Proceedings of the Standing Senate Committee on
National Finance
Issue 5 - Evidence
OTTAWA, Tuesday, March 18, 2003
The Standing Senate Committee on National Finance met this day at 9:32 a.m. to examine the expenditures set out in the Supplementary Estimates (B) for the fiscal year ending March 31, 2003.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Today we will examine the final, I think, set of Supplementary Estimates (B) of $1.9 billion for the fiscal year ending March 31. To help us in our examination of these estimates, we will hear from Treasury Board officials Mr. Richard J. Neville, Deputy Comptroller General, and Mr. David Bickerton, Executive Director of Expenditure Operations and Estimates Directorate.
Mr. Richard J. Neville, Deputy Comptroller General, Comptrollership Branch, Treasury Board Secretariat: Honourable senators, I am appearing before you today to discuss the government's Supplementary Estimates (B) for the fiscal year 2002-03 that were introduced in Parliament on February 26, 2003. I am pleased that Mr. David Bickerton joins me today.
I will begin by stating that, from a fiscal planning perspective, these Supplementary Estimates seek Parliament's approval to spend $1.9 billion on expenditures — voted appropriations — for 2002-03. These were provided for within the $175.8 billion in overall planning for 2002-03, as set out in the Minister of Finance's February 2003 budget. These Supplementary Estimates were not included in the 2002-03 Main Estimates.
These Supplementary Estimates also provide information to Parliament about a net decrease of $493.5 million in changes to projected statutory spending from amounts forecast in the Main Estimates.
[Translation]
Some of the most significant items for which approval is required include: $297 million for the Department of National Defence for increasing repair and maintenance of aging equipment and for cost increases in NATO;
You have $270 million to the Department of National Defence for costs associated with the Operation Apollo — The operation, the Canadian Forces, deployment in Afghanistan and in the Arabian Sea — health care, maintenance and repair, and additional air operations in support of NORAD;
$191.5 million for the Canadian International Development Agency to increase the grants for international aid;
$140 million for the Department of Finance to enable the Minister of Finance to pay a one-time settlement up to $140 million to the province of Manitoba under Federal-Provincial transfer payments;
$113 million to Agriculture and Agri-Food Canada for grants to improve infrastructure and to purchase equipment to ensure continued international accreditation of Canada's veterinary colleges which is vital in safeguarding in Canada's food supplies;
$96.9 million in additional capital resources for Public Works and Government Services to acquire the Skyline Campus buildings, located at the corner of Merivale and Baseline, in Ottawa;
$93.5 million for the Treasury Board Secretariat to distribute funds to departments and agencies to compensate them for the impact of recent collective agreements and related adjustments to terms and conditions of employment;
$75 million to the Department of Finance provide a grant to the Heavily Indebted Poor Countries administered by the World Bank;
$59.4 million for the Department of Justice to the continued implementation of the Canadian Firearms Program;
$54.3 million for the Department of Human Resources Development for three new grants approved: $53.7 million for the Quebec government, $336,000 for the Northwest Territories government, and $271,000 for the Nunavut government, to ensure appropriate support of their provincial or territorial student assistance programs;
$52.1 million to Fisheries and Oceans Canada to address core operational requirements for the department to continue to deliver its core services to Canadian citizens for the remainder of this fiscal year;
$50.7 million to Citizenship and Immigration Canada to increase grant to Quebec for 2001-2002 and 2002-2003 under the terms and conditions of the Canada-Quebec Accord on Immigration.
[English]
The above items represent $1.4 billion of the $1.9 billion for which parliamentary approval is sought. The $428.7 million balance is spread among a number of other departments and agencies. The specific details are included in the Supplementary Estimates.
With respect to changes in projected statutory spending, there is a $493.5 million net decrease to spending previously authorized by Parliament. The updates shown in these Supplementary Estimates are provided for information purposes only. The major statutory items, to which there are changes in the projected spending amounts, are:
[Translation]
The Department of Finance' statutory public debt charges are forecast to increase by $800.0 million — from $36.3 billion to $37.1 billion — due to increases in the interest on retirement and post-employment liabilities, and decreases in interest on public sector pensions and federal debt. This is consistent with the forecast for public debt charges that was included in the February 18, 2003 Budget issued by the Minister of Finance;
$323.4 million in payment to the Canadian Air Transport Security Authority for operating and capital expenditures. The amount was entered under statutory expenditure in the Budget Bill C-49 of February 2002 passed by Parliament;
$108.7 million to Natural Resources Canada for Newfoundland Fiscal Equalization Offset Payments;
$63.5 million to Natural Resources Canada for statutory payments to the Newfoundland Offshore Petroleum Revenue Resource Fund;
$50 million to Agriculture and Agri-Food Canada to help farmers in Quebec manage challenges, and make the transition to the new generation of risk management programming under the Agriculture Policy Framework;
A net decrease of $550 million in Human Resources Development's forecast to statutory payments for Income Security Programs in 2002-2003, bringing the revised total to $25.8 billion;
A decrease of $296 million in Human Resources Development in loans distributed under the Canada Student Loans Program, resulting from improvements to the accuracy of the forecasting model used to estimate growth in the student loan portfolio and from the inclusion of repayments.
A net decrease of $242.8 million in Human Resources Development in budgetary Statutory payments under the Canada Student Loans Program to reflect a decrease in the alternative payment to non-participating provinces as well as reduced charges for debt reduction in repayment provisions, the Canada Study Grants and the Service Bureau cost.
A decrease of $129 million to the Department of Finance for statutory transfer payments to provincial governments.
[English]
Mr. Chairman, there are two other items that I would like to mention to the committee prior to concluding my remarks: the situation in these Supplementary Estimates with respect to the Canadian Firearms Program; and the status of the work regarding changes to Treasury Board vote 5.
Regarding firearms, as I stated above, there is $59.4 million in these Estimates for the continued implementation of the Canadian Firearms Program, including $50.6 million for operating expenditures and $8.8 million for grants and contributions. I can assure this committee that none of this requirement was met through TB vote 5. The Department of Justice is seeking these resources for the CFP to continue a minimum level of service for 2002-03, allow them to meet contractual obligations, ensure that the registration of firearms can continue, ensure the development of necessary IT infrastructure and continue plans to move the program into the final-phase, steady-state operations.
I am certain that the honourable senators have been following the appearances before the Public Accounts Committee in the other place. I believe it is fair to say that the work of this committee in discussing the costs of the firearms program has not gone unnoticed. Yesterday afternoon, the President of Treasury Board reminded the members of the Public Accounts Committee of your ongoing interest and questions relating to this government program over the years.
I also understand that in the Ottawa Citizen today, there is an article that makes reference to the work of this committee on this issue.
The resources being sought will replace the $72 million that was removed from the supply bill for Supplementary Estimates (A) in December 2002. The Department of Justice has reduced its original CFP requirements for 2002-03 by some $12.6 million.
With respect to TB vote 5, the Treasury Board Secretariat is keenly aware of this committee's concerns. We have undertaken a major study aimed at clarifying and improving the policy governing the use of TB vote 5 and the associated vote wording. I can assure you that requests for access to TB vote 5 undergo very rigorous review by the Treasury Board Secretariat prior to consideration by TB ministers. Your guidance in reviewing the criteria has been used in refining the work of the Treasury Board Secretariat.
I would like to point out that the Minister of Finance, in his budget document, committed the government to continue to improve the relevance, timeliness and clarity of the information it provides to Parliament. More specifically, the Treasury Board will, amongst other things, review the use of the TB Contingency vote 5 and how it is reported to Parliament.
I would like to assure the honourable senators that their report on the use of the Contingency vote 5, and their recommendations on the criteria, will form a key component of the government's response to this budget commitment. The consultations that will be undertaken will include the members of this committee. I know that the President of the Treasury Board is looking forward to your consideration of the new and improved Contingency vote 5, in addition to your thoughts on how to improve the relevance, timeliness and clarity of the information provided to Parliament.
I would be happy to respond to any questions you may have on the Supplementary Estimates (B) for 2002-03.
Senator Lynch-Staunton: I have two or three topics I would like to bring up, none of them having to do with the gun control program, I can assure you.
I might have one question on foundations if we have time; but the first issue I would like to bring up is found on page 58 under Foreign Affairs and International Trade. It is an item of $14.85 million, identified as support to the Canadian Lumber Trade Alliance. It says in brackets that funds were provided from the Treasury Board contingencies vote to pay for this item.
Can you give us some background on this item? Who or what is the Canadian Lumber Trade Alliance, and why is it deserving of such a large amount?
Mr. Neville: Just to clarify the question, are you referring to the $15 million to the Department of Foreign Affairs and International Trade, and $0.5 million to Industry Canada to assist the Canadian softwood lumber sector? Is that the specific issue?
Senator Lynch-Staunton: It is as specific as $14.85 million to the Canadian Lumber Trade Alliance.
Mr. Neville: Yes, we rounded that up to $15 million. This initiative is a response to the imposition of duties on Canadian softwood lumber exports by the United States in May 2002, totalling approximately 27 per cent. It is a multi- faceted initiative to improve the situation of the softwood lumber industry by supporting industry associations who have incurred considerable costs participating in ongoing trade disputes, and by supporting community economic adjustment initiatives.
Amounts are for the following items: The Department of Foreign Affairs and International Trade, $15 million, rounded, to assist the softwood industry associations in paying the costs relating to their participation in ongoing trade proceedings, consultations, negotiations and advocacy. The following grants are listed in the estimates: $14.85 million to the Canadian Lumber Trade Alliance; $75,000 to the Canadian Lumber Remanufacturers Alliance; and $75,000 to the Independent Lumber Remanufacturers Association. With respect to the $0.5 million for Industry Canada, this is for operating expenses for preliminary activity relating to community adjustment issues. It is a separate issue.
Senator Lynch-Staunton: Can you tell us who is the Canadian Lumber Trade Alliance?
Mr. Neville: I think you would have to ask the Department of Foreign Affairs or Industry Canada.
Senator Lynch-Staunton: I can help you then, because the little information we have been able to find on it is that it was incorporated on January 28, 2003. This comes from the Industry Canada Web site, which lists a number of directors directly associated with the lumber industry out West. One is with Lignum Ltd., one is with Canfor and one is with International Forest Products. I am wondering what the policy is in handing over such a large amount of money to a corporation that — and I may be jumping to the wrong conclusion here — on the surface seems to have been created to receive it.
Mr. Neville: If the entity has been incorporated under the Canada Business Corporations Act, I do not see any reason why there would be a problem.
Senator Lynch-Staunton: The problem is that it was created less than two months ago. It has no track record or background. It has no financial statements. There is nothing except the information we have from the Industry Canada Web site, where it says it was incorporated on January 28, 2003. Yet, less than two months later, Parliament is being asked to hand over $15 million to it.
The Chairman: Is there any other source of funds?
Senator Lynch-Staunton: There is no other information here. I know that this is a political decision, so I can only take you so far in this discussion. However, I am surprised that Treasury Board would approve such an expenditure based on the information I have, unless it had other information that is not available publicly.
Mr. Neville: I do not have any further information other than that it is a grant in this instance. If you wish to ask the department concerned, that might be one way to get additional information; but in terms of the Supplementary Estimates, it is presented as a grant to the Canadian Lumber Trade Alliance.
Senator Lynch-Staunton: On page 58, it says in brackets that funds were provided from the Treasury Board contingencies vote. Treasury Board obviously must have looked into the recipient of the funds and given approval based on its ability to spend them wisely. As I said, the only information I have been able to come up with is that this alliance was incorporated less than two months ago. I assume that the Treasury Board was faced with this request before the incorporation was registered.
Mr. Neville: Mr. Chairman, we work directly with the department concerned. The request would have come in from DFAIT because they did not have enough funds to make the payment at that time. Yet it was a necessity to make the payment. Hence it was on that basis that the approval would have been given after we looked at their cash flow, their requirements and the legality of the request within their mandate. Then we would have made a decision to go to TB vote 5 for this particular item.
Senator Lynch-Staunton: Do you have the date when Treasury Board provided the funds?
Mr. Neville: No, we do not have a date. We do not normally put forward a date as to when something is considered by the Treasury Board.
Senator Lynch-Staunton: I was hoping that you would dissuade me from tying in the creation of this alliance legally to a condition of its receiving the funds, rather than vice versa, that of having a well-established corporation with a track record that would justify its receiving the funds.
I am, hopefully wrongfully, interpreting from that that the funds were supplied, but someone said, ``Hey, you had better make yourself legal''; so they rushed out and created this alliance. I cannot go any further, but I hope we do not just leave this hanging. This is $15 million.
Mr. Neville: Having dealt with entities similar to this, not in the context of a grant but with foundations, I can say that we do not transfer funds until they are incorporated. I would think it is probably the other way around. We want it to be incorporated in order to transfer funds, that we would not transfer funds until it is incorporated. I am not arguing with the date that you state because I do not know if it is accurate. My thinking is that they would need to be incorporated in order to receive the funds.
Senator Lynch-Staunton: Would that mean that you could have a corporation receiving funds without a track record of any sort, just a name?
Mr. Neville: I go back to my original comment. That would be a departmental responsibility, to review what specific work was done by the Canadian Lumber Trade Alliance in order to be eligible to receive the grant of $14.85 million.
Senator Lynch-Staunton: Does not Treasury Board ask questions, or do they just assume that Industry Canada or whatever department is asking for the funds will get them automatically?
Mr. Neville: There would probably be discussions, Mr. Chair, between the analysts and the department. I am not privy to those discussions.
Senator Lynch-Staunton: As I say, I can only take this so far. I would appreciate it if someone could look into it. Perhaps this committee will want to pursue it.
Mr. Neville: Perhaps this committee would like to pursue it with the department concerned.
Senator Lynch-Staunton: That is certainly one party. I will stop there. Thank you, Mr. Chairman.
Senator Cools: There seems to be, if not a controversy, at least a major difference between the opinion in the documentation of the Department of Justice and Treasury Board's current position as outlined yesterday by the Minister Robillard. Can you tell us the difference between a major Crown project and one that is ``treated'' as a major Crown project?
Mr. Neville: I should have brought my other briefing book with me from the Public Accounts Committee yesterday. I will try to do this from memory.
A major project is one that exceeds the delegated authority of a department. Most departments — in this case, the Department of Justice — have a $1-million delegated authority. A project in excess of $1 million would be a major project.
Senator Cools: Do you mean $100 million?
Mr. Neville: No, anything in excess of the delegated authority, in this case, $1 million, is a ``major project.'' A ``major Crown project'' has two components to it. The first component is high risk, and there are a number of subsets in terms of what constitutes ``high risk.'' Any one of the components would suffice. The second component is cost in excess of $100 million.
That is the standard definition, high risk and over $100 million. Having said that, Mr. Chair, if a project is deemed to be high risk and is less than $100 million, Treasury Board may deem the project to be a ``major Crown project'' nevertheless. There are instances where we have done that. The judicial centre project is an example.
Senator Cools: I understand your answer, but I still cannot grasp the difference between a major Crown project and one treated as a major Crown project. This has been dogging me. We had the Auditor General before us a couple of weeks ago. I have read Treasury Board Secretariat's manual on all of this. There is no doubt that the Department of Justice treated the firearms program as a major Crown project and designated it as such in all its documentation.
Mr. Neville: Mr. Chairman, I was trying to give you a high-level answer. To be more precise — again without my briefing notes — in order to deem a project as a major Crown project, approval in principle is required from cabinet, as a general rule.
Second, the reporting requirements are much more stringent than a major capital project. There is a requirement to have a senior official in charge of the project who must report directly to the deputy head. There is also a requirement for a project manager. Evaluations and audits must be carried out on a regular basis. The evaluations are made public, as are the internal audits. There are a number of other components, Mr. Chair.
There is a stronger and more robust governance regime on a major Crown project than on a major capital project.
Senator Cools: Mr. Chairman, I prefer to defer to other members, but I will return to this point.
Senator Stratton: I would like to go right away, of course, to guns. In December the government withdrew its proposed Supplementary Estimates for the gun registry totalling $72 million. It said it would manage the shortfall through ``cash management.'' The Leader of the Government in the Senate stated on December 9 in her response to a question from Senator Murray that:
I believe that public scrutiny is such now, having been carried out by the Senate for some time, although not in the other place, that the government would try not to avail itself of that particular vote.
Here we have the figure for the gun registry funding in the Supplementary Estimates of $59.4 million, which you have explained to a degree. There is also a contingency amount of $14.1 million for incremental funding to meet core requirements. Funnily enough, adding $14 million to $59 million totals $73 million, which is not far off the discarded Supplementary Estimate of $72 million.
I know you have made a point of explaining, but when we look at the $72 million, and the government's assurance that it would handle the shortfall through cash management, what exactly is that cash management? I do not see it in your explanation.
On page 7 of your submission you stated that the resources being sought would replace the $72 million that was removed from the supply bill for Supplementary Estimates (A) in December 2002. The Department of Justice has reduced its original CFP requirements for 2002-03 by some $12.6 million.
With that as background, can you assure me that this is ``cash management'' and that you are not coming for additional monies to replace that shortfall of $72 million?
Mr. Neville: There are a number of questions there. I would like to go through them in sequence. First, in the original Supplementary Estimates (A) for 2002-03, there was $72 million. Let us keep that number in mind. It was taken out of the Supplementary Estimates supply bill. There is no funding in the Supplementary Estimates (A) supply bill for firearms. We now move to Supplementary Estimates (B). For 2002-2003, it only has $59 million for the Canadian Firearms Program. I stress that amount, $59 million.
The makeup of that $59 million is based on vote 1, $50.589 million and vote 5, $8.858 million, for a total of $59.447 million. The other amount that the Senate was referring to, namely, $14.1 million, is not related to the Canadian Firearms Program whatsoever.
The amount of $14.1 million is part of the $16.4 million, which is incremental funding to address core operational requirements of the Department of Justice outside the Canadian Firearms Program. It was for the drug prosecution fund and for Aboriginal litigation. The amount of $14.1 million was paid out of TB vote 5 until Supplementary Estimates (B) is approved.
That being said, I want to return to the $59.447 million, the last part of your question, and how that cash is managed. The department has taken stringent measures to reduce their operating costs. Payments under provincial agreements and to other federal partners are being delayed; arrangements from provincial policing agencies are being delayed as well as payments to Aboriginal communities. In addition, they have cut all discretionary spending and have deferred payments through staffing and contracting where possible. The new number in the Supplementary Estimate is $59 million and not $72 million. Does that help you?
Senator Stratton: When you say it is cash management, in business that was called putting off until next year what you cannot afford to do this year. Are you telling us that?
Mr. Neville: No. On the cash management part, they have deferred payments. They have not made those payments.
Senator Stratton: I appreciate all that. However, you still must pay those bills. You are saying, ``deferred.''
Mr. Neville: That is until Supplementary Estimates (B) is approved by Parliament, in which case they will have the funds and will make the payments accordingly.
Senator Stratton: You are coming to us for part of the $72 million.
Mr. Neville: An amount of $59 million is required out of the previous $72 million. The difference between the two is reduced salaries — that is, reduced staffing — reduced contracting, and they have actually reduced discretionary spending. That is the difference between the $72 million and the $59 million. They got this far in the year without asking us for access to TB vote 5 because they deferred payments to all these entities, namely, provincial agreements, federal partners, provincial policing, Aboriginal communities and so forth. That is how they have been able to survive.
Senator Stratton: They now have to pay the bills out of the $59 million.
Mr. Neville: Yes, once they receive approval.
Senator Stratton: Despite the fact that they talked about making up the shortfall of $72 million through cash management, we are indeed paying $59.4 million towards that.
Mr. Neville: If the Supplementary Estimate were approved by Parliament, they would make those payments. That is correct.
Senator Stratton: Have other funds for this cash management process been put into or deferred to other departments? In other words, do we have all the information, or are there other costs that had been hived off to other departments; or are they fully accounted for here when we talk about the $59.4 million? That is to say, there are no other costs in any other departmental Supplementary Estimates to your knowledge?
Mr. Neville: There are two questions there. You mentioned the term ``cash management.'' In vote 1, their operating vote, the Department of Justice has flexibility. They would have probably used some of those funds internally to cash manage as well, so that we are not losing sight of that. With respect to the $59.4 million, that is for the needs of the department and any commitments that they would have made to any other departments. However, there is additional funding in the RCMP because they are coming in under the Canadian Firearms Program for resources.
Mr. David Bickerton, Executive Director, Expenditure Operations & Estimates Directorate, Comptrollership Branch, Treasury Board Secretariat: If I could add a point of clarification, part of the $59 million were the costs of other federal partners. They include some costs being incurred now by the RCM Police. Once the Supplementary Estimates are approved, those monies will be transferred to the RCMP for the costs they have incurred over the course of this fiscal year.
Mr. Neville: This came up yesterday as well. I should like to think of this as three parts. First, there are Department of Justice CFP costs that are purely related to the department. They are voted under vote 1, the operating vote.
Second, there are other departments involved in this particular initiative that are funded by Department of Justice. Therefore, the Department of Justice seeks the money. They receive the money and transfer it to the departments, for example, the RCMP, et cetera. Those two together are part of CFP vote 1.
There is a third part that is confusing, and may be connected to what you have read in the Auditor General's report. There is a third component for departments that incur expenses but do not charge back. They keep track of those costs but they do not charge it back — for example, the Department of Public Works and Government Services' costs for accommodation. The Auditor General has said, ``In this particular instance, we would like to know the total cost — that is, part one, the cost of a purely dedicated amount related to the Canadian Firearms Program under the Department of Justice, and part two, those partners that are working with the department and who are funded from vote 1 — again, the RCMP, CCRA and so on. The third component involves the costs of items that are provided free of charge by other departments and therefore should be added in. If you added the three parts together, you would have a complete overview of the Canadian Firearms Program, but it is not the traditional way in which we vote the funds.
Minister Cauchon has agreed, in the other place, to provide that information, either in a future report on plans and priorities or in a future departmental performance report.
Senator Stratton: That helps to explain it. There are fairly substantial monies, as you know, across the various departments for which we need an accounting. Including these Supplementary Estimates, what is the total running cost for the gun registry to date? What costs do you expect over the planning horizon? For example, contingencies have been used for six years, from 1995-96 to 2001-02, totalling $156 million. Taking into consideration those contingencies and the other costs that you have identified as being spread over various departments, what is the total cost to date of the gun registry? What is the anticipated total cost over the planning horizon of the gun registry? If you cannot supply that information today, I would appreciate receiving it at another time.
Mr. Neville: It is always my intention to be as forthright as possible at the time of the committee meeting. May I take a minute to try to align the numbers? Coming back means much additional work for my staff, and I would like to avoid that. It will take me a moment or two.
Senator Mahovlich: I do not think it is $1 billion.
Senator Stratton: If you read the data, Mr. Neville has told us that it is close to $ 1 billion — I think it was $896 million.
Mr. Neville: I could spend a good part of the morning reviewing the details. I will give the figures to you by year so that you will at least have an idea how much we have spent per year of the last seven years. They are as follows: 1995- 96, $12,753,000; 1996-97, $26,138,000; 1997-98, $50,322,000; 1998-99, $130,807,000; 1999-2000, $131,254,000; 2000-01, $200,364,000; and 2001-02, $136,629,000.
If you add those figures, you should have a total of $688.267 million by the end of 2001-02. I could break that down into the major components of program administration, communications and public affairs, Canadian firearm registration, program delivery and national enforcement. I think you are looking for summary amounts. Total at the end of 2001-02 is $688.267 million.
Moving into the current fiscal year and the Main Estimates, the rounded-out number is approximately $35 million for 2002-03. There was nothing in Supplementary Estimates (A), and in Supplementary Estimates (B), the rounded figure is $59 million. That would give us $95 million for the current year, give or take some, for $783 million in planned expenditures by the end of 2002-03.
Senator Cools: That is consistent.
Mr. Neville: It is important for an accountant to be consistent. For the future out years, 2003-06, the report on plans and priorities will, in all likelihood, be tabled in the House of Commons in the next couple of weeks. You will find in that report the proposed planned spending for the three out years.
Senator Stratton: Is it $113 million for the next year?
Mr. Neville: That amount is in the Main Estimates for 2003-04. I think you may want to look at the reports on plans and priorities, which will be tabled soon, specifically in respect of the Department of Justice. You will find interesting sections that deal with the Canadian Firearms Program, where you will see the planned spending for each of the three out years.
Senator Stratton: Where do the out years begin?
Mr. Neville: One out year is 2003-04.
Senator Stratton: That is a couple of weeks from now. You will be here tomorrow night for Main Estimates.
Mr. Neville: My colleague, Mr. Bickerton, will be here. The two subsequent out years are 2004-05 and 2005-06. Those numbers will be in the reports on plans and priorities.
Senator Cools: I cannot see a number for firearms in the Main Estimates.
The Chairman: We will examine the Main Estimates for next year when we meet tomorrow night.
Senator Cools: I wanted to ask Mr. Neville how much there was for that.
The Chairman: The question can be addressed tomorrow night.
Senator Stratton: It is too bad that we do not have more time because I would like to continue with this issue, particularly with a concern about the cost of the needed software replacement.
Senator Furey: Mr. Neville, my question is a fairly general one and it follows from the initial question of Senator Stratton. The cash management scenario, which you outlined for the committee, involves delaying payments on a number of programs, contracting out, discretionary funding, et cetera. Is this a fairly normal practice for departments that find themselves cash-strapped in one program when they are expecting funding for other programs?
Mr. Neville: Yes, it is normal. Every year we receive a number of requests from departments for funding in either Supplementary Estimates (A) or (B). We suggest that, based on our analysis, they have enough cash and flexibility within their appropriation to cash manage until Parliament approves its funding. Therefore, we do not wish to access the TB vote 5 when we can demonstrate to the department that it is not necessary. This is a case in point: There was enough flexibility in the justice department's vote 1 — that was our take on it. They agreed, and hence they are cash managing until approval of Supplementary Estimates (B).
Senator Furey: At first blush, it may seem as though a department is looking for more money. However, once this cash-management scenario is approved, Treasury Board is not increasing, in any way, the actual funding for any particular program.
Mr. Neville: We will be increasing the vote for those items identified in Supplementary Estimates (B), once they are approved.
Senator Comeau: Following up on Senator Furey's question, what would happen if the House were not to approve the $59 million funding for the gun registry?
Mr. Neville: Mr. Chair, it is a hypothetical question.
Senator Comeau: However, the money has been spent. I am trying to think of how I would run my business if I had to depend on somebody saying yes or no at the end of the year to pay my bills. Would I continue spending the dollars, which have not been approved? A strong signal was sent some weeks ago that there were problems with the firearms registry, and it was pulled from Supplementary Estimates (A). The spending continued, but what if it was not approved?
Mr. Neville: My understanding is Minister Cauchon has said in the other place that this government has made a decision to put those additional requirements in Supplementary Estimates (B). They are in front of you for discussion.
Senator Comeau: My understanding is that this government can say, ``We have a program,'' and that Parliament would say yes or no to the money. However, if the money is spent, Parliament has no choice. We have to pass the Estimates because the money has been spent. I may be looking at this simplistically.
Mr. Neville: It is a hypothetical question and I prefer not to answer those. I will make this observation: The Department of Justice has taken action, specifically in the CFP program, to defer making payments. Therefore, payments have not been made.
Senator Comeau: Nevertheless, the accounts payable are there.
Senator Furey: It has never happened in the past.
Senator Comeau: Yes, but maybe we should be questioning why this is happening. It is a parliamentary responsibility to vote the money; it is not the government's responsibility.
Senator Furey: If the witness does not want to answer a hypothetical question, perhaps we should put something concrete to him. Has this type of scenario that Senator Comeau is outlining ever happened in the past? If so, what were the consequences?
Mr. Neville: We have not, to the best of our knowledge, been in a situation where an amount has been taken out of the Supplementary Estimates, as was the case in Supplementary Estimates (A).
Senator Comeau: I appreciate that I was posing a hypothetical question and it was not very fair. However, it is something we may need to pursue more vigorously in this committee.
My understanding is that, over the past number of years, a total of $469 million was requested under Supplementary Estimates for this registry. The Auditor General's report recently noted that Supplementary Estimates are only for unanticipated expenditures not approved by Treasury Board in the normal business cycle — those that cannot be estimated in advance.
To me, $469 million is a great deal of money that cannot be estimated. Does this not raise red flags?
Mr. Neville: We are concerned every time a submission comes in from a department asking for additional funds. This means that additional amounts over and above what was planned are being requested. Therefore, we obviously are quite concerned.
We all know that the Canadian Firearms Program was a complex program. As it evolved, it was fraught with a lot of changes that were not planned at the outset. There were legislative amendments. There were decisions taken by the provinces. There were some internal decisions made. All of that put it in what we call ``off-cycle'' to the Main Estimates. Hence, when you are off-cycle, your next recourse is to the Supplementary Estimates process. This is exactly what we have done. We have gone to Parliament with a request for Supplementary Estimates subsequent to the Main Estimates because there have been decisions made that were either not contemplated or, if they were, the impact was not fully understood. Therefore, only at the time of the Supplementary Estimates could we deal with those requests.
Senator Comeau: To the tune of $469 million.
Mr. Neville: Correct. It is obviously a file that has evolved significantly. I am sure we have all been made aware of the changes along the way. What you are seeing is the result.
Senator Comeau: The initial firearms registry was supposed to be self-financing eventually. Is this still the target in the plans submitted to the Treasury Board?
Mr. Neville: Not to the same extent it was to be originally. This was to be almost entirely self-financed, with a small amount to be funded by Parliament. In effect, what we are seeing now is a significant reduction in the revenues with a significant increase in the cost.
Senator Comeau: My follow up question is: Have any plans been provided to you that foresee recouping this money from the firearms' owners?
Mr. Neville: I do not believe that is the government's intention. Minister Cauchon has made many announcements, but I do not recall that particular one among them.
Senator Comeau: Have any plans been presented to Treasury Board to recoup the costs?
Mr. Neville: Do you mean the entire costs? First of all, we have not spent a billion dollars. As far as I know, there are no plans to recoup the amount that has been spent so far.
Senator Comeau: None has been presented yet?
Mr. Neville: Not that I am aware of.
Senator Comeau: I think somebody asked earlier about major Crown projects. I have been reading in the media about a controversy between the Auditor General and the Treasury Board, Minister of Justice and a few others, who basically are saying this was not a major Crown project while the Auditor General is saying that it was.
Could you give us an idea as to whether this was a major Crown project or not?
Mr. Neville: If one would review the testimony of the President of the Treasury Board yesterday afternoon before the Public Accounts Committee, it is clear that the Treasury Board never designated the Canadian Firearms Program as a major Crown project.
Having said that, I would like to make it clear that we understand how the Office of the Auditor General, and the Auditor General herself, arrived at that conclusion. We are trying to look beyond that, in the sense that what is really important is the reporting that should have been done. We believe that there could have been better reporting and steps have been taken to improve that henceforth.
Senator Comeau: I do not want to take this too lightly. This is a major point of controversy between two extremely senior government agencies, the Treasury Board and its minister, and the Auditor General. I think we are caught in the middle here, and you are saying, ``Do not look at this as being a problem, let us go beyond it.''
The Auditor General did in fact say that Treasury Board officials went so far as to correct the reference to ``major capital projects'' to read ``major Crown projects,'' which it was not.
This is confusing to some of us laymen.
Mr. Neville: Going back to the testimony yesterday afternoon by the Auditor General, if memory serves me right, her comment on that question was that this is a minor point. We have had meetings with the Treasury Board Secretariat. We understand how this could have occurred, and we are moving forward and trying to improve on the reporting.
I think she was very pleased to hear that Minister Cauchon and the minister of the Treasury Board have agreed with all the observations of the Auditor General and we are taking significant steps to improve the reporting to Parliament.
Senator Comeau: I will leave it for now, sir.
Senator Cools: Point of order. Mr. Neville, were you quoting the Auditor General or the President of the Treasury Board just now? You used the two terms. It seems, at one point, you mixed the two.
Mr. Neville: I will try to separate the comments. I am quoting based on my memory.
The Auditor General herself stated that this is a minor point. Still quoting the Auditor General: We have met with the Treasury Board Secretariat. We understand how this misunderstanding occurred. She said: I am pleased to hear that Minister Cauchon and the President of the Treasury Board have agreed with my recommendations and are moving forward to improve the reporting to Parliament.
I think I then went on to say that we, being the Treasury Board Secretariat, are working very closely with the Department of Justice to ensure that future reporting to Parliament is much better. Does that help?
Senator Lynch-Staunton: Was that a written statement by the Auditor General?
Mr. Neville: It was a verbal statement at the Public Accounts Committee yesterday.
Senator Day: Mr. Chairman, I apologize for being late, and to you, Mr. Neville and Mr. Bickerton. I appreciate your frankness and your help with respect to these matters.
I would like you to comment if you could, Mr. Neville, on the issue of the Treasury Board Contingencies Fund vote 5. You will recall, and you say in your report, that the Treasury Board Secretariat is keenly aware of the committee's concerns in this regard. Our report of about a year ago included a number of recommendations. My recollection is that we were going to discuss that issue last fall and wanted to know what Treasury Board Secretariat's response was to our report and the nine recommendations we made.
In the fall, we decided to defer any discussion because the indications were that there would be something happening in the spring. Now we are in the spring, and it looks to me as if what you are saying in your report here today is being triggered in part by the budget commitment. We were anticipating that some concrete steps would have been taken by now.
Are you now saying that you are just beginning a consultation process on this? Could you give me some idea as to when we could expect some reply to our recommendations of almost a year ago?
Mr. Neville: That is a fair question, Mr. Chairman. I have a prepared text with respect to TB vote 5 because I want to make sure I cover all issues. The Treasury Board Secretariat is keenly aware, as you said, of this committee's concerns, and has undertaken a major study aimed at clarifying and improving both the policy governing the use of TB vote 5, as well as the associated vote wording.
In effect, we are looking at three components — the overall policy, the vote wording and the guidelines. Requests for access to TB vote 5 undergo very rigorous review by Treasury Board Secretariat prior to consideration by Treasury Board ministers. Therefore, this committee's guidance on reviewing the criteria is being used in refining the work of the Treasury Board Secretariat.
That being said, and this is the change that was not envisaged back in the fall, the Minister of Finance in his budget document committed the government to continue to improve the relevance, timeliness and clarity of the information it provides to Parliament.
More specifically, the Treasury Board will, amongst other things, review the use of TB contingencies vote 5 and how it is reported to Parliament. There are a number of components in the budget speech and the budget documentation that talk about improved reporting to Parliament. There are several facets to that, one of them being improved reporting vis-à-vis TB vote 5.
The report of the honourable senators on the use of the contingencies vote and their recommendations on the criteria will form a key component of the government's response to this budget commitment. The consultations that will be undertaken will include the members of this committee.
I want to reiterate that the President of Treasury Board specifically asked me to say that she is looking forward to this committee's consideration of the new and improved contingencies vote, in addition to its thoughts on how to improve the relevance, timeliness and clarity of information provided to Parliament.
Last year, we were looking at an isolated change to TB vote 5. We were going to look at it and make some recommendations, which we did. It is not as if that has not been done. As a result, we would move it forward in isolation, because there was nothing else that we were dealing with vis-à-vis that specific initiative.
The budget is delivered in February, but I think honourable senators are all aware that budgets do not get formulated from one day to the next. Budgets are developed over time. The process starts in the summer, progresses in the fall, with hard decisions made in late fall or the beginning of winter, and then closes with the actual budget in February.
Along the way, a decision was made to improve reporting to Parliament as a major initiative of the budget. Accountability was driving that. There are a number of subcomponents in the initiative on improving reporting to Parliament. One of them is TB vote 5. Therefore, we are caught up in the initiative that was announced in the budget and that we are trying to deliver at the same time. By the way, I said spring. Spring begins March 21, so bear with me.
The Chairman: We will not see this new and improved contingency vote 5 in the Main Estimates tomorrow night?
Mr. Neville: If you had asked me that question last fall, that would have been my intent.
Senator Day: I think we did.
Mr. Neville: I am being quite honest with you; that was my intent. Decisions have been taken subsequent to that, but we have not lost sight of it and it will be part of the bigger package.
Senator Day: What is the timing on that bigger package and what do you envisage as a consultation process with us?
Mr. Neville: I do not think the time line has been completed. We are having those discussions this week, as a matter of fact, so I cannot give you a date, much as I would like to. In terms of consultation, I would like to share with you where we are at before we close on this issue.
My commitment today is that we will share with you the recommendations before we go further.
Senator Day: Then we can decide whether we want to have a meeting.
[Translation]
Senator Gauthier: In reference to Senator Day's question, you said awhile ago that all major programs are audited and evaluated. Is that right?
Mr. Neville: All major projects, except for Crown projects, are evaluated by the Department and up to a certain point — not 100 per cent — by the Treasury Board Secretary. We do not have the resources to review all major projects of every department. With regard to major Crown projects, we are very involved in each one of these.
Senator Gauthier: Yes, but parliamentarians rely on you to report to Parliament on your evaluation of the efficiency of a program. If we do not have timely and serious reports, our role is somewhat diminished.
Mr. Neville: I agree, but we must not forget that every department must prepare, on behalf of the minister, a report on plans and priorities in the spring that should review the objectives and the costs estimated for the coming fiscal year, and also for the two subsequent fiscal years. At the end of the year, these same departments must prepare a report on the department's performance for the year just ended. This report is prepared by the minister and in this context, it is a departmental responsibility.
Senator Gauthier: I have sat in Parliament for many years. I have rarely seen truly serious reports on program evaluations. There was no evaluation of the major firearms issue, as far as I know. As for official languages, since 1971, there has been no evaluation, by either you or the department. Even though millions have been spent.
Mr. Neville: Two policies were approved by Treasury Board in this regard on April 1, 2001. The first one concerns evaluations and the second, internal audit. It is now mandatory, and I stress the word ``mandatory,'' The departments must all evaluate their programs on a cyclical basis and in the same way, they must have internal audits.
As far as the firearms program goes, there is a request for an evaluation of the program. If I understand correctly, this evaluation is almost over. So we expect to have the results of this evaluation soon and they will probably be made public on the Web site. Internal audits, once complete, are posted on the Web site. Thus things have been very transparent since April 1, 2001. Before, it was not a requirement for each of the departments to have evaluations of each of their programs or to have internal audits. Does that answer your question?
Senator Gauthier: When you begin to negotiate the 2003-2004 Budget, are you going to have in hand the evaluations of all the government's major projects and programs?
Mr. Neville: They are done on a cyclical basis. They are not 100 per cent, right from the beginning. The departments have a few years to implement the requirements of all their policies. Otherwise, it would be very expensive to have evaluations of all programs right from the first year — in fact, it would be almost impossible to do so.
[English]
Senator Gauthier: I understand where you are coming from, and I know what the problem is, but I only wish we could get some results here.
[Translation]
Mr. Neville: There are 87 performance reports prepared by the departments. I think that the objective should be the results. There have been a lot of improvements in recent years in the content of these reports and I strongly suggest that you read them. You will see that there is a lot of information concerning the department's results for the fiscal year just ended. And we will have even more. There is also the report that the President of the Treasury Board tabled in Parliament, ``Results for Canadians,'' and also this document, in a higher way, gives us the government's results overall according to some very specific criteria.
Senator Gauthier: One of the government practices, when things get too hot, is to transfer the file to another department and put the blame on it. In the firearms case, it is no longer the Department of Justice, it is the Solicitor General —
Mr. Neville: If you heard me clearly, I said that an evaluation was already underway. I think that it was almost complete on the program even while it was the responsibility of the Department of Justice. The results of this evaluation are expected soon.
[English]
Senator Gauthier: I will draw back.
Senator Lynch-Staunton: My question, based on information on page 103, is about an item you referred to in your remarks, Mr. Neville. It is the $97 million for the purchase of the Skyline Campus; and the total of that purchase is $177 million.
I would like some information as to how this amount was arrived at and what the campus will be used for; but before that, why is this shown in the Supplementary Estimates? What is it supplementary to? This is a brand new acquisition. Why is it not in the Main Estimates? The reason I ask is because these Estimates have to be passed by the end of March. In effect, today might be the last opportunity to ask any questions, and the information we get will be what we get. We do not have any time to have a thorough discussion on items that are brand new and which, to my mind, should not be in the supplementaries but should be in the Main Estimates. My answer to that is the government has realized another surplus in its budget and, like many other items in the supplementaries, it is here to absorb some of that surplus.
What would an acquisition of a new building, or a series of buildings — I do not know the site at all — be doing in the supplementaries? What is it supplementary to?
Mr. Neville: Mr. Chairman, had we known about this requirement at the time of the preparation of the Main Estimates, in all likelihood we would have included it.
Senator Lynch-Staunton: I mean the Main Estimates for next year.
Mr. Neville: It is because an opportunity has presented itself to acquire this additional office space. It is to meet the needs of government, and the government would like to purchase it immediately. Hence, it is unplanned but still a requirement. I believe there may even be a specific offer with a time limit to it.
Senator Lynch-Staunton: Do you have that in your notes to justify spending $97 million in the next 10 days?
Mr. Neville: Mr. Chairman, my notes talk about the requirement for allowing the government to acquire this particular item by March 31. In order to do so, it has to be approved in the Supplementary Estimates (B).
Senator Lynch-Staunton: Are we approving $177 million, in other words?
Mr. Neville: We are approving $96.9 million for the Skyline Campus.
Senator Lynch-Staunton: By approving that, are we not committing ourselves to the total purchase of the building? Actually, you are asking us to approve $177 million in the next 10 days. I am not pointing the finger at you, I am pointing the finger at the system, which provides no information on what that money is to be used for; or why the government needs the building and why it needs it now.
Mr. Neville: In all fairness, the case has been made for this acquisition. There are seven buildings at the Skyline Campus that represent 67,750 square metres of rental floor space. The case has been made for the need.
Senator Lynch-Staunton: No case has been made.
Mr. Neville: The title would have to transfer by March 31, 2003.
Senator Lynch-Staunton: It makes one wonder what we are doing here except spinning our wheels. The government, through you, is presenting us with a fait accompli. It is a fait accompli, whether we support it or not. Someone made the case to someone else and then we are told that a case has been made so we should move on. I am not paraphrasing you but I am condemning a system that makes us passive spectators in the arena of massive spending.
Mr. Neville: As you are probably aware, the option is to replace the Sir John Carling building on the Experimental Farm.
Senator Lynch-Staunton: I am not focusing on the purpose of the purchase but on the way it is presented to Parliament, as a last minute necessity with little debate on the item.
Mr. Neville: It is my understanding, Mr. Chairman, that the opportunity has presented itself now. In order to seize that opportunity, a decision has to be made. Hence, the requirements have been placed in the Supplementary Estimates (B).
Senator Lynch-Staunton: May I suggest that, when we are faced with massive expenditures such as this, we have some briefing notes to accompany your notes on these items so that we would have background information. Mr. Neville, you have all the information in your book. Why do you not share that with committee members before our meeting with you so that we may discuss the issue with some evidence in front of us?
Mr. Neville: Mr. Chairman, I do not think that is how the system works.
Senator Lynch-Staunton: I am afraid you are right.
Senator Cools: I have a couple of questions. The committee knows that I remain singularly disturbed that, after the House of Commons repudiated and rejected a minister's request for money — $72 million — by a vote, essentially the minister suspended paying bills. The minister did not suspend spending but suspended paying bills and just postponed payment.
My understanding of such a vote — reducing the Estimates — is such that it is a disapproving, repudiating, censuring vote. After all, the Estimates are the financial expression of the minister's policy. I wish to put on the record that I find the whole phenomenon of the so-called ``cash management'' somewhat disturbing.
I appreciate that you officials are in a different position because you are with Treasury Board.
Mr. Neville: May I make a point of clarification? You mentioned that it was all cash managed and that is not correct. There were some clear reductions made, which I thought I had reviewed; discretionary spending was reduced; staffing was frozen; and contracting was not carried out as originally planned. There were some significant reductions made, hence getting down from $72 million to $59 million.
Senator Cools: You are making a small point, Mr. Neville. We can talk about $1 billion, and a few minutes ago you talked about ``only'' $59 million. Now, we are ``only'' talking about $14 million, if I may adopt your terms.
Mr. Neville: That is correct.
Senator Cools: I spent the weekend answering questions about the firearms program. All my friends in the House of Commons have spent the last two weeks being brutalized in their various ridings over this issue. However, that is not my question. My question is about Treasury Board's process for authorizing of money. You gentlemen, who are extremely diligent about your work, repeatedly impress me. This committee relies on that diligence.
I would like to know about the process when a program begins to overrun and escalate beyond what the minister requested of Parliament to meet its needs. Somewhere inside that process, there is someone who keeps saying, ``Oh well, that is $100 million more than it was supposed to cost''; or, ``That is another $300 million more than it was supposed to cost.'' I am sure that no individual, such as you, in Treasury Board is simply handing over that money to the Department of Justice. I would like to know who is the person within the system who would have signed off on the first $15 million, the next $15 million, the next $100 million or the next $200 million? Is that person the Prime Minister or the Minister of Justice? Someone was doing it, I am sure.
Senator Stratton: It is the Minister of Finance.
Senator Cools: We heard something about it, and I have some good information on who and where it was. Do you have any idea about that? Who would have said that it was okay to hand over that money? Is it okay to get that money? It is okay to ask for that money?
Mr. Neville: No amounts of money are provided unless Parliament approves the funds. Parliament has voted on each of these requests, whether it is through the Main Estimates or through Supplementary Estimates or warrants.
Senator Cools: Then I phrased the question incorrectly. Who is authorizing someone to ask Parliament for that money? Who is saying that it is okay to keep going back because parliamentarians are just thoughtless, mindless individuals?
Mr. Neville: Prior to going before Parliament, we go to the Treasury Board ministers to seek authority for inclusions to the Main Estimates. Subsequently, in each instance, we seek authority for what would be included in the Supplementary Estimates. If we had to move the authority down from Parliament, we would move it down to the Treasury Board ministers as approving the individual request. I want to make sure that this is clearly understood — it had been voted by parliamentarians and approved.
Senator Cools: Does the Prime Minister's Office, or the Prime Minister, have a role in this?
Mr. Neville: I think that would come under cabinet confidence, Mr. Chair. I do not feel comfortable answering that question.
Senator Stratton: To follow up on the earlier statements with respect to costs to date, you had stated various figures. To the end of 2001-02, the number was $688.267 million.
Mr. Neville: That is correct.
Senator Stratton: There was another $95 million to conclude this fiscal year.
Mr. Neville: That is a planned amount.
Senator Stratton: To take us to $783 million, give or take some. In a report prepared by former public servant, Mr. Ray Hession, it was concluded that the gun registry would cost an additional $500 million over the next 10 years. If you add that figure to the $783 million that will take us to the end of this fiscal year, the total is about $1.3 billion. Do you agree with that number? Mr. Hession has projected that additional $500 million, so added to the $783 million, we have a substantial sum of money that borders on $1.3 billion.
Mr. Neville: Mr. Chairman, I am not at liberty to discuss Mr. Hession's report.
The Chairman: To whom was that report made, the Minister of Justice?
Mr. Neville: That is correct.
Senator Day: Mr. Chairman, in respect of the comments of Senator Cools about the House of Commons vote on the supply bill that flowed from the Supplementary Estimates (A) in November and did not include the $72 million, not everyone would characterize that as a censuring vote and a repudiation of the activities of the Minister of Justice.
Senator Cools: May I respond, first? Senator Day is totally mistaken. There was no vote on the $72 million in the bill of supply. The fact that the bill of supply moved forward without the $72 million is testimony to the diligence and commitment to government of these officials from Treasury Board.
I was referring to the vote of the House of Commons to reduce the Estimates, which preceded the bill of supply. It was following that particular vote. The motion was moved by Mr. Peter MacKay and seconded by Mr. Garry Breitkreuz. The bill was reprinted before it was brought forward again by Minister Robillard.
Senator Day: It is the use of the adjectives ``repudiating'' and ``censuring'' —
Senator Cools: In the parliamentary system, a vote to reduce Estimates is always a censuring and disapproving vote. It is never flattering.
Senator Day: I think the record is clear.
The Chairman: I do not know whether some loose ends need to be tied up, but there is the matter of grants to the lumber alliance. You have told us to pursue it with the department. Perhaps a letter from you, Mr. Neville, about the issue would save us the trouble. If that is possible, we would like to have it.
Mr. Neville: That is a departmental issue, but we can take it under advisement.
The Chairman: Please do. We are confronted with a bald fact.
Mr. Neville: I will accede and do my utmost to find the information and report back through the President of the Treasury Board.
The Chairman: We want to know whether this amounts to a subsidy to the operators or money for promotional activities on the softwood lumber issue in the United States. The latter, is my hunch, but we would like to know for certain.
Mr. Neville: I will do my utmost to comply.
The Chairman: Thank you.
The committee adjourned.