Proceedings of the Standing Senate Committee on
National Finance
Issue 1 - Evidence - Meeting of March 16, 2010
OTTAWA, Tuesday, March 16, 2010
The Standing Senate Committee on National Finance is meeting today at 9:32 a.m. to consider Supplementary Estimates (C), 2009-10, tabled in Parliament, for the fiscal year ending March 31, 2010.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: I welcome you to the first sitting in this session of the Standing Senate Committee on National Finance.
This morning, we are continuing our consideration of Supplementary Estimates (C), 2009-10, which were referred to our committee last week. Supplementary Estimates are used for various purposes.
[English]
First, they provide information on the government's spending requirements that were not sufficiently developed when Main Estimates were tabled for this fiscal year or have been refined subsequently to account for new developments in particular programs and services. Second, they provide Parliament with information on changes in forecast statutory expenditures, meaning those authorized by Parliament through enabling legislation. Finally, they are used to seek parliamentary approval for items such as transfers of money between votes or categories, debt deletion, loan guarantees, new or increased grants and changes to vote wording.
This morning, we are pleased to welcome back to this committee Alister Smith, Assistant Secretary, Expenditure Management Sector, from the Treasury Board of Canada Secretariat. He is accompanied by his colleague and our friend Brian Pagan, Executive Director, Expenditure Operations and Estimates Division of the Treasury Board of Canada Secretariat.
Gentlemen, thank you for being with us again to help us with another of these extensive documents, this one entitled Supplementary Estimates (C), 2009-10.
The floor is yours, Mr. Smith.
[Translation]
Alister Smith, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Mr. Chair, I would like to take a few moments to provide you with an overview of the Supplementary Estimates (C), with emphasis on the acquisition process context, the total amount of the Supplementary Estimates, the key features of the main initiatives and the implementation of the priorities set out by the government in January 2009 as part of the 2009 Supplementary Estimates.
[English]
I would like to provide you with a brief overview of the Supplementary Estimates (C) document. I hope you all have the decks for our presentation. The purpose of Supplementary Estimates (C) is to seek Parliament's approval of the spending authority required to implement planned spending for programs within the 2009-10 fiscal year. This includes approximately $16.1 million from Budget 2009. These supplementary estimates help to realign or transfer existing spending authority between voted appropriations, different votes for government departments. As the chair mentioned, they also inform you of updated projections of statutory spending.
On the third page is a diagram laying out the supply schedule for the year and the entire context within which we ask for appropriations. It is simply to remind the committee of key dates for these Supplementary Estimates (C). The first date is the end of the supply period, March 26. This document has to be approved by Parliament by March 26 for cash to flow to departments for the end of the 2009-10 fiscal year. The next key date is June 23, the end of the next supply period which will be important for Main Estimates. December 10 is the third key date in that diagram.
These supplementary estimates were tabled on March 3 following prorogation. They are for this particular supply period ending March 26.
The next page provides an overview. These supplementary estimates total $6.1 billion. That includes $1.8 billion in voted items for which we need approval. These voted appropriations are the key elements of the supplementary estimates. There is also a change in the statutory authorities of $4.3 billion.
The table distinguishes between budgetary and non-budgetary items. We are mainly interested in voted items as opposed to statutory items because we need parliamentary approval. However, the budgetary/non-budgetary distinction is also important. Non-budgetary items refer to loans, investments and advances whereas budgetary items actually affect the deficit.
On the non-budgetary side of the ledger, we have $708 million, of which $450 million is the forgiveness of a loan to the government of Pakistan and $243 million is an increase in loans to the Canada Student Financial Assistance Act.
Voted budgetary items are the main focus for us in the supplementary estimates. The largest parts of the $1.3 billion in voted budgetary requirements, for which we are asking Parliament's approval, are: $179.4 million for policing and security preparations for the 2010 G8 and G20 summits; $176.1 million for Canada's initial response to the earthquake in Haiti; $120.5 million for compensation costs related to the Indian Residential Schools Settlement Agreement; $110 million for Atomic Energy of Canada to support completion of the CANDU reactor refurbishment; and $83.6 million for policing and security for the 2010 Olympic and Paralympic Winter Games.
A complete list and description of the major budgetary requirements can be found in the blue Supplementary Estimates (C) document on pages 9 to 12. That provides more detail on major items.
Page 6 highlights Canada's efforts in Haiti. As noted, these supplementary estimates seek approval for $176 million to support Canada's initial relief efforts related to the January earthquake in Haiti. Included in this funding are costs associated with humanitarian assistance and establishment of the Haiti Earthquake Relief Fund; deployment of 2,046 DND personnel, including the Disaster Assistance Response Team, DART, to provide medical services, safe drinking water, engineering expertise and to secure provision of humanitarian aid; facilitation of the evacuation of Canadian citizens; establishment of a field hospital in partnership with Norway; provision of emergency consular assistance to Canadians affected by disaster; deployment of RCMP forensic specialists; implementation of measures to assist Haitian family members of Canadians to come to Canada and to prioritize current adoption cases; initial repairs to Canada's embassy in Haiti and provision of temporary facilities and accommodations; hosting the Friends of Haiti conference in Montreal; and support for Haiti's embassy and consulate in Canada.
In conclusion, these supplementary estimates are fully consistent with the Budget 2009 framework, which is the guide for fiscal year 2009-10. They reflect the government's commitment to accelerate implementation of Canada's Economic Action Plan. They also reflect normal year-end approvals and adjustments for departments' reference levels to support delivery of government programs.
[Translation]
This concludes my brief overview of the highlights and the main features of the Supplementary Estimates (C), 2009- 10. My colleague Brian Pagan and I would be happy to answer any questions you might have regarding Supplementary Estimates.
[English]
The Chair: Mr. Smith, we appreciate that initial overview. We will go to questions, comments and replies. Any honourable senators wanting to be recognized for a question or a comment may signal to Adam Thompson, Clerk of the Committee, to be put on the list. I will proceed through the list in order of placement.
Mr. Smith, could you explain the reference to approximately $16.1 billion for Budget 2009 initiatives? Had we not examined those items?
Mr. Smith: There are some items from Budget 2009 in the Supplementary Estimates (C). That is normal business for supplementary estimates. I refer to page 110 of the Supplementary Estimates (C) where you will see an explanation of the requirement. Where there is a Budget 2009 initiative, we have identified it as such. For example, under Environment, you will see "Funding for enhancing federal public service student employment (horizontal item) (Budget 2009).''
As well, under Parks Canada Agency, you will see "Funding for the purchase of a new research vessel for federal underwater archaeology (Federal Laboratories Initiative) (Budget 2009)'' under Voted Appropriations.
Another voted appropriation under Parks is "Funding to support improvements and upgrades to infrastructure in national historic sites and national parks in British Columbia, Alberta, Ontario and Québec (Budget 2009).'' They are both Budget 2009 initiatives, senator. We have collected all of the Budget 2009 items and reached a sum total of $16 million. This is a small and final component, effectively.
The Chair: All other items in Budget 2010 that the government intends to proceed with have been picked up already.
Mr. Smith: Yes, they have been picked up in Supplementary Estimates (A) and (B), for the most part. We have a second year of spending to the economic action plan, which will continue through 2010-11, but the approvals are in place and the funding will continue. In some other cases, in the Main Estimates you will see the second year of funding for the economic action plan.
The Chair: For those who are new to the committee, the Main Estimates for the fiscal year come out before the budget is prepared. Therefore, some budget initiatives are not reflected in the Main Estimates but are picked up in the Supplementary Estimates (A), (B) or (C) as the year progresses.
Mr. Smith: Thank you, senator; that is absolutely correct. We tabled the Main Estimates on March 3 — the day before Budget 2010. It was prepared without the benefit of the budget. It would take us some time to incorporate Budget 2010. Therefore, in Supplementary Estimates (A) and (B) 2010, you will see Budget 2010 initiatives. In fact, some items might come all the way through to Supplementary Estimates (C).
The Chair: We will return to that issue later. The first senator on my list is the Deputy Chair of the Finance Committee, Senator Gerstein, from Toronto.
Senator Gerstein: Mr. Smith, thank you for your most informative comments. It is always a pleasure to have you and Mr. Pagan before our committee.
I noted that in your opening comments you made reference to the fact that Supplementary Estimates (C) must be approved by March 26 for funds to flow. I also note that the largest expenditures outlined in Supplementary Estimates (C) are for the earthquake in Haiti, the H1N1 flu vaccine, and security at the Olympic and Paralympic Games.
Could you explain to the committee where the funding comes for these items, given that Parliament has not yet approved them? In practical terms, how does the government deal with initiatives that cannot wait for the appropriation process?
Mr. Smith: I will start with Haiti, and my colleague can speak to the H1N1 vaccine.
We have the International Assistance Envelope, which is an interdepartmental envelope for aid and other international costs. We have an earmarked crisis pool that begins the year with $200 million set aside for crises. If funds are not used in one year, they are re-profiled and rolled over into the second year. This system has served us well in the case of assistance to Haiti because we began with a balance of about $350 million in the crisis pool this year, from which we could earmark some of these costs.
It still requires that Parliament approve the funds because if the funds are not approved, then departments do not receive the cash. The provisions are in place within our structure to deal with crises. Similarly, in the past we have had provisions for health epidemics, such as this year's H1N1.
Brian Pagan, Executive Director, Expenditure Operations and Estimates Division, Treasury Board of Canada Secretariat: In preparation for H1N1, the policy coverage or source of funds for these requirements was established in Budget 2006 when the government set aside in its fiscal framework up to $400 million to cover the costs of pandemic planning and response over the period 2006-07 to 2010-11. The funds are there in terms of the fiscal planning process.
The principle is that departments come forward to seek access to those funds only when they have fully developed terms and conditions for programs or requirements. Of course, during the past several months this winter, a great many preparations were made by both the Public Health Agency of Canada and Health Canada for the second wave of pandemic planning. Those costs total $85.6 million. The requirement to seek access to that amount comes from the amounts previously provisioned for in the fiscal framework according to Budget 2006.
Senator Gerstein: Am I to understand that pools are created from which government may draw when a crisis arises?
Mr. Smith: That is correct. Approval is still required for the cash to flow to departments. These funds have been in the fiscal framework and earmarked for such events.
Senator Gerstein: At page 117, I see that $18 million is earmarked for the development of permanent staff quarters in Kabul, Afghanistan. Given that the government has indicated that its mission in Afghanistan will end in 2011, does the investment in permanent staff headquarters in Kabul suggest that Canada will continue its presence once the military component of the mission is completed?
Mr. Smith: Yes, it is a fair assessment that even though the military mission is completed, there will be a continuing Canadian presence in Kabul.
Senator Gerstein: Thank you, Mr. Smith.
The Chair: For clarification, let us return to the international assistance envelope. You said that the funds are in the fiscal framework of planned spending but that they have not received parliamentary approval. Is that reflected in the Supplementary Estimates (C) before you seek parliamentary approval?
Mr. Smith: Senator, it is usually reflected in budget documents. On page 160 of the current budget document, there is a discussion of the international assistance envelope, which is being capped at $5 billion. There are provisions in the fiscal framework for growth of the envelope up until 2010-11. It is a $5 billion envelope.
It therefore has cabinet approvals before it comes into supplementary estimates. However, we need cash for departments and that is what Parliament approves or not, as the case may be, in supply.
The Chair: The cabinet approval is there and that puts it in the fiscal framework. However, until Parliament speaks and says you can spend whatever you are asking for within that fiscal framework, they cannot spend it.
Mr. Smith: Yes, with one proviso, I would say: When Parliament approves budgets, it is implicitly approving the framework, and the international assistance envelope and the funding for it. However, cash and approval from Parliament for cash requirements is still required.
The Chair: If it is approved by cabinet in the fiscal framework, and something happens before you get to Parliament, does that allow Treasury Board Secretariat to use emergency funding?
Mr. Smith: I think it has to be case by case. As you know, according to the wording of our Treasury Board vote 5, we would have to look at any situation — like Haiti — and, if Parliament was not sitting due to prorogation, perhaps, decide whether funds could be drawn for that purpose. It would depend on the vote wording and the actual case-by- case situation.
The Chair: Thank you, Senator Gerstein, for the question. I think this is the first time we have explored the interplay between the fiscal framework and cabinet approval and the role of Parliament. Vote 5 and Treasury Board's emergency funding side of things might be an interesting area to explore. We have had a lot of real life examples in the last little while.
Senator Callbeck: Welcome back, Mr. Smith and Mr. Pagan.
I have some specific questions. On page 12, the forecast for the Guaranteed Income Supplement is being decreased. Yet on the page before that, you tell us the amount of the old age pension is going up. What is the explanation for that decrease in the Guaranteed Income Supplement?
Mr. Pagan: I will start with the first increase to the Old Age Security Benefit. As you know, it is a monthly benefit available to Canadian residents age 65 years and over, meeting a residency requirement.
The increase of $192 million is driven by three factors: A decrease in the estimated number of beneficiaries, which accounts for a decrease of $4.1 million; an increase in the forecasted average monthly payments for recipients, which accounts for an increase of $151 million, a minor adjustment — $492.13 a month to $494.83 a month; that small amount adds up to $151 million — and, finally, a decrease of $45 million in anticipated benefit repayments. Benefit repayments are those costs that are recovered by government for various reasons.
Those three factors add up to the overall change of $192 million. The second part of that was. . . .
Senator Callbeck: Guaranteed Income Supplements.
Mr. Pagan: GIS is a monthly benefit to low-income seniors. The decrease is driven by two components: An increase in the average monthly rate from $398.41 to $401.78 cents, which accounts for an overall increase of $69.2 million; and a decrease in the estimated number of beneficiaries, which accounts for a decrease of $297 million. In both cases, we are seeing a primary factor as being the decrease in the overall number of beneficiaries.
Senator Callbeck: The method by which people receive GIS was changed a few years ago by the government, was it not? At one point, everyone had to apply for the GIS, and a lot of people did not know about it, so they were not applying. That change has been in effect. How does it work now?
Mr. Pagan: I am sorry. I do not understand.
Senator Callbeck: My understanding of the GIS was that you get it if you have a very low income. However, in order to get it, you had to apply for it.
Mr. Pagan: Right.
Senator Callbeck: Many low-income retirees did not realize that and were not applying for it. My understanding was that the government changed the application process. Now, if the person applies once, that is all that is necessary. If the person is found to be eligible he or she will receive the GIS from then on.
Mr. Pagan: My understanding is that there is an automatic entitlement, if you will, that is based on tax records. Yes, that is right.
Senator Callbeck: What if you do not pay income tax?
Mr. Pagan: I am not familiar enough with the program to account for how they might capture people.
Mr. Smith: We can follow up on that. I imagine that people can contact Service Canada to ask those questions.
Senator Callbeck: Many people with low income do not know this program is available. This is my concern. We see a decrease and I want to be sure that decrease is not there because people do not know enough to apply. I am interested in how the government delivers that program.
Mr. Smith: We will follow up on that with HRSDC and see what their plan is for dealing with that question. I am sure they have a strategy.
Senator Callbeck: My other question concerns the Department of Veterans Affairs. On page 184, there is a heading entitled Explanation of Funds Available. About $3.8 million is identified as savings as part of the government's ongoing strategic review of department spending. I would like to know what programs were affected by that saving — that $3.8 million.
Mr. Smith: Again, senator, we will follow up with Veterans Affairs and get the details on the strategic review. As you know, with strategic reviews, there are savings and reinvestments, and it is complicated. We leave that to ministers and departments to explain in detail.
Senator Dickson: You said a reinvestment. Therefore, that amount will be reinvested into Veterans Affairs, will it not?
Mr. Smith: No. In each of the strategic reviews which have been undertaken to date, there is a pattern of reallocations which are reductions, and reinvestments, which are additional monies provided either in the department or elsewhere with other departments. Without looking at the entirety of the strategic review, it is complicated to sort out what accounts for particular savings, if you wish; the net savings may be a product of both a reallocation and reinvestment.
Senator Callbeck: I am interested in knowing whether that affected programs and what programs were affected. Can I continue?
The Chair: Yes, you have another minute or two.
Senator Callbeck: On page 64, $37.6 million is allocated to the Department of Justice for government contingencies for compensation adjustments. That was vote 5, which I thought was for urgent and unforeseen expenditures.
We have that amount for compensation adjustments in the Department of Justice, but also in Treasury Board, on page 65, we are asking for $196 million for compensation adjustments. It lists the departments and Justice is listed there.
Mr. Pagan: I can address that question. First, with respect to allocation of funds from Treasury Board, vote 15 for compensation adjustments, these are in fact planned allocations to departments that are based on collective bargaining agreements. As you know, collective bargaining is a process of negotiation. Although there may be a schedule, there is no set time at which agreement may be reached. We regularly aggregate all of the agreements during a certain process and reflect these in supplementary estimates, subject to approval by Treasury Board ministers and Parliament. Upon approval of the supply bill, the funds are released to departments.
You are correct in noting that upon approval of Supplementary Estimates (C), $196 million is to be allocated to departments, including an amount for Justice — I think in the order of $45,000.
The issue around an advance allocation to Justice from vote 5 for $37 million is, in effect, an unplanned allocation. This is a result of an arbitral award. There was a particular situation with a group of employees for which there was not collective bargaining. It went to arbitration, the arbitrator ruled and according to the ruling, payment needed to be made by January 21.
In recognition of that arbitral ruling and the fact that the department did not have adequate cash to meet that requirement, there was a request for access to vote 5, which was considered by Treasury Board ministers and approved.
Senator Gerstein: May I raise a point of clarification regarding elderly benefits? Would I be correct regarding the expenditures on page 12 that these are statutory spending and, in fact, are not a reflection of policy decision but are basically formula driven?
Mr. Smith: You are absolutely correct. We just show the changes in the statutory forecast, but the enabling legislation guides it. We pay the benefits according to the enabling legislation. There is no issue as such; it is a matter of changes in population — the changes in the amounts that are there.
The Chair: Thank you, that is a helpful clarification between what we are voting in the estimates and what we have voted previously in some statute that we have to go back to follow those rules. It is helpful for us for you to give us the statutory expenditures even though they are already voted for.
Mr. Smith: In the interests of transparency, it is good to see these changes from one supplementary estimate to the other.
Senator Neufeld: It is good to see both of you again. I just want to ask a couple of questions about the earthquake in Haiti and the $176 million that was allocated. I would assume that is not the full costs that have taken place up until an estimated time of March 31 of this year, but up until a certain period of time. Can you tell me how the ministry calculates the $176 million?
Mr. Pagan: You are quite right that the costs of $176 million are planned or anticipated costs for the balance of this fiscal year; but we are looking at a multi-year commitment or requirement to rebuilding Haiti, so there will be subsequent requests coming forward in future supplementary estimates. Because of the timing of the event, those costs were not included in the Main Estimates that were just tabled. They will appear in subsequent supplementary estimates next fiscal year.
Of the amounts for this fiscal year, this represents a coordinated approach by the Government of Canada that includes the Canadian International Development Agency, Department of National Defence, Department of Foreign Affairs and International Trade, Citizenship and Immigration, the RCMP and the Canadian Border Services Agency. Those six departments coordinated their requirements and presented a joint needs to both cabinet and Treasury Board ministers. I believe that the amounts for each department are listed in both the horizontal item and in the individual departmental page proofs.
Of the $176 million this fiscal year, $90.5 million of that is for CIDA. This covers early humanitarian relief activities, such as the establishment of field hospitals, provision of relief supplies and the provision of humanitarian workers to the UN agencies.
Some of these funds will also go toward matching Canadian contributions. As you know, the government committed to match dollar for dollar contributions made to specified relief agencies from the period January 12 to February 12. The auditing of those contributions is ongoing, and it is the government's intention to match those funds both this fiscal year and into next fiscal year through future supplementary estimates.
With respect to the Department of National Defence, which is the next biggest call on this $176 million, their requirement is $62.3 million. This covers the deployment of their disaster assistance response team or DART — the establishment of a joint task operation and deployment of approximately 2,000 personnel from army, navy and air force.
Then the other departments have what would be considered more modest requirements, which cover their particular areas of responsibilities including consular services, immigration screening, security and policing.
Senator Neufeld: Thank you. I think everyone in Canada is tremendously proud of what Canada has been able to do in Haiti and how fast Canada reacted to that huge disaster.
What you are saying is that from January 12 to February 12, whatever those donations were from organizations or individuals that is being audited now by Finance or someone to find out exactly what that number is; but internal in this $176 million, there is an estimate of what that would be. If there is an estimate, could you tell me what that estimate is?
Mr. Smith: Yes, senator, I think we can give you some indication of that estimate. The number that is potentially eligible is somewhere in the range of $128.8 million, according to our information. This may change when the final numbers are in. To match that would result in a total contribution of $257.6 million, if those numbers hold up. That is quite a contribution. That is not all reflected here; some of it will be in the next fiscal year.
Senator Neufeld: That is fantastic when you think of $128 million. That is good to know.
You piqued my interest and I would like to go back to page 110, on funding for the purchase of a new research vessel for federal underwater archaeology. Do you know if that will be an offshore ship?
Mr. Smith: I do not know. I assume so but I do not know; I am sorry. We can try and find out.
Senator Neufeld: Can you track that for me and give me a response to that question?
Mr. Smith: Yes.
Senator Neufeld: Atomic Energy of Canada Limited, I see in the estimates on page 155 that $182 million is being requested. I remember some discussions about this last time, and I just want to remind myself. The funding for the repair and return of services for the NRU reactor, the $72 million, does that have to do with the isotopes?
Mr. Smith: Yes, the NRU is the Chalk River facility and that is about the isotope supply.
Senator Neufeld: Then the $110 million is for refurbishment of reactors sold by Atomic Energy of Canada to other countries and provinces within Canada; is that correct?
Mr. Smith: That is correct, yes.
Senator Neufeld: Would some of that be for Ontario and New Brunswick?
Mr. Smith: Yes, Bruce Power in Ontario; Point Lepreau, New Brunswick; South Korea, Wolsong; and Quebec, Gentilly 2.
Senator Neufeld: Can you break those three out and tell me how much of the $110 million is for each?
Mr. Smith: I do not have the breakdown of the $110 million, but we will speak to AECL and get the breakdown for you.
Senator Neufeld: Thank you.
The Chair: Mr. Smith, you did indicate that you would provide us with the breakdown?
Mr. Smith: Yes. We will contact AECL and I am sure they have those numbers.
Senator Dickson: As far as the refurbishment of the CANDU reactors — this question relates to New Brunswick — is there a pending claim by the Province of New Brunswick against the federal government for delay in that reactor? If so, what is the status of that claim?
Mr. Smith: I do not think we should comment. We do not have the necessary information to address that properly. However, we can contact AECL and see what they would like to respond.
Senator Dickson: Thank you. My next my questions relate to the Department of Veterans Affairs particularly, the last item on page 184, and the Veterans Independence Program and contributions made under that program. No doubt this program is of interest from an outcome perspective to all Canadians.
Mr. Smith: Yes. Your question, senator, is what?
Senator Dickson: My questions relate to that particular program. Does the program activity structure set out concrete results and performance targets and are these results being achieved?
Mr. Smith: Indeed, what Treasury Board requires of all departments and programs is identification of outcomes to be achieved. In an attempt to examine these in a systematic way, we undertake strategic reviews for those types of analyses. Departments like Veterans Affairs have to provide information to Parliament in their Reports on Plans and Priorities in the spring, and they will be tabling these by March 25, I think. Sometime before April 1 we will be tabling all the RPPs from departments, including Veterans Affairs. At the end of the year, they report back on progress under each program in their Departmental Performance Reports, DPRs, or results documents, so we do regularly assess whether the programs are achieving their stated objectives.
We require departments to establish performance measurement systems and we increasingly hold departments to fairly tight requirements in that regard in reporting back to us on performance. I am glad you asked the question because these are important to ensure we get value for money for all of these programs.
I should also mention that in the case of grants and contributions, and this is a contribution agreement, the Federal Accountability Act required that all grants and contribution programs be evaluated within a five-year period, so there will be a specific evaluation of this program within a five-year period as well.
Senator Dickson: From your past experience, are the results being achieved?
Mr. Smith: Without looking at the details of the results for that particular program, I would hesitate to guess, but we can follow up on that, senator.
Senator Dickson: Do the program activities of the VIP program extend beyond the purpose of assisting in defraying the costs of extended health care benefits to veterans?
Mr. Smith: Do they go beyond?
Senator Dickson: Are there other activities?
Mr. Smith: Other activities beyond the stated purpose, again I will have to come back to you on that. I would hope not, but we will have to check.
Senator Dickson: Could you confirm whether the extra appropriation of $4.6 million is adequate to meet the demands and objectives of the program?
Mr. Smith: Again, we will take that question under advisement and bring it back from the department.
Senator Finley: I am fairly new on this committee, so bear with me if I stray off course a little.
In response to Senator Dickson you discussed getting value for money or checking performance. I am interested in this non-budgetary spending item of $450 million dollars; a forgiveness of debt to the Republic of Pakistan. The amount of $450 million is a lot of money. How do we know that what we are converting this to, what the measurement parameters are, who measures it, when they measure it, when they will report on it?
Mr. Smith: It is for $450 million, as you are suggesting. It was a debt that Pakistan owed us. There was an arrangement made to forgive debts and rechannel funding into education in Pakistan. The Government of Pakistan's investments in education under this project are subject to an extensive accountability system. Each component's activities and expenditures are subject to annual reports to a central secretariat, and these investments are audited both by the Auditor General of Pakistan and an independent auditor and monitor team engaged by CIDA. The reports of these exercises are then reconciled and reviewed by the project's steering committee prior to any recommendation for debt forgiveness. Canada is under no obligation to forgive debt for expenditures that it does not deem substantiated by the audits in compliance with the project. That is the information we received from CIDA.
Senator Finley: If the independent auditor, CIDA, determines that the Pakistani government is not fulfilling its obligations under this undertaking, does the money revert to debt to our situation?
Mr. Smith: The debt would remain on the books for collection by us. They may not be in a position to repay. There has been a set of international agreements in the past — Canada has participated in them as well — to allow for these debt swaps. It is my understanding that if it has not met our conditions, the debt would be staying on the books.
Senator Finley: Are we just saying this is a nice way to allow someone to forgive another nation a debt to us?
Mr. Smith: Over the course of the last decade-and-a-half we have forgiven a great deal of debt to countries that were not able to pay back. These are the so-called heavily indebted poor countries. We have effectively written off a great deal of debt. In some cases, this type of arrangement allows more control over the funds that would be freed up. Debt forgiveness does not give us any leverage. This allows us some control of a redirection of funds into the education sector in Pakistan.
Senator Finley: Thank you very much. I want to go to page 92. Under Agriculture and Agri-Food, I notice considerable appropriation or increased appropriation for the AgriInsurance program and the AgriStability program. Could you tell me what gave rise to these increases and how they assist farmers? Why are we putting this extra money in? What is the purpose of the increase?
Mr. Pagan: In both cases, these requirements are the result of changes to statutory forecasts. These are statutory programs, so they are presented for information but we are not voting on them. The payments are according to the statutes moved by Parliament.
In the case of the AgriInsurance program, a change in forecast of $125 million is due to an increase in the number of acres insured under the program and an increase in the federal share of insurance premiums.
With respect to AgriStability, the change of $78 million is a change in forecast payments due to declining grain and oilseed prices in 2009. That reduction reduced the value of producers' inventories. Therefore, adjustments are required to reflect an increase in the number of provinces delivering the program.
Senator Finley: This presumably would be particularly for the Prairie provinces, I am guessing.
Mr. Smith: That is correct.
The Chair: As a point of clarification, if I can go back to Pakistan, when does one of these loans that we have decided to forgive move out of non-budgetary and into budgetary? It will affect the bottom line. That is the normal rule, that non-budgetary does not affect the bottom line and does not affect the debt of our nation because it is still in the books as a loan. When will we see this change? Because we know this money is not coming back to us.
Mr. Smith: That is a fairly complicated question.
The Chair: Are you able to put it down on paper and I can circulate it to everyone?
Mr. Smith: Yes.
The Chair: You understand the basic premise?
Mr. Smith: Yes. We do carry these loans on the books, and there are provisions against default or less than full payment. There is an official creditors' process, the Paris Club, which can restructure debts and change the arrangements considerably, long before these go into default. The process can be dragged out over a long period of time and there can be many adjustments and changes made before getting to the point where something is deemed to be irrecoverable or until G8 or G20 groups decide to write off a group of debts to poor countries, at which point the budgetary implications become clearer. It is a long process.
The Chair: Sometime in the future, there would be a time when it is decided that this is no longer a non-budgetary item carried on the books as potentially repayable and now becomes a grant. Is that right?
Mr. Smith: There may not be much of a budgetary implication by that point because by that point, we will have written off the debt, in effect. We will have had provision against non-payment of that debt. As allowances are made for the non-payment of debts, those provisions will cancel out any budgetary effect.
The Chair: Will that provision be done in the estimates?
Mr. Smith: You will see the provisions in the Public Accounts of Canada. There is an allowance for these provisions and they are audited each year. The Auditor General works with the Comptroller General to audit the quality of those debts that are on the books and determines the validity of the provisions that are set aside for them. It is an annual process of determination. If a debt is not recoverable, then the provisions will rise to the point where, in fact, there will not be any budgetary impact because we will have essentially written it off.
The Chair: Thank you. If you have something in writing, we can circulate that information to the committee members.
Mr. Smith: Yes.
The Chair: Senator Finley raises another area that we have not explored, which could be quite interesting.
Next is Senator Marshall, a new member of the committee. Welcome. She is from Newfoundland and Labrador.
Senator Marshall: Thank you. I want to go back to earlier comments that you were linking up the spending with parliamentary approval. I would like to return to your fourth slide and have you discuss budgetary and non-budgetary items with both the voted items and the statutory items.
Has any of the $1.3 billion, the budgetary amount for voted items, been spent at this stage?
Mr. Smith: Yes, I think one could safely say that funds would have had to flow in departments. Departments are held to their votes, so the authority is not so much for a specific program as for the vote authority. They are bound to stay within the votes for operating, for grants and contributions and for capital. Those are strict limits set by Parliament on their authority to spend.
In some cases, then, if funds have to flow for one purpose or another for urgent reasons, funds can flow, but it may mean that if at the end of day Parliament does not approve the cash, then other programs will be squeezed. It is still required that Parliament approve the cash for departments but, at the same time, we could not have a situation like Haiti, send troops and help them without incurring expenses.
Senator Marshall: Theoretically speaking, you could be in a situation where if Parliament does not approve a certain amount, the money will be gone. Does that defeat the purpose of going back and requiring parliamentary approval for this amount?
Mr. Smith: No. It will mean, however, that if Parliament does not approve the cash, that other programs will have to be severely constrained in order to make room for an urgent situation like Haiti.
In the case of Haiti, which is probably not a good example, we already had earmarked funds which were sitting, if you wish, in the International Assistance Envelope. If they had not been used, they would have been re-profiled to the following year. They were there and could be used in this particular case.
Your question is a good one because there can be other situations where a department must cash manage and use funds under its vote for a purpose that was unexpected. If the funds are not approved by Parliament, it could constrain their ability to deliver other programs, but they are bound by the vote and are required to stay within their vote.
Senator Marshall: Depending on the amount being requested, a government department could be in a predicament if they cannot free up cash from other programs.
Mr. Smith: This only arises when things cannot be planned and forecasted. Normally, if things can be planned well and forecasted, they will come in with supplementary requirements earlier in the year, and these issues will not arise.
Senator Marshall: It seems unusual to come after the fact to ask for approval to do something that has already been done.
Mr. Smith: We could not wait until March 26 to deliver military assistance to Haiti. We could not ask Haiti to wait until then for us to take action. We took action within our budget. In this case, we had earmarked reserves, it was better, but we had to take action and then cash manage, trying to stay within budget.
Senator Marshall: Is there a mechanism for special warrants in the federal system?
Mr. Smith: Yes. That only applies in the case of an election. During a prorogation warrants cannot be used.
Senator Marshall: Statutory items should not be a problem, because they are statutory.
Senator Finley spoke about the debt with regard to Pakistan. You explained that it is non-budgetary. I take it that the money was loaned to Pakistan. It was non-budgetary then and it is non-budgetary when it is forgiven?
Mr. Smith: I would have to check into this particular loan. I think it is an old loan to Pakistan.
Senator Marshall: Would you check into that? At some point there has to be a link between the Main Estimates and the Public Accounts of Canada, and I do not quite understand that.
The Chair: I agree. That is the point I was trying to make. We will follow up on that.
Mr. Smith: We do distinguish between what is budgetary and therefore affects the budget deficit, for example, and what is non-budgetary, such as loans, investments and advances. Those are fully accounted for in public accounts on an ongoing basis, even though they do not affect the budget deficit per se.
You will see, for instance, any provisions for bad loans in there. These are fully audited. It is important to keep track of what we have lent, but in the case of aid, for instance, more recent aid has not been in the form of loans. That was an old practice that has been largely superseded. Some of these loans have been on the books for a long time and have grown due to accumulated interest. They are still carried on the books. However, the aid business has changed very much in the last 10 years and there are now very few loans extended to developing countries.
The Chair: Mr. Smith, you have undertaken to provide us with some background that would help us understand that, but our difficulty is that a loan is non-budgetary and does not require parliamentary approval, yet it can be written off after the fact by provisioning.
Mr. Smith: If I may, non-budgetary requirements still require parliamentary approval. You have that voted column. If you look at that table again on page 4 of my presentation, you will see that voted items include both budgetary and non-budgetary. Therefore, in effect, Parliament has approved the loans and investments.
The Chair: As a loan?
Mr. Smith: Yes.
The Chair: In approving the loan, are we also approving the possibility of taking provisions against that and forgiving it?
Mr. Smith: The provisioning is a different story in that it becomes important for the integrity of the public accounts to ensure that one knows the creditworthiness of all loans.
The Chair: I think we all understand the reason we take provisions. By doing that and then ultimately writing the loan off, you are in effect doing something different from what was approved by Parliament, unless somewhere along the way Parliament approved the possibility of it never being repaid in the first place. We are looking for that link.
Mr. Pagan: I will make one point to underline what Parliament does approve, because there may be a misconception.
On page 116 we see the requirements of CIDA. This underlines the point that Parliament approves both budgetary and non-budgetary requirements, and the distinction is how they are recorded on the books by the Department of Finance and reflected in the public accounts. Non-budgetary votes are indicated with an "L'' in front of them, because ostensibly they are loans that do not affect the bottom line of our debt and deficit situation.
At page 116 we see vote L35b, which is the authority by which CIDA can make payments to international financial institutions. If I recall correctly, that vote was adjusted through Supplementary Estimates (B). In fact, the designation "L35b'' means that something about the vote was affected in Supplementary Estimates (B), and that was approved by Parliament. It could have been conditions of the vote wording or it could have been an amount, but there was an adjustment by Parliament in Supplementary Estimates (B).
We see here that vote L37, which again was previously approved by Parliament, is being adjusted to reflect a forgiveness of the debt. As Mr. Smith indicated, it is considered a fairly routine occurrence now to translate debt into something that is perhaps more productive or effective in terms of development priorities. In the case of Pakistan, the intention is to divert funding that would otherwise come to us and go to the bottom line of the accounts of Canada, as you said, to development priorities in the education sector.
That is the way in which Parliament approves this. I hope we have addressed that question.
Your second question deals with the impact on the bottom line. I take the point. That is, however, not something that Treasury Board Secretariat maintains. That fiscal framework is the responsibility of the Department of Finance. Earlier in our testimony we explained the issues of the fiscal framework and the provision of certain pools, reserves and sources of funds in the fiscal framework. Decisions like this are made in consultation with Treasury Board, the department involved, and the Department of Finance. In that way, if there is a recommendation and agreement that we should change accounts, if you will, from non-budgetary to budgetary, that Department of Finance can update their overall fiscal framework and reflect that in the budget and subsequently in the public accounts.
That bottom line is not seen in estimates. In estimates we see things that require approval, a new appropriation, the issuance of a loan or the forgiveness of a debt. We do not see anything with respect to the overall bottom line of the government in terms of revenues, total expenditures, or debts and deficits.
We can work with the Department of Finance to determine how and when this will be reflected in their fiscal framework and public accounts, but that is not information that we would expect to see in estimates documents.
The Chair: Is there anything else, Senator Finley?
Senator Finley: Looking at a corporate balance sheet, I can see the types of loans, debts, monies et cetera. Where do I find that in the government system? How much money sits in this situation of having been lent that could be converted to something else? Where would I find the total exposure?
Mr. Smith: These data are in public accounts. For 2009, you will see details of all loans, investments and advances that have been made and provisions for any debts not likely to be repaid or repaid in full. That is done separately from appropriations.
In this particular instance, these are very old loans under the Official Development Assistance rubric paid to Pakistan over a long period of time. A rescheduling agreement was signed in April 2003 between Canada and Pakistan that included a debt-to-education conversion. These very old loans were approved by Parliament many years ago in public accounts. We will try to get the exact references for you and more details on the types of loans made. We will try to obtain information on the countries and our involvement with international organizations.
For example, Public Accounts of Canada 2009, volume 1, has a section on international organizations and the development banks. This includes all the loans we have made, our capital shares and status of the loans, investments and advances.
Mr. Pagan: For clarification, the Expenditure Management Sector is not involved in or responsible for public accounts. That is the Receiver General, the Office of the Comptroller General and the Department of Finance. However, we synchronize our efforts because they reflect the authorities provided by Parliament through estimates in subsequent reports of public accounts.
The most recent version of public accounts covers fiscal year 2008-09. Volume II includes a table on page 1.41 that lists the source and disposition of non-budgetary authorities by ministry. It is a complete listing of all ministries provided authorities by Parliament authorities for non-budgetary instruments. Foremost amongst these is the Department of Finance that manages our debt.
In that table is a reference to Foreign Affairs and International Trade and the Canadian International Development Agency, which has $937 million available in total non-budgetary authorities for the Ministry of Foreign Affairs and International trade.
The Chair: Thank you. This has been an interesting discussion.
[Translation]
Senator Poulin: I would like to thank you for your patience in answering our questions, it is much appreciated. Speaking to us on behalf of all the departments is not an easy thing to do.
In the supplementary estimates summary, there is mention of a sum of $83.6 million for security-related expenses at the Olympic Games. We know that the games were planned several years ago. Does the request for $83.6 million mean that security costs were $83.6 million higher than what was originally forecast in the budget?
[English]
Mr. Smith: I think there was about $900 million earmarked for Olympic security. This represents one part, so it is not additional to what was planned. It is part of what was planned to address higher than anticipated security costs and previously unidentified security requirements for a variety of organizations — RCMP, DND and DFO. It pulls together a number of these costs, but it is within the $900 million contingency funding provided for Olympic security.
[Translation]
Senator Poulin: The request was made as part of supplementary estimates. It was not made earlier in the fiscal year. I do not understand the budgetary process.
[English]
Mr. Smith: The fact is that we do come back for approval, even if there is a plan if a certain amount of money is required or sought from Parliament. We will come back to refine requirements. You will sometimes see that requirements are less than what was anticipated.
We will ask for money, as it is required along the way as opposed to simply asking for a big block of funds — $900 million please — to cover a large range of costs. When we are unsure of the outcome, we may make requests in stages and ask for the funds as we encounter the costs or are much closer to the event.
The process is about trying to be as accurate as possible and only to ask for the funds we actually need. Even if we have earmarked a certain sum in our fiscal framework — $900 million will be required for this purpose — we will come back to ask for the required funds as we go along.
[Translation]
Senator Poulin: Do we know at this time what the actual cost of providing security at the Olympic Games was?
Mr. Smith: I believe so. The numbers we have before us are close to the estimated costs.
Senator Poulin: Are we talking about $900 million?
[English]
Mr. Smith: I think that is the case. We are currently tracking toward that amount. We are within that amount. Our total supplementary estimates appropriations for departments are in the range of $847 million. We are below the $900 million total. There may be additional bills to come into this fiscal year that will have to be paid probably to bring us close to the amount.
[Translation]
Senator Poulin: Which time period will be covered by the $900 million sum?
[English]
Mr. Smith: It certainly will cover all of fiscal year 2009-10. There were some additional costs in fiscal year 2008-09 as well.
Mr. Pagan: As you can appreciate, planning for this event began several years ago. Costs were involved in that planning process going back to at least 2007-08. As Mr. Smith indicates, $763 million has been appropriated to this point by departments. This final appropriation reflects final costs involved for the event just concluded.
The real costs for this fiscal year will be reflected in public accounts once the year closes.
[Translation]
Senator Poulin: My next question is about the CBC. On page 89 of the French version of the Supplementary Estimates (C), a request is made for a transfer of $26.299 million from the operating budget for funding a capital expenditure. If a request is made for a transfer of funds from an operating budget to a capitalization budget, there should be a cut in the Canadian Broadcasting Corporation's budget in the amount of $26.299 million for 2009-10. Am I wrong, Mr. Smith?
[English]
Mr. Smith: Senator, it is not necessarily the case that when you transfer funds from one vote to another that it is a reduction in budget. It is not a reduction in reference levels. There are good reasons for transfers from one budget to another, one vote to another within a department, but it does not mean a reduction in budget. It may be that operating funds are used to purchase a capital asset, and that is one reason why you would move from operating funds to capital funds.
Senator Poulin: Just on that matter, if you are moving $26 million from operating funds to capital funds, would it not mean that in 2009-10, you have $26 million less for operating funds? It could revert the following year, but what about the current financial year?
Mr. Pagan: That is correct, but it is balanced or compensated by a $26 million increase to another vote within CBC, so aggregate spending does not change by them.
Senator Poulin: What do you mean by "aggregate spending''? Sorry, I am not an accountant.
Mr. Pagan: CBC and most other departments receive authorities from Parliament according to votes, and there often are distinct votes for operating, capital, grants and contributions. The sum, or the aggregate, of those votes represents the resources available to the department.
Senator Poulin: On page 34, is that the sum, $1,000,000,112?
Mr. Smith: This is on page 102 of the English version. It is an internal reallocation of resources to fund capital expenditures of Newsworld and RDI, Réseau de l'information, and to fund capital projects, such as the disaffiliation projects in three Quebec markets, the transition to high definition television and the transition to digital broadcasting for delivery of television signals beyond the August, 2011 CRTC deadline for analogue distribution. The way CBC accommodated those requirements was to move funds from operating to capital.
Senator Poulin: My question remains: When you are moving $26 million in the current financial year, 2009-10, does that not mean that you are reducing your operational funds of $26 million for that year?
Mr. Smith: In order to increase your capital by that amount, the answer is yes. However, you are dealing with an organization that also has a budget of $1 billion.
Senator Poulin: Comparing apples and oranges, we spent nearly $1 billion on security for the Olympics, so I am not worried about the cost of the CBC, when it is the only national broadcaster in this country, CBC and Radio-Canada. Keeping our country linked on a daily basis is worth more than $1 billion.
Mr. Smith: I do not take issue with those things.
In terms of scale, if you look at page 99 — I have the English version here — you can see payments to the CBC for operating expenditures, vote 15, are over $1 billion, and with this reduction in the operating, their operating vote is still over $1 billion.
Their capital vote is close to $100 million, and they have acquired that additional 26 to bring their capital vote up to 118. Within an organization, there could be good reasons why, for business purposes, they have decided to fund something in a particular way.
Senator Poulin: I agree with the reason for the funding because of the need to modernize the television services. It is a basic and necessary need of that industry.
My question is, because of that necessary need, why would a department ask an arm's length organization like the CBC to take money from its operational budget in that current year and bring it to capital, instead of asking for that one-time capital budget as a department on its own for the CBC, given that the CBC had to lay off 800 people this year?
[Translation]
All my colleagues know that I am especially concerned by the fact that the CBC had to close its only French- speaking regional station in Windsor, which served an entire community in the region bordering the U.S. It obviously worries me to see a $26-million transfer from an operating budget to a capitalization budget, when capitalization requirements had clearly been identified.
[English]
Mr. Smith: Before my colleague has further information to provide, I would just mention that no department requires CBC to make this decision. CBC is asking for that itself. It has decided that this is the best way of modernizing. It will draw funds from operating to put into capital, into the Réseau de l'information, for example, and Newsworld. It has made some business decisions on this basis. It is asking for approval for the transfer. No one is telling them to do that; they are asking to do so.
Mr. Pagan: If I may, previously, I tried to explain that with the transfer between votes there was no change to the aggregate spending by the CBC.
Senator Poulin: Thank you for your answer.
Mr. Pagan: Just to underline the points made by Mr. Smith, as you know, the CBC operates under licence of the Canadian Radio-television and Telecommunications Commission, or CRTC, and according to the terms of their licence, CBC Newsworld and RDI must be self funded. CBC Newsworld and RDI have received revenue during the course of the year, advertising and marketing, et cetera, and as they have to be self funded and their revenue has come into the operating vote, they are now, in accordance with normal parliamentary procedure, seeking approval to move those funds that they have generated from their operating to their capital so that they can undertake the capital projects that will support those two specialty channels.
They have generated revenue and they have accounted for it in their operating budget. In accordance with parliamentary procedure now, they are seeking approval to transfer that from operating to capital, and that is in accordance with both parliamentary procedure and the terms of the licence under the CRTC.
Senator Runciman: When we deal with the Main Estimates, does the committee have an opportunity to bring in a specific minister to deal with it? Do we devote X number of hours to deal with the particular estimates of a particular ministry? How does that process work?
The Chair: In the past, we have looked at the ministries that are the most implicated in the particular estimates, and then we bring them in. For tomorrow, for example, some of the questions deal with CIDA, the Department of National Defence and those initiatives in Haiti and elsewhere, and that is one of the panels that we will have tomorrow to deal with their specific requests in Supplementary Estimates (C).
Senator Runciman: The steering committee makes that decision?
The Chair: That is correct, but the broader question is whether we focus in depth on one or two departments. We have talked about doing that, but we have always run out of time dealing with the major items. It is a good suggestion and the steering committee talked recently about it again.
Senator Runciman: Provincially, all three parties are involved. Each selects one to three ministries and the hours are allocated according to the significance of the individual ministry. Such an idea might be worth considering.
We talked about $110 million for nuclear reactor refurbishment and you mentioned Bruce Power and others. What is the process? Is there an ongoing obligation on the part of AECL in respect of refurbishment? I can see a guarantee or warranty for a period of time but the Bruce reactor has been around seemingly forever. What is the obligation? Is this an in-and-out funding system such that you bill back the governments? What is the process?
Mr. Smith: The refurbishment projects are fixed price contracts whereby AECL and the Crown bear responsibility for additional costs incurred. They are first-of-a-kind in terms of the technology and it will be the first time that AECL has taken on a maintenance project of this size. They are quite complex in the kind of radioactive environment in which refurbishment has to occur. Therefore, they have taken longer to complete and are more costly than anticipated.
There have been a number of reviews, panels and discussions about the refurbishment projects, including third party reviews. As well, there has been ongoing involvement of the provinces from the outset. I am not entirely sure about the relationships between AECL and the provinces on the refurbishment so we will have to get back to the committee on that.
Senator Runciman: It strikes me as never-ending expenditure obligations. What is the bottom line in that respect? There was reference in the supplementaries to $72 million for the Chalk River reactor and some indication of a Treasury Board vote 5 approval earlier. Is this a conflict? Is this an addition to the vote 5 approval?
Mr. Smith: The $72 million is for repairing and returning the National Research Universal reactor to service. There has been funding for both the refurbishment and the NRU reactors in previous supplementary estimates and in Treasury Board vote 5 as well in the past. I am not sure that we asked for TB vote 5 in the case of the NRU this last year.
Mr. Pagan: Allow me to explain the way vote 5 works. I believe this is the first question we have had about the use of vote 5 government contingencies. The requirements reflected by AECL in the Supplementary Estimates (C) are broken down into distinct purposes: Refurbishment of CANDU for $110 million; and repair and return to service the NRU for $72 million. These requirements are before Parliament and if Supplementary Estimates (C) are approved later this month, those funds will be available to departments.
In advance of that, the department identified immediate requirements of cash to support ongoing repair and return- to-service work, the total for which can be seen at page 64 in the amount of $50 million allocated from vote 5.
It is deemed normal use of the vote when a department has an approved requirement or activity for which their cash requirements exceed their money in the bank. In this case, funds are allocated to the department and they will be reimbursed by the department when the amounts included in Supplementary Estimates (C) are approved.
The requirement is not $110 million plus $72 million plus $50 million. Rather, it is $182 million net, $50 million of which has been already advanced to them will be reimbursed upon Parliament's approval of the supplementary estimates.
Senator Runciman: What is the cap on vote 5?
Mr. Pagan: Vote 5, as approved by Parliament, is $750 million. As funds are allocated, available funds decrease. The vote is replenished upon approval of the supplementary estimates.
Senator Runciman: Is it normal practice to replenish the depleted funds?
Mr. Pagan: Yes.
Senator Runciman: Why do you not set the cap higher? Is it a case of smoke and mirrors?
Mr. Smith: It is similar to a line of credit in that departments are advanced the funds and then repay the amount on subsequent supplementary estimates. We found that $750 million covers our requirements.
In this case of the $50 million from vote 5, turn to page 64, where we identify the funding as required for the refurbishment. Previously, we sought funds through Treasury Board vote 5 for refurbishment projects.
Senator Runciman: The supplementary estimates reference the North America Free Trade Agreement and an allocation for potential litigation. Why would potential litigation be referenced in the supplementary estimates? Is that a normal practice?
Mr. Pagan: Yes, it is normal. As Mr. Smith indicated earlier, it is our practice to work with departments to review their requirements so that they stand the scrutiny of ministers and Parliament and so they do not ask for funds before they are required. In this case, a specific issue before the courts has reached the point where the department can anticipate some settlement or resolution in the supply period.
Senator Runciman: Is there such an issue before the courts?
Mr. Pagan: Yes, and therefore, it is appropriate to forecast it. The alternative would be to not provision for it with an appropriation by Parliament but to make the payment if and when it is required through the use of government contingencies. Where we are able to anticipate, it is our practice to plan for a requirement through appropriation rather than rely on the use of a contingency vote.
Senator Runciman: This is a question of accounting as well. We talked about the Pakistan loan and how that is accounted for. I understand that you will give us information with respect to that. How is that reflected, apart from the bottom line? In essence, you are writing off a significant amount of money. Is there a transfer of allocation of the amount? For example, is it then attributed to foreign aid? I would suggest that is precisely what is occurring in this case because you are funding education programs. Rather than deem it a loan, it is transferred to another line item.
Mr. Smith: You get credit for debt relief as part of the ODA. While writing off or converting a debt might not be purely budgetary, it does count as official development assistance in the same way as aid money in the comparisons that look at ODA to GDP ratios. It is the OECD's assessment of how much money we provide to developing countries.
Senator Eggleton: On this debt forgiveness to Pakistan, do we know what we received for the money that we put into this program? Do we have some statistics that indicate how many people might have been educated? Do we know how many of the people might be female? We know that the education of females is an issue in this part of the world.
I assume all of this money went into a public education kind of program as opposed to the Madrassas-type program. Can you give us any information to indicate whether we received value for this investment?
Mr. Pagan: We will confirm with the department on that question. It is my understanding that that work has not been initiated. The first step is to forgive the debt so that the funds that would otherwise be paid out for debt can now be directed to the education program. However, I am not familiar.
Senator Eggleton: How long has this education program been going on? For how long have we been pumping money into this program?
Mr. Pagan: They are separate issues. The debt was not related to education. The initial debt was related to a loan to the government of Pakistan for general use. It is now the intention of the government to channel the payments into a specific sector.
As you may be aware, CIDA has been involved in Pakistan for many years as a development partner. There has been a consistent focus on education within CIDA broadly speaking and more recently within their program in Pakistan.
Senator Eggleton: We are giving the money to the Government of Pakistan as a loan for general purposes but now we are saying that we are willing to forgive it, but we want to ensure that it is used for education.
Mr. Pagan: That is correct.
Senator Eggleton: That is after we have given them the money. Do we have much control over how it is being spent if it is after the fact?
Mr. Pagan: The original loan would have been subject to some covenants and conditions, but it was not for specific sectors.
Senator Eggleton: If it is being justified based on public sector education programming, then let us hear how we are getting value.
Mr. Smith: That is the justification.
Senator Eggleton: Picking up on Senator Poulin's comments about the $26.2 million to the CBC, if you are transferring this money into capital projects, that is fine. However, if you are taking it out of operating, are any specific programs or services being reduced as a result?
Mr. Smith, you said earlier that, given the size of the budget, perhaps it would be a matter of tightening the belt here and there rather than identifying specific programs. Is that the case?
Mr. Smith: I do not know the answer to that question. We would have to ask CBC.
Senator Eggleton: It would be interesting to know what is being sacrificed, if anything.
Mr. Smith: They receive revenue as well as appropriations.
Senator Eggleton: I understand. Someone told them it was capped and that they had to transfer it as opposed to adding it on.
Mr. Pagan: The CBC began the year with a certain appropriation from Parliament. I will find the exact amount in a moment. Over the course of the year, they generated revenue independent of parliamentary appropriations. They are transferring the money they have generated and they have earned because they have decided that they want to invest it in another aspect of their business. There is no change to their bottom line.
Senator Eggleton: I understand. However, if you transfer money from one account to another, what is the trade off?
Mr. Pagan: Their appropriation as approved by Parliament was $1.043 billion. What we see now on page 32 and page 33 is that, because of subsequent supplementary estimates and allocation of votes, they were beginning this exercise with $1.112 billion. That is $80 million more. As a result of adjustments in transfers through the Supplementary Estimates (C), their estimates authorities to end the year will be $1.139 billion. Their reference levels or resources available through the year have increased. This transfer is what they consider a routine transfer from the conditions prescribed by Parliament under one vote to another vote.
Senator Eggleton: You are saying that it does not necessarily affect programs or services. That is, it is revenue increase.
Mr. Pagan: They are channelling the revenue that they have earned for a specific purpose in capital and they need Parliament's approval to do so.
Senator Eggleton: On the G20 summit in my home city of Toronto, do I assume that part of the budget request on security, $179.4 million identified in Supplementary Estimates (C), would also involve giving money to cover the costs of local policing? Would that be covered or would the property taxpayer face a substantial tax burden?
Mr. Smith: The range of costs is associated with both of these summits. You are referring mainly to the G20 summit in Toronto as well. Within this request, we have specific requirements from a number of departments, for example, RCMP, public safety, and so on. Within at least one of them, there is funding to reimburse the Ontario Provincial Police.
I am not sure how much of the requirement is for the preceding G8 in Huntsville versus Toronto, but there is reimbursement for the OPP.
Senator Eggleton: What about the Toronto police?
Mr. Smith: I have not seen it in here but it is possible or it will be coming, as a future request.
Senator Eggleton: Perhaps you can let me know, then.
Mr. Pagan: Cabinet, in a security cost framework policy, approved the provisions of reimbursement for provincial, territorial and municipal security partners.
Senator Eggleton: You are saying that municipal security was part of that.
Mr. Pagan: Yes, a government lead policy reimburses security partners. That policy is applicable to all major international undertakings, for example, G8, G20 and the Olympic Games. The lead department for negotiating arrangements with the municipal, territorial and provincial partners is Public Safety and Emergency Preparedness.
As Mr. Smith said, the requirements here by Public Safety and Emergency Preparedness at this time are primarily for conclusion of an agreement with the OPP to secure provincial highways and the Huntsville site. There will be subsequent supplementary estimates coming in Supplementary Estimates (A) for what I believe to be the Toronto portion.
Senator Eggleton: That is fine.
Let me follow up on some questions asked by colleagues about the NRU reactor at Chalk River. Will this additional $72 million allocation sufficient to bring about the final repairs and bring it into service? What is the status of the matter?
Mr. Pagan: At this time, I believe that this represents the most up-to-date requirements of AECL.
First, I wish to remind the committee that an expert review panel on medical isotope production was commissioned to look into the matter. They released a report on December 3 in which they confirmed that the NRU really does represent the only short-term prospect for continued domestic isotope supply. Again, the NRU had been providing approximately 60 per cent of the global isotope production.
Mr. Smith: It is our understanding that the $72 million required here, vote 10, is for the repair and return to service of the NRU. That should be the all-in cost. According to our indications, it is proceeding with its return to service shortly, probably in April-May.
Senator Eggleton: Is it expected that this money will be spent and the service will be restored by April or May of this year?
Mr. Smith: Yes, the most recent indications are in May, and then they will be returning to service and production of isotopes shortly thereafter.
Senator Eggleton: That is good news. Thank you.
Let me ask about the headquarters in Kabul, $18.3 million. Is this to serve just as a Canadian headquarters? Since we are told the military is pulling out, there might be military people there in desk jobs, and I assume there would be CIDA and Foreign Affairs people, et cetera.
Mr. Smith: Yes.
Senator Eggleton: Is this strictly for Canada's operations following our military phase? Is it just for Canadians or does this have a broader use by the UN or NATO?
Mr. Smith: It is our understanding that this is to construct a permanent staff quarters for Canada's diplomatic mission.
Senator Eggleton: So it is the embassy.
Mr. Smith: It would be the embassy and staff, and of course the staff can be drawn from CIDA and other departments, not just Foreign Affairs.
Senator Callbeck: Page 160 lists $45,000 that is going to an advisory group to look at the creation, operation and establishment of a Canadian democratic promotion agency with the mandate to provide support to fragile emerging democracies abroad.
How will that agency differ from the one that we now have that was set up in 1988 by an act of Parliament?
Mr. Pagan: This requirement is for an advisory panel. At this point there is no agency being created. They are looking at options and any gaps in terms of capacity or need. The file falls under the responsibility of Minister of State for Democratic Reform, Steven Fletcher. He is working with CIDA and an advisory group that includes Tom Axworthy, Senator Pamela Wallin, Leslie Campbell and Eric Duhaime on identifying options and recommendations in this area.
Senator Callbeck: I am interested in why we are looking at this at all. As I say, we have the International Centre for Human Rights and Democratic Development.
Mr. Smith: That is a policy question that we are not prepared to answer.
Senator Callbeck: I would like you to explain, on page 151, why the Department of Finance requires an additional appropriation of $32.3 million for access to remaining surplus budgetary resources.
Mr. Smith: You are referring to the Department of Defence, I think, senator, not the Department of Finance.
Senator Callbeck: Yes, I refer to National Defence at page 151. Please clarify the meaning of this appropriation.
Mr. Pagan: What was the amount?
Senator Callbeck: The amount is $32.3 million.
Mr. Pagan: The $32.3 million is an amount that has been set aside in the fiscal framework for 2009-10 but not yet approved through the estimates. It relates to budget commitments in 2005 and 2006 that provided significant new resources to DND for investments in personnel, infrastructure and equipment. This funding is being appropriated at this time to support the national procurement budget and operating costs of the department.
Senator Callbeck: That does not tell me a great deal.
Mr. Pagan: As you know, the department is actively engaged in Afghanistan and therefore bearing a significant demand on their operating budget. These funds are for operations and maintenance, or national procurement, which is available for the provision of materiel and equipment throughout the Canadian Forces.
The Chair: Senator Callbeck, we are running out of time, but you will be able to follow up on this tomorrow with another panel.
Senator Gerstein: I would like to refer you to page 181, Treasury Board Secretariat, and the compensation adjustment of $196 million. Am I correct in understanding that this is basically to honour collective bargaining agreements?
Mr. Smith: That is correct.
Senator Gerstein: Would I also be correct that this is the last time we will see this for a while, inasmuch as under the budget, the departments have been frozen so that collective bargaining agreements, although they will be honoured, have to be forced out of the department's current budget?
Mr. Smith: That is also correct, senator. This will be the mechanism.
Senator Neufeld: Had I gone through all the different ministries that would have been responsible for security at the Olympics, when would it have become apparent to me that it was a total of $900 million? Would it have been 2007-08, 2008-09 or 2009-10?
Mr. Pagan: Typically, when the government makes commitments of this sort — projects and funding agreements with the provinces and contributions to international events — there is an announcement by a minister with the provincial counterparts or stakeholders. There would likely have been some indication at an announcement of the government's overall commitments. As Mr. Smith indicated, those funds are appropriated as they are sequenced or scheduled.
Senator Neufeld: Is that $900 million inclusive of the province's share or is the province's share outside that $900 million?
Mr. Smith: The province's share is outside; these are federal costs only.
Senator Runciman: Will the $179.4 million for the G20 and G8 be committed in this fiscal year? How much has been spent to date? It seems like a great deal of money. Why is this happening? Is it related to the move from Muskoka to Toronto?
Mr. Smith: Senator, indeed costs are being incurred, definitely, and the costs will continue. You will see a second instalment of requirements probably as early as the next supplementary estimates.
Senator Runciman: Is there an estimate of what the total security costs?
Mr. Smith: We do not have an estimate of the total security costs at this point, but it is not due to the move from, say, Huntsville to Toronto. It is the scale of these operations. There will be up to 10,000 participants in the summit, and that is a very large operation.
Senator Runciman: There must have been an original security budget. How much of an increase is this from the original budget in terms of percentage?
Mr. Smith: In all likelihood, this is the first major instalment. There will be other instalments. I do not have a figure for the overall costs, but these are significant security operations involving many thousands of people in two locations, so the costs will be high.
Senator Runciman: I think we should know the amount of the estimate.
The Chair: Thank you, Senator Runciman.
Tomorrow, honourable senators, we have Canada's response to Haiti. We will have CIDA, DND and DFAIT. As a second panel, we will have a discussion on security with respect to the Olympics, G8 and G20, and that will give you an opportunity to follow up on some of these points. We will have representatives of Public Safety Canada, the RCMP and the Privy Council Office.
Thank you all for participating today. There were very good questions. Thank you for respecting the time limit so that everyone had an opportunity to pose a question.
On your behalf, let me thank the Treasury Board Secretariat personnel, Mr. Smith and Mr. Pagan, who are our good friends. We always start our study of the estimates with you, which leads me to invite you back next Tuesday morning to start the Main Estimates, which we have to get on with as well. Until then, thank you very much and we will look forward to those undertakings for questions that you were not able to answer and your response to those questions.
Mr. Smith: Thank you.
The Chair: Thank you. This meeting is now concluded.
(The committee adjourned.)