Source: Treasury Board, 2002-2003 Supplementary Estimates "B'' p. 9.

Supplementary Estimates "B'' 2002-2003 provide estimates of the spending requirements for departments and agencies of the federal government. Senators showed interest in both the general spending plans and specific items in these new estimates. Mr. Neville and Mr. Bickerton outlined some of the significant changes and responded to questions from the Committee members. The officials noted that these Supplementary Estimates seek Parliament's approval to spend an additional $1.9 billion on expenditures (voted appropriations) for 2002-2003. These amounts were provided for within the $175.8 billion in overall planned spending for 2002-2003 as set out in the Minister of Finance's February 2003 Budget. These Estimates were not included in the 2002-2003 Main Estimates.

According to Mr. Neville, some of the most important items for which approval is required include:

• $297.0 million to the Department of National Defence for increasing repair and maintenance requirements of aging equipment, and for cost increases in NATO contributions.

• $270.0 million to the Department of National Defence for costs associated with Operation Apollo (Canadian Forces, deployment to Afghanistan and the Arabian Sea), health care, maintenance and repair and additional air operations in support of NORAD.

• $191.5 million to the Canadian International Development Agency to increase the grants for international assistance.

• $140.0 million to the Department of Finance to allow the Minister of Finance to pay a one-time settlement up to $140.0 million to the province of Manitoba regarding federal-provincial transfer payments.

• $113.0 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 Canada's food supply.

With respect to changes in projected statutory spending, Mr. Neville reported a $493.5 million decrease in spending previously authorized by Parliament. He reminded the Committee that the updates shown in these Supplementary Estimates are provided for information purposes only. The major statutory items with changes in the projected spending amounts are:

• The Department of Finance's statutory public debt charges are forecast to increase by $800 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 18 February 2003 Budget.

• $323.4 million in payments to the Canadian Air Transport Security Authority for operating and capital expenditures. This was included as a statutory expenditure in the February 2002 Budget Bill (C-49) passed by Parliament.

• $108.7 million to Natural Resources Canada for Newfoundland Fiscal Equalization Offset Payments.

DISCUSSION

A. Government Contingencies Vote — Treasury Board Vote 5

In earlier examinations of the Estimates by this Committee, questions were raised regarding the funding of initiatives through the use of the Government Contingencies Vote — Treasury Board Vote 5. Specifically, Senators were concerned about the advancement of Contingency Funds to provide temporary funding for the creation of the Foundation for Sustainable Development Technology in Canada. These concerns led to a more detailed examination of the use of Treasury Board Vote 5 to finance government initiatives. The Committee's findings were published in its Seventeenth Report of 6 June 2002, which contained nine recommendations. During the Committee's examination of the 2002-2003 Supplementary Estimates "A'' in November 2002, officials from the Treasury Board Secretariat indicated that they would respond to the Committee's recommendations during the examination of Supplementary Estimates "B''. In these Supplementary Estimates, the Committee found 12 items that were funded using Vote 5 monies.

Mr. Neville indicated that the Treasury Board Secretariat is keenly aware of this Committee's concerns and has undertaken a major study aimed at clarifying and improving both the policy governing the use of Vote 5 and the associated vote wording. He assured the Committee that requests for access to Vote 5 undergo a very rigorous review by the Secretariat prior to consideration by Treasury Board Ministers. He acknowledged that the Committee's past comments have served as a guide in reviewing the criteria used in refining the work of the Secretariat.

Mr. Neville reminded the Committee that the Minister of Finance, in his budget, 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 Contingency Vote (Vote 5) and how it is reported to Parliament.

Mr. Neville assured the Committee that its report on the use of Treasury Board Vote 5, including its recommendations on the criteria, will form a key component of the Government's response to this budget commitment. Furthermore, Mr. Neville indicated that the President of the Treasury Board wishes to consult with the Committee on the new Treasury Board Vote 5 wording and guidelines.

B. Canadian Firearms Program

The Committee observed that the Department of Justice is seeking an additional appropriation of $59.4 million for the Canadian Firearms Program (CFP). Most of the money ($50.6 million) is earmarked for operating expenditures. The balance ($8.9 million) is for contributions to the provinces and territories for the Canadian Firearms Program. The Committee has followed with concern the rising cost in the implementation of the Canadian Firearms Program throughout the existence of the program. Several Senators questioned this request for further funding.

Mr. Neville confirmed that the $59.4 million in these Estimates is for the continued implementation of the Canadian Firearms Program, and assured the Committee that none of this requirement was met through Vote 5. The Department of Justice is seeking these resources for the CFP to continue a minimum level of service for 2002-2003 and to allow the Department 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.

He explained that the amount being sought in these estimates will replace the $72.0 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 2002-2003 by about $12.6M. These savings were achieved through cash management practices, including the elimination of salaries, the reduction of operating costs and the deferral of certain payments.

C. Other Issues

Although the largest portion of the Committee's hearing was spent discussing Treasury Board Vote 5 and the implementation cost of the Canadian Firearms Program, the Senators did have questions on other items in the Supplementary Estimates.

The Department of Foreign Affairs and International Trade was seeking an appropriation to provide a number of grants to the Canadian lumber industry. One such item, a $14,850,000 grant in support of the Canadian Lumber Trade Alliance, was originally provided through Treasury Board Vote 5. Since the recipient of the funds was only recently incorporated (28 January 2003), some Senators were concerned that the recipient might not have sufficient experience to justify the granting of these funds. Therefore, the senators have requested that the officials provide to the Committee additional information on the policies and guidelines on which this decision is based.

Another concern of Senators was the disagreement between the Auditor General on the one hand and the Department of Justice and the Treasury Board on the other as to whether the Canadian Firearms Program should be defined as a "major project'' or a "major Crown project''. Mr. Neville explained that a "major project'' is one in which the expenses exceed the delegated authority of a department. Most departments would have a $1 million delegated authority. He went on to explain that a "major Crown project'' has two components. The first component is that the project is relatively high risk, as defined according to a set criterion. The second component is that the cost of the project exceeds $100 million. He acknowledged that if a project is deemed to be high risk and it is less than $100 million, the Treasury Board might still deem the project to be a "major Crown project''. There are instances where the Treasury Board has done that. In order to deem a project as a "major Crown project'', approval in principle is required from Cabinet, as a general rule. The designation carries with it certain obligations on the Department. For instance, the reporting requirements are much more stringent than a "major project'', there is a requirement to have a senior official in charge of the project who reports directly to the deputy head, and there is a requirement to have a project manager. "Major Crown projects'' are also subject to regular evaluations and audits. Mr. Neville suggested that there is a stronger and more robust governance regime on a "major Crown project'' than on a "major project''.

Senators also questioned the process by which a relatively large capital project is introduced with little or no opportunity for the Committee to examine the merits of the initiative. As an example, it was noted that the Department of Public Works and Government Services will be acquiring the Skyline Campus in west Ottawa for use as government offices. The cost of the investment is estimated to be $176.8 million. The Supplementary Estimates request an initial appropriation of $96.9 million. The Committee does not question the actual merits of this purchase, but rather the timing of the request for such large appropriations. Specifically, the Senators want to know why such an amount needs to be in the Supplementary Estimates as opposed to the Main Estimates. Mr. Neville suggested that it is the timing of the opportunity that determines the timing of the request for the appropriation.