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Proceedings of the Standing Senate Committee on
National Finance

Issue 7 - Eighth Report of the Committee

Thursday, March 6, 2008

The Standing Senate Committee on National Finance has the honour to present its


Your Committee, to which were referred the 2008-2009 Estimates, has, in obedience to the Order of Reference of Thursday, February 28, 2008, examined the said Estimates and herewith presents its first interim report.

Respectfully submitted,





The 2008-2009 Estimates were tabled in the Parliament on 28 February 2008 and subsequently referred for review to the Standing Senate Committee on National Finance. As is customary, the committee anticipates that several meetings will be required in order to complete a thorough review of the 2008-2009 Estimates. The initial examination began on 4 March 2008. Appearing from the Treasury Board Secretariat was Mr. Alister Smith, Assistant Secretary, Expenditure Management Sector. He was accompanied by: Mr. Brian Pagan, Executive Director, Expenditure Operations and Estimates Division. In addition to their presentation, which outlined and explained the main features of the 2008-2009 Estimates, the officials responded to the Committee's initial concerns about the government's planned spending for the new fiscal year.

This report is the Committee's First Interim Report on the 2008-2009 Estimates. The Committee intends to examine certain aspects of these Estimates in greater depth at a later date and to submit further reports. The Committee will present a final report on its work before the end of the fiscal year 2008-2009.


As in the past, there are four components to the 2008-2009 Estimates. They include PART I — the Government Expense Plan, which provides an overview of federal spending by summarizing the key elements of the Part II and by highlighting the major year-over-year departmental changes. PART II — the Main Estimates, directly supports the Appropriation Act, and lists the resources that individual federal departments and agencies require for the upcoming fiscal year. It also identifies the spending authorities and the amounts to be included in subsequent appropriations. Since 1997, PART III has been divided into two sections. The Report of Plans and Priorities (RPP) provides additional details on more strategically oriented planning and results for each of the departments and agencies. It focuses on outcomes expected from federal government spending activities. The RPPs are normally tabled in Parliament in the spring. The Departmental Performance Report (DPR) focuses on results-based accountability by reporting on accomplishments achieved against the performance expectations and results commitments as set out in the Report on Plans and Priorities. The DPRs are normally tabled in Parliament in the fall of each year.

The Main Estimates 2008-2009 of $221.5 billion present information on both budgetary and non-budgetary spending authorities (see Table 1 below). Budgetary expenditures include the cost of servicing the public debt; operating and capital expenditures; transfer payments to other levels of government, organizations or individuals; and payments to Crown corporations. In these Main Estimates budgetary expenditures amount to $220.6 billion. These budgetary expenditures are further divided between Statutory Expenditures of $141.6 billion and Voted Appropriations of $79.0 billion. Non-budgetary expenditures (loans, investments and advances) are transactions that represent changes in the composition of the financial assets of the Government of Canada. In these Main Estimates they total $0.9 billion and are composed of $0.1 billion of voted appropriations and $0.8 billion of statutory expenditures. As in previous years statutory expenditures make up the largest component (64.3%) of planned spending.

Table 1 — Total Main Estimates 2008-2009
($ million)

  Budgetary Non-budgetary Total
Voted Appropriations 79,015.2 61.3 79,076.5
Statutory Authorities 141,595.4 795.4 142,390.8
Total Main Estimates 220,610.6 856.7 221,467.3

Source: 2008-2009 Estimates, pp. 1-2.


In total, the 2008-2009 Main Estimates are $9.8 billion greater than the 2007-2008 Main Estimates published in March 2007: an increase of $4.1 billion in voted appropriations and an increase of $5.7 billion in statutory spending. Altogether, this represents a 4.6% increase in the level of the Main Estimates over the previous fiscal period.

While not all of the February 2008 Budget items are accounted for in these Main Estimates, all of the items announced in earlier budgets or fiscal updates are included. Since the Main Estimates are prepared well in advance of the beginning of a fiscal year, they would not include expenditures for initiatives announced in the Budget that require separate legislation or further development to implement, or that were not known in advance due to budget secrecy.

The Budget also provides for possible adjustments to those major statutory expenses driven by economic or demographic variables that could change during the course of the year such as interest costs on the debt and equalization payments to the provinces. Supplementary Estimates permit these requirements to be met within the overall planned expense levels provided for in the Budget or the Economic and Fiscal Update but not reflected in the Main Estimates.

Table II, below provides an overview of the distribution of spending by payment type. A more detailed explanation is available on pages 1-4 to 1-6.

Table 2 — Budgetary Main Estimates 2008-2009
By Payment Type
($ million)

Fiscal equalisation
Canada Health Transfer
Canada Social Transfer  
Other transfers and subsidies (net)
Sub-total Transfers to Other Levels of Government  

Elderly Benefits
Employment Insurance
Universal Child Care Benefits
Sub-total Major Transfers to Persons
Sub-total Other Transfers and Subsidies
Total Transfer Payments  

Operating and capital expenditures
Public debt charges
Other obligations and payments
Total Budgetary Main Estimates  

Adjustments to reconcile with the October 2007 Economic Statement and the net to gross basis of Budget Presentation*  

Total Budgetary Expenses  






* Includes adjustments for the impact of accrual accounting, expenses charged to prior years and any anticipated lapses. It also includes expenses not yet allocated for initiatives which require further development or legislation.

Source: 2008-2009 Estimates, Part I, pp. 1-4.

Program spending by sector is discussed on page 1-6 of Part I of the 2008-2009 Estimates. The section is set out by sector and, within each sector, by federal department and agency. While some sectors show a decline in spending in 2008-2009, others are showing increases that, in part, reflect measures announced in either the 2007 Budget or the October 2007 Economic and Statement. A table in the section summarizes program budgetary spending by sector, along with the total and percent change in spending as compared to the 2007-2008 Estimates.


A. Re-profiling

Some Senators were interested in the meaning of the term re-profiling of expenditures as employed in the Estimates. Mr. Smith explained that there are occasions when approved expenditures cannot be completed in the current fiscal year. These expenditures are transferred into the next fiscal year. The amount listed for the coming fiscal period is offset by a reduction of the same amount in the current fiscal year so that there is no net increase in previously approved expenditures for the items involved.

B. Department of Indian and Northern Development

The Department's appropriations contain two decreases in value from the previous period. The first is in the amount of $108.2 million due to the sunsetting of Budget 2003 funding provided for the First Nations Water Management Strategy. The second is a decrease of $36.7 million reflecting the sunsetting of funding to implement the Action Plan for safe drinking water in First Nation communities. Senators were concerned about whether a provision is being made to continue to deal with these issues. Mr. Smith assured the Committee that indeed a new action plan was being implemented.

Senators observed that there was a $302 million decrease in appropriations for the Department's Justice and legal programs. Mr. Smith explained that the reduction is for a decrease in spending associated with the Office of Indian Residential Schools Resolution of Canada. It relates to several major one-time undertakings that had been included in the 2007-08 Main Estimates such as the implementation of the Settlement Agreement including $100 million for the payment of legal fees, $58 million for transfer to the Truth and Reconciliation Commission, a grant of $125 million to the Aboriginal Healing Foundation, and funding of $20 million for other implementation-related activities.

C. Regional Development Agencies

It was noted by some Senators that there were significant reductions in the budgets of some of the regional development agencies and departments. For instance, the budget of the Atlantic Canada Opportunity Agency (ACOA) is reduced by $38 million and that of the Economic Development Agency for the Regions of Québec by $107.3 million.

The officials explained that in Québec, spending for the Economic Development Agency of Canada will decrease by some $107.3 million or 27.2% due almost entirely to reductions in Grants and Contributions and other transfer payments. Major changes to grant items include a planned decrease of $20.3 million for the Quebec Port Authority and a decrease of $2.4 million because of the end of financial assistance to the Sept-îles Port Authority to expand wharf number 41. The reduction in contributions and other transfer payments was due to several items, including a reduction of $72.9 million in contributions to the Province of Quebec under the terms of the Canada Infrastructure Program and a reduction of $4.3 million to the CANtex Program.

In Atlantic Canada, ACOA is anticipating a net decrease of $38.1 million or 10.4% due primarily to a reduction in activity under the Saint John Shipyard Adjustment Initiative and winding up of the Infrastructure Canada Program.

While the officials pointed out that the decreases resulting from the winding up of the Infrastructure Canada Program will be completely offset by an overall increase of $437.8 million in the budget of the Office of Infrastructure Canada, several senators were concerned about the overall policy effects of moving this program from the regional development agencies to the new program. They were concerned about the impact that this policy shift will have on the distribution of spending in the regions and on the involvement of the provinces in infrastructure projects. The Committee feels that it may be necessary to explore this matter further at a later date.

D. Correctional Service of Canada

There was an interest on the part of Senators about the proposed $304.2 million increase for the Correctional Service of Canada. The officials explained that The Main Estimates for the Correctional Service of Canada are increasing by a net of $304.2 million. Of this total, $200.5 million is in the operating budget, while the remainder is virtually all in capital expenditures. They include a wide variety of expenditures on operations and capital. While there is a $109.9 million of new funding in the capital budget, the officials were not aware of any amount being set aside for new correctional facilities.

E. Heritage Canada

Some Senators were concerned about the overall decline in spending on cultural programs. The officials acknowledged that there was indeed an overall decrease but that there were also increases in the budgets of several government organizations. Nonetheless, Senators remained concerned about the decreases in the appropriation of some organizations in the Heritage Canada portfolio. For instance they observed decreases of $25 million (a decrease of 29.7%) for the Canadian Museum of Civilization and a decrease of $3.3 million (-24.6%) for the National Battlefield Commission. The Committee is concerned about the reduction of these budgets and may wish to examine these numbers in greater detail at a later date.

F. Office of Official Languages

Senators noted that the action plan on official language lapses in March 2008. In the February 2007 budget there is no specified amount for a renewal of the program. Senators wanted to know how an amount for this program will be determined and when will Parliament be informed about the new funding amounts? Mr. Pagan explained the process of preparing an estimate for inclusion in the government expenditure plan. He was not able to say categorically when such a figure would be available, but that when it was it would be listed in the Supplementary Estimates for this fiscal year. The earliest possibility would be in the Supplementary Estimates (A) 2008-2009 which are scheduled for release in late spring of 2008.

G. Public Debt Payments

Senators observed that there is a reduction of $1 billion on the payment of public debt. Mr. Smith explained that the reduction in public debt payments are not only due to the recent reductions in interest rate levels, but also to a decrease in the outstanding debt as a result of debt repayments in recent years. The latest data put the actual federal debt at $467.3 billion for fiscal 2006-2007.

H. Foreign Currencies Risk

Some Senators observed that the Canadian debt is denominated in various currencies and that some government purchases may also require foreign funds. Senators inquired as to how the government provides for fluctuations in currency values when it prepares these estimates?

Mr. Smith acknowledged the difficulty in anticipating currency movements. While the budget could overstate anticipated expenditures because of a rise in the value of the Canadian dollar, it can also end up understating expected expenses when the dollar declines. Although the government is not involved in any arbitrage or hedging operations, there are provisions in the Department of Finance estimates for covering the unanticipated increase in spending due to currency fluctuations of some departments such as the Department of Foreign Affairs.

I. Supreme Court of Canada

Senators saw a reduction of $2.7 million in the proposed budget of the Supreme Court of Canada. Mr. Pagan explained that this is due to the completion of a computer upgrade project—Modernization of the courtroom, audiovisual, IT project. It was a one-time expenditure, and hence the reduction of the Court's budget as compared to the previous year. Furthermore, the spending appears as operating expenses because it is below the $5 million threshold required to list it as a capital project. At that level of funding the Court would have borne the cost out of their operating program.

J. Export Development Corporation

Senators observed that there were payments to Export Development Canada. They noted that these payments are down about $600 million from the previous year. The officials were not able at this time to identify the specific reason for the decline or even the purpose of the payments. They did agree to look into the matter and inform the Committee at a later date.


These and other matters were discussed during the Committee's examination of the 2008-2009 Main Estimates. In the coming months the Committee intends to return to some of these topics and other items in the current Estimates in order to more fully examine the government's spending plans for the 2008-2009 fiscal year and to report on this work at a future date.

The Standing Senate Committee of National Finance respectfully submits its First Interim Report on the 2008-2009 Estimates.

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