Proceedings of the Standing Senate Committee on
National Finance
Issue 34 - Evidence - March 6, 2013
OTTAWA, Wednesday, March 6, 2013
The Standing Senate Committee on National Finance met this day, at 6:45 p.m., to study the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2014.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this evening, we will begin our study of the 2013-2014 Main Estimates for the fiscal year ending on March 31, 2014.
[English]
This evening, we are pleased to welcome special guests, including the Secretary of the Treasury Board Secretariat of Canada, Yaprak Baltacioilu.
We are very pleased, Madam Baltacioilu, that you along with your colleagues are able to be with us to help us learn a wee bit about the Main Estimates for the fiscal year beginning April 1, which is coming.
We are charged by the Senate to deal with the Main Estimates throughout the year, but as honourable senators will know, we will be asked to vote on interim supply for a three-month period before the end of this month. The government will need funds for April, May and June. In order to vote on that, it is nice to be somewhat informed on the estimates document at the front end. In late June, we will be expected to vote on the full supply. We will continue our studies of these Main Estimates leading up to that time.
Accompanying the Secretary of the Treasury Board Secretariat of Canada are officials from the Expenditure Management Sector of the Treasury Board. Each of you has been here on several occasions previously, and we thank you very much for agreeing to come back. We have Bill Matthews, Assistant Secretary; Sally Thornton, Executive Director; and Marcia Santiago, Senior Director.
Ms. Baltacioilu, I will call on you first for some introductory remarks and then you can spread the work around among your colleagues. Before we do, I have an intervention by my colleague to my left.
[Translation]
Senator Hervieux-Payette: Mr. Chair, there are three francophones at this meeting and there are no copies in French. I find that quite unacceptable.
The Chair: It is unacceptable, yes. The document was sent to each office. Are there any additional copies?
Senator Hervieux-Payette: Thank you.
The Chair: All senators received a copy of the document at their office.
Senator Hervieux-Payette: No, I did not receive it.
Senator Bellemare: Yes, I received it in French.
Senator Hervieux-Payette: I asked my office and no one knew about it.
The Chair: Is everything all right now?
Senator Hervieux-Payette: Everything is fine, thank you.
Yaprak Baltacioilu, Secretary of the Treasury Board of Canada, Treasury Board of Canada Secretariat: Thank you very much, Mr. Chair, honourable senators.
My name is Yaprak Baltacioilu. I thought it was a good idea to pronounce my name because some people find my name difficult; I am not exactly sure why.
Thank you for the invitation. This is my first time appearing before a parliamentary committee since I have been in this position.
[English]
I have been the secretary for a little over three months. It is an honour to be here, and it is very important to be before you where we can cover the estimates of the whole of government.
The probity and the examination of the estimates is the supreme function of Parliament, and anything we can do to make the overview easy and explainable I think will be an honour. I am looking forward to working with you all over the next number of years.
I feel a little as the odd man out here because I know that you know my colleagues very well and they know their issues, and I think they know these blue books better than anyone else. They have made some improvement based on comments they have received from this committee as well as the House of Commons committee. My colleague Bill Matthews has a presentation he will walk you through, and then we will be happy to take questions.
Again, thank you very much for the opportunity to be here.
[Translation]
Bill Matthews, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: You received a copy of our presentation, which provides an overview of the Main Estimates for 2013-14. I would like to go over this presentation with you, and then we will be pleased to answer your questions.
[English]
I will start on slide 2. I have three objectives in mind as we go through the presentation. The first is a reminder of the purpose of the Main Estimates, including the supply cycle and the relationship between Main Estimates and the budget. This will be a bit of refresher for members, but it is worth spending a few minutes on this because it is a complex topic.
The Chair: It is always a subject we can afford refreshment on.
Mr. Matthews: The second objective would be to spend time talking about the structure of the document itself. As has been mentioned, we have made some improvements and I will highlight those changes for you because, even though they are improvements, they may make it challenging the first time through as change is always tough.
Finally, we will get into the specifics of these Main Estimates themselves in terms of how they compare to previous years' estimates and what some of the biggest changes in dollar amounts will be.
Turning to slide 3, the purpose of the Main Estimates themselves, the key thing to remember is that no money can be spent without the approval of Parliament. For money to be spent from the Consolidated Revenue Fund, we need Parliament's approval. The way Parliament's approval is obtained is through the supply bills, as was already discussed, as well as through statutory funding, and we can spend time on that as well.
Main Estimates represents the spending plans of departments to date to start the new fiscal year. The Main Estimates supports two supply bills, as has already been mentioned — the interim supply bill, which must be voted on before April 1 so departments can begin spending money on April 1, then to be followed up by the balance of supply, typically in mid-June.
[Translation]
Now on slide four, your committee has already seen this diagram a few times, but it is worth mentioning it once more. Right now, we are on the left side of the slide. The Main Estimates for 2013-14 were tabled in Parliament on February 25, at the same time as the 2012-2013 Supplementary Estimates (C).
In the coming weeks, the departmental reports on plans and priorities will also be tabled in Parliament.
[English]
We also anticipate that the interim supply bill will be tabled before March 31 as that does need parliamentary approval before the new fiscal year starts.
Slide 4 is our infamous picture of the government supply cycle. We do like to say that for the government fiscal year, we run two years at once. The budget is typically the start of a new fiscal year, so there will be a budget coming up. The fiscal year finally closes sometime in the fall when the public accounts of Canada get tabled. We are in the January to March 26 time period, which has the tabling of Supplementary Estimates (C), which we dealt with last week; at some point a budget; the tabling of the Main Estimates; sometime soon the departmental Reports on Plans and Priorities; and interim supply for Main Estimates as well as Supplementary Estimates (C) all in this cycle. It is a very busy time period, and I know this committee has a good handle on what is coming.
Slide 5 shows the differences between Main Estimates and the budget plan, which gets a fair amount of attention. To start, I would say the budget is the government's key fiscal plan, fiscal document, for the upcoming years. The Main Estimates represents departmental spending plans on a cash basis for programs and spending that have already been approved.
The timing of the budget does not actually allow for Main Estimates to reflect new budget announcements, so legally Main Estimates must be tabled on or before March 1. There is no legal requirement to table a budget and we do not yet have a budget for this current year, so obviously any new budget items are not yet included in the Main Estimates. Where there are new budget items that will require spending in the year 2013-14, they will be picked up in supplementary estimates when departments have had their spending plans properly designed and approved by Treasury Board. That is the connection between the two.
In slide 6, the Main Estimates is structured in two parts. The big blue books you have before you are Part I and Part II. The Part I is the Government Expenditure Plan. It is 18 pages in length and it is a very high level overview of the government's spending, including the Main Estimates.
If you were to pick up your Main Estimates document, you will notice — and I will go through some of this in a few more minutes — that at each page there is a ``I'' and a dash; that means you are in Part I of the document, which is the government-wide part. If you get into the body of the document, Part II, which is just under 400 pages in length, that is where we list department by department. If you hear me refer to Part I, page 5, it is the ``I'' before the number; Part II is the number that starts with II; but both in the same document are Parts I and II.
The rest of the estimates family, as we call it, is the Reports on Plans and Priorities, and the departmental performance reports, which come later.
I will mention several things. The government expenditure plan does include on a government-wide basis transfer payments, public debt, operating and capital information in terms of totals. We have one table that shows planned expenditures by organization, and I will review that any a moment. I will highlight some other changes that we think will make it easier for you to review the estimates because we have included additional information in this document this year.
If I could take you to slide 7, I will speak about the format changes here. I would warn you against paper cuts because we will be flipping pages as I point to some of these changes. Part I is the first part of the document, the government-wide spending plan. I suggest you flip to Part I, page 4.
[Translation]
It is exactly the same page number in the French version.
[English]
I will give you a moment to find those pages.
You will first notice a lot of bar graphs this year. In previous years we had a lot of numbers, and those who are not visually inclined may struggle with that. I am one of those people. I will highlight the bar graphs in Part I, page 4, which give a quick visual of the changes year over year. If you look at the budgetary spending, it is split between statutory and voted. The solid colour is the statutory piece; the marked-up part is voted. You can see it is fairly consistent with previous years.
If you look on the graph to the right of that, you will see the non-budgetary spending. If you look at 2011-12 expenditures versus 2012-13 estimates versus the Main Estimates for 2013-14, you can see there is a quite a change going on there. We are happy to speak to why that is, if that is of interest to members of the committee.
The Chair: It would be of interest.
Mr. Matthews: If you go over to I-5, you will see the longer term trend of statutory and voted expenditures. You will see it is slightly down from its peak in 2010-11, but you will see a fairly consistent pattern there. You will see those bar graphs throughout the document, and we think that does help people in terms of getting their mind around what is going on here.
The other thing I will highlight for you, if you go to Part I, page 10 — Part I, page 11 in the French version — you will see what I think is a very helpful chart. This lists all the organizations that are in this document. They are listed alphabetically for the first time. You will see this change throughout. You will see that departments are now listed alphabetically as opposed to by portfolio as in the past. Listing them alphabetically will help us find organizations when we are looking for them. The downside is that the order is not the same in French as in English, so it may be a struggle for us as we go through to find the various organizations, but it should make it easier to find the organization you are looking for.
The information that I think is very helpful is the column on the far left. You will see 2011-12 expenditures. That is what the organization actually spent in the year 2011-12. That number will correspond to the Public Accounts of Canada, Volume II, if you are looking for what they actually spent the last fiscal year we have numbers for, 2011-12.
The next two columns relate to the year we are in right now, 2012-13. The first column says Main Estimates, so that is the number that was in the current year's Main Estimates. The last time we did Main Estimates for Agriculture and Agri-Food Canada you would have seen 2.4.
The column to right of that, ``Estimates to Date,'' represents the Main Estimates plus Supplementary Estimates (A), (B) and (C). You will see how their spending authorities evolved through the year because they grow, as we know.
Finally, in the column to the far right, 2013-14, is the number in this year's Main Estimates.
We think this gives a very nice picture of what has gone on for each organization in a very summarized fashion so you can find out what they spent for last fiscal year that was closed, what they had in last year's Main Estimates if you wish to compare to this year's, as well as their current estimates to date for Supplementary Estimates (A), (B) and (C), plus mains. That is another improvement we made. We think it is a useful change, but I would be interested to hear your feedback.
There are other things I should mention for you in terms of changes. For the statutory spending information in these documents, we have one line in each department for statutory spending. The breakdown of the statutory spending for each department is now online. We added a lot of information to this document and did not want to make it too big. We were looking for ways to shrink it down. If you are looking for a breakdown of the statutory spending for each department by component you will have to go online. That is another change that has been made.
Finally, on the Main Estimates themselves, there is spending by strategic outcome and program in each department's part of Part II, so you will get spending numbers for strategic outcome as well as program in Part II. Again, there are additional details online if that is of interest to you.
The last bits I will highlight are more changes that are coming. Some of the changes were in the works anyway. Other changes related to the report that the house committee did on the estimates and commitments were made to improve things there.
Reports on Plans and Priorities will be coming soon. The change you will see there is that they will contain three years of history in terms of spending data, as well as a three-year forecast for what each department plans on spending. That will give a longer term view of the department.
Embedded in the online version of the RPPs you will see a link to the department's tax expenditures and evaluation report. There was some interest in getting information on tax expenditures and linking it to Reports on Plans and Priorities, so there will be a link in the online version of that document which should help the study as well.
The Chair: When you say the online version, is this by department?
Mr. Matthews: Yes, and if I recall correctly, you can go to the Treasury Board of Canada Secretariat website and get the links to them all.
Those are the changes. They are substantial and we think they are good improvements, but we will be happy to hear your views on them.
On slide 8, when you get into Part II of the document, which is department by department, Crown corporations, et cetera, you will find a standard format for each department. You will find the raison d'être, which is the description of the purpose of the organization, and you will find Main Estimates numbers in terms of what is being sought this year compared to previous years at a very high level, and it is by vote, statutory. You will see information on programs as well as strategic outcomes and then a highlight section that talks about the major changes in this year's Main Estimates versus last year's. That is where you would go to find out what has changed for a given department. Again, there is more information.
With slide 9, I remind members that we were here last week on supplementary estimates. To be frank, they are much easier to explain because you get what the department is looking for item by item — $10 million to do something new or $5 million. The Main Estimates represent an aggregate, so it is not as easy to explain the changes.
The major changes have been discussed in the highlights section, but they do represent the aggregation of a number of years of approvals, of spending. Even though departments must come back to Parliament each year to get their annual spending approved, some of that spending is spending that could have been approved through the cabinet process two or three years ago, but they are coming for this year's portion. Main Estimates are more challenging than supplementary estimates. There is a lot of information here and we hope it helps you with your study, especially looking at the highlight section of this document.
The Chair: Can you give us one example of a statutory item being shown as just one line item?
Mr. Matthews: Yes. Let us go to the first organization in the English version, which is Agriculture and Agri-Food Canada. In Part II, page 4, almost at the bottom of this chart you see the very bottom total, and above that you will see ``Total Contributions'' and above that you will see ``Total Statutory.'' Agriculture Canada has a number of statutory programs. That is all of those statutory programs rolled into one number. If you wanted a breakdown of which statutory programs by program, you would have to go to the online version.
Senator Black: Mr. Matthews, taking that example of the total statutory for Agriculture, does that mean spending pursuant to a statute?
Mr. Matthews: Yes. The best way to explain statutory spending is that I know with agriculture —
Ms. Baltacioilu: The Farm Income Protection Act governs all income support programs and gives the authority to the department. Underneath that there are separate programs. You might actually have heard of specific programs in the olden days, such a NISA, et cetera. Those would always have been under this particular act. That is why it is hard to connect specific programs or its name to a particular statute, but basically these are approved by Parliament as overall.
Senator Black: For further clarification only, Mr. Matthews, I was with you up until I-13. I get all that. What does I- 14 represent?
Mr. Matthews: It is a continuation of I-13, so you are into the Employment Insurance Operating Account. You may recall when we were here for Supplementary Estimates (C) that we talked about the distinction between budgetary and non-budgetary spending. At the top of I-14, you will see the totals for budgetary and then we go into non-budgetary. Remember that non-budgetary spending are items that, if all goes well, will not affect the bottom line of the government. A loan we expect to collect is a non-budgetary item. If that loan goes bad and we do not collect it, at some point that becomes a budgetary item because it does affect the bottom line of the government. This is split from budgetary to non-budgetary.
The Chair: It is like writing off student loans that we had to do a while ago.
Mr. Matthews: This is a reminder that the statutory information included is just for information. It is not actually voted on as part of the appropriation bills, which is why we felt comfortable putting the additional detail online.
Slide 10 will move into the third part of the presentation to talk about these estimates themselves in terms of numbers. If you are looking for the 2013-14 voted and statutory split versus the 2012-13, you will see voted is down slightly. We are $87.1 billion at this stage versus the 2012-13 number which was $91.9 billion. Statutory spending is up by a little more than that. It is 165.5 versus 160 in the previous year. The total is 252.5 for 2013-14 and 251.9 in last year's Main Estimates.
The other item I will highlight is the split between statutory and voted. Normally about 65 per cent of spending is statutory in Main Estimates, and we are roughly in line with that this year. It is about 66 per cent, with 34 per cent voted, so that trend is continuing and no surprise there.
If you are wondering why statutory spending is up in terms of the forecast, we talked a little about this last week. It very much relates back to the guaranteed income programs for our older population. The Guaranteed Income Supplement, Old Age Security, increasing numbers of recipients as well as a small increase in the payment itself is what is driving the increase in statutory spending this year.
Slide 11 is borrowed from Part I of the document, which gives you a split of these funds across the various components. This shows you the total across public debt charges versus transfer payments versus operating and capital. Again, consistent with the previous year, roughly 63 per cent of the spending is transfer payments. It was slightly lower in 2012-13 versus 2013-14. It was 63 per cent in 2013-14 and 61 per cent 2012-13. Operating and capital is 26 per cent in 2013-14 versus 27 per cent in 2012-13, and interest on public debt is holding steady at around 11 per cent.
We discussed interest on public debt last week. When you see it here, it is interest on all of the debt, including debt to other countries, other parties, as well as pension liabilities for the government. It is interest on all debt here.
Slide 12 is where we get into the largest increases for the 2013-14 Main Estimates. I will take you through these. This is a good way to understand some of the big changes.
I will highlight two things before I go through some of this detail. First, when you are dealing with Main Estimates, there are a lot of ins and outs; some things go down and some go up for each department. I will just highlight the major things that have changed for these departments, but there are many ups and downs.
The other thing to mention is that there are two reasons you could see a change: There has been a change in programs — for instance, a program might end in a current year — and the other reason might just be a timing difference, and I will speak to an example of a timing difference as we go through this. It would be something included in this year's Main Estimates that was not quite ready for last year's Main Estimates, and that might cause a timing difference.
First on this list you will see Public Works and Government Services Canada and an increase of $223.6 million. That is really being driven by a couple of things. The first thing is the ongoing long-term vision and plan for the Parliamentary Precinct, so there is some increase in spending there. There is also an increase in spending on the replacement for the pay system, which is the project going on in terms of Miramichi. I believe we spoke about that last week with Supplementary Estimates (C). That is partially offset by the reductions from the strategic and operating review, or Budget 2012, as well as the strategic review reductions. There is also some money in there for the purchase of a new building, and that is causing an increase. Those are the major items for Public Works.
Next is Aboriginal Affairs and Northern Development Canada. There are a few items I will highlight for you. Residential schools are driving part of the increase. There is also the ongoing money from Budget 2012 related to the First Nations Water and Wastewater Action Plan that is causing an increase. There is an increase related to the construction and renovation of schools. The First Nations population is also growing, so there is an inflation factor in terms of the number of people being affected by these programs.
The third one I will highlight for you is the Royal Canadian Mounted Police. This is a great example of a timing difference. Hopefully you will understand what I mean by this. The main reason for that change is the contract policing agreement that was reached whereby the RCMP provides police services to other levels of government and charges for those services. When we did last year's Main Estimates, the contract had not been signed yet, so there was no money included in the Main Estimates for that. When you looked at the 2012-13 Main Estimates for the RCMP, they looked like they dropped because there was no money in there for contract policing because the new contract had not yet been signed.
If you remember Supplementary Estimates (B), the RCMP came along because the contract had indeed been signed. There was a fairly large amount of $330 million in Supplementary Estimates (B) for the RCMP for contract policing. This year, because the contract had been signed, it is now back in their Main Estimates. You will see it looks like an increase, but it really is a timing difference. In the current fiscal year 2012-13, those funds were in Supplementary Estimates (B) instead of the Main Estimates.
The Canadian Space Agency is $125.7 million. That is largely related to their RADARSAT project that is aiming for a satellite launch in 2018, if I recall correctly.
For the National Research Council of Canada, the increase is largely driven by the Industrial Research Assistance Program. That is another one that was in Supplementary Estimates (B) in 2012-13 and is now in the 2013-14 Main Estimates.
Next on that list you will see Veterans Affairs. That is really two things: an increase in population in terms of the number of program recipients —
Senator De Bané: You have skipped National Research Council.
Mr. Matthews: Sorry. The National Research Council is the Industrial Research Assistance Program, which was in Supplementary Estimates (B) last year.
Senator De Bané: I would like to just clarify. On page I-12 we see that for the National Research Council there is an increase of 154. We start with 698; we end with 852.
I am using the English version. For the National Research Council on page I-12, we see there that it is between 698 and 852, which means a $154 million increase. On slide 12 we see that it is only 109.8.
Mr. Matthews: Correct. You are seeing a couple of things. First, you are looking at the money they spent in 2011-12, whereas we are comparing the Main Estimates they had in 2012-13 versus the Main Estimates in 2013-14. When you see National Research Council at $110 million, that is their voted, if I recall correctly.
We are speaking Main Estimates to Main Estimates. You were looking at the 2011-12 actual spending versus the Main Estimates. Both are relevant, but when we show the numbers here for you, we are looking at the Main Estimates in 2012-13 versus 2013-14. We have only hit the major components here, so for National Research Council, we are showing $110 million. When you actually look here, it is $120 million, Main Estimates to Main Estimates.
Senator De Bané: Am I correct when I look at page I-12 and I see that National Research Council has spent 698, and we are projecting now 852 hopefully for this coming year?
Mr. Matthews: You are correct in saying that for the year 2011-12, which is now ended, the National Research Council did spend 698. That is actually spent; those are actuals. The Main Estimates for the year 2012-13, when we started, was at 700. For 2012-13 with the supplementary estimates, it came up to 852. For this year's Main Estimates we are starting with 820.
Senator De Bané: So the 109 on the slides —
Mr. Matthews: The 109 is the voted amount, not the statutory amount, and it largely relates to the Industrial Research Assistance Program. There are a lot of ins and outs; I am just highlighting the major change for you. That item was included in Supplementary Estimates (B) last year.
Senator De Bané: Thank you very much.
Mr. Matthews: Next is Veterans Affairs Canada, which is 70.9. I mentioned an increasing population as well as the item we discussed that last week, which is no longer offsetting those two disability payment amounts.
I apologize, Mr. Chair. I just remembered you were not here last week.
The Chair: I had occasion to read what you said.
Mr. Matthews: Thank you.
After that, we have the Jacques Cartier and Champlain Bridge. There are few things going on there. The re-decking for the Honoré-Mercier Bridge, as well as the planning work for a temporary crossing at Nun's Island, are driving that change.
Next on that list you would see Canadian Heritage for 37.4. The largest chunk of that relates to money for the Pan- Am Games in 2015.
Then you have Communications Security Establishment Canada for 32.5. That one is the Signals Intelligence program and an IT security program they are running, two programs that have significant pieces.
Last on this list is the Canadian Air Transport Security Authority for 21.9. That relates to a new baggage screening system they are putting in place, so there is additional funding there.
Those are the voted pieces.
As for the statutory pieces, we have a few highlights for you here, and this would be old news for you.
There is an increase in forecast for elderly benefits; that is, as I mentioned earlier, Old Age Security and the Guaranteed Income Supplement. That is basically because of an increasing number of recipients and an increase in payment values.
The increase in the Canada Health Transfer is 6 per cent, and that was legislated. Payments to provinces regarding sales tax harmonization are linked to the payment to Quebec for the sales tax harmonization.
The Chair: Does that net out the amount coming back from British Columbia?
Mr. Matthews: This is spending. The amount coming back from British Columbia will come in as revenues.
The Chair: It is not a net figure?
Mr. Matthews: Not netted, no. It is an increase in fiscal equalization, which is formula driven, of 0.7.
Those are the large increases. We think this might be useful for committee members in determining where you might want to put the emphasis for the rest of their study.
If we could turn the page to slide 13, we will do the opposite and go through the largest decreases.
National Defence is up at the top of this list. There are a couple of things for National Defence worth talking about. Here is a great example of some changes as well as what we can call a timing difference. There are reductions related to Budget 2012 as well as their strategic review that are kicking in. However, if you look at DND's explanation of the changes, they had temporary funding for the Canada First Defence Strategy. That was three-year funding that expires at the end of this year, and there is nothing to replace it in the current year's Main Estimates. If you read National Defence's highlights, you will see it flags that they are planning on coming forward with something to replace the Canada First Defence Strategy, but until that is firmed up, we will not include anything in the estimates document. That is another example of some sort of timing difference.
I will deal with the Office of Infrastructure Canada and Transport Canada at the same time, both decreases there. There was some fair amount of economic action plan stimulus funding that is winding down. In the case of Infrastructure Canada, you are looking at the Building Canada Fund as well as the Canada Strategic Infrastructure Fund, Transport Canada Gateways and Border Crossings Fund. Those programs are winding down, still going on, but you are seeing reduced activity there.
The Correctional Service of Canada is an interesting one to look at, with a drop of close to $400 million. What you are seeing on correctional services is that the forecasted increase in the number of inmates has not happened, so the decrease over last year's Main Estimates is as a result of that. The Correctional Service's spending on that chart early on, on page 1, this year's Main Estimates, if I recall correctly, lines up fairly closely with what they actually spent in 2011-12. This is more of adjusting Main Estimates to reflect real experience in terms of number of inmates.
With respect to Foreign Affairs and International Trade, you are seeing some reductions because of Budget 2012 but also some sunsetting of programs that were scheduled to sunset. There is $132 million for the Global Peace and Security Fund, as well as the reduction in the global partnership fund. That is a mix of some sunsetting funds as well as some Budget 2012 reductions.
CIDA, for $247 million, is on this list as well. Agriculture is a good example of a timing difference. Growing Forward 2 is not yet in these Main Estimates, so Agriculture Canada has signalled in their highlights section that there is something coming when Growing Forward 2 gets finalized. We will see something from them later on.
Finance Canada is an interesting one. That has largely to do with their grants and contributions votes. In the previous year, they had scheduled repayments to debt relief to the Paris Club that were made through Export Development Canada. There are no such scheduled payments this year, so you are seeing a drop there.
For VIA Rail, the decrease here is similar to what you saw with Transport and Infrastructure. Their previous year's numbers were because of the economic action plan. In VIA's case, it was around what they call ``rolling stock,'' which is money for new trains and railcars. That money is now no longer going on in 2013-14, so you are seeing the drop there.
Finally, you have Industry Canada. There are some changes in terms of timing of funding for some auto innovation fund money as well as some sunsetting programs expiring on their front.
The only decrease I will mention for you is the decrease in the public debt charge. Again, we talked about this last week in that longer term interest rates on bonds are lower than was originally anticipated, so we are seeing a decrease forecast here.
The Department of Finance has a budget coming.
Slide 14 is my last slide. As a reminder, these estimates were referred to various committees for study, including this one. At the end of this estimates document is a draft appropriation bill, which is what will get voted on. Remember, for Main Estimates it gets split into two. You have the interim supply, which happens before April 1, and then the full supply bill, which will be tabled at some point in June.
The last thing, before I conclude, is that we have found a small error in the Main Estimates document, and I wish to flag that for the attention of members now. Please go to page II-45.
[Translation]
In the French version, it is Part II-37.
[English]
It is the Canadian Environmental Assessment Agency. If you look on the far right, you will see there are brackets around the numbers for contributions — ``Contribution to the Province of Quebec — James Bay and Northern Quebec Agreement.'' Those numbers should not have brackets around them. That is the error we found. They look funny because they have brackets around them, so you should read that as planned spending, like any other number.
I apologize for that, Mr. Chair, and hope it has not caused any confusion in preparing for this meeting.
The Chair: Should we follow the removal of the brackets at II-45? I have taken them off of ``Contributions for support of public participation . . . .'' Should we take them off on the ones down below as well?
Mr. Matthews: Yes, you should.
[Translation]
Senator Hervieux-Payette: What is the number, in French?
Mr. Matthews: In French, it is II-37.
Senator Hervieux-Payette: Part II, page 37?
The Chair: It indicates that it is a transfer from Quebec to Canada for almost $5 million. It is the opposite; now it is Canada to Quebec. That is why I said yesterday that it was good for Quebec.
[English]
Mr. Matthews: That concludes my presentation, Mr. Chair.
As a kind request, where there is a page number, if members could provide their page number with their questions, that would help us immensely in trying to answer questions.
The Chair: Are you able to take page numbers in French or English?
[Translation]
Mr. Matthews: Both are fine.
[English]
The Chair: Very good. A number of senators have indicated in interest in engaging in conversation with you.
Senator Buth: Thank you very much for being here this evening. I will try not to repeat questions that I had from last year going through this process. I figure I have given myself a year, but I am sure I will ask some of them again.
At page I-14, I am curious. Although you said that the non-budgetary items should not affect the bottom line of the government, there is a fairly large amount there for actual expenditures in 2011-12 for Finance, then moving through Main Estimates in total estimates, and then virtually nothing for 2013-14 estimates. Could you tell me what that might be?
Mr. Matthews: In terms of Finance, there are a couple of things going on. I will start with CMHC, and then move to Finance.
The biggest change in non-budgetary is CMHC. If you recall, under the economic action plan, and it was linked to Finance, there was a plan to help major financial institutions become more liquid. They were having a hard time borrowing money, so a program was launched to buy insured mortgages from the banks. That basically made the banks more liquid and allowed them to continue issuing mortgages. For those insured mortgages that were bought up, the repayments have started. When you look at the non-budgetary items, they started coming back in the door in 2013- 14. I will take you back to the chart on page I-4. When you see the non-budgetary as being negative, it is because there is a bunch of money coming back in around that insured mortgage program.
Sally Thornton, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: The reason for the decline in non-budgetary for Finance, you may recall that Canada has been involved in a number of debt initiatives going back to 1956 with the Paris Club. They look at ways to find coordinated and sustainable solutions for payment difficulties experienced by debtor countries. We have been actively involved in other negotiations and stopping our payments through EDC to support the Paris Club, hence the diminution there. We are no longer paying EDC to support the Paris Club and are looking at alternative ways.
Senator Buth: I would now like to go to page II-151, under Foreign Affairs. Thank you very much for that high-level description of what the main components are for decreases and increases. You mentioned that one of the main pieces of this was the decrease of $108 million in accordance with savings identified as Budget 2012. Where would we find out what those decreases actually were?
Mr. Matthews: I will say a couple of things about DFAIT and departments in general. The best way to find out what they actually are is if you look in the department's quarterly financial reports, you will see where the spending is dropping versus the previous year.
You do have the Reports on Plans and Priorities coming in the next week or so. That would be a good indication as well.
As a general comment, not on Foreign Affairs themselves, the targets that were given to departments were very much split between operating and grants and contributions. Departments were tasked with coming up with options for 5 and 10 per cent savings. They had to have at least a fair share from operating expenditures versus grants and contributions. You could not come in and achieve your 10 per cent reduction by saying you will just eliminate a few programs. You had to get a fair share from operating. I can tell you that all departments respected the rules around that, so a proportional share at least came from the operating side of things.
When you look at the changes in Foreign Affairs specifically, again I would suggest the RPP is the best place to look for the actual changes as well as the quarterly reports.
There is another thing going on here which affects most departments, which the transfer to Shared Services Canada. You will see most departments have a drop in spending because they have transferred money to Shared Services Canada, and that is for standardization around email servers and data centres. In the case of Foreign Affairs, that was a $4 million transfer over.
The Chair: This year we will not see the transfer over through any of the supplementary estimates; it will be an item for Shared Services Canada now and it will no longer be in Foreign Affairs or whatever department.
Mr. Matthews: If a department reaches a one-off arrangement with Shared Services Canada and wants to transfer money to them, you could see that through supplementary estimates, but the money that was used to stand up Shared Services Canada, transfers from other departments, is now done.
Senator Buth: In terms of taking a look at a department like Foreign Affairs and International Trade and whether they will be able to meet their commitments, obligations and programs, what would you suggest the committee should do?
Mr. Matthews: There are a couple of things. You could have a discussion with the department itself, but for tonight's purposes I would take you back to page I-10, which might be I-11 when I find Foreign Affairs here.
Senator Buth: Yes, I-11, three quarters of the way down, just under Fisheries.
Mr. Matthews: I would look at several things. Look at their spending in 2011-12 first, so you look at Main Estimates versus what they spent in 2011-12. It is an interesting comparison to make.
Second is to understand what has actually changed. The reduction from Budget 2012 is $118 million. Then you have to think about programs that are sunsetting. Where they had time-limited funding that is sunsetting, that represents a planned end to spending. In their case, they had $132 million for the Global Peace and Security Fund that was scheduled to stop and it will stop; it was time-limited finding. That does not really impact their operational abilities. Understanding the sunsetting funding is good as well.
The Shared Services Canada funding I mentioned is a transfer, so that is just moving responsibilities from that department to another. Again, that should not impact their ability to do operations.
Then they are closing the International Centre for Human Rights and Democratic Development, another $5 million there, so again no real impact on their operations themselves.
Those would be where I would start in understanding the impact.
Senator Buth: I have one more question to do with Shared Services Canada, which is at II-322. I have not gone through this in any great detail because it just dawned on me. Could we find a list of which departments have contributed to Shared Services Canada and what they contributed?
Mr. Matthews: You can. The best place to look is the supplementary estimates from last year because all those transfers are listed in your appropriation bills. I do not think you will find a centralized spot.
Ms. Thornton is telling me you will.
Ms. Thornton: They are not in these books but the order-in-council that created it. The first big thrust was last summer, and that was with Public Works, but the remaining 42 organizations were all identified in the order-in- council. I think that was in the fall of last year.
The Chair: Would that not have qualified for a horizontal item in supplementary estimates?
Mr. Matthews: It was not new spending. We were just moving spending from many departments to another. Horizontal items are typically when we have new monies. If there is an interest in getting a copy of the order-in-council, we can certainly provide that.
Senator Buth: That would be helpful.
The Chair: Every one of these questions is very good. They help the rest of us understand, especially, Mr. Matthews, when you refer us to the pages so we can get used to your new format.
[Translation]
Senator Hervieux-Payette: My question is for Ms. Baltacioilu. We previously looked at the issue of acquisitions at Foreign Affairs, particularly the London project with Trafalgar Square Buildings. What is the line of authority for spending when it is not in the budget? Who decides what decision to make and how the decision is made? We were told yesterday that the decision had been made in December because there was a good opportunity to acquire the building beside a government building in Trafalgar Square, that we would eventually buy another residence for the ambassador and that we would sell the other building on Grosvenor Place.
Who authorizes that? I thought that every time we spent something, it was because we had the authorization to do so and that it had been approved. The sale happened yesterday. I would like to know who made the decision and on what, and what steps are followed within the department.
Ms. Baltacioilu: This is vote number five of the Treasury Board. Ms. Thornton can answer that question better than I can.
[English]
Ms. Thornton: If I may, with specific reference to the Trafalgar Square purchase, look at page II-349 in the English version.
[Translation]
Which is in part two, page 322, in French, for the Treasury Board. There is the matter of a vote, vote five: government contingencies.
Senator Hervieux-Payette: So you have $750 million to spend with no approval except the fact that you were given it as pocket money?
[English]
Ms. Thornton: No. What we are doing in the Main Estimates is that we are coming to Parliament to seek the authority to spend up to $750 million for things that meet certain criteria: urgent, unforeseen needs. Parliament actually provides that authority. For an expenditure to be made from that vote it must meet those criteria and be approved by the Treasury Board. It is then reported in the next supplementary estimates for information so that you always know exactly what we have done. We have received the authority in advance to spend up to that amount for things that fall within that.
Senator Hervieux-Payette: With respect to the line of authority, who is submitting the budget and that all the criteria are met? Who is preparing that and where does it go in the department?
Mr. Matthews: I will start with a couple of things. To access Treasury Board vote 5, which is for contingencies, when Parliament approves the appropriation bill attached to these estimates, they are giving Treasury Board the authority to manage the government-wide contingency vote. The way the situation works is when Treasury Board exercises that authority, they report back to Parliament in subsequent estimates to show how it was used. To actually access it, the department has to come in to Treasury Board with a business case showing why this is an urgent need and why they cannot wait for the next supplementary estimates. This vote is not used often.
In this case, the department had a closing date on the real estate deal that did not allow them time to wait for the next supplementary estimates cycle, so they made a case to use Treasury Board vote 5 to borrow the money until the next supplementary estimates cycle. That is what has happened here, and now it is being reported through the estimates.
Treasury Board Secretariat vote 5 is the way we deal with unforeseen circumstances. We have used it in the past for other things. Aboriginal Affairs and Northern Development Canada is the most common one, I think.
Ms. Thornton: And Atomic Energy of Canada Limited.
[Translation]
Senator Hervieux-Payette: Okay, but neither one of you answered my question. My question was about the hierarchical authority in the Department of Foreign Affairs, namely, who makes the decisions on this. Does it come under the deputy ministers? Is it at a lower level or is it at the ministerial level?
[English]
Ms. Baltacioilu: No, the minister signs a Treasury Board submission. The submission comes to Treasury Board. If it meets the criteria, Treasury Board authorizes them to access this emergency money; basically, it is emergency money. Then we make sure that they report on it in the estimates.
It is just the timing issue. Yes, it is the flexible fund, but emergencies need flexible funds, and this is particularly for that.
Senator Hervieux-Payette: It is minister to minister?
Ms. Baltacioilu: Minister to a cabinet committee.
Senator Hervieux-Payette: Would the President of the Treasury Board then authorize the expenditures?
Ms. Baltacioilu: The Treasury Board cabinet committee authorizes it; a group of ministers.
Senator Hervieux-Payette: That was my question. I want to know how it is done. We are all accountable for that $750 million, and we do not know if it was in your back pocket that could you spend without telling us, or tell us after you have spent the money. I understand, but it is a fairly large amount of money — three quarters of a billion dollars. If there were to be a natural disaster, let us say, I would tend to believe that you cannot wait. When it comes to buying a building — I am sure there was a big emergency.
Ms. Baltacioilu: By the Main Estimates process, you are giving us the authority.
Senator Hervieux-Payette: I know, but it is a blank cheque on our part because we do not know who will approve it and how. We just learn about it after it is done. Both in the House of Commons and here, we represent the public, but we are just put before the fact that it is done.
[Translation]
For me, an emergency is an unforeseen accident. And in that case, it is unpredictable.
I apologize if this was long, but I think it took a lot of time to answer my question and get real responses. I had a second question.
The Chair: Before you ask your second question, would you allow Senator Smith to ask a supplementary question?
Senator Hervieux-Payette: Yes.
[English]
Senator L. Smith: Who is on that board? You said the Treasury Board has a cabinet.
Ms. Baltacioilu: Yes.
Senator L. Smith: Who is on it?
Ms. Baltacioilu: It is a cabinet committee of Treasury Board. The membership changes.
Senator L. Smith: Who is on it, as an example?
Ms. Baltacioilu: Right now Minister Menzies is on the board, as are Minister Fletcher, Minister Ambrose; Minister Clement, who is the president, Minister Valcourt . . . .
Senator L. Smith: So the internal group is composed of ministers within the government.
Ms. Baltacioilu: It is the government's executive, just like any other cabinet committee.
Senator De Bané: It is the only cabinet committee that exists by law; the only one. It states that no money can be spent, even approved by cabinet, unless it is approved by Treasury Board, because it is the only cabinet committee that has a law. I used to be a member of that Treasury Board committee.
[Translation]
Senator Hervieux-Payette: Could we please have the total amount to be paid on the money advanced by CMHC to the banks? You mentioned $40 billion; how much still needs to be paid back to the government?
We bought mortgages that are in the bank's books, and I would like to know what there is left for the future. We can see the data for this year, but I would like to be able to see the overall picture. If it is not in these documents, I would like them to be sent to us.
I have one last quick question about the infamous Nun's Island Bridge in Montreal; is this a study or a project?
[English]
Ms. Baltacioilu: I will start with the Nun's Island Bridge. It requires replacement ahead of the Champlain Bridge. Minister Lebel had announced that we would build this, so the subsidiary Crown is doing the work so that we can actually get the Nun's Island component of the bridge in ahead.
Senator Hervieux-Payette: It is good news. Maybe we will get there before we fall into the St. Lawrence River.
[Translation]
But is the amount — if it is not in this document — somewhere else? Because it is like looking for a needle in a haystack.
[English]
Mr. Matthews: The Department of Finance Canada website has some information on this, but I will share a couple of things with you tonight.
With respect to the initial authority for the program itself, when the program was first launched, they originally thought $25 billion. They then raised it to $75 billion. This was the authority limit. Then they finally raised it to $125 billion because the banks were making great use of this. In the end, $69 billion worth of mortgages were purchased by the Government of Canada, so $69 billion was the amount out there. The repayment period is a maximum of five years, so it is starting this fiscal year coming up.
The other interesting thing I will add for you is that the Government of Canada did not take on any additional risk on this. I want you to think about this one for a minute because it is complicated. These mortgages were held by banks and insured by the Canada Mortgage and Housing Corporation. If something happened to the Canada Mortgage and Housing Corporation, the government is the risk holder. We are basically buying up mortgages that we already were the risk holder for anyway. The government did not take on any additional risk. The interesting bit is that the additional revenues the government got off of this program from the banks are, at this stage, about an additional $1.6 billion.
Senator Hervieux-Payette: What was the exact interest rate charged to the banks?
Mr. Matthews: I am not sure, but I think that is on the Department of Finance's website. We can forward to the committee the link with the relevance information.
Senator Hervieux-Payette: The 1.9 billion is what I am talking about.
Mr. Matthews: I cannot recall if the money was made from interest or if it was a transaction fee. I think it was interest, but we will get the mechanics forwarded to you.
The Chair: Once the federal government bought the mortgages, they would get the interest on those mortgage payments, too.
Mr. Matthews: This was a special financing arrangement with the banks. There was some really good disclosure on the Department of Finance Canada's website, so we will get those details.
The Chair: Thank you.
Senator Black: Thank you all for the tremendous work you have done. This is most impressive.
I have a number of questions — really more for my understanding than not. First, in terms of the payment of public debt, over the last four or five years — whatever period of time you are comfortable discussing — has it increased, decreased or held its own? Are you able to draw my attention to that?
Mr. Matthews: The numbers you would want to look at are in the Public Accounts of Canada themselves. There is actually a nice 10-year history at the front part of that document, so that would be the one I would refer you to.
There are a couple of things. The actual deficit has grown over those years; we have been running deficits for the last couple of years. Therefore, as we run deficits, the debt itself has grown. I cannot give an exact number on how the deficit or the debt has grown. The deficit is not always a good measure of the debt. About six pages into the Public Accounts of Canada, there is a wonderful 10-year history of all the key numbers that will show you how the debt has grown.
Senator Black: In terms of the Canadian position on competitiveness, we hear continually that Canada is losing its position as a competitive nation and that our standard continues to fall. I have seen this in various sources that I read. Where would I find in all this material the government's approach to research and development? Is that through various departments, or is it lumped together somewhere?
Ms. Baltacioilu: You will be able to find research and development quite a lot in Industry Canada documentation. Also, specific documents and studies have been done on innovation, et cetera, and not all of it is in one place. However, budgets usually outline initiatives that help the competitiveness. However, in terms of this particular process, for Industry Canada it would probably be their Reports on Plans and Priorities, their department.
Senator Black: That would be a good place to start.
Ms. Baltacioilu: In terms of research and development, yes.
Senator Black: In terms of the national portrait collection of Canada, where would I find in here where and how that is maintained and who is responsible for that?
Mr. Matthews: You will not find it in here, but perhaps in the actual department's Reports on Plans and Priorities. I am trying to think.
Senator Black: Maybe the National Gallery?
Ms. Baltacioilu: I think national portraits reside in the Archives building because many years ago there was an idea to have a portrait gallery. I think Heritage may have the responsibility for overall ownership of them. We will check that.
Senator Black: I would be interested to know that as well.
Ms. Baltacioilu: I know where they are physically.
The Chair: We just do not know who owns them.
Ms. Baltacioilu: It might be Heritage.
Senator Black: I chaired a committee in terms of the National Portrait Gallery, endeavouring to get it relocated to another location, so I am interested to know —
Ms. Baltacioilu: I worked on that file in the Privy Council Office about six years ago.
Senator Black: It would be about then. I am wondering where that collection is these days.
Ms. Baltacioilu: It is in Ottawa.
Senator Black: The issue of pipelines and getting our product, whether it is oil or gas, out of Canada is a national challenge to us now. The National Energy Board is a key player in that, obviously because things cannot happen unless the blessing comes. I notice that the National Energy Board's money has not increased dramatically over the last two or three years. Can you comment on whether they have enough to do the job we are expecting of them? I would understand if you cannot.
Mr. Matthews: I cannot comment on the process to get increases in resources. There is a process in place to make a case for a budget and the estimates are held steady, so I assume that if they have not come forward looking for additional funds, they are comfortable with what is going on. There are a number of players in that file as well. It is not the National Energy Board, but a few other departments. However, if you look through past budgets you will get a sense of what has gone on with that department.
Senator Black: Who would the other players be?
Mr. Matthews: Perhaps the Environmental Assessment Agency would be involved, and a good one to look at and the national pipeline agency itself.
Senator Black: That is helpful. Thank you all very much.
[Translation]
Senator Bellemare: I have a few small general questions and a few specific questions. The first is more of a comment, and I would like to hear what you think of that. It is interesting to see that, in the total budget, a large portion of the planned expenditures will go to transfers to provinces or individuals. These two elements make up 63 per cent of the expenditures. I am not asking you for an exact percentage, but I imagine that a large portion of those funds are statutory credits and not voted, with respect to transfers. Am I correct?
[English]
Mr. Matthews: You are correct. The major ones are all statutory, and I am thinking of the Canada Health Transfer, the Canada Social Transfer payments on Employment Insurance, Old Age Security and the Guaranteed Income Supplement. They are all statutory in nature and that is why, when you look at Main Estimates, you see roughly 65 per cent of Main Estimates are statutory themselves, as are the vast majority.
Ms. Baltacioilu: Basically the transfers are $122 billion and overall statutory is about $165 billion, so transfers to provinces plus the rest of them and all the other programs that we talked about like the farm income program, et cetera.
[Translation]
Senator Bellemare: So, I have interpreted the document correctly. I am on page 1.6 in the budgetary/non-budgetary table; you see the operating expenditures and capital expenditures in the Main Estimates 2013-2014. Sixty-six billion dollars is planned; that is 26.3 per cent. Do you have a division between operating and capital? Because this 26 per cent includes operating and capital budgetary expenditures. There is some detail in section 2, but I did not find the distinction between the operating expenditures and capital expenditures in the highlights.
Mr. Matthews: You are right. You cannot find the distinction between the two here, but we can provide that information.
Senator Bellemare: Do you have an approximate idea?
[English]
Mr. Matthews: I do not know off the top of my head and I do not think my colleagues do either, but operating is bigger for most departments. Capital is intensive in a few key departments. If you think about National Defence, Public Works, Fisheries and Oceans, that is the vast majority of our capital spending. In the rest of the departments you will see a heavier emphasis in operating, but for capital those are the three big ones.
[Translation]
Senator Bellemare: I have another question about a more macroeconomic analysis. I was very pleased to hear your introductory comments, because it helps us understand the variations from year to year. When we look at this table, if we take the Main Estimates for 2012-2013, again on page 1.6, we see that the total budget in the Main Estimates 2012- 2013 was $251.9 billion.
The estimates to date are $259 billion. What I understand is that these are really the expenditures after the full study of the supplementary budgets, including Supplementary Estimates (C). I was wondering how this compared to the budget tabled by the government. On first reading, I thought that the government had budgeted for $251 billion — or $252 billion — to begin with; that increased to $259 billion. Now the estimate is $252 billion for this year.
So, the killer question in my mind is: how is the government going to reach $252 billion when it finished the year with $259 billion?
What I understand is that this $252 billion, which is the Main Estimates you are presenting here, is really an approximation of government expenditures that cannot be compressed. Could you say that?
Mr. Matthews: Yes.
[English]
It gets back to the notion of getting Treasury Board approval for spending. The Main Estimates are what departments have approval to spend right now through budget, cabinet, Treasury Board, and several times a year we come forward with supplementary estimates where departments have received permission to spend additional money. That will be no different in 2013-14. We will be here for supplementary estimates. I cannot tell you how much.
If you look through the Main Estimates, you will see indications from some departments signalling they will come for additional money in supplementary estimates. National Defence has said for the replacement for the Canada First Defence Strategy that they will be coming forward with something. Agriculture Canada for the Growing Forward 2 will be coming forward with something, so this is quite normal. It relates to the notion that departments have to get through budget, cabinet and Treasury Board before they get here. This is the last step before they start spending money.
[Translation]
Senator Bellemare: My question was more about the budget, because we often table estimates and the government budget at the same time. For the government budget, we know there is a deficit; the budget is prepared by taking into account not only the main estimates, but also the expected revenues. I wanted to sort of understand the links between them. One way of improving the presentation in the future—unless it would make it worse, I do not know—would be to perhaps have an additional column for the budget, simply so that we could compare the expenditures and the budget being tabled.
Ms. Baltacioilu: That is a very good idea. We will do that this year.
[English]
With this issue about budgets and the linkage to estimates — Main Estimates and Supplementary Estimates (A), (B) and (C) — there is always a question. We are in a bit of a cycle. When the budget comes down, the budget gives gross numbers. For example, it says that a department can have a certain program. It gives a general number, a gross number, and then the department has to work to make it into a net number as to exactly how that program will run. It gets approvals. It comes to Treasury Board, the minister's committee that we explained. They go through to determine, first of all, whether the department has legal authorities. They examine that. Then they examine whether this department designed this program the right way because sometimes there could be other choices. You may not want to deliver it yourself. You may want to have someone else deliver it or some other department deliver it. You have to talk about the program design. Lastly, at Treasury Board, we also say, ``Okay, you can deliver this program with this much of grants of contributions money, this much of operating money and, if there is capital, this much.'' Once they have that authority, then that is when they come into the estimates.
Now, depending on which cycle they are in and how fast they could come in, it becomes tricky for the estimates because you cannot do a one-to-one check as to which budget where. Our folks heard this committee and as well the government operations committee in the House of Commons. They have said the same thing. From now on, whenever we put these things, we will do a reference to which budget they were in so that it is better explained, but also it increases the transparency.
Mr. Matthews: It does. You will see that link.
The other thing I should mention, since you did link back to the budget, is that I must remind members that the budget is done on an accrual basis and this is done on a cash basis. Just to give you a frame of reference, the 2011-12 expenses were around $270 billion, so that is the accrual number. The cash number will be something different than that, usually a bit lower. Keep that in mind as well as we are doing the link. In future supplementary estimates documents, for all new funds from budget 2013 and going forward, we will flag for the public and for parliamentarians which budget it links to so you can draw the link.
To get back to the previous question, we found an answer on the split between capital and operating. It was under our nose. Roughly 6.5 of that operating and capital total is capital.
Senator Bellemare: Thank you.
I went through the table, page I-11, and I was surprised to find out that, in most of them, the Main Estimates for 2013 are lower than the Main Estimates to this date.
[Translation]
The difference is very large in some cases, especially with Atomic Energy Canada. If we could look at it, I would like you to explain it to me; it is on page II-222 in the French version.
[English]
Mr. Matthews: Thank you for the question. Atomic Energy is the link back to AECL, if I recall correctly. Their base funding is very low. Through the last couple years, they have received additional funds through supplementary estimates. As to what they are funded for, you may recall they divested part of the organization to SNC-Lavalin, but there is still is some left. They are funded for those base operations. That is not to say they could not come forward again for more money in supplementary estimates, but their base funding is what you see in these Main Estimates. It is not that different from what we have had in past where they get substantial funds in the past through supplementary estimates.
Ms. Thornton: That is true in terms of the voted. In terms of the difference in the statutory funding, that is related to the divesture of the CANDU Division, which you saw last year. That relates to the statutory portion.
[Translation]
Senator Bellemare: I was very surprised to see that even actual expenditures were much higher in 2011-2012 than the voted credits. It is like that in a few sectors.
Ms. Baltacioilu: Yes.
[English]
Senator Callbeck: Thank you for your explanations.
I want to start with Defence on page II-216. The second paragraph says there is a decrease in that authority of $1.8 billion, approximately 9 per cent. Then the next paragraph says that of that 1.8, 1.1 is from ``decreases in departmental funding under the 2010 Strategic Review and savings identified.'' Can you help us out here and give us any explanation as to the $1.167 billion savings? Were programs cut? Were programs or services affected? That is a lot of money.
Mr. Matthews: It is. Defence does have, I think, the largest budget of all departments.
As we talked about earlier with DFAIT, the best place to look for the information on where the cuts are occurring or where the changes are occurring is in both the quarterly financial reports and their upcoming Report on Plans and Priorities. Defence was under the same rules as everyone else in terms of putting forward reductions that affected operations, internal efficiencies and things like that, but I cannot specifically comment on what National Defence is doing to achieve those cuts.
Senator Callbeck: That is one of the problems I find with these estimates. Every so often you read about $1 billion being saved, but there is no explanation and we do not have a clue what the saving came from.
On VIA Rail, at page II-359, there is about a 60 per cent cut there. How is that going to affect Canadians? Will there be reduced service? Will there be less money for safety and inspection? What do these cuts mean to Canadians?
Mr. Matthews: On the VIA front, a few things are going on. First, the 2011-12 expenditures, and I think even the year before, were artificially high because some temporary funding was given to VIA Rail to build additional rail cars, engines, improve tracks and things like that. That was time-limited funding that caused the 2011-12 numbers to be higher than they were in past, and that funding is no longer included in these Main Estimates. That was on the capital side, largely.
In addition, VIA Rail received, in the current year, funding through supplementary estimates to top up its pension liabilities. Again, that funding occurred during supplementary estimates and was not part of this year's Main Estimates.
You will see, if you look at VIA's explanation, that they have changed some of the routes because of reduced domestic demand, and they talk specifically about the Quebec City to Windsor corridor. There are some changes in services that VIA has flagged. I will say that VIA'S corporate plan is an excellent place to look for additional detail on what they have actually done.
Ms. Baltacioilu: For clarification, in terms of the VIA reductions, they really do not have anything to do with inspection. The safety inspections are done through Transport Canada. On safety, they have not reduced anything on their safety record. They have done a lot of management improvements in terms of how they run the railway. Their corporate plan definitely explains that quite well.
Senator Callbeck: It is good to clear that up because I was concerned about the safety when I saw a 60 per cent cut.
I have a few specific questions regarding my province. The first is about halfway down page page II-3 on Agriculture and Agri-Food, Part II. ``Rural and Co-operatives Development'' is taking a huge hit. Can you explain why?
Mr. Matthews: If I recall correctly — and I might have the secretary weigh in as well — I mentioned earlier that the Growing Forward 2 program was in last year's Main Estimates and has not yet been finalized for inclusion in these year's Main Estimates, so there is something else coming for Growing Forward 2. It is not yet at the point where we can put it into the estimates, but it is another one of those cases where the department has signalled that there is something coming.
Ms. Baltacioilu: I am not exactly sure about this one. We will check, but there might be some of the reductions that they have done as part of the Deficit Reduction Action Plan. The rural secretariat might have experienced some cut. It might be part of that.
Senator Callbeck: That Growing Forward proposal does affect cooperatives, does it not?
Ms. Baltacioilu: It will affect the developmental programs for farmers, but I do not know if cooperatives are under there. We can get you that. It is public. It has been agreed upon by federal and provincial governments. It is just that the funding is not here because they are catching up in terms of their approvals.
Senator Callbeck: It is a huge reduction, going from $20 million to $4 million.
Ms. Baltacioilu: That sounds like the secretariat. There was a Rural and Co-operatives Secretariat in the Department of Agriculture and Agri-food. It was established a number of years ago to coordinate various activities. I think Agriculture and Agri-Food Canada has integrated that into their mainline business rather than having just 20 people doing a coordination activity, but we will check that to see if I am completely correct. If I remember it, it must be that.
Senator Callbeck: I appreciate that.
Senator Buth: I am wondering if this is not related to the fact that cooperatives are being transferred from Agriculture to Industry Canada.
Ms. Baltacioilu: That is possible. That is true; I forgot about that.
Senator Buth: I do not know if it was something that was included in the estimates.
The Chair: Could Mr. Matthews trace that?
Ms. Baltacioilu: It could be; we will double check.
The Chair: He might even be able to tell by looking at Industry Canada.
Mr. Matthews: I am checking that now.
Senator Callbeck: My next question is regarding tourism, Part II, page 98. As I understand it, the Canadian Tourism Commission spent millions of dollars promoting Canada abroad. In 2011-12, it was $82 million. Then, it went to 72. Now, it has gone to 57. Can you give us any information on that? On the next page it shows the marketing and the sales. There has to be less promotion of Canada in other countries.
Mr. Matthews: They have streamlined and focused their activities. Our commission goes into detail on where they are placing the emphasis. You can see where they have changed to put in the greater streamlining, so there are some more focused activities. You are quite right that the funding amounts have been reduced, but their corporate plan is an excellent place to look for what has gone on there.
Senator Callbeck: This concerns me because I would think an expenditure reduction like that will affect the tourism industry in this country, which creates a lot of jobs.
Page II-119, Corrections, says, ``The custody, correctional interventions, and supervision of offenders, in communities and institutions, contribute to public safety,'' and that amount is being reduced from last year. I find that difficult to understand because there are more people in our institutions. In fact, I think that between 2010 and 2012 there was about a 7 per cent increase. Why would that figure be going down?
Mr. Matthews: I will take you back to page 117. The operating and capital expenditures for Correctional Services in 2011-12 are very much in line with what the Main Estimates are in 2013-14. You will see in the 2012-13 Main Estimates that there was anticipated growth in terms of number of inmates, and we are not seeing the growth that was actually forecast. The actual spending that is outlined in Main Estimates is very much in line, in total, with the operating and capital votes, so you are seeing consistency there.
Senator Callbeck: Maybe it did not go up as much as you anticipated, but there has still been an increase.
Mr. Matthews: If you look at the totals on page 119, when you factor it all in, you are at 2.6. The Main Estimates are pretty close. There are some reductions, but it is largely about the growth that has not materialized. There are also some efficiencies. Correctional Services Canada went through the Budget 2012 exercise like everyone else. They found some efficiencies, so there is reduced spending. However, again, it is also about the growth that has not quite been there.
Senator Callbeck: Maybe, as I say, it is not the figure you anticipated, but there has been growth. Yet, the budget for these things has gone down.
[Translation]
Senator Bellemare: I have a supplementary question about correctional services. In that example, the total statutory funds are very low compared to yours.
[English]
Mr. Matthews: Right. The Correctional Service of Canada is a department that does not have much in the way of statutory programs.
Marcia Santiago, Senior Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: For a department that is mostly operating and capital based, the statutory payments will be primarily employee benefits and pensions.
Senator Bellemare: Thank you very much.
Senator Gerstein: Thank you, witnesses. Unlike my colleague Senator Buth, I am knowingly going to ask a question that I have asked before.
In December we had a general who appeared before us and was transferring money from his capital budget to his operations budget. When I asked him how he could do it, he answered, ``It is complicated.'' Yesterday, we had a witness from Foreign Affairs who was transferring money from their operating account to their capital account, and when I asked how they could do that, they said, ``Treasury Board actually moves the money.'' The question I would like to ask is: How does a department rob Peter to pay Paul? How does one reprofile?
I direct you, for a moment, to page II-217, the National Defence budget. If I look down at the fifth number, ``Equipment Acquisition and Disposal,'' it is $2.6 billion. I presume that that is hard assets; that is capital, depreciable assets. If I go down four more lines, I come to ``International Peace, Stability and Security,'' and I see $1.3 billion. I assume that that is operating.
What I do not understand and have asked repeatedly is that — and I apologize that I am do not understand it — it appears that in that $2.6 billion equipment acquisition you have 10 tanks at $10 million each. Ten times 10 is $100 million. They are expected in the year 2014. They do not arrive. Next thing we hear, there is $100 million going from the $2.6 billion to the operating account. Pick one of the other numbers. The 10 tanks are coming in next year, in 2015. Where do you get the money?
Ms. Baltacioilu: I will start by saying that I will not say ``complicated'' and turn it over to Mr. Matthews who can explain everything to you.
Mr. Matthews: Can I say ``complex''?
There are a couple of things. Two concepts were raised: one, transferring money from capital to operating and vice versa; and, two, reprofiling. We will deal with them separately because they are different, but I can see the link.
Let us use the tank example. Remember that Parliament votes money in three ways for DND: capital, operating, and grants and contributions. If National Defence wants to move money from one vote to another vote or any other department wants to do that, they have to come to Parliament for approval. That is what we call a vote transfer, and we do those in supplementary estimates.
Senator Gerstein: They cannot do it arbitrarily. They must come to you Parliament to have it approved.
Mr. Matthews: Yes. When you see ``vote transfers,'' that is what is going on.
Senator Gerstein: That is not complicated, I understand that.
Mr. Matthews: To move money from vote A to vote B, you need Parliament's approval.
The Chair: Could they just operate within the cash they have available and then ask for forgiveness?
Mr. Matthews: No.
The Chair: Do it but then come to us.
Mr. Matthews: If they had a $10 million capital vote and a $12 million operating vote and if they were going to spend $13 million on operating and wanted to transfer money, then they would need to come here first. If they can live within their cash envelope, they do not need to come to Parliament. However, if they want to increase one vote at the expense of another, they have to come to Parliament for authority.
Using your tank example, DND has been appropriated to buy tanks as part of their capital budget and there is a delay. They think they will spend the money this year, but it will be next year. At the same time, and I will give a fictitious example, they have been given authority to hire 1,000 new people, so they come to Treasury Board and say, ``We need money for 1,000 new people.'' We would say, ``Hang on, you already have money for tanks that we know you will not spend this year. Rather than give you new money, we will do a transfer.'' We will take that money for tanks and put it to operating and go to Parliament for a vote transfer. That is completely legitimate.
The key thing is that they receive proper approval to hire new people and they received approval to get the tanks. When they are going to spend money for the tanks, their money will go back in the reference levels when we know they are going to spend it. We do not give departments money when they know they are already holding onto money they cannot spend. We do a vote transfer first. That is the logic behind vote transfers. If you are coming in for new money anyway, but we know you cannot spend the money on the tanks this year, we will do a vote transfer. Parliament appropriates money on an annual basis. Every year you have to come in fresh, and that is where reprofiling comes from.
Reprofiling occurs when a department gets money for anything in the current year and realizes they cannot spend it this year. It happens a lot with our infrastructure programs and major acquisitions that they have approval in cabinet and through a budget to do something, but the timeline just has not worked out the way they thought. In that case, they come in and ask for permission to reprofile. That is to say, they cannot spend that money this year and would like to spend it next year. Finance will look, as the keepers of the fiscal framework, and ask, ``Can we still afford to let you spend that money next year?'' Sometimes they say yes and sometimes they say no. If they say yes, you will get rolled up into the next year's appropriations. The key thing is that Parliament approves money annually. If you do not spend it this year, you need to go back to Parliament to get approval to spend it next year because your money expires.
Infrastructure is the best example of a reprofile because you are negotiating with third parties. You do not see the word ``reprofile'' in the estimates because Parliament does not approve reprofiles. You start fresh every year.
Senator Gerstein: To be clear that I heard you correctly, when it is requested that monies be transferred from capital to operating or vice versa, it must be approved by Parliament. Is that correct?
Mr. Matthews: Correct.
Senator Buth: On a supplementary, who keeps track of the total funds allocated to the tanks, how many we have received and how many we might be getting in years two, three and four?
Mr. Matthews: There are a couple of things. From a parliamentary perspective the money for the tanks is rolled into a capital vote. National Defence would have money for capital for tanks, ships, whatever. National Defence would keep track of what they have been given money for. We would keep track at the centre as well, but the onus is really on the department. Obviously, we keep records but it is up to the department to manage their acquisition budget. They have been given money to buy 10 tanks, and depending on what conditions Treasury Board might put on them in terms of reports, et cetera, the department has to do the tracking and the centre does the monitoring.
Ms. Thornton: I have two points. First, with regard to timing, when you see something or approve something through supplementary estimates, it becomes effective as of April 1 that year. If you were to approve a transfer from one vote to another in Supplementary Estimates (C), it is actually effective April 1 of that year.
Second, with regard to reprofiling, Mr. Matthews is correct in that it probably should not be used in the estimates. It is actually the result of this committee's intervention three supplementary estimates ago on Supplementary Estimates (B), which was my first appearance here. It is technically incorrect in terms of Parliament because you approve the funds every year. However, there was a specific question, ``Did we not just approve this for that purpose last year? Is that not a reprofile?'' The word that was understood is ``reprofile.'' It is technically wrong in the appropriations context, but it conveys the meaning better than any other word we came up with. You now begin to see the word ``reprofile'' in the estimates documents.
The Chair: How would you like us to describe this activity?
Ms. Thornton: We were unable to come up with a different word. Conceptually, reprofile is exactly what it is. You have previously seen this and previously approved it for the same purpose; it was not spent and it is coming back. Internally it is a reprofile within government, but in terms of Parliament, you are approving it new each year. Just because you have seen it before, it is not a guarantee. That was the best word and you provided it three Supplementary Estimates (B) ago. The first introduction was the Supplementary Estimates (C) after that.
Senator Gerstein: Let us take the number up and assume it gets approved here. DND has money left in its capital budget. You know those tanks are coming in next year or the following year, et cetera. You also know that in addition to the tanks that are coming in, 101 other things are coming into the capital budget as well. Somewhere along the line, whether it is $100 million or $200 million, does it not catch up with you? At what point are you saying, ``We have $1 billion that we can spend next year, but keep in mind, my friends, that we have $0.5 billion that we are dragging from a year ago or two years ago.'' How does that work? You have only $0.5 billion and you really need $1 billion, but you have been dragging this stuff and putting it out through your operating account. That is the part that I am missing.
Mr. Matthews: We may need a whiteboard at these meetings to walk through these.
There are two pieces. If the tanks are legitimately delayed, that is a great example of a reprofile. We thought we would spend it this year, but now we will spend it next year; so it comes back again. The confusion arises when there is a vote transfer at the same time that there is a delay. You have to remember that when there is a vote transfer, it is because the department has received permission to spend other money as well.
I gave you an example earlier of the department being given permission and resources to hire new people. Money is put aside in the fiscal framework for that. However, rather than give the department authority to spend additional money, we just say, ``We gave you money for capital and we know you will not spend it this year, so we will put that aside. Rather than give you new money for operating, which we know you will spend, we will do a transfer from capital to operating.'' That is how it works.
Typically, it occurs when a department receives authority to spend additional money on something else as well. It is not that the department has gone off and decided to do something different.
A whiteboard might be helpful some day.
The Chair: We used to call them blackboards.
Mr. Matthews: We will take either one.
The Chair: Senator Gerstein, thank you very much. Keep asking that question.
Senator L. Smith: Is that not poor planning? You are buying 10 tanks at $10 million per tank. That is your capital budget and you have another $100 million in your operating budget. All of a sudden your tanks will be delayed. Then someone says, ``Aha, we can do a vote transfer to take some of that money to put it into operating.''
You were saying earlier that they would have had a plan, which they may have presented. Someone knew that the plan was out there, but the money was not out there. However, if something happened, they could make an adjustment. As Senator Gerstein said, you will have an accumulated deficit of money over time if you keep on doing that on a repetitive basis. To me, that appears to be kind of a manipulation.
Mr. Matthews: I would not say that. As I said, they are only transferring that money where they have received approval to do something else. Let us say they had to deploy some in a different country or something. There are additional expenses that had been approved, so they are doing it for approval purposes. Is it poor planning?
The other thing I would say is no. We are really driven by the fact that appropriations are annual and it is illegal to overspend your vote. If you are a department, you have to come forward with what your worst-case scenario is for spending in a given year, because it is illegal to overspend.
Infrastructure is a better example in this case. Transport and Infrastructure come forward with kind of the maximum number of agreements they think they might negotiate that year. They never all happen, so they end up moving to subsequent fiscal years. However, because it is illegal to overspend your vote, they have to come in, and assuming they will spend the maximum amount possible. It is really driven by the fact that appropriations are annual and that it is against the law to overspend your vote.
Those two things force departments to say, ``Okay, how much might we spend here?'' It is a ceiling. You do not have to spend it all. It is a ceiling, and you cannot exceed that ceiling. That is really what drives the behaviour.
Senator L. Smith: You had $100 million on the tanks and $100 million on your operating budget. Your tanks do not come in but something else came in in the operating budget. You had a vote to take that $100 million you are going to spend on the capital, you move it over to operating, and you spend the money, but you will have to pay for the tanks next year.
Mr. Matthews: The money is set aside for the tanks. That is the point. What we could do is say, ``Okay, DND, hang on to your capital money, and here is some additional money for operating.'' However, why would we do that? We know they have money in their capital that they will not spend this year, so we just do a vote transfer and we keep money back at the centre for the tanks, for next year. When they come in and say, ``We are not going to spend it, but we would rather spend it on something else,'' we do a transfer rather than just give them additional resources.
The Chair: You do not keep money in a pot. This is all a paper thing.
Mr. Matthews: A paper thing, absolutely.
Senator De Bané: Mr. Matthews, you said something that is very true and reflects reality. You said we would never allow a manager, a deputy minister, to overspend; he is fired if he does that.
The other side of the coin is that they think very carefully about how much they will ask for. Each manager thinks about the worst-case scenario. Assume I am the manager of 500 people in Ontario. I am the director. Let us talk about travel expenses. Find me the furthest place in the province where you will go next year. Pad it as much as possible.
Each one thinks about what how much they will need in the worst-case scenario, therefore, they all pad. If you give them a bonus if they reduce it as much as possible, do you not think you will have better numbers?
Ms. Baltacioilu: I think Mr. Matthews' examples make more sense when we talk about either major capital investments or big program expenditures. Take Infrastructure, for example. The Infrastructure Department assumes they have $2 billion to spend that year, according to the profile of money they were given. They look at it and say, ``We have an agreement with Quebec, an agreement with Ontario, an agreement with this and that.'' Basically, they think they could do five of them. It turns out that there is a strike. One of the agreements or projects does not start. They are not sending the bills; therefore, the federal government is not paying. Suddenly you end up spending less. The problem is that if we had not anticipated that we were going to do all of these things, then we would have actually blown our vote, which is the illegal part.
In terms of operating expenditures, it is not calculated that a bunch of managers sit around and think about how to pad the budgets to deliver a program. A department will have to say, ``I have so many people working for me, this is my salary budget, these are my employee benefits, and these are the authorities I have per program to run these programs.'' If you are running any program, if you have operating, it is 5, 6, 10 per cent of whatever the program is. That is already in your budget. There is not that kind of ``Let me anticipate the worst-case scenario and then plan like that.'' Operating budgets are not planned that way.
For big infrastructure projects, big acquisitions, you almost have to plan to do your maximum best. You cannot always foresee what will happen, but you have to work to your optimum solution; and if that does not happen, then you are at least below. It is better to be below than over.
Senator De Bané: Is there some truth in the fact that the rank of the civil servant, the rank of that official, is related to the budget that he or she administers, the number of bodies reporting who him, et cetera? He has an incentive to have an organization as big as possible because his own remuneration is related to that. If Treasury Board would think about giving them bonuses to say, ``Okay, think about 10 different ways of doing something and find the one with the least cost and you will get a bonus,'' do you not think the way they will think about it will be different? We all know there are different ways of doing something. Everybody can think about it, but the smart guy will find the way that no one has thought about.
Ms. Baltacioilu: I think you have two points. One of them is the incentive system. I understand that, and I think it is a good point. In the last five or six years a lot of attention has been given to senior leadership and the senior leadership's performance against priorities that are corporate in nature, government wide. Spending money wisely or making sure that the right savings are done, or done as innovatively as possible, are all objectives. That is one issue, and I think you have a very valuable point there.
In terms of ranking of deputies, deputies do not have many ranks. We have associate deputy ministers, meaning that they are number two in departments. They are all one rank. The rest of the deputies are two ranks. Seniority is not based on the organization you are running but more on where you are in your career.
Senator De Bané: However, you have 2,500 EXs, executives.
Ms. Baltacioilu: Right.
Senator De Bané: Those are the top managers.
Ms. Baltacioilu: Below the deputy level. You are right. Yes, it is dependent on how much money.
Senator De Bané: I thank you very much for your comments.
The Chair: Do not thank them quite yet. We still have some questions here. I am mindful of the clock, and we do not want to wear out your goodwill. I have three senators for the second round, so one quick, snappy question. I will get all the questions on the record and then if you can answer them quickly, that is great; if not, we would ask you to write us as quickly as you can with a reply.
I will start with Senator Buth, followed by Senator Hervieux-Payette and Senator Callbeck.
Senator Buth: What is Canada's total debt?
The Chair: $530 billion?
Ms. Thornton: We are just short of $600 billion; The Fiscal Monitor, December.
Senator Hervieux-Payette: Two things. Let us not go to the document. I see ``Food Safety and Biosecurity'' going from $94 million to $64 million. I have found $30 million there. Then I have the administration of justice. It is the same there. From 2012 to today — and this is at page II-197 — Justice went from 426 to 380. I have the big budget, but I am talking about the judges.
In Quebec, our Court of Appeal judges have 500 cases to address this year. They think they are overloaded and overworked. There is a big shortage at the Superior Court. I see there a $46 million cut. I ask you: Who is making these decisions that we cut judges when it is an essential component of a democratic system? We can legislate all the time, but if we legislate and people cannot enjoy these rights, there is a problem. I do not know about other provinces, but I know in my province it is chaos. People do not have access to justice. We are appointing judges and reducing by $46 million.
Regarding ``Food Safety and Biosecurity,'' it is being reduced by $30 million, and I think this is also the wrong time. We are talking about the health of the Canadian population. Do not tell me that it is done perfectly; it is less than perfect.
Senator Callbeck: Part II, page 355, go a third of the way down the page. There is a figure there for ``Housekeeping and Grounds Maintenance.'' This is under Veterans Affairs. Is that referring to the VIP program? Does that mean the program will be expanded? I hope so.
Mr. Matthews: This is a program that was changed. They have changed the way they are running it. In the past veterans had to submit receipts and were reimbursed. Now it is done where they are actually paid up front. There are actually some people on the old system and some on the new as we transition over. I believe the increase you are seeing here is because of the transition and also more recipients of the program as well.
The Chair: Do you have any further, Senator Callbeck? We are out of time. I will get you to put your question on the record and then they will write it.
Senator Callbeck: Fine.
The Chair: If there are any other points you would like to make and send us written answers, or if there are others you would like to answer quickly, that is fine.
Mr. Matthews: I think we have answered the one on debt and the one on Veterans Affairs. The other two on judges and biosecurity, we will have to take away, I think.
The Chair: Thank you, Treasury Board Secretariat, very much.
Ms. Baltacioilu, thank you very much for being here. This is an ongoing matter, but as you can see from Senator Gerstein, the more he asks the question, the better it gets.
(The committee adjourned.)