Proceedings of the Standing Senate Committee on
National Finance
Issue 13 - Evidence - May 28, 2008 (Evening meeting)
OTTAWA, Wednesday, May 28, 2008
The Standing Senate Committee on National Finance met this day at 6:13 p.m. to examine the expenditures set out in the Supplementary Estimates (A), laid before Parliament for the fiscal year ending March 31, 2009.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: I welcome all the senators and our guests here this evening. My name is Joseph Day, and I represent the Province of New Brunswick. I am chair of this committee.
The committee's field of interest is government spending and operations, including reviewing the activities of officers of Parliament and various other individuals and groups that help parliamentarians, senators and members of the House of Commons 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 this committee by the Senate.
This committee has been studying budget implementation act, Bill C-50, and we will have a number of those issues ringing in our heads. If we happen to get a little bit off-line tonight with our witnesses, you will understand why.
The Supplementary Estimates (A) for 2008-09, were tabled in the Senate on May 13, 2008 and were referred to this committee for review. These are the first set of supplementary estimates that will be issued in this fiscal year ending on March 31, 2009.
I welcome our witnesses this evening, from Treasury Board of Canada Secretariat, Mr. Alister Smith, Assistant Secretary, Expenditure Management Sector, and Brian Pagan, Executive Director, Expenditure Operations and Estimates Division.
Welcome to you both. I understand you may have some introductory remarks. You are both quite familiar with our procedure here. We will then enter into a question and answer dialogue. Mr. Smith?
[Translation]
Alister Smith, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Mr. Chairman, thank you for the opportunity to be here today, this time in order to discuss the Supplementary Estimates (A) for 2008-09 which were tabled, as you said, on May 13 this year.
[English]
I have a very brief presentation, which I believe has been circulated to committee members. I would refer you to this deck that we have circulated.
Senator Nancy Ruth: Could you show us what the presentation looks like?
The Chair: If you flip the first page, you should see something like that. Is everyone okay? It is very helpful to have the deck to follow Mr. Smith as he goes through this process.
Mr. Smith: I will begin by trying to put these supplementary estimates in context and explain why budget initiatives are incorporated here in the supplementary estimates and not in the Main Estimates that we presented a short while ago. I will then try to outline some of the major elements of these supplementary estimates that we are presenting here today.
With me, as you have mentioned, is Mr. Brian Pagan, Executive Director of Expenditure Operations and Estimates Division. After my preliminary remarks both Mr. Pagan and I will be pleased to answer your questions.
If I could ask senators to turn to the second slide of this presentation, the purpose of supplementary estimates is to provide Parliament with information on the spending authority required to implement planned spending for recently approved programs, to realign or transfer existing spending authority between voted appropriations and to update projections on statutory spending.
As you know, in accordance with the House of Commons standing orders, the Main Estimates must be tabled before March 1. The process of compiling these Main Estimates begins the preceding October, so it is not always possible to include in the Main Estimates the appropriations required to support the budget initiatives that were announced just shortly before the Main Estimates. The Main Estimates were tabled on February 28, and the budget was tabled on February 26.
The initiatives presented in these supplementary estimates include some $700 million for priorities that were announced in Budget 2008. The supplementary estimates do play a useful role in enabling the government to bring initiatives forward for parliamentary approval as they become ready.
If I could ask you to turn to slide 3, I will try to explain why we are introducing a third supplementary estimates this year, a spring supplementary estimates, for the first time in about a decade. The introduction of this spring supplementary estimates supports the government's commitment to renew the expenditure management system by better aligning the estimates with the budget. The $700 million in budget initiatives in these estimates represent about 56 per cent of the total of $1.3 billion in new spending that was announced in Budget 2008, the February 2008 budget.
Tabling the supplementary estimates in the spring rather than the fall provides for parliamentary approval of appropriations in June rather than in December, as has been the case in recent years, and as a result that will enable government departments and agencies to provide new programs and services to Canadians earlier in the year and likely curb the frequency and amount of lapses that occur with supplementary estimates in the fall.
Turning to the next slide, we want to give you a couple of quick historical graphics on Supplementary Estimates (A) and (B). Slide 4 shows the size of supplementary estimates over the past ten years. As you can see from this slide, the supplementary estimates we are presenting today of only $4.1 billion are fairly small, relatively speaking, compared to previous years. That occurs because, in part, the time that has lapsed since the tabling of Main Estimates does not provide an enormous amount of preparation time for program design for many initiatives. There is only so much that one could do in this time frame. Second, we have also created a new central vote in the Main Estimates, which you voted on before, for the operating budget carry forward. This is the provision that allows departments to carry forward 5 per cent of their operating budgets. That innovation takes out of these supplementary estimates $1.2 billion in carry forward requests. Those are two of the reasons why this is a smaller supplementary estimates than previous years in Supplementary Estimates (A).
Slide 5 provides a comparison between the Supplementary Estimates (A) and Supplementary Estimates (B) that you have seen over the last few years. As you can see, there is a marked difference most every year between the Supplementary Estimates (A) and Supplementary Estimates (B), with quite a disparity in the two. This year, we hope, with three supplementary estimates, one in May, one in October and one in February, to even out some of the scale of estimates and try to reduce the disparity going from one instalment of estimates to the other.
Page 6 shows an overview of the amounts we are seeking authority for in these supplementary estimates. The total for Supplementary Estimates (A) this year is $4.1 billion, which includes $3.6 billion in voted items requiring parliamentary approval, and $443.5 million in adjustments to statutory forecasts, which of course are provided for information purposes only. These would be the amounts that would appear in the appropriations bill that is tentatively scheduled for introduction in the House of Commons on June 5.
On page 7, very briefly, this new set of supplementary estimates adds incrementally to the Main Estimates, which you have seen before, taking the total to $225.5 billion in the third column. That is a small increase in the supplementary estimates of 1.8 per cent over the Main Estimates numbers, well within the planned spending levels of $239.6 billion that were established by the Minister of Finance in the February 2008 budget.
Slide 8 breaks out some of the main Budget 2008 measures that are in these supplementary estimates. As I mentioned, the primary objective was better alignment with the budget. Slide 8 shows the budget items that total $731.7 million, or 56 per cent of the $1.3 billion in additional planned spending in the budget. The items shown there include funding for the operating costs of AECL and the development of an advanced CANDU reactor, which amounts to $300 million; $162.9 million for the implementation of the First Nations Water and Wastewater Action Plan; $109 million for CIDA to support the Global Fund to Fight AIDS, Tuberculosis and Malaria; and $29.3 million for Veterans Affairs to implement the Veterans Independence Program, which is a housekeeping and grounds maintenance for low income and disabled survivors of war veterans. Remaining budget items will be brought forward in future supplementary estimates and in future Main Estimates as well.
On slide 9, three items account for 34 per cent of the total voted requirements. One is for funding for the tactical airlift capability at National Defence, and that is $557.3 million. A second is funding for a new contribution program, the Building Canada Fund, as a component of the overall Building Canada Infrastructure Plan. The third is to assure program continuity in the implementation of the Growing Forward policy framework at Agriculture Canada.
On slides 10 and 11, other major specific items, including horizontal items, are shown. These are the items that are greater than $100 million individually. In total, they account for close to 70 per cent, or $2.5 billion, of the voted budgetary requirements in these supplementary estimates: $223.1 million to Transport for investments in infrastructure at key international trade gateways and corridors; $163.5 million for INAC to conclude two settlement agreements with First Nations parties; $121.3 million for Industry Canada to support investments in innovation under the new strategic aerospace and defence initiative, SADI, which represents partnerships Canada; $120 million for National Defence for the environmental allowances for Canadian Forces members serving in field units; and $100 million to Indian Affairs and Northern Development for payment to the Quebec Cree to settle implementation issues respecting the James Bay and Northern Quebec agreement.
On slide 12, we also mention, for your information, an adjustment in the spending forecasts for previously approved statutory programs. In this case, there is an increase of $443.5 million, which breaks down into $254.4 million in transfer payments to provincial and territorial governments and an increase of $180 million in temporary financial incentives for provincial governments to eliminate their capital taxes.
If you look at supplementary estimates on slide number 13, by ministry, you can see where some of the largest supplementary requirements are by ministry. For example, Transport Canada, with a supplementary requirement of $769 million, represents approximately 19 per cent of the $4.1 billion in these supplementary estimates. The reason for its large supplementary estimates is its portfolio includes Infrastructure Canada, and therefore you have investments in strategic infrastructure development through the Gateways and Border Crossings Fund contribution program, as well as the Asia-Pacific Gateway and Corridor transportation infrastructure fund, continued project development work on the new crossing at Windsor-Detroit, key infrastructure projects such as the Mississauga rapid transit project, and participation in work on five Security and Prosperity Partnership priorities.
[Translation]
In conclusion, the spring supplementary estimates represent approximately 56 per cent of the new spending initiatives for fiscal year 2008-09 announced in Budget 2008. Parliamentary approval in June, rather than December, for the supplementary estimates will enable departments and agencies to begin delivering programs and services in support of results for Canadians earlier in the year, which meets one of the government's commitments to the renewal of the expenditure management system.
Mr. Pagan and I will be glad to answer your questions about the supplementary estimates procedure.
[English]
The Chair: Thank you very much, Mr. Smith. We appreciate that background. It is helpful to have that deck of the outline with the various graphs. That is helpful to help us understand and focus on the points you are making.
Senator Eggleton: This is early for Supplementary Estimates (A), but that is fine. That is why the amount is small. I just want to ask you a few very quick questions on some of these items.
First, in this major capital equipment for tactical airlift capability for National Defence, this is replacement of the old Hercules aircraft. How many planes will this buy? I assume they will be sole-sourced to Lockheed Martin, which makes the Hercules. This will be the J model; I assume that will all be sole-sourced on that basis.
How many are involved here? What are the delivery dates? Does this $557.3 million include full life-cycle costs?
Mr. Smith: I can answer some of your questions, but maybe we will need to ask our National Defence colleagues to answer some of the others.
This item does relate to the profile of resources for the tactical airlift capability, which is to replace the aging Hercules fleet. The project was announced in 2006 and we will acquire 17 new tactical lift aircraft to replace the Hercules at a cost of $3.1 billion in total. The first deliveries will begin in fall-winter 2010.
I do not know about the contracting provisions, whether this is sole-sourced. If it is Hercules, there is only one producer of Hercules.
Senator Eggleton: There is no one here to answer that then, I take it?
Mr. Smith: We would be happy to confirm that for you.
Senator Eggleton: Very well. I assume it is sole-sourced but I would like that confirmed. Then there are 17 of them, and delivery starts, you said, in the fall of next year?
Mr. Smith: The fall-winter of 2010.
Senator Eggleton: The next one you have here is the Building Canada Fund. The amount that was announced for this fund, which was $8.8 billion, is the amount for this year, I assume. However, it was part of a seven-year package that the government announced. That $8.8 billion happens to correspond to roughly the sunsetted programs that were established by the previous government and are coming up for expiration. Is that the case?
Also, if that is the case, then I want to know if municipalities get priority on this, or is this to be open to the provinces as well? How will they determine how a municipality or province gets money under this Building Canada Fund?
Mr. Smith: The funding for this Building Canada Fund was announced in Budget 2007, and at that time what was announced was $8.8 billion. As you know, it is a component of an umbrella program called the Building Canada Infrastructure Plan, which includes other elements such as the gateway infrastructure.
There is a communities component of the Building Canada Fund which is quite substantial, and more than half the funds, as I understand it, will be flowing to municipalities.
Senator Eggleton: Including the amount being allocated here?
Mr. Smith: The amount being allocated here is for a contribution program which is to handle a number of projects under either the communities component or the other component, which is the major infrastructure component. There are projects on the major infrastructure component which are national or regional, and there are projects on the communities component which are really aimed at communities with populations of less than 100,000. There is a split between the two.
Senator Eggleton: Is there some set of rules or guidelines available that we could get on this program so that we could understand better how this fund will be used?
Mr. Smith: I believe we can provide that to you. In general, this is equal per capita funding among provinces and territories, as I understand it.
Senator Eggleton: Per capita funding on a provincial level?
Brian Pagan, Executive Director, Expenditure Operations and Estimates Division, Treasury Board of Canada Secretariat: We will confirm the eligibility criteria, but as Mr. Smith mentioned, the funding is allocated to provincial jurisdictions on a per capita basis. Under the Building Canada Fund, Treasury Board ministers would only see those projects greater than $15 million for approval; projects less than $15 million are delegated to the minister for approval. The other details we will have to confirm with the department.
Senator Eggleton: Whatever you can get in terms of criteria would be helpful. You say on a per capita basis to the province. Would the province then determine how it is divided up within the province, or is that, again, a federal ministerial approval — subject to what you just said about the $15 million? Who brings forward these applications? Do they come from the bottom up? Do they come from the municipalities through the province to the federal level?
Mr. Smith: We should come back to you with details on the application procedures and criteria.
Senator Eggleton: If you give me the criteria and all that sort of stuff, that will do it.
Let me go to this land duty allowance. Environmental allowance, I do not recall that phrase, but it has been a few years since I have been at National Defence. This is not for operations overseas, such as Afghanistan or things like this. This is something that falls in between. Do I understand you correctly? These would be people who are not on their base but are in some operation, maybe in the country. Can you please explain who gets that?
Mr. Smith: It is compensation for living conditions faced by land forces components, land forces undergoing training or operating in the field. It is more general.
Senator Eggleton: They are not on their base at the time. They are away from the base. They might be in Wainwright or one of these other places where they do training, so these are operational allowances?
Mr. Smith: That is my understanding.
Senator Eggleton: Why is this coming in here? That is an ongoing thing, is it not?
Mr. Smith: The idea is to have parity with the compensation that the other elements, air and sea, already receive.
Senator Eggleton: That is true. Very well. Let me move along to one other area, funds to support the Global Fund to fight AIDS, Tuberculosis and Malaria; that is through CIDA. How much is spent on this item now? How much of an increase is this $109 million? I am sorry, I know it is in the book but my eyesight is a little difficult with these small numbers.
Mr. Smith: This forms part of a $450 million grant to the fund over four years that was announced in Budget 2008.
Senator Eggleton: Does CIDA administer it directly or does it go to NGO organizations under CIDA's guidance or whatever?
Mr. Smith: They participate in the global fund. In fact, Canada was instrumental in the creation of this fund. It is a mechanism to finance developing country planned —
Senator Eggleton: Is this a UN entity?
Mr. Smith: No, it is a separate, very well respected entity. I think it is probably the premier vehicle for combating AIDS in the world.
Senator Eggleton: Very well, that is good. Thank you.
The Chair: Next on the list, a senator from New Brunswick, Senator Ringuette.
Senator Ringuette: Mr. Chair, I have a question for you. My first question is: Will we be hearing from witnesses from AECL and Agriculture Canada?
The Chair: The good thing about this committee is that we have the estimates for the entire year, and these supplementary estimates are referred to us. We can meet with any entity seeking funds throughout the year as outlined in these estimates. I am sure that if you wanted to bring that issue to the steering committee of this committee, we would be pleased to consider it.
Senator Ringuette: Thank you very much.
Mr. Smith and Mr. Pagan, it is always a pleasure to see you here. My first question is with regard to part of the overall spending provision, and I would like an update on the program review with the $2-billion target. I realize that you probably do not have that with you, but could you provide it to the clerk and forward it to us?
Mr. Smith: Senator, are you referring to the expenditure review exercise in 2006?
Senator Ringuette: Yes. I would like to know the status on the $2-billion per year target that was established.
Mr. Smith: My colleague may have a quick answer. We can follow up with a more detailed answer.
Mr. Pagan: Since taking office, this government has made renewal of the expenditure management system a priority, and this priority was reiterated in Budget 2008 in February. Senator, if I do understand correctly, what you are referring to is the initial activity that launched renewal of the expenditure management system which was known as the expenditure review exercise from 2006 where the government established a target of $2 billion?
Senator Ringuette: Yes.
Mr. Pagan: As you know, the former president of the Treasury Board announced the results of that exercise in September 2006. This committee has seen some of the effects or impacts of those reductions, and we recorded those quite transparently in previous supplementary estimates where we could show the overall reduction on departments.
The way in which that exercise worked is that it looked at a range at activities within departments, including some monies that had been allocated to departments in previous budgets but had not come forward and received a parliamentary appropriation. It is difficult, frankly, for us to reconcile all the results in the estimates documents because we do not show negative appropriations in estimates. We only show the net impact or increase.
Senator Ringuette: That is why I am asking.
Mr. Pagan: In 2006, ministers announced the reductions. There was a press release with details on a number of savings across a variety of departments. Since that time, the government has moved on to make expenditure review an ongoing feature of the expenditure management system. Last year, some 17 departments were subject to the first round of strategic reviews that looked at the totality of their A base. Those decisions were presented to ministers this past winter. The results have been incorporated into the fiscal framework but the final details on the reductions in each of the 17 departments is not yet complete, although it is nearing completion.
In Supplementary Estimates (B), which we intend on bringing forward to Parliament in the fall, there will be a depiction or a summary of the first round of strategic reviews for those 17 departments. I have a list of the initial departments that were subject to that strategic review exercise and the next candidates that are undergoing review as we speak in 2008-09.
Senator Ringuette: In the information that you have for the 17 departments, do you have the items or programs that have been decreased to meet the different targets? Do you only have the list of the 17 departments?
Mr. Pagan: At this point, I have the list of the 17.
Mr. Smith: Senator, you may want to also look at annex 3 in Budget 2008. It provides details of the first round of strategic reviews. For each of the departments reviewed, you can see both the reallocation or savings measures and also the reinvestment measures. The savings identified of $386 million were largely rechanneled into reinvestments, usually in the same departments. There are further details on the measures in that annex as well.
Senator Ringuette: Very well. I will look at that. If you can provide us with an update, that would be great. Basically, what you are saying is that I will find it in the annex?
Mr. Smith: Right. This annex will give you an update of the new exercise strategic reviews, the ongoing exercise and not so much the program review exercise that preceded it, the expenditure review exercise that preceded it in 2006.
Hon. Senators: What you are talking about is the 17 departments?
Mr. Smith: That is right.
The Chair: As a point of clarification, Mr. Smith, is that annex 2 to the budget plan for 2008, is that correct, annex 2?
Mr. Smith: Annex 3 on page 252 of the budget.
The Chair: Page 253, right.
Mr. Smith: It lays out each of the departments and the measures proposed to increase efficiency and effectiveness, and even reinvest.
The Chair: Thank you. We have that. That helps us.
Just another clarification before we go back to Senator Ringuette. Who oversees the review of these, in effect, zero- based budgeting? You look at each line item and justify it. Who is doing that?
Mr. Smith: Senator, ministers responsible for the departments themselves in the review bring proposals forward to Treasury Board.
The Chair: Surely ministers are always doing that each year.
Mr. Smith: Indeed. In this case, the terms of reference for the exercise were to look, first of all, very comprehensively at what we call the A base, existing spending programs, and to try to identify high-priority, low-priority, high- performing, low-performing programs and to see whether there was potential to reallocate from the 5 per cent of low- performing, low-priority programs into other areas.
The ministers themselves brought forward these proposals to Treasury Board ministers for approval and, eventually, cabinet and then budget consideration.
The Chair: Thank you. That was helpful. Senator Ringuette, you have the floor.
Senator Ringuette: Now that I am at annex 3, if you would help me understand, it says, for instance on page 253, ``Strategic review savings in millions of dollars, savings identified, 2008-09 $199 million,'' and then for the next two years, $310 million, and so forth.
Then it says ``Reinvestment, strategic review'' and reinvestment includes reinvestment in the international assistance and below, and Budget 2008 reinvestment and review departments.
I have to say, that is a very few words for a lot of money. That is where my question lies. I want to know, in the different departments, what savings were identified? What were the programs that Finance and the different ministers and departments in the 17 different departments were speaking of?
Where did you save? From which program? From what operation did you save $199 million for 2008-09? What are the programs that constitute the next three lines, the reinvestment, the strategic review of reinvestment, the Budget 2008 reinvestment in reviewed departments? We do not know what the reviewed departments are. We know that there are 17; you just told us that there are 17 of them, but what are those reinvestments for a total of $39 million? Then there is another investment in the Budget 2008 priorities for 23. Do you understand my question?
Mr. Smith: I think so. Senator, the next few pages do not go into the detail that you need, but they will tell you a little bit about the exercise. For example, the Canadian Food Inspection Agency identified some areas where the minister thought — and the department advised as well — that money could be shifted into higher priority areas. In this case, the money was invested in the Food Safety Action Plan.
Senator Ringuette: Exactly. Let us take this particular example. We are speaking about food safety and the inspection agency responsible for that?
Mr. Smith: Yes.
Senator Ringuette: On page 254, we see reallocating funding for equipment purchases that are not required, $17 million. What equipment worth $17 million is no longer required to do food inspection, at the same time that we and Canadian citizens are questioning the quality and safety of the food that we have on our grocery shelves?
The next line says: Reinvestment in Budget 2008, Food Safety Action Plan for $21 million. How can you have a food inspection plan and not have the equipment to do it?
Mr. Smith: Senator, the details at the level of programs will be coming out in Supplementary Estimates (B). That is where we will have to implement the line-by-line details. There are areas in every department where, with technological and other changes, some equipment may be no longer needed. In this case, food safety would not necessarily use the same equipment.
Without going into any of the line-by-line detail here, these reviews have led to efficiency improvements as judged by the minister and the department and through the scrutiny of Treasury Board and, indeed, cabinet before they came this far. They are all sensible proposals, I am sure.
Senator Ringuette: I forgot to mention that there is also another line that says ``Take advantage of private sector in regards to food inspection.''
I am saying that for all those 17 departments, I would like to know which programs are being cancelled in order to make what they call increasing efficiency effectiveness, and what is replacing it. I would like to see if it makes sense for the Canadian taxpayer.
Mr. Smith: Those details will be prepared for Supplementary Estimates (B), and that is where we will go through line by line to change reference levels for departments.
Mr. Pagan: Just to add to that and to be clear, as Mr. Smith said at the outset, Budget 2008 has created a statement of priorities and announced a way forward for the government. Estimates are the way that those priorities are brought forward for approval by Parliament, the appropriations. In the same way, with strategic reviews, as a result of the first round, Treasury Board ministers have accepted and directed certain reductions and reallocations within those 17 departments. Those details will be confirmed by Treasury Board ministers over the next few months, and then the results of that will be reflected in a table or some sort of summary in the next supplementary estimates that it will bring forward.
Senator Ringuette: My issue, Mr. Pagan, is that, on the one hand, in February, which was quite a few months ago, announcements were made in the budget for spending. They are here. At the same time, reductions in spending were made. Therefore, it is part of this whole exercise. I do want to see the information before this committee is caught up in September or October or in November, with last-minute information and not being able to make a positive contribution to the programs that we are looking at. That is the issue and the reason for my comments here.
Mr. Smith: Senator, with respect, some of these items are not yet ready for Supplementary Estimates (B), for the next supplementaries. That is when they will be prepared and finalized for that purpose, and have gone through all the various internal scrutiny to be there. There are some that are definitely announced here, and that is what you see, in general terms, here. We would be better positioned to answer the question when we have the details of Supplementary Estimates (B) prepared.
Senator Ringuette: If we are dealing with a budget and Supplementary Estimates (A) is dealing with spending, I would like to know where the money is coming from to make those spending decisions. I want to know what the programs and the operating costs are in the 17 different departments that are being used in order to have the current budget announcement that was done in February and Supplementary Estimates (A). You cannot ask us to approve spending if we do not know where the money is coming from.
Mr. Smith: Senator, these elements here are not in Supplementary Estimates (A).
Senator Ringuette: They were announced in the budget.
Mr. Smith: Only 56 per cent of the budget measures are in Supplementary Estimates (A). What has been prepared and is ready and has gone through all of the internal scrutiny and Treasury Board approvals comes into Supplementary Estimates (A). The Supplementary Estimates (B), and indeed future supplementaries and even the Main Estimates will have to pick up the rest of the budget items for Budget 2008. It does depend on when they are ready for scrutiny.
When we come forward for appropriations, we are only coming forward for increases in spending, not reductions as well, which is a nuance.
Senator Ringuette: It is a big nuance. If we are to approve spending, I want to know where the money is coming from. That is the mandate of the committee. It is not an issue of us approving spending; it is an issue of us also having a mandate to know where the money is coming from to approve the spending.
Mr. Smith: One final point, senator, if I could: In this case, the savings identified have been rechanneled. This is really neutral, essentially, for the purposes of this exercise.
Senator Ringuette: I want to know where the savings that you are re-channelling are coming from, in detail.
Mr. Smith: Thank you. We will be able to provide you with that information for Supplementary Estimates (B).
The Chair: You will try to provide us with whatever you can now, and the rest will be in Supplementary Estimates (B), as I understand it?
Mr. Smith: We will see what we can prepare now, based on this discussion, but the details really are being prepared for Supplementary Estimates (B). It is important that we get the final numbers and that we do this properly.
The Chair: We will be ready when you have the Supplementary Estimates (B). We look forward to seeing you at that time.
Senator Di Nino: I will try to be a little less detailed than Senator Ringuette, although I am not sure I fully understood what she was getting at, either.
Senator Murray: You have heard the expression, ``robbing Peter to pay Paul,'' but Senator Ringuette wants to identify the Peter that is being robbed with the Paul being paid in each case.
Senator Di Nino: We have been hearing from municipalities that the infrastructure money is not flowing. These supplementary estimates have a component of some nearly $400 million for the Office of Infrastructure Canada. Will that reflect on the flowing of money to the municipalities, or are there other considerations?
Mr. Smith: Yes, senator, if Parliament approves these appropriations, this would result in $390.7 million flowing to municipalities and others through the Building Canada Fund. The advantage of these early supplementary estimates is that the money would flow as soon as the supply bill is voted, which we hope will be in June rather than in December. That should help to alleviate some of the problem.
Senator Di Nino: That gives us an answer to some of the questions that we had when we were looking at these figures in another context.
The Chair: We are not confusing this with the $2 billion Community Development Fund. This is quite different from that.
Senator Di Nino: This is infrastructure money. ``Statutory'' basically means that we have no choice. Is this by way of a formula, or are these programs that were approved and are just coming into play now?
Mr. Smith: Senator, these statutory items come from enabling legislation, very often long approved, long in place. Essentially, the statutory increases are driven by demographics, such as pension programs or other social benefits. They have enabling legislation and are demand-driven.
There are some other programs which are more formulaic-driven and are not quite statutory, whereby cost increases are built in. We think of those as quasi-stat programs. In these estimates, we refer only to statutory programs, often on the social side.
Senator Di Nino: Mr. Smith, what confused me were the two items you had under ``Major Statutory Spending.'' One is ``Revised forecast of transfer payment to provincial and territorial governments.'' I imagine that that is a formula. The second item is a ``Temporary financial incentive for provincial governments to eliminate their capital taxes.'' That does not sound like it is based on a formula. Is that borderline?
Mr. Pagan: You are quite right, senator. The first item is formula-driven, based on tax point agreements with the provinces. The second item of $180 million was announced in Budget 2007. It proposed a temporary financial incentive for provincial governments to eliminate their capital taxes by 2011. To be eligible for this federal money, a province must eliminate its existing general capital tax on financial institutions or restructure a currently existing capital tax on financial institutions into a minimum tax that meets agreed-upon standards.
The deadline for this restructuring is January 1, 2011. The amount of $180 million is an estimate and is based on consultations with the provinces, as well as on information from Statistics Canada on the capital taxes paid by corporations in the respective provinces.
Senator Di Nino: The fact that it was included in the statutory spending confused me a little. Thank you for your explanation.
In the Supplementary Estimates (A) book at page 85, you have an item in the amount of $65 million: ``Funding for development, transition and ongoing maintenance related to the assumption of responsibility for corporate tax administration for Ontario.'' Is that a long-standing item or is it new?
Mr. Pagan: That is a new undertaking on the part of the Canada Revenue Agency, based on agreement with the Province of Ontario. This amount of $65 million is for salary and related operating costs required to transfer from Ontario to the federal level the employees who will assume responsibility for Ontario corporate income tax administration. The responsibilities will include modifying information technology applications, communications with stakeholders and Ontario corporations, and audit responsibilities. The objectives are streamlined and improved service to taxpayers in this jurisdiction.
Senator Di Nino: Why are we being so nice to my province of Ontario? Will this eventually save us some money, or will it make the system more effective or efficient? What is the rationale?
Mr. Smith: Senator, one part of the rationale is to have a single corporate income tax administration process for Ontario.
Senator Di Nino: That should result in a more efficient system.
Mr. Smith: Yes, a simplified system.
Senator Di Nino: It would obviously be of benefit to the taxpayers.
Mr. Smith: Yes.
Senator Di Nino: At page 94, under ``Citizenship and Immigration,'' the first item is a little less than $8 million for funding to modernize the information system and manage the backlog. I suspect that this has nothing to do with $109 million that is part of the component of Bill C-50 dealing with some changes to immigration. This is over and above that, is that correct?
Mr. Smith: That is correct, senator. This initiative is aimed at reducing wait times and improving service. Amendments to the Immigration and Refugee Protection Act were introduced to provide more flexibility, but this funding is to address immediate processing pressures at high volume missions abroad. In addition, in Budget 2008, $124 million was provided over five years and $37.1 million ongoing to apply measures to manage growth in the immigration system and to address the existing backlog.
Senator Di Nino: In the previous session, we talked about whether $109 million was enough to solve the problem. I am not sure whether it is related to that one number. We must have been spending a certain amount of money in the last couple of years since we see a supplementary estimate. There must have been some in Main Estimates, et cetera. We have been trying to fix this problem for a long time. How much have we put into the idea of trying to reduce this backlog in the last two or three years? Do you have that information?
Mr. Smith: I would not have an estimate of the overall costs of trying to reduce the backlog, but we could come back to you with some additional information from our colleagues at Citizenship and Immigration.
Senator Di Nino: To be clear, it is not the cost that I am interested in but, rather, the amount expended on that particular initiative.
Mr. Pagan: The initiative being processing or just the backlog?
Senator Di Nino: How much has this government committed in the last two or three years to eliminate the backlog? That information would be useful.
The Chair: For the record, Senator Di Nino, could we clarify the figures that you referred to in respect of the additional spending on immigration? Is that in the presentation?
Senator Di Nino: Yes, that is in the presentation made today. The $109 million is part of the Bill C-50 budget.
The Chair: The Bill C-50 discussion was $109 million, which I understand. The additional amount, is that in the presentation?
Senator Di Nino: It is on page 94, under ``Citizenship and Immigration.''
The Chair: Page 94 of the Supplementary Estimates (A)?
Senator Di Nino: Yes. There was a number there. That struck me, since we have been discussing that initiative. Obviously, this is an issue that the government has been dealing with, certainly for the last year since this is here, but there may be more. It would be useful in our discussions to see how much we can put into that initiative.
The Chair: Knowing what we now know about the growing backlog, I think it could be very useful to us in dealing with this problem.
Do we have your undertaking on that, Mr. Smith?
Mr. Smith: Yes, indeed.
Senator Murray: May I ask the witnesses, one or other or both of them, to describe, just for the record, the process by which the spending plans of Atomic Energy of Canada Limited — which I presume originate with that body, a Crown corporation with its own board of directors, et cetera — the process by which they come and appear in the Blue Book here?
Mr. Pagan: Senator, the process for AECL is consistent with the process used for similar organizations, Crown corporations in this case. They present an annual corporate plan to ministers, and that corporate plan embodies the requirements for a particular planning period through an ongoing process within the Treasury Board Secretariat known as the Annual Reference Level Update. We regularly compile the aggregate of different approvals and initiatives of AECL and any other appropriation-dependent organization. We capture these at one time in the year, which is December, and that becomes the basis of the Main Estimates that are presented to Parliament in February or March.
Over the course of the year, or within that year, as plans evolve, AECL, or any other organization, can come to ministers with a special requirement, provided that that requirement has been provisioned for in the fiscal framework. If it passes through that gate, then it is approved by the executive and rolled into the estimates that are presented to Parliament on a regular basis.
That is the big picture of the process: a corporate plan, a technical exercise to update the numbers for AECL and all departments, and then an estimates document that presents the requirement for anyone or any organization requesting adjustments to that plan.
Senator Murray: Who assists the ministers in doing their evaluation of the corporate plan? Does Treasury Board Secretariat do that?
Mr. Pagan: The Treasury Board Secretariat is intimately involved in the review and recommendation of different positions to ministers, but it is ultimately the ministers themselves.
Senator Murray: Of course. Finance also?
Mr. Pagan: Yes.
Senator Murray: So you recommend whether or not a particular aspect of the corporate plan ought to be approved by ministers; is that the case?
Mr. Pagan: That is right.
Senator Murray: Once that is done, the other stages that you have mentioned, when they come during the course of the year to present their needs, that becomes fairly routine, I would think, once the corporate plan has been approved. Is that fair?
Mr. Pagan: That is a fair starting point, yes. If ministers have previously seen a plan and then a department brings forward a request that is consistent with that plan, whether it is the provisioning of capital equipment for DND or operating requirements for AECL, it does tend to get approval.
Senator Murray: However, there is some difference between an organization such as AECL and the Department of National Defence, or a line department of government in terms of your role, is there not?
Mr. Pagan: Yes. We have a dedicated sector within Treasury Board Secretariat that is responsible for Crown corporation policy generally, broadly, and in particular, aspects related to guidelines for corporate plans, governance of Crown corporations and the like, so there is specific policy direction provided.
Senator Murray: When you talk about ministers, do you mean Treasury Board Ministers?
Mr. Pagan: Treasury Board ministers, yes.
Senator Murray: Mr. Chair, our briefing notes for this meeting suggested a number of questions. I do not know whether they have been asked. I am interested in several of them.
The first is Order-in-Council P.C. 2007-1888, which transferred control and supervision of the Federal Project Coordination Secretariat and the Pipeline Readiness Office of the Mackenzie Gas Project from the Department of Indian Affairs and Northern Development to the Department of Industry. Why was this done?
Mr. Smith: Senator, the responsibility moved with the minister who has oversight, Minister Prentice, so it simply follows him around.
Senator Murray: There is precedent for it; that is all I can say. It is odd. If Minister Prentice had gone to the Department of Health, I suppose it could still have followed him there, or to the Department of Immigration?
Mr. Smith: Ministers are assigned certain responsibilities. Minister Baird is assigned responsibility for the Toronto Waterfront Initiative. It used to be with Treasury Board and is now with environment. That is what that item reflects.
Senator Murray: Then we have the order in council that authorizes the Canada Development Investment Corporation to procure the incorporation of a wholly-owned subsidiary under the name PPP Canada Inc. — public- private partnerships, I guess that means — effective February 7, 2008.
This is a big subject here. These PPPs have had rather mixed reviews in the provinces where they have been tried. Why is the federal government going this route, incorporating a subsidiary under the name of PPP Canada? The order in council authorizes it to be done. Has it gone ahead? What are the functions of PPP Canada? It says here: Who was the previous owner of the company? I do not know what that means. Perhaps there was a company in existence. Do you have some detail on that item for us?
Mr. Smith: I would be happy to provide some details, senator. As you know, Budget 2007-08 did announce these measures to create this PPP Canada. The federal office is a Crown corporation which will work with the public and private sectors towards encouraging the P3 market. It will be responsible for managing the P3 fund, and will be a source of expertise and advice on P3 matters.
The fund investments will be used to provide federal contributions to municipal and provincial infrastructure projects, excluding federal assets. The supplementary estimates here seek funding of $95.5 million to allow the newly created PPP Canada Inc. to undertake its operations and to launch the fund.
Senator Murray: PPP Canada Inc. is a Crown corporation?
Mr. Smith: That is correct.
Senator Murray: And you incorporated it?
Mr. Pagan: That is right, yes.
Senator Murray: Under what act did you incorporate it?
Mr. Smith: The order in council mentioned here authorizes the Canada Development Investment Corporation to procure the incorporation of a wholly-owned subsidiary under the name of PPP Canada Inc.
Senator Nancy Ruth: A Crown corporation?
Senator Murray: Not quite.
Mr. Pagan: The enabling legislation for that, if I am not mistaken, was the Budget, and the Economic Statement Implementation Act, 2007. That was a provision of the BIA.
Senator Murray: Perhaps there is something that I do not understand here. The Crown corporation is the Canada Development Investment Corporation. You have authorized them to create a wholly-owned subsidiary and to incorporate it under the Canada Corporations Act. Is that the way it is being done?
Mr. Smith: I am sorry, senator, I do not feel that I am at all expert on this area. We could try to come back to you with some more detail.
Senator Murray: It may be. What I am getting at is to what extent they are putting this subsidiary at as great a remove from parliamentary oversight and control as they can. That is what my suspicious mind is getting at.
Mr. Smith: We can certainly come back to you with some more information.
Senator Murray: I would like to know who is running this thing. I would also like to know exactly how it is being run, if you could please let us know.
Finally, there is another order in council here, amended Schedule I.1 to the Financial Administration Act to add the office of the Communications Security Establishment Commissioner to the list of divisions or branches of the Public Service of Canada, and names the Minister of National Defence as the ``appropriate minister.'' Is this a typographical error? It says ``effective 24 September 1996.''
Mr. Smith: I think that is still correct.
Senator Murray: Regarding the Communications Security Establishment Commissioner, is that an oversight person or is that the guy who runs it?
Mr. Smith: That is an oversight commissioner.
Senator Murray: That person or that office is now being added to the list of divisions or branches of the Public Service of Canada. It is being brought in from the cold, is it? Where was it before?
Mr. Smith: The services provided to it were provided by PCO and reimbursed essentially by DND. It will now be more formally created under the Minister of National Defence.
Senator Murray: That is the next question. You say ``under the Minister of National Defence.'' I have never seen this description before. It names the Minister of National Defence as the ``appropriate minister,'' effective 24 September 1996, which is getting on to some 12 years ago.
What does ``appropriate minister'' mean? Is the Minister of National Defence the responsible minister, or is he just the minister who reports for the communications commissioner? What does ``appropriate minister'' mean?
Mr. Smith: I am not sure I can answer that question very well, but I do want to underscore that this office would still have continued independence from the Department of National Defence. That is key. The establishment of a separate vote here ensures that its budget can only be reduced or increased with the approval of Parliament, so it just underscores its independence.
Senator Murray: And that of the ``appropriate minister.'' You understand what I am getting at. I presume the relationship is that the Minister of National Defence reports for the commissioner to Parliament?
Mr. Smith: That is for the purposes of the estimates.
Senator Murray: Yes. I think we understand each other. The autonomy is protected. That is what it means when it says ``appropriate minister,'' rather than ``responsible minister.''
Mr. Smith: That is my understanding, and I am not a legal expert.
The Chair: We should have on the record that you are satisfied that the date of 1996, which is 12 years ago, which appears on page 13 of Supplementary Estimates (A), and which formed the basis of Senator Murray's question, that that page 13 is not a typographical error? It is indeed 1996?
Mr. Pagan: That is correct, senator.
Senator Murray: Why would they be saying ``effective 1996''?
The Chair: There must be an awful lot of people in National Defence wondering where the appropriate minister has been since 1996.
Senator Murray: Is this a technical point, or is there something substantive to it?
Mr. Smith: This is a clarification on what was the case, but in breaking it out separately here as a separate vote, we had to identify the appropriate minister for this organization. There is no real change.
Senator Murray: There is no hidden agenda?
Mr. Smith: There is no hidden agenda.
The Chair: It went for 12 years without National Defence knowing who the appropriate minister is. Maybe you do not need to change it.
[Translation]
Senator Biron: The Department of Indian Affairs and Northern Development is asking for $163 million in order to conclude agreements with the First Nations. What is the total cost of these two agreements for the federal government?
Mr. Pagan: Senator, these figures are an estimation made by the Department of Indian Affairs to resolve certain files that are currently being negotiated with various actors. The purpose of resolving these files without going to court is because we want to negotiate or reach agreements with our clients without going to arbitration. At this time, it is merely an estimate. The real figures will be finalized once the parties have signed the agreement. Therefore, I cannot give you any further details at this time, because these files are currently being negotiated with the clients. Thus, we are not able to disclose the department's negotiating positions.
[English]
Senator Biron: Is there any other litigation or claim pending from the First Nations?
Mr. Pagan: There are a number of outstanding claims or contingent liabilities that face both the department and the federal government as a whole. According to the Department of Indian Affairs and Northern Development's 2006-07 financial statements, there are 71 comprehensive land claims outstanding, and 744 specific claims, and 451 of these are being pursued through the courts.
[Translation]
Regarding the supplementary estimates, this involves 2 cases out of a total of 451 files currently being negotiated or settled in court.
[English]
The department estimates their liability, and this is something that is recorded in the public accounts, under contingent liabilities, at something in the order of $3.2 billion.
The Chair: You never like your opponent in a court case to know how much you have set aside to pay them out. Is this somehow just grouped all together so that the individual claimants would not be able to make an estimate? They could divide $3.2 billion by 744, and say, ``On average, I should get X dollars.'' That is very interesting.
Senator Stratton: I will be brief. This question of water and wastewater for First Nations, the government has been trying to clear up the concerns of the boil water advisories. I think there were 182. and it is down now into the 90s, or something like that. It was brought down fairly quickly because the easy ones were done first.
This says that you have $162.9 million in funding for this purpose. Is that new money, or is it transferable money? I want to get out of ahead of Senator Ringuette here.
Mr. Smith: Senator, there is funding here for $137.2 million for the First Nations Water and Wastewater Action Plan. It includes both operating funds and grants and contributions. The funding is to support the development of a regulatory regime for First Nations that is enforceable and compatible with provincial and territorial regimes, which would help provide continued investments in the capital construction and operation of water and wastewater systems.
It is a fairly comprehensive set of initiatives. It does build on existing efforts to improve water on reserves, but it goes well beyond that and targets operations and maintenance funding.
Senator Stratton: I guess my question is: When we see this amount of money, $330 over two years, my question is how long will it take to try and solve this problem? Is there a projected end to solving the problem of water and wastewater treatment on First Nations reserves?
Mr. Smith: Senator, I do not think we would be qualified to give you an answer.
Senator Stratton: I have to go to Indian and Northern Affairs?
Mr. Smith: We would be happy to ask them.
Senator Stratton: I would appreciate it. Some of the problems are much more difficult to solve than others. You have to start from scratch and do the feasibility study, do the engineering and then put that out to tender, and all the rest of that, but I would expect they would have some kind of plan to have this issue resolved.
Mr. Smith: This is a pretty substantial investment.
Senator Stratton: That is why I would be curious to see, if there are 92 or 98 left, what the number is brought down to and how many years are left to solve the balance. I would appreciate that very much.
Mr. Smith: We will come back to you with information on this item.
Senator Stratton: Thank you.
The Chair: Thank you, Senator Stratton. I just have two or three points of clarification.
All the figures you have given us in this documentation is based on a cash accounting basis and not an accrual basis?
Mr. Smith: That is correct, senator.
The Chair: When we look at the question that Senator Eggleton had earlier of $500 million for aircraft, that clearly will not buy those aircraft, but that must be some upfront money or administrative money, as opposed to an accrual basis of one year over the life of the aircraft?
Mr. Smith: That is correct. For appropriations purposes, we only refer to the cash estimates.
The Chair: On that contract for the new tactical aircraft that you discussed earlier, that $500 million is to do with an upfront, good faith payment or something along the lines of negotiating the contract as opposed to buying the aircraft?
Mr. Smith: The overall cost is $3.1 billion, and this is at least one stage in the acquisition of those aircraft, the $557 million.
The Chair: This is actual cash that must go out this year?
Mr. Pagan: Senator, when the contract was signed — and we will confirm whether that was a competitive or a sole- source contract — there would have been a basis-of-payments schedule negotiated that it is dependent on progress in the manufacturing line. As the manufacturer reaches a successful completion, say the completion of the fuselage or the wings, they would submit an invoice to the department for payment against that item.
The Chair: It is a progress payment?
Mr. Pagan: At this time, this is the department's best estimate of the cash required to pay the contractor this year for the progress that is anticipated in the contract.
The Chair: That is helpful. You had another discussion earlier in terms of real dollars, and then there was a suggestion that some of the infrastructure programs of previous administrations had been cancelled or moved into a new Building Canada Fund.
The actual dollars that you have here are new dollars, and not dollars transferred from a previous program that was not fully used up, had then been clawed back and are now being reallocated? These are actual new dollars going to infrastructure that had not been announced in previous programs; is that correct?
Mr. Smith: That is correct.
The Chair: Thank you. Is the procedure for handling the classification of documents a Treasury Board function to ensure that these procedures are properly followed? Is that correct?
Mr. Smith: There is a government security policy which does cover elements of this, but there is also a Security of Information Act which I believe goes beyond Treasury Board's responsibilities.
The Chair: Classification is one thing, but ensuring that people who work for the government are actually following the rules according to the classification, is that a Treasury Board function to ensure that those employees or persons are actually following the rules?
Mr. Smith: Again, this is an area where you are taking us out of our area of comfort and expertise; but as I understand it, there are two sets of provisions here. There is the Security of Information Act which deals with classified documents, and then there is the government security policy which is a very broad policy which is a Treasury Board policy.
The Chair: It is a Treasury Board policy?
Mr. Smith: The Treasury Board policy applies to broader issues of security, including security of infrastructure and security of government offices, and very broad areas such as IT systems.
I think what you are referring to is the Security of Information Act.
The Chair: I want to know what department in government, if not Treasury Board, ensures that the rules generated — I would have guessed by Treasury Board, but if by some other body — are administered and ensures that those rules are being followed?
Mr. Smith: If you are referring to cabinet documents, it is the Privy Council Office.
The Chair: I might be, but I might not be.
Senator Murray: Who is the minister responsible for the Security of Information Act?
Mr. Smith: That is a good question. It may well be the Prime Minister. At the end of the day, yes, it may well be.
The Chair: Could you let us know how that is administered, who oversees the rules with respect to the handling of confidential documents? Presumably, if it is top secret, they are handled a bit differently than they are for ``secret'' and then ``confidential.''
Who oversees the rules and who ensures that those rules are being followed? If they are not followed, what steps are taken?
Mr. Smith: We will get back to you with some further information on that.
The Chair: Thank you. Just in passing, we were talking about funding to communities and the Community Development Trust. Can you tell us if the money has gone from Treasury Board, from the government purse to the trustee? Has the $2 billion been transferred yet?
Senator Ringuette: $1 billion.
The Chair: Has it gone down?
Mr. Smith: Again, we will double-check, but as far as I know, the funds have gone to the trustee and would be ready for all of the agreements that were signed with the provinces under the national Community Development Trust.
The Chair: Yes. The last we heard was that all the agreements had not been signed between the trustees. Perhaps you could bring us up to date on that, if the funds have gone from the government purse to the trustee. We understand you have nothing further to do with it once the money has been transferred. If you could help us with that information, it would be helpful.
Mr. Smith: Very well.
Senator Murray: Is there one trust, as I thought was the case, or is there a separate trust for every province and territory? I ask the question because I do have some information — it is not for me to place it on the record — that I obtained through our own research people.
The Chair: Perhaps we could ask these witnesses if they could confirm that for you.
Senator Murray: I am told here that the trusts, plural, have been set up and an agreement exists for all provinces and the three territories. My interlocutor was informed that the funds are available to the provinces to carry out their activities under this program.
I have been given, although I have not had a chance to read, the various press releases and so on and the priorities of certain provinces in respect of areas that they want to develop. What I do not know about is what the evaluation process, if any, is to be, whether that is the end of it so far as the federal government is concerned. Perhaps in due course we can get that information one way or the other.
I was about to put some written questions or have some questions put on the Order Paper about this matter, but if you can provide that information by way of a letter to the chair, that is fine.
The Chair: It is the Community Development Trust legislation, Bill C-41, that we handled a while back. We would like an update on where it is. That would be helpful.
I think the final question I have is with respect to your $223.1 million to implement the Gateway and Border Crossing Fund contribution program. That has been announced and that has been partially funded. The money has been flowing on that. What do you mean to implement? What has happened, and why is this item in Supplementary Estimates (A) and not in the Main Estimates? Did you find it?
Mr. Pagan: Yes, senator, I have something on that. This initiative, the Gateway and Border Crossings Fund, is valued at $2.1 billion over seven years, and the $223 million included in these supplementary estimates represents the year-one funding that was recently approved by Treasury Board ministers. It is simply a question of the timing. The terms and conditions of the program were not in place in time to be included in the Main Estimates in February.
The Chair: But money has already flowed on this?
Senator Stratton: Yes. There was a project in Manitoba.
The Chair: Money has already flowed, so you are not implementing what you just got around to getting the rules on?
Senator Stratton: The announcement was not that long ago, so I do not think they would have that.
The Chair: The money in the Maritimes in Halifax was spent about a year ago.
Mr. Smith: If I could clarify, senator, I think —
The Chair: If this is just an annual subscription to the seven-year program, then it should not be in Supplementary Estimates (A).
Mr. Smith: Budget 2007 kicked off this item. There were funds provided then for the Asia-Pacific Gateway and Corridor Transportation Infrastructure Fund. Since then, money has flowed from this fund. Here we are coming back for further funds for the implementation.
There are many different projects under that fund. It may be that the language suggests implementation and therefore just start-up when in fact —
The Chair: Could you clarify that for us?
Mr. Smith: Sure.
The Chair: That would be helpful. There may be a new initiative that was announced, as Senator Stratton suggests, under that same umbrella, but a new initiative that was not contemplated before.
Senator Stratton: For clarification's sake, it was an overpass of a train crossing to expedite the transport of goods to the coast. It was Asia-Pacific infrastructure that was being constructed. It is not a new initiative. It is just a new project to enhance that Asia-Pacific corridor.
The Chair: Senator Stratton, as I understand the witnesses, it is a program costing $2.1 billion over seven years, and so there will be amounts each year that will be made available. Then for the specific programs, like overpasses that you have, applications will be made to Treasury Board to release some funds for that particular program?
Senator Stratton: Yes.
The Chair: That should not be showing up in a supplementary estimate.
Senator Stratton: Why not?
The Chair: Because it is a Main Estimates item. It is predictable. Supplementary estimates are for something you did not know anything about.
Senator Stratton: Maybe, at that stage, they did not.
Mr. Smith: Senator, not necessarily. It could be that a particular element of a program was not quite ready to be funded. The money would have been set aside, essentially, but the department must come forward with a business plan, with specifics, with program design. That is when it would show up in the supplementary estimates.
The Chair: You will get us some information on this item, but when you get the information back to us, are you telling me that a program such as an overpass would not come out of an annual allocation under this $2.1 billion, seven-year program? It would not come out on an annual basis but, rather, would only come out in a supplementary estimate when the specific program is known, and there would be no drawdown on that money otherwise?
Mr. Smith: The individual cases will vary here. It is hard to be definitive on this.
The Chair: I will look forward to a little clarity.
I was listening to Senator Murray's question and the process. We are still trying to grapple with some of the terminology and how the process works in terms of Treasury Board's role in determining the overall fiscal framework. What is the other term that you often use — the reference, the specific amount that is allocated at a particular time?
These terms are a little bit different from what we use in terms of budgets and line items, but they seem to refer to the same things. When you say this Supplementary Estimates (A) is still within the overall fiscal framework, do you mean it is still within the overall budget that we were talking about?
Mr. Smith: Yes, senator, it is within the overall budget. The fiscal framework is really set by the budget, by the Department of Finance.
The Chair: On an annual basis, when the budget is released?
Mr. Smith: On an annual basis.
The Chair: But you call it a fiscal framework?
Mr. Smith: We do.
The Chair: Thank you. I will start doing that, too, and stop calling it a budget. Next time we see the minister, we will say ``That was a fine fiscal framework you came out with.''
When the ministers were in Halifax with the Prime Minister, they made an announcement of $20 to $30 billion with respect to DND. Has that money been allocated? Is that part of the fiscal framework?
Mr. Smith: You are referring to the Canada defence —?
The Chair: Yes, the announcement in Halifax.
Mr. Smith: The Canada First Defence Strategy. Any funding for the Canada First Defence Strategy would have been booked in the fiscal framework before an announcement.
The Chair: It would have been booked and was booked are two different things. Was everything that was announced previously booked?
Mr. Smith: I do not have the statement of what —
The Chair: If I were to give you the statement, will you go through it? To save everybody's time here, we will not do it now. Will you let the clerk know and we will circulate it to everybody?
You recall that the Prime Minister announced $20 billion, and then Minister MacKay said, no, no, no, it is $30 billion over the next 15 years. Has that all been booked? That all should have been booked, is what you have told me. Would you confirm that it all has been booked?
Mr. Pagan: Yes.
Mr. Smith: We will confirm that.
The Chair: I have all the announcements here for you. It gets quite complicated. Is there anything flowing from any of my questions?
Mr. Pagan: Senator, I think I can clarify one of the questions that you raised with respect to the Border Crossings Contribution Fund.
The Chair: Yes.
Mr. Pagan: The difference, and Senator Stratton, I think, was alluding to it, is that it can sometimes be the difference between a particular contribution program for which there are detailed terms and conditions, and then what might be more routine or normal procedures that can be funded from a department out of their operating budget.
For reference purposes, what we would do is take you back to the Main Estimates tabled in February, which I have. When we look at the Department of Transport, on page 24-5, they break down their program activity in terms of what they expect to achieve with their funding through the year.
As you know, grants and contributions are listed in the estimates, and so when we look at Transport's contributions, we will see that the Asia-Pacific Gateway and Corridor Transportation Fund is listed, but the Border Crossings Fund contribution is not yet listed. It may have been announced. There may have been discrete, smaller projects that may have been funded out of an operating budget. However, in terms of a larger contribution program, that has only recently been approved by Treasury Board ministers, and that is the reason it is being brought forward now in these supplementary estimates.
The Chair: You just referred me to page 24. Is that the Main Estimates?
Mr. Pagan: Yes.
The Chair: As you were answering, I was frantically looking for it in the supplementary estimates. That is why I was not following you as clearly as I should have been, perhaps. We have the supplementary estimates here, and I appreciate you tying the two together, but I will still look forward to your explanation of that in due course.
Senator Ringuette: You mentioned earlier that, in the process of having money allocated, the first thing is that the department and the minister submit a plan to Treasury Board, sometimes to Treasury Board and Finance, and sometimes jointly. Did I hear that right?
Mr. Smith: Senator, there are different ways of addressing this. Ministers bring forward memoranda to cabinet for policy proposals, and then, once those are approved by cabinet, they then come to Treasury Board ministers for the approval of the specifics of the business plan, the funding, implementation — the more detailed application of the policy. The Treasury Board involvement is one of taking a policy that has been approved by ministers and translating that into action.
Senator Ringuette: Where is the policy that has been approved and the subsequent plan from your department in regard to the announcement that was made in Halifax, mentioned earlier by Senator Day, for $30 billion of Canadian taxpayer's money? One day, we seem to have had a press release, and then the next day we seem to have no plans and no real policy. How has that $30 billion been announced without any policy or plan?
Mr. Smith: We cannot go into which memoranda to cabinet are considered by cabinet and decisions by ministers. There is a very well-known and established process for determining what policies will be announced. Funds are set aside for those in budgets. When items come forward thereafter for implementation, they will come to Treasury Board individually. That is where we start to see them.
Senator Ringuette: Can you provide us with the plan that you have seen in regard to the spending of $30 billion?
Mr. Smith: Senator, we cannot, because we are at the implementation end, if you wish, of the spectrum, or the implementation side of the process. When policies are determined at cabinet or announced sometimes in budgets, they still will come through the estimates process after they have gone through Treasury Board. That can still be some distance down the road from the time they come through budget or through the cabinet process.
Senator Ringuette: I understand what you are saying. I and the general public do not understand why there was an announcement of $30 billion in spending with no plan. That is a major concern. I would like to receive the information that you have in regard to what the spending plan is for this amount of money. What is the strategic spending plan for it? I think that is important. Maybe there is already a request through the Access to Information Act from a media outlet or a concerned citizen, but I am making this request as a member of Parliament to Treasury Board right now.
Mr. Smith: Senator, you are asking for the details of the announcement that Senator Day mentioned before that was made in Halifax, and what the elements were; is that correct?
Senator Ringuette: Yes.
Mr. Smith: We can try to provide that information, but that is about as far as we can go. This really is not a Treasury Board matter, per se. It becomes a Treasury Board matter when the items come in individually for Treasury Board scrutiny and the approval of ministers, and funding and the sequencing and implementation. That is when it shows up next in Main Estimates and supplementary estimates, and our arcane reference level updates, and so on. We see that part of the process at the end of the process as opposed to the policy side of the process.
Senator Ringuette: I understand the policy side of the process, but you said maybe half an hour ago that before Treasury Board approves spending, they must approve the plan. In order to approve a plan, you need to have one.
Mr. Smith: Senator, that is not quite what I think I said. If I did, I did not mean it that way. When a budget comes out, we see the plan. We see the spending and the plan for many, many items here. These represent the government's stated intentions about what to do with First Nations water or infrastructure, or many other things. When this gets translated into the individual items for implementation, that is when we see it. We see Treasury Board submissions coming in, and we see the funding, and we look for the source of funds. We see a source of funds in the budget. We see policy approvals by cabinet. We look at the implementation plans, and we scrutinize them. Our role in the process is very much at that implementation end.
Mr. Pagan: The plans to which I referred dealt with corporate plans for Crown corporations.
Senator Ringuette: Yes, I am coming to that next.
Mr. Pagan: They are treated slightly differently than departments. As Mr. Smith says, for something like a government white paper, be it on defence or the environment or our international development agenda, the process by which that plan is approved is by the appropriate cabinet committee, not by Treasury Board ministers.
Once the policy coverage is in place by the cabinet committee, then the department can access Treasury Board ministers to approve the funding. As we are explaining, we only see that tail.
Senator Ringuette: You see the plan to proceed with the funding?
Mr. Pagan: We would not know any more about DND's plan than that which was announced in Halifax because we do not see the detailed agendas of those cabinet committees. Ministers and the PCO manage that process.
Senator Ringuette: What will you see from this process to release the $30 billion?
Mr. Smith: Down the road, as we do with all of the Canada First Defence Strategy, we will see the individual elements. We will see tactical airlift and various other capital expenditures as they come through. We will see them over time, and this will probably be over a matter of years.
Senator Ringuette: You never receive an overall plan?
Mr. Pagan: There is a reference here to the replacement of the Buffalo fixed-wing search and rescue aircraft. The suggestion in the announcement is that that will proceed in 2014, at the earliest. We at the Treasury Board Secretariat would see the funding request for that Buffalo fixed-wing replacement sometime around 2012 or 2011, something like that.
Senator Ringuette: You have also mentioned that Treasury Board is responsible for Crown corporation policy direction and guidance.
Mr. Pagan: That is right.
Senator Ringuette: Could you provide this committee with policy direction and guidance for the two following Crown corporations: AECL and Canada Post?
Mr. Pagan: There would not be specific guidance to either of those two entities from the Treasury Board. There would be a policy on corporate governance and guidelines for corporate plans. Crown corporations adhere to those processes so that they have a way of selecting CEOs, boards of directors and independent auditors and the like. We provide direction in terms of governance.
In terms of their corporate plan, that is something approved by ministers and that would be a cabinet confidence. We see the funding implications of any approvals from that plan and are brought forward for Parliament's approval. The plan itself would be a cabinet confidence.
Senator Ringuette: You do not have individual policy direction and guidance? Is it a general statement for Crown corporations?
Mr. Pagan: That is right.
Senator Ringuette: Chair, I want to reiterate that we need to have AECL before this committee.
On your slide 10, the last item for Industry Canada, there is an item for $121 million and it is noted as: ``Funding to support strategic investments in innovation under the Technology Partnerships Canada Program, and the Strategic Aerospace and Defence Initiative.'' Could you give me some information on that?
Mr. Smith: We can, senator. As you know, the Technology Partnerships Canada Program was established in 1996 as a special operating agency within Industry Canada. It was aimed at the development of commercialization assistance, part of the continuum of support to corporations in the technology area.
The Strategic Aerospace and Defence Initiative, SADI, was created specifically to facilitate industrial research and development by the federal government in Canadian aerospace defence, space and security companies, as well as to foster collaboration between research institutes, universities and colleges and the private sector. SADI will replace TPC, however some of the terms and conditions of TPC, which were extended in 2007, will continue to be used for the purpose of managing some contribution agreements, contracted up until 2006.
Senator Ringuette: Did I understand correctly that this is a scenario of robbing Paul to pay Peter?
Mr. Smith: No, I do not think so. I think there is transition with any program such as TPC. If you have extended repayable contributions under a program such as this, you must let the program run until you can collect those repayable contributions.
In the meantime, the program itself has been replaced with another program called SADI. This funding is to support investments under it, as well as continuing the transition with the old program.
Senator Ringuette: It is —
Mr. Smith: Transitional.
Senator Ringuette: — the Peter and Paul scenario.
The Chair: Thank you, honourable senators. Mr. Smith and Mr. Pagan, I am afraid we have left you with quite a bit of homework this time, but all of this information is helpful to us. We know we can rely on you to produce the documentation that is helpful to us in performing our mandate.
We thank you very much for being here this evening with Supplementary Estimates (A), and we congratulate you on getting it out so quickly. That must have been quite a bit of work. Keeping it down to $4 billion always makes us all feel very good. We look forward to the next opportunity to meet with you, and receiving the documentation in the meantime.
The committee adjourned.