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Proceedings of the Standing Senate Committee on
National Finance

Issue 6 - Evidence - Meeting of February 26, 2008

OTTAWA, Tuesday, February 26, 2008

The Standing Senate Committee on National Finance met this day at 9:35 a.m. to study Bill S-201, An Act to amend the Financial Administration Act and the Canada Banking Act (quarterly fiscal reports) and the supplementary estimates (B) for the fiscal year concluding March 31, 2008.

Senator Joseph A. Day (Chair) in the chair.


The Chair: Good morning, everyone, and welcome to this meeting of the Standing Senate Committee on National Finance. My name is Joseph A. Day and I represent the province of New Brunswick in the Senate. I am also chair of the committee.


Welcome to this 15th meeting of the Standing Senate Committee on National Finance. The committee's field of interest is government spending and operations, including the reviewing of activities of officers of Parliament and those various individuals and groups that help parliamentarians to hold the government to account. We do this through the estimates of expenditures and funds made available to officers of Parliament to perform their functions and through budget implementation acts and other matters referred to us by the Senate.

Today, we are holding our second meeting — and there may be more — on Bill S-201. It is a new manifestation of a previous bill that was sponsored by Senator Segal.

Senators will recall that on February 13, we heard from the bill's sponsor, the Honourable Senator Hugh Segal, who appeared before us to explain the modifications made to the bill since we last considered the bill in the first session of the 39th Parliament. Following Senator Segal's testimony, we heard from the Interim Comptroller General of Canada, Mr. Rod Monette, and his official, Mr. Bill Matthews. Some fruitful discussion ensued and it was agreed that Senator Segal would consider his bill and reappear here today.

Committee members should have received yesterday, in advance, various amendments that are being proposed by Senator Segal. I thank Senator Segal for making those amendments available to us. If honourable senators do not have copies of the amendments, we have extra copies here.

I am pleased to welcome the sponsor of this bill, the Honourable Senator Hugh Segal. Senator Segal, do you wish to address the committee briefly or shall we proceed to clause-by-clause consideration and you can explain your amendments at that time?

Hon. Hugh Segal, sponsor of the bill: I would be delighted if the committee were to proceed clause by clause.

The Chair: Are honourable senators prepared to proceed clause by clause at this time?

Hon. Senators: Agreed.

The Chair: It is agreed that the committee proceed to clause-by-clause consideration of Bill S-201, An Act to amend the Financial Administration Act and the Bank of Canada Act (quarterly financial reports).

Shall the title stand postponed, honourable senators?

Hon. Senators: Agreed.

The Chair: Shall the preamble stand postponed?

Hon. Senators: Agreed.

The Chair: It is agreed. Shall clause 1 carry?

Senator Segal, I understand you may have an amendment with respect to clause 1.

Senator Segal: I have an amendment on clause 2(a).

The Chair: Are there any other amendments for clause 1?

Senator Murray: Far be it from me to contradict the sponsor, but there is an amendment here.

Senator Segal: I thought the preamble had been postponed.

Senator Murray: We are talking about clause 1 on page 2, senator.

Senator Segal: Are you referring to the one that begins with ``The Financial Administration Act is amended by adding the following after section 65''?

Senator Murray: Yes.

Senator Segal: I have no changes to propose until 65.1(2)(a).

The Chair: That is all part of clause 1 of the bill.

Senator Segal: I apologize.

The Chair: The other number refers to a section of the Financial Administration Act. When I refer to clauses, they are in the bold print on the bill before you. This is clause 1 at the top of page 2 and it makes amendments to proposed section 65.1.

Senator Murray: Look at it by lines — 7 and 8, or 14 to 16.

Senator Segal: My first amendment is on lines 14 to 16. Lines 7 and 8 are in the preamble.

Senator Eggleton: No, they are in proposed section 65.1.

Senator Segal: I do not have an amendment for lines 7 and 8.

The Chair: Let us get our documents straightened out here or we will all lose where we are. We are on page 2 of the bill, clause 1 in bold print. We should be looking at lines 7 and 8. The amendment that has been proposed to us is to replace lines 7 and 8 with the following: ``be prepared a quarterly financial report for''. As I read it, that would mean that the words ``for submission to each House of Parliament'' are deleted. Is that correct?

Senator Segal: Correct.

The Chair: Then do you wish to proceed?

Senator Segal: Yes. With respect to lines 14 and 16, we would be removing the reference to the balance sheet, which is precisely the advice we received from officials at our last committee meeting. The balance sheet reference was seen to create norms that were beyond the capacity of the public service to address in any proximate future.

The Chair: That in effect would delete proposed section 65.1(2)(a)?

Senator Segal: That is correct.

The Chair: That would delete that proposed section. One moment. An honourable senator is not following.

Senator Ringuette: Depending on how you want to deal with this, do you want the honourable senator to propose his complete amendment to clause 1, following which we can ask questions?

The Chair: Yes.

Senator Murray: Someone has to move the amendment and he cannot do it because he is not a member of the committee. Therefore, I will move the amendments on his behalf.

The Chair: Let us have an explanation first and then we will go into questions.

We are now at subparagraph (b) in the amendment deleting lines 14 to 16. With regard to subparagraph (c), that in effect re-letters or renumbers these paragraphs consequentially.

Senator Segal: That is right. The next substantial change is in proposed section 65.1(3) and deals with changing the 45 days to 60 days. That was also based on the advice we received from officials at the committee's last meeting.

Honourable senators, I apologize profusely for the fact that the House of Commons is still mentioned in the draft amendment.

Senator Murray: No, it says here each House of Parliament.

Senator Segal: The concern that was addressed by the committee last time was that in the event the House was not sitting for an elongated period of time, such as perhaps between elections or for some other reason, there would be no way in which one could report. The advice the committee offered at that time, which I thought was very sound, was that we merely say 60 days after the end of the financial quarter.

That is what I am recommending as the change; therefore, proposed section 65.1(3) would say that the appropriate minister shall cause the report referred to in subsection (1) to be made public within 60 days after the end of the financial quarter. There would be no reference to either one of the Houses.

Senator Eggleton: There is a paragraph (b), which adds: ``to be laid before each House of Parliament at the first reasonable opportunity.'' Are you not moving that as well?

Senator Segal: Yes, that will not get in the way of the matter being made public within 60 days. We have both items there, so the duty to report to Parliament exists, but the elongation of a pause in parliamentary sittings would not reduce the burden of reporting within 60 days.

The Chair: Can you give us the wording to proposed paragraph (3)(a) then?

Senator Tkachuk: Is the wording the same as on the sheet that was distributed by the clerk?

The Chair: No, look at the sheet before you; Senator Segal wants to make a change to proposed paragraph (3)(a).

Senator Eggleton: I do not think so. He is just paraphrasing.

The Chair: Could we hear from Senator Segal regarding what his amendment might be?

Senator Segal: I think the document before you for the proposed subsection (3) says:

The appropriate Minister shall clause the report in subsection (1)

(a) to be made available to the public within 60 days after the end of each three-month period referred to in that subsection; and

(b) to be laid before each House of Parliament at the first reasonable opportunity.

I am comfortable with that amendment.

The Chair: You were absolutely right, Senator Eggleton. Senator Segal was paraphrasing.

Senator Segal: I was reading from the wrong paper. I apologize.

The Chair: Are there questions of Senator Segal?

Senator Murray: I do not think that this amendment in any way does violence to the spirit of Senator Segal's bill. May I suggest that you put the question, Mr. Chair?

The Chair: We do have some who would like further clarification.

Senator Ringuette: What exactly are we doing in removing lines 7 and 8? Lines 7 and 8 say to be prepared for submission to each House. I now see that will be replaced further down in replacing lines 32 to 37. Okay.

Senator Segal: That is my understanding.

The Chair: Is there anything further?

Hon. Senators: No.

The Chair: Are we ready to vote on the proposed amendment? All those in favour of the proposed amendment?

Hon. Senators: Yea.

The Chair: Contrary minded, if any?

The amendment is carried. Are there any further amendments to clause 1?

Shall clause 1, as amended stand?

Hon. Senators: Agreed.

The Chair: Shall clause 2 stand?

Senator Murray: On behalf of Senator Segal, I will move that Bill S-201 be amended in clause 2 on page 3. You can see the detail of that in the document before you, replacing lines 3 and 4 to begin.

Senator Segal: I am sad to report that I am now lost.

Senator Murray: You should be on page 3 of the bill, senator. I am trying to be helpful.

The Chair: It is your motion, so go ahead.

Senator Segal: I appreciate that. I am now completely lost.

Senator Murray: We are on page 3 of the bill. This amendment is to the same effect as the amendment to clause 1 that we just passed.

Senator Segal: Okay, thank you. We are doing the same thing in this clause as we did in the prior clause.

The Chair: That is to remove the reference ``for submission to the House of Parliament'' which is at lines 3 and 4; to delete the proposed paragraph (a) at lines 12 to 14; to make the consequential amendment regarding the lettering of the other clauses; and finally in lines 32 to 37, to add the 60 days and ``to be laid before each House of Parliament.''

Senator Segal: Correct.

The Chair: The amendment to clause 2 is the same as the amendment that we have just gone through with clause 1. All those in favour of the amendment, say yea.

Hon. Senators: Yea.

The Chair: Contrary minded if any, nay.

The amendment is carried.

Shall clause 2 as amended carry?

Hon. Senators: Carry.

The Chair: Thank you.

Senator Murray: I move that Bill S-201 be amended in clause 3 on page 4 as indicated on the document before you. These amendments relate to the Bank of Canada.

The Chair: Is there any discussion? The amendments, in effect, are the same with changes in wording to reflect that these relate to the Bank of Canada.

Senator Murray: A quick reading suggests to me that it is exactly to the same effect.

Senator Segal: That is precisely correct.

The Chair: Are honourable senators ready to vote on the amendment? All those in favour say yea.

Hon. Senators: Yea.

The Chair: Contrary minded, if any?

Then the amendment is carried.

Shall clause 3 carry as amended?

Hon. Senators: Agreed.

The Chair: Shall clause 4 carry?

There appear to be no amendments to clause 4.

Senator Segal: That is correct.

The Chair: Clause 4 carried. Shall clause 5 carry?

With regard to coming into force, that was amended previously.

Senator Segal: That is correct, Mr. Chairman.

The Chair: Are we agreed, honourable senators?

Hon. Senators: Agreed.

The Chair: Shall the preamble carry?

Senator Segal: There is an amendment to the preamble.

Senator Murray: I do not have an amendment here. I usually take Senator Grafstein's principled objection to preambles.

The Chair: Would you like someone else to move this?

Senator Murray: Yes, you move that.

The Chair: You are nothing if you are not consistent.

Senator Ringuette: I move that Bill S-201 be amended in the preamble, on page 1, by replacing lines 9 to 11 with the following:

``traded companies;''.

Senator Segal: Thank you. These financial reports should, over time, embrace full accrual accounting methods. As honourable senators will recall, the officials from the Comptroller General's office took the position that reference to accrual accounting methods would create burdens with which the existing accounting systems are unable to cope at the present time. However, the government is moving in that direction. It would be problematic in terms of understanding the purport and delivering upon it if that accrual reference was in the preamble. Therefore, this amendment removes it from the preamble.

The Chair: Does everyone understand this? All in favour the amendment say yea.

Hon. Senators: Yea.

The Chair: Contrary minded, if any?

Amendment carried.

Shall the preamble as amended carry?

Senator Murray: On division.

The Chair: Agreed, on division. Thank you. We all understand the principle of on division with respect to the preamble.

Shall the title carry?

Hon. Senators: Agreed.

The Chair: Shall the bill carry as amended?

Hon. Senators: Agreed.

Senator Eggleton: Are there any other concerns? We went through quite a discussion the last time we met with our officials about what was or was not practical. I am not talking about policy; we make the determination of policy decisions we want to take. However, in terms of our officials, is there anything here we have or have not amended that will make this bill difficult to implement?

I would like to know that now. The Comptroller General is here, along with our staff from the library. Is there anything else, from a technical standpoint, that we should be considering?

Senator Tkachuk: We passed it.

Senator Eggleton: No, we have not. I am entering the debate on the question to adopt the bill.

The Chair: We are just at the stage of ``Shall the bill as amended carry?''

Senator Eggleton: No, that was the preamble. We have not passed the bill.

The Chair: The question was whether there is anything other than what we have already heard. We heard from our officials last day. Is there anything further you are looking for? We do not want a repetition of what we have already heard.

Senator Eggleton: We have gone through some substantive discussions of change. I do not want to hear later, when we get into the Senate, that this is not going to work or is not practical. I want it to work, as I think we all do. It is a last call. Are there any concerns from a technical standpoint?

The Chair: Mr. Monette and Mr. Matthews, would you like to come to the table? Senator Segal could stay on.

Mr. Monette, you have been here before; and Mr. Matthews, we appreciated the information you gave us last day. You have heard the amendments that have been made today. Would you like to comment on them or on any comments you made last day, since the bill is now amended?

Rod Monette, Interim Comptroller General of Canada, Treasury Board of Canada Secretariat: I believe those amendments would deal with all our concerns except for one very minor suggestion, which has to do with the reference to ``generally accepted accounting principles,'' which is found on page 2, at lines 11 and 12, in proposed section 65.1(2).

The Chair: Yes.

Mr. Monette: In accountants' language, ``generally accepted accounting principles'' refers to the valuations and accruals we were referring to at the last meeting. I do not know whether it is appropriate for me to make a suggestion for wording, but I think the idea there is to have a standard, but one that would not require us to make the accrual evaluations we were talking about at the previous meeting. I do have a suggestion for that, if you wish.

The Chair: What is it?

Mr. Monette: To require that the financial statements be prepared in accordance with accounting policies consistent with the Public Accounts of Canada. That would remove us from the valuations but would ensure that we do have some appropriate, rigorous standards to report against. That is the only comment I would make.

Senator Ringuette: If I understand you, in proposed section 65.1(2), which reads ``The quarterly financial report shall be prepared in accordance with generally accepted accounting principles, and shall include . . .'', you are recommending that we replace the word ``principles'' with ``policies.''

Mr. Monette: The suggestion would be to remove the words ``generally accepted accounting principles,'' and to replace those four words with ``policies consistent with the Public Accounts of Canada.''

The suggestion is because generally accepted accounting principles require that we do valuations and so forth — accrual accounting.

The Chair: That was the point you made last day. I am assuming that Senator Segal has not made an amendment because he has decided that he would like to try to move the government toward an accrual accounting method. Senator Segal, would you like to comment on that?

Senator Segal: Here is my concern. I think it is fair to say that when the public is anguished about financial reporting and government, it is because you often get apples and oranges year to year because accounting policies change. We have, I think, at least five, if not seven, accounting systems in the Government of Canada. If you do not at least embrace some set of objective principles that are free-standing in the marketplace overall, which people in general and the Institute of Chartered Accountants in particular are comfortable with, you end up with the chance of getting reports year to year that are apples and oranges and not apples against apples. Therefore, I think part of the purport of the bill would be gutted — I am sure unwittingly, but nevertheless gutted. That is why I did not include that particular proposition, but obviously it is up to the committee members to decide.

The Chair: That is what I understood from your not making the amendment and from the fulsome discussion we had on this issue at our last meeting.

Senator Eggleton: Those particular words do have a special meaning, certainly as they are used in the private sector and with the Institute of Chartered Accountants. I think what the Comptroller General is saying is a more general wording, but it catches the spirit of it.

Senator Segal: The wording he is suggesting, I am sure in the best of faith, is ``in accordance with policies consistent with the Public Accounts of Canada,'' but those policy change. Treasury Board and others can change those policies. That is the point: consistent with what are, by definition and for good reason, changing policies; hence, the bill does not establish any norm and its core purpose.

I think by removing the reference to balance sheet, which colleagues have decided to do, and removing the reference to accrual policies in the preamble, we have created as much flexibility as is likely to facilitate the kind of accommodation that Senator Eggleton hopes is possible when the public service addresses what the Senate and House may order in this respect.

It would be my hope that we could, at least on balance, leave it at that. However, if colleagues wish to make changes, they have the authority to do so.

The Chair: Is there any further discussion?

Shall the bill, as amended, stand?

Hon. Senators: Agreed.

The Chair: Shall I report the bill back to the Senate, as amended?

Hon. Senators: Agreed.

The Chair: Thank you all. Thank you, Mr. Monette, very much, and we appreciate your help, Mr. Matthews. Thank you, Senator Segal and congratulations.

We will proceed now with our examination of the Supplementary Estimates (B) for the fiscal year ending March 31, 2008, which were tabled in the Senate on February 14, 2001, and subsequently referred to this committee by the Senate. These Supplementary Estimates (B) are the second set issued in this fiscal year ending on March 31, 2008.

I welcome two witnesses from Treasury Board of Canada Secretariat to help us to understand the Supplementary Estimates (B): Alister Smith, Assistant Secretary, Expenditure Management Sector; and Brian Pagan, Executive Director, Expenditure Operations and Estimates Division.

I understand, Mr. Smith, that this is your first appearance before the committee in this capacity. We hope that you will express our best wishes to Mr. David Moloney, who has appeared before the committee on several occasions, as he moves on to his new responsibilities.


Alister Smith, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. I am very pleased to be here today with you to discuss the supplementary estimates (B) for the fiscal year ending March 31, 2008, tabled on February 14.


With me today is Brian Pagan, Executive Director, Expenditure Operations and Estimates Division. We have distributed some remarks and, after my preliminary remarks, Mr. Pagan and I will be pleased to take your questions and comments.

Please refer to the document before you. At page 2, I provide an overview of the key features of the 2007-08 Supplementary Estimates (B), and I will introduce the major spending items. As well, I will refer to previous areas of interest raised by the committee and provide an update on the recently created central votes.

The 2008 Supplementary Estimates (B) provide Parliament with information regarding $4.3 billion in proposed spending, including $1.3 billion in voted appropriations. Supplementary estimates seek Parliament's approval of spending authorities. Specifically, these supplementary estimates request approximately $1.3 billion in voted appropriations to implement planned spending for programs that have been approved by cabinet but were not included in the Main Estimates 2007-08 or the Supplementary Estimates (A) 2007-08.

In addition to parliamentary approval of spending authority, supplementary estimates also seek parliamentary authority to realign or transfer existing spending authority between voted appropriations and allocate other spending that could not be fully specified, for example compensation adjustments, at the time of earlier estimates.

Senator Nancy Ruth: Mr. Smith, you are reading from a different text that the one we have. Can you tell us when you are on these pages so that we can follow you more accurately?

Mr. Smith: I am turning to page 4, where you will see a table showing the breakdown of budgetary, non-budgetary, voted and non-voted items. Previous Treasury Board decisions and existing statutory authorities amount to a Supplementary Estimates (B) total of $4.3 billion, including $1.3 billion in voted items. The voted items will be the focus. The remaining $2.9 billion is statutory spending that has already received approval through existing legislation. These amounts are included in the supplementary estimates for information purposes only.

Page 5 shows a breakdown of Main Estimates, Supplementary Estimates (A), Supplementary Estimates (B), and the total of the three as well as the percentage change in the total from the original Main Estimates. To date, the government has estimates of $228.5 billion, which includes Main Estimates of $210.7 billion, Supplementary Estimates (A) of $13.6 billion and Supplementary Estimates (B) of $4.3 billion.

The larger Supplementary Estimates (A) 2007-08 was consistent with efforts to bring forward new spending plans as early as possible. Consistent with that, the Supplementary Estimates (B) supply period is smaller and reflects normal year-end transactions and minor changes to departmental reference levels.

Moving on to page 6, under Key Messages, the $228.5 billion is fully consistent and in line with the amount of $233.4 billion in planned spending that was outlined within the framework of Budget 2007. Of the $4.3 billion requested in Supplementary Estimates (B), 78 per cent of the total requirements are for three major items, one of which is a voted item and two of which are statutory payments. The voted item is the payment to the Quebec Cree to settle implementation issues in respect of the James Bay and Northern Quebec Agreement and totals $1.09 billion. The other two are statutory payments to the Newfoundland Offshore Petroleum Resource Revenue Fund of $1.1 billion and compensation for individuals infected with Hepatitis C of $1.02 billion.

Turning now to page 7, Annex A highlights the major voted initiatives presented in the Supplementary Estimates (B) with a value greater than $25 million. Specifically, I would like to draw the committee's attention to three initiatives. The first item is the payment to the Quebec Cree to settle implementation issues in respect of the James Bay and Northern Quebec Agreement is $1.09 billion. In 2007, the government came to an agreement with the Quebec Cree totalling $1.4 billion. It enables Canada to fulfill its obligations and improve relations with the Cree and Inuit of Quebec with respect to the James Bay and Northern Quebec Agreement. Specifically, the settlement of the agreement includes the Cree taking on certain implementation obligations under the James Bay and Northern Quebec Agreement for the next 20 years, modernization of Cree regional governance, and the commitment to self-government negotiations.

Item 2 is funding to support the Centres of Excellence for Commercialization and Research program. That is $163.4 million and is required for grant payments to the Centres of Excellence for Commercialization and Research announced in Budget 2007. There are seven centres of excellence, located in Halifax, Toronto, Sainte-Foy, Montreal and Vancouver, which focus on priority areas in research and commercialization that are key elements of Canada's new science and technology strategy. These grant payments flow through each of the three federal granting councils due to the varying areas of research being conducted at these centres.

Finally, in terms of major voted expenditures, item 3 is funding for the expansion of market-based approaches to on-reserve housing in First Nations communities through the establishment of the First Nations Market Housing Fund. That is a $150-million item.

Budget 2007 announced $300 million for the First Nations Market Housing Fund, intended to give First Nations people living on reserves a better chance to own their own home by providing a backstop for private-sector loans. The need for adequate, affordable housing in reserve communities is considerable and contributes to the gap in quality of life between First Nations people living on reserve and other Canadians.

Annex A, page 9 of the deck, also highlights major statutory spending presented in the supplementary estimates with a value greater than $25 million. These are expenditures that have already received approval through other enabling and existing legislation. Therefore, the statutory amounts are included for information purposes only, and the supplementary estimates provide updated forecasts on statutory spending previously approved by Parliament.

I will draw the attention of the committee to a few notable items. First is compensation from Health Canada for individuals affected with hepatitis C through the Canadian blood supply. That is a $1.1 billion statutory payment. The government placed funds in trust pursuant to a settlement of claims for compensation of individuals infected with hepatitis C virus through the Canadian blood supply before 1986 and after 1990. For individuals infected with hepatitis C, the compensation amounts range from $10,000 to about $400,000. In addition to these amounts, eligible class members may apply for damages for past loss of income and loss of services. The number of beneficiaries will be determined as claimants come forward and the claims are adjudicated by the trustee.

On page 9 is funding from Agriculture and Agri-Food Canada to help transition producers from the current business risk programming suite of policies to the new AgriInvest program. That is $561.1 million. The AgriInvest kick-start program will provide a one-time federal-only payment to all producers in the form of grants and contributions to their AgriInvest savings accounts. In total, $361.1 million in transfer payments will be made to help producers transition from the current business risk management program to the new AgriInvest program.

Next on the statutory list is payments from CRA, the Canada Revenue Agency, to provinces under the Softwood Lumber Products Export Charge Act, accounting for $437 million. CRA is responsible for collecting from and making payments to the provinces based on the charges collected over the course of the application of the Canada-United States Softwood Lumber Agreement. It is estimated that $437 million will be paid in these supplementary estimates to provinces under the Softwood Lumber Products Export Charge Act. These payments have been reduced by several factors, including refunds paid to the softwood lumber industry, cost of administration and implementation of the agreement, and costs incurred from any litigation resulting from the act.

Finally, I would like to draw attention to a forecast increase of $78.4 million in non-budgetary statutory spending for expenditures including loans, investments and advances to support increases of net loans disbursed under the Canada Student Financial Assistance Act. The increase in net loans disbursement is attributed to increased use of debt management measures, allowing students to temporarily forego repaying their loans while on such measures.

During Mr. Moloney's most recent appearance before the committee to discuss Supplementary Estimates (A) 2007- 08, committee members expressed interest in a number of areas, which are addressed in Annex B in the deck. On page 11 are guaranteed income supplement payments, gender-based analysis of government programs, and the parliamentary review of estimates. Mr. Moloney responded in writing with specific information on these issues. I look forward to continuing his excellent working relationship with the committee and the secretariat.

In Annex C, on the last slide of the deck, I have further information on the new central votes. I will be happy to update the committee on the creation of these central votes created in Supplementary Estimates (A). One is for the government-wide operating budget carry-forward, and the other pertains to government-wide pay list requirements. Creation of these votes represents concrete actions the government is undertaking to fulfill its commitment to renew the expenditure management system.

These two central votes do not represent additional spending requirements in supplementary estimates as these items were previously funded from other sources. They do, however, mean that there will be greater transparency in accounting of personnel costs and a clear identification of the funding source.

Over all, the creation of these votes and their inclusion in Main Estimates will reduce the dollar value of typical supplementary estimate amounts in future years by approximately $1 billion.

This will also address to some degree the concerns of the Auditor General, who has been critical of the government's reliance on supplementary estimates. Supplementary Estimates (B) provide information relating to allocations from these new votes. Further information and details can be found on pages 68 and 69 of the supplementary estimates blue book.

Mr. Chair, that concludes my opening remarks. We would welcome your questions at this time.

The Chair: Thank you very much, Mr. Smith. We appreciate your reminding us of these new central votes that were explained to us by Mr. Moloney the last time. I think that is moving in the right direction. Supplementary Estimates (B) is a large book. We have had it for about three or four days now and we spent the weekend reading it. Therefore, we should have some interesting questions.

Senator Murray: Is the final set of supplementary estimates for the present fiscal year, or do you expect that there will be a third set?

Mr. Smith: These are the final supplementary estimates.

Senator Murray: I hate to do this to you on your first appearance, but I will ask you about something not here: the national Community Development Trust.

Parliament passed Bill C-41 and it received Royal Assent on February 7. It provides for $1 billion to help hard-hit communities affected by economic downturns and layoffs. Now the government announced that the $1 billion would come out of the 2007-08 surplus; the $1 billion will be put into a trust that will have a three-year lifespan starting from the date of the bill's Royal Assent. Am I to assume that none of this $1 billion will flow during the present fiscal year?

Mr. Smith: This is created by separate legislation. The funding would be provided from the fiscal framework for that and would not be part of supplementary estimates for this year.

Senator Murray: Where will it appear?

Mr. Smith: It will show up as expenditures from this fiscal year, but not in the Supplementary Estimates (B).

Senator Murray: It obviously was not in the Main Estimates, because there was no statutory authority until February 7. It is not in the supplementary estimates. It will not be in any estimates. Are you telling me that it will be in the public accounts?

Brian Pagan, Executive Director, Expenditure Operations and Estimates Division, Treasury Board of Canada Secretariat: The accounting for the expenditure will show up in public accounts. With these supplementary estimates, we are presenting information to Parliament for initiatives that Parliament has not yet approved. Therefore, they will be voting these appropriations.

Senator Murray: That is partly what we are doing here.

Mr. Pagan: In the case of the Community Development Trust, Parliament has voted that appropriation and has passed the legislation that permits the expenditure of funds this year. Therefore, it is not included in these estimates.

Senator Murray: Why would it not be included under statutory expenditures?

Mr. Pagan: It will be in future years. We began preparing these supplementary estimates in December and January. Treasury Board ministers approved them at the end of January and they went to print. The approval by Parliament of this separate legislation coincided with that. Therefore, it is not possible to present it for information this year. It will show up in the public accounts and it will be presented as information to Parliament in subsequent estimates.

Senator Murray: Will Parliament have any way of knowing how much of that $1 billion will be spent in the fiscal year that ends March 31?

Mr. Pagan: No, not through these estimates.

Mr. Smith: The money will be provided to a trust fund as the enabling legislation suggests. Therefore, in that sense, the payment is made in 2007-08.

Senator Murray: Some of it.

Mr. Smith: All of it will be paid to the trust fund.

Senator Murray: That is to the trust fund. There is $10 million for each of the provinces and $3 million for the territories initially. However, it is not clear to me, and I do not think it is clear to anybody, how much will flow to the provinces and territories in the present fiscal year. Nor is it clear to me when we will know the answer to that question. However, I will not belabour it. Do you have any indication of whether the trust has been set up?

Mr. Smith: I do not have that information.

Senator Murray: Has the trustee been appointed?

Mr. Smith: Nor do I have that information.

The Chair: Would you be able to get that information for us and let our clerk know?

Mr. Smith: Yes, I would. We would be happy to do that.

Senator Murray: When the Minister of Finance and the Deputy Minister of Intergovernmental Affairs were here, we were told there would be no written agreements between the federal government and the provinces. Rather, there would be press releases indicating that the provinces in question would be spending the money for the purposes intended by the federal government, and the provincial announcements would be more specific.

We have two such joint press releases involving Prime Minister Harper and the premiers of New Brunswick and Saskatchewan. Have there been further announcements of this kind?

Mr. Smith: I am not aware of any other announcements, senator.

The Chair: Could you clarify for us your answer to Senator Murray? You indicate in your presentation that the Supplementary Estimates (B) is $4.2 billion. Then you add that to the Supplementary Estimates (A) plus the Main Estimates to come up with a figure of total estimates for this year. Is it correct that we should add $1 billion to that for the expenditure coming out of this fiscal year?

Mr. Pagan: That is correct. These numbers were current on the date we went to print. Therefore, this information was presented to Treasury Board ministers on January 31 and we went to print the next day. Anything that has happened in Parliament since that point or any change in the circumstances of a program managed by departments since that point would not be reflected in these estimates.

The Chair: Are you aware of any other expenditures or commitments to expenditures by the current government in this fiscal year other than what has been reflected here in the $1 billion that we have just discussed? Are there any other others we have not seen in the Main Estimates, Supplementary Estimates (A) or Supplementary Estimates (B)?

Mr. Pagan: I am not aware of any.

Mr. Smith: We are not aware of any additional spending. Of course, with supplementary estimates being tabled before a budget, one has to expect that there may be further implications for spending for this current fiscal year from the budget. However, we are not aware of that information.

The Chair: We will be hearing about the budget this afternoon. Thank you for your answers.

Senator Ringuette: I have a few questions. One is in regards to the funding to support the Centres of Excellence for Commercialization and Research. There are seven centres and each is receiving an additional $163.4 million. Could you provide us with more detail about where these centres are located, what is their last report, what are their activities and how these additional monies will be provided to them? Perhaps you could provide that information to the clerk so that we can have a view of what is happening.

How much more does this $163 million provide as a percentage of their current allocation?

Mr. Smith: First, let me give you more information on where the centres are located, if that is of value to you. Then we will take some of these questions back and get further information.

Senator Ringuette: You said where they were located earlier in your presentation. I would like to know their activities, why they are requesting this additional funding, and what percentage of their current budget this increase represents. You must have that in your briefing material.

Mr. Smith: Because these payments are made through the granting councils, one would have to look at each granting council's funding and what percentage of the granting council's spending this particular contribution agreement would represent. We can provide you with that kind of information.

Senator Ringuette: Have you a ballpark figure? Would it be a 10 per cent or 12 per cent increase?

Mr. Pagan: I have that information. First of all, I can name the geographic locations of the centres for you.

Senator Ringuette: It was already mentioned.

Mr. Pagan: There are specific universities or NGOs involved in these initiatives.

Senator Ringuette: What is their current total operating budget from the federal government?

Mr. Pagan: We would not have that. We have the amount of the appropriations provided by Parliament to the granting agencies.

Senator Murray: What are the three granting agencies?

Mr. Pagan: The Social Sciences and Humanities Research Council of Canada, SSHRC, has Main Estimates totalling $619 million. Through these supplementary estimates, they are requesting $32.6 million as their portion of the $163 million going to the seven centres.

Senator Murray: What are the other two?

Mr. Pagan: The other two are the Natural Sciences and Engineering Research Council of Canada, NSERC, and the Canadian Institutes of Health Research, CIHR. Those three centres are supporting the Life Sciences Research Institute at Dalhousie University; the National Optics Institute in Sainte-Foy, Quebec; the Montreal Neurological Institute at McGill University; the Li Ka Shing Knowledge Institute at St. Michael's Hospital at the University of Toronto; the Brain Research Centre at the Vancouver campus of the University of British Columbia; the Canada School of Energy and Environment, a virtual organization at the University of Alberta, the University of Calgary and the University of Lethbridge; and the Heart and Stroke Foundation Centre for Stroke Recovery, a virtual enterprise between the University of Ottawa and the University of Toronto.

Senator Ringuette: What are the numbers for the other two granting agencies?

Mr. Pagan: For CIHR, it is $73.5 million; and for NSERC, $57.1 million.

Senator Tkachuk: Those three make up the total amount.

Mr. Pagan: Correct.

Senator Murray: In each case, what are the total budgets that those amounts are in addition to? You gave us the annual budget for SSHRC, $619 million, and I think some $30 million was being added to that. Give us the other two please.

Mr. Pagan: For NSERC, their starting appropriation in the 2007-08 Main Estimates was $899.5 million; through these supplementary estimates, they are adding $57.1 million. In the case of CIHR, their Main Estimates number was $822.4 million and they are adding $73.5 million.

Senator Ringuette: Please provide details about the reports and where this additional funding will be going and so forth in writing to the clerk for her to distribute.

Mr. Pagan: Regarding where the money is going, I have named the seven centres and the specific research focus they have.

Senator Ringuette: I would like to know what the money is for. Never mind the entities; I want to know what the entities are doing with this additional funding. In one case, we are looking at an additional 20 per cent of their current budget.

The other item I want to receive information on is increases to pay and allowances for Canadian Forces members, which is $88.7 million. Can you give us some information about the disbursement of these funds? Is it for new recruits? As I recall, six months ago there was a major article in the papers indicating that our Canadian troops had been short- changed in regard to reallocation payments. What is the purpose of the additional $88.7 million?

Mr. Smith: The $88.7 million here is for an increase in pay and allowances to Canadian Forces members from the ranks of lieutenant-colonel and below. It is a 2 per cent pay adjustment across the board for non-commissioned members, general service officers, pilots in the ranks of lieutenant-colonel and below, and for medical and dental officers in the ranks of lieutenant and below. Without a ratified collective agreement this year yet, this 2 per cent increase is considered the minimum required to ensure equity for Canadian Forces members, given current inflation.

Senator Ringuette: In other words, these additional funds do not address the situation that was highlighted six months ago in regard to funds allocated for members of our forces that are relocated in certain areas. This money does not correct that situation; it is just a general pay increase of 2 per cent.

Mr. Smith: That is correct.

Senator Ringuette: Can you tell us how much money would be needed, or what was removed from those reallocation funds? Actually, if it was removed from them six months ago and it should have been a statutory amount of money, then you have that pot of funds that has not been given out to the Canadian Forces, and you are requesting $88.7 million. Therefore, this 2 per cent adjustment that you are talking about actually represents more than $88.7 million.

Mr. Smith: We would like to refer that question to our colleagues at the Department of National Defence to answer.

Senator Ringuette: Could you provide that in writing to the clerk, please?

Mr. Smith: We will, or we will ask our DND colleagues to respond directly in writing on that question.

The Chair: I think it is important for the witnesses to understand that we have a very tight time frame. Therefore, regarding these undertakings that we are asking you to give us answers on, there is some urgency with respect to getting the answers back. We are getting close to the end of the fiscal year and the government would like the Supplementary Estimates (B) to be passed when the appropriation bill comes.

Mr. Smith: Absolutely, senator.

Senator Ringuette: On page 8 of your deck you have funding to address shortfalls related to the cost of providing contract policing, from Public Safety and Emergency Preparedness. That is for a little over $29 million. What is contract policing? What is the current contract, who is the current contractor and how many people are we talking about?

Mr. Pagan: Under the police services agreements that are entered into between the Government of Canada and various provinces and territories, the RCMP is contracted to provide policing services on a cost-recovery basis to the province, territory or municipality with which they contract.

Contract policing is the largest program activity within the RCMP, employing roughly 60 per cent of the force's personnel and accounting for approximately 68 per cent of its operating budget. These additional funds were requested by the department to resolve some long-standing systemic shortfalls in the funding for contract policing services. This funding had been earmarked within the fiscal framework and was approved by Treasury Board ministers earlier this year.

Senator Ringuette: Are you saying that it is not additional policing services, it is just to address the shortfalls with the provinces?

Mr. Pagan: The RCMP contracts with provinces, territories and municipalities to provide services. They have requested additional funds to carry out those duties. It is conceivable that with these funds they may be able to put additional officers in the field, but that is not necessarily the intent. They have identified separate initiatives to hire additional police officers, and that initiative was presented to this committee through Supplementary Estimates (A).

Senator Ringuette: We already agreed to additional funds in Supplementary Estimates (A).

Mr. Pagan: It was specifically for the purpose of hiring additional officers. This funding is to enable the department to respect the contractual arrangements that they have with provinces, territories and municipalities.

Senator Ringuette: I guess they must have some accounting problems at the RCMP if they are looking at a shortfall of $30 million in Supplementary Estimates (B) and they already had funds in Supplementary Estimates (A).

Mr. Pagan: It is $29 million against their operating budget, which represents approximately 60 per cent of their costs; and that is about $2.3 billion. This is an increase of $30 million against an activity that represents about $ 2.3 billion within the RCMP.

Senator Ringuette: I understand that, but it is a question of planning.

Another issue is payments to provinces under the Softwood Lumber Products Export Charge Act from the Canada Revenue Agency in the amount of $437 million. I would like to know from which category this money is drawn. It is a large amount of money, and I would like to have all the details that you can provide in writing. I assume that you would not have the information offhand today.

Mr. Pagan: May I respond to your question on softwood lumber?

Senator Ringuette: Do you have all the minute details of the $437 million, including where it comes from, where it goes and for what purpose?

Mr. Pagan: We will attempt to respond. As is often the case in dealing with something as large as the Government of Canada, if the senator is looking for that specific detail, the question is probably best addressed to the department. We will be happy to forward these requests to them for a more detailed response than we can provide today.

As you know, the Government of Canada signed an agreement with the United States in October 2006 to settle the softwood lumber dispute. Under the legislation, every business that exports a softwood lumber product to the United States after October 11, 2006, is required to pay a charge to the Crown, which is determined under the Softwood Lumber Products Export Charge Act in respect of the export payable at the time that the lumber product is exported. The CRA is responsible for collecting the charge and making payments to the provinces based on the charge collected over the course of the application of the agreement. These payments can be adjusted by several factors, including other refunds paid to industry, costs of the administration and implementation of the agreement and any costs involving litigation of the agreement.

As a result of activity in this fiscal year under that act, it is estimated that $437 million will be paid to the provinces under the statutory provisions of the Softwood Lumber Products Export Charge Act.

Senator Ringuette: That is what I suspected and why I want more details. We are looking at a little less than $1 billion in one year that has been collected in the form of a duty paid by our forest industry, which is in dire straits. I want all the information on this. It is very nice to say that in one week, we will give out $1 billion across the country for any kind of manufacturing or economic downturn. However, if you are collecting $0.5 billion in one year from an industry that is in dire need, then there is a major problem. I want all the information that you can provide to the clerk of the committee because I find this alarming.

I thank you in advance for attending to this matter. As the chair indicated earlier, we have a certain time frame to examine these Supplementary Estimates (B), so the faster we can get the information, the faster we can deal with this.

My last question is on funding to set up a disaster relief framework that provides a coordinated process for federal, provincial and territorial governments to respond rapidly to agricultural disasters, and that is in the amount of $63 million. My understanding is that efforts have been made to set up a federal-provincial-municipal coordination mechanism. We received these people a few years ago before the committee and heard evidence on issues surrounding natural disasters. Is this amount of $63 million dollars in one year a duplicate amount? Who operates this? What are the guidelines? What are the issues?

The Chair: This is not a benefit. The way this is worded suggests that we are only setting something up. It is an administrative cost as opposed to funding going to the farmers. Is the wording poor, or is there an explanation of why it would cost $63 million to set something up?

Senator Tkachuk: On the forestry agreement, the monies paid back to the provinces can be spent by the provinces in any way they choose. They can spend it for community development or anything else. Is that right?

Mr. Smith: Are you talking about the community re-investment?

Senator Tkachuk: No, I am talking about the money collected by the CRA on softwood lumber that is then paid to the provinces. That money can be spent by the provinces in any way they choose, whether on community development or transition funding for failing industries.

Mr. Smith: I believe that is the case under the terms of the Softwood Lumber Products Export Charge Act.

Senator Tkachuk: Thank you.

The Chair: We have just discussed the Softwood Lumber Products Export Charge Act and the collection of relevant duties. Senator Ringuette felt about $1 billion and you indicated $437 million or so that goes back to the provinces. Will you provide the committee with more details on the difference?

Mr. Smith: Yes, I will provide details on the accounting of that. We will speak to the Canada Revenue Agency. It is a very complex matter because funds were remitted from the U.S. following the signing of the agreement and the accounting is complex. The export charge is part of that agreement and the money is sent back to the provinces.

The Chair: Pleases do your best to find those details for the committee.

Mr. Smith: Yes, we will do that.

The Chair: The Agriculture and Agri-food Canada charge of $63 million appears to be for setting up an administrative program. Senator Ringuette asked specific questions on that. Are you able to help us?

Mr. Smith: We will try, senator. The amount of $63 million in grants will be used to support the development of a coordinated process for federal, provincial and territorial governments working together to respond rapidly when disasters strike. This is called the AgriRecovery program. It is a disaster relief framework that ensures that producers can count on rapid assistance from governments when hit by smaller disasters — those that are regional in scope but have a relatively small impact overall in the Canadian industry. They can be more easily contained and have fewer trade implications, but they can be devastating for a region or for a specific part of the agricultural industry.

The Chair: Is this funding to set up an administrative body or will this money actually flow, in the case of an emergency, to someone who is injured?

Mr. Smith: This is a new program and I am not sure how it will work.

Senator Murray: Looking at page 93 of the Supplementary Estimates (B), authorities to date is zero and $62.6 million is grant payments for the agricultural disaster relief program called AgriRecovery. It is a new program and these are grant payments. A layman looking at the words ``grant payments'' would think that money will flow to the farmers.

The Chair: The figure in the presentation is $63 million.

Senator Murray: They round off the figure.

Mr. Smith: Those are specifically for grant payments. I would have to know the terms and conditions of those grants to be able to tell the committee where the money flows. It would probably flow to affected farmers or others in these disasters, given the scale of this spending.

Senator Murray: Are these disasters to come or disasters that have already befallen us?

Mr. Smith: I believe they are disasters to come.

The Chair: It must be in a trust, because you are asking to charge it against this fiscal year. If it is disasters to come, the money is sitting somewhere.

Mr. Pagan: We will confirm the disposition of funds here. However, the department is identifying two requirements. In their vote 1 operating, they are identifying a requirement of $8.3 million dollars to establish the management systems, IT systems and framework to administer this program. We will confirm that the $63 million in statutory payments is presented as information to Parliament but that it is money that will be going to producers in response to real or anticipated requirements before the end of the fiscal year.

Senator Murray: Will that flow through the provinces? By ``coordinate,'' do you mean we will pay some and they will pay some, or we will pay for some things and they will pay for others?

Mr. Pagan: This framework was developed and announced by federal, provincial and territorial ministers of agriculture in June 2007. There is some coordination involved in this measure, but I do not have precise details regarding any cost-sharing arrangements.

Senator Ringuette: I know I have taken a lot of time this morning, but I have one more question. In my continuous driving to and from New Brunswick, I listen to CBC and I get a lot of information and good documentaries on that station. Coming back on the weekend from New Brunswick, I listened to a report about a program within Environment Canada that Parliament has voted on and agreed to an amount of $38 million. That is for a program to help recycle old cars. There were no program guidelines and no program planning. Of the $38 million, zero cents has been provided to any kind of entity.

I want to know why, a year after the $38 million was announced, there is no plan, no guidelines whatsoever and no accountability for that $38 million that was announced and approved last year. I want to know where it has been transferred. It is not in Supplementary Estimates (B). Where has the $38 million been transferred to? It has not been spent.

Mr. Smith: There is funding in this in Supplementary Estimates (B) for implementation of this national vehicle scrappage program. It is in support of Canada's clean air agenda. There is an amount here for $379,000. The funds will cover the initial start-up costs of the national program, the development of a contribution agreement, and the oversight and establishment of a program advisory committee to focus on the development of the vehicle recycling practice codes. Therefore, I believe the funding is in here in Supplementary Estimates (B).

The Chair: Are you looking at the Supplementary Estimates (B)? Is there a page you can direct us to?

Mr. Smith: Page 117.

Senator Ringuette: That is $379,000 out of $38 million.

Mr. Smith: That is correct. Only $379,000 is required in Supplementary Estimates (B). My colleague has the numbers for the overall program expenditure.

Mr. Pagan: It was a transfer of $1 million, not $1,000.

Senator Ringuette: The program was announced for $38 million.

Mr. Pagan: I am not familiar with the program. However, these funds are transferred from Transport Canada to Environment Canada for the start-up of the program.

Senator Ringuette: Could you provide us with the reason that a program was announced for $38 million a year ago but only $1,000 has been allocated to it? I do not know what kind of start-up you can do with $1,000.

Mr. Pagan: It is $1 million.

Senator Ringuette: Can you give us the information asked for?

Mr. Pagan: We will be glad to pursue this with Transport Canada and Environment Canada and have them provide the details to the committee.

Mr. Smith: The transfer from Transport Canada to Environment Canada was because Environment Canada was viewed as a better place to run the program. That may well be part of the explanation.

Senator Murray: Where can I find authorities to date for this program? I see on page 117 the vehicle scrappage transfers from Transport Canada for implementation of the national vehicle scrappage program in support of Canada's Clean Air agenda. Vote 1 is $310,000 and vote 10 is $690,000 total. Therefore the total is $1 million. Do I go to Transport Canada to find out what the previous authorities were?

The Chair: If you look up under ``voted appropriations'' on page 117, you will also see another $379,000. That is $310,000 and $379,000 just to set it up.

Senator Murray: Where is that?

The Chair: Operating, vote 1, about the fourth item down on the page: $379,000, funding for implementation of the national vehicle scrappage program.

Senator Murray: You have $310,000 and $690,000.

The Chair: If you go up to the top, it is the fourth item down; it is $379,000 more.

Senator Murray: Yes, implementation. I see it.

The Chair: There is $310,000 coming from Transport Canada for operations and $379,000. This is all just to set up a bureaucracy. We do not see anything that says what they will administer.

Senator Murray: Is the chair portraying that accurately?

Mr. Smith: The $379,000 is the figure we discussed earlier for implementation of the program.

Senator Murray: The $310,000 and the $690,000 are transfers from Transport Canada. Is this a new program?

Mr. Smith: This is a relatively new program. We are just discussing now the set-up for this program.

Senator Murray: If I wanted to know whether there was anything previous, where would I go? Would I go to the Main Estimates under Transport Canada?

Mr. Smith: Transport Canada was the department that was involved.

Senator Murray: They had the program. Therefore, the program is being transferred?

Mr. Smith: Right.

Mr. Pagan: My understanding is that funds were initially allocated to Transport Canada in 2006 and that, as a result of adjustments to the government's environment and clean air agenda, there was a subsequent allocation in Budget 2007 for the specific program. This transfer begins to effect those changes, but we do not have detailed notes on this. We will ask Transport Canada and Environment Canada to provide details to the committee.

Senator Murray: We should be able to find it in the Main Estimates. All we have in the supplementary estimates under Transport Canada — if you look at page 187 — is the credit of transfer to Environment Canada for implementation of the national vehicle scrappage program: vote 1, $1 million.

Senator Ringuette: I think this committee definitely needs more information. From the comments that I have just heard, the information that I received over the weekend was that this program was a year old and had $38 million. However, you are referring to a program that should have been in place in 2006 and in Budget 2006-07. It is even worse than I thought. You do understand my concern. We announce programs for two years in a row, and still as of this month there is no program, no plan, no guidelines, nothing.

Mr. Pagan: There is often a time lag between the announcement of a program and the ability to effectively implement it based on the need for consultations.

Senator Ringuette: Will we see the same time lag with the $1billion to help communities?

Mr. Pagan: We will direct this question to the departments involved so that they can explain to the committee both the circumstances contributing to the delay and the plans for the program. It bears repeating that there are often delays from an announcement to implementation because of the need to conduct consultations and negotiations with provinces and stakeholders, and to engage in contracting practices to either bring in staff or engage facilities and resources to deliver the program. This by no means is the only program for which there is a lag between an announcement and implementation.

Senator Ringuette: I would not want to take you up on your statement that this is the only program. If we had the time in this committee to take item by item by item from the budget to the Supplementary Estimates (A) and the Supplementary Estimates (B) that are in front of us, I dare say that this would not be the only program. There is a minimum two-year time delay to implement and have a program in place, yet we were asked to approve $38 million for that program.

As a closing note from me, I certainly will welcome all the information in regard to the issues that were asked this morning, without, hopefully, any time lag.

Mr. Pagan: To be clear, what I said was that this is by no means the only program for which there may be a delay between announcement and implementation. That is to suggest that there are any number of programs in environment and other departments where there can be a lag between a budget announcement and the request to Parliament to appropriate funds. There are any number of reasons that contribute to that delay. More often than not, it is the due diligence required by the department to ensure that they have the resources and the right people in place to deliver a program that adds results and value to Canadians.

The Chair: Thank you. We will look forward to hearing from you on that.

Senator Nancy Ruth: I wanted to ask you about the Canadian International Development Agency at page 132 in the supplementary estimates. Our briefing note said that the funding represents a realignment of grants and contribution authorities as a result of a major relocation exercise within CIDA to further increase the efficiency and the effectiveness of aid delivery; specifically, authorities were moved from contributions to grants, reflecting a shift of focus within CIDA toward risk-based program-oriented initiatives with trusted partners such as the United Nations and the World Health Organization.

If the $211 million were still to be spent by way of contributions rather than the new grants, who would have been eligible for them? For example, what types of groups would have received contributions in the last three years? Get me the information if you do not know it, because I want to know what the implication of this change is.

Mr. Smith: We would, of course, have to ask CIDA for the detailed information you are requesting. I can provide you with some more information on the change that we understand they are undertaking, if you like, in moving to grants from contributions.

Senator Nancy Ruth: That would be great.

Mr. Smith: Essentially, this reflects a shift within CIDA's programming from traditionally smaller projects with various partners, which are usually funded through contributions agreements, to larger, program-oriented initiatives with partners such as international organizations, including the UN and recipient country governments, which are more suited to grants. That is the overall shift. It is believed that this will make CIDA more efficient and effective in providing Canadian aid.

Senator Nancy Ruth: Would that mean that grants to small Canadian NGOs who have been working abroad for a number of decades are now out of the cut and this money will be granted only to those large organizations, especially if they are linked up to the UN or that kind of organization?

Mr. Smith: I doubt very much that it means that. It means a rebalancing, perhaps, to the World Food Programme, the United Nations Development Programme, the United Nations Population Fund, for example — some concentration perhaps of effort on the aid side from more dispersed aid through smaller projects.

Senator Nancy Ruth: What does ``risk-based program-oriented initiatives'' mean? What do specific programs within the United Nations and the World Health Organization, which would receive a good part of this $211 million, have to do to qualify to receive it and why are they perceived as risk-based program-oriented initiatives?

Mr. Smith: The rationale is that providing funding through established mechanisms of the UN and other international agencies with strong audit and strong governance is a way of reducing risk in providing funds for specific concerns.

If you are moving from contributions to grants, some people might wonder if grants are not more risky because there are fewer strings attached. They are not if you are working through these established organizations, which have trust funds, good governance and good audit. In fact, this may well be a fairly low-risk and prudent way of providing aid.

Senator Nancy Ruth: Does Canada have any evidence that these UN structures will fund and encourage programs that are on the edge in Sudan, Congo, or any of these places that are in desperate need of all kinds of things?

Mr. Smith: We have many decades of experience working with these programs, such as the United Nations Development Programme and the World Food Programme, and the programs report results.

Whether they are able to meet the cutting-edge needs in very difficult places, such as Afghanistan or Darfur, is another story; other calculations will determine whether they will be able to maintain a presence in those situations, but the programs themselves are very well known. They report results. They are effective in delivering aid, and they are used by almost all countries in the Organisation for Economic Co-operation and Development.

Senator Nancy Ruth: For me this is a great sadness because my life experience is as a small NGO on the ground, whether a church-based or a teaching organization or whatever. They can see, hear, listen and adapt more quickly than a UN operation. I have some concern that Canada has moved in this way. I understand it may be safer for the taxpayers' dollars, but I am not as sure it will be as effective in the long run.

I have a third question. Since you put gender analysis in your notes, there should be one question on that subject. How does this change in CIDA's programming, moving from contributions to grants, strengthen equality between men and women? That is a strategic focus that CIDA identified in 2007-08.

What do we know about the efficiency and effectiveness of these so-called trusted partners in the United Nations, since we are well aware of United Nations soldiers raping women at war in war zones? Why is it that Treasury Board, which has some obligation in monitoring what comes into it, believes that these so-called trusted partners will be more effective in narrowing the gender gap?

Mr. Smith: That is a question I do not feel qualified to answer. We will need to speak to our CIDA colleagues about that, to see what their analysis is of the impact of this change on gender effectiveness, if you wish, through third parties. It is a complex question.

Senator Nancy Ruth: I would be happy to have you do that and send an answer to the clerk. In the back of your presentation you refer us to your own website for gender-based analysis, as well as Status of Women. I am curious about what obligation you have at Treasury Board to have a second look at what departments send in to you around gender analysis.

Mr. Smith: Let me begin, and my colleague may want to add some commentary. I believe my predecessor responded to the committee on these issues.

We do require at Treasury Board that when departments make submissions there be evidence that they have undertaken gender-based analysis.

Senator Nancy Ruth: Is there any analysis of the evidence?

Mr. Smith: We are able to check whether they have done the work. We cannot check the quality of the analysis of all departments at all times. However, under our Treasury Board submission guide, we require them to take this into account, and we trust that the analysis has been done well.

Senator Nancy Ruth: Where in government would there be some watchdog on the quality of the analysis?

Mr. Smith: Status of Women does some quality assurance on gender-based analysis.

Senator Nancy Ruth: What does it say about your department?

Mr. Smith: I have not seen anything recently from Status of Women, so I am not entirely sure. We responded to a standing committee in 2006 with four commitments we made on gender-based analysis, including looking at the capacity of departments to do the analysis through our math, looking at training, looking at the information we would request in submissions which we would then monitor and looking at our monitoring. I believe those were all viewed as good responses to the committee. It is an ongoing challenge, and as with other areas where we are trying to check the quality of analysis, it is not always easy for us to do, but we have made commitments and are trying to follow through on them.

Senator Nancy Ruth: You can understand my frustration when I see $211 million shifting into agencies that have historically not cared too much about this issue when little NGOs were far more able to have influence over the board of directors, the program management and so on.

Mr. Smith: Senator, if I could add one more thing, I do not think this precludes that. I doubt that our CIDA colleagues would say that they have completely shifted to a grant-based world. Contribution agreements and working with small partners is still important.

Mr. Pagan: To reiterate that point, this rebalancing of their portfolio represents $210 million out of a budget of $2.9 billion. The department is engaged now in an exercise to pursue more effective aid development, and they have been encouraged to do that by another committee of the Senate that is quite concerned with Canada's value added in international development.

The department is rebalancing its portfolio, all the while maintaining traditional relationships with NGOs. There has been and will continue to be a Canadian partnership branch that is the window for the department to the broader NGO community. According to the Main Estimates 2007-08, that program activity dealing with institutions represented approximately $918 million of the department's Main Estimates.

When Canada or CIDA engages with other development partners to join up their resources and therefore acquire a critical mass to have a bigger impact, they do so to have that impact and to mitigate risk. They also bring their relative strengths to the table, and CIDA has been recognized in the broader development community as an organization that has a comparative strength in the issue of gender. The department continues to put that forward when they design programs and support to the countries in which they work.


Senator Chaput: My question will be brief and concerns international development assistance. As my colleague has already asked several questions on this topic, I have already heard a number of answers. Nevertheless, I would like a clarification on a point. On page 7 of your brief, you refer to additional grants to international organizations. When you look at page 11 of the budget, reference is made to a reallocation of funds, that is a transfer of contribution funds to grants. When amounts of money are transferred from one area to another, why do they constitute supplementary expenditures?

Mr. Pagan: That is a matter of parliamentary authority. Earlier in the year, CIDA put forward a plan and, in the course of the year, that plan changed, and a change in parliamentary authority who needed.


They identified the requested authority from Parliament to make contributions or they identified to Parliament that they were going to proceed with the business with contributions, and now they are proposing to make grants, which requires parliamentary authority. They are identifying this through the supplementary estimates to note that change in approach.


Senator Chaput: So the CIDA funding was not necessarily cut back; rather, additional funds were allocated?

Mr. Pagan: That is correct.


Senator Tkachuk: I want to follow up on Senator Ringuette's question regarding the $38 million. I did not know there was such a program; I do not know if anybody did. I am not sure what she wanted to know, because sometimes Senator Ringuette goes around and around and I get lost.

I wanted to know about that $38 million. Was it budgeted in 2006? Did it get transferred in that fiscal year from Transport Canada to Environment Canada? If the money was budgeted for and not spent, did it go back to the consolidated fund or was it used for other purposes? I would like to know that. I never liked transferring money between departments because we get lost. I am not sure if it is done as a matter of policy or whether there is special permission or procedure that must happen when this takes place. It does bother me that it disappeared. Could you answer what you can now, and use the rest as a backup when you answer Senator Ringuette's question? I may have it wrong too, but that is what I want to know.

Mr. Smith: First, we will have to check this figure of $38 million.

Senator Tkachuk: Yes, because it could have been in an announcement but not in the budget.

Mr. Smith: We do not have a figure to support that.

Senator Tkachuk: That never happened before, of course.

Mr. Smith: As my colleague said earlier, it often takes time to determine, specifically in areas like this, standards or whatever is required to make a program work effectively. In this case, at some stage the program was viewed as being better run through the Department of Environment, and the funds were transferred.

Any money that had been set aside for this previously, whether $38 million or some other number, would have lapsed if the money was not being used. The money is not misspent; it is not used.

Senator Tkachuk: When the $38 million gets transferred, who provides the authority for that?

Mr. Smith: You do. If there are transfers from one vote to another, it is Parliament that has to decide on those transfers through the supplementary estimates.

In fact, you are voting on not just the amounts being asked for here, but also these transfers, in response to Senator Chaput before as well. These transfers are also part of what we are asking you to approve.

The Chair: That is helpful. If Parliament has already approved the expenditure and then the government decides to move it from one department to another, then Parliament is called upon to approve it a second time.

Mr. Smith: Correct.

The Chair: I understand that between votes, if you are moving money from one vote to another, that is approved by Parliament.

Mr. Smith: That is true, and also these transfers, as you can see on some of the pages here; this one is a good example. The transfers from one ministry to another are also for approval.

The Chair: Good. I have a question for clarification, and it is at the bottom of page 9 in the estimates. Could you explain, ``Net adjustment, from net to gross basis of Budget''? There is a $14.8 billion net adjustment to gross. I do not understand that.

Mr. Smith: This is a standard adjustment that is made every year as we go from the budget to the estimates. I will let my colleague break this down for you. It includes a number of adjustments.

Mr. Pagan: In some respects, this adjustment deals with the previous discussion concerning the accounting basis — generally accepted principles, accrual versus cash, et cetera.

The bottom line is that the amount of money anticipated on a cash basis for this fiscal year is $228.6 billion. The amount that the government has identified in the fiscal framework through Budget 2007 is $233.4 billion. That difference is accounted for through a number of factors including program expenses — announcements that the government has committed to but which have not yet been brought forward for parliamentary approval.

They also account for expenditures that, for budget and accounting purposes, have been charged to prior years. The government may book something in a previous year but the actual cash required from Parliament can be in a subsequent year or vice versa. Then accrual accounting adjustments are required to account for the fact that the budget is on an accrual basis and the estimates are on a cash basis.

Collectively, these factors are administered by colleagues in the Treasury Board Secretariat and the Department of Finance to make sure that we are bringing forward to Parliament cash requirements that are consistent with what the government has planned for in its accounting exercises — the budget and the public accounts.

The Chair: When we hear the budget this afternoon, will all the figures be on an accrual basis?

Mr. Smith: That is correct.

The Chair: When we do the appropriation bill based on these estimates, it is on a cash basis, is that right?

Mr. Smith: That is correct.

The Chair: How quickly will we be dealing with one system? How many more years do you anticipate? Was it like this when you were chair of this committee?

Mr. Smith: It is a complex matter to move to accrual appropriations. Indeed, as Mr. Monette mentioned and Senator Segal also, we are moving on accrual budgeting within departments.

Senator Tkachuk: There is a lot to be said for cash, chair — cash in, cash out. It is easy to understand.

The Chair: That is called ``near cash,'' another term we hear from time to time. So that the public understands, when a minister makes a promise about a certain amount of money that will be allocated for something, is that on an accrual basis, a near-cash basis or a cash basis?

Mr. Smith: Because budget announcements, memoranda to cabinet and policy proposals are prepared on an accrual basis, those numbers are communicated on an accrual basis usually.

The Chair: Thank you very much. You have several undertakings and we look forward to receiving that information. Thank you again, Mr. Smith, for your first visit here. We look forward to many more. Will we see you next week for the Main Estimates?

Mr. Smith: You will indeed.

The Chair: Senators, one week from now, you will have another book like this.

Mr. Smith: Larger.

The Chair: You will have it for next weekend to study. Then next Tuesday, we will be meeting with you to start delving into that particular book. That concludes our meeting for today.

The committee adjourned.

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