Proceedings of the Standing Senate Committee on
National Finance
Issue 33 - Evidence - February 27, 2013
OTTAWA, Wednesday, February 27, 2013
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to study the Supplementary Estimates (C) for the fiscal year ending March 31, 2013.
Senator Larry W. Smith (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Honourable senators, this evening, we are starting our study of the Supplementary Estimates (C) for the fiscal year ending March 31, 2013.
[English]
We are pleased to welcome back officials from the Expenditure Management Sector of the Treasury Board of Canada Secretariat.
Appearing this evening are Bill Matthews, Assistant Secretary; Sally Thornton, Executive Director; and Marcia Santiago, Senior Director.
Those who have been on the committee for a while will know that we are welcoming back a team that helps us immensely in our examination of the supplementary estimates. As you will recall, we studied Supplementary Estimates (A) last June and looked at Supplementary Estimates (B) in late November, early December. Supplementary Estimates (C) before us today represents the final chapter for the fiscal year ending March 31, 2013.
For the newer senators, we all learn how this functions.
Mr. Matthews, we thank you once again for digging yourself out of a snowbank and for being here with us. The floor is yours.
[Translation]
Bill Matthews, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: We are pleased to be here this evening to help the committee with its study of the Supplementary Estimates (C) for the fiscal year ending March 31, 2013.
[English]
We do have a presentation that we think would be worthwhile going through. It has only been two days since the documents were tabled in Parliament, and the presentation highlights the major items of these Supplementary Estimates (C). If senators are agreeable, I would like to walk through the presentation, which I believe you have before you.
The Deputy Chair: Thank you. Everyone has a copy. Go ahead.
[Translation]
Mr. Matthews: I will start on page 2 and talk about the organization of the Supplementary Estimates, the 2012-13 Supplementary Estimates (C) totals and the 2012-13 estimates to date. I will especially focus on major voted items, major statutory items and horizontal items. Before I conclude, I will explain the impact of the 2012 budget cuts on the Supplementary Estimates (C).
[English]
If I could get you to turn to page 3, I have a quick reminder on how the document itself is organized. This would be the blue books that were tabled. There is an introduction section that goes through the major changes to planned expenditures, broken down between voted and statutory. A reminder here is that voted is what the appropriation acts that you will eventually vote on cover. The statutory items are just presented for information.
As well, we present both the Supplementary Estimates (C) number as well as the estimates to date; that is, the mains, plus Supplementary Estimates (A), (B) and (C).
We do have some ink and pages dedicated to horizontal items. That is an increasing trend you will see if you look through previous estimates where we put more information on horizontal items. Horizontal items are items where multiple departments are receiving funding for related initiatives. If you did not have information on horizontal items you would not see the whole picture of what is being spent on certain initiatives. I will speak to horizontal items as we go through.
There are the summary tables. The biggest part of the estimates is the details for each department, agency and Crown corporation.
The last bit I will mention is the proposed schedules to the appropriation bill. That is what eventually gets voted on by Parliament.
There is additional information available online that includes statutory forecasts, and we have a list for you on the page here as well as those $1 items that we frequently mention at committee.
At page 4, what you have in terms of these Supplementary Estimates (C) are voted items of $1.5 billion, so relatively small amounts in terms of previous supplementary estimates. I remind you that typically Supplementary Estimates (B) is the largest supplementary estimates. There is no change this year; Supplementary Estimates (B) was the largest.
We have a reduction in statutory items of 0.1, and I will speak to where that comes from, for a net total of 1.4. I will use this time to remind senators of the difference between budgetary and non-budgetary. A budgetary item is an item that effectively impacts of bottom line of the government. A non-budgetary item is something we expect to recover. For instance, I suspect we will be talking about student loans at some point this evening.
When student loans are issued, the government expects to collect them, so they are a non-budgetary item. When it gets to the point that we will write them off because a portion is uncollectable, that is when they become a budgetary item because they are affecting the bottom line of the government when we realize there are some that are uncollectable. There will be more on that later.
On slide 5, a reminder of the estimates to date this year and how it compares to previous years. I always warn people of the dangers of comparing Supplementary Estimates (A) to the previous year because there are often timing differences. However, when you get to Supplementary Estimates (C) you have the whole year to look at. If we compare this year versus the previous year, we have 259 in total, made up of 160.4 statutory and 98.6 voted. You will see here that voted is down a bit over the previous year's figure of 99.9. If you went back two years, voted was at 104.3, so you are seeing a decrease here. Statutory items this year is 160.4, compared to 159.7 the previous year, so it is up slightly. We will speak more to statutory items as we go through.
The next three slides are where I will focus my attention. It will give senators a good sense of the major items included in these documents.
For major voted items, we will start with National Defence — the Canadian Forces Income Security Insurance of $726 million. That relates to a legal agreement that was settled. There were two programs for disability amounts, one from Veterans Affairs and one from National Defence. There was a netting of the two. There was a court challenge on that front, which you may be familiar with, called Manuge v. Canada. There was an agreement reached, and this amount is going to Manulife to make the settlements related to that agreement.
The next item, again on National Defence, is the Canada First implementation plan, as well as severance. There are two things in here. We have spoken before at this committee about the phasing out of severance for voluntary departure in the public service. Individuals used to accumulate roughly one week of severance for every year worked, and they received that severance whether or not they left voluntarily. National Defence has done the same as other organizations and eliminated that benefit, so their members now have the option to cash out the severance they have earned to date as they wish. There is roughly $200 million in here for that severance amount. It has nothing to do with layoffs; it is that severance amount we spoke about previously. As well, there is $238 million related to the Canada First Defence Strategy.
The Human Resources' writeoff of unrecoverable student loans is $231 million. Again, this is not debt forgiveness; this is a writeoff. There is an acknowledgement that six years or more have passed and that we will write these off because that is the way that the regulations work. That does not mean that the debt is forgiven. CRA still tries to collect these things. In many of these cases the people have left the country or passed away. If they happen to come back into the country and if they pop back up into the system, the Canada Revenue Agency can make an attempt to collect these loans, but it is actually good bookkeeping and good housekeeping to come through once a year and update the amounts.
To give you a sense of perspective on the student loans, there are roughly $14 billion in accounts receivable on student loans. This year's writeoff is $231 million, and we can speak in more detail, if you wish, about some of the metrics around that program.
The next item up is, again, National Defence. This is the Afghanistan training mission — $144 million. This is a NATO mission that Canada is participating in. The training relates to both the Afghan National Army and the Afghan National Police Force.
Foreign Affairs is the next item, the High Commission in London, for $108 million. This is an interesting one. Right now in the U.K the High Commission in London is in two buildings — Canada House and Macdonald House. The property adjacent to Canada House became available. A decision was made to buy that property and to sell Macdonald House so that we could effectively consolidate our people into one location. Think of this as bridge financing. When Macdonald House is sold, the money will be used to cover the purchase of this new building, as well as any modifications that are required. The department needed money to buy the property adjacent to Canada House. When Macdonald House is sold, that money will come back into the fiscal framework.
Next up we have the Copenhagen Accord financing. This is one of those horizontal items I mentioned. We will see it again on another side. That relates to fast-start financing in developing countries for climate change and adaptation. The amount originally committed there was $1.2 million. This is the final piece. All will be spent by March 31, 2013, which wraps up Canada's commitment under that agreement. You will see that three departments are receiving money through Supplementary Estimates (C) — CIDA, Environment Canada and Parks Canada.
Next is another CIDA item — child protection and maternal, newborn and child health — for $100 million. This is not new money. This money was originally in here as a contribution and is being moved to a grant. There is a ceiling in Parliament for grants, so we had to update the grant ceiling. They are just moving money from a contribution to a grant, but because they are moving money from one vehicle to the other, it comes across in your supplementary estimates.
The last item is Public Works, $85 million related to accommodations.
I will now take you to slide 7 and major statutory items. Even though these are not voted on, it is good to get an understanding of the changes.
The first item — and most of these relate to Human Resources, HRSDC — is an enhancement of Employment Insurance benefits of $281 million. That relates to Budget 2009 when EI benefits were enhanced. A decision was made at that time to hold the Employment Insurance account harmless for the additional benefits. I believe $2.9 billion was initially set aside for those benefits. This is a final piece based on the costs to hold that account harmless.
The next item is again HRSDC — the Guaranteed Income Supplement, $143 million. That relates to two changes. First, there has been an increase in the number of recipients by about 13,000. That accounts for about $68 million of that increase. An additional $74 million relates to a small increase to the amount of the actual benefit. I believe it is $3.60 on the average payment.
Next up we have a change in the forecast related to Canada Disability Savings Grants. They have extended the provisions of that program to allow recipients to go further back in terms of making their claims. There is a retroactive piece now that effectively makes it more open and will result in more payments; $115 million is the estimate.
The last one for HRSDC is Old Age Security, an increase of $105 million. There are two reasons for that increase. The number of recipients has gone up by about 6,000 over what was forecast. That is worth about $5.1 million. There is also an increase in the entitlement itself or the average payment.
The final thing that more than offsets all of these increases is a revised forecast for the interest on unmatured debt. Interest rates, as you know, have stayed fairly low, so the Department of Finance has changed its forecast for unmatured debt. That one more than offsets these others. That is why, when you go back to the first page, you see a negative adjustment of about 0.1 on the statutory front.
Slide 8 contains the horizontal items I mentioned earlier. Again, these are cases where we have multiple departments. In the estimates document, you will see the amounts received through all supply periods, (A), (B) and (C), to put this all together. I have already spoken about the Copenhagen Accord.
The second item on this list is the international crisis response, $60 million. That is money largely used by CIDA, but it is for DFAIT as well. It is an interesting one because we used to hold that money in the fiscal framework. This meant that if there was an emergency, such as an earthquake or food crisis, and CIDA decided they needed access to that money, they had to come through a process to get their hands on it. The whole idea here is quick funding to get out into the emergency situation. We have decided to put $60 million into CIDA's hands up front, into their reference levels. If there is a crisis they can get at it more quickly to spend the money. That is money we would have held in the fiscal framework before, and we are just streamlining the process to let CIDA get at the money more quickly if they happen to need it. This response was used for Haiti, as well as a few food crises in the past.
The next item is Centres of Excellence for Commercialization and Research, $29 million. You may recall this from a previous supplementary estimates. We had the funding to do the administration part of this program. This funding is actually for the grant awards. Three organizations are receiving this money: the Canadian Institutes of Health Research, NSERC and the Social Sciences and Humanitarian Research Council. This is for the grant awards going out. They were awarded back in November. If you are curious about which organizations are receiving that money, we are happy to take questions on that as we go through.
The fourth item on this list is the modernization of pay administration, $26 million. That is a Public Works and Government Services Canada project. It is the pay administration for the government. You may have heard of this project, which is in Miramichi where they are relocating our centre of expertise for payroll. It is a horizontal item because it is Public Works as well as Shared Services Canada, the new department that is doing email, data servers, et cetera. Both are getting money there.
Next is $22 million for food-borne illness prevention and response related to listeriosis — the Canadian Food Inspection Agency, Public Health Agency as well as Health Canada.
Next, we have streamlining import regulations and border processes for $9 million. CBSA, our border services organization, Health Canada, the Canada Food Inspection Agency and Natural Resources Canada are getting money under that one.
Rouge National Urban Park, a new park near Toronto, is under Transport Canada and Parks Canada. There is just early activity for $3 million.
Government advertising programs is another horizontal item. In these Supplementary Estimates (C), $1 million is requested for the Canada Revenue Agency related to advertising around new tax rules. It is not uncommon at this time of year to have advertising related to tax returns or tax credits, et cetera.
There is a small item of $74,000 for the sharing of immigration information with the United States.
I will now move to slide 9.
[Translation]
In terms of the 2012 budget cuts, you will remember that the 2012-2013 Main Estimates were produced before Budget 2012 since it was not possible to include the budget cuts in the Main Estimates afterwards. We are using the 2012 budget cuts to offset new supply requests.
[English]
You may recall that under Budget 2012 there were reductions to departments. The Main Estimates had already been tabled in Parliament when that budget was produced, so departments effectively had money in their reference levels. Then a budget came along with some reductions. How we account for that is that when departments come looking for new money, the first thing we do is reduce that request for new money by anything already in the system. If you go through the estimates department by department, you will often see the wording "funds available due to savings as part of Budget 2012 spending review." For instance, if a department came in with a new request for $10 million but we had reduced them by $2 million because of a budget 2012 saving reduction, we would give them only $8 million because they already have $2 million in their reference levels. If they do not come in with anything new, we freeze their funds centrally in the background and they do not spend that money. If they come in for new money and a reduction has been in place, we offset the two. I wanted to flag that for you if you see that wording.
As I mentioned, Supplementary Estimates (B) is our biggest supplementary estimates. You would have seen $483 million in offsets related to Budget 2012 in Supplementary Estimates (B). Supplementary Estimates (C) is smaller — only 40 some departments are there — and $58 million in funds has been reduced in Supplementary Estimates (C) to offset those requirements.
Slide 10 is the last one and shows $1.5 billion in budgetary voted expenditures, offset by a 0.1 reduction in the statutory forecast.
There are 49 departments and agencies in this document. You may be wondering why they are not all here. Departments only come in for supplementary estimates if they are looking for new spending authorities. If they are not looking for anything new, they do not need to come to this document; so there are only 49.
A final reminder: The appropriation bill is what is actually voted on, so you should spend time looking at it.
For questions specific to something in the supplementary estimates, if you could give us the page number, it would help us greatly in answering your questions.
The Deputy Chair: Thank you, Mr. Matthews.
Ms. Thornton or Ms. Santiago, do you have anything to add to start us off?
Sally Thornton, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: No thank you.
The Deputy Chair: Do you have any recommendations in terms of how we could introduce the next part of questions and following some form of consolidating everything you said?
Mr. Matthews: The only other reminder is that there have been discussions about what estimates are good for and not good for. First, these represent cash requirements. They are based on cash that departments plan to spend. They represent amounts that have been approved through a previous budget and have been approved centrally through Treasury Board. This is basically the stuff that has been through the internal process and departments are now ready to spend the money. If they have not been through that process, they do not come through to Supplementary Estimates (C).
It is not abnormal to see supplementary estimates. It is basically a timing issue. Departments get money in the budget; but sometimes it takes two or three years before they are ready to spend the money. When they are finally ready to spend, they come through either main or supplementary estimates. If you are new to the supplementary estimates process, normally there are three of them each year. I do suggest that you focus on the bigger items. We are happy to take your questions.
Senator Callbeck: On page 32, under "Agriculture and Agri-Food" there is a transfer out of the Canadian Food Inspection Agency in the amount of about $2.9 million. It says:
For the development of a Traceability information sharing solution to enhance the ability of conducting rapid, accurate and efficient investigations on animal health incidents. . . .
The agency is losing the money that was to be used for this purpose. Certainly, we have had a lot of problems with beef plants in the past. What was this money earmarked to do?
Mr. Matthews: This money — and I will let Ms. Thornton add remarks at the end — is still being used for the same purpose, if I recall correctly. This is one of those items delivered jointly by the Canadian Food Inspection Agency and Agriculture and Agri-Food Canada. Some pieces of this program are being delivered by Agriculture and Agri-Food Canada and some by the Canadian Food Inspection Agency. All the money went to the CFIA, so when they are resourcing Agriculture Canada to do their part of the same project, it shows up as a transfer.
The other option would have been to give each department a piece of the pie, and it would have shown up as a horizontal item. It is not being diverted for another purpose; it is just that two departments are working on this. The money all sits in the CFIA's reference levels, and they transfer it out to Agriculture and Agri-Food Canada as needed.
Ms. Thornton, is there anything you wish to add?
Ms. Thornton: This is common with certain organizations, in particular Agriculture which works closely with a number of partners. Both organizations have a mandate to deliver, but one is more effective in certain areas. In this traceability initiative, the CFIA usually does most of the delivery. The monies originally go to AAFC and are transferred. In this instance, some of those funds are unused and are being returned from the CFIA to AAFC. The objectives were met exactly pursuant to the mandate. They have done the work and are returning the balance that was outstanding.
Senator Callbeck: That is fine.
At page 35 is ACOA, which I am interested in, being from the Maritimes. There is a program whereby monies come from Foreign Affairs to support the North American Platform Partnership. Will you explain what that is?
Mr. Matthews: I am trying to recall, but I believe the program relates to work that DFAIT is doing to promote Canadian investment abroad. I will turn to Ms. Thornton to see if there is anything she wants to add.
Ms. Thornton: It is that. Each of the regional development agencies transfers some funds annually to DFAIT for the administration of the North American Platform Partnership, which is a coordinated initiative to strengthen trade and investment links with the U.S. and Mexico. In this instance, some money is being transferred back at the end of the year to ACOA and DFAIT.
Senator Callbeck: The extra money being transferred into those programs —Business Development Program, Atlantic Innovation Fund and Innovation Communities Fund — would be distributed among the provinces according to the formula. Is that right?
Mr. Matthews: That money would go back into ACOA's reference levels to use as they see fit. They would have a way to allocate across the provinces.
Senator Callbeck: On page 37, you said that the $1 million for Canada Revenue Agency is for advertising.
Mr. Matthews: That is right.
Senator Callbeck: It looks as though there is $1.4 million, "Less: Spending authorities available with the Vote" of $1.4 million.
Mr. Matthews: Right. Earlier I said $1 million, but it is $1.4 million for advertising; thank you for catching that. This is one of those offsets I spoke about earlier. The Canada Revenue Agency has said that they would like to spend $1.4 million on advertising. We know that as a result of previous initiatives they already have money for that, but that money had been frozen, so effectively we net the two off.
Yes, they have a new item they want to pursue and there is money available from a different purpose. In this case the money is available because they reduced the money they had set aside for a different advertising campaign. We had frozen that internally so that they could not spend it. Now that they want to spend some new funds, we decided to net the two off, so they do not need any new money. For transparency purposes we show it as new money less money we are offsetting.
Senator Callbeck: Can you tell us the total amount that the government spends on advertising across all departments in a year?
Mr. Matthews: It is a complicated process. If we go to horizontal items —
Senator Callbeck: I do not mean just Supplementary Estimates (C).
Mr. Matthews: We will give you the whole picture.
Senator Callbeck: Maybe you would rather send that.
Mr. Matthews: If you refer to page 17 in both the English and the French versions you will see funding related to government advertising programs. This is how we present all horizontal items. We give you the complete picture for (A), (B), and (C). You will see here a list of what was funded through Supplementary Estimates (A), 51, and you get the breakdown by department there.
In Supplementary Estimates (B) we had additional money for Canadian Heritage, which if I recall correctly was the War of 1812, and then Natural Resources for 4,000; and now in Supplementary Estimates (C) we see 1.4, so we end up with $56.6 million through the supplementary estimates.
There is some additional reporting done on the Treasury Board Secretariat website about funding from the advertising fund.
I will ask Ms. Thornton to add to that.
Ms. Thornton: There are two ways for organizations to fund advertising. The first is through the government advertising plan, which is reviewed by cabinet, and that is what is reflected here in the supplementary estimates. You see the total allocations over the year. Roughly $65 million a year is put aside and allocated throughout the season after cabinet and board approvals.
Departments can, however, also do some advertising within their mandate and within their budget that goes through a separate process. Public Works does an annual report on all advertising. It encompasses both the formal government advertising plan, the pieces of which you have seen, and much lesser amounts from individual organizations that do bits and pieces. That is reported annually in the Public Works communications and advertising report.
Senator De Bané: How much is it?
Ms. Thornton: The allowable budget for the government advertising plan is about $65 million a year. This year it is $56 million.
Senator De Bané: What page is that?
Ms. Thornton: Page 17.
Senator De Bané: I see $56 million.
Ms. Thornton: Yes. What has been spent or is being approved by Parliament is $56.6 million this year.
Senator De Bané: Why did you say 65?
Ms. Thornton: That is the overall amount that is allocated for the year. It has not actually been drawn down.
Mr. Matthews: The 65 would only come into play if something were to happen in excess of that. We come to Parliament for what departments would like, and 56.6 is the number. Internally, roughly 65 is set aside as a threshold.
Senator De Bané: Is the number 65 published somewhere?
Ms. Thornton: It is well known. I am not sure where it is published. What is approved, though, is 56.6.
Senator Callbeck: Vote 1 at the bottom of page 48 gives a couple of figures and says:
. . . provide a source of funds for the establishment of the Business Transformation and Renewal Secretariat of the Privy Council ($68,000).
What exactly is that being set up in the Privy Council?
Mr. Matthews: That is an initiative from the Privy Council, and I think you would have first seen that in Supplementary Estimates (B). They are looking at ways of restructuring delivery of government services with more efficiency and effectiveness. If I recall correctly, all significant departments contributed to that initiative, so there was no new funding required for it. It was funded by taking money from all the other departments.
We will have to wait and see what the results of the work of that group are, but it is housed within the Privy Council Office and they are looking at things like how government delivers services, et cetera.
Senator Callbeck: On page 56 there are some transfers that I am trying to figure out. The bottom part of page 56 is transfers. In vote 1, $100,000 is taken out and then it is put back in. The same happens in the next one; 25 is taken out and then put back in. For the small craft harbours, 8 is taken out and then put back in, and so on. Why is that?
Mr. Matthews: This comes back to how Parliament votes money. Vote 1 is typically operating money, and they also have a vote for capital and a vote for grants and contributions. Parliament controls government spending by votes. If a department wants to move money from one vote to another, from operating or grants and contributions or vice versa, they need Parliament's approval. Here the department is saying that it would like to transfer money from one of its votes to another one of its votes, and it needs to go to Parliament to get the votes changed to do that.
It is no different than moving money from one department to another, but in this case, Fisheries and Oceans is moving it from one of their votes to another vote. It shows up as an in and an out.
In the case of the one hundred you mentioned, they are taking money out of operating and moving it into a contribution payment.
Senator Callbeck: I understand that.
[Translation]
Senator Bellemare: Mr. Matthews, could you explain the amount that is listed under Human Resources and Skills Development. I am talking about the $281.1 million that is being added because the government spent more than $2.9 billion on Canada's Economic Action Plan in 2009.
Is the $281 million an accounting entry? I think it is on page 10 in the French version, under the section "Fonds pour l'amélioration des prestations de l'assurance-emploi conformément à la Loi d'exécution du budget de 2009."
It is right at the beginning. Is it on page 10 in the English version too? Yes.
Is the $281.1 million an accounting entry? The money is being requested now, but the money has actually already been spent.
Mr. Matthews: Thank you for your question. Actually, it is the same thing I mentioned on page 7 in my presentation. In the 2009 budget, the amount of money that was transferred was sufficient to cover all the costs.
[English]
That program was to enhance Employment Insurance benefits, and you do not find out until several years after the accounting is done how much money the fund actually recovered. You are right in the sense that the EI account had probably already spent that money. In this case, HRSDC is reimbursing the EI account for the money spent.
Senator Bellemare: This is what I wanted to know.
Mr. Matthews: Remember that the EI account is kept separate.
Senator Bellemare: So it is a transfer.
Mr. Matthews: Yes.
[Translation]
Senator Bellemare: My second question has to do with the interest fees on unmatured debt. The last item on page 11 indicates that there is a return of $762 million, which is explained by the fact that the interest rates were lower than anticipated.
Are those interest rates for the real debt, the direct debt, or the retirement plans? Do you know how the interest rates are applied?
[English]
Mr. Matthews: It is a mix of the two. When we think about the interest on public debt, it is all interest on real debt as well as on our pension plan liabilities, health care liabilities, et cetera. When Finance updates their forecast through the year, it is typically not related to pension plans. It is usually related to changes in the long-term interest rate, related to what we can call real debt or third-party debt. I cannot say with certainty. The interest charges are on all debt, but typically when they are updating through the year it is more on the outstanding debt with third parties.
[Translation]
Senator Bellemare: In terms of the retirement plans, are we talking about accounting entries or is there a real transfer of money? Is there a real fund for employees' retirement plans or is it just an account, once again?
[English]
Mr. Matthews: It is both. I forget the year we did the switch, but it used to be a paper-based account within the government. They have effectively kept the money, but there was an accounting of the liability. If you went to the Public Accounts of Canada, you would see always what the liability was.
Several years back, the government actually started moving money outside into a separate fund to build up that fund for future retirement. When you see the pension plan liability right now, it is the liability, but it is funded by a fund held outside the government. A separate set of financial statements issued each year by that pension plan actually shows their investments and the return on investment and all those things.
When you think about the pension plan liability, it is the liability, period. Some of it has been covered off by a gradual shift to fund money outside the government into a separate plan. That has been a gradual switch. I am guessing we made that switch in about 2006, but I am not certain.
[Translation]
Senator Bellemare: Does this amount of $762 million cover all the commitments made in terms of retirement plans and the debt? It does not only apply to the retirement plans managed independently?
[English]
Mr. Matthews: That covers all debt, but remember that Finance is forecasting a decrease, so they are not actually asking for money here. They are indicating that the interest on the cost is less than they had originally forecast.
I thought I had numbers for the pension plan liabilities, and if it comes to me, I will get back to you.
Senator Runciman: My question is related to issues raised in the slides. With respect to the $725 million to National Defence for the class action lawsuit, you said that these are monies that have been approved, cash that will flow. The decision has been made. It also says that negotiations continue with respect to settlement. I am wondering if a decision has been made, but at the same time there are still negotiations with respect to the final settlement. How does that come out in the wash?
Mr. Matthews: Thank you for the question.
The agreement reached was actually related to the eligible members themselves. There are still, to my knowledge, some negotiations going on around costs, legal costs in particular. The decision has been reached about how much money individuals are owed. Manulife Financial, if I recall, started flowing that money quite some time ago. This money is to effectively top them back up because they started flowing the money to recipients several months back. The negotiations you are referring to are around costs, particularly legal costs, is what I have heard.
Senator McInnis: I think I read that the legal costs were $66 million. Is that reasonable?
Mr. Matthews: I cannot comment on the reasonableness of the costs themselves. The money here is to reimburse Manulife for what they have paid to recipients.
Senator McInnis: They have not made any commitment for legal costs?
Mr. Matthews: That does not cover off legal costs. They are still being negotiated, as far as I know. The Department of Justice might be better placed to answer that.
Senator Runciman: Some of these may be better placed in terms of asking the agencies.
With regard to the CIDA funds for the Copenhagen Accord commitment, do you have any examples of specific projects and what kinds of checks are in place to ensure that, first, the money is spent in the right way, in the way it was intended, and second, it has some impact on climate change, which is the end goal here?
Mr. Matthews: Sure. I will start with background.
CIDA does a risk assessment on all of the organizations it gives money to in terms of what the history has been. They will set up their arrangement, whether it is a grant or contribution agreement, based on their history with that organization. The logic is that you have a higher level of trust and experience with the recipient, so you are willing to put a more flexible arrangement in place.
In this case, the money CIDA is looking to spend is $16.5 million is going to the UN Development Programme. That money is targeted for Sudan, Haiti, Mali, Niger and Cambodia. There is a $3.2 million grant to the Canadian partnership fund going to Burkina Faso, as well as Mali, and that is the big part of CIDA money.
Environment Canada is also making $21 million worth of contributions to UN programs as well as the World Meteorological Organization and the UN centre for sustainable economies.
Senator Runciman: Is there some bigger picture assessment of impacts on climate change, whether this money is actually having a meaningful impact?
Mr. Matthews: Where you would find this, and I cannot speak in any specifics here, but when the program is over you would see an evaluation done on what the effects have been. All programs have to have performance metrics put in place. Climate change is a tough one to do because it is such a long-term thing, but there would be an evaluation done when the program is over.
Senator Runciman: With the student loan issue, which you knew was going to be raised, we talked about risk assessments. It may that Human Resources is getting into these details, but I saw a quotation that all reasonable efforts to collect have been exhausted. Do you have any idea what that means?
Mr. Matthews: Yes. I will give you some metrics first.
Roughly $14 billion, as I mentioned, are in accounts receivable. They issued $2 billion a year in new loans to roughly 400,000 students. The Canada Revenue Agency is now in charge of collecting, so we can offset student loans against tax refunds, anything that flows through there. Since we have made that shift we have seen a significant improvement in the collection because they can do things that collection agencies cannot do.
Senator Runciman: When did that take place?
Mr. Matthews: In 2003. The default rate has roughly halved over recent years. The estimate is that CRA probably collects an additional $200 million over what we would have received in the past because of its ability to do offsets.
Senator Runciman: That is like 30 per cent down to where we are today, 13 per cent. I did see that number.
I saw a Global News story, but I am perplexed by it when they are talking about this issue. The department previously said that more than 98 per cent of the loans written off by the government are dropped because of the expiry of a six-year limitation period — I guess that is the statute of limitations — between when the borrower last acknowledged a loan and any legal activity by the Crown to recoup that debt. This left me puzzled — and maybe it was just the way it is worded — but there is an implication that there has not been any pursuit over that six-year period. I guess that is incorrect. That is what you are telling me.
Mr. Matthews: That does not sound exactly right, but I will ask Ms. Thornton to answer.
Ms. Thornton: The CRA does try to avoid the clock ticking, because from the last date of communications with that individual, there is a six-year statute of limitations. They will try to set off against any other HRSD program, against income tax, and refer those to the Receiver General for Canada for legal action if there is a cost benefit there. They make those efforts, and it is only after all of that is exhausted and there is no further communication that the clock starts ticking for that six years. The six-year statute of limitations is pursuant to the debt write-off regulations.
Senator Runciman: You mentioned that you can pursue this later, but only if there is an acknowledgment by the individual.
Ms. Thornton: That is if they come back in the system. This is written off the books for accounting purposes, but if those individuals come back in the system, either through income tax or through another HRSD program, it can be claimed.
Senator Black: Thank you to the three of you for the excellent work that you have done, not only up to today but preparing for today. I have five questions to ask you, sort of wandering around a bit.
Can we start on the Centres of Excellence for Commercialization and Research? That was in the document that was circulated under "Horizontal Items." That is on page 8.
Mr. Matthews: It is page 8 of the slide presentation.
Senator Black: You mentioned that covers NSERC, the social sciences program, and there was a third.
Ms. Thornton: The Canadian Institutes of Health Research.
Mr. Matthews: That is correct. The breakdown is $14.2 million for the Canadian Institutes of Health Research; $7.7 million for NSERC; and $6.9 million for social sciences. Ms. Thornton can give you further details on who is getting the money, if that is useful to you.
Senator Black: It would be interesting, but if you would rather do it subsequently, that is fine.
Ms. Thornton: It is specifically the organizations that have received awards this year, and there are four of them. One is the Prostate Centre's Translational Research Initiative for Accelerated Discovery and Development. They are in Vancouver. MaRS Innovation does therapeutics, medical devices and diagnostic imaging in Toronto. Then there is the Centre for Probe Development and Commercialization, more medical devices, in Hamilton. The final one is the Centre for Drug Research and Development in Vancouver.
Senator Black: That was under the health program. How about under NSERC? Do you have that information?
Ms. Thornton: It is actually under the combination.
Senator Black: That $29 million went to those four organizations.
Ms. Thornton: Yes.
Senator Black: On the same page is mention of the food-borne illness response. I thought the listeriosis issue was two or three years ago, and I am wondering why there is still $23 million there.
Mr. Matthews: There are a couple of pieces here. The Canadian Food Inspection Agency is the biggest piece. That includes 70 inspectors for listeriosis testing around ready-to-eat meat products, as well as training for inspectors and keeping up a government web portal on warnings and things like that.
Health Canada's piece is around ongoing risk assessments and improving detection. The public health agency piece is around coordination with other jurisdictions as well as a government response plan in case there is another crisis likes the previous one.
Ms. Thornton: It is now into awareness, prevention and investigations, and that will be ongoing.
Senator Black: My question was motivated by whether there was something related to that incident, and you are saying this is carried forward for prevention exercises.
Ms. Thornton: Yes, to make sure it does not happen again.
Senator Black: I am now looking at Supplementary Estimates (C) on page 38 of the English version. For the Canada Council for the Arts, are total budgetary expenditures of $181 million an increase or a decrease from last year?
Mr. Matthews: That is tough for me to say. Perhaps Ms. Thornton could look that up in the public accounts and we could get the authorities for the previous year. We can get back before the meeting is over.
Senator Black: That is fine.
Mr. Matthews: We would rather deal with it tonight.
Senator Black: In respect of the Canadian Broadcasting Corporation, I see that total budgetary expenditures are just over $1 billion. You have broken it into three categories. With respect to the payments to CBC for operating expenditures, have you greater details than that? That is $1 billion.
Mr. Matthews: For that, you would go to CBC's annual report. Every Crown corporation issues an annual report, and that would give you additional details on their operating expenses.
If I recall correctly, that is not for specific items for CBC's operation. That effectively goes to the pot. They have additional revenues and other operating expenses, and the two together fund CBC's operating expenses. It would be mixed in, but you will get a sense of the breakdown of CBC's operating expenses.
Senator Black: You believe that could be found in the annual report.
Mr. Matthews: If you go to the annual report of CBC, you will see a breakdown.
Senator Black: Is it the same situation for capital expenditures for CBC?
Mr. Matthews: It is the same situation, but I believe — I am going from memory here — that there was some dedicated capital around broadcasting towers that they had to upgrade. There was some money dedicated to that.
Senator Black: That is helpful.
My last question relates to Foreign Affairs and International Trade. You are suggesting that the costs that will go into Canada House will be offset by the sale of Macdonald House. Do you know whether the Macdonald House is contracted for sale now?
Mr. Matthews: I do not believe Macdonald House has been sold yet; I believe it is in process. Based on the valuations they have done, the money they will raise from that sale will offset the cost of acquiring the additional property as well as any renovations or modifications.
Senator Black: Therefore, it will be greater than $107 million.
Mr. Matthews: Correct. This was a bridge financing event.
Senator Black: That was helpful.
Mr. Matthews: Ms. Thornton found the answer to your other question.
Ms. Thornton: On the Canada Council, their Main Estimates were slightly higher than previous years, and the figure is $181.76 million.
Senator Black: Is it basically the same?
Ms. Thornton: Yes.
[Translation]
Senator Chaput: On page 111 of the French version, under Human Resources and Skills Development, I have some questions about the unrecoverable Canada student loans in particular. When I look at the statutory appropriations, I see that the fifth point deals with an increase of the Canada student grant payments due to higher than anticipated demand. Do you know how many of those Canada student grants are awarded and what percentage is awarded to foreign students?
[English]
Mr. Matthews: I am afraid I do not think I can answer that question. I am sorry; that may be a better question for the department itself. We can undertake that.
Senator Chaput: Could you send us the information?
Mr. Matthews: Yes.
Senator Chaput: Thank you.
[Translation]
Senator Chaput: On the other hand, we are looking at an increase of interest payments mainly due to interest payments to financial institutions being higher than previously anticipated. Financial institutions have charged higher interest rates than anticipated, despite the fact that the rates are going down not up? I am looking at item 11.
[English]
Mr. Matthews: That relates to existing contracts in place with the financial institutions. Effectively, the department gives their best estimate of the take-up, but it is an existing contract.
Senator Chaput: Those contracts are there for a number of years, so you have to pay whatever is in the contract.
Mr. Matthews: They do their best to estimate the statutory item, and then we have an update here.
[Translation]
Senator Chaput: Point 13 deals with the provinces and reads as follows: "decrease of the payments related to . . . financial arrangements . . . mainly due to a decrease of administrative fees paid to participating provinces and territories."
[English]
Could you explain what that means?
Mr. Matthews: On that one, again, we will have to get back to you, unless Ms. Thornton knows.
Ms. Thornton: In this instance, it is a decrease of $4.3 million in administrative costs due to decreased administrative fees paid to participating provinces and territories for fluctuations in the calculation as well as increased service bureau costs for newly negotiated rates.
Senator Chaput: How many provinces and territories are in this?
Ms. Thornton: Canada Student Loans go to all provinces.
Senator Chaput: Yes.
Ms. Thornton: I may have an answer to your earlier question about the increase. It does not answer the question about foreign students, but it does look like it is due to the anticipated increase in the number of students in need of financial assistance. It has been estimated by the Chief Actuary based on the current year expenditure trend. It would not necessarily break down for you.
Senator Chaput: Can you get the information for us?
Ms. Thornton: Yes.
Mr. Matthews: An actuarial evaluation of that program is done every three years, if I recall correctly. They try to forecast take-up as well as default rates. We will get back to you on the foreign students.
Senator Chaput: Thank you.
Senator De Bané: I have a supplementary question regarding scholarships for foreign students from Third World countries. I assume those funds will be in the budget of CIDA and not the Department of Human Resources. It comes out of the funds allocated to a poor country, and there is a certain amount of that budget allocated to send students from there to university here, or is it in development?
Marcia Santiago, Senior Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: I am fairly sure that you are right, that the funding for foreign students is normally paid through a CIDA grant. I am going on the basis of what I have been allowed to borrow myself through the Canada Student Loan Program. I believe the HRSDC programs are normally offered only to Canadian citizens or residents and that foreign students are funded through a different mechanism. We would have to get the department to confirm that.
Ms. Thornton: That is consistent with other information I have about that 85 you were talking about. It really is to low- and middle-income families, low-income students and dependents and people with permanent disabilities, which is very likely domestic.
Senator Chaput: And it is Canada?
Ms. Thornton: Yes.
Senator McInnis: What is "fast start financing"?
Mr. Matthews: Fast start financing, if I recall correctly, is the program related to the Copenhagen Accord.
Senator McInnis: Yes it is.
Mr. Matthews: I believe it relates to countries that are of a Third World nature, so the most vulnerable countries. I will ask Ms. Thornton whether there is a definition of "fast start."
Is that just a name we gave it? Does "fast start" imply quick funding?
Ms. Thornton: As part of the Copenhagen Accord in 2009 the idea was to provide funding, which came through Budget 2010. It was for three years to get moving quickly on climate change adaptation activities for the poorest country, things they could bring in immediately; clean energy and some work on forests and agriculture to help promote more sustainable development, but it is a limited program.
Mr. Matthews: They wanted the money spent by March 31, 2013. The commitment was for three years of intensive spending. I assume that is why it was called "fast start."
The Deputy Chair: Mr. Matthews, on National Defence, can you give us a summary of the case of Manuge v. Canada?
Mr. Matthews: I can tell you a little bit.
Canadian Forces has an insurance plan called SISIP, the Service Income Security Insurance Plan. It provides long- term benefits for military members who are injured or discharged for medical reasons. There is a benefit piece as well as a vocational rehabilitation piece to prepare people to gain employment post military.
The other issue, which went side-by-side, is that Veterans Affairs had a program for disabled veterans as well. Some members were receiving payments under the Canadian Forces plan, and when they got a similar payment when they became a veteran, there was effectively a clawback. Once they started getting money from the veterans' disability plan, some of the money under the Canadian Forces plan was clawed back. Mr. Manuge launched a legal action, saying that it was not right to have that clawback. They were arguing against the clawback for the offset. A legal agreement was reached in January of this year to undo that clawback.
Ms. Thornton: If you picture the spectrum, an individual in the Canadian Forces has been injured and for various reasons can no longer be "universality of service" and will be forced to leave.
The Canadian Forces has a number of programs, including SISIP, this insurance program, that helps individuals while they are in the forces and for two years after so that when they leave the Canadian Forces they are not left with nothing. Veterans Affairs works very closely with the Canadian Forces, and the day an individual leaves the Canadian Forces they are effectively a veteran. Veterans Affairs has programs as well that help them from the day they leave, but there is an overlap.
There is also a need for greater continuity from when the individual is injured in the Canadian Forces through the process to Veterans Affairs. Some veterans programming reaches into the Canadian Forces and some Canadian Forces programing goes beyond the individual's actual stay in the Canadian Forces.
Here we had some programs that were similar in nature and overlapped. We initially did a netting. If an individual was in two programs that were very similar, the idea was that they would receive funding from one. The court disagreed. They felt that the programs were dissimilar enough that individuals should be entitled to both, and that is what the reimbursement is for.
There is an agreement in principle now. Some of the details are still being worked out. You saw it in Supplementary Estimates (B) for initial payments; you are seeing it here. Depending on how quickly the agreement in principle is reached, you may see this again in next year's supplementary estimates.
The Deputy Chair: What would the legal fees be?
Ms. Thornton: The Department of Justice would be in a better position to talk about that.
Senator McInnis: Not $66 million, I hope.
The Deputy Chair: Do you have a supplementary question on that?
Senator McInnis: No, that was fine.
Ms. Thornton: Were we more confusing than helpful?
Senator McInnis: No.
Now we are dealing with the Manuge case. The court has set the precedent and the government has concurred. Where is this likely to end up?
Ms. Thornton: The Manuge case is a class action suit, so we are not dealing only with that individual. That is one reason we do not have the final numbers yet.
Senator McInnis: I understand that, but this is a precedent. What about the RCMP; what about other groups? Are we likely to see more class actions with respect to this, ending up in huge settlement costs?
Ms. Thornton: It is unique in many ways because it is an individual who is in the Canadian Forces who then becomes eligible for Veterans Affairs benefits, because members become a veteran the day they leave the forces. That does not necessarily apply with the other organizations. You do not necessarily have the same continuum.
Senator McInnis: I am not so sure of that. However, I am not advocating it.
The Deputy Chair: Is there any contingency fee planning in a case like that?
Mr. Matthews: That is the nature of our appropriation system. Departments come to Parliament with their spending requests for the year, and they cannot overspend. However, when they are dealing with lawsuits they typically do not come forward until they know what the amount is.
Senator Callbeck: I want to go back to the total for government advertising. This figure is for Supplementary Estimates (A), (B) and (C). What is the figure for the Main Estimates plus the supplementaries?
Mr. Matthews: I am not aware of anything that was in the Main Estimates, but the overall notional total maximum is 65, and we have allocated roughly 56, if I recall correctly. The best place to look on an ongoing basis to find out what was spent is the Public Works advertising report. The allocations you see are from two departments for Supplementary Estimates (A), (B) and (C). I do not recall anything in the Main Estimates on advertising. It is done every year through the supplementary estimates; it is not included in Main Estimates.
Senator Callbeck: I will refer now to page 96. You mentioned the money for Afghanistan. We have been there for quite a while, including in a training role. You mentioned the army and the police.
Mr. Matthews: Yes.
Senator Callbeck: I am surprised to see this in Supplementary Estimates (C).
Mr. Matthews: It is the money that National Defence plans on spending around that program. This may supplement money they have already set aside. It is not necessarily a brand new piece. This is additional money they need for those two programs, both the Afghan National Army and the Afghan National Police.
Senator Callbeck: What is the total amount, then?
Mr. Matthews: For Canada in that NATO exercise? I am not certain. We will have to get back to you on that.
Senator De Bané: Mr. Matthews, if advertising is done by Public Works for the benefit of a particular department, do they bill the client department for the expense or is it shouldered by Public Works?
Mr. Matthews: No, to my knowledge, Public Works would bill the department. Public Works gets involved because they do the contracting and are in the best position to assemble the report. They would bill departments or departments would pay directly.
Senator De Bané: I have heard, but do not know whether it is accurate, that except for perhaps the Departments of Defence and Foreign Affairs, all the lawyers serving in the different departments are members of the Department of Justice. There is a rumor that the Department of Justice would like those lawyers serving different departments to eventually belong to the departments that they serve as legal advisers, with the cost of legal services in each department being borne by the individual departments and not by Justice. Is there any truth to that?
Mr. Matthews: There are two parts to that question.
Yes, even though the lawyers work in different departments, they belong to Justice. There are lawyers that work in the Treasury Board Secretariat, but they belong to the Department of Justice.
The Department of Justice bills for their services. They track how many hours are spent, and departments pay for that. That change was made a few years ago. Justice does a cost recovery for the value of the time put in. Legal services are important, but they are not free. Charging departments for them helps to manage the cost.
Senator De Bané: Thank you.
The Deputy Chair: There being no further questions from senators, Mr. Matthews, do you have any summary comments to make?
Mr. Matthews: I wish to thank you for the questions. It is clear that your committee was well prepared.
The Deputy Chair: Thank you very much.
(The committee adjourned.)