Proceedings of the Standing Senate Committee on
National Finance
Issue 8 - Evidence - March 5, 2014
OTTAWA, Wednesday, March 5, 2014
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, 2015.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this evening, we are going to start our study on the Main Estimates for the fiscal year ending March 31, 2015.
[English]
We are very pleased to welcome back officials from the Expenditure Management Sector of the Treasury Board of Canada Secretariat, who will provide us with an overview of expenditures set out in these Main Estimates for 2014-15. Appearing once again this evening, by popular demand, are Bill Matthews, Assistant Secretary; Marcia Santiago, Executive Director; and Darryl Sprecher, Director.
Mr. Matthews, I understand you have some introductory marks, and then we'll get into our usual question-and- answer dialogue. You have the floor.
[Translation]
Bill Matthews, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. We are pleased to be here once again to talk about the Main Estimates for the year starting April 1, 2014.
As you said, I have a few colleagues with me to help me. As usual, we prepared a presentation to provide you with an overview of the Government of Canada's estimates.
After the presentation, I will let Ms. Santiago explain the department's expenditures.
Then we will be happy to answer any questions you may have.
[English]
I am hoping you all have a copy of the presentation in front of you. I will walk through what we usually do, which is remind you of the supply cycle and how Main Estimates fit with the budget. It is a bit of a Review of Estimates 101, Mr. Chair, so if you want me to skip over any parts, please send me a signal. We will go through the structure of the Main Estimates and then do a comparison of Main Estimates for 2014-15 versus the previous year. Then we will get into a few highlights from these Main Estimates themselves, which hopefully will allow you to focus your questions.
The Chair: You will highlight some of the items that don't appear in these Main Estimates that had in previous years?
Mr. Matthews: We will absolutely do that.
The Chair: Thank you.
Mr. Matthews: If I could start maybe on slide 3 and the purpose of the Main Estimates, it's a reminder that to spend money out of the Consolidated Revenue Fund, all spending has to be either voted on by Parliament or departments can get authority through what we call statutory votes, which is specific legislation. We have some information in here on voted and statutory. This is for all departments and agencies.
I will admit right now that Main Estimates are a little difficult to cover. They're different than supplementary estimates. In supplementary estimates, which we spoke about just last week, you will see incremental spending for specific purposes. We can talk about why a certain departments needs additional funds. In Main Estimates, you're seeing the rolling up of all those different funding decisions that have been made over the years into one big block for the department, or two or three votes. We can speak to what's changed versus the previous year, but it is a difficult one to get your head around. We'll do our best.
I did mention that some of the things we spoke about last week with Supplementary Estimates (C) you will see in these Main Estimates in the totals. If I recall correctly, last week we spoke about Citizenship and Immigration. We spoke about the grant for the Canada-Quebec accord. There was $33 million in there, if I remember correctly. There is also money for citizenship and temporary resident programs in CIC as well. Those funding decisions are now factored into these Main Estimates, so they're in the total showing up for those departments. It does flow through. They got incremental funding in the current fiscal year, and that's been added to their base funding for the fiscal year that will start in a few weeks.
The Chair: Just to make it clear: That money that was in Supplementary Estimates (C) is money from last year, and it's an equivalent amount that is in here but not the same amount.
Mr. Matthews: Not the same amount, that is absolutely correct. In those cases they got a certain amount added to the base funding — they're spending in the current year — and they got a similar amount added to future fiscal years as well.
Slide 4 is our favourite program. This is our cycle of parliamentary reporting and supply. A quick reminder that there are two bases of reporting in here: accrual accounting for the budgets and the government's financial statements; and there's modified cash accounting, or an expenditure basis of accounting for the supply cycle, so the estimates documents. That is particularly important for one item that I will speak to later in the Treasury Board Secretariat's vote. This difference between accrual and cash will come up as we go through.
I'm going to start on the left of this diagram, the January to March cycle. I'm sure, senators, you feel like you're dealing with two fiscal years at once because I believe you're still studying Main Estimates from last year, and you're about to start Main Estimates for the current and future year. There's a good reason for that. When you think about the government's fiscal year, the best way to think about it is an 18-month cycle. In my explanation, I would say the process starts with the budget, which we had a couple of weeks back, typically in February or March. It was February this year. There is no legal requirement to have a budget, but we typically have one. There is a legal requirement to table Main Estimates. Main Estimates must be tabled on or before March 1 of every year for the upcoming fiscal year.
The reason is the point I mentioned earlier: departments need parliamentary authority to start spending money. In order to get departments funding on April 1, Parliament must do something before April 1. That is the Main Estimates and the related interim supply bill. We table Main Estimates on or before March 1. That is then used to help study the Appropriation Acts. We normally give an Appropriation Act called interim supply, which gives departments three months' worth of funding to get them through April, May and June, while Parliament is finishing studying the balance of the Appropriation Act and the Main Estimates, and that's what gets them through the rest of the year.
So we have the Main Estimates and we have the budget. We'll talk about the links between those two things.
During this time period you will see the departmental Reports on Plans and Priorities. They will be tabled shortly, and they will also help you in your studies. They give more detail on the spending plans and performance objectives of each department.
I've already mentioned the interim supply for Main Estimates. That will be before April 1 because we need to give departments authority to start spending.
Then we hit April 1, which is the start of the new fiscal year. In the next cycle, you will be seeing us sometime between April and June to talk about Supplementary Estimates (A), because we usually have that during that time period. During that period you will also see the appropriation bills for both Supplementary Estimates (A) and the balance of Main Estimates.
I did mention that for interim supply we give most departments three months' worth of funding to get them through April, May and June. That assumes that departments have a very even spending profile throughout the year. Some departments are quite busy in the first part of the year and if they need more money than three months' worth, they can make that request. Three months is the standard, but if we have a department that needs a little extra to get them through the first three months — they might have a large transfer payment due or something — there are ways to deal with that.
With respect to September to December, I will highlight the tabling of the public accounts for you. That's for the year ended March 31 of the previous year. If you think about it, that's six months after year-end. When I say the government fiscal year is really 18 months in total, think about a February start with the budget, then you have a year's worth of spending and activity. It all wraps up with the public accounts, which are five or six months after year-end. That's the full cycle. That's why you feel like you're dealing with more than one fiscal year at once, because in fact you are.
At the same time or shortly after public accounts, you will see the Departmental Performance Reports. That's the companion piece to the department's Reports on Plans and Priorities. Basically the Reports on Plans and Priorities gives the plans, the Departmental Performance Reports tell you how they did against those plans.
During the same period, an economic and fiscal update is usually offered by Finance, a projection update. There is no legal requirement to do that, but it is normal practice. You will see also Supplementary Estimates (B) in that period, which are typically our busiest or largest supplementary estimates.
That's the cycle.
On the far right we have flagged other documents that might be of interest to you in your studies. Departments produce and make public quarterly financial reports for the first three quarters of the fiscal year. They do not do so for the last quarter because their Departmental Performance Report takes up that space. There's no need to do one at year-end.
The Department of Finance produces the monthly Fiscal Monitor. The results for December have come out recently to give an overall sense of where the government is from a fiscal perspective in year.
A couple of documents that have been mentioned before are the annual Debt Management Strategy and Debt Management Report, and the annual tax expenditure report.
That's a quick overview of the parliamentary supply and reporting cycle. The key message is typically the government publishes plans. Any time we publish a plan we eventually follow up with an actual, so you can compare the plan versus the actual. And you should really ask yourself when you're looking at a document: Am I dealing with accrual or with cash? Am I dealing with a whole-of-government report like the estimates or with a departmental- specific report like departmental Report on Plans and Priorities for Citizenship and Immigration Canada. We can have both flavours. There's always a plan and an actual that goes with it eventually.
Slide 5 outlines the link between Main Estimates and budget. This has gotten some attention in the past. Some people wonder why when we had a budget a few weeks back you couldn't have budget initiatives in these Main Estimates. To give you a sense of why, it really is about the role of the Treasury Board. When new spending is announced in the budget, departments go away and prepare their detailed spending plans for how they're going to spend that money, what the various breakdowns will be, how much for capital, how much for personnel, what their performance objectives will be, how they will measure them, is there an evaluation strategy. Once that gets pieced together, it goes to Treasury Board. Once Treasury Board is happy, it eventually makes its way into the next set of estimates. That's why there's a delay.
To give you an example, Main Estimates are pretty much wrapped up from a Treasury Board submission perspective by Christmastime. Anything that's not through Treasury Board before end of December has to wait until the next set of estimates.
If you look to the budget from a few weeks back you would have seen money in there for First Nations Water and Waste Water Action Plan, $323 million if I recall correctly. That is not in these Main Estimates. It will be in an upcoming supplementary estimates when the department has developed its spending plans. If you're looking for that link, one thing we've done to improve it is that the first-time funding appears in estimates, we do now link back and reference the appropriate budget so members can actually follow which budget it came from.
Slide 6 is a reminder on how the structure of the estimates works. Part I is the Government Expenditure Plan. It provides an overview of federal spending, including distinctions between voted and statutory, budgetary and non- budgetary. Part II supports directly the Appropriation Act, and it's the spending authorities to be included in the supply bill.
The vast majority of content in the estimates itself is departmental-specific information on planned expenditures, and they are now presented in alphabetical order. If you're looking for a specific department, it is in alphabetical order. That does mean that the order is different in the English version and the French version, so do give us and your colleagues a few minutes when we're finding details tonight so we can find the appropriate reference in both English and French.
What you will see in the summary is budgetary and non-budgetary information — and we can walk through that if it's of interest — voted and statutory, transfer payments, the split between operating and capital, public debt, and then you're into tables by organization.
Slide 7 is really the departmental-specific portion of the estimates. This is Part II, where we get into the raison d'être for each organization, and we outline the planned expenditures, voted and statutory, with a comparison to the previous year. You will see some text that helps explain the changes over the previous year, so there might be new programs listed in 2014-15 over 2013-14. I'll give you an example: Disaster financial assistance arrangements. Last year the submission hadn't come through in time to be included. This year is came through during I believe both Supplementary Estimates (B) and (C). This year we have it in the Main Estimates. If you look at the highlight section for that department, Public Safety, you will see some text around the increase because disaster financial assistance arrangements funding was not in Main Estimates last year but is this year.
Slide 8 reminds you of different slices of spending. We have spending on a program basis, which is kind of our major results area. For each department, we have major expenditure type, which is operating and capital, grants and contributions, and that is how Parliament actually votes money, along those three lines. If you're looking for more details on what will be achieved with that spending, that's where the department's Reports on Plans and Priorities that will be tabled shortly will be of use to you.
Slide 9: A couple of changes in presentation, and I do suspect we'll have some questions on this tonight. The chair has already hinted at one. Alphabetical order I've already spoken about. That's one change in presentation. That has also led to a change in vote numbering, so that has changed a little bit.
Forecasts for statutory expenditures for Employment Insurance benefits are no longer included in the estimates. I'm happy to take questions to explain why that is, but that relates to the separate account called the Employment Insurance Operating Account. We can discuss that if that's of interest.
The last bit relates to a change in how we deal with any funding that was deemed to have been transferred if we move resources because of a transfer related to a reorganization of the federal public administration. We can talk about an example if that's of interest as well. That's the refresher.
So that's the refresher and what's changed.
Slide 10: We can finally get into some numbers for you.
[Translation]
As I mentioned at the last meeting on the Supplementary Estimates (C), the statutory amounts continue to increase because of the Canadian health and old age security transfers.
[English]
Statutory spending continues to grow, largely related to our programs around Old Age Security and the Canada Health Transfer, which are statutory in nature. That is partially offset by decreases in voted spending, and we have talked about the reasons for some of the drops in voted spending related to things like the Deficit Reduction Action Plan and some of the restraint measures that have been taken.
Overall, voted budgetary amounts are down by 0.9 per cent. Statutory budgetary amounts are up by 2.5 per cent. That trend is continuing. It's the same trend I mentioned last time I was here on Supplementary Estimates (C).
Slide 11 provides you with a different slice of things. If you're interested in how things break down between transfer payments, operating and capital, and public debt, this gives it to you a graphic and then numbers.
Sixty-one per cent of our spending is on transfer payments, and that is a mix of transfers to other levels of government and to individuals, like Old Age Security, as well as to the grants and contributions programs that are run by various departments. Twenty-eight per cent is operating and capital, and then the balance of 11 per cent or so is interest on public debt. Interest on public debt has been dropping as spending on public debt goes down.
Slide 12 is where I will spend the most of my time, and this gets at the largest increases by organization and largest decreases by organization. For the most part, I'll go through the increases first and then the decreases, but some of these are linked.
The first item on this list you'll see is an increase for Foreign Affairs, Trade and Development. There's a corresponding decrease — the first item of which is the Canadian International Development Agency. That's because of the folding in of CIDA into the Department of Foreign Affairs, Trade and Development. The spending under CIDA has effectively been moved into the Foreign Affairs, Trade and Development envelope, so that's why you're seeing a drop for CIDA and an increase for Foreign Affairs. There is one other thing worth mentioning going on in Foreign Affairs, and Ms. Santiago will probably speak to it later on. There's funding in there for the crisis pool of $120 million that's been added.
Remember that Treasury Board Secretariat is a department on its own, but it also has a government-wide role. Most of the increases here relate to our activity as a government-wide organization. I mentioned earlier that one of the items — this notion of accrual accounting versus cash — is going to come up, so please bear with me as I walk you through this.
The first one I'll mention is the vote for the operating budget carry-forward. Senators, you may recall that departments can carry forward a percentage of their unspent amount at year-end into the next year, 20 per cent for capital and 5 per cent for operating. We've increased the size of that vote because in the last couple of years, when we've added up the 5 per cent, we were actually bumping up against the vote limit. We were at risk of not being able to allocate all the carry-forward amounts to departments. We've bumped up that amount by $400 million, just to give us more flex in terms of allocating the unspent money eligible for carry-forward. That's what that one is about. It's one of our central votes. It has not yet been allocated to departments. That will depend upon the results from the fiscal year that we are about to wrap up. When we get our final numbers on spending, we can then do the math and figure out what's available for carry-forward.
There is about $440 million extra in there to fund an actuarial deficit related to the pension plan. That has occurred a couple of years in a row now. When there's an actuarial evaluation of the pension plan, if there are changes in assumptions that cause a deficit, there's a requirement to fund that, and that funding happens over 15 years. The deficit that was created based on the actuarial evaluation was around the performance of investments, as well as some changes in assumptions around life expectancy and interest rates and things like that. That's the second item.
The one I said I would confuse you with relates to the implementation of a new pay system. What we have right now in the government is a system for payroll that is run by Public Works, and we are actually moving to a new system. In the private sector, you're normally paid in arrears. You would work two weeks. Then you would get a paycheque. In the government system right now, when you get paid, it's right up to that day. If I'm paid on a Wednesday, for example, it includes my work for that Wednesday. It's not really pay in arrears. It's pay up to the second. In moving to a new system, we're going to an off-the-shelf product. Pay in arrears is the way all these things are designed. In implementing this new system, we are changing our pay cycle. If we did nothing, employees would have to skip a paycheque. That doesn't make a lot of sense.
Appropriations are charged on a modified cash basis. From a payroll perspective, nothing is really changing. You're paid for 362 days a year. That gets charged against departmental appropriations; no change there. There will be an additional charge to the appropriation because of this change to the new pay system. Effectively, we're holding employees harmless. We will collect this amount when they leave the public service as we change our pay structure, but we didn't feel it was appropriate for departments to take that budgetary hit. Changing a pay system and asking departments to take a budgetary hit because you're changing your pay cycle didn't make a lot of sense. There's money in a central vote here for departments to request to basically absorb the impact of that change in pay system, which will happen in the next fiscal year.
I apologize for that confusing explanation. I'm happy to come back to it and try it again if that's of interest. That is kind of what that relates to. It has not yet been allocated to departments. So that's the Treasury Board Secretariat.
For Employment and Social Development, the increase in there relates to the amounts I've already spoken about, Old Age Security and Guaranteed Income Supplement.
For Public Safety and Emergency Preparedness, most of that money relates to the amount I've already highlighted for you for the Disaster Financial Assistance Arrangements, so 662 of that 681.9.
National Defence is largely around some spending on capital: light armoured patrol vehicles, as well as a surveillance system related to that; Arctic offshore patrol ships; and, finally, the Canadian Armed Forces health services centres. Those are the increases.
As for the decreases, CIDA I've already spoken to. That's simply the result of the movement into Foreign Affairs, Trade and Development.
Infrastructure Canada is just a decrease, largely related to changes in cash forecasts based on the projects they have under way. There's funding in there for the provincial-territorial base fund, as well as the gas tax payments. Their forecast based on planned spending this year is down over the previous year, so you're seeing a drop there.
For Canada Revenue Agency, the decrease you're seeing here we've already spoken about. The last time I was here we spoke about a decreased forecast related to payments under the Softwood Lumber Products Export Charge Act. That's the same decrease being forecasted into the upcoming fiscal year.
With respect to Citizenship and Immigration Canada, that decrease is again one we spoke about at supplementary estimates. That is related to the revolving fund at Passport Canada that we spoke about at Supplementary Estimates (C) and the reduction in the drawdown authority.
Correctional Service Canada is the last one on this list, and that is decreased due to the expiration of some time- limited funding around building additional facilities and space for their prisoners. That's the expiration of time-limited funding there.
Those are the highlights.
On slide 13, we have talked already tonight about the link between the budget and the Main Estimates. The first- time funding appears in the Main Estimates, and we will highlight it for you in terms of which budget it came from.
For Budget 2013 items appearing for the first time in the estimates, there are two examples: $253.1 million for investment in affordable housing that I believe is with CMHC, with $70 million specific for housing in Nunavut. That funding is $100 million over two years designed to specifically target new housing in the territory of Nunavut.
With respect to other budget items that appear in the highlighted section, you have some funding here for Health Canada for $311.7 related to First Nations and Inuit communities and health services.
I will highlight for you the $95.6 million for Shared Services Canada. It's nice that we come back two weeks in a row because we can cover some of the same material.
The last time we were here, we had a transfer from other departments related to Shared Services Canada. This is that funding being made permanent in Shared Services Canada's budget, so this is not an increase in total government spending. This $95.6 million is basically achieved by reducing other departments' funding related to the procurement of software. It's the same thing we spoke about at Supplementary Estimates (C).
Lastly, there is $59.6 for the National Research Council related to the realignment on industry-focused research. That relates to getting Canadian industry access to labs and testing facilities and that kind of thing.
Before I turn it over to Ms. Santiago, what will happen is the Main Estimates are tabled. They will be off to various standing committees, including yours, to study. You will see the introduction of the Appropriation Act for interim supply. The draft of the proposed appropriation bill is in the annex to the Main Estimates. And these Main Estimates, I should stress, do support both the interim supply and the full supply bill that will be tabled in March and June respectively.
With that, I'm going to turn it over to Ms. Santiago.
[Translation]
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: Honourable senators, thank you again for the opportunity to once again go over the 2014-15 Main Estimates of the Department of Foreign Affairs, Trade and Development. In the French version of the printed document, the organizational estimates are on page II-5.
[English]
In the English document, you will find the Department of Foreign Affairs, Trade and Development, DFATD as it's sometimes called, on page II-143.
[Translation]
The first section is the raison d'être of the organization, which provides information about: the minister or, in this case, the three ministers who run the organization, the mandate of the organization, and its core responsibilities.
Honourable senators, you may recall that the current department is the result of the merger with the former Canadian International Development Agency. This amalgamation is reflected in the mandate that was broadened to include international development.
In the graph and table that follow, you will see the summary of the department's estimates. The data for the 2014-15 fiscal year are in the shaded column. There are also data about the current 2013-14 budget and the expenditures for the previous fiscal year, 2012-13. The voted authorities in the shaded column correspond to the votes in the proposed schedules to the appropriation bill. Those are at the end of the printed document. In the same table, you can also see the distribution of budgetary and non-budgetary authorities
[English]
Honourable senators, you will notice that there is quite a lot of information in this table, particularly in relation to the voted authorities. The Department of Foreign Affairs, Trade and Development has three of the same budgetary votes as many other organizations of similar size: Votes 1, 5 and 10 for operating expenditures, capital expenditures and grants and contributions.
However, they also have a vote 15, which is unique to them, for pension insurance, social security and social security arrangements for staff engaged outside of Canada. This vote, as I said, is unique to them and has the same function as Treasury Board vote 20 for public service insurance.
On the non-budgetary side, there are votes L20 and L25. These are two more examples of the one dollar entry fee into the Appropriation Act. In these cases, section 12 of the International Development (Financial Institutions) Assistance Act gives authority to make a payment from the Consolidated Revenue Fund, but the same section also requires that the specific amount of that payment for a given period be specified in an appropriation by Parliament.
For example, how it works in this case is that the full wording for Vote L25 — which, again, you will find in the annex with the proposed schedule to the Appropriation Act — describes the payment in respect of a period from April 1, 2014, to March 31, 2015, estimated in Canadian dollars at a figure of about $50 million, and it's written out in the vote wording, but the vote itself is listed with an amount of one dollar. Then, consistent with section 12 of the International Development (Financial Institutions) Assistance Act, the full amount is actually included in the total statutory figure that you see below the table. The details of all the non-budgetary and budgetary statutory authorities are listed in an online annex.
From this point, the presentation of information by the department is considerably less technical. There are many more words and somewhat fewer numbers.
A short section of text highlights the biggest contributing factors to the net change from the last Main Estimates to this one. More narrative for the department may in fact be found in the department's Report on Plans and Priorities, which will be tabled shortly. In this section, the department itself supplies the text and it highlights here things like the consolidation of funding from the former Canadian International Development Agency, as well as the $120 million in funding for the crisis pool quick release mechanism that Mr. Matthews has already mentioned.
The next table presents a different view of the expenditures planned for this department. It is based on strategic outcomes and programs for both the budgetary and non-budgetary authorities. A summary table is provided in this printed document, and another table showing similar information broken down by operating and capital, grants and contributions, as well as by outcome and program, is given in an online annex.
The last table in the department section presents grants and contributions for which the department already has spending planned at this point. The listing of contributions is indicative. Departments may reallocate from and to any contribution authority according to changes in requirements and priorities.
However, the grants listed in the estimates are included by reference in the Appropriation Act and therefore have legislative character. This means that parliamentary approval is required to raise the amount listed for a grant.
There is one other table that we provide with the Main Estimates. It shows planned expenditures by standard object and is available online.
Mr. Chair, senators, this concludes the walk-through of this department's estimates, and we would be pleased to take questions on this or any other aspect of the Main Estimates.
The Chair: Thank you, Ms. Santiago. While you're talking about grants and contributions, there may be some honourable senators here or perhaps some viewers at home who don't understand the difference between grants and contributions. Can you give us a brief explanation?
Ms. Santiago: A grant is essentially a benevolent payment. There are no conditions, besides being eligible, to receive the grant. For a grant to be listed in the estimates, essentially, we have to have a program defined; we have to know what it takes to be a recipient. Sometimes, there is only one recipient in the case of a named grant.
Once the recipient satisfies the conditions for being eligible to receive the grant and it's accepted by the department that administers the grant, the payment is just made. There are no further obligations to report or to be otherwise accountable for those payments.
Contributions are a little bit more involved. They are agreements between the Crown and the receiving organization, usually to undertake some service that is of benefit to Canadians in general or to the constituency of the receiving organization. There are usually things like reporting arrangements. Sometimes there are requirements to submit detailed financial statements at the end. Essentially, it's the expectation of further reporting that makes a grant different from a contribution.
The Chair: Thank you.
Mr. Matthews, you invited us to ask you about page I-6, Employment Insurance no longer being considered in the group of transfer payments. Do you want to expand on that?
Mr. Matthews: I will.
If senators were to look at the detailed schedule of estimates by organization that starts on page I-9 and page I-11 in the French version, you won't see anything there for Employment Insurance. If you were to look there in the previous year, you would have seen one line at the end that said Employment Insurance. The reason we have decided to remove Employment Insurance from this is a little long-winded. I will walk you through it.
Employment Insurance is different than any other statutory payments we have in the estimates for a couple of reasons. Employment Insurance itself is actually managed by the Canada Employment Insurance Commission, which is a departmental corporation jointly managed by the government, employers and employee representatives, and the activities of that commission are reported through what's called the Employment Insurance Operating Account. There is all sorts of disclosure in the Employment Insurance Operating Account that I will walk you through momentarily. It doesn't work like the rest of the statutory payments we have. It's actually what we call a consolidated special purpose account, so still part of the Government of Canada, absolutely, but the arrangements around it are a bit different.
If you looked at this list on page I-9 in the English version and I-11 in the French version, everything in here you would find in a department's specific detail. If you tried to find that for Employment Insurance last year, you wouldn't have found anything. It was a one-liner that had no department attached to it and no additional information.
What really got us thinking about this was when we chatted with researchers both at OGGO and Public Accounts Committees about ways to improve linkages between the budgets, the estimates and public accounts. One of the questions came up, and I will dig out my public accounts here.
When I look at the government's financial statements, the audited financial statements of the Government of Canada, there is a note to those statements, Note 3, called "Spending and Borrowing Authorities." It outlines the annual spending limits voted by Parliament, including special warrants, and then expenditures permitted under other legislation. Those titles sounded a lot like what you would find in estimates, but when you tried to reconcile the number in the audited financial statements and estimates, they weren't the same number. The reason they weren't the same number was that the Employment Insurance authorities, if I can use that word, or estimates, were not actually included in the note to the financial statements of the government's audited financial statements. To reconcile estimates with what was showing up here, plus the fact that there was no information in the departmental spending on Employment Insurance, the decision was taken to remove it from the statutory spending forecasts.
The other thing we looked at in making that decision was the amount of disclosure that goes around the Employment Insurance account itself. Very quickly, if you looked in the budget on page 276, you will see forecasted details for Employment Insurance, so they already exist in the budget. Roughly $17.7 billion in benefits is what's forecasted for the upcoming fiscal year. The funds to actually operate the Employment Insurance account, the program, are already voted in another department's reference levels. In ESDC, Employment and Social Development Canada, their reference levels have the dollars to operate the program itself, so they're already in their reference levels. That is the planned numbers that exist in the budget.
If you look in public accounts, the government's financial statements, so our statement of operations — or, if you want the private sector terminology, our income statement — you will see a line for actuals in relation to premiums and actuals in relation to benefits. They are there.
More importantly, if you went to Section 4 of the Public Accounts, Volume I, because this is a consolidated special purpose account, it actually gets special disclosure in the public accounts. The Employment Insurance Operating Account actually gets its own audited opinion from the Auditor General of Canada. There is a full set of financial statements in the public accounts dedicated to the Employment Insurance Operating Account.
The Chair: That's all after the fact, six months after the year is over, whereas we're looking at these Main Estimates at the front end as to what we anticipate may be spent.
Mr. Matthews: Correct, and what's in for "planned" is in the budget. Page 276 of the budget exists in terms of what's actually forecasted. Because it's not voted on by Parliament and because it wasn't part of any department's detail, the decision was made to take it out.
The Chair: Thank you for the explanation. It would have been nice to have some consultation on something like that before it was removed, but we appreciate you coming and letting us know it has been removed.
[Translation]
Senator Hervieux-Payette: Welcome, everyone.
I am referring to page 4 of your presentation, the section from September to December; it says tabling of departmental performance reports. I would just like to know what a departmental performance report entails. Who prepares it? How is it done? Are questions asked? Is it strictly financial? Is the quality of the results taken into consideration?
That aspect is very important for me, because when, you spend money, you have to achieve the objectives. You can achieve them to a small, moderate or great extent. I therefore want to know who prepares the report, how it is prepared and how long it takes.
Mr. Matthews: The question is about the tabling of departmental reports on plans and priorities. Those documents are part of our estimates for the Government of Canada. The President of the Treasury Board Secretariat establishes the documents for Parliament, but he also does it for all the other departments. It is the responsibility of each department to prepare the content of the documents.
[English]
On the information itself, there is financial information there, but what's more important is the text. It outlines the performance objectives and how the department will spend the money and what it hopes to achieve with that money.
Equally important is the piece that comes at the end, which is the Departmental Performance Report, which states how the department actually did. It would compare what it intended to do with the actual outcomes it achieved. Yes, there are financial pieces in each, but it's the description of what the department plans to do at the outset and then what they actually achieved at the end of the cycle.
[Translation]
Senator Hervieux-Payette: If senior departmental officials have a very good performance, do they also get a performance bonus?
Mr. Matthews: There is a compensation program for senior officials. I am not sure whether there is a connection with the objectives of the department; that would make sense.
[English]
Each person has a different performance agreement with their supervisor, so I can't speak to exactly how it works.
[Translation]
Senator Hervieux-Payette: Can we get an answer? I think it is important to know this. We are told that senior officials receive additional compensation based on their performance and that the amounts are very significant, sometimes two or three times the salary of a senator. So we might like to know how these additional amounts are given to senior officials, who may be paid $300,000 or more.
[English]
Mr. Matthews: The only thing I would add to that in terms of the objectives is that performance reporting in government is a challenge because many of the programs have very long, extended outcomes. If you are thinking about something like the impacts on child health or road safety, it's not like garbage collection where you can measure whether the garbage collector show up every week.
The performance objectives in government are tough to articulate and to measure, but that's why we do it. The reason we have an evaluation function is to actually get information around how departments did performance-wise.
[Translation]
Senator Hervieux-Payette: Is there a questionnaire or a standard document to ensure consistency across departments?
[English]
Mr. Matthews: The Treasury Board Secretariat gives guidance to each department in terms of what should be in its Report on Plans and Priorities and the Departmental Performance Report. It gives guidance on how to set performance objectives and how to measure them, but it's not extremely detailed because the nature of government programs, if you think about Defence versus Natural Resources Canada, you couldn't come up with a formula that determines exactly how you should do it.
[Translation]
Senator Hervieux-Payette: I would like to have a copy. Perhaps my colleagues would like to know how the performance of departments is assessed. We are reviewing our performance assessment and I would like to know how we can be more informed about how the performance of senators will be assessed compared to that of government officials.
[English]
The Chair: Let's find out if they're able to furnish a document along the lines just discussed.
Mr. Matthews: The Departmental Performance Reports were tabled in Parliament for the preceding year several months ago. The upcoming ones, the Reports on Plans and Priorities that will go with these estimates, will be tabled in the coming week or so. Those will be out publicly very soon. They are an important part to be able to study the estimates; they go hand-in-hand.
The Chair: I understand, but from the point of view of the guidelines that you had indicated —
Mr. Matthews: In terms of the guidance to departments?
The Chair: Yes.
Mr. Matthews: I'm sure we can make that available. We'll take that away.
The Chair: Thank you.
[Translation]
Senator Hervieux-Payette: When you talked about the new spending, I must have misunderstood because it does not make sense; the department says that it will spend more without providing any details and that it will come back with the information later. When you ask for more money, you usually have to justify why you are asking for more. What is the procedure for granting additional funding? Is it a given that the figures are provided later in your 18-month cycle? If you are asked for $50 million or $100 million, do you ask for a breakdown of the $100 million?
Mr. Matthews: That is the role of the Treasury Board Secretariat. First, there must be something in the budget to indicate a new program is on the horizon. The department must then provide the details on how the money will be spent and specify what the performance indicators for the program will be.
[English]
When that submission is completed, that is what Treasury Board ministers approve. It's only after Treasury Board ministers have approved that it makes it into the estimates and the department actually has resources to start spending. That's the link between the budgets and the estimates, those details around just what will be spent and how it will be spent.
Senator Hervieux-Payette: When it's in the budget, no one has any detail as to how it came to that amount of money?
Mr. Matthews: Typically there might be a discussion at cabinet in advance to set some high parameters, but the detailed discussion around spending is at the Treasury Board stage.
Senator Buth: Thank you for being here again this evening.
My first question relates to the removal of Employment Insurance from the estimates. The first thing I looked at was the total amount. When people ask me what the Government of Canada spends or what the budget is, I usually say it's around $250 billion. I notice this time it is $235 billion. Is that essentially the difference in the EI account?
Mr. Matthews: That's the big difference. As I mentioned, statutory spending is increasing because of the health transfer, but in terms of comparing what you would have seen in previous years, the benefits of around $17.7 billion is what Finance is forecasting.
Senator Buth: Should I not tell people the amount is $250 billion anymore? Or should I say $235 billion but then we manage the EI account for employers, essentially, and Canadians?
Mr. Matthews: It depends on your objective. If I'm talking about spending and revenues, I typically start with the budget and the financial statements. That's on an accrual basis. When you look at the budget for 2014-15, you would see spending forecast on an accrual basis of almost $280 billion. That's where I would start. How that actually translates into cash requirements depends on the year, but it has been 270-ish in previous years, so you've nailed the numbers.
Senator Buth: My next question is for Ms. Santiago, and it's related to Foreign Affairs, Trade and Development on page II-143.
You made a comment about the budgetary voted expenditures and vote 15, payments in respect to pension, et cetera, and that it's unique because it involves staff located outside of Canada. Why is that not included in the operating expenditures? Just because they're outside of Canada, there are still FTEs and operating expenses involved.
Ms. Santiago: It's listed as a separate vote so it can be considered separately for the same reason that Treasury Board vote 20 is listed separately, because it's public service insurance for the whole of government as opposed to the operations of Treasury Board itself, even though it is Treasury Board Secretariat staff who administer the central vote, vote 20, on behalf of other departments. We list them separately for clarity and for disclosure to Parliament. It's the same reason here for Foreign Affairs, Trade and Development.
The content of that vote is also salaries and operating expenses, the same as in the regular operating vote. It happens to be listed separately so it can be seen clearly that that portion is separate from the regular operations of the department.
Senator Buth: It's different than Treasury Board in that they are actually de facto employees, are they? Or are they employees from other departments? You compared it to Treasury Board vote 20, but you're administering that on behalf of all departments, essentially.
Ms. Santiago: This is Foreign Affairs staff administering it on behalf of employees engaged outside of Canada. This particular vote for Foreign Affairs was originally part of the larger Treasury Board vote 20 and it was separated out a few years ago.
Mr. Matthews: Chair, am I allowed to ask Marcia a clarifying question? Just to be clear, we're not talking about Foreign Affairs employees who are located in missions overseas, right? It's locally engaged staff?
Ms. Santiago: It's locally engaged staff. I thought the question was about who was administering this vote.
Senator Buth: I just wondered why it was separate. Now I understand; it's locally engaged staff. So these are staff like in the embassy in China wherein they employ so many employees who are Chinese essentially to help with that locally engaged staff. That makes sense to me.
Senator L. Smith: Mr. Matthews, the public is very interested to see how our public debt will be reduced. Of course, tying into the next election, there have been statements made by our Minister of Finance. Could you walk us through? I'm looking at the graph on page 11. Walk us through where our public debt will end up by, say, the end of 2015.
Mr. Matthews: There are two pieces to this. The Minister of Finance recently tabled a budget, and I may draw on that in a moment.
Public debt charges have been dropping, largely because of changes in long-term interest rates; they're decreasing. If you actually look over the last few years, the government has been running deficits. If you went to the government's statement of operations, you would see that expenses have been larger than revenues. That's where the deficit comes from.
At the same time, if you looked at the government's balance sheet, you would see that debt has been going up because we've been running deficits and borrowing more. The spending around interest has actually been decreasing because of the change in interest rates.
If you look to the budget in terms of forecasted surpluses and deficits, you're seeing a projected surplus in 2015-16, a small deficit in 2014-15 and there is an amount for risk built into that small deficit.
For 2014-15, the current projection is a deficit of $2.9 billion, but there's an adjustment for risk of about $3 billion in there. If that's not needed, in fact, we'll be right in line in 2014-15.
Here's when you get into the difference between accrual and cash accounting. People often assume just because we run a surplus that debt is going down. That's usually the case, but depending upon the timing of payments, sometimes you can run a surplus and debt might go up in a given year. Sometimes you could run a deficit and debt might go down. What you're seeing on the interest payments is that debt has been increasing during this period of deficit, and because of decreasing long-term interest rates we're seeing reduced requirements for interest. That's been a consistent theme the last couple of years.
Senator L. Smith: Just so I understand, on page 11, when you look at the public debt charges, could you walk me through those numbers? Is that $27 billion?
Mr. Matthews: That is, and that's a combination of interest both on what I'll call market debt, which is borrowings, but you would also factor in interest charges on things like the public sector pension plan. It's both items combined.
Senator L. Smith: What is the biggest challenge to the government in terms of making sure it can meet its target?
Mr. Matthews: Government has a pretty good track record of bringing in expenses on track or even lower, partially because it is against the law to overspend your budget. That's where the study of the appropriations comes in. So if a department does need additional resources — and it happens — there's a process where they have to come through the Department of Finance, then to Treasury Board to get spending approval.
If you look over the last couple of years, government spending has been well forecasted and in most cases has come in under because there is what we call a "lapse" where you don't have to spend your full authorities. They're able to quite accurately forecast government spending. You get incidents like disasters that can cause blips in spending, so we can talk about the Alberta floods, Lac-Mégantic. That is why the Department of Finance builds in that $3 billion for risk just to cover off unplanned events, because it is possible.
[Translation]
Senator Bellemare: I have a question for Mr. Matthews about the structure. Page I-4 of the French version shows that statutory expenditures have increased a great deal since 2012 into 2014-2015. That generally has to do with the aging of the population and transfer payments to individuals and other levels of government.
People are needed to manage the money being used and the statutory expenditures; are those people included in the voted or in the statutory estimates?
Mr. Matthews: The first question has to do with the cost of managing government programs; that is included in the votes for each department.
Senator Bellemare: In relation to the workforce budget cuts, does that increase the productivity of managing position transfers?
Mr. Matthews: Yes.
Senator Bellemare: My second question deals with the debate we just had. In all the studies we do here, we look at the estimates and the implementation of the government budget, but we do not really see how the funding is managed, how debt is managed.
For instance, you mentioned pension plans; we will see whether, for instance, the public service pension fund is in deficit and whether we will need to make up for it. We see it in part here. You said that it shows up somewhere when the public service pension fund has to be recapitalized.
Parliamentarians also have pension plans, but there are no funds. It is just accounting with numbers on paper. As parliamentarians, where can we study the whole issue of funding? As you said earlier, there can be an increase in the surplus, but there can also be an increase in debt.
Mr. Matthews: Yes.
Senator Bellemare: Where does the debt management appear? We know that it might be under public accounts and there is often a previous report, but where do we see that portion of the budget?
Mr. Matthews: Thank you for that question. There are two things. First, the Minister of Finance publishes two documents, one of which is the annual debt management strategy. You can find it on the Department of Finance website. He also publishes an annual report on tax expenditures. You can start with that.
Senator Bellemare: We have the information, but it does not show up here.
Mr. Matthews: No, because here we have the costs or the interest forecasts. Can this committee study the financial reports? I would think so. We can ask about that.
[English]
The other piece of this is the pension plans. Pension plans make up a good part of the debt and related to that, a portion of the government's pension liability is funded and there's an investment board that produces an annual report on how their investments have done. If you're looking to study or ask questions on the management of debt, the information is out there. Which committee is best placed to study it? I would leave that to others to figure out. But what you're seeing here is the amount of money the government is forecasting to actually spend on interest. It is quite predictable simply because of the long-term nature of much of our debt.
[Translation]
Senator Bellemare: The government can also decide to service the debt by borrowing from the Bank of Canada or from foreign and domestic markets. Do the parliamentary committees not study this issue?
Mr. Matthews: I am not sure.
[English]
I don't recall seeing questions at any of the finance committees in the House of Commons on debt management. I do recall the odd bit of interest, but I'm not sure that there's a formal requirement to study the report that Finance produces.
[Translation]
Senator Bellemare: There is no requirement. Thank you.
I would like to ask one last quick question about the Senate. When we review the Senate expenditures, we have votes and statutory items. Program expenditures are to the tune of $57 million; this is on page II-295 in the French version. There are also statutory estimates to the tune of $34 million. What do the Senate statutory authorities include?
Mr. Matthews: Perhaps I will ask Marcia to answer, but I think employee benefits are included.
[English]
It is things like statutory obligations around employee benefit plans, if I recall correctly. Do I have that right?
Ms. Santiago: That's one of them. The contributions to employee benefit plans, which are required for just about all the voted salaries. There's a statutory component that's associated with the salaries that are part of the operating votes.
But for the Senate, the majority of the statutory authorities, something like $27 million out of that total, relate to the salaries, allowances and other payments for the Speaker, the members and other officers of the Senate. In the case of the Senate and of the House of Commons, the salaries and allowances for the members are paid under a statutory authority. They are not voted as part of the Appropriation Act.
The Chair: I understood Senator Bellemare was asking about administrative support, and I see that at page II-315, at 29. Is that correct? Is it $29 million? You seem to be discussing $34 million, which was the statutory. One is statutory, which includes everything statutory; and the other was administrative support, which was $29 million.
Mr. Matthews: Correct. The administrative support, I'm assuming, is the budgetary piece. Sorry, this is under strategic outcome and programs. This is just a different slice. Remember that, when money is voted, there's statutory versus voted. Then, each organization can break down their spending in terms of their programs. So this isn't how Parliament votes, but the Senate has broken down its spending by strategic outcome and program into the buckets: senators and their offices, admin support, chambers, committees and associations. That's not actually how the funding is voted. That's just the way the Senate has broken up their spending to provide information.
One would assume admin support is the funding related to actually running the operations of the Senate itself, but that would be a better question for the Senate chief financial officer or equivalent.
The Chair: We may just have to bring him in here.
Senator Callbeck: Welcome back to all of you.
I have a couple of questions on your presentation, Mr. Matthews. On page 12 of your presentation, you list five largest decreases by organization, and one is Correctional Service Canada — $262.9 million. You said that had to do with building additional facilities. Are some projects getting cancelled here? Do you have any comment on that?
Mr. Matthews: Sure. The actual legislation was a few years back around tackling violent crime and the Truth in Sentencing Act. It wasn't one-time funding, but it was temporary funding in capital to basically put in additional beds. That funding has effectively expired now, and there was additional work done. It's not that the funding has been cancelled. It was time-limited funding, and it has run its course. That's kind of the end of the story in terms of building additional spaces in the various institutions.
Senator Callbeck: Was everything completed that was proposed?
Mr. Matthews: If I recall correctly, what they had originally forecast in terms of growth in inmate population as a result of those two acts didn't materialize. The inmate population did not grow to the extent that was originally forecast. I would imagine that the department then revised downward its requirement for additional spaces, but I'm speculating a bit there.
Senator Hervieux-Payette: A shortage of prisoners.
Senator Callbeck: The other question I had was on page 13. You list $253 million for an investment in affordable housing. Do you have any information on what programs?
Mr. Matthews: Those are the programs that I believe are matched by the provinces. If I recall correctly, that comes on the heels of about $715 million over three years that was given in previous years. That's matched by the provinces. I'm going from memory. It's population based, so the largest amount of allocations would obviously go to Ontario, Quebec and B.C., and the smallest would go to P.E.I. and Nunavut because it is population based.
I'm not sure if Ms. Santiago can expand on the actual program.
No.
Senator Callbeck: We'll have to get someone from CMHC, then.
In the Main Estimates, Treasury Board Secretariat, II-323 — Government Contingencies, $750 million. Can you tell us what items might be in here?
Mr. Matthews: There's actually nothing in there right now. This is one of our central votes. Treasury Board Secretariat has central votes that they can allocate to departments. Government-wide contingencies is one of them. We've already mentioned tonight the operating budget carry-forward, which is one we allocate to departments, and compensation adjustments is another. There's nothing in there right now. This is basically the amount to start the year. Some years, we don't need it. If something happens during the year, we have access to that vote, but there's nothing specific allocated against that at the moment.
Senator Callbeck: So this was something new in 2013-14.
Mr. Matthews: No, that vote has been around for quite a while.
Senator Callbeck: On the operating budget carry-forward, do a lot of departments do this?
Mr. Matthews: Yes. Departments that have operating votes, which is the vast majority. There's a special rule for National Defence because they spend a lot more than everybody else does. The basic rule is that they can carry forward up to 5 per cent of their authorities, provided they're unspent. If you looked to the previous year, the government had significant lapses. You can't overspend your budget, so it's not a bad thing to underspend. Most departments actually had 5 per cent available to carry forward. When we added up all those 5 per cents, we were bumping up against the limit of the vote. That's why we put this in place. It's not uncommon for us to see large lapses when we're in a period of restraint because departments are so worried about making sure they respect the law and don't overspend. Sometimes they actually end up with larger lapses than in the past. The previous fiscal year was one of the largest lapses we've had.
The Chair: Ever?
Mr. Matthews: In recent memory, anyway.
Senator Callbeck: On that same page, on the chart, there's the total statutory. There's a big difference between the Main Estimates for 2013-14 of $28 million and 2014-15 — $470 million.
I understand that's got something to do with addressing the actuarial deficit of the public service pension fund.
Mr. Matthews: You're correct.
Senator Callbeck: What is the actuarial deficit?
Mr. Matthews: I didn't bring the report with me — there's an actuarial report — but the amount of deficit, if I recall, is funded over a 15-year period. I think it's $440 million a year over 15 years. Mr. Sprecher is nodding his head in agreement. If anyone can do the math of 440 x 15, that would give you a sense. That is driven largely by the investment performance of the funded plan. In more recent history, the investments are doing better. It's just like the stock market. That is something that can reverse itself as well.
Senator Seth: Thank you for such detailed information about the budget.
I'm going to discuss 2014-15 estimates, page II-165, Indian Affairs and Northern Development. I see here that Northern Science and Technology, from $12.8 million roughly, has decreased to 7.3 Why this sudden decrease and such a high number? Is it that the approach has changed for the development of science and technology, and how is it going to affect the Aboriginal committee?
Mr. Matthews: I'm just trying to find the part on the page.
The Chair: Almost at the bottom, about five lines up, Northern Science and Technology.
Mr. Matthews: There are a couple of possibilities. I can't give you a definitive answer. These expenditures are expenditures by strategic outcome and program.
[Translation]
Do we have the page number in the French version? It is page II-16 in the French version. Thank you.
[English]
The allocation, in terms of how this allocates across strategic outcomes, is a departmental decision. They're best placed to answer why there was the decrease, but my assumption, based on this, is that it could be the expiration of some time-sensitive funding. I'm not certain.
Senator Seth: The same thing applies on the next page, II-166: "The Government — Support good governance, rights and interests of Aboriginal Peoples." This has decreased from $70 million to 25. Can you explain that?
Ms. Santiago: That is a non-budgetary item. The program is described as Aboriginal rights and interests, but in fact this non-budgetary authority pertains to vote L15. It's loans to Native claimants. A lower number in a non-budgetary item just means that there is an expectation of having to extend fewer loans or lower amounts of loans to support negotiations.
Senator Seth: But why?
Ms. Santiago: It fluctuates a lot. It depends on the amount of negotiation activity going on at any given time and how much repayment is expected in that year. I'm speculating that that number is net of the expectation of loans to be issued as well as repayments to be collected in the same year.
Senator Seth: I see, so it balances.
Mr. Matthews: Those loans are demand driven, so it is done on negotiations.
Senator Seth: You get more money back, so the loan is less.
Mr. Matthews: On a net basis, yes.
To come back to the first question, it is worth noting that if you look at the 2014-15 Main Estimates for the department on page II-163 in English, the actual funding for the department on a voted basis, their voted spending is up to 7.8 versus 7.7 in the 2013-14 Main Estimates for, so it may just be a change in the way the department has allocated funding.
The Chair: Honourable senators should know that we will have Aboriginal Affairs and Northern Development here tomorrow, so we will have the actual administrators of the department in to explain this. It is always good to hear what Treasury Board has to say. It helps us with our questions.
[Translation]
Senator Chaput: My question is about the Treasury Board Secretariat, on page II-288 in the French version. I think the Treasury Board Secretariat has a program entitled "Official Languages Centre of excellence," at least it used to exist in the past. Is that still the case? If this program still exists, where can we find it in the table and what are its operating costs?
Mr. Matthews: I do not remember that program under the Treasury Board Secretariat. Could we perhaps check and see which department exactly has the program?
Senator Chaput: That is what I thought, but I wanted to check with you.
Mr. Matthews: If I had to guess, it would probably be Canadian Heritage.
Senator Chaput: The Treasury Board Secretariat helps the government manage things. That included the Official Languages Act and the various parts of the legislation that needed to be reviewed. I was told that the Treasury Board Secretariat had what used to be called the Official Languages Centre of Excellence that did the audit and review work for the Treasury Board Secretariat.
[English]
Senator Eaton: I know Aboriginal Affairs is coming tomorrow. Do I ask you about the highlights? In the highlights, there was $311 million for Health Canada to stabilize, renew and expand. I'm wondering if that covers the health accord with the treaty in B.C.
Mr. Matthews: Yes.
Senator Eaton: Do you anticipate further health accords? You don't know.
Mr. Matthews: I don't think it would be appropriate to comment. I don't know. I'm not sure.
The Chair: They don't appear in these estimates.
Senator Eaton: He turned red. Did you notice that? Perhaps I will ask you an easier question. I don't mean that. Of course not.
I would love to ask you more about the accountability, but I guess that's not the —
Ms. Santiago: If you have more questions about the health accord, it's actually listed under Health. It's delivered by First Nations and Inuit Health at Health Canada, not by Indian Affairs.
Senator Eaton: It's under Health Canada.
Ms. Santiago: In fact, there is a specific reference to that arrangement on page II-156.
Senator Eaton: Maybe I'm the only one that's confused. I find that all the amounts are segregated for anything to do with First Nations. They are "siloed" in the various ministries. It's very hard to account, because for instance there is the health accord, and then you have something else to do with houses and health and mould. It's almost a shame that it's not in one batch.
Mr. Matthews: Thank you for the question/comment. It's an interesting one for us. The horizontal items often come up at committee and what we can do to our reporting around horizontal.
Inuit and First Nations programs are a particular challenge because the money is segregated depending on the nature of the spending. If it's in health, it's in Health Canada. It might be in CMHC if it's housing. It is across the board. We are looking at our guidance on horizontal reporting. If you would like us to take away and think about how we might do better there, we're happy to do that.
The Chair: We'd like you to do that.
Senator Eaton: Thank you, Mr. Chair. That would be very helpful.
The Chair: These horizontal items are helpful.
Senator Eaton: Another horizontal item is the Indian Residential Schools and Reconciliation Committee. They are going to extend it, I understand, for another year. Will you have enough money? Will you have money left over? How do you think that whole process is going?
Mr. Matthews: It's tough to speculate on funding. The reason it was extended, if I recall correctly, is that when the program was first put in place, there were assumptions made around how many cases would need independent assessment and how many cases would come in basically with enough documentation to do a quicker assessment. The number of cases requiring independent assessment has been greater than they thought and, conversely, the number with sufficient documentation for a quicker assessment has been less than projected. That has slowed things down. I'm not aware of the financial forecast around that, but it's really around getting through those independent assessment cases, which effectively takes more time than originally thought.
Senator Eaton: Thank you.
Senator Gerstein: Thank you for being with us tonight.
Mr. Matthews, I would refer you to page II-199, National Defence. National Defence is the third largest expenditure in the budget, after Finance and Employment and Social Development. We have $18.6 billion that we're spending. Could you refresh my memory? I know you've said it already. This is accrual accounting, or this is cash accounting?
Mr. Matthews: This is modified cash, so it's closer to cash than accrual.
Senator Gerstein: Modified cash, so something new, closer to cash. If you look on page II-199, $12.5 billion are operating expenditures, and 4.7 capital. It's pretty clear what each pocket is. How much of the capital is reprofiled from previous years?
Mr. Matthews: That is a good question. I will speak to reprofiles generally, and I will hand my colleague some information to see what she can find out.
When you think about reprofiling, DND, from a procurement perspective, often does actually bump into those. There is new funding in here if you look at the capital amounts for the upcoming year versus the previous year. If you look at Main Estimates 2014-15, there is 4.7; in the Main Estimates from 2013-14, there is 3.6.
I know part of the increase for National Defence relates to plans around light-armoured vehicles and surveillance systems for light-armoured vehicles. I think the last bit with Arctic offshore patrol ships is why there is an increase.
One interesting thing about National Defence's funding is they have what's called an escalator clause. The notion is that we know the types of things Defence spends money on are subject to greater inflation than average, so they do have an escalator clause to increase funding. Part of the increase is because of that clause.
I'm hoping Marcia has found something for you.
Ms. Santiago: No, there was not actually any specific reprofiling approved for inclusion in these Main Estimates. However, that does not mean that there have been not been reprofiling requests that were previously considered.
When we brought forward the Main Estimates a couple of years ago, there might have been a request at that point to reprofile capital funding over several future years. That is, in fact, how capital reprofiling usually works. They can either come in with the capital carry-forward — and National Defence does have a small capital carry-forward that comes in with the capital carry-forward for everyone else from one year to the next, but when they have significant reprofiling initiatives, they usually do it over several years. You will see parts of those profiles more commonly in supplementary estimates than in the Main Estimates.
Senator Gerstein: Mr. Matthews, did I understand you to say at the outset that the maximum you can reprofile capital, the capital account for operating is 20 per cent and 5 per cent? Did I get that number right?
Mr. Matthews: Five per cent for operating and 20 per cent for capital.
Senator Gerstein: So that's moving from one year to another, but that does not preclude, as I understand from previous discussions, that you can reprofile within the year from capital to operating and operating back to capital. Conceivably, you can move it around during the year. Is it complicated or is it just me?
Mr. Matthews: No. I'll say two things. You're not going to like this answer. It is complicated.
When we talk about the 5 per cent operating and the 20 per cent capital — DND does have different rules in place, but generally speaking — that's what I will call the almost automatic reprofile. Using the central votes, we can allocate money to departments.
If a department would like to pursue a reprofile outside of the 5 and the 20 per cent, they can make their case to Finance, and you will sometimes see those reprofiles here.
The in-year movement of money that you refer to is what we would call a vote transfer, and that does have to come through Parliament, so you will see it in supplementary estimates that a department may want to move money from operating to capital or vice versa.
Senator Gerstein: Thank you, Mr. Matthews.
Chair, we're learning new words. Today I learned the word "almost." It's "almost" cash and it's "almost" reprofiled.
Mr. Matthews: May I clarify that comment, Mr. Chair?
The Chair: At the same time, perhaps you could clarify another one he didn't pursue, which is this escalator clause that you talked about.
Mr. Matthews: The reason I said "modified cash" — accrual accounting is great; that's the budget and the financial statements. These estimates are on a modified cash basis. Basically, if you are buying a car, we would charge your appropriation with $20,000 because that's the amount of cash that's going out the door.
The reason it's modified is we don't want a case where if a department has an invoice come in and they don't have enough cash, they could stick it in a drawer and wait until next year to pay it. That would be a no-no.
The reason we say "modified cash," if you took delivery of those goods during this fiscal year, you have to charge your appropriation for those goods, regardless of when you write the cheque. That's the distinction.
The Chair: That certainly modifies the cash, doesn't it?
What about the escalator clause?
Mr. Matthews: The escalator clause is put in to recognize the fact that National Defence is subject to greater levels of inflation than other departments. If you are looking at high-tech weaponry, it's steel, so effectively a 2 per cent factor is added on to allow their budget to keep pace with inflation.
The Chair: Okay. It's 5 per cent for operating carry-forward, and instead of 20 per cent, what is it?
Mr. Matthews: For National Defence, it's less than 5 per cent.
Ms. Santiago: For National Defence, I believe it's something in the order of 2.5 per cent for operating and capital.
The Chair: And capital?
Ms. Santiago: Yes, just because their total vote is magnitudes larger than everyone else's, so 5 and 20 per cent would swamp the whole central vote.
The Chair: I see. Thank you for that.
Before I go to round two, I wanted to clarify this. When you were discussing with Senator Buth about your reporting, you dropped the Employment Insurance amount from transfer payments. I think it was 17 —
Mr. Matthews: I was $17 billion and change.
The Chair: Senator Buth was doing her math and bringing down the overall government expenditure by that amount. That brings it to $235 billion per year.
For comparison purposes, have you removed the Employment Insurance portion for the other years as well so that we can compare?
Mr. Matthews: Correct. When you look at the estimates, we have put them on a consistent basis.
The Chair: You've lifted it out of all of them?
Mr. Matthews: The ones that appear in this document.
The Chair: Yes. When we see these figures elsewhere, can we assume that from now on, there is no Employment Insurance in there?
Mr. Matthews: Anything we do that applies to multiple years has to be consistent, so we'll make the same change to ensure they are comparable.
The Chair: Thank you.
Senator Buth: You explained the difference between grants and contributions. Who makes the decision in terms of whether something is a grant or contribution? Contributions have strings attached in terms of financial reporting and results reporting and a grant doesn't.
Ms. Santiago: The establishment of contribution authorities, and in some cases even specific contribution agreements, are all subject to Treasury Board decisions, so they are governed by the policy on transfer payments. The determination of what makes it a grant or a contribution actually begins with the department and their concept of what they would like to do with this program funding. When they have their proposal together, they will propose a program as being either a grant or a contribution, and that comes forward to Treasury Board. In all cases, Treasury Board approves terms and conditions for all contributions and for classes of grants.
Senator Buth: I'm thinking back to my days involved in agriculture research. The government would have a contribution agreement with a commodity association, like the Canola Council of Canada, which would then fund research projects at universities. They would go to the universities and say, "Well, we want you to do this research for us and it needs to be a contribution because we're under a contribution agreement with the federal government." The university would say, "Okay, that's 35 per cent overhead." But if we give them a grant, there is no overhead.
Mr. Matthews: It is a trade-off. You're right; grants are more efficient to administer, but we had a discussion earlier tonight about performance reporting. If we're interested in doing performance reporting on our programs, we have to build reporting into the program itself. Under a grant arrangement, performance reporting would be a little trickier.
I do appreciate that there is extra overhead on both ends to administer a contribution agreement, both for the government and the recipient, but if we're interested in knowing what we got for our money, you have to build in the reporting requirements with the contribution agreement. That's always the trade-off.
Senator Buth: Are transfer payments to provinces grants or contributions?
Ms. Santiago: They are more similar to contributions. They are called "other transfer payments," but in character they are more similar to contributions than to grants.
Senator Buth: What about the Canada Health Transfer? The strings attached are that you have to follow the requirements under the Canada Health Transfer legislation.
Mr. Matthews: Because there are strings, it's more like a contribution, but yes.
Senator Buth: Okay. I might come back to that at another time in another meeting.
The Chair: I'm sure there will be other opportunities.
Senator Buth: My other question relates to Atomic Energy of Canada, at II-9 in the English version. If you look at the 2012 expenditures, it was $341 million; Main Estimates 2012-13, $341 million in expenditures; 2013-14, $102,143, main, and then another $275 million in supplementary estimates; 2014-15, $102 million in main. For two years previous they spent something similar, in the order of $300 million but, again, they come forward with $102 million in the Main Estimates. What's causing that?
Mr. Matthews: AECL has gone through some restructuring, as you're likely aware. In the last year or so there was some statutory funding related to commercial commitments around divesting the CANDU Reactor Division and that statutory funding has come to an end. However, there was some temporary funding in the department around the divestiture and the restructuring. That's now ended. There is nothing new in here at the moment so I can't speculate on the future, but the CANDU stuff has come to an end.
Senator Buth: If that's the $200 million, that's the difference between the main and the end.
Ms. Santiago: Actually, Mr. Matthews was speaking to the statutory line that's below the total voted line, so that shows that the statutory amount has come to an end at this point.
In relation to the voted amounts, we've spoken before about funding decisions being taken at some point and then proposals from organizations having to come to Treasury Board for approval before they can be included in estimates. It's fairly common, actually, for Atomic Energy of Canada to have a timing problem in that their funding decision and the Treasury Board approval do not come in time to be included in the Main Estimates. They have historically been a fairly frequent visitor to the contingencies vote because they will usually find that they can't get past the first couple of months of the fiscal year without having to ask for a temporary allocation from Treasury Board vote 5. That's one of our fairly usual uses of the contingencies vote.
Mr. Matthews: My colleague, Darryl, has found some information that you might find helpful.
Darryl Sprecher, Director, Expenditure Management Portfolio, Treasury Board of Canada Secretariat: In Budget 2014 there was $195 million that was announced for AECL, so that will make up some of that difference that you're seeing there.
Mr. Matthews: That will come in future supplementary estimates.
Senator Buth: Your comment was that this a fairly traditional thing for an organization and you actually used the word "problem."
Ms. Santiago: It's a timing problem because of when the decisions are taken. A Budget 2014 announcement in February does not give us time to get this in for mains.
Senator Buth: If it's a budget item I can understand that. Say there is not an issue in terms of their coming late all the time. However, if you had a department that was coming in late all the time, what are the repercussions for that and how does that get fixed?
Mr. Matthews: We mentioned the government contingencies vote, which is typically used for unforeseen and unplanned and it really gets departments through until the next supplementary estimates process. If you have a department that thinks they need to make use of that on an ongoing basis, either they have to make some changes in terms of how they operate, or structurally we need to fix their funding levels. That feeds into budget process and you will see those discussions from time to time. Do you effectively give them a few years of funding to change the funding base, or do you ask them to restructure? In AECL's case it has been a bit of both. They've gone through some restructuring, and then they needed some funding to get through that restructuring.
Senator Buth: Who tells them?
Mr. Matthews: If they're looking for additional money, they could make a request to the Minister of Finance through the budget process and they would be told yes or no. Typically the starting point is either a cabinet discussion or a budget ask.
The Chair: Senator Mockler and I are both from New Brunswick and would be interested in knowing if the outstanding lawsuit with respect to Point Lepreau and AECL has been resolved. I understand you can't do a contingency for that because you don't want a figure in here that might interfere with negotiating the settlement.
Mr. Matthews: I don't know about the lawsuit and I'm curious if my colleague Darryl does, but I can't comment on that one.
The Chair: If you have any other information back at your shop that would be interesting to know because a settlement could amount to a very significant amount more in one of the supplementary estimates.
Mr. Matthews: It could and I'm assuming if there was a settlement we'd know about it. If it's not settled there is really not much we can say.
The Chair: It's a contingent liability.
[Translation]
Senator Hervieux-Payette: I have a short question that is of interest to Senator Bellemare, Senator Smith and I. I am looking at the budget for the Champlain Bridge and I see that $274 million were spent in 2013, but the amount for 2014 is down to $146 million.
That worries me a little. I keep telling myself that our current bridge is about to collapse. If there is a call for tenders to build a new bridge, will it appear under this section or somewhere else?
Mr. Matthews: This is the same issue as Atomic Energy we just discussed. If memory serves, there was an envelope in the budget for the bridge. We will check.
In terms of the new bridge, the supplementary estimates will include the amounts needed to either build or buy the bridge. I am not sure what the decision will be.
[English]
It's only at the time we're actually ready and have an understanding of the actual funding requirements during the year that you will see it in the estimates. If they are going to spend money on a new bridge two years from now, that won't be in these estimates; it will be the spending requirements for this year. I believe there was some money in the budget and we may be able to come back to you before the end of the second round.
[Translation]
Senator Hervieux-Payette: This bridge is supposed to be built in 2018, and we are looking at 2014-15. There is not a lot of time left. There will certainly be preliminary work and there is even some construction on the approaches under way.
I was wondering why there were only $146 million. That is $100 million less than was spent in 2013.
[English]
Mr. Matthews: I think, if I recall correctly, it was funding allocated through supplementary estimates last year and we may say see the same thing again this year.
[Translation]
Senator Bellemare: I have a question about the statutory programs.
On page I-6, under Transfers to other levels of government, there is a line with reductions for 2012-13, 2013-14 and 2014-15 of around $3.3 billion. That is under the category Alternative Payments for Standing Programs. Can you tell me what that is? I would imagine that has to do with the provinces, but what do these annual reductions cover?
Under Major Transfer Payments, you have Transfers to other levels of government and the last line is Alternative Payments for Standing Programs.
Mr. Matthews: I do not know the answer to that question. We can provide you with an answer in writing, if you would like.
Senator Bellemare: Perfect. Thank you.
[English]
Ms. Santiago: It's actually explained in the text on the next page. The alternative payments for standing permits represent recoveries, so the fact that they're negative doesn't mean that they're being decreased. It just means that these are recoveries attributed to year-over-year changes in the value of things like federal personal income taxes.
[Translation]
Senator Bellemare: Yes, I see it on page I-8.
Mr. Matthews: Mr. Chair, I think my colleague just found the answer about the bridge in the budget.
[English]
Mr. Sprecher: In Budget 2014, there was $378 million dollars provided over two years for The Jacques-Cartier and Champlain Bridges Incorporated.
Mr. Matthews: So you will see that in future supplementary estimates.
The Chair: And until we do, it's just a promise.
Mr. Matthews: It's just in the budget.
The Chair: Just in the budget; exactly.
Mr. Matthews: In this case, there is some urgency around this project, but we have cases of budget funding that happens in estimates years later.
The Chair: Yes, exactly, which we've seen.
Mr. Matthews: This case is a little more urgent, as we know.
The Chair: That's why you put the budget year beside some of these items that come two or three years after the budget.
Mr. Matthews: Correct.
The Chair: You keep coming here and we'll start to understand.
Senator Gerstein: Mr. Matthews, I'm looking at page II-250, Old Port of Montreal, and in particular just the top line where, as I understand it, Old Port of Montreal was amalgamated with Canada Lands Company. Where does one find the information on Canada Lands?
Mr. Matthews: I think Canada Lands shows up under Public Works.
Ms. Santiago: It's a parent Crown. It does not have an appropriation.
Mr. Matthews: It does not. There we go. I misspoke.
Ms. Santiago: Canada Lands doesn't have a vote.
Mr. Matthews: There are no appropriations going through Canada Lands, so disregard my comment about Public Works. My apologies.
Senator Gerstein: So, then, where does one find out about Canada Lands? They publish their own statement separately?
Ms. Santiago: They're a Crown corporation.
Senator Gerstein: As a Crown corporation. Canada Post is not a Crown corporation?
Ms. Santiago: Canada Post is a Crown corporation.
Senator Gerstein: But it publishes its statement, or it does not?
Mr. Matthews: Canada Post publishes its own financial statements. The distinction there is that Canada Post sometimes receives funding from the federal government. You have some Crowns that actually do receive public appropriations.
Senator Gerstein: But Canada Lands does not?
Ms. Santiago: Canada Lands does not. Export Development Canada does not, for example.
The Chair: It would be interesting if you have a list of all of the Crown corporations that do not receive appropriations and therefore don't appear in these estimates and aren't subject to our review unless we specifically ask them to come and talk to us.
Mr. Matthews: If you give me a moment, I may be able to give you an answer.
The Chair: If you have that in a list, you can send it to us. We're not going to act on it tonight, but that's an interesting area of oversight that we may wish to look into.
Ms. Santiago: We can provide that.
The Chair: Thank you.
With that undertaking and all the others you've given us, I'd like to thank you on behalf of the Standing Senate Committee on National Finance for getting us started on these new estimates for 2014-15.
Colleagues, tomorrow afternoon at 2 we're meeting with three different departments. We're meeting in 160-S, Centre Block. We'll be able to just go downstairs from the chamber. Infrastructure, Revenue Canada, and Aboriginal Affairs and Northern Development Canada are the three we'll deal with tomorrow. We, of course, are charged with the review of these Main Estimates throughout the year, so we'll continue from time to time dealing with these.
Thank you very much.
(The committee adjourned.)