Proceedings of the Standing Senate Committee on
National Finance

Issue 30 - Evidence - November 15, 2005

OTTAWA, Tuesday, November 15, 2005

The Standing Senate Committee on National Finance met this day at 9:35 a.m. to examine the expenditures set out in the Supplementary Estimates (A) for the fiscal year ending March 31, 2006.

Senator Donald H. Oliver (Chairman) in the chair.


The Chairman: Honourable senators, as you know, this committee's field of interest is government spending, either directly through the estimates or indirectly through bills that provide borrowing authority or bear upon the spending proposals identified in the estimates.


On November 1, 2004, our committee received an order of reference to examine and report on Supplementary Estimates (A) for the fiscal year ending March 31, 2006. This is our first meeting devoted to the study of the supplementary estimates.


Joining us this morning to present the Supplementary Estimates (A) are two officials from the Treasury Board of Canada Secretariat. We welcome for the first time before this committee in his new role as Assistant Secretary, Expenditure Management Sector, Mr. David Moloney. We also welcome back Ms. Laura Danagher, who appears often before us in relation to the estimates. She is the Executive Director, Expenditure Operations and Estimates Directorate, Expenditure Management Sector.

Before turning to you to make your presentation, I would like to introduce the senators: Senator Segal, Senator Downe, Senator Murray, Senator Eggleton and Senator Ringuette.

You have the floor. As you know, after you make your presentation, I will turn to senators for questions about this huge Supplementary Estimates (A). I am sure there will be a number of questions about why it is so big and questions about some of the particular items.

David Moloney, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you for the welcome and for those remarks.

Mr. Chair, honourable senators, I am pleased to be appearing before you today, as the chairman as indicated, for the first time, to discuss the government's Supplementary Estimates (A) for the fiscal year 2005-06. I am joined by Laura Danagher, Executive Director of the Expenditure Operations and Estimates Directorate, who has appeared before this committee, as the chair has noted, on several previous occasions. Mike Joyce appeared before you for several years on these and related issues. His sector and another within the Treasury Board Secretariat were merged in the spring of this year. As the chair as indicated, I was recently appointed Assistant Secretary of this newly-formed Expenditure Management Sector.

The estimates before the committee were introduced in Parliament, as you know, on October 27, 2005. Let me begin by stating this morning that, with these supplementary estimates, the government continues to move forward with its priorities as articulated in previous budgets and in the most recent Speech from the Throne. As senators know, the funds being requested through these supplementary estimates do not represent new spending. From a fiscal planning perspective, they are within and fully consistent with the $196.4 billion in overall planned spending for 2005-06 that was laid out in the Budget 2005. The expenditures and adjustments reported in the supplementary estimates reflect the Government of Canada's commitment to manage taxpayers' dollars effectively.


More specifically, with these supplementary estimates, the government is seeking Parliament's approval to spend $7 billion in expenditures that were not reflected in the Main Estimates tabled on February 25, 2005, because they were either not sufficiently developed or known in time to be integrated into the Main Estimates.

This is related, in part, to the close proximity between the tabling of the Budget and the tabling of the Main Estimates. The Government already has approval for the remaining $6.5 billion through enabling legislation for priorities such as transfer payments to provinces and territories, reflecting the new framework for these payments, and the Gas Tax Fund Transfer Payment Program that was announced in Budget 2005. Also contained in the 2005-2006 Supplementary Estimates is information on the government's expenditure review committee savings that were announced in Budget 2005.

Although the government is seeking spending authority for significant amounts, this is consistent with past examples when government has moved forward with significant initiatives for Canadians. For example, the 2000-2001 Supplementary Estimates (A) tabled in March 2001 totalled $12.9 billion. Furthermore, it is fully consistent with the government's commitment to maintaining a balanced budget as well as to enhancing Parliament's role in the review of the estimates by bringing spending initiatives to Parliament on a timelier basis during the year for committee consideration.


I will not go through all of the major spending proposals, since these are outlined on pages 8 through 19 in the 2005- 06 Supplementary Estimates document. I will, however, point out that the bulk of the proposed spending is centered around four of the government's priorities.

The first priority is improving Canada's social foundation. For example, senators will find a $5.8 billion increase in transfer payments to provincial and territorial governments, including increased health spending, and $220 million in transfer payments to persons for increases to Old Age Security payments, Guaranteed Income Supplement payments, and allowance payments.

The second priority is implementing policies that support a productive and growing economy. For example, $140 million is allocated for a strategic investment in Canadian automotive engineering, research and development and manufacturing modernization under the Program for Strategic Industrial Projects; and $600 million for the Gas Tax Fund Transfer Payment Program.

The third priority is developing a green economy and sustainable communities. For example, there will be $197.8 million for investments in public infrastructure projects designed to improve the quality of life in both urban and rural communities.

The fourth priority is meeting Canada's global responsibilities while maintaining sound and prudent financial management. For example, $1.1 billion is allocated to enhance operational sustainability for the Canadian Forces; $130.9 million to forgive the debt of six countries, specifically Cameroon, Republic of Congo, Madagascar, Rwanda, Tanzania and Zambia; and, finally, there is $119.5 million to promote peace and stability in failed and fragile states such as Afghanistan, Haiti and Sudan.


Last fiscal year, significant changes to the supplementary estimates were introduced to provide greater transparency and consistency with other estimates documents. In addition to enhancing the introduction and summary tables, other key features were added such as a ministry summary table preceding each ministry, a presentation of the gross funding requirements for each organization, and an explanation of funds available to offset new spending requirements.

These supplementary estimates continue to build on those improvements by refining some of the information previously introduced to improve the linkages between the various tables and sets of information as well as launching some new elements. In particular this year we have introduced a section to each organization's page to reflect all transfers between votes, both within and across organizations, including a full description of the specific initiative for which the money is being realigned.

This additional section is intended to increase the transparency of spending, previously approved by Parliament, that is shifting between organizations. This presentation is helpful in reconciling the impact of these transfers on the total resources available to departments.

These details also support the information summarized in the Transfers between organizations included in these supplementary estimates tables and are reflected in the transfer column of the summary of these supplementary estimates section.

We see the improvements to the Supplementary Estimates as an interactive process and part of the overarching objective of the government to enhance its accountability to Parliament by providing improved financial and performance information.


The other item I would bring to the attention of the committee is the Treasury Board Secretariat's intention to move forward with changes to Treasury Board contingency vote 5.

As you may recall, the President of the Treasury Board tabled a proposed package of reforms with the committee this past spring. Many of the changes described there, such as changes to the introduction of the Main Estimates, have already been adopted. The final step is to adopt the changes being proposed to the TB vote 5 wording, as well as to get TB approval for the revised set of criteria. It is our intention to include the new vote wording in the upcoming 2006-07 Main Estimates.

Consistent with this approach, you will note that we have improved the information relating to the allocation of TB vote 5 in these supplementary estimates by providing more context as to why the allocation was improved.

While these changes are an important step, they are just one piece of the secretariat's commitment to improving reporting to Parliament. One input may be a reduction in the government's reliance on supplementary estimates.

Working with you to find ways to continue our efforts to provide you with effective support is also one of our priorities. The President of the Treasury Board will likely be pleased to discuss many of these issues with you tomorrow, when he is here before you, as they are central to the management agenda that he recently announced.

Mr. Chairman, honourable senators, this concludes my preliminary remarks. My colleague and I will be happy to respond to any questions you may have on the supplementary estimates for 2005-06.

The Chairman: Perhaps I can start by asking you a general question so Canadians can understand a little bit about how supplementary estimates work.

There is some statutory funding for monies that, by statute, have to be paid; there is voted money; and there are budgetary and non-budgetary items. For these voted expenditures, has any of the money listed in this $7 billion that is before us today in these Supplementary Estimates (A) been advanced or spent to date?

Mr. Moloney: None of those monies has been advanced to departments. Departments need to plan. Departmental managers need to plan to work within the resources that they have been provided in the Main Estimates, and they are fully aware that supplementary estimates are proposals to Parliament.

There are exceptions such as in the case of TB vote 5 where, as senators will know, urgent requirements are recognized by Treasury Board. A rigorous vetting process is in place.

The Chairman: For instance, under public security initiatives, $163 million for improving border security, none of that has been advanced to date.

Mr. Moloney: That is right. That is not a TB vote 5.

Senator Downe: On page 13 of the supplementary estimates, you note a meeting that is proposed to be held on November 28 to December 6 regarding the Kyoto Protocol. Obviously, we have an international obligation, but I have a concern, and I should like to know if Treasury Board has a concern about the cost of that meeting.

Mr. Moloney: The cost of the meetings reflects the range of events in the preparatory process. It also reflects the considerable security costs associated with any international meeting at a ministerial level.

Senator Downe: Correct me if I am wrong, I notice that the security costs are listed at $20 million and the total cost is $66 million. I also note that there will be $900,000 for emergency health care. The conference is to be held in Montreal where there are many clinics and hospitals where people can go, should they be taken ill. Has there been any scrutiny of these budgets? Has Treasury Board expressed the opinion that the cost may be a little high?

Mr. Moloney: All budgets for specific initiatives require approval by cabinet, through the normal memorandum to cabinet process, ahead of time. All such spending must also be approved through a Treasury Board submission. Then, working from the policy approvals given by cabinet, due diligence processes are conducted by all of the central agencies at each level. Then, of course, there are reporting requirements after the fact.

Senator Downe: I am not suggesting that the costs are not confirmed and that they will actually be spent. My concern is that spending $66 million Canadian tax dollars to host a meeting seems extremely high.

Mr. Moloney: It is a significant expense indeed. The specific emergency health care cost, for example, relates to the individuals who are designated as internationally protected persons and their families, which entails extra costs.

Senator Downe: I go back to my original point. The conference is being held in Montreal, a city that has world class health care. I suspect that, if you had an ambulance standing by, you could get someone to assistance within minutes. You are obviously setting up a separate infrastructure for people that may not use it at all. It seems excessive to me.

My other question pertains to the Privy Council section of the supplementary estimates, page 246. If you cannot answer this, perhaps you could send me an answer. There, I see the following: ``Funding to strengthen and enhance the Government of Canada's presence in the regions by building capacity for regional Ministers.'' I am not quite sure what that means. I can think of many ways to enhance the presence of the Government of Canada in regions, but building capacity for regional ministers is not one of them.

Mr. Moloney: The proposal is for funding to support the government's presence in the regions by building capacity in terms of ministerial staff, which is proposed to further efficient and effective operation of the government in the regions. The requirement is specifically for additional exempt staff funding for ministers with parliamentary secretaries in their portfolios, to support the work of the parliamentary secretaries in this respect.

Senator Downe: Can you advise the citizens of Canada watching this today how much that will cost the taxpayers of Canada?

Mr. Moloney: The total proposed amount is $383,000.

Senator Downe: For all regions?

Mr. Moloney: That is the total.

Senator Downe: Can you send me the information you have on the total cost to date for commissions of inquiry? I would include in that the sponsorship and any other inquiries. I am only aware of two currently under way, although there may be more.

Mr. Moloney: Yes, we can, certainly.

The Chairman: Do you have any idea of what the sponsorship inquiry costs are as of today?

Mr. Moloney: The amounts in here are additional. We will have to provide that.

There is an additional amount respecting the commission of inquiry into the action of Canadian officials in relation to Maher Arar, and that is $17.6 million in these estimates. However, that only represents costs this year, so we will have to provide numbers for the previous year.

Senator Downe: My earlier question about enhancing the regions by building capacity for regional ministers referred to and item under ``Privy Council.'' I notice the same expenditures in various departmental estimates. What is the total cost?

Laura Danagher, Executive Director, Expenditure Operations and Estimates Directorate, Expenditure Management Sector, Treasury Board of Canada Secretariat: The total is the $383,000. It affects more than one department. That figure was the total for every department.

Mr. Moloney: I do have a total cost to date in respect of the commission of inquiry into the sponsorship program and advertising activities. These supplementary estimates request $25.4 million. This would bring the total cost to date to $65.4 million.

The Chairman: That would include invoices up to what date? This is November. Would that be up to the end of September or October?

Mr. Moloney: This is the current estimate of the cost required through this fiscal year. There may be a further update to that, but this is the current estimate of the total cost.

Senator Segal: I want to ask a couple of process questions and then one or two specific questions.

My understanding of your role in the management of day-to-day government expenditures is that, when departments develop programs and cost estimates around those programs, it is your role within the system, Treasury Board classically, management board in the provinces, to challenge the basis upon which those estimates have been built and to push back, if necessary, so that the final number is as close to what is likely to be real as is humanly certifiable. On occasion, Treasury Board will, if things have not changed much in the last 10 or 15 years, push back rather hard when they think a department is aiming in the wrong direction or perhaps not finding the most cost efficient way of achieving the public policy goal as mandated

When a supplementary estimate in the range of $13 billion plus takes the total planned expenditure to $201.3 billion, so it is not within the $100-odd billion referenced by Mr. Moloney in the opening statement — it is a 6.7 per cent increase — is this, in your estimation, because the departments were fundamentally wrong in their assessment of the base cost forecast?

I understand the distinction between statutory and voted items. If you have a statutory proposition under which people have access to benefits, and if they apply in excess of what the estimate was, you still have to provide the cash for them under the statute. Is it because, to get things through the process, departments will classically underestimate the requirement, knowing they can roll back at supplementary estimate time to get what they need? I would be interested in your sense of how that process has evolved in the last few years in relative terms.

The second question I have relates to whether or not there is any break in the system, in your judgment, when a statutory program is running over or running under. I notice with respect to the compassionate care leave program, which the government adopted, that the actual take up by recipients who would have met the criteria was well beneath the anticipated take up, but the administrative costs were what they were. It is argued that those are fixed costs. I think the ratio was $27 million in administrative base costs for an actual outflow of less than $9 million or $10 million. Notionally, over a two or three year period, that might work itself out if the program is taken up a level. What is your role at the Treasury Board in terms of stepping in when you see a huge disconnect between what was anticipated as the statutory number, either going above or well below, so as to assure that those dollars are reassigned appropriately, within the context of what one can do based on appropriation votes?

The third question is about hidden contingency funds. I am not talking about anything inappropriate. I am talking about the notion that the government has a core number that it sets aside for gross contingencies, external, exogenous economic impacts such as floods or whatever. That assumes, of course, that every department has not in some way built a contingency into its own spending. If any department of a federal government or any government did not have some contingency in its spending, I would be troubled, as a taxpayer, that it was not doing its job. How do you assess all that, and how might you connect that to the fact that a few months ago somebody suggested an operating surplus of less than $1.8 billion, and we are now looking at a surplus that is $11 billion or $12 billion? I am not suggesting any malice. I am suggesting that, with the best of intentions, contingencies are buried through the piece; statutory numbers move in different directions, and we are left with a large number that either creates the sense of overtaxation on the part of some Canadians or too much cash at the centre.

One final question relates to accrual accounting. I notice a reference in, of all places, the defence department to extra funds associated with accrual accounting activities and the adjustments. The movement to accrual accounting by public spending authorities is one of the most constructive and progressive movements we have seen, because it does express some real value of what the actual underlying costs are, as opposed to just cash in and cash out. However, there are costs associated with that. I think I heard your minister indicate in front of the comprehensive audit foundation a few weeks ago that something like 16 or 17 different accounting systems in the government have now been reduced to about six or seven. Six or seven is still a large variance between different accounting approaches and different parts of the government. Could you give us any sense of progress on moving to one accounting system so that, when a department gives out its numbers they are meaningful in a relative context? In terms of the burden of process, how long do you think it will be before that kind of rationalization is possible?

The Chairman: The minister will be here on Wednesday evening. Indeed, the last question you asked is probably one you will want to put to the minister as well. Mr. Moloney, you have the floor on those important questions.

Mr. Moloney: In respect of the first question: why would it be that we have these significant amounts of money, and do they relate to better cost estimates or updated cost estimates that are fundamentally different, the senator is absolutely correct that the Treasury Board Secretariat, along with the other central agencies, the Department of Finance and the Privy Council office staff, do indeed play an important challenge function as initiatives come to cabinet, in terms of the costing estimates that are put before cabinet as being necessary to achieve an objective.

Treasury Board Secretariat plays a second and detailed challenge function again when a minister comes before Treasury Board to seek funds against the fiscal authorization that cabinet would have put in place and that would have been funded through a budget. That is a nitty-gritty, detailed review. Where the Treasury Board Secretariat officials are not convinced that all of the proposed funds are required, it is not unusual to have the Treasury Board approval be in the nature of an ``up-to-a-certain-amount'' or to have detailed conditions put on the spending of those amounts. Sometimes, in fact, those approved amounts will be frozen pending further verification of facts or requirements.

In the case of these particular supplementary estimates, whether we are looking at statutory or non-statutory initiatives or amounts, in a number of cases, the large amounts reflect developments that could not have been properly reflected in the Main Estimates. For example, in the statutory area, a number of initiatives came out of the first ministers' meeting of last fall in the health area related to the equalization increase and the fundamental restructuring of the territorial financing. All of these initiatives required the budget bill to be approved through Parliament before the government could seek appropriations authority. Thus, it was not possible for the government to reflect those in the Main Estimates. That is similarly true of a number of significant initiatives that were in fact announced only and financed in the budget itself. In the voted area, for example, we would have the $1.1 billion of defence spending. That would similarly be true of the gas tax program.

In a number of these areas, whether it is statutory or voted expenditures, it would, generally speaking, not be the case of a new understanding of departmental managers that they needed more money to conduct an existing initiative or program. There are such examples, but the large amounts here reflect news, essentially, that comes along.

Senator Segal: Mr. Moloney, it only works one way. In other words, someone has decided they need more money and that is the basis of a supplementary estimate. When for some reason a program underspends, which could end up swelling a surplus, how is that accounted for in terms of the overall management of the back and forth between the core fiscal capacity and the departmental requirements?

Mr. Moloney: In the case of statutory programs, there are some significant examples here of reductions. For example, in the public debt program there is a significant reduction in the sought authority — if memory serves, over $800 million — due to revised estimates of interest rates. In the case of, in particular, statutory programs driven by a specific statutorily defined entitlement, those monies will lapse back to the fiscal framework.

In the case of other initiatives, the government has, in the 2003 budget, in the 2005 budget, made major reallocation initiatives on the basis of both vertical, department-specific, and horizontal, across-department, reallocation exercises, looking precisely at whether or not programs were achieving their objectives or whether or not those objectives and programs could be conducted in such a way that less money would be required to achieve the same objectives.

The management paper that the president has just recently released confirms what the government has specified in the last three budgets — that ongoing reviews of spending across the government will be part of the government's normal practice, with Treasury Board taking a lead role in that to assess, just as you say, with experience, are programs, first, achieving their objectives and, second, are they cost-effective.

In terms of contingency funds, departmental managers certainly do need to manage their operations with a certain degree of flexibility. To promote that, departments are allowed a maximum of 5 per cent carry-forward on their operating budgets in order to encourage good and prudent management and at the same time not penalize a manager who does set aside money and then not have untoward events, while at the same time creating some flexibility within the department before coming to Treasury Board or going to cabinet.

There are such funds. We look closely at departmental carry-forwards. We look closely at any lapses of funds in order to assess, as a macro signal, if you like, departmental overall financial health and management.

The Chairman: What do you do about end-of-fiscal-year binge spending? How do you control that? If someone is sitting with several million dollars of unspent money and that is more than their 5 per cent carry-over, how closely do you look at that?

Mr. Moloney: There are lapses of funding that do take place across the government. The operating budget carry- forward was indeed instituted to help avoid such spending. It is fair to say that some of the bunching of spending toward year ends will reflect managers that are risk managing against budgets that may in some cases not be fully adequate for ongoing requirements and so may reallocate monies within if there are no government-wide reallocation exercises that would require that.

Senator Segal: True accrual accounting, certainly in its private sector reality, allows people with that circumstance to execute what are called ``pre-paids'' to cover some of next year's expenditures and to portray that openly for shareholders and everyone else to see so that people see the value of the savings actually carried forward to finance more efficiency in the following year. Is there any chance you folks would see yourselves clinically moving in that direction?

Mr. Moloney: I want to be cautious about the specifics of your question because I am not sure the Auditor General would necessarily approve of that specific action. I do want to turn, though, to accrual accounting and your question in that respect.

The Chairman: Just before you turn to accrual accounting, Senator Eggleton wants to ask a supplementary question on the third question to which you just responded.

Senator Eggleton: I am delighted to see Treasury Board officials here. As a former President of the Treasury Board, I am catching up on the language once again.

Senator Segal has asked some excellent questions. Is it not the case that the bulk of this is reflective of the budget that comes out? When the Main Estimates are finalized, are printed, in fact you do not know what the budget results and impacts will be, so that this Supplementary Estimates (A) reflects what will come out of the federal budget, not entirely but to a great extent.

Mr. Moloney: Almost entirely in fact. Within the fiscal framework, as the senator well knows, the government does not seek appropriations authority that would go beyond the budgetary aspect of what is in the fiscal framework. That gives me an opportunity to actually address, if I could, just one of Senator Segal's points.

The amount that you make reference to, the $201 billion, reflects both budgetary and non-budgetary spending, but importantly, some of the appropriations authority sought here is against initiatives where the government recognized the fiscal impact, the budgetary impact, in previous years. The reference that we are making here in terms of this being fully consistent with the fiscal framework in the budget is that — that the fiscal impact, the impact on the government's bottom line, and thus on the government's asset position at the end of the year, that surplus deficit change in the national debt, is fully consistent.

Senator Segal: That is a multi-year fiscal framework.

Mr. Moloney: It is a multi-year fiscal framework.

Senator Eggleton: I just wanted to get that clear. That is the biggest part of all of this.

The Chairman: Have you responded to Senator Segal's questions?

Mr. Moloney: I believe I still owe the senator a response on accrual accounting.

The government, as you know, has moved the basis of our overall accounting and reporting through the public accounts to accrual accounting. The Comptroller General is now conducting work with departments to assess the possibility of moving departmental books to an accrual basis over time. The president has made references a number of times and recently, as the senator said, to departmental financial systems being somewhat different.

It is important to — I believe I am correct in saying this — understand that not as accounting systems but literally as financial systems that capture data in a different way. The government has one accounting standard. You asked how far we would go on accrual accounting. The Treasury Board Secretariat, my office, and the Comptroller General's office are looking at the challenges and opportunities associated with moving further in terms of how we inform Parliament with accrual information as we go in the appropriations process. We have a significant study under way in that respect. This is part of the improved reporting to Parliament agenda to which I made an earlier reference.

Senator Murray: As you know, I would not ask you to comment on policy matters and still less to anticipate decisions that ministers may have to make down the road. However Parliament is in a somewhat unusual position as we meet and I think the committee and the public should have a clear idea as to what the options before the government are in the event of one or other of several scenarios taking place.

One scenario is that before Parliament has an opportunity to vote on these supplementary estimates, prorogation or dissolution will have intervened. Another scenario is that these supplementary estimates will come to a vote on, I believe, December 8 and they will be defeated as a matter of confidence in the government.

Correct me if I am wrong, but I think that the position of the government in terms of constitutional and parliamentary convention is somewhat different in the second scenario where their supplementary estimates have been defeated than it is in the first scenario where they just do not get voted.

However that may be, let us take the first scenario in which there is prorogation or dissolution before these supplementary estimates get voted. You are quite explicit about the fact that these statutory expenditures are put in the book for information purposes only, and, irrespective of the fate of these supplementary estimates, the statutory expenditures will go forward. Let us look at the $6.9 billion that ought to be voted.

By the way, are the pay increases for the Armed Forces in here somewhere?

Mr. Moloney: Yes, they are.

Senator Murray: Are they in the $1.1 billion for Department of National Defence to enhance operational sustainability?

Mr. Moloney: That is correct.

Senator Murray: How much of that is for pay raises in the present fiscal year?

Mr. Moloney: That would be $322.1 million.

Senator Murray: Now tell me whether, in the event of these estimates not being voted next month, and prorogation or dissolution intervening, surely, in a budget of $14 billion for the Department of National Defence, the government could begin to provide the wage increases to our servicemen and women pending parliamentary approval of these estimates.

Mr. Moloney: Senator, two or three process issues are perhaps worth briefly describing in response to the point. In the case of an election, the government does have the ability to fund through what are called Governor General's Special Warrants, referred to in the Financial Administration Act as items that are urgently required for the public good. In those circumstances, however, the government may not move money between votes since that is a parliamentary prerogative. The government may not increase or create a new grant. The government may, subject to this overall test, increase funds that are necessary on an urgent basis for the public good in respect of particular uses.

In the specific case that you are pointing to, if the government does need to establish that there is no room within available votes or available appropriations that are accessible for the specific use — in the case of DND's vote, that would be relevant — the government is not in a position to move money otherwise between votes. If the Minister of National Defence attests to the urgent requirement or the urgent need for the public good of a specific use, the President of the Treasury Board must make such a decision as well. Then the government does have the availability to seek the Governor General's concurrence, and the president then is under an obligation to report to Parliament in a specified number of days after the writs are returned.

Senator Murray: We have had lengthy discussion in this committee going back some time about the guidelines governing Governor General's Special Warrants and also, as you mentioned in your opening statement, the guidelines and policy respecting Treasury Board vote 5. Is vote 5 available to you during dissolution as well as Governor General's Special Warrants?

Ms. Danagher: Before we can issue a warrant, we would have to deplete any central votes. Treasury Board vote 5 would be the first mechanism that we would access. We would have to deplete that entirely before we could issue a warrant.

Senator Murray: In terms of the pay raises for the Armed Forces, if dissolution took place later this month with an election in January, we are talking about having enough money to pay them a few months until Parliament reconvenes. Treasury Board vote 5 would be the most accessible and simplest.

Ms. Danagher: It would be the first recourse. Coming in with their cash requirements, we would deplete that first.

The Chairman: You also have Treasury Board vote 15.

Ms. Danagher: Only if we got supply for it. If the scenario is that we do not get the supply for vote 15, then we do not have that cash.

The Chairman: Turn to page 271. Senator Murray was asking about the Canadian Forces, and you have an item there for $854 million. Has not some of that already been paid, and have letters not gone out to people telling them that they will be receiving this?

Ms. Danagher: Departments are cash managing those costs because those increases have been negotiated.

The Chairman: Has money flowed out of this $854 million for the Canadian Forces, as Senator Murray is asking?

Ms. Danagher: No, those monies have not flowed yet. We are awaiting parliamentary approval for those items. Departments will have been paying salaries to their staff and cash managing those increases through the supply they got through the Main Estimates.

Senator Eggleton: Including those for the Armed Forces?

Ms. Danagher: Including the Armed Forces, if those are retroactive to the beginning of the year. They are relying on getting supply in December to compensate them for that.

Senator Murray: You mean they have already been dipping into that.

The Chairman: There has been an advance.

Ms. Danagher: We have not given them incremental spending authority yet. They have been using their existing spending authority to pay the bills because it is a requirement. There were retroactive payments. Some of these settlements were a couple of years old, so there is retroactive funding as well.

Mr. Moloney: In the case of collective agreements, the government as employer is bound to respect the collective agreements and to pay according to agreements that have been duly signed and ratified. Departments do need to make those payments, but their budgets have not been so increased.

The Chairman: The $800 million here will be used to pay back departments that have been advancing funds to the Armed Forces pursuant to the contract, then?

Mr. Moloney: In respect of the wages and salaries, the labour costs, yes, which are a portion, less than half.

The Chairman: That went to the heart of Senator Murray's question to you.

Senator Murray: You do have Treasury Board vote 5 available. I could take you through, but will not, the other non-statutory items here. They range from $100 million and change for BSE, up to $954 million for operating budget carry-forward and the compensation adjustments of $854 million. The point that I make, even allowing for the fact that you have been using cash flow to pay some of the bills and that you are dependent on supply now to replenish the cash, is that we are talking about $6.9 billion in an overall government budget, as Senator Segal reminds us, of some $200 billion. I will not ask you to comment on this, but in that connection, the efforts of the Prime Minister to suggest that the little children of our service men and women will be facing a lean and mean Christmas if we do not get this through may amount to a bit of poetic licence on his part.

Correct me if I am wrong. Other than a decision by ministers, there is no reason why a start cannot be made during an election campaign on any of these non-statutory items.

Mr. Moloney: I would draw the attention of the honourable senator to page 85, which notes that Treasury Board vote 5 had a current balance, as of the printing of this document, of $587.3 million. The senator is correct that there are significant sums, although smaller than the total here.

Senator Murray: There is Treasury Board vote 5, which, as you say, is not much more than half a billion. You have Governor General's Special Warrants that you could access. A much larger pool, if I can put it that way, still exists in terms of cash management for a couple of months. You are not out of money as we speak.

Mr. Moloney: With the proviso of an inability to move money between votes. That is the one constraint against that, but otherwise, yes.

Senator Murray: Can you use Governor General's Special Warrants to replenish Treasury Board vote 5?

Mr. Moloney: No.

Senator Ringuette: When you were answering Senator Murray's question, you referred to having to make payments in accordance with union agreements. Therefore, the spending that you referred to that had already been spent as a result of collective agreements is in reference to the civilian staff within the military or the defence department. It has nothing to do with the proposed salary increase for the military. Am I right?

Mr. Moloney: Yes, you are. I am sorry if I left the impression that this was all collectively bargained. No, it is absolutely not. Within those amounts, there will be civilians with wages and salaries that are collectively bargained, others that are non-represented, and then there will be the military, which is, of course, a separate process. I was also trying to draw a link to the broader issue across the government of the position that was in one of the votes that the senator referred to where there is a further amount outside the military in respect of wages and salaries.

Senator Ringuette: Just to ensure that we have a clear picture here, the amount of money that has already been spent in regard to salary increases is for civilian staff who fall under collective agreements; is that correct?

Mr. Moloney: Yes, that is correct.

The Chairman: I have three supplementary questions.

Senator Murray asked you about vote 5, and you raised that subject in your initial remarks. You said that in the 2006-07 estimates, you intend to use the new vote 5 wording. Will this new wording that you will use at that time be different from the wording in the presentation made to us by the President of the Treasury Board, or is it identical? If it is not identical, is it something you can table with us so that we can review it before it does go into the 2006-07 document?

Mr. Moloney: It has not changed, but I will ask my colleague to remind senators of the details.

Ms. Danagher: The package tabled with you in the spring is exactly what we are proposing to implement. There has been no change to the vote wording since that time.

The Chairman: Senator Eggleton asked a question about the whole budget process and the Main Estimates process. It is something I have spoken about in the Senate and asked a number of questions on for some time, because of the lack of flexibility that seems to exist in Canada between the Treasury Board Secretariat and the Department of Finance.

In your view, is there a way to reduce the discrepancy between the Main Estimates and the budget documents? What can be done so that we need not have such huge supplementary estimates?

Mr. Moloney: It is a complicated question. The government committed, in the 2005 budget and confirmed again in a management paper that was recently tabled, a commitment to consult with parliamentarians on a range of ways to improve reporting to Parliament and make the government's reporting of greater use to parliamentarians as well as to Canadians.

In the case of the recent paper, specific reference is made to the challenge of increasing ``the consistency,'' I believe the words were, between the budget and the Main Estimates.

In the case of Budget, 2005 and the 2005 Main Estimates, we had a lag of two days, February 25 to 27, I believe. Evidently, there is not time under that system to reflect a document in the Main Estimates.

The Chairman: Does your process not start many months in advance of the tabling of the budget?

Mr. Moloney: In fact, our process starts in some respects before some of the budgetary determination processes start.

The Chairman: Should there not be some way that the two can be brought together so that we are not sitting here looking at $7 billion in new spending called supplementary estimates?

Mr. Moloney: I believe that there are alternatives that we will want to work through with parliamentarians. We would be happy, should senators be interested, to discuss those ideas with this committee.

The Chairman: We would be most interested in that.

Mr. Moloney: Clearly, aspects of changing the timing between these two instruments need to somehow be broached. We have, as you know, under standing orders a limit date by which time the Main Estimates must be tabled. There are no fixed dates around government's budgets, for a variety of reasons. Most of those reasons would continue to be valid in a number of circumstances.

In principle, one could fix a lag between the two documents, but there will be challenges on the two sides.

With parliamentarians' consent, we could consider changing the timing of the Main Estimates. One of the key aspects is to get initial supply for the first three months. That is something that we think could be reviewed, the role and timing of asking for that initial supply in order to give the government time to bring forward a set of estimates that would be more consistent with the budget.

This obviously changes the nature of parliamentarians' ability to review spending and the Main Estimates. It changes the time factor quite a bit.

The Chairman: It would also help if there would be more detailed cooperation between Treasury Board and the Department of Finance in the making of the budget. If the Main Estimates that are to flow from the budget were to come down following that consultation, do you not think we would not need such huge Supplementary Estimates (A) as are before us today?

Mr. Moloney: There is a range of dimensions along which there is in fact close cooperation between Department of Finance officials and Treasury Board Secretariat officials. I am now on the second of two sides of that divide in my own career.

As the chair has alluded to, the nature of the requirements to appropriately change votes to establish the vote requirements and, as we now have, the various program activity architecture elements of the Main Estimates to reflect budget initiatives, is a process that requires considerable time. Transparency is less of an issue.

As well, a significant number of items are finalized for budget purposes, particularly on the statutory side, where the information is simply not available. The statutory items may change in significant ways.

If we are just focusing on the voted items, there are national governments in other countries looking at multi-year appropriations. This raises quite a few challenges for parliamentarians and for governments.

The Chairman: Accountability is another challenge.

Mr. Moloney: Yes. Opening that door does allow one to consider such things as interim supply and appropriate ways in which the government can come before Parliament in the same week or in a matter of a few days with major documents that are more consistent.

We expect to come before parliamentarians to ask for consultations on those issues through the course of the next many months.

The Chairman: We look forward to that.

Senator Eggleton: On the question of the timing of the Main Estimates versus the budget, the Main Estimates have to be out, as I recall, by March 1, a month in advance of the beginning of the fiscal year. Of course, the budget usually comes a week or two before that, so there is no way you can incorporate it, given the time you need to prepare all these documents.

I take it that, in order to be able to incorporate in the Main Estimates the budget impact, we would probably require the budget to be delivered in the fall. That would give you enough time to do that. One of the difficulties with the budget in the fall is that it is further away from the beginning of the fiscal year. As we just found out, the estimates that economists make about the economy can change in a few months' time and, therefore, a budget in the fall might not be as relevant to the fiscal year as one that comes on the lip of the fiscal year. Is that roughly the dilemma?

Mr. Moloney: That is a key part of the dilemma. I was trying to allude to the fact that there are also factors that suggest that governments would wish to preserve flexibility to introduce a budget as the country's needs require.

From the point of view of Treasury Board Secretariat, our challenge to ourselves has been: If we work within the budget parameters we have now, what can we do in respect of Main Estimates? Clearly, there can be no change made without the standing orders changing, which in turn means a broad parliamentary consensus that an alternative approach would be warranted.

The specific detail of the need for interim supply is part of what drives that calendar, however. If we had an alternative way to deal with initial supply with which parliamentarians were generally happy, that could potentially open the door without having to revisit the budget aspect. If not, then you have to look at the two of them together.

Senator Ringuette: I have two items on which I would like more information. To no surprise to my colleagues, I would like to talk about the Public Service Modernization Act.

Two years ago, this committee went through the supplementary estimates and agreed to $48 million to implement Bill C-25, which is the Public Service Modernization Act. You are now back here with a request for additional funds of $58.4 million. Two years ago, the President of the Treasury Board promised that the $48 million would fully implement the Public Service Modernization Act, which would include technology to remove the geographic barriers to national hiring. Two years down the road, you are requesting an additional $58.4 million, and we still have the geographic barriers to national hiring.

Where did the $48 million go? Have you parked it somewhere? If so, why are you requesting an additional $58 million?

On page 13, you have broken down the $58.4 million into three different agencies: The Public Service Human Resources Management Agency of Canada, which, I agree, desperately, needs money to ensure they can manage our HR resources appropriately; then you only have $9 million for the Public Service Commission; and the Canada School of Public Service, $7.7 million. That totals $22.4 million. I would like to know where the other $36 million will be spent. As well, I would like to know if the $9 million for the Public Service Commission will go towards increased technology to remove the geographic barriers to hiring.

Mr. Moloney: The Public Service Commission made a public announcement on its intentions respecting a national area selection policy on October 6, immediately prior to tabling this report.

Senator Ringuette: I know all of that. That is only a small portion of the equation, because that announcement relates to a four-year plan, and only for the jobs in the Ottawa region.

Two years ago, when we agreed to the $48 million to implement Bill C-25, it was to include the necessary technology for the commission to remove the geographic barriers. The transcripts of the meetings of this committee reflect that. I know that you personally were not here, but that was a commitment. Where did that money go? That commitment was not fruitful. Why are you coming back to ask for an additional $58 million?

Mr. Moloney: Three or four points are worth making in that respect.

We can, if the senator wishes, provide further details on the precise use of the $48 million. To clarify the announcement that was made in October, it is true that the immediate commitment, as of April 1, 2006, is for external recruitment for all officer-level jobs in the National Capital Region. However, there were two further commitments. One was that, as of April 2007, all officer-level jobs across Canada will be subject to these requirements. As of December 2007, all jobs are open to Canadians, so there is a graduated implementation.

Senator Ringuette: Would you give me a copy of what you just read? That is not the press release that I received.

Mr. Moloney: Certainly.

Second, it is the case that these estimates are requesting $9 million for the Public Service Commission, of which $2.65 million is in support of activities related to the implementation of the new PSMA. In addition to that, there is $6.36 million for the purposes of developing and implementing the public service resourcing system, an IT system designed to support the recruitment and staffing processes within departments and agencies. I believe this goes further to the senator's questions.

The balance of the funds, of the total of $58.4 million, does in fact support, in addition to the Public Service Human Resources Management Agency of Canada requirements as well as those I just mentioned of the Canada School of Public Service, 25 departments and agencies to address critical needs within their own context in respect of their responsibilities under the new PSMA. These are qualitatively different.

Senator Ringuette: What assurance do I have, looking at roughly $9 million for the Public Service Commission, that Treasury Board will provide that money to the commission? I have a letter that is dated 10 months ago from the president of the commission telling me that she has requested the money from Treasury Board but was having difficulty with Treasury Board and that she could move on the technology required.

You come here as representatives of Treasury Board and tell us that X amount of money will to towards something, and Y amount will go towards something else. Once that is accepted and we have agreed to the allotment of funds, you create barriers. It goes back to the process. Why are you creating barriers for the Public Service Commission move, even though we have given the authority to spend money for that specific purpose? What authority do you have to not go ahead and undermine parliamentarians?

Mr. Moloney: The President of the Treasury Board and the Treasury Board ministers have a fiduciary duty to recommend the appropriate use of funds that are allocated by cabinet for uses. They do require Treasury Board submissions to come in from departments that explain how the funds will be used in a manner that has appropriate performance management frameworks, that has appropriate specific objectives, means by which those objectives will be achieved, assessed and reported against.

Given the fact that the government is proposing now to have these monies voted, we could only have reached this stage if Treasury Board had received an approved submission from the Public Service Commission, and this is the amount that Treasury Board ministers have approved as a result of a request from the Public Service Commission. This amount, on being voted, goes into the appropriate reference level of the Public Service Commission.

Senator Ringuette: The same items were part and parcel of the supplementary estimates we approved two years ago. We are still looking at millions of dollars for the same issue. I have a lot of difficulty with that. I fear that there is a lot of spin in order for us to approve funds. After the funds have been approved by parliamentarians, it is another ball game in ensuring that those funds are allocated to deal with the issues discussed with parliamentarians. It comes down to an issue of accountability. I will wait to see the specific spending of the $48 million. Hopefully I will see that before I am asked to cast my vote in support of an additional allocation of $58 million.

Mr. Moloney: If I could offer one footnote, the senator will of course have the opportunity, through departmental performance reports, to receive an accounting from the appropriate minister on how funds were used against priorities that had been set out. Such uses of funds, the priority in terms of the national area of selection and the funds against it, will be reported to Parliament through the departmental performance reports, after the fact.

Senator Ringuette: You promised a few minutes ago that you would send me the detailed spending of the $48 million.

Mr. Moloney: We absolutely will.

Senator Ringuette: Another issue that I think is important relates to the gas tax. It is $5 billion over five years, and you are requesting $600 million for this fiscal year.

How will you audit the municipalities to ensure that the funds were granted as per the program guidelines? We have a national, federal audit mechanism, and each province has its own provincial audit mechanism. What guarantee in regards to control and audit do you have for the municipalities for all of this $5 billion?

Mr. Moloney: I think it would be wisest to provide the senator with a specific written reply that would record the auditing requirements for this specific program. All grants, contributions and transfer programs of the government have specific audit requirements, as well as reporting requirements. If the senator wishes, we can provide the specific wording that would be associated with this particular program.

Senator Ringuette: Thank you very much.

Senator Eggleton: Senator Murray asked about the pay of the Canadian Forces. I On page 233, the second item down under ``Voted Appropriations,'' it indicates: ``Increases to pay and allowances for Canadian Forces members, including medical and dental officers, senior military officers and military judges,'' and under vote 1 there is the figure of $322-odd million. Am I looking at the right item?

Mr. Moloney: Yes.

Senator Eggleton: Has this increase been put into effect, or will it only be in effect when the supplementary estimates are passed or when there is a dissolution of Parliament and Governor General's Special Warrants are granted under vote 5 provisions? When exactly will this flow? Has it flowed already and is it being cash managed?

Mr. Moloney: In respect of increases in pay for Canadian Forces non-commissioned members, general service officers in the rank of lieutenant colonel and below, medical and dental officers in the ranks of lieutenant and second lieutenant, increases of 2.4 per cent in pay and 2.4 per cent in environment and special allowances were put in place, effective April 1, 2005.

Senator Eggleton: There are no pay increases in these supplementary estimates for the Canadian Forces in those ranks you mentioned. No additional ranks are impacted one way or the other by the passage of this document.

Mr. Moloney: These amounts do not have a source of funds within the department's reference levels at this point. Those specifics, as my colleague mentioned, need to be cash managed because they were put in place. Those were not collective agreements, but they were put in place as of April 1 of this year.

Senator Segal: I am trying to get clarity on this as between your answer to Senator Murray and your answer to Senator Ringuette. If Parliament were to dissolve in a heap of smoke this afternoon, these payments that began on April 1 would continue until such time as the department ran out of cash, at which point it could then revert to funds made available under Governor General's Special Warrants to continue meeting these obligations. Do I understand that correctly?

Mr. Moloney: The department would have two choices: To access votes it had in place and to not proceed with other planned expenditures; or to request access to further funds via the Governor General's Special Warrants, within the same vote.

Senator Segal: Just so I am clear, there is nothing that will necessarily happen in Parliament that will get in the way of the department's capacity to meet its obligations under previous votes to these levels of pay for the people enumerated in this specific item.

Mr. Moloney: For that to be the case, it would require either access to other money within the same vote, not proceeding with other spending, or for the government to recommend to the Governor General a special warrant.

Senator Murray: I presume you are telling us that those raises have already started to be paid. It is not retroactive, is it? It has already started, right? The money is in their pockets.

Mr. Moloney: Yes.

Senator Murray: I should ask somebody who is authorized to speak on his behalf, but I do not know why the Prime Minister has been raising this subject of premature dissolution interfering with pay raises for our military.

The Chairman: Immigrant settlement would be another example.

Senator Murray: I am putting this on the record so that the President of the Treasury Board, when he comes tomorrow night, will have a prepared and satisfactory answer.

The Chairman: Before turning to the second round, I had a question from page 10 of the estimates dealing with Government-On-Line. These initiatives use information and communications technology to provide Canadians with enhanced access and to improve citizen-centered, integrated services. Government On-Line is aimed at supporting the implementation of a common electronic infrastructure and multi-channel service delivery strategy.

On page 10, it indicates that GOL has been allocated $880 million since budget 2000. Of this amount, $429 million has been requested in supplementary estimates from 2001 to the present supplementary estimates. This committee has, in the past, been concerned with the supplementary estimates being used in this manner. Why do departments continually use supplementary estimates to request funding for the Government-On-Line initiative? Does the use of the supplementary estimates to fund increases in the Government-On-Line budget imply that they are having some kind of difficulty in the planning that they should be doing for this program? What is the reason for it?

Mr. Moloney: There are two sorts of issues reflected here. A portion of the funds for Government-On-Line initiatives, specific initiatives that are conducted by departments, do go through a central review and allocation process.

The Chairman: Is that at Treasury Board?

Mr. Moloney: No, it is not. The responsibility for Government-On-Line was transferred in 2003 to Public Works Canada. Specific business cases need to be brought forward for initiatives with the expectation that, as initiatives prove themselves, they will be taken on by departments within their existing reference levels.

As well, a portion of this funding is in support of the secure channel, which is essentially the backbone, a contract managed by Public Works and which has had for the last two years annual approvals to continue within an overall contract that Public Works has authorized. That contract does extend beyond next year, so the secure channel functionality is being reviewed for funding. The Government-On-Line initiatives, which are the applications, if you like, are the amounts that are referred to here as having had funding that runs through the end of this fiscal year.

The Chairman: Thank you.

Senator Downe: I would like to lobby Treasury Board to clear up the language in their estimates documents so that Canadians can understand them after the first read. That would make parliamentarians' jobs much easier.

I referenced the earlier question I asked about enhancing the Government of Canada's presence in the region by building capacity for regional ministers. The explanation for that is on page 103, and I will read it into the record:

(This funding will increase federal presence in the regions, contributing to the shaping of national policy from a regional perspective, improving horizontal management and integration of policy and programs, and enhancing the capacity of the government to respond to regional issues.)

Senator Segal: Amen.

Senator Downe: That sounds like a job of a member of Parliament.

Having asked the question, I find out that the expenditure of $383,000 is for additional political exempt staff for ministers to be located in the region. Had that been in there, it would have been clearer to everyone. Throughout the report, there is similar wording. I notice that you have a briefing book there that has more detailed notes in it that you refer to when you answer our questions. Maybe we should all receive that.

I would lobby Treasury Board in the future for language that can be clearly understood, not only by parliamentarians, but by all Canadians.

I have a specific question.

The Chairman: Do you mind if he responds to that question? I should like to hear his response to the use of improving horizontal management as almost a camouflage for having new exempt staff in the regional offices.

Senator Murray: It is parliamentary secretaries, so it appears.

Mr. Moloney: We can certainly work on the clarity of the language and the clarity of description of the initiatives.

Senator Downe: If not, we will have to recommend that Treasury Board officials be transferred to the income tax division which uses language like that. We live in hope for next year.

I have a specific question about a topic of which I was unaware but was intrigued by what I found when studying the documents. I refer to page 243 of the supplementary estimates, where there is a reference to a transfer of land from the Department of National Defence to Downsview Park. Then there is a reference as well to establishing a borrowing authority of up to $100 million for Downsview Park.

I understood that government policy was that surplus lands went to Canada Lands. How did the Department of National Defence get in the business of transferring land without going through Canada Lands? If you do not know, you can send the answer to me.

Mr. Moloney: The available information I have, senator, describes the transaction. It does not describe why there was an intervening role or why there was not. We will provide that in writing.

Senator Downe: One of our colleagues may have the answer.

Senator Eggleton: There was a subsidiary or an agent Crown established, a separate entity called Parc Downsview Park, with a separate board of directors. It came out of Canada Lands, but because Canada Lands has primarily been in the business of disposing of and developing property, and in this case the proposal was that the land would be retained as a park, it went to a separate entity. In other words, it was outside the usual work that Canada Lands does. A subsidiary Crown corporation was established.

Senator Downe: Was Canada Lands excluded from the transaction, in your understanding?

Senator Eggleton: Yes.

Senator Downe: I am interested to hear that. We have a similar situation in Charlottetown regarding some surplus land.

I am also intrigued by the note on page 127 of the supplementary estimates where there is reference to the Government of Canada forgiving a debt to Downsview Park of over $15 million. Do I have it clear that, on the one hand, they guaranteed the borrowing of up to $100 million and, on the other hand, they wrote off a debt of $15 million?

Mr. Moloney: It is the borrowing authority reference, yes. Do you have the reference to that?

Senator Downe: If you do not have it at hand, you can send me a note on it.

Mr. Moloney: We will do that.

Senator Downe: Thank you.

The last question I have pertains to page 18, the increase in the Guaranteed Income Supplement, which is $100 million. This program is most helpful to the Canadians who receive it, but there has been an ongoing concern that hundreds of thousands of Canadians do not receive it because the government has no way of getting the money to them. Canadian seniors of low income have to file an income tax application every year to receive the money. Seniors who do not owe income tax sometimes do not file and, as a result, hundreds of thousands, maybe up to 400,000, are not receiving it. Is Treasury Board concerned at all when the departments come forward about how the program is being administered?

Mr. Moloney: Statutory programs are not reviewed by Treasury Board in the same manner or, generally speaking, are approved by cabinet. Their operations are subject to reviews, but we do not have a standing review process at Treasury Board for statutory programs.

Senator Downe: Is the onus on the individual department?

Mr. Moloney: In general, yes.

Senator Segal: I have some brief questions, some of which I do not expect our guests will have detailed information on.

On page 233, with respect to the Department of National Defence, there is a specific provision, some $17 million `` support the lawful interception of private communications and the search and seizure of information or computer files to ensure public safety and security.'' Could I ask you at some point, at your convenience, to share with us what laws relate to lawful interception? What is the statutory base for that? What laws passed by Parliament constitute the authority under which this is taking place?

A second question from the same page relates to the $62 million item relating to the Canadian Forces and the extension of their forces, both regular and reserve. I assume that, with the normal rigour of Treasury Board, when those funds were asked for by the department pursuant to the defence policy statement, Treasury Board would have been given the targets for recruitment and the achievement of these goals related to that particular expenditure of funds. If it is at all possible, we should like to see any of those targets that you feel you can share with this committee. It would be most helpful to Canadian to understand the anticipated rate of progress with that level of funding going forward. I understand that that is interim and supplementary funding. There are other funds in the Main Estimates for some of this. Any advice you could share with in that respect would be most helpful.

I have two general questions. It strikes me that the supplementary estimate process is about capturing, for the purposes of parliamentary approval, new expenditure requirements which have emerged, either through statutory or policy change realities. In the private sector — which is by no means perfect in that it makes its own level of mistakes — corporations publicly traded, much smaller than many of the single-line items in this document, issue regular quarterly reports with a prescribed terminology around discussion by management of changes that are taking place to the expenditure pattern. How much money was supposed to be spent in this last quarter? How much was spent? Why was there a difference? Is there some materiality to the changes affecting that difference?

It strikes me that in our process — and it is not the fault of the officials but the fault of the process — we play catch- up all the time. The Auditor General comes in long after programs have been expended on to pass judgment ex cathedra for which, sadly, she has the authority to pass judgment on — matters beyond simple prudence and parliamentary appropriation, but also value for money. You are in the process at Treasury Board of coming forward with requests with respect to sups. Then, of course, we have the $1 items, which are a way for the government to say, ``We think we will have to spend some money in another area, we just want to get a nailed-down line of approval so we have the freedom to do that without really knowing how much we will spend.''

It strikes me that the quarterly report phenomenon might help us all understand the process on the way through, create greater transparency for Canadians, and allow some clarity. I just leave that for you to comment upon.

I have a final question with respect to Governor General's Special Warrants. I would be interested in your perception, in terms of convention, tradition and parliamentary practice, how long the absence of a Parliament would allow Governor General's Special Warrants to be used to fund the expenditures of the realm? How long could that go on before we would be beginning to exceed the conventional practice under the principles that were established at Runnymede so many years ago?

Mr. Moloney: The last is probably simplest so perhaps I could start there.

Senator Segal: By all means.

Mr. Moloney: What is generally referred to as the Milliken bill of 1996 established the current regime, which allows for Governor General's Special Warrants to be signed up to 60 days after the return of writs. The practice has been, on the last three occasions, that warrants would have a duration of up to 45 days in terms of a final warrant that could be signed.

Senator Segal: Sixty and 45 would be the extension beyond the return of the writs, which is usually a month after the actual vote takes place.

Mr. Moloney: Three weeks.

Senator Segal: Thank you very much for that.

Mr. Moloney: As to the specifics, the $17 million under DND, referred to as supporting the lawful interception of private communications, is a horizontal initiative. This is part of what the government refers to as the lawful access initiative, which is coordinated by Public Safety and Emergency Preparedness Canada, in support of combatting terrorism and other crimes; CSIS; the RCMP; and access to private communications, computer files and other information.

Senator Segal: Is the governing legislative authority the Anti-terrorism Act? What is the public authority under which this is being done? Is this being done under a series of statutes?

Mr. Moloney: In fact it is an initiative which is operated against the requirements of the Telecommunications Act, as well as the Charter of Rights and Freedoms, and the privacy legislation.

Senator Segal: Those are the governing authorities.

Mr. Moloney: Those are the relevant authorities.

Senator Eggleton: What is CSE?

Mr. Moloney: In terms of the amounts that are in these supplementary estimates, we have National Defence, CSE, RCMP, the Department of Justice, Industry Canada, and Public Safety and Emergency Preparedness Canada.

Senator Segal: I only ask the question because the government has just introduced a bill to create legislative authority, where it would suggest that the authority already exists for senior agencies within the federal Crown to be doing this work on behalf of national security.

Mr. Moloney: This is in support of the existing practices.

The Chairman: Senator Downe has a supplementary on that.

Senator Downe: On that same topic, when I read this I was intrigued to note that National Defence is making the largest contribution and the Royal Canadian Mounted Police is second. I would have assumed that the RCMP and CSIS would have been larger contributors to this. Why is the Department of National Defence the largest contributor?

Mr. Moloney: As the senator pointed out, it is the communications security establishment within National Defence, which is working closely in conjunction with RCMP and CSIS.

With respect to the reserves, we do not have with us any interim objectives in terms of the 5,000 plus the 3,000. We can provide those if they are available.

Senator Segal: That was the quarterly report.

Mr. Moloney: Yes, the quarterly report. I believe that Minister Alcock may well speak tomorrow, as part of the improved reporting to Parliament, about timely reporting. As you know, the government currently has the monthly fiscal monitor that looks at the state of the government's aggregate spending and at categories, but it does not have a department-by-department update.

As we move to what we call the expenditure management information system, which will allow us to have a common approach, a common architecture across departments in terms of reporting to Parliament on our outcome objectives, how we did against those on an annual basis, and as we get that information in place and available to parliamentarians on an annual basis, that will be the first step towards being able to move in an intra-year way, by department.

Senator Segal: I assume, however, that Treasury Board — as is the case with management boards in the provinces — determines, on a quarterly basis, if not on a monthly basis, how all departments are doing as against their statutory expenditure levels. You have to do that to discharge your obligations.

My question is: Do you see any difficulty — aside from the fact that it would take time to develop and could not be done overnight — on a quarterly basis, with the public and Parliament having access to those same financial performance numbers so that there would be transparency and understanding and fewer dreadful surprises, either plus or minus, at the end of the fiscal year? I am talking from a point of view of your process. The politics is for the minister and others to address, I understand that. Just from the point of view of the job you do, would it be made more difficult if that measure of transparency were available to the taxpayers or ``shareholders?''

Mr. Moloney: Senator, you are pointing towards assessing the government's overall fiscal situation.

Senator Segal: I am thinking about department by department; I am more interested in that.

Mr. Moloney: Department by department, the monthly fiscal monitor gives us the best bottom-line assessment in aggregate. I believe the challenge of moving from informing Parliament for appropriations authority purposes to requesting appropriations versus reporting, would be significant in terms of building an understanding — not just with parliamentarians, but also the public in general — in terms of what is the normal rhythm and flow of funds in the course of a fiscal year, and what would be a sign of normal or good management, and what would be a sign of the spending pace through the year.

Senator Segal: If we took a specific example, such as I referenced in my first round, the proposal with respect to compassionate leave and support therefrom, clearly the government had a duty to set an infrastructure in place to provide a basis for the funding applications to be processed and tell the resources officers across the country and that has a cost whether one person applies or millions apply. I understand that. One would better understand how that is proceeding, quarter by quarter, rather than waking up to see that we spent $27 million on infrastructure to deliver, but only $9 million was actually paid out, which I am sure is as troubling to the public servants who are honourably involved in that program as it is to any of the parliamentarians who may be concerned. Would transparency not allow public servants who work hard to have it done right to do that more quickly than they are able to do so because of the lack of clarity in our present context?

Mr. Moloney: That is obviously a hypothetical situation.

Senator Segal: It is indeed.

Mr. Moloney: It is fair to say that, in any existing program, let alone new, to be able to understand the lags between expected application rates and expected payout rates, it is critical that part of Treasury Board's role is to ensure we have in place, good tracking and reporting systems not just on an annual basis, but on a much more frequent basis in order for managerial and ministerial response, where appropriate. Whether public transparency would aid that or not is a different question.

Senator Eggleton: I appreciate Senator Segal's comparison with what is done in the private sector as it relates to quarterly reporting. I appreciate the answer as well. However, that raises a question in my mind. I read an article in a newspaper in the last couple of days — and I do not know if it is accurate or not — where the writer suggested that the public service spends about 30 per cent of its time reporting on the other 70 per cent of its time. In a private sector analysis, that would be considered extremely inefficient.

Senator Segal: Post-Enron the private sector might be doing some of the same things.

Senator Eggleton: Is that a fair assumption? If this is a matter, if we are to get into quarterly reporting that we have to look at the entire reporting system? You provide many reports. Does that 30 per cent figure seem real?

Mr. Moloney: It seems somewhat of an exaggeration, but that might depend on the individual public servant. In relation to those of us whose job nit is to report to Parliament, the figure would be somewhat higher. That is a significant part of the sector that I am leading.

There are a significant number of reports within departments to Treasury Board and to Parliament in general. One of the management agenda objectives is to streamline reporting internally as well as to Parliament so that we can be not only more effective, but also more efficient as we do that reporting.

Assessing what will be useful internal reporting to parliamentarians is clearly an important objective on which we want to consult. We would do that so that, as the senator says, if managerial information systems are required to support good management, you do not make decisions without the information.

Senator Segal: Just so I understand Treasury Board's authority in these matters, if you had been appraised — and this is hypothetical — that the administrative costs for the compassionate care leave program were running well ahead of the actual disbursement relative to recipients and you were aware of that on a real-time basis, do you have the authority to intervene to try to arrest some of that expenditure, or is that outside your authority because the program is being operated under the statute of another department?

Mr. Moloney: Treasury Board has a clear role in terms of overseeing ministers' and deputies' accountabilities toward the good, prudent management of their departments. That would give Treasury Board the scope to ask questions and obtain information. However, it is not that it is another department. Treasury Board ministers are not in the business of formally approving funds for statutory uses.

Senator Segal: Would the Comptroller General intervene and stop it, or does anyone undertake a CFO function?

Mr. Moloney: The Comptroller General would report to Treasury Board. That good management and overall fiduciary responsibility role does lie with the board, apart from the specific approval. Yes, the questions could be asked. The studies could be launched, and a minister and deputy could be asked to explain their strategy.

Senator Downe: Is that true even in regard to statutory funding?

Mr. Moloney: Under the general auspices of good management, that would be done. I stand to be corrected, but Treasury Board cannot step in and change statutory aspects. These are programs, the nature of which Parliament has specifically approved.

Senator Downe: If you detect a problem in the delivery of a program — and I referenced my earlier question to the Guaranteed Income Supplement — what I heard you saying is that Treasury Board could do a study or review of the problem; is that correct?

Mr. Moloney: Treasury Board could request a deputy and a minister to explain their strategies in respect of any identified problems.

Senator Downe: You have now been made aware of the problem in the delivery of the Guaranteed Income Supplement. I have tons of information in my office that I can send you. It has been documented by a host of outside groups as well, that the objectives of the program that Parliament approved for low-income seniors are not being met because of the delivery problems in the program. The Parliamentary intention is not being followed up. That would seem to be of interest to Treasury Board. Would you conduct a review or request some studies?

Mr. Moloney: I will be happy to let the senator know what the government is doing in particular in response to that situation.

Senator Downe: Thank you, but I have already heard that in letters to the Prime Minister, ministers and others.

The government is making what they call a best effort. Many people would argue that that is not good enough because they are not reaching the people who need the money the most, the people who do not have lobbyists running around Ottawa or advocates in Parliament. They need the help, and they need it now. They are socially isolated. They may have difficulty filling out forms. Perhaps the language is too difficult to understand. Hundreds of thousands of low-income seniors are not getting the funds that Parliament wanted them to get. Particularly with winter approaching and high heating costs, the Treasury Board should ask hard questions about how that program can be delivered to meet the objective that Parliament outlined it wanted to achieve. Thank you.

The Chairman: Our time is up. I know, Mr. Moloney, that you have had experience in CIDA. I will try to squeeze in one short question in relation to that. The G8 ministers and leaders met in Kananaskis back in 2002. We are now close to 2006. In 2002, they agreed that they would come up with a fund to help solve the problems in Africa. At that time, Canada pledged $100 million. We passed a bill in the Senate called the Jean Chrétien Bill in support of Africa. Here we are in the supplementary estimates on page 19 asking for funding of $100 million to allow the Canadian International Development Agency to make investment contributions to the Canadian Investment Fund in Africa in accordance with section 3 of the Canada Fund for Africa Act.

I have been told that not one cent of money has yet been spent in support of the health and other needs of Africans, promised as early as 2002. Why is it taking so long, and why was it not put in the Main Estimates, pursuant to Royal Assent being given to the bill? Why has this taken so long? Why has no money been paid by CIDA towards this important initiative?

Mr. Moloney: The Kananaskis commitment did refer to a $100 million private sector fund in support of private sector development in Africa within a larger $500 million Canada Fund for Africa that was funded under the Canada Fund for Africa Act. The resources in that broader fund have been entirely committed. Significant portions of that have been expended, and the balance of that will be expended, I believe, by next year.

The Chairman: The balance of the $100 million?

Mr. Moloney: The other $400 million. The particular $100 million that is the subject of these supplementary estimates is for the Canada Investment Fund for Africa, which was one of the initiatives within the broader Canada Fund for Africa. This initiative took considerable time to unfold. In fact, there was a worldwide competition for a fund manager to be identified. That took considerable time.

The Chairman: Were you able to find a Canadian fund manager for it?

Mr. Moloney: The winner in the competition was a partnership between two firms. To negotiate and sign a funding agreement between the government and those two partner firms, one of which was Canadian, did take considerably longer. That funding agreement was only finalized and signed since the Main Estimates were tabled in the house. Thus, the government has come forward seeking this authority.

Since the fund managers had an initial group of investors, we did have recourse to Treasury Board vote 5 for an initial draw down against this authority, since those initial co-investors' contributions would have otherwise been lost.

The Chairman: Thank you for that. Mr. Moloney, this was your first appearance before this committee. You have done a superb job in answering a variety of difficult questions. Congratulations. Ms. Danagher, thank you for your help at this committee.

This concludes our meeting today. Our next meeting will be tomorrow night, and at that time we will have before us the President of the Treasury Board, the Honourable Reg Alcock.

The committee adjourned.