we need''; the House of Commons passed it; the Senate passed it; it received Royal Assent and the cheques were written. Even that seems to be a little speedy in terms of parliamentary deliberation, but you see Ms Fraser's point. I hope you see my point, at any rate. If this process had been followed with the grants to the airlines, we members of the House of Commons and the Senate would have had an opportunity to ask the minister, ``How did you arrive at that figure? What are the criteria? What did the airlines tell you about how they arrived at their figures?'' and many other questions relating to the position of the airlines post-September 11.
We do not have that opportunity until much later when Vote 5 is used in the way it was. Perhaps there is an answer, because I saw Mr. Neville consulting urgently with you. Do please put it on the record. It is important to have it there.
Senator Cools: I would continue on that particular point, because I think most of us can agree that the government had a problem and the minister had a problem and needed money. Yet at the same time, in assessing quantum and how to proceed, it seems to me that the Auditor General has said it is not minor. That is her opinion; it was not minor, but it was miscellaneous and unforeseen. If one were to look inside the head of the directing mind of the secretariat and also of the minister, it would be clear that the minister himself was not sure as to the total extent of the damage and whether or not he would have to go back for more money. At that time, the minister would have had to make a decision on whether he should proceed by way of a bill or in this way. My understanding is that the minister was not too sure whether he would need one bill or have to go back with many bills. He decided to proceed in this way.
The Chairman: Parliament can be quite accommodating in situations like that.
Let us give the last word to the officials.
Senator Cools: That is a political question, and perhaps even the minister might be able to meet with us to explain, because he would have been better served politically if he had proceeded by way of a bill. I think Parliament would have been accommodating. That is neither here nor there, however.
I was trying to say some of these problems revolve around how these individuals are taking these highly politically charged decisions. That is a political issue and you cannot answer that.
The Chairman: We will give the last word to the outgoing Secretary of the Treasury Board.
Mr. Claydon: I have one observation. I was at the Department of Agriculture in 1986, or whenever it was that these funds were approved. The amount of money that was needed was very close to the total amount available in Vote 5. One of the reasons for going to Parliament and seeking its authority was that this was not an amount that could be managed within Vote 5.
The Chairman: You would have used it if you could have done so.
Mr. Claydon: I would not go that far.
The Chairman: Thank you very much. We appreciate this. Mr. Claydon, we wish you every success and satisfaction in your future endeavours.
The committee adjourned.