Proceedings of the Standing Senate Committee on
National Finance
Issue 13 - Evidence
OTTAWA, Tuesday, March 8, 2005
The Standing Senate Committee on National Finance, to which was referred Bill C-24, to amend the Federal- Provincial Fiscal Arrangements Act and to make consequential amendments to other acts (fiscal equalization payments to the provinces and funding to the territories), met this day at 9:35 a.m. to give clause-by-clause consideration to the bill; and to examine the Supplementary Estimates (B), laid before Parliament for the fiscal year ending March 31, 2005.
Senator Donald H. Oliver (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the 17th meeting of the Standing Senate Committee on National Finance to order. I remind senators that we have two orders of business this morning. The first is clause-by-clause consideration of Bill C-24, on which we have heard much evidence in committee and substantial debate in the chamber. Last night we heard from officials from the provinces of Saskatchewan and Prince Edward Island.
Honourable senators, shall we proceed to clause-by-clause consideration of Bill C-24, to amend the Federal- Provincial Fiscal Arrangements Act and to make consequential amendments to other acts?
Hon. Senators: Agreed.
The Chairman: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall clause 2 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall clause 3 carry?
Some Hon. Senators: Carried.
The Chairman: Shall clause 4 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall clause 5 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall clause 6 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall clause 7 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall clause 8 carry?
Some Hon. Senators: Agreed.
The Chairman: Shall the title carry?
Some Hon. Senators: Agreed.
The Chairman: Shall the bill carry?
Some Hon. Senators: Agreed.
Senator Murray: On division.
The Chairman: Honourable senators, I will report the bill to the Senate, on division.
Senator Harb: Would the committee, in its wisdom, consent to writing a letter to the government on this notion of equalization payment as communicated to the committee by a number of witnesses who expressed concerns about the way in which we handle those kinds of transfers, without being specific, so that we have an engagement to provide clarity to the rules?
The Chairman: A panel with a chairman has been constituted. We were told last night that it will travel to Prince Edward Island to hear representations from them. The mandate of the panel is quite broad, and it has the right to consider what you have just mentioned. The committee will not appear before the panel.
Senator Harb: Perhaps in your capacity as chair of the committee you might make representation so that we have a clear understanding of the scope of the panel's activities and how it will proceed. What time frame will it have, and what mechanism will it use to achieve this kind of arrangement?
Senator Day: Perhaps Senator Harb is suggesting that the chair of the committee inform the minister of our desire to remain somewhat engaged with respect to the panel's activities. We have been following this issue for some time, and we do not want it to be moved over to the panel without our knowing what transpires.
The Chairman: Thank you, honourable senators. I have the message. I will prepare a draft and circulate it to all members of the committee, including Senator Massicotte, so that all will know what is being said.
Senator Ringuette: Chair, so that I understand, there is no clause 2 in the bill.
The Chairman: It is on page 9 of the bill, at the bottom left.
Senator Day: The other numbers you see are the numbers of the bill.
The Chairman: Is there anything else to come before the committee with respect to Bill C-24? If not, I will report the bill, on division, as agreed.
I would now call officials from Treasury Board, who are certainly not strangers to the committee, to the table.
I would cordially welcome back Mr. Mike Joyce, Assistant Secretary, Expenditure and Management Strategies Section, and Ms. Laura Danagher, Executive Director of Expenditure Operations and Estimates Directorate.
We have before us Supplementary Estimates (B) for the fiscal year 2004-05. Mr. Joyce, following your presentation, you can be assured that honourable senators will have a few questions for you.
Mr. Mike Joyce, Assistant Secretary, Expenditure and Management Strategies Sector, Treasury Board of Canada: Mr. Chairman, honourable senators, today I will discuss the government's Supplementary Estimates (B) for the fiscal year 2004-05 that were introduced in Parliament on February 25, 2005. I am pleased that Ms. Laura Danagher could join me today.
From a fiscal planning perspective, the total estimates for 2004-05, including the Main Estimates, Supplementary Estimates (A), and these supplementary estimates are consistent with the $185.2 billion in planned spending for the 2004-05 fiscal year announced in the Minister of Finance's November 2004 Economic and Fiscal Update.
[Translation]
The 2004-05 Supplementary Estimates (B) seek Parliament's approval to spend a total of $1.5 billion on expenditures that were not sufficiently developed or known when the Main Estimates were tabled. Today, the supplementary estimates also provide information to Parliament about reduced forecasts totalling $0.9 billion to projected statutory spending, as set out in the 2004-05 Main Estimates.
The net total of these supplementary estimates is approximately $600 million, which is relatively low compared to other supplementary estimates tabled in previous years. In large part, this is due to the decrease in statutory spending.
[English]
The majority of the $1.5 billion amount in new funding that is being requested from Parliament is due to the following items: $256 million related to the tsunami disaster relief rehabilitation and reconstructions initiatives; $215 million for increases to pay and allowances for Canadian Forces members; $185 million relating to the revised forecast of transfer payments to provincial and territorial governments; $180 million for transfers to departments and agencies for salary adjustments — these are for collective agreements signed up to the end of December 2004; $160 million in support for the Global Alliance for Vaccines and Immunization; and $140 million in support for the Global Fund to Fight AIDS, Tuberculosis and Malaria.
The above items total approximately $1.1 billion of the $1.5 billion for which parliamentary approval is sought. The remaining increase of $0.4 billion is spread among a number of other departments and agencies, the details of which are included in the Supplementary Estimates.
[Translation]
With regard to changes in projected statutory spending in these Supplementary Estimates, there is a net decrease of $894 million in expenditures previously approved by Parliament. As was mentioned earlier, these forecasts are provided for information purposes only.
[English]
The major statutory items to which there are changes in the projected spending amounts are: an increase of $438 million for payments in support of business risk management under the agriculture policy framework, the Canadian Agricultural Income Stabilization Program; an increase of $220 million related to the requirements of the Chief Electoral Officer; plus an increase of $222 million related to the Newfoundland Offshore Revenue Fiscal Equalization payments.
This increase is offset by decreases in the following forecasts: $272 million in expected public debt charges due to lower than forecast interest rates; $535 million in Statutory Transfer Payments to provincial and territorial governments; $496 million in the Consolidated Specified Purpose Accounts primarily due to the downward adjustment in the net Employment Insurance benefits; and $138 million due to the revision of the forecast of income security payments.
Earlier this year with Supplementary Estimates A, we introduced a number of changes to the format of the documents aimed at providing greater transparency as well as consistency with other estimates documents.
At this time, I would thank the committee. Many of the initiatives we are looking at and have introduced are a testament to the productive dialogue that we have with this committee on the need for better information to support the spending plans of the government.
[Translation]
You will be happy to hear that we continue to be inspired by these improvements and that, in these supplementary estimates, we have taken into consideration comments made by senators when we last met. For example, the table on $1 items has been expanded to provide more clarification on these items; and, finally, a table summarizing all the transfers between government organizations has been added.
[English]
Improvement to the estimates is an iterative process and is part of the overarching objectives of the government to enhance its accountability to Parliament. As we have mentioned to you in the past, we are encouraged by your interest in the longer-term plan we are developing and will be seeking your input and support of the work in which we are engaged.
Honourable senators, this concludes my preliminary remarks. We would be happy to respond to any questions you may have on the Supplementary Estimates (B) for 2004-05.
Senator Harb: I want to take you to the CIDA estimate vote on page 129. In your statement on page 2, you indicate that $256 million is related to the tsunami disaster relief rehabilitation and reconstruction initiatives. Under vote 20, where you talk about the relief, you have $223 million and then you have a reference to a horizontal item, which takes me to the bottom of the page, funds in the amount of $65 million were advanced from the Treasury Board Contingency Vote to provide temporary funding for this program. A summary can be found at the front of this document.
I want you to explain this a little. If I were to take $223 million and add it to $65 million, that would be slightly more than $256 million. Could you give us an idea of the scope of that spending? You have in it here for fiscal year 2004-05, but is it the government's plan to spend it in the next fiscal year? Is it spread over a number of years? Will it be part of what has already been allocated for the region? Would you give us some explanation for this?
Mr. Joyce: Thank you, senator, for the questions. Let me deal with the last one first. These are supplementary estimates for the current fiscal year. Therefore, they are seeking authorization for the department to spend the money this fiscal year. That is what we understand the development agency intends to do.
The requests would have gone through an analysis of the Treasury Board. Our understanding, based on the analysis before this went to Treasury Board, would be that these plans are reasonable, particularly given the circumstances and the need to actually get these funds out.
As you know, plans are plans. I cannot assure you that every last dollar of this will be spent by the department. However, in our view, the plans they do have are reasonable. This is why we are proposing these amounts to you.
Senator Harb: The Prime Minister's statement was that the money would be spent over a five-year period. The question some of us are asking is, if that is the case, are you putting it all up front now and spending it late. How will that proceed?
Ms. Laura Danagher, Executive Director, Expenditure Operations & Estimates Directorate, Treasury Board of Canada: Honourable senators, the full amount that was committed by the government was $425 million, to be spent over the five-year time frame. This money represents what is going out for the current fiscal year only. You will see some money flowing next year, in 2005-06, and probably in subsequent years.
The Chairman: Yesterday the Toronto Star reported that much of the $265 million — not the $256 million, but $265 million — that the Canadian International Development Agency has pledged for tsunami relief, which ends March 31, still sits in the federal government's bank account waiting for aid groups to submit proposals about how they will spend it.
Has any of the money been spent at all? In the next two weeks, will you advance $265 million?
Ms. Danagher: The $265 million is the part of the $425 million that is allocated to CIDA specifically. Other departments are also involved. DND is involved. They have money as well. The $265 million represents the total forecasted spending for CIDA, not necessarily all of the money in 2004-05. What CIDA is asking for this year is $223 million, which it is their intention to spend in the current fiscal year.
The Chairman: Before March 31?
Ms. Danagher: That is correct. Their plan is to spend it. They have plans. They presented a proposal to spend this money for the immediate aid that they gave, that is, humanitarian assistance and development aid.
Mr. Joyce: There is a policy of the Treasury Board called, ``payables at year end,'' which is where a department has entered into a commitment. It is a legal commitment this fiscal year but, for a number of reasons, the payment can be made later and still charged to the current fiscal year. This is an accounting policy. It is consistent with generally accepted accounting principles. In some respects it is a minor step of the federal government to introducing accrual accounting in the sense that you are looking at whether a commitment has been made and rather than actually forcing the payment to be made by March 31, it allows for a number of instances where the payment can be made later, as long as a certain number of criteria related to the accounting principles have been met.
The Chairman: Would it have to be dated on or before March 31 or could it be dated in April or May?
Mr. Joyce: The cheque could be dated later, but the commitment and the obligations must be incurred by the end of the fiscal year. I do not have the details of the policy with me or in my head, and it is not one for which I am responsible, but there are a number of arrangements like this, particularly with contracts where there may be a need to review the precise amount of the payment.
Rather than forcing a department where they have had goods delivered, for instance, to simply arbitrarily cut the cheque, it allows the department to actually review and ensure that it is paying the right amount of money. It is responsible accounting. It can also be applied to instances like this, I believe, where the commitment is made but the cash may not flow until some time later.
The Chairman: Senator Harb, I did not mean to intervene.
Senator Harb: Not at all. You hit the spot. When they come to you to get authorization, they must have submitted some form of action plan. Do you have a copy of the action plan relative to how expenditures will take place?
From past experience, we know that, in the other place, money was designated and identified for a specific project, but somehow that money was moved around and went somewhere else. Sometimes money is allocated, supposedly for a specific project, but the department has already identified the money.
Perhaps you can enlighten the committee as to what sort of action plan you have before you say, ``Go ahead. We will ask for the authority.''
Mr. Joyce: Senator, you are absolutely right. Before any item goes into the supplementary estimates, a submission by the minister must be made to Treasury Board, unless it is a purely technical issue. In this case, a submission would have gone forward to the Treasury Board. I would not necessarily describe the submission as an action plan in the sense that the key issue for Treasury Board analysts and the recommendation that the analysts would make to the Treasury Board is about the appropriateness of the funds and consistency with Treasury Board policies. They also look at the reasonableness of what is being proposed. Typically, the job of analysts is to challenge the department. One of the challenges they would mount to the department is what you said: Can you reasonably spend the money?
I would suggest that the role of the analyst is not to squeeze the department back to some absolute minimum amount of money that the department can assure that they can spend. You want to actually give the department the flexibility to implement its plans, even if there is some risk that the money will not be spent. This is a stated policy objective of the government in allocating these funds. It has been allocated by the government to the department to achieve certain objectives.
If there is a reasonable chance that the money will be spent, then the recommendation to Treasury Board would be to approve. There would not be any specific part of the analysis that does what I just said, that would assure Treasury Board that every last cent will be spent. Particularly in a situation like this, that is a flexibility you do want to give to the department. You want to ensure the funds are spent appropriately, with probity, consistent with Treasury Board policies and requirements.
If, at the end of the day, because it is close to the end of the year, the department has not spent the money, then the money will lapse. As you pointed out, that happens across the government.
Historically, if you look at the public accounts and the actual lapses you could prove that our judgment and the department's judgment was not as good as it could have been and that the amount appropriated was excessive. The primary concern is that the funds are appropriately allocated, that the department has a program in place to spend them, that they can be spent with prudence and probity, that they are consistent with the rules and regulations of the government and the Treasury Board, and that they are not excessive. There is a grey judgment area.
The Chairman: In the year 2004, the Senate of Canada passed the Jean Chrétien Aid to Africa bill for giving money to fight AIDS in Africa, among other things. I thought that the money had all been appropriated. In the new funding you list two things that come as a surprise. First, you say that there is new funding, $160 million in support, for the Global Alliance for Vaccines and Immunization. Following that you say that there is another $140 million in support for the Global Fund to Fight AIDS, Tuberculosis and Malaria. Was the latter not the amount that was included in the so-called Jean Chrétien Aid to Africa bill, and is this new money?
Mr. Joyce: I would have to check that. I am not absolutely sure. As I recall, the bill did not provide funding authority. This would have had to have come through Supplementary Estimates. I do not think there was a statutory part to that bill. I would have to check whether there is any overlap or whether this is an implementation of those initiatives.
The Chairman: Would that apply to both of them, both the $160 million and $140 million figures?
Mr. Joyce: This would have to be subject to verification. The Global Alliance for Vaccines and Immunization is a much more recent initiative that would not have been foreseen by that bill. That was an initiative in recognition of emerging concerns in the scientific community about the risk of a pandemic. Therefore, it is a prudent approach by the government to put in place a mechanism to stockpile vaccines. I do not think that had any link to the bill to which you referred.
Senator Day: I have a supplementary question on the general area of CIDA. In your remarks, Mr. Joyce, you talked about the contingency amount advanced. In the vote 5 listing at page 60 of the Supplementary Estimates (B), it looks as if $65 million was advanced to CIDA for tsunami disaster relief. Should I be able to find that $65 million as a separate line item? I have not been able to do so in the documentation.
Ms. Danagher: At the bottom of page 129, it indicates that funds in the amount of $65 million were provided.
Senator Day: Yes, but that is an addendum.
Ms. Danagher: The asterisk relates to the additional funding related to tsunami disaster relief. CIDA received $65 million through vote 5.
Senator Day: Does that have to be paid back?
Ms. Danagher: Yes, from the $223 million.
Senator Day: Is the fact that this addendum says that $65 million was advanced, sufficient for us to know that it comes out of the $223 million? Maybe it is, but someone who is not familiar with these documents may be looking for a separate line item in the body of the list of documents.
Ms. Danagher: I take that point. We normally have a table at the front indicating what amount of money had been advanced to that organization, and then it is footnoted against the specific item.
Senator Day: Someone familiar with this way of presenting this information knows that they will get $223 million less the $65 million which was already advanced to them but was not approved.
Ms. Danagher: That is correct.
Senator Massicotte: I want to give you a chance to change the tone of the last response. You spoke about ensuring that the amount is big enough that it would be spent. I do not like that tone. I would like to see efforts to ensure that we only spend money where necessary.
What process is in place to ensure that demands are necessary? I believe that the effort should be to ensure that the budget is adequate but not excessive.
Mr. Joyce: I will answer that in two parts. When the government makes a decision to achieve a certain objective, there is a costing process that determines the appropriate amount of money required to achieve that. An example is the vaccines, which was a policy decision made by the government.
When dealing with the issues at the level of broad government policy, there are limits on the costing that can be done, because there are many ways to achieve a policy objective, and you can achieve a policy objective at various levels. For some policy decisions, the issue is affordability in terms of the fiscal framework at that time of the year. The primary discipline applied in that process is the ability of the government to live within the planned spending limits that it has set out in the budget and usually the fiscal update that the Minister of Finance presents in the fall. As the submissions come into Treasury Board, we check that the supplementary estimates do fit within the overall fiscal framework and plans of the government.
The second discipline is rigorous costing. The newly appointed Comptroller General, Charles-Antoine St-Jean, is emphasizing costing, and the government has stated it wants rigorous costing. Part of rigorous costing is finding the most effective way to achieve a policy objective.
One way of looking at that is achieving the most effective results with a given amount of money. Another is to look at whether a reasonable result can be achieved with less money. That is part of the debate in the policy process. As you can appreciate, there is heavy competition for surplus money that emerges either throughout the fiscal year or in the budget development process.
These tensions produce a discipline. In simple terms, there is a two-step process: the policy process that sets the policy and allocates a global amount of money. Before a department can get money, it must come to Treasury Board with a specific proposal for the allocation of those policy funds to its reference levels and through the allocation process by Parliament. The Treasury Board analysis focuses on whether the program is designed to implement and achieve the policy objective. Is that the most efficient and effective way of doing it?
I come back to the fact that the primary discipline is living within the fiscal framework and ensuring that departments make the most efficient and effective use of the funds allocated to them.
The second method for the government to ensure the efficient and effective use of funds is the expenditure review process. You have seen that in the budget. Over 80 per cent of the reallocations that were announced in that part of the budget will be achieved through effectiveness gains.
Those are the basic processes that are put in place. Reallocation is a difficult process, but there has been quite a significant achievement in this budget with the nearly $11 billion reallocation over the five-year period. Within a set fiscal framework, that enables the government to reallocate from lower priorities, or through gating efficiencies, to the higher priorities of the government, which reduces the amount of money the government would otherwise have to find within the fiscal framework to achieve the same policy objectives.
Senator Massicotte: We have the age-old problem. There are three weeks left until the end of the fiscal year. The budgets of departments are based on their previous budgets rather than on actual spending. How do you ensure that they do not rush to spend all their money in order that they are not penalized the next year?
Mr. Joyce: Again, if you will bear with me, I will give you a two-part answer. Year-end spending was a real problem more than 10 years ago. In order to alleviate that, we introduced the operating budget carry-forward policy, which gives departments an automatic carry forward at the end of the year of up to 5 per cent. This largely takes away the lack of incentive for a department to spend the money sensibly during the year. That is an effective policy that has taken away the silly year-end spending.
Treasury Board took $1 billion out in its contribution to the reallocation last year. That was announced when we tabled the supplementary estimates and the Main Estimates in November. Much of that is coming from the operating budgets of departments, so they are very tight. We have seen symptoms of this tightness, as the Comptroller General has indicated, in terms of the capacities of departments to do due diligence in the financial and audit areas. I see tight budgets there, so the scope for silly year-end spending, or ineffective or irresponsible year-end spending, is low. The fact that the expenditure review announcement in the budget is largely efficiency and effectiveness will be an even further incentive for departments.
I know I have not answered your question in a specific way, but I am trying to give you the environment as I see it. I would not say that every department is absolutely tight; I could not say there is no silly spending. In fact, the Auditor General looks at that. You have seen the reports that the office of the Auditor General puts out. I believe there has been an improvement and that the Auditor General has recognized that.
Senator Massicotte: What is the total budget increase that you are now seeking compared to last year's budget and actual? If you exclude the transfers to persons and organizations, what is the percentage increase relative to inflation and GDP growth?
Mr. Joyce: We will be able to give you those numbers when we deal with the Main Estimates tomorrow.
Senator Massicotte: For 2004-05 — including this supplementary — how does the revised budget compare to the previous year's budget and actual?
Mr. Joyce: We do not have those numbers with us, but we can get them. The key issue there is the planned spending set out in the budget. All the estimates we bring forward, both for the previous fiscal year and the current fiscal year, are within those planned spending limits. If you look at the overall spending increases announced in the 2004 budget and compare it to the 2003 budget, that will give you an indication, and we are pretty well within that. I can make sure we have the numbers with us tomorrow when we come back with the President.
The Chairman: I have a question on a response you gave about the operating budget carry forward. When talking about the binge spending that used to take place in the last couple of weeks of March, you said that we have a new system in place to carry forward. If a few million dollars is carried forward, is it carried forward as new money or is it deducted from what the department will receive in its budget for the ensuing fiscal year?
Mr. Joyce: The process that we go through is that the amount they can carry forward is the amount lapsed. We look at the actual amount that had been allocated and approved by Parliament. They can then claim up to 5 per cent of any unspent authorization. That is added on as new money to the next year process. That is done through the supplementary estimates.
The Chairman: Is it only 5 per cent?
Mr. Joyce: It is up to a maximum of 5 per cent.
Senator Massicotte: Not the authorized?
Mr. Joyce: It is of the authorized spending.
Senator Massicotte: You said the unspent authorized.
Mr. Joyce: It is of the authorized spending. If they lapse or do not spend, they can carry forward up to 5 per cent of that total.
Senator Stollery: My question refers to one of the items on page 4 in the printout and on page 12 in the Supplementary Estimates (B).
In the decreases in the following forecasts you have on page 4, I have a question on the $535 million in statutory transfer payments to provincial and territorial governments. In other words, there is a decrease of $535 million. I did not understand it as it appears on page 4, and I understand it less when I read the explanation on page 12: decreased forecast for federal-provincial transfers of $535 million. Could you explain that to me in a way that is a little more comprehensible?
It says equalization payments are expected to decrease by a total of $601 million due to the combination of the downward revision, the forecast of current year entitlements offset by small increases due to the revised estimate of prior year entitlements. It then says that, in addition, the Department of Finance is expecting to recover $3 million less under its Youth Allowance Recovery Program due to an upward revision of personal income tax points. It goes on to say that this decrease is offset by a total increase of $69 million in alternative payments for standing programs due to a lower yield for personal income tax points compared to the data used in developing the forecast for the 2004-05 Supplementary Estimates. It requires a special dictionary to understand this. Perhaps you can enlighten me?
Mr. Joyce: I accept the points you made. The language is indicative rather than clear.
Senator Stollery: It twists a little.
Mr. Joyce: Yes. I would have to go back to the Department of Finance and the departments that are actually responsible for doing these forecasts.
As I am sure you know, statutory payments like this are formula funded. They are driven by economic and demographic variables; and it is changes in those variables that determine the actual expenditure. What has happened here is that the Department of Finance has gone through and looked at the particular elements of the formula that are enshrined in the legislation and, based on updated information, has revised its forecasts. What I can do is undertake to get more information.
Senator Stollery: It twists and turns a little.
Mr. Joyce: I can certainly get more information about the specific parameters that have driven these decreases and increases, but I would have to go back to the department for that.
Senator Stollery: My reason for asking the question is that we have just passed Bill C-24, which affects this class of payment.
Senator Ringuette: I am looking at page 142, human resource development. There is an item here for $150,000 funding to modernize human resource management in line with the federal Public Service Modernization Act, which was Bill C-25. I thought that was under Treasury Board.
Mr. Joyce: You are correct, but it is also flagged as a horizontal item, which is where we have a number of departments contributing toward the same objective. In this case, you will see that this particular department has $150 million. Somewhere we have a table that brings all those together. Perhaps Ms. Danagher can find that.
Senator Ringuette: Last year we were looking at $40 million to implement Bill C-25 under Treasury Board. Are you indicating to us that was the major cost, and then there are also additional departmental costs to implementing the Public Service Modernization Act?
Ms. Danagher: The component going to social development deals with the support to the regional joint career transition committee, which is the collaborative committee of union and management representatives. It is a horizontal initiative, and the money has been allocated to various departments in support of that initiative.
Senator Ringuette: Can you provide more details in regard to this?
Mr. Joyce: There is, in fact, $1.1 million to Treasury Board. Treasury Board Secretariat still has the bulk of the additional money. We are still very much involved in this.
Senator Ringuette: On that same issue, there are additional funds coming from departments for the purposes of the Public Service Modernization Act.
Mr. Joyce: That is correct. A number of departments are involved in this. With this particular horizontal initiative, we have the Public Service Human Resource Management Agency with $5.2 million; the Canada School of Public Service, $2.6 million; Treasury Board Secretariat, $1.2 million; and Western Economic Diversification, $.4 million. That is just to give you a sense of the number of departments that are combining to achieve the objective.
Senator Ringuette: That leads me to my next question. Under ``Funding to Modernize Human Resource Management in the Federal Public Service'' on page 66, you list the Canada School of Public Service as well as health, human resources, and so forth. Could you provide me with some details with regard to the implication of the Western Economic Diversification Agency for $382,000 in respect of the Public Service Modernization Act? I find it difficult to understand the connection.
Mr. Joyce: This amount of money, $382,000, is included in these supplementary estimates to support regional joint career transition committees in Saskatchewan, Manitoba and Alberta. These are collaborative committees of union and management representatives that contribute to effective labour relations.
Senator Ringuette: Are they public service employees?
Mr. Joyce: Yes.
Senator Ringuette: Do they operate under the auspices of the agency or should I make that assumption?
Mr. Joyce: That is a fair characterization.
The Chairman: Why would there not be a comparable line for ACOA in Atlantic Canada?
Senator Ringuette: For others as well.
Mr. Joyce: I would have to go to the lead in this, otherwise I would be speculating, which I should not do. I should find out why they have chosen western diversification in particular to help them with these committees when they may have other arrangements in place in other regions of the country. My speculation is that it is for administrative reasons, but if there is more to it than that, I will obtain that information for the committee.
Senator Ringuette: Thank you. Other departments, such as Health, have about the same operating budget and the same number of people. I would like some details on that.
Mr. Joyce: My sense is that it is simply an administrative arrangement and you should not read too much into the regional implications of it. I do not think that it is because Western Economic Development was specifically chosen.
Senator Ringuette: Perhaps you could provide us with the details.
Mr. Joyce: I will do that so the committee might draw an informed conclusion.
Senator Ringuette: Still on Bill C-25, the Public Service Modernization Act, and the issue of regional barriers to employment within the federal public service, I would like to know where we stand in respect of removing such barriers so that all Canadians would have access to federal jobs. We would appreciate an update on that.
Mr. Joyce: Yes. Would you like me to provide that as supplementary information?
Senator Ringuette: Yes.
Mr. Joyce: That might be more satisfactory to you.
Senator Ringuette: That would be fine.
I have been trying to find a specific detail in the supplementary estimates but, for some reason, I cannot locate it. With regard to decreases in forecast, on page you're your opening remarks you state: ``$496 million in the Consolidated specified purpose accounts primarily due to the downward adjustment in net Employment Insurance benefits.'' That is $.5 billion.
Mr. Joyce: Yes.
Senator Ringuette: That is a great deal of money and you are saying that it was because of a downward adjustment in net Employment Insurance benefits. We definitely need more information about that.
Mr. Joyce: Again, senator, I have the same answer that I gave to Senator Stollery. It is a statutory payment and would be looking at the forecasts of the claims. It is not that people have been denied Employment Insurance but rather it is simply a revised estimate of the number of claims against that program and the costs that will come forward, based on experience throughout this year.
Senator Ringuette: Are we to assume that the department has estimated a much higher cost?
Mr. Joyce: On the surface it appears this could have been an estimate that, in hindsight, could have been better. I would have to understand what went into the forecast and how the original forecast changed, and I do not have that information.
Senator Ringuette: There is no mention of anything to do with the revenue from EI premiums. There is only mention of the payouts from the EI account. Last year, Minister Volpe began a pilot project to increase by five weeks the benefits payable to people living in regions with 10 per cent and higher unemployment rates. The department estimated that it would cost $225 million. I would like to know the real cost of that pilot project.
Mr. Joyce: We would be happy to obtain that information for the committee.
Senator Ringuette: Please add any relevant details that would help the committee to understand this overestimate.
Senator Stollery: I have a brief supplementary. The amounts of $496 million and $535 million are statutory. However, I do not know whether we altered the statutes with the passage of Bill C-24. The whole question of federal- provincial fiscal arrangements has been, to some extent, amended by the bill we just passed. Therefore, did that affect the $535 million in statutory transfer payments? That stands out because everyone is saying that the provinces are complaining that they are not receiving enough money. Naturally, that causes one to reflect that they will have $535 million less because of statutory arrangements that were just changed with Bill C-24. Would the bill affect these amounts?
Mr. Joyce: As a general principle, it would not, because we are not allowed to foresee legislation in the estimates. The estimates we present are based on existing legislation. I would point out that we add these forecasts to the supplementary estimates for information purposes. It is not that we are disinterested in them, in particular when we see overestimates and underestimates, but they are primarily the responsibility of the Department of Finance. Finance is responsible for the statutory programs and the departments that are delivery agents. That is why I would rarely be able to answer a question related to statutory payments because it is not a direct responsibility of Treasury Board.
Senator Stollery: Thank you, I understand.
Senator Murray: Mr. Chairman, we have made excellent headway in recent years with the estimates and the way in which they are presented, such that we receive the needed information in the form that we want. It occurs to me, because I have been struggling with the budget documents recently, that we might go through the same exercise with regard to the annual budget. Perhaps we should seek some help on this and consider what information we want and how we want it presented.
I have been trying to separate factual information from spin in some of these documents. I do not object to a certain amount of spin in the budget address and even in some of the documents, although it is sometimes difficult to find what you are looking for. I know what I am looking for, and I have some difficulty in locating it.
The Chairman: Maybe we could ask Mr. Joyce to respond to that.
Senator Murray: It is not his responsibility, but I make the point. It would be our business to concern ourselves with how the information, the budget, is presented to us.
The Chairman: I do not want to put words in your mouth, Mr. Joyce, but did you want to respond to Senator Murray's initial observation?
Mr. Joyce: That is something that I think you could pursue.
Senator Murray: To take a small matter, I am always interested in the increase in program spending year over year. Indeed there is a table, 7.8, in the budget plan that gives us a program expenses outlook. I can see year over year in 2003-04, $9.3 billion, 2004-05, $13.3 billion. If I had a pocket calculator I could figure out the percentage, but they nowhere have it here. They want to spare us. There is a narrative in which they tell us that average annual growth in program expenditures over the 2005-06 to 2009-2010 period is projected to be around 4 per cent, slightly below expected average annual nominal GDP growth. I can figure this out if I have to, but I would like to have the bald information in front of me and not presented as a narrative in this way — averages and so forth.
Mr. Joyce, I have a couple of questions, but and I do not expect you necessarily to have the information. They relate to the fiscal year that is now coming to an end. I would draw your attention to Table 7.8, page 264, ``Alternative Payments for Standing Programs.'' This is the negative item, starting with $2.7 billion in 2003-2004 — I know there is a simple explanation for this but I do not know what it is — a negative item all the way through, $3.7 billion in 2009- 2010. Could you tell us what that is?
Mr. Joyce: I have the explanation that Finance provides on that. It relates to the difference between tax transfer payments points. It relates to an arrangement where the arrangement with the provinces is tax abatement, rather than trying to transfer tax points. It is a Finance responsibility.
Senator Murray: They consider it a tax expenditure. It is put in there so that they can put their best foot forward, not because it is relevant to that table.
Mr. Joyce: They do have an explanation for that and I can get them to provide it to you.
Senator Murray: I am sure.
Explain again the $5 billion ``trust fund,'' if that is what it is, or the ``commitment,'' if that is what it is, in regard to early child care.
Mr. Joyce: Yes.
Senator Murray: It states that some $700 million will be accounted for in 2004-05. What does that mean? Senator Massicotte and Senator Oliver were talking about binge spending. I do not suggest that is binge spending, but it is smoke and mirrors at the end of year. There is the big money that goes into the foundations, and now of this $5 billion, $700 million will be accounted for in 2004-05. What does that mean?
Mr. Joyce: My understanding is that it means that, according to the accounting rules, a sufficient portion of that new initiative — because of the announcements and conditions that have been met before the end of this fiscal year — is allowed to be charged to the current fiscal year. It is simply a reflection of accounting policy.
Senator Murray: But it has not been spent, has it?
Mr. Joyce: No, but it means that a provision can be established according to accounting rules against which a later expenditure can be charged.
Senator Murray: I do have some other questions and I cannot find the information I need. If there is an opportunity, I will ask those later.
Senator Day: I do not think my honourable friend likes the generally accepted accounting rules and procedures here.
Senator Murray: You are a lawyer and an engineer, but you are not an accountant.
Senator Downe: I have a few specific questions. I appreciate you may not have the information. If you do not have it, you could send it to me.
I am concerned about the increase in the estimates for the Chief Electoral Officer. Could you break that figure down, the $220 million on page 173? Part of it is a quarterly allowance to the parties; part of it is the cost of the last election and the preparation for an election that may be held at any time. Is there any additional cost in that figure of which we should be aware?
Mr. Joyce: My colleague has gotten there before me.
Senator Downe: If you do not have it, you can send it to us.
Mr. Joyce: We can give you some information now. By far, the largest amount of it, $207.7 million is funding to prepare, conduct and evaluate the 38th general election.
Senator Downe: What is that figure?
Mr. Joyce: $207.7 million.
Senator Downe: The concern I have there relates to the evaluation. What part of that figure is for that; and what is that?
Mr. Joyce: I do not think I have any additional information on that. I do not have the breakdown.
Senator Downe: I would appreciate it if you could send that to me.
Mr. Joyce: We would have to get that from the commission. We will undertake to do that.
Senator Downe: The second question pertains to page 172 of the Supplementary Estimates. I am interested in what seems to be enhanced policy research of the Privy Council Office. Is that public opinion polling?
Mr. Joyce: I do not believe it is. It is a group within the Privy Council Office and supported by the Privy Council Office which is, in fact, looking at exactly what it says, policy research. One part of the Policy Research Development Program is almost a recruitment initiative to bring in and give experience to policy analysts.
Senator Downe: Could you send me and explanation of what they are doing with that money?
Mr. Joyce: We will have to get that from the Privy Council Office, but we will undertake to do that.
Senator Murray: A part of the PCO is called communications and consultations.
Senator Downe: This is a new, enhanced development since my days there.
Mr. Joyce: Again, I will confirm that. This is quite separate. It is not to do with polling. This is focussed on policy research and policy development.
Senator Downe: Referring to page 11 of the Supplementary Estimates, funding related to government and advertising programs. I notice a number of departments contribute to that. I am curious about the Department of Finance. At the top of page 12 there is $11 million for the annual campaign to inform Canadians of the Canada Savings Bond program. I understood Finance was considering dropping Canada Savings Bonds.
Mr. Joyce: That is correct. I have heard that is something that they are examining, but until they do, they still have that program. The advertising of those bonds is an integral part of that program.
Senator Downe: Do they know how effective they are? I cannot imagine Canadians not being aware of Canada Savings Bonds although, given the interest that they pay, they are not as popular as they were. I would question whether the funding is effective. Following up on my question by my colleagues about money well spent that is one that raises a flag for me. Do you have any comments on that?
Mr. Joyce: Only that the Department of Finance is examining that program.
Senator Downe: Thank you. If you know any more, you could send that to us. That would be appreciated.
My last question pertains to the salary adjustments in a number of departments and agencies. I do not have the page in the book, but the figure is $180 million. Does that include bonuses for deputy ministers?
Mr. Joyce: No, my understanding is that is strictly related to the results of collective agreements signed.
The Chairman: Does that exclude adjustments for increases in salary for the Armed Forces?
Mr. Joyce: As you correctly imply, they are not unionized, but there are other arrangements with the Armed Forces and the RCMP and we do provide funding in a similar fashion for equivalent increases, if they were unionized. That is the amount that they would have got. It represents the arrangements that are in place to give economic increases to those groups. That is provided as well as the funding provided for collective agreements.
[Translation]
Senator Ferretti Barth: My questions are very basic, and not complicated like those of my colleagues. On page 12, we see $59 million for a centralized management process for advertising. Is this not a sponsorship program?
Mr. Joyce: No, not at all, this is a new initiative launched by the Privy Council Office. The aim is to reduce the total amount the government spends on advertising campaigns. This is a new process. In fact, all the monies allocated to these advertising campaigns have been centralized within the Privy Council Office. The monies were not allocated until all the requests were reviewed. What you see in the supplementary estimates is the result of that process. But these monies are not for sponsorships, they are for advertising campaigns.
Senator Ferretti Barth: Is this a new way of allocating funding for advertising or rather a purification of the previous process. In reality, requests for sponsorships continue to follow the same process and the government subjects them to the same approval process. I will simply say that now we are taking a few more precautions. There is a bit more oversight, but $59 million is quite a lot of money.
Mr. Joyce: True, but there are a number of ways to reach that goal. There is a new policy to ensure this process is cleaned up. This initiative, which is evident in the supplementary estimates, is simply the result of the approval process to ensure effective advertising campaigns despite the overall decrease compared to previous years.
Senator Ferretti Barth: How much money is there in the centralized management fund for advertising at this time?
Mr. Joyce: Are you referring to the total amount in the fund or the amount for management?
Senator Ferretti Barth: I am referring to the $59 million. Some amounts have not yet been spent. I think it is $90 million in total.
Mr. Joyce: Unfortunately, I cannot remember the total amount in the fund. I will have to verify this information, because the amount escapes me. I can certainly find out. There was an announcement on the new process, which clearly illustrates the total budget for investments.
[English]
I can provide that announcement
[Translation]
Senator Ferretti Barth: I have another question, which I find very interesting. CIDA asked for $485 million in funding. Of this, $140 million will be allocated to support the Global Fund to Fight Aids, Tuberculosis and Malaria, since Canada has been a board member since March 2004. Since the 2002 G8 Summit in Genoa, Italy, Canada has felt almost obligated to donate this $140 million. However, many countries do not contribute to this global fund. Do you know how many countries are donor countries and what progress has been achieved to date?
Mr. Joyce: We will have to do some research, but that information is available.
Senator Ferretti Barth: CIDA wants to cuts its aid programs to NGOs. Do you know why? We were giving almost $240 million and now we want to cut that amount to $77 million.
Mr. Joyce: Unfortunately, all the information explaining these cuts is in English, but I can summarize it for you.
[English]
There is a total of $238 million in reduced contribution requirements that is available within CIDA's grant and contribution program. I may have the wrong information. I can give you this information now but it would be better if I gave you an answer later.
[Translation]
Senator Ferretti Barth: I am curious. Do the cuts from $240 million to $77 million in aid to NGOs mean that they did not do their job? Did the government not send anyone there to investigate? Does this mean that, in the past, when we gave these organizations a lot of money, they had nothing to show for it, because there must be a serious reason for a 50 per cent cut in funding?
Mr. Joyce: I will ask CIDA this question, but the cuts made here represent only changes in plans. This is not a decision to do nothing. But I will give you a better answer at a later date.
[English]
Senator Day: Could you give me a more precise explanation of planned expenditure? When it is not an election year, when would we normally hear from the government, usually through the Minister of Finance, about what the total planned expenditure would be for a fiscal year?
Mr. Joyce: The starting point for that in terms of public communication is the budget. That does set out the expenditure plans. This year, those are for a longer fiscal framework period than usual. Normally, it is two years; but in this case, they are for a full five years.
That is immediately followed with more substantive information in the reports on plans and priorities, which the President of the Treasury Board tables on behalf of each department and agency. Those set out in detail the operational plans of each department. Those documents provide the basis for accountability against which departments report in their performance reports that are tabled some 18 months later.
What is perhaps not as comprehensive as anyone would like is the information in the reports on plans and priorities on the new initiatives in the budget. That is simply a reflection of budget secrecy, and the fact that, with the production deadline that we are obliged to meet with the reports on plans and priorities, departments have limited time to integrate the new budget spending into the reports on plans and priorities. There tends to be a lag of one year in terms of the formal documentation that is provided to Parliament. Those are the two key sets of documents that lay out the plans.
I had indicated to you one of the issues that is a current constraint on providing Parliament with fully comprehensive information on new spending plans. That is an issue that is part of the improved reporting project, which the resident announced as part of the budget. There was a pamphlet in the budget that laid out some management agenda issues that we are pursuing. One is the improved reporting project, which both the President and I have pointed out to this committee in previous appearances, but it is now a specific commitment. I am sure the President will be pleased to talk about that when he appears tomorrow.
The Chairman: Would you like to be doing that in conjunction with the Department of Finance?
Mr. Joyce: There are linked issues. We take the lead from the Department of Finance in terms of information that comes out in the budget. As we move through that project and start looking at options to address this issue, it will be impossible to do that without having discussions with the Department of Finance. There are issues.
However, there are other issues, as I think you will see as we move through this project. The President will be pleased to indicate some of the issues that we are looking at, which relate to the parliamentary timetable — particularly the parliamentary timetable that is set by the House of Commons — which is one of the constraints that we are facing right now. As I indicated, the President will be happy to start the process of discussion on that when he appears tomorrow.
Senator Day: I appreciate that we are dealing with Supplementary Estimates (B) for the fiscal year ending in two or three weeks. In the normal course, would the government look forward and say that it cannot develop all of the expenditures; therefore, in the Main Estimates, it cannot include some of the expenditures that it anticipates and that it may be required to claim in Supplementary Estimates (A) and (B), but that the overall amount is typically known by the government, other than some contingencies or surprises? The primary amount is claimed in the Main Estimates, and then the Supplementary Estimates come along. When you add all of those up — the Main Estimates, Supplementary Estimates (A) and Supplementary Estimates (B) — that total amount is what was anticipated by the government at the beginning of the year. Is it often more than they anticipated in the typical situation?
Mr. Joyce: The short answer to your question is that normally it is not more. The government is committed to living within the fiscal framework and the parameters set out in the budget, particularly a balanced or better budget. That is the primary fiscal constraint.
You are right in terms of the spending plans of the government; they unfold through the year. As you correctly pointed out, it is impossible for us to include in the Main Estimates any of the new spending plans announced in the budget because the budget is usually very close to the Main Estimates. It is simply a secrecy constraint and a budget constraint. That is why we come before you with supplementary estimates, which puts in place both the planned spending that was not in the Main Estimates and the new spending. As has happened this year, we had the tsunami relief as well as the decision to buy vaccine. These decisions that are made during the course of the year are within the fiscal framework but were not specifically planned as initiatives when the budget was tabled.
Senator Day: I am trying to find my way through the Supplementary Estimates (B). On National Defence, page 159 and 160, could you explain the transfers? The various transfers that were coming into National Defence are explained on page 10. Is the new appropriation of $188 million part of what was announced earlier as coming at the beginning of the year for National Defence, or is that something new? I am looking at new appropriations, page 159 in the Supplementary Estimates (B) for National Defence, the $188 million.
Mr. Joyce: If I have understood your question correctly, I think we dealt with any initiatives that were part of the previous budget in Supplementary Estimates (A). If you go through the list of items here, by far the largest component of the gross supplementary estimate effect is the increases to pay and allowances, followed by the next item, $190 million, which is the additional money that the government gave for sustainability to address the pressures in the defence services program. Those are the two primary components. One is simply pay; the other is additional money to address pressures that the government did signal in the budget.
Senator Day: There are explanations on page 10 — increased operating requirements for the Department of National Defence, and there is a figure referred to there of $405 million. Then, at the bottom of page 160 there is an explanation of funds available. I have been trying to reconcile all these different funds. Page 10 deals with $405 million; and page 160 deals with $245 million. I cannot find either of those when I look at the operating expenditures at page 159.
Mr. Joyce: In the summary tables, we simply pick out the items that are in excess of a threshold amount of $50 million. On page 10, we are extracting the major items. This is not the total. Page 10 addresses the two items that I just picked out of the table on page 160. I am referring to the first two items.
Senator Day: You have $215 million to cover increases in pay.
Mr. Joyce: Yes, and then $190 million, which is sustainability. We did not put the remaining items into the summary table because they were below our threshold. The summary table is intended to indicate the biggest single individual items.
Senator Day: With respect to that $405 million, those two items, are they included in the transfers and appropriations? They do not add up to that, but you dropped some. Is that, in effect, what you are saying?
Mr. Joyce: This is one of the things we are doing to try to increase the transparency of the documents. Unfortunately, by being more transparent, it also does increase the complexity.
Senator Day: It creates more questions and confusion.
Mr. Joyce: It does. What we have shown here — which we have not done in the past — is what we call the gross supplementary amount the department has been seeking. Then, at the bottom of the table, on page 160, we back out of the total $439,000,611, authorities that are available within the vote that for one reason or another are no longer required. That brings the actual net amount that Parliament has to authorize down to $188,533,000. The increased transparency is showing you the total gross amount of the supplementary estimates. Therefore, if there were not existing authorities that the department no longer needed then the supplementary vote total would have been $439,000,611. Because we have two sets of spending authorities in two votes that are no longer required, we subtract those, and that arrives at the actual voted authority we are seeking from Parliament.
Senator Day: If we look at page 159, the second vote item is 5b, capital expenditures. There is a transfer from that previously voted amount of $190 million in capital expenditure that the Armed Forces did not use this year, so they transfer that presumably into operating expenditures. Is that correct?
Ms. Danagher: Yes. If you go to page 160, you will see the explanation at the bottom of the page. The explanation reads, in part:
$190,290,021 from Vote 5 due to delays in various capital projects such as the Maritime Helicopter Project, the Armoured Personnel Carrier, the Primrose Lake Test Establishment and the Search and Rescue Helicopter ($100,000,000).
These were projects that were delayed, and because they needed the money in operating, they are transferring that money.
Senator Day: Do we have to bring in the Minister of National Defence, or do you have the information as to whether these delays were brought about because they needed the money to operate, to live on — that they have delayed very important capital projects that we had already approved?
Mr. Joyce: You would have to bring in the Minister of National Defence to get a definitive answer, but I can say with a fair degree of confidence that these are delays in capital projects.
Senator Day: I understand they are delays, but are they self-imposed delays?
Mr. Joyce: I am almost certain they were not. If that is not the case, I will come back and correct that.
Senator Day: I have visited the Maritime Security Operations Centres. They are crying for equipment and money. National Defence has told you that they were delays. I should like to know whether those delays were self-imposed — so that they could have money to live on and to operate — or whether these are actual notions that we could not spend the money?
Mr. Joyce: One of the reasons I am fairly confident that that is not the case is that they are the ones who have identified needs. The total amount of money the government has authorized is the $439,000,611. That is an approval from Treasury Board. They would not have been required to generate these offset amounts. They have been given an additional total of $440 million by government decision. We go through the process of looking at whether they do not need funds in particular votes.
National Defence is probably a poor example, because of the complexity of their programs. However, typically in another department where this would occur, you would have a capital project where we have a policy that allows capital carry forward. This is in addition to the operating budget carry-forward policy that I talked about earlier. If a department has come in and says that we do not want to delay this project but, like many capital projects for reasons beyond our control, we need to delay, we will say fine, we will allow you to carry forward the money from this year into the next year. We will then put into place a frozen allotment, to ensure that the department does not spend that money that it has told us it does not need this year. It is that frozen allotment that becomes available as an offset. That is the principle applying here.
If my assertion that this is not forced delays is incorrect, I will correct that and bring it back to you.
Senator Day: Thank you very much. You have prompted another question. For the offsets that you are talking about, do we see any of these expenditure review offsets that every department is being required to make in the sups, or are they reflected in the Main Estimates?
Mr. Joyce: The answer is no to both. The reason they are not reflected in the supplementary estimates is the expenditure review initiatives start next fiscal year, not this fiscal year, so they are not in this document.
Senator Day: Were there not previous expenditure review programs?
Mr. Joyce: That is correct; there would be some offsets in here that result from the $1 billion the President of the Treasury Board announced in the fall.
Senator Day: My recollection is that National Defence got hit pretty hard.
Mr. Joyce: They contributed, along with everyone else.
The Chairman: Before going to other senators, could I ask you, Mr. Joyce, I am interested in the carry forward accounting concepts. You gave us a clear explanation of how the operation carry forward works, and now you have mentioned to Senator Day capital. Is there a limitation of 5 per cent on the capital, as there is in the operating, or could you explain the difference?
Mr. Joyce: No, there is no limitation on the capital carry forward. It is simply looking at the particular situation of a capital project. If there is a capital project that has a fixed multi-year budget, this is not an increase in the total cost, but taking the money they do not need in one year and adding it on to another year within the total of the capital project. This is not new money in terms of multi-year funding. This is done annually with departments in conjunction with the annual reference level update exercise, which is the exercise that the secretariat does in generating the numbers for finance for the fiscal framework and the Main Estimates. Departments can come in and seek a re-profiling, as we call it, under that policy. There is no fixed amount because we look at the actual particulars of a particular capital project. The intent is simply that if a total project over three years cost $100 million, if the cash profile has changed then we say that is okay as long as there is a reasonable justification provided by the department.
The Chairman: Let us say that the capital in a project was $100 million and they were not ready to build that particular capital project. Would that cash have come down or would that cash still remain in the Consolidated Revenue Fund? Would it already have been transferred to the department and carried forward and invested in the department, or would it still be in the Consolidated Revenue Fund?
Mr. Joyce: No. Essentially, it sits in the Consolidated Revenue Fund. What you see in the approval process of the government is that the Treasury Board actually sets the departments' budgets with reference levels. That is the first authority given. The second authority has to be the parliamentary authority to make the expenditure. However, once Parliament has voted money to the department, it then has the authority of Parliament to make that expenditure, but until a cheque is drawn there is no money flowing. Even with an appropriation, the money is sitting in the Consolidated Revenue Fund.
The Chairman: So even on the capital carry forward, it is an accounting entry?
Mr. Joyce: Correct.
Senator Ringuette: I am trying to relate what you have just said to an earlier question in regards to the child care program, and money that will not be spent and not accounted for in this budget. Therefore, how can you relate that to what you have just explained to us with respect to the example for capital spending?
Mr. Joyce: I will extend that. First, the example you used is actually statutory funding, so this would not apply. The statutory authority is multi-year funding, by definition; the statutory authority is there every year.
We do apply the same principle to what I think of as any expenditure activity of a department that is project-like. Therefore, you could have, for instance, a commitment by the government that is executed through transfer payments where there is a commitment to spend a certain amount of money over several years. In a situation like that, even though it is not a capital project, we do look at it with the same principle, that is, if for reasons beyond a department's control — it could the same thing, $100 million over three years; and often with federal provincial agreements, it may be there have been delays in entering the agreement — the department has not been able to spend the $33 million in the first year, it still reflects an overall commitment of the government, in other words, a moral or a legal obligation, then we would consider the same re-profiling.
Therefore, if they had only been able because of delays in getting an agreement in place to spend $15 million of the $33 million, we would then take the other $18 million and add it to next year's budget or spread it over the two years. Therefore, the same principle applies to any activity that is project-like. It is bounded by something that is a commitment; it is a fixed multi-year period and the intent in authorizing that activity was reflected in achieving a particular objective with multi-year funding.
Senator Murray: Mr. Chairman, this is one of those small matters, but it has piqued my curiosity and I want to ask Mr. Joyce to have someone send us a note about it.
From the budget plan, at page 69, in May 2004, the government responded to the spike in gasoline prices by announcing that the additional goods and services tax revenues in 2004 — I presume that is calendar 2004, or is it fiscal 2004 — would be directed to investments in medical equipment on a one-time basis. The value of this commitment is estimated to be $150 million.
I should like to see the arithmetic for that. I should like them to calculate it. What was the increment in GST revenues as a result of the apparently unexpected spike in gasoline prices? Did it turn out to be $150 million, more or less?
Mr. Joyce: We will relay your question to the Department of Finance.
Senator Murray: Then they say: As part of the plan to strengthen health care, the government more than tripled this commitment by dedicating $500 million for the purchase of diagnostic and medical equipment. Sure enough, when I turn the page, there is table 3.1, and there for 2004-05 is medical equipment $500 million.
It is not a mortal sin, it is done all the time, but I think what happened is that 15 months later they committed $500 million and then folded the $150 million into the $500 million that they committed with such fanfare. I think that was probably what happened, but I am surmising of course.
Mr. Joyce: I should not tread on Department of Finance's territory.
Senator Murray: I hope you do not consider this too picky, but you can pass it on to the drafters. On the same page 69, an additional $500 million will be provided through the Canada Health Transfer in 2005-06 to help ``deepen progress'' on home care services and catastrophic drug coverage, bringing the new CHT base to $19 billion, et cetera.
What does it mean to deepen progress? Does that mean to increase progress or accelerate progress, or does it mean something else that is not quite clear?
Mr. Joyce: I probably should not speculate, senator. I shall ask the Department of Finance.
Senator Murray: By the way, on the GST, if you eyeball the revenue outlook at page 261, it does not look to me that there have been any unusual increases in GST revenues. The increase year over year starting 2003-2004 right through to 2009-2010 seem pretty consistent.
I just make that point, somewhere between $1.5 and $2 billion.
Mr. Joyce: If you look at the bottom of the table it gives you the goods and services tax as percentage of the GDP and that reinforces the point you have made because it is 2.3 flat.
Senator Murray: As a percentage of GDP?
Mr. Joyce: Yes.
[Translation]
Senator Massicotte: On page 32, we see the heading ``Consolidated specific purpose accounts.'' What is this amount for $16 billion? There is no table explaining this amount.
[English]
Mr. Joyce: It is because the employment insurance account is consolidated. It is shown separately from the amounts that are attributed to the votes in the departments. It simply follows the usual way that we display it.
[Translation]
Senator Massicotte: These are employment insurance disbursements. The revenues are elsewhere?
Mr. Joyce: It is because it is a net account.
Senator Massicotte: But it is not the net amount, because this account contains a surplus. So it is simply the disbursements and the revenues are elsewhere. Are they not with employment insurance?
Mr. Joyce: Yes, it is the expenditures.
Senator Massicotte: The revenues are elsewhere, because the account contains a surplus.
Mr. Joyce: Yes.
Senator Massicotte: Why does it not say ``employment insurance'' instead of ``consolidated specified purpose accounts?'' It is strange that there is no table explaining this either.
Mr. Joyce: Yes, I understand the difficulty. It is not totally clear, but this is standard accounting practice. We do this every year. But perhaps improvements could be made.
Senator Massicotte: The purpose of each word is to create the meaning.
Mr. Joyce: That is true.
[English]
Senator Downe: At page 128 of the Supplementary Estimates, the Forum of Federations — is that a foundation?
Mr. Joyce: Yes, it is.
Senator Downe: I appreciate you do not have this information, but could you send me a breakdown of what that additional funding is for?
Senator Murray: What are the other sources of funds? Do the provinces support it?
Mr. Joyce: I do not think we have anything on that; it is a payment to the foundation. There would be a management agreement. As you know, part of the arrangements we have when we grant money to foundations and set them up is that there has to be a management framework, a management agreement. We can certainly provide that to you, which would indicate the purposes to which the foundation can use the monies it has been given.
Was you other question whether other governments contribute to that foundation?
The Chairman: Senator Murray asked that.
Mr. Joyce: I will have to confirm. I do not think so, but I do not know.
Senator Downe: Can you send me what they spent the money on last year. I would like to have a breakdown on their budget and what they spent their money on? We do not seem to know much about this foundation. I should like to education myself on it.
Mr. Joyce: They would prepare an annual report. The current arrangement with foundations is that the responsible minister is required to report on the foundations in both their Report on Plans and Priorities and in their Departmental Performance Reports. The Report on Plans and Priorities tabled toward the end of this month will contain something on that particular foundation.
Senator Downe: I will pursue it at that point; thank you.
You spoke earlier in some detail, and other senators have talked about it as well, the Expenditure Review Program. I was interested when I saw the budget for 2005 at the departmental reduction for the Canadian International Development Agency. I noted it was second to only National Defence in significance of the contribution.
This is my concern about the expenditure review exercise, and we will have to pursue this at further meetings, but I just wanted to raise it for senators who may want to do their own research.
The expenditure review exercise booked savings of $458 million for CIDA, but it appears that the money was simply reallocated, which is my first concern. The second concern is that most of these savings that the expenditure review committee has identified are starting in a significant way after your fiscal year 2007-08, which is a concern that the savings may never be realized. Are you aware of this with CIDA?
Mr. Joyce: I am aware in some detail of all the expenditure review committee's decisions. I do not know whether you are aware of this, but there is a website for the expenditure review committee. It lists, in more detail than you will find in the press release, the individual initiatives that constitute the savings identified for each department and agency. I have a paper printout here; however, there is a considerable amount of detail on the website if you want to see how much the individual components of the total savings are for any department.
Senator Downe: We were advised that the expenditure review in the budget — in the documents associated with the budget — received a saving of $458 million, second highest among departments. However, it appears the department reallocated what they were going to do anyway. There is no actual savings; there is no reduction in foreign expenditures on behalf of the Government of Canada. There is simply a reallocation. Therefore, there is no real saving of $458 million.
Mr. Joyce: The process for achieving the savings will be that the Treasury Board will be extracting the money from the reference levels of the departments and agencies involved. That is how the savings will be realized.
Senator Downe: Will there be an actual reduction?
Mr. Joyce: Yes, there will be an actual reduction in the reference levels of each department and agency concerned. It could not be done in the Main Estimates for the same reasons of production constraints and budget secrecy. That is an action that Treasury Board will take.
The process we will be using is the one we have used with previous expenditure reduction exercises, which is putting in place a frozen allotment against the vote in question for the next coming fiscal year. Then there will be a specific Treasury Board decision to reduce the reference levels — the Treasury Board-approved budgets for each department and agency — by the amount specified by the expenditure review committee.
Senator Downe: CIDA will actually have a reduction in their budget; but then the Government of Canada announced in the budget a further increase in foreign assistance that will go through CIDA. So it is a bookkeeping entry?
Mr. Joyce: In some cases, it can be seen that way. The government was quite clear in the expenditure review committee announcement that this was a reallocation initiative, that it was an intention to find money that could be removed from lower priority areas — in most cases, efficiency gains through administrative efficiency — that could be reallocated to higher priorities. There is, in many cases, departments who have given through increased efficiency measures, but because of policy decisions have received additional monies for higher priorities. It is consistent with a reallocation initiative, which is how it was intended to be.
The Chairman: That is consistent with what the minister said when he appeared before this committee.
In your introductory remarks today, Mr. Joyce, you said that at this time you would like to thank the committee for recognizing and appreciating the efforts of your department in the December report, for producing documents aimed at providing greater transparency as well as consistency with other estimates' documents. You indicated that the process is ongoing. Is there a time frame for when we can expect to see finality? When will there be the transparency that we would all like to see?
Mr. Joyce: The short answer to your question is no, because the project that we are currently embarked on is to design by April what we are calling a framework or a blueprint for the types of improvements that we want to investigate and make. This will be, of necessity, a consultative process. I do not think you would want to see us come out and say here is what we intend to do, here is the timeline and we just do it.
An integral part of the blueprint we are coming out with will indicate what we think the issues are to be addressed — the questions — and some direction that we think could be taken as the basis for consultation. It will be a staged, phased and incremental approach. My own estimate is that to undertake a major exercise to look at the nature of the documents and the processes will be a two- or three-year initiative.
To get it right, we have to recognize this as long-term initiative, not something we do in a quick burst of change, because that will not be productive. We have made steps that way in the past, but we now need to look at more fundamental changes that will require extensive consultation with all interested parties — both Houses of Parliament, but other interested parties as well. The president will be pleased to talk more about that tomorrow when he is here, and he will outline something in more detail.
The Chairman: Will he also be prepared to talk about the report on vote 5 that this committee has talked to him about?
Mr. Joyce: Yes, he will.
The Chairman: And DM responsibility as well?
Mr. Joyce: I can signal that to him, if you want to talk to him about that, yes.
The Chairman: Earlier today, we were talking about carry forward of capital funds. You sent a report to this committee, dated February 11, 2005, arising from questions we asked at a previous meeting. In the summary of the section of carry forward of capital funds, you say: ``Under certain circumstances, departments may carry forward into the next fiscal year up to 5 per cent of any capital vote in estimates.'' Capital, not operating. ``For 1988-89, the maximum to be carried forward per vote will be $25 million. This will increase to $50 million for 1989-90 and to $75 million thereafter.''
Earlier, I thought you said there was no limitation on the amount of capital dollars that can be carried forward, but there was a ceiling of 5 per cent for operating dollars. Could you explain?
Mr. Joyce: There is certainly a ceiling of 5 per cent for operating; on capital, I would have to look at our response. The current practice is that we examine projects on a case-by-case basis. The amount of carry forward or re-profiling that we do is subject to our assessment of what is reasonable.
The confusion arises because we do have a relatively old capital carry forward policy, but we also have an exercise we go through, which we call re-profiling. In effect, they amount to the same thing. The re-profiling is a more up-to- date practice of the Treasury Board, where we do what I described earlier.
The Chairman: Thank you for that.
Mr. Joyce and Ms. Danagher, thank you again for attending here and answering a whole series of difficult questions.
The committee adjourned.