Proceedings of the Standing Senate Committee on National Finance
Issue 2 - Evidence
OTTAWA, Tuesday, November 23, 1999
The Standing Senate Committee on National Finance met this day at 9:33 a.m. to
examine the Supplementary Estimates (A) laid before Parliament for the fiscal
year ending March 31, 2000.
Senator Lowell Murray (Chairman) in the Chair.
The Chairman: Honourable senators, on November 17 last, the Senate referred to
us Supplementary Estimates (A) for the current fiscal year 1999-2000. You have
those before you. Our witnesses today are from the Treasury Board. These same
two witnesses have appeared before this committee many times. In particular, I
draw to your attention their appearance here on Thursday, May 6, 1999, under
the chairmanship of my distinguished predecessor Senator Stratton, when they
provided to the committee an outline of the entire financial process involving
the government and parliamentary authority -- Canada's appropriation process.
If you do not have a transcript of that meeting, especially if you are a new
member of the committee, you should obtain one and read it. It is an excellent
overview of where the government sits and where Parliament sits in this process.
Without further ado, I call on Mr. Neville to make a brief opening statement.
Mr. Richard Neville, Assistant Secretary and Assistant Comptroller General,
Treasury Board of Canada, Secretariat: Mr. Chairman, I am appearing before you
today to discuss the government's Supplementary Estimates (A) for the fiscal
year 1999-2000, which were introduced in Parliament on November 4, 1999.
From a fiscal planning perspective, these amounts are provided for within the
planned spending level for the year 1999-2000 as announced in the February 16,
1999 budget. Specifically, these Estimates seek Parliament's approval to spend
$3.9 billion on expenditures that were provided for in the February 1999 budget
but that were not specifically identified or sufficiently developed in time to
ask Parliament's approval in the 1999-2000 Main Estimates, such as additional
requirements to address the Y2K problem and to respond to the conflict in
These Estimates also provide information to Parliament about a net increase of
$171.1 million in changes to projected statutory spending from amounts forecast
in the Main Estimates that Parliament has already approved in legislation.
These items include, for example, a $182.3-million increase in fiscal
equalization payments to provinces.
As I have already mentioned, the total amounts set out in the Main Estimates as
well as in the Supplementary Estimates do not amount to more than the
expenditure levels provided for 1999-2000 and announced by the Finance Minister
in this February 16, 1999, budget.
Some of the more important items for which monies are required include, for
expenditures involving more than one organization, $544.7 million, shared
between 14 departments and agencies, relating to issues having to do with the
year 2000 computer problem.
These funds will serve the financial needs of departments and agencies having to
ensure that their systems are Y2K compliant, to monitor their state of
preparedness, to ensure central coordination of activities and the
establishment of emergency plans;
$485.7 million for 65 departments and agencies, so as to carry forward to
1999-2000 the amount necessary to fill certain operational needs that had
originally been slotted for 1998-99. The purpose of this measure, which is part
of the operational budget system, is to reduce year-end expenditures and to
improve accounts management. It will allow managers to carry forward from one
fiscal year to the next up to five percent of the preceding year's operational
budget. Operational budgets include salaries, operational expenditures and
secondary capital expenditures;
$482.5 million for six departments and agencies for the coordination of Canada's
activities relating to the conflict in Kosovo. Since the beginning of the
humanitarian crisis in Kosovo at the end of February 1998, Canada has
participated in the efforts of the international community in reaction to the
conflict. Given the rapid deterioration of the situation in March 1999, Canada
took an active part in the humanitarian response to the refugee crisis, both
diplomatically and militarily;
$199.4 million to the Secretariat of the Treasury Board of Canada for the
payment of wages in accordance with the collective agreements that have been
recently signed and the related pay adjustments. Collective bargaining resumed
at the beginning of 1997, and this amount will cover salary increases and
retroactive pay for 1999-2000;
$149.5 million to National Defence and Veterans Affairs in response to a series
of recommendations made by the Standing Committee on National Defence and
Veterans Affairs that carried out an in-depth study of issues relating to the
lives of Canadian Forces' members and of their families;
$123.4 million to 12 departments and agencies for the Youth Employment Strategy,
a pan-governmental initiative announced in February 1999 and aimed at creating
job opportunities for young Canadians. The strategy encompasses a number of
initiatives including summer jobs, international training courses in trade and
development or science and technology, training courses for young Inuit and
First Nations' people, as well as other programs aimed at young people;
$112.2 million to four departments and agencies for the Canadian Fisheries
Adjustment and Restructuring Plan, aimed at reducing the impact of the removal
of the Atlantic Ground Fish Strategy on the people and the communities of the
East Coast and at helping West Coast salmon fishermen;
$62.1 million for Health Canada -- $34.9 million -- and for the Medical Research
Council -- $27.2 million -- for priority initiatives in the area of health that
were announced in the federal government's February '99 budget, including the
establishment of the Canadian health infrastructure and the promotion of
health-related research and innovation.
Items affecting a single organization: $108 million for Human Resources
Development Canada to replace the transitional jobs fund with the Canada Jobs
Fund, as announced in the February 1999 budget, to reflect the federal
government's continuing commitment to address the problems of Canadians in
high-unemployment areas. The department will work in close partnership with
other levels of government, the private sector, regional development agencies,
and community organizations to stimulate employment.
For the Department of Foreign Affairs and International Trade, $84.1 million to
provide certain provinces with a share of the revenue collected from fees paid
by exporters of softwood lumber.
For the Department of Canadian Heritage, $70 million to enhance the Official
Languages Support programs by increasing direct support for the development of
minority communities and funding for federal-provincial agreements, mainly in
the area of minority and second-language education.
In terms of non-budgetary expenditures, $50 million is being allocated to the
Department of National Defence for a temporary increase to a working capital
advance account, to meet the department's pay requirements for personnel
deployed outside of Canada in the event that Year 2000 transition difficulties
necessitate cash payments.
The above items represent $2.5 billion of the $3.9 billion for which
parliamentary approval is sought. The remaining $1.4 billion is spread among a
number of other departments and agencies, the specific details of which are
included in the Supplementary Estimates.
Update to Parliament on forecast statutory expenditures: The statutory
adjustments included in the Supplementary Estimates (A) reflect a net increase
in forecast expenditures of approximately $171.1 million from the amount in the
1999-2000 Main Estimates.
The major statutory items to which there are changes in the projected spending
amounts are as follows: First, in terms of increases, there is an increase of
$179.5 million for Agriculture and Agri-Food Canada for payments to
agricultural producers under the various components of the Farm Income
Protection Act. The primary purpose of the program is to provide an agricultural
safety net by helping producers stabilize incomes and manage risks. Many of the
specific programs are delivered by the provinces or by provincial agencies or
There is an increase of $182.3 million for the Department of Finance for
equalization payments to the provinces. This increase reflects changes in the
forecasts upon which these payments are based, such as provincial tax bases,
population and tax revenues.
In the area of decreases, a $108.5 million reduction of the Canada Health and
Social Transfer for the Department of Finance. This decrease is due to a
corresponding increase in the fiscal component of the transfer, due to higher
than expected revenue from personal and corporate income tax. This transfer
ensures financial support for the funding of health needs, post-secondary
education, social assistance programs and social services.
A $79 million reduction in the Finance Department's alternative payments for
standing programs due to a higher recovery rate than that provided for in the
Main Estimates. This increase is attributable to higher individual incomes and
to other tax payments.
The above major items represent an overall increase of $174.3 million, which,
when offset by a decrease of $3.2 million spread among a number of other
organizations mentioned in these Supplementary Estimates, amounts to a net
increase of $171.1 million.
Mr. Chairman, that concludes my opening remarks. I would be pleased to answer
any questions you have pertaining to the Supplementary Estimates (A).
The Chairman: Mr. Neville, I believe I can speak for all members of the
committee in congratulating you on your new position as Deputy Comptroller
General of Canada. We extend our very best wishes to you in your new
responsibilities. We also thank you for your many appearances before this
committee and for the thoroughness and care with which you have replied to the
questions and concerns of members of the committee.
Senator Lynch-Staunton: I join with the chairman in wishing you well, Mr.
Neville, in your new responsibilities. You and your colleagues have always been
very helpful to this committee. I find it most instructive. I hope your
successor will be as open and helpful as you and your predecessors have been.
I have a number of questions. Perhaps I can list them all. Those that you can
answer now, I would appreciate your doing so; and those that need to wait for a
written answer, I will accept that.
My first question deals with an item on page 39, under the Department of
Canadian Heritage, the Publication Assistance Program of $47.3 million. Is that
amount related to Bill C-55 and part of a subsidy program arising from that
bill, or is it an additional amount for an existing program, which may also be
applicable to Bill C-55?
The second question I submit on behalf of Senator Carney, who has taken a
particular interest in lighthouses on the Pacific Coast. On page 60, under the
Department of Fisheries and Oceans, staffed light station restoration, British
Columbia, estimated total cost $16 million, estimated expenditures for the
current year, $5.450 million. I ask on behalf of Senator Carney in the hope that
it is as a result of her efforts that this amount is being requested.
My third question relates to page 105, which is a Department of Justice request
for $1 million for preparation costs for implementation of the Personal
Information Protection and Electronic Documents Act, $1 million. That
legislation is now before the Senate in the form of Bill C-6. I am wondering
how appropriate it is to ask for monies for the implementation of a piece of
legislation when that legislation has yet to be given Royal Assent.
My last question refers to page 126, the Department of Public Works. There is an
increase in the appropriations for the Old Port of Montreal in the amount of
$16,570,000. The original estimate was for $7,756,000. The increase is more
than double the original requirement. I am sure that more than one person would
wish to know the reason for this extraordinary increase in appropriation coming
under Supplementary Estimates (A).
Mr. Neville: I will start with the question dealing with the Department of
Canadian Heritage, which is referred to on page 39.
With respect to the Publication Assistance Program, as you are aware the federal
government has subsidized the postal distribution costs of Canadian periodicals
through a variety of arrangements for a number of years. We have had that
discussion previously. The Department of Canadian Heritage paid Canada Post
$47.3 million in 1998-99, an amount that allowed Canada Post to charge eligible
periodical publishers an average of 8 cents per issue as opposed to 35 cents per
In June 1997, the appellate body of the World Trade Organization, the WTO, ruled
that the Publications Assistance Program postal subsidy was not an allowable
subsidy, as payments were being made by one government body to another. For
example, Canadian Heritage was paying Canada Post Corporation, instead of
paying the periodical publishers directly.
In October 1997, Canada agreed to comply with the WTO ruling. To make the postal
subsidy WTO-compliant, changes to the subsidy program were approved effective
April 1, 1999.
Because the changes were major and ongoing, they could not be completed before
the 1999-2000 Main Estimates were tabled; therefore, Supplementary Estimates
were required. As payments are now being made to periodical publishers
directly, and not to Canada Post, a separate vote, Vote 10 in this instance, is
no longer required. The funds, $47.3 million, as you referenced, are to be paid
out of Canadian Heritage regular grants and contributions votes to eligible
periodical publishers. Hence, the transfer from Vote 10 to Vote 5a. I think
that clears that up.
Senator Lynch-Staunton: Yes, it does. Thank you.
Mr. Neville: Your second question, which refers to page 60, is in regard to the
Staffed Lightstation Restoration project for British Columbia.
The purpose of these funds is to maintain staff at 51 lighthouses that otherwise
would have been destaffed in the current and coming fiscal years. In all, 27
lighthouses will remain staffed in British Columbia, and 24 in Newfoundland.
These funds represent the second year of funding in support of staffed
lightstation operations. You will recall that we discussed this matter last
year. Of the $9.149 million approved for 1999-2000, $6.699 million is being
requested for operating costs through Supplementary Estimates (A). This item is
also being offset by approximately $1 million, for a total amount included in
the printed item additional costs of $5.76 million. There is a more detailed
Obviously, these expenditures were not planned at the time of the Estimates, but
it is still a requirement for the 1999-2000 year; hence, they form part of this
Supplementary Estimate request.
As to your third question, Bill C-54, which relates to the proposed Personal
Information Protection and Electronics Documents legislation, which is in the
House, proposes to extend the mandate of the Privacy Commissioner to all
federally regulated institutions -- banks, telecommunications companies, and
airlines. This proposed legislation will have significant resource implications
for the organization. In 1999-2000, the Office of the Privacy Commissioner is
undertaking a study to determine actual needs. That study, which will cost $1
million, will be funded by Industry Canada. This is the preparatory work for
putting in place legislation, if and when approved. This is the front end to
the actual full implementation. It is not presuming anything.
Senator Lynch-Staunton: What is slightly offensive is that it is written as if
the bill were already law. Bill C-54 died in the last session. It has been
revived as Bill C-6, which is now before the Senate and has yet to go before
committee. Its fate is still uncertain; yet, this proposal takes for granted
that the bill will be passed. I do not think that is quite the consideration
Mr. Neville: It is clear that what is before us is related to preparation costs,
not actual implementation costs. Its purpose is to get everything in place so
that the legislation could be presented with a substantial detailed action plan
as to how it should play itself out, should the proposed legislation be
approved. I stress that the expenditure is related to preparation costs, rather
than implementation costs, post-approval. However, I take the point.
Senator Lynch-Staunton: I will not belabour it, but the word "implementation"
does appear. However, I may raise this point in another forum.
Mr. Neville: The last item, which relates to page 126, is for increased support
to the Old Port of Montreal. It is a request for $16.57 million. These funds
relate mainly to the construction of the Montreal Interactive Science Centre,
the iSci Centre, as it is commonly referred to.
I will provide a little bit of background, for those who are not familiar with
the Old Port of Montreal. The Old Port of Montreal Corporation was created in
1981. It has a mandate to promote the development of the Old Port of Montreal
site. The corporation provides a wide range of maritime, cultural,
recreational, and commercial activities for the local population and tourists.
The corporation is a subsidy of the Canada Lands Company but is treated as a
parent company for planning and reporting purposes.
More specific to your request, the iSci Centre is intended to be a permanent
showcase for high technology in Canada. The purpose of the centre is to educate
the public by using the technology of local companies and agencies in order to
demonstrate the scientific and technological principles and methods in the
major economic sectors at the leading edge of Canadian achievement. The opening
is planned for May 2000. The work at the centre in preparation for 1999-2000 is
to be mainly completed during this fiscal year.
On a personal note, it is ironic to see fulfilment of these activities. Several
years ago, when I was with Public Works and Government Services Canada, on
behalf of the Old Port I had an opportunity to go to San Francisco to see their
science centre, which is a model, as you are aware. It is internationally known
and recognized as being one of the best ISCI centres worldwide. It was based on
that model that we worked out the modalities for the iSci Centre in Montreal.
It is interesting for me to see how this project has evolved. For all intents
and purposes, it is modelled on the San Francisco ISCI centre.
Senator Lynch-Staunton: Thank you for the explanation.
Surely, the project was known at the time of the original Estimates. Why would
it not have been included then?
Mr. Neville: It is probable that the detailed costs were not finalized and that
there were still some discussions between the Old Port and Public Works and
Government Services as to what would be required during this fiscal year.
Senator Lynch-Staunton: Is this solely a federal project? Do your notes say
whether there is any private-sector participation in this?
Mr. Neville: My notes do not state that specifically.
Senator Lynch-Staunton: Is there any further information in your notes?
Mr. Neville: I read every word.
Senator Lynch-Staunton: I have a particular interest, since I am from that area.
Mr. Neville: I have a personal interest, too.
Senator Lynch-Staunton: So I gather. It must be a good project.
Senator Stratton: Welcome, gentlemen. It is good to see you. I would like to go
to page 56, if I may. My area of concern relates to a small item but,
nevertheless, one that bothers me. I am sure that there is a clear explanation.
It relates to a payment to the European Bank for Reconstruction and Development
for supplementary subscription of shares. I know that it is a statutory item.
The amount in question is $4.270 million.
Two years ago, you told us that we had to contribute $20 million, or whatever it
was, and that that was going to be the end of it. Are things not going too well
there? Is this an ongoing item that we will be continually addressing, in your
Mr. Neville: I remember the discussion. I do not recall saying that it would be
the last call.
Senator Stratton: Mr. Neville, you did not say that. I heard, when I was over in
London, that this would be the final contribution that would be required. I
apologize for accusing you.
Mr. Neville: We are talking about the payment of $4,270,000 to the European Bank
for Reconstruction and Development. This represents the encashment of two
demand notes, each in the amount of $2.135 million. One note was issued in
1998-99, and the other in 1999-00. The issuance and encashment of these notes
was agreed to by Canada, in November 1996, as part of the first increase of the
capital stock of the European Bank for Reconstruction and Development. This was
authorized in June 1991 by the passage of Bill C-71, the budget omnibus bill.
These payments increase Canada's sharehold in the capital stock of the EBRD,
which provides direct loans that are designed to facilitate the development of
market-oriented economies and to promote private entrepreneurial initiatives.
The charter of the EBRD mandates that at least 60 per cent of its loans must
contribute to privatization of state-owned enterprises. The remaining 40 per
cent may fund public infrastructure or environmental projects that promote
private-sector development as well as state-owned enterprises that operate in a
competitive fashion. The EBRD was established in May 1990 and began financing
operations in June 1991. Hence, this expenditure relates to the encashment of
two demand notes that we had previously provided to the bank, as per earlier
Senator Stratton: I understand that. The European Bank for Reconstruction and
Development does excellent work. It would appear that we will be contributing
to the bank on an annual basis. Will anyone go to Europe for a meeting at the
European Bank to confirm these activities?
Mr. Neville: Are you inviting us?
Senator Stratton: No, I am referring to one of the senators.
My second question relates to pages 62 and 63, in reference to Foreign Affairs
and International Trade. We have debt write-offs of $45 million to Zambia,
Congo, Tanzania, Madagascar, Cameroon and Rwanda. Is this a continuation of the
clean-up of previous items that we talked about?
Mr. Neville: Yes, it is. Let me give you more information. This item deals with
the forgiveness of debt, specifically, Can. $45 million, or, using a conversion
factor of 1.5, U.S. $30 million, for loans to the governments of Congo,
Madagascar, Tanzania, Zambia, Cameroon and Rwanda.
The breakout of this debt, in Canadian dollars, is as follows: the Republic of
Zambia, $900,000; the Republic of Congo, $600,000; the United Republic of
Tanzania, $26.850 million; the Republic of Madagascar, $11.250 million; the
Republic of Cameroon, $900,000; and the Republic of Rwanda, $4.5 million. The
total debt is Can. $45 million.
The original loans were provided through the Canada Account program of the
Export Development Corporation to support Canadian exports and are thus
recorded as assets in the Public Accounts of Canada. The following provides
details of these transactions, in Canadian dollars. In 1974, the amount of the
original loan to Zambia was $27.8 million, mainly for aircraft sales; in 1984,
the loan to Congo was $3.45 million, primarily for locomotive sales; in 1978,
the loan to Tanzania was for $28 million, mainly for aircraft sales and
support; in 1982, Madagascar received $24.3 million for the construction of a
urea plant; in 1987, $12.7 million to Cameroon, primarily for the construction
of schools; and the loan to Rwanda, as previously rescheduled.
The Paris Club is an informal organization of creditor governments that meets to
reschedule and regularize the sovereign debt of debtor countries. Over the past
10 years, the Paris Club has developed a debt strategy for the most heavily
indebted, poorer developing countries. Debt relief for these countries can be
provided either through a reduction of the outstanding debt -- in other words,
forgiveness -- or a reduction in the interest rate charged during the repayment
period. In either case, the two options are structured to be equivalent in net
present value terms.
In concert with other creditors of the Paris Club, Canada opted to provide
relief to these developing countries through the debt reduction option. The
forgiveness of these outstanding obligations completes the implementation of
Canada's agreement at the Paris Club to provide multilateral debt relief. The
Paris Club agreements were negotiated with the debtor countries between 1996 and
Parliament approved a similar forgiveness in the 1994-95 Supplementary Estimates
with regard to the $60 million debt of Tanzania, Zambia and Poland, to
implement previous Paris Club rescheduling. That forgiveness had no fiscal
impact, as the expenditure was recognized in 1990 when an allowance for general
contingencies was set aside for this purpose. The forgiveness of certain loans
to Latin American and developing countries in the Supplementary Estimates (C),
1998-99 was in response to the Latin American debt initiative launched at the
Rio Summit on the Environment. That debt was related to development assistance
loans that were provided by the Canadian International Development Agency in
the 1960s and 1970s. We have also discussed the forgiveness of China's debt in
1997-98, a 50-year-old debt related to an export credit insurance payment
covering the sale of fishing boats to the former Chinese government, which
repudiated this debt.
Once again, this item related to a continuation of initiatives that had already
Senator Stratton: Is there a likelihood that each year you will write off old
Mr. Neville: Every year, we carry out a systematic review of all our debts. We
determine whether we should write off these debts or whether we should change
the interest repayment dates to remain in line with the agreements reached at
either the Paris Club or the Rio Summit meetings.
Senator Stratton: Why would that not be included in your Main Estimates instead
of in the Supplementary Estimates (A)? Is it because the decision had not been
made at that time?
Mr. Andrew Lieff, Senior Director, Expenditure Operations and Estimates
Division, Planning, Performance and Reporting Sector, Treasury Board of Canada,
Secretariat: There are two reasons. As mentioned by Mr. Neville, the agreements
and the work might not have been done in time for the Main Estimates. As this
is a statutory item and is not for the purpose of seeking, per se, the
appropriation of funds, we put it in the Supplementary Estimates to highlight it
for Parliament. That is probably the primary reason for doing it this way. We
use the Supplementary Estimates to bring a focus.
Mr. Neville: We usually do this during the months of May and June. I usually go
over the accounts and come up with an allocation. The Main Estimates have
already been tabled by then; thus, we include it in the Supplementary Estimates
(A) or Supplementary Estimates (B).
Senator Stratton: On page 62, Vote 5a, with regard to Foreign Affairs and
International Trade, capital expenditures, the previous estimate was
$87,690,000 and the current appropriation is $43,875,000, for a total
$131,565,400 for construction, acquisition of land, buildings and works, and the
acquisition of machinery and equipment. That seems like a staggering sum of
money. Have we built a new embassy somewhere for $131 million?
Mr. Neville: The bulk of the expenditures involve moving the Canadian embassy in
Germany from Bonn to Berlin. DFAIT, the Department of Foreign Affairs and
International Trade, is relocating its embassy in Germany following the
decision of the German government to designate Berlin as the new capital of the
new unified Germany. Funds for the move include not only the acquisition of the
chancery itself but also the purchase of the chancery site, acquisition of an
official residence, staff quarters, personnel relocation costs, and local staff
I will not go into the detail of funding unless you are interested, but we have
a funding profile that goes back from 1998 right through 2001-02. Total
operating cost is $5.79 million, and for capital it would be $73.491 million.
Since this was approved, new estimates indicate changes in anticipated funding
requirements. Basically, an additional $6.5 million is required for the
retrofit of the Bonn chancery, to meet the required standards to prepare for
resale; that is, for some staff relocation, personnel costs, and the
acquisition of staff quarters and rental space in Berlin. Many factors,
including credit for site conditions, interest accrued at the time of land
purchase, a more favourable exchange rate, plus some slight project delays and
the need to lease additional space in Berlin, have contributed to these changes
and the timing of the expenditures.
We are looking at a situation where the German government has made a decision to
move its capital from Bonn to Berlin. We have acceded to that and are in the
process of building the new embassy in Berlin.
Senator Stratton: Am I correct that it is around $70 million?
Mr. Neville: That is the total cost from 1998-99 to 2001-02.
Senator Stratton: We are spending, therefore, an additional $60 million on other
embassies and consuls?
Mr. Neville: I was giving you the main expense.
Senator Stratton: I understand that. However, are we opening new consulates and
embassies so that we would be spending an additional $60 million?
Mr. Neville: Not to that magnitude -- that is, that I am aware of.
Senator Stratton: Berlin represents $70 million of the $130 million. I am trying
to get a handle on the other $60 million. It is a lot of money for capital
expenditures. That usually means buildings. Does it cost that much annually to
repair and upkeep our holdings?
Mr. Neville: DFAIT has a number of embassies around the world, and there are
construction and capital expenditures related to those embassies. However, this
is the largest.
Senator Stratton: Could you send me a breakdown of that number? I understand the
$70 million for Berlin, but I am curious about the $60 million. That is a lot
Mr. Neville: Yes. We will be able to provide you with that.
Senator Ferretti Barth: I would like to tuen to page 62, relating to the
Canadian Transportation Accident Investigation Safety Board, where you talk
about Swissair investigtion costs of $14.4 million. I do not understand why we
are asking for Supplementary Estimates for this inquiry which I believe is
finished. I would like to know if it is common practice, in other countries in
the world, to have the taxpayers of the country where the accident occured pay
all the costs of the air disaster. If we, as Canadians, suffer an air disaster
in Switzerland, will Swistzerland pay all of the investigation costs in order
to determine the cause of the Canadian plane's crashing on Swiss territory?
Mr. Neville: Indeed, if a accident occurs, then it is the country it occurs in
that must pay all of the expenses related to the accident. In the example you
have given, if the accident had taken place in Switzerland, it would have been
the Swiss government's responsibility to pay all the cost. But since the
accident happened in Canada, these are our expenses, but I will give you a
little bit more information to explain why there was an increase.
Senator Ferretti Barth: That is what I would like to know, because I had thought
that it was over and done with.
Mr. Neville: No, it is not over.
The Swissair investigation accounts for a total $14.426 million additional
dollars. Swissair flight 111, bound for Switzerland out of New York City,
crashed in the Atlantic Ocean approximately 5 nautical miles from Peggy's Cove,
Nova Scotia, on September 2, 1998. Pursuant to its own legislation in Annex 13
of the Chicago Convention of the International Civil Aviation Organization, it
will be necessary for the transportation safety board to explore all avenues
that might lead to a possible cause of the accident, to ensure that any
possibility is eliminated. Basically, the Canadian Transportation Accident
Investigation and Safety Board is not funded on an ongoing basis to undertake
and pay for an investigation on the scale that is required by this crash. In
this Supplementary Estimates, the TSB is receiving incremental funding of $14.4
million, including $2.5 million for the RCMP to cover the final phase of the
wreckage recovery operations. The TSB was advanced $4 million from Treasury
Board Vote 5, government contingencies, to meet urgent funding needs, most
important of which is the cost of two contracts needed to finalize the recovery
of the wreckage. To date, the TSB has been appropriated a total of $35.5
million, provided through the 1998-99 Supplementary Estimates (B) and (C) -- $7
million and $28.5 million, respectively. These funds have been used to cover
expenses related to the TSB investigation, as well as to reimburse the costs
incurred by different federal departments and agencies to March 31, 1999 in the
rescue and subsequent recovery operations.
The important part, however, is that legal advice provided by the Department of
Justice asserts that there is no statutory basis to recover these costs. There
are no precedents whereby the investigating country has initiated cost-recovery
action with a foreign government for costs associated with the investigation of
an accident; nor are there any known precedents where a national investigation
agency has recovered costs from the airline or its insurance company. To date,
the TSB has been unsuccessful in approaching Swissair's insurance agents. I
have asked this question on numerous occasions whether there is any possibility
of recovery. The answer over and over is "no".
The final phase of wreckage recovery operations requires the use of a suction
dredging vessel and holding facility to offload and then sort the contents of
the dredging operation. Given the fact that the dredging vessel, based in the
Netherlands, was already present on Canada's East Coast, the TSB determined
that this was the most effective, efficient and economic method to complete the
recovery operation. While 90 per cent, by weight, of wreckage has been
recovered to date, and it is known that there was a fire in the forward portion
of the aircraft, the cause of the fire is yet to be determined. The area of the
plane of primary interest is the cockpit and forward galley sections. To date,
only 50 per cent of that area has been recovered. It is hoped that dredging
will significantly increase recovery of material in this area.
Of the total incremental cost of $49.9 million, approximately $2.6 million has
been spent in support of services provided by the Nova Scotia government. It is
also understood that the Province of Nova Scotia has incurred costs of
approximately $2 million related to the Swissair accident, primarily by the
Medical Examiner's Office, the Department of Transportation and Public Works,
and the Emergency Measures Organization.
It is not known at this point if the provincial government will press the
federal government for reimbursement of these costs. The investigation has led
the TSB to promulgate a safety advisory and six interim safety recommendations.
Regulators and members of the industry have accepted the TSB findings and have
already undertaken actions to reduce or eliminate the risks associated with
Based on TSB's analysis, the U.S. Federal Aviation Administration has ordered
that the material known as metallized Mylar be replaced over a period of four
years on 1,230 planes worldwide.
It is not possible at this time to indicate the final cost of the Swissair
investigation to the federal government. However, after the completion of the
wreckage recovery operation, we expect that incremental costs henceforth will
I could go into details, if you are interested.
I could give you further details pertaining to the costs incurred during the
years 1998-99 and 1999-2000 and for the Estimates for 2000-2001, for the
Senator Ferreti Barth: How much has this operating license for Swissair cost
until now? Is it not possible for both parties to split it fifty-fifty? It is
not our fault if the plane crashed on canadian territory. There is also the
matter of air insurance. Was this plane insured by the Swiss authorities? This
must be looked into, to pay for something that is not due to our neglicence.
Mr. Neville: We spet $48.4 million in 1998-1999 and 1999-2000. There are still
estimates for the year 2000-2001 because we are expecting significant expenses
relating to this accident.
As to the sharing of expenses, we have an agreement with the International Civil
Aviation Organization; it is the responsibility of the country where the
disaster or the accident occurred.
In accordance with the agreement that was ratified, we must pay the costs and
there is no means to recover these funds. I have asked this question several
times over the last two years. I have been told several times that it is not
possible to recover these costs, except if the airline or if the country itself
offers to pay for these voluntarily. It is not our impression that this will be
Senator Tkachuk: My questions, Mr. Neville, are on issues relating to the
Department of Justice, page 100, the firearms control program. I think my first
question was asked in the other place. It is with respect to the $35 million.
What was the original budget number that was estimated for this year for
Mr. Neville: With respect to the firearms control program, the Department of
Justice is seeking Supplementary Estimates of $35 million in the form of loan
funding for the firearms initiative. In 1996, cabinet approved a provision of
$40 million in repayable loan funding to resource this initiative. To answer
your question, initially, there was a $40 million repayable loan. That was just
for the repayable loan component.
Senator Tkachuk: Would you explain that repayable loan to me?
Mr. Neville: It is repayable. We loan money to a department, but when the
revenue eventually comes in, it, in effect, comes back to the Consolidated
Senator Tkachuk: You mean the actual $10 or now $45 that gun owners are paying
for the program?
Mr. Neville: Yes.
Senator Tkachuk: The $27 million on the federal legal framework, is that related
to the firearms control program as well?
Mr. Neville: No, it is not. I could explain that, if you wish.
Senator Tkachuk: Not if it does not have to do with the gun program.
Mr. Neville: Just quickly, because I was going over it myself on the weekend, it
is mainly to address critical workload pressures identified through the
price-workload exercise. As you can appreciate, there have been several years
of reduction, and this is basically to deal with a number of internal
pressures. It is not related to the gun control program.
Senator Tkachuk: Can you explain what is meant by "pressures"?
Mr. Neville: Maybe I can spend some time on it.
Senator Tkachuk: Not too much, but perhaps you could explain it a little better.
What are you talking about?
The Chairman: He is talking about the $27 million that you did not want to hear
Senator Tkachuk: He started to explain it, and the pressure got to me. Now I
want to know.
Mr. Neville: The Department of Justice, in presenting its 1998-99 business plan,
sought approval for a Supplementary Estimate to partially address critical
workload pressures identified through what we call a price-workload exercise.
We have analysts sit down with the department and go over the various
components of their operations.
As you can appreciate, there have been, over the years, some delaying
initiatives in putting in place new workload procedures. There have been some
internal reallocations and there has been increasing use of unpaid overtime and
recoveries from client departments. Based on all of those, the Department of
Justice finds itself severely underfunded and increasingly unable to fulfil its
mandate. As you can appreciate, inherent risks in these situations are lost
prosecutions and litigation cases, faulty policy development, and a compromised
judicial system, at the end of the day. These pressures were highlighted in
that price-workload exercise, and the department has received an initial
infusion to cover these pressures.
Senator Tkachuk: I will come back to that. However, going back to the gun
registration program, the $35 million represents additional costs for this
year, over and above the figure you mentioned, $40 million?
Mr. Neville: I am talking about the $40 million repayable loan.
Senator Tkachuk: So, for this fiscal year, they will advance $75 million to
register guns for that program, right?
Mr. Neville: For this fiscal year, in total, if you take all the expenditures
planned, including Main Estimates, we expect the number to be close to $87.9
Senator Tkachuk: When the bill came before Parliament, the Minister of Justice
estimated a total cost of $85 million, which would take care of all the gun
registrations between 1995, when the bill was introduced, and 2001, when all of
the guns were supposed to be registered.
Who did those original estimates of $85 million?
Mr. Neville: I would guess that the department at the time had their program
analysts work out the modalities of what was proposed and they came up with
Senator Tkachuk: Counting the $75 million, and the loans, what has been the cost
of the gun registration program to date?
Mr. Neville: I shall provide you with total costs, as we know them. They are:
1995-96, $12.6 million; 1996-97, $25.7 million; 1997-98, $51.2 million;
1998-99, $172.1 million, plus estimated for 1999-2000, $87.9 million. That is a
total, not spent, but planned, $309.7 million.
Senator Tkachuk: The difference between $309 million and $85 million is huge.
Mr. Neville: I am not familiar with the $85-million figure. I am familiar with
the numbers that I just discussed.
Senator Tkachuk: Let us go back to that loan program. As the loan program is
based on future revenue, I think of the taxpayer or the gun-owner who is paying
licence fees. That is what the government expects to be paid back. How much has
been collected in revenues to date?
Mr. Neville: I do not have those numbers.
Senator Tkachuk: Could you get them for us? If these are loans, I would think
the government would have some background papers or some studies as to what
kind of revenue they expect when these loans are repaid.
Is this a way to lift the expenditures so they are called loans rather than
expenditures, when in reality they will never get the money back?
Mr. Neville: Let me back up a bit. In terms of those revenues, as you can
appreciate, there are approximately 1.5 million Canadians who should be getting
licences. That is due by the year 2001. I am not sure we are into the revenue
stream in any significant way, considering that it is only next year that they
must be registered.
If you are asking me if I can get you the revenues to date, certainly we will be
asking the department for that information. I do not wish to raise expectations
here in terms of the revenue stream at this point.
Senator Tkachuk: I do not have any expectations, Mr. Neville. I just want to
know what they are.
Mr. Neville: The other point on which I wish to touch lightly, without going
into too much detail, unless we decide to do that, is that there have been a
number of changes to this program since its inception. Some of the provinces
have backed out. There has been a change in the program perspective. We are
looking at a changed program today, in terms of its implementation and the
buy-in from the provinces, as compared to what it was at its initial outset.
Senator Tkachuk: The $85 million, though, is what the estimates were.
Parliamentarians as well as departmental officials were telling the Minister of
Justice in committee, both in the Senate and in the House of Commons, that the
$85-million was highly underestimated and that the figure would be much larger.
At the time, the $85 million was a big selling point to pass the bill. If they
knew the numbers of $309.7 million, there may have been more public outcry
about the bill.
Were consultants hired to come up with this $85-million figure? Will an
investigation be launched, either by the deputy minister or by the Clerk of the
Privy Council, as to who made these projections or estimates and how they could
be so terribly wrong?
Mr. Neville: I am not privy to that particular information. However, I will
state that, normally, when a program is conceived and preliminary discussions
are held, there is a costing that is prepared and that that is refined as the
program is finalized, in terms of its legislation. As you can appreciate, we
like to think that all factors have been included therein.
That could have involved outside consultants. It could have been done
internally. It depends on the department. It very much depends on the
department. We do leave that flexibility with the program manager.
I am not privy to how that figure was calculated. However, I do know that there
were a number of changes that took place subsequent to the initial preliminary
numbers. Hence, there have been some changes in the costing.
What I can give you are the costs that have been incurred to date and what is
being proposed to date for this fiscal year.
Through parliamentary debates, the design and cost requirements for the Canadian
firearms program have evolved to include: First, implementation in aboriginal
communities, safety requirements in the form of spousal notification,
additional screening of applicants, and a centrally located processing site, in
As you are probably aware from the press, Alberta, Saskatchewan, Manitoba and
the Northwest Territories have decided not to administer the program.
Consequently, there are additional costs related to operational set-up in those
There have been some changes that were not factored in or even known about at
the time of the original Estimates.
Senator Tkachuk: Are you saying that, in 1985, the researchers did not know that
aboriginals had guns?
Mr. Neville: No, that is not what I said. We did not know the modalities of the
program vis-à-vis the aboriginal communities. They were certainly not
aware that a number of provinces would not be willing to opt in and administer
Senator Cools: I have a supplementary question on this point. Senator Tkachuk is
raising something that is extremely profound. We cannot settle it today;
however, at some point in the life of this committee in the next year or two we
could dedicate a little bit of time or a few meetings to this issue.
My question is: When a minister comes to Parliament with a bill, and gives an
estimate of the cost of the bill to Parliament, and asks Parliament to pass
that bill, how reliable is that estimate? My secons question is: How can
members be assured tht, when a minister gives them certain numbers, those
numbers are within the realm of possibility? When Bill C-68, the firearms bill,
was before us, many of us questioned those members quite strenuously. We were
assured that we were in the wrong.
Is there a process? Can one be implemented? At some point in time, we must deal
with this. When a minister comes before us and tries to support his measure
with a certain indication of costs, we need to know that his estimate is
Mr. Neville: Yes, there is a process. Let me assure you that there is a process.
It starts off within the department with the program analysts working through a
number of models that would allow the costs to be attained in such a way that
it is defensible. Those costs are then either vetted at the central
administration level within the department, or, if it has been generated at that
level, reviewed by other organizations, whether it be the Treasury Board
Secretariat, the Privy Council Office, or other fora or interdepartmental
There are a number of steps that normally take place with the creation of a new
program. I would say with certainty that when the numbers are put forward by
the minister they are reflective of the estimated costs.
However, during debate, clauses are added and modifications are made to the
bill. When the bill receives final approval, there may be a different
connotation or perspective, which would result in program implications. Hence,
one must re-cost and put into play the changes that have been agreed upon. As
you can appreciate, that means that either we come back to Parliament for
Supplementary Estimates or we change the costing during the year.
In this case, a number of changes have been made to the legislation, from what
was originally proposed, and you are seeing the result in additional costs.
There have been a number of issues with technology as well, which is obviously
part of the cost. Many factors that were not envisaged in the original proposal
come into play. However, as best we know in terms of how the process works, when
the original proposal was put forward, the costs were realistic based on the
program expectations at that time.
Senator Tkachuk: I want to go back to the question of accountability, which
parliamentarians always face. In 1995, the Minister of Justice and departmental
officials told Parliament what this would cost. There was serious debate on
that, and estimates were as high as the amount we are hearing now, and we are
not yet done. Who is accountable for this? Is it the deputy minister; is it the
minister? Will someone be fired?
Mr. Neville: In our legislative system, the minister is accountable for
legislation proposed to the house.
Senator Tkachuk: To whom does the minister turn? Does no one get angry and ask
how this happened? The group who designed this should never be allowed to run a
department. However, we do not even know who these people are and no one tells
anyone. Is there a process to handle such things, or is it just dismissed?
I am not being personal. The Finance Committee has dealt with such issues before
and there is no process to deal with these things. No one is accountable.
Mr. Neville: Accountability rests with the minister responsible for the
department or the program. Ministers with whom I have worked have always been
very accountable and have taken necessary action when required.
Returning to this particular program, as I said, it is my understanding that the
costs were equivalent to those envisioned in the conception of the firearms
program. Subsequently, changes were made and costs were adjusted accordingly.
Hence, we see the increased costs.
Senator Tkachuk: I will not belabour the point; I simply wished to make it.
I have a technical question. Is it correct that a loan vote is preceded by the
letter "L" to signify that it is a loan?
Mr. Neville: This is not a loan vote such as when we make loans to third
parties. This is an internal loan to a department and we will recoup the costs
later. A loan vote with an "L" is a loan to a third party and the
loan is set up as a receivable in the books of Canada.
Senator Tkachuk: Therefore, this is a loan to yourself, with the understanding
that there will be enough revenue from gun owners to pay it off?
Mr. Neville: We have done that in a number of instances. Y2K is an example. We
have given loans to departments. When the year 2000 arrives, we will start
reclaiming those loans from departments.
Senator Tkachuk: Do you draw up agreements?
Mr. Neville: It is a Treasury Board decision. Yes, we do.
Senator Tkachuk: Are those public?
Mr. Neville: Treasury Board decisions are not made public.
Senator Tkachuk: So we do not know on what this loan was based?
Mr. Lieff: Senator, it is not a loan per se. It is a device of the executive.
The department has come to us, having incremental requirements. There are
always discussions on how much can be funded through existing appropriations
from the department and how much needs to be approved through either the
policy-setting process in the budget or through whatever reserves the executive
has to apply to new initiatives. I do not know the specifics of this particular
case. However, it may be, as in the case of Y2K, that departments have changed
their resourcing requirements; that they had a number of capital projects
planned but in order to meet the Y2K needs they deferred some until later, in
order to meet an urgent requirement.
We always go through that process when a department is looking for funds. We see
what they can afford first. Sometimes, if they want new money but we believe it
should be funded by the department's existing funding, in order to help them we
make an arrangement whereby we will advance them the money from a central
provision, and ask Parliament's authority for that. They will re-plan their
programming in future years and we will reduce their appropriations, thereby
recouping the loan.
It is not like a traditional loan for which we come to Parliament. It is a
device of the executive. In fact, we are seeking additional funding from
Parliament to enable us to do this on the expectation that departments will
reduce their expenditures in the future to offset that amount.
Senator Tkachuk: Is all of this year's appropriations for the firearms control
program of $40 million plus $35 million a loan?
Mr. Lieff: No, I do not believe so.
Mr. Neville: No, only parts of it.
Senator Tkachuk: I have heard that about 800 people are working in this program.
Are they paid from borrowed money?
Mr. Neville: It would be transparent to them. In its overall funding, the
department would have a component that they are required to pay back over time
based on the Treasury Board decision. It would be transparent to the employees
whether they are being paid out of a loan or out of the other parts of the
Senator Tkachuk: Will it be transparent to parliamentarians?
Mr. Neville: Yes.
Senator Doody: There is quite a frightening sum of money involved in the recent
Federal Court decision regarding pay equity. Is there any provision for that in
these Supplementary Estimates? I have heard that there is a contingency fund
for this. How much is in that fund? Where is it shown? Has it been voted, when
will it be paid out, and to whom?
Mr. Neville: This is one of my personal files, so I am pleased to respond as
best I can.
We are talking about Supplementary Estimates (A) for 1999-2000. There is no
amount in the Supplementary Estimates (A) requirement with respect to pay
equity. Therefore, we are not asking Parliament for additional funding at this
time, as per Supplementary Estimates (A).
In response to your second question, about the allowance that we have set up, as
is normal in the private sector, as well as in any other provincial
governments, at the end of the year a provision is set up in the account for
liabilities. In the private sector, you would talk to your legal counsel, and if
it were determined that a particular court case would go against you, you would
make provisions accordingly. You do not disclose that, because that would
obviously prejudice your negotiating position. You do that as a matter of
course, and you do allow for that. Your auditors are consulted. Since they are
signing off on the financial statements, they would have an opinion. In our
particular case, over the last several years, again at the end of the year, we
have looked at each account for each country, as I mentioned earlier, to
determine the balance outstanding and whether we should be providing for that.
We did the same for pay equity. We carefully followed the progress of the
negotiations, made a determination about what we thought the tribunal would
rule and then at what the court would eventually decide. Based on our
information and on a number of discussions with Justice and others within
government, we made a provision in the allowance. Therefore, we had provided for
a specific amount that would handle the costs associated with the pay equity
decision. We will be coming to Parliament in due course. As the amounts are
required by departments, we will be identifying them and asking for authority
to make the payments accordingly.
Senator Doody: Are you in a position now to say when, if ever, this money will
Mr. Neville: Yes. I do not mind sharing that with you. We discussed this again
yesterday. The first cheques will be cut probably in the March-April 2000 time
line. The second series of cheques will be cut probably in the
September-October 2000 time line. There may be a number of other requirements
for cheques to be issued subsequent to that. It depends on the calculation. It
is very complex.
The Chairman: Will the first two cuts be in the Main Estimates for next year?
Mr. Neville: That is a good question. I do not know the specific answer to that,
but I will consult with my colleague.
My colleague and I are obviously of the same view in this case. Bearing in mind
that this is a statutory item, we will be coming to Parliament with information
about this statutory payment. If the information is there in time for the
Estimates, it will be included in the Main Estimates. Otherwise, based on our
information, we will include this item in Supplementary Estimates (A), as we did
this time, or in Supplementary Estimates (B).
The Chairman: Is it a statutory item because it is being paid pursuant to the
pay equity legislation?
Mr. Neville: No.
The Chairman: Why is it statutory? It is a negotiated settlement.
Mr. Lieff: I might try a general answer on that.
The Chairman: Any of the above.
Mr. Lieff: Under section 30 of the Crown Liabilities and Proceedings Act, the
tribunal has the status of the court. Section 30 of that act allows the
Minister of Finance to make payments to settle court decisions.
In this case, the tribunal arrived at a decision. It left it to the parties to
negotiate the modalities of how to implement that decision and the amount. We
just received confirmation that once the agreement is referred back to the
tribunal it will basically endorse the agreement. It will now be referred
through an administrative process to the Federal Court. As soon as that
happens, it will be under Section 30 of the Crown Liabilities and Proceedings
Act. The Minister of Finance will be required to pay out of the Consolidated
Revenue Fund the amounts necessary to settle.
The Chairman: That is what makes it a statutory requirement.
Senator Doody: Will this come to Parliament before the cheques are issued?
Mr. Lieff: Parliament has already authorized payment through Section 30 of the
Crown Liabilities and Proceedings Act, given the fact that it is a court
Senator Doody: A blank cheque has been issued somewhere previously, and it is up
to you to fill in the numbers.
Mr. Lieff: That is correct.
Senator Doody: To my understanding, the amount is somewhere between $2.5 billion
and $4 billion.
Mr. Neville: The number is between $3.5 billion and $3.6 billion, depending how
you want to cost it.
Senator Doody: I do not want to cost it at all, but apparently it is ours. I am
mindful of Senator Tkachuk's questions, which pointed out the fallibility of
some of the estimating process.
Mr. Neville: In this case, the estimating was fairly accurate.
Senator Doody: Therefore, you have at your disposal $3.5 billion that you will
begin to distribute in March or April.
Mr. Neville: That is correct.
Senator Doody: As far as Parliament is concerned, it is a done deal, and they
will not see it.
Mr. Neville: As we make the payments, Parliament will be informed of the amount.
The Chairman: No further authority is required.
Mr. Neville: Parliament has already voted.
Senator Doody: They voted the money, although they did not know how much it
Mr. Neville: Let us be more precise. Any court action or decision that involves
payment by the Crown is authorized by previous legislation. Therefore, we make
the payment. We do not know what the court will order in some other case
tomorrow; however, we do know that, if there is a decision by the court to make
a payment, we will be in a position to pay it, and we must pay it. It must come
out of the fiscal framework.
The fiscal framework has provided for this pay equity settlement. That is the
bottom line. The fiscal framework as we know it today has already provided for
the pay equity.
Senator Doody: Regardless of the bottom line, whether the Government of Canada
elected to accept the decision of the Federal Court or whether they preferred
to appeal it and go further with it was entirely a decision of the government.
Mr. Neville: Yes.
The Chairman: Where is it? It is not the $3 billion. We know about the $3
billion that Mr. Martin puts aside every year. Where is it, or where was it?
Mr. Neville: It was on the balance sheet on the Statement of Assets and
Senator Stratton: Is that in the Main Estimates?
Mr. Neville: No, it is in the Public Accounts.
Senator Doody: It is a notional figure. It is not really there.
Mr. Neville: No, it is a real number.
Senator Doody: You have $3 billion stashed aside.
Mr. Neville: It is in the Statement of Assets and Liabilities, on the
liabilities side of the ledger.
The Chairman: When did we vote the appropriation?
Mr. Neville: You do not vote the Public Accounts.
The Chairman: I know that. You have the money.
Mr. Neville: You have not voted it because, in a sense, it has not been paid
The Chairman: You have told us we are never going to vote it.
Mr. Neville: It is statutory. Legislation states that that when a court decision
is rendered we must make the payment. That would be the basis of authority.
The Chairman: You have set the money aside against this day. You have set enough
money aside. You told us that the fiscal framework will not be upset by this.
Mr. Neville: Yes.
The Chairman: How was that done? If it was set aside, we must have voted it at
Senator Doody: If the court decision had gone the other way, would you still
have $3.6 billion to spend on something else?
Mr. Neville: Yes, we would have.
To answer your question specifically, Mr. Chairman, at the end of the year, we
set up year-end adjusting entries to close the books of the government. Hence,
when we closed the books for 1998-99 and arrived at a $2.9 billion surplus,
included in the $2.9 billion surplus was an amount, along with what we put in
over the years because we did not do this all in one shot, that provided for the
potential pay equity settlement. That amount is included in the $2.9 billion
surplus of last year for 1998-99, which was audited by the office of the
Auditor General and given a clean audit. The Auditor General was fully aware of
it and agreed to the amount put aside as being reasonable in the circumstances.
When we do the balance sheet for 1999-2000 to show our assets and liabilities,
it is in the liabilities section of the balance sheet.
The Chairman: Was it identified as such?
Mr. Neville: Not specifically, for obvious reasons, but it was part of the
balance sheet portion.
The Chairman: Was it under miscellaneous?
Mr. Neville: No, it was under allowance for salary benefits.
Senator Doody: It was not in Contingency Vote 5.
Mr. Neville: It had nothing to do with Contingency Vote 5. For information
purposes, Contingency Vote 5 is $550 million, and that would not cover $3.5
Senator Doody: Therefore, there was a separate contingency.
Senator Cools: Which section of the Crown Liability and Proceedings Act were you
Mr. Lieff: I believe that it is section 30.1. I will get back to you if that is
Senator Cools: I have two questions. What is the meaning of statutory authority,
in appropriation terms, in terms of this committee? My second question regards
the settlement of lawsuits. The authority of the Crown Liability and
Proceedings Act allows the government, the Minister of Finance, to settle
lawsuits. However, it was my firm understanding that there must be some limits
to the amounts of money that the minister could so expend. To describe that
authority under that act as a statutory authority in the classical sense, a
statutory authority for expenditures, is something that is in need of
examination. My understanding of statutory authority is that it is the authority
of expenditures as described and permitted under the designated or delineated
I am not faulting you; I understand that you do a very good job. However, it
seems to me that this is a question that should perhaps come under the purview
and examination of this committee. If a settlement is large, as in this case,
$3 billion, perhaps the minister should have to come before Parliament
specifically to seek that authority.
What are the limits of the dollar amounts that can be used by government under
the Crown Liability and Proceedings Act? What is the meaning of statutory
Mr. Neville: I will address the meaning of statutory first. For us, it is
legislation that has been approved and, as a result, is quite clear as to the
terms and conditions of payments. There are various classes of payments, and
those are the only payments that we can allow. We are judicious about what goes
In that context, once it is approved, we have a responsibility to inform
Parliament on an ongoing basis as to what the expenditures are. We can do it
through the Estimates or through the Public Accounts, but we do report back to
Parliament. That is statutory.
With respect to section 30 of the act, if a court order is deemed appropriate
and signed, we are required to make the payment. The Minister of Finance is
required to make the payment, and we charge it to statutory.
If a negotiated settlement is the way in which a particular court order deals
with a settlement, then we do not charge that to statutory. It is charged to
the respective department as a voted charge against the appropriation. It is,
therefore, not statutory in that sense, which may mean that the department would
need additional Supplementary Estimate funding or Main Estimates disclosure.
The Minister of Finance does not have the right to negotiate a settlement and
put that through as a statutory amount.
Senator Cools: I am curious, Mr. Neville. What is the dollar limit? What if the
quantum here was $10 billion, or $15 billion? What are the limits?
Mr. Neville: There is no quantum.
Senator Cools: Mr. Chairman, this is an issue that the committee should look at
sometime in the future.
Senator Moore: Mr. Neville knew what the outside demands were. Therefore, he
knew what the maximum quantum would be. Am I correct?
Mr. Neville: In the case of pay equity, we guessed right.
Senator Moore: In another type of claim, Mr. Neville may not know the outside
limit; but in this instance he had an idea of the outside limit.
Senator Cools: My query concerns the authority to spend within the Crown
Liabilities and Proceedings Act.
Senator Moore: Was there a specific sum set out in the allowance for salaries
Mr. Neville: Yes. It is quite specific. It was a component thereof. The number
was in the billions, but it was not more than double.
Senator Moore: What was the allowance that you set aside?
Mr. Neville: I want to be sure that I understand the question. Are you asking
what was the allowance set out for pay equity?
Senator Moore: Yes. It is behind us now, so we can talk about it.
Mr. Neville: Unfortunately, it is still being discussed with the Department of
Justice at this point. We have not closed on that question.
Senator Moore: Are you reluctant to advise us?
Mr. Neville: We are concerned about our legal positioning on future claims,
because we have other claims, as you can appreciate. There are other court
orders before the courts. Hence, we are concerned about releasing the specific
amount at this time, because it could prejudice our future negotiations.
Senator Moore: The budget surplus of $2.9 billion was at least $3.6 billion
better than that; correct?
Mr. Neville: That is not necessarily correct. You will remember that I mentioned
earlier that, over time, we had been putting aside specific amounts. I was
quite clear about that. We did not put aside the whole amount in one fiscal
year. We did that over a number of years.
The Chairman: Always in that same salaries vote; correct?
Mr. Neville: Yes. If you were to say that the surplus for last year or for the
year previous could have been different had we not put the provision, that
would be correct. However, it would not have been by that amount specifically.
The Chairman: Some of us have been critical of the government for not having
foreseen the outcome of the Marshall case. We cannot now complain that the
government did not make provision in this case.
Senator Tkachuk: Had a parliamentarian asked a decision question before the
court rendered its decision on the salary allowance, how would that question
have been answered?
Mr. Neville: It would have been answered exactly the way I answered it today. In
order for the government not to prejudice its negotiating position, there is no
disclosure. The private sector would handle the situation in the same manner;
they would not disclose their position ahead of time.
Senator Tkachuk: I am not arguing with you.
Senator Moore: I want to go back to the matter of the Swissair investigation,
which was raised by Senator Ferretti Barth. You mentioned that the total cost
of the investigation thus far is $48 million. I think that you said there would
be substantial additional claims in the next year.
Mr. Neville: I will go back and give you the exact wording. However, I am 100
per cent sure that that was not what I said.
I said that it is not possible at this time to indicate the final costs of the
Swissair investigation to the federal government. However, after the completion
of the wreckage recovery operation, which is the last part, where they are
retrieving the cockpit component, costs henceforth are expected to be minimal.
The bulk of the costs are behind us.
Senator Moore: There have been reports in the press in Nova Scotia that many
valuable items have been lost, including precious gems. If Canada is paying for
that second ship I have seen working out in the waters and some precious items
are recovered, to whom do they belong -- the insurer?
Mr. Neville: I do not know the answer to that question.
Senator Moore: I find it hard to believe we cannot proceed against the insurer
if we are going through the expense of recovering. I do not know what the
Chicago Convention indicates. I can understand it requiring us to do the
investigation, but I wonder why we cannot proceed against the airline or the
insurers to recover some of our costs.
Mr. Neville: We have tried on numerous occasions to contact the insurance
company and the airline. We were rebuked in each instance.
Senator Moore: That does not mean that you should stop there. You could proceed
Mr. Neville: I am sure the department is taking all the necessary legal steps;
but, from what we understand, the department is not meeting with success.
Senator Moore: Under Citizenship and Immigration, on page 52, there is mention
of money related to the Kosovo conflict -- $84.2 million to provide assistance
for resettlement. During the reconstruction and resettlement of Bosnia, there
were billions of dollars taken out of foreign aid by corrupt local officials.
The money designated for the re-settlement never reached its intended
destination. Did we put money into Bosnia and it was pilfered? Or, was it
applied to the right cause? What assurances do we have that this money,
intended for Kosovo, will be applied to the areas of reconstruction and
resettlement and that it will not be siphoned off by some corrupt local
official. The situation that occurred in Bosnia was scandalous. I wish to know
how we monitor the distribution of our funds to ensure that they are applied to
the right designations, reconstruction and resettlement expenses, in countries
such as these.
Mr. Neville: I do not have the answers to those questions. I have a make-up of
these costs, and I assume that National Defence, and others who are involved,
have taken necessary precautions to ensure that the funding is spent on what
has been proposed. However, I am not in a position to answer the questions
directly. I am sorry.
Senator Stratton: Regarding Agriculture and Agri-Food, on page 37, an additional
$27.1 million is being sought under Vote 20a. That is an increase, according to
the Library of Parliament, of 12.9 per cent over the original estimate for this
Mr. Neville: One must look at the majority of the component for that. There are
amounts from an operating budget, as well as from the capital budget, carried
forward. That represents about 95 per cent of the total amount being requested.
As you are aware, departments are allowed to carry forward up to 5 per cent of
their operating vote. The rationale for that, over the years, has been to
eliminate year-end spending and to allow better management of resources. That
has paid off significantly. Therefore, we continue to provide that opportunity
for departments. In this case, Agriculture and Agri-Food have availed
themselves of that policy and are transferring approximately $25 million from
their operating budget and about $6 million from their capital budget. That
represents approximately 95 per cent of the amount being requested.
Senator Stratton: The government consolidated food inspection services, did it
not? A consolidation took place, I believe. Do we know what the supposed
In light of the mad cow disease scare in Britain, there is a great deal of
concern within Canada that there has been a cut back on inspection of meat
products. That issue has been raised in the Agriculture and Forestry Committee.
There is indeed a concern that we are cutting back on inspections, particularly
at a time when mad cow disease has been a problem in Britain.
I know you cannot respond to the concerns related to mad cow disease, but do you
have abefore and after comparison of the monies expended on food inspection
Mr. Neville: Yes, I believe we do, and it is a positive one. As you recall, the
Government of Canada consolidated all federal food inspection and quarantine
services into a single food inspection agency.The CFIA, the Canadian Food
Inspection Agency, began operations in April 1997 and reports to Parliament
through the Minister of Agriculture and Agri-Food.
In answer to part of your question, the single agency enhances food safety
systems by integrating the delivery of inspection and quarantine services
previously provided by Agriculture and Agri-Food Canada, Health Canada,
Industry Canada, and the Department of Fisheries and Oceans Canada. All
inspection services related to food safety, economic fraud, trade-related
requirements, and plant and animal health programs are provided by the agency.
The responsibilities for food safety policies, standard-setting, risk
assessment, analytical testing, research, and audit are reinforced and remain
with Health Canada.
I will answer the first question you raised. The bringing together of the
inspection services previously distributed across four federal departments has
contributed to significant cost savings and improvements in efficiency. For the
fiscal framework 1998-99, we expect a savings of $44 million, and these will be
ongoing. Thus, we have seen an efficiency savings accrued to the government,
and yet we are maintaining a very integrated delivery of inspection and
Senator Stratton: Thank you. I will raise the issue in the Agriculture
Senator Moore: I have another question with respect to Canadian Heritage. We
discussed earlier the Publication Assistance Program, on page 39.
Mr. Neville: The $47.3 million?
Senator Moore: Yes. That is now being used to offset the overall request. What
was the original intended use of that for Vote 10?
Mr. Lieff: I have notes on that, but I will give you an overview answer first.
Originally, the funding was to assist Canada Post with the Publication
Assistance Program, to reduce those costs.
Senator Moore: That was the 8 cents and 35 cents that you explained earlier?
Mr. Lieff: That funding was found to be in contravention of the WTO guidelines.
Therefore, there was a recasting of how we were going to support those
publications to fit with the requirements of that ruling, and that is basically
what we are seeing. It is the same amount of money. It is being delivered in a
way that is consistent with the WTO ruling. However, I understand that there is
an ongoing review at the WTO about the revised program.
Senator Ferretti Barth: In the area of agriculture, i food inspection the
responsibility of the federal government or of provincial governments?
Mr. Neville: The provinces have an important role to play as does the federal
government, the terrirories and even municipalities. Since its creation in
1997, the new agency has negotiated various agreements with provinces,
establishing partnershps for all aspects of agriculture.
To date, such agreements have been signed with Alberta, Ontario, Quebec and the
Northwest Territories, and negotiations are well under way with Nunavut,
British Columbia, Saskatchewan, Manitoba and Nova Scotia. These negotiations
will shortly lead to the signature of new agreements.
Senator Ferritti Barth: For what purposes will the 27 million additional dollars
be used? Will there be an injection of funds for the provinces?
Mr. Neville: We must take into account the various items, the most important of
which, the $24.7 million, will be used for a transfer of funds from one year to
the next. For now, the department has exercised its right to transfer up to 5%
of its votes for last year to this year. This is, by far, thye highest amount
used, and it is within the criteria and standards of Treasury Board.
Senator Ferritti Barth: On page 92 of the English version of your document, I am
surprised to see that the Copyright Board is seeking to increase its budget by
some 108.9%. When a department makesa request to increase its budget, it must
explain its reasons. In this case, the additional millions of dollars requested
do not appear to be justified. Could you explain to me what these $1.5 million
will be used for?
The Copyright Board is seeking an increase that will more than double the
original allocation to this agency, from $745,000 to $1.556 million, by an
additional $811,000. Although this is a relatively small absolute amount in the
government budget, it still is an increase of 108.9 per cent. The additional
operating costs related to amendments to the Copyright Act, totalling $781,000,
are required for 1999-00 to fund the increased responsibilities as a result of
the 1997 amendments to the Copyright Act. The workload of the Copyright Board
depends on the number of tariff proposals filed in applications received, and
this level of activity can fluctuate from year to year. The Copyright Board
must be able to act expeditiously in scheduling cases for hearings and in
issuing its decisions. Delays can cause financial hardship for both copyright
owners, and the user is required to pay for the royalties set by the Copyright
Board. The additional funding requested in 1999-00 Supplementary Estimates (A)
by the Copyright Board will be allocated as follows: $95,000 for salary, and
$716,000 for the non-salary operating budget. These requested resources will be
used to support actual hearings and prehearing conferences, any procedural or
preliminary motions requiring a decision, and paper-related specialized
Since the expansion of the mandate of the Copyright Board in 1997, the trend in
its expenditures has been consistently higher than its present appropriation
level of $870,000, which it obtained by using the additional funding to be
transferred from Industry Canada and Canadian Heritage to its budget.
As you can see, there is a change in the mandate of this organization and this
is the reason for the increase in resources.
Senator Ferretti Barth: Does this amount double the amount?
Mr. Neville: Yes, nearly double
Senator Ferretti Barth: I do not understand. This request does not seem
appropriate to me. For how many years has this Board not asked for a budget
increae? Is this a annual request?
Mr. Neville: The department, through resource reallocation has been able to meet
its needs, but this is now more difficult. This is why it has made a more
official request for a budget increase.
Senator Moore: The same department, on page 89, Mr. Neville, deals with the
Atlantic Canada Opportunities Agency. If it will help the Atlantic area, I am
all for it. There is an amount of almost $17 million additional dollars. Under
"Operating", I see "Professional and Special Services, $3
million." It is indicated that $3 million of the $17 million is for "Professional
and Special Services." What is that?
The Chairman: I was going to ask a question about "Special Services"
in general. If you look at the objects of expenditure, Mr. Neville and Mr.
Lieff, you will find that "Professional and Special Services," in
virtually every case, is by far the largest item under "Objective
I am sure this has been discussed in the past. However, I flag it as something
we may wish to go into at some time in the future. "Professional and
Special Services" sounds like a catch-all item. Perhaps you can be more
precise on what is included therein. There is a another item called "Personnel",
which, I presume, relates to PYs or permanent staff. Please reply to Senator
Mr. Neville: Perhaps I could build in a response to both. You raise a good
There are 12 standard objects. Basically, these are the categories by which all
expenditures are categorized. These are budgetary estimates. These include, for
your information, the following: personnel, which includes salaries, wages,
overtime, and severance pay; transportation and communication, namely,
travelling and transportation expenses of government employees, members of
defence forces and the Royal Canadian Mounted Police, judges, members of the
House of Commons, senators, et cetera; information, which has three
sub-components, namely, advertising, publishing, printing and exposition,
public relations, and public affairs; and professional and special services.
The last category includes professional services performed by organizations or
individuals. It would include the services of accountants, lawyers, architects,
engineers, scientific analysts, reporters and translators, corps of
commissionaires, hospital treatment care of veterans, and welfare services.
They are services that we have had to go outside for. It also covers rentals of
all kinds -- for example, rentals of properties required for special purpose,
accommodation for government offices, hiring charter vessels, aircraft and motor
Purchased repair and maintenance is a category that includes upkeep under
contract of a durable physical asset. Utilities, materials and supplies, as you
would expect, are basically for water, electricity, and gas. Construction
and/or acquisition of land, buildings and works is a capital investment
category. These are expenses for contracts for new construction, building roads,
and irrigation works and canals. This is just a quick summary.
Construction and/or acquisition of machinery and equipment is a category that
includes expenses for machinery, equipment, office furniture, furnishings, EDP,
and electronic or other office equipment, microfilming, et cetera.
Transfer payments are comprised of grants, contributions, subsidies, and all
transfer payments made by government for which no goods or services are in fact
Public debt charges, a category all by itself, includes interest on the
unmatured debt of Canada's special outstanding debts, including treasury bills
and other liabilities, such as trust.
Other subsidies and payments is a category that includes payments to Crowns and
other government corporations or organizations and payments to certain
non-budgetary accounts, as well as write-offs of various types of losses, the
annual executive reserves for financial claims, and some other miscellaneous
items referred to as sundries.
That is a brief overview of how we categorize all the government's expenditures
when we present that to Parliament.
As to professional and special services, one would expect that this would be a
high component of specific requests, where the work is not being done within
the government but rather is being acquired through outside sources. It is only
normal to see that under professional and special services. An example of that
is the Y2K issue, which has only a short life. We do not wish to bring in
thousands of employees to do that work because, if all goes well, that work will
end early in the new fiscal year. Hence, we have spent a tremendous amount of
money through the Y2K proposal of working in partnership with the private
The Chairman: I understand the point about accountants and engineers and lawyers
and so forth. Where do I find all the part-time and temporary help that is
brought in at every level, and which, I presume, would not be included in the
Mr. Neville: That is correct. When a manager goes outside to hire temporary help
for a week or so, the costs would be charged to professional and special
The Chairman: All the contractual employees fall under that category?
Mr. Neville: Yes.
The Chairman: This has been a bone of contention with the unions for a long
time. It is a matter that we may wish to address in the future.
Senator Moore had some questions on the ACOA expenditures. What was the number
in the Main Estimates for ACOA special services?
Mr. Neville: I will turn to that. I have a response to Senator Moore's question
in general terms, not a specific response.
I have the breakout in terms of major components; however, that $3 million is
not broken down in terms of the objects of expenditure.
Senator Moore: I thought it was a large part of the total. You can see that it
is consistent in every department.
Senator Stratton: It always happens.
Mr. Neville: My guess, based on what I can see, is that ACOA has a carry-forward
from a previous year at $2.4 million. Hence, the bulk of it would probably be
in professional and special services. That would address the administration of
various programs, such as the Canadian Fisheries Adjustment and Restructuring
Program or other programs that were deemed as regional economic development
programs. That would be my best guess at this time.
The Chairman: That keeps the PYs down.
Mr. Neville: On your initial question, the Main Estimates number for
professional and special services was $10.866 million on a base of $280
million, so that is 3.9 per cent.
The Chairman: Honourable senators, unless there is a disposition on the part of
the committee to have another meeting on these Supplementary Estimates or to
recall these witnesses, I will thank them for their appearance today.
Mr. Neville: This may be my last appearance before this committee in respect of
discussions on Supplementary Estimates. I will be assuming the duties of Deputy
Comptroller General at the beginning of December. Mr. Keith Coulter, who has
recently joined the Treasury Board Secretariat, will be presenting the
2000-2001 Main Estimates, and, if required, the Supplementary Estimates (B),
later this year.
It has been an honour and a privilege to have appeared before this august group
and, on numerous occasions, to present and defend both the Main Estimates and
the Supplementary Estimates for funding. I have always tried to address all
concerns and questions of senators to the best of my abilities. I have found
our exchanges to be both challenging and stimulating, and I mean that
sincerely. Thank you for the privilege to be here.
Senator Cools: For our side, Mr. Chairman, I thank Mr. Neville and also Mr.
Lieff. We especially wish Mr. Neville well in the next phase of his career. I
have no doubt he will do a stunning job in that role.
The Chairman: Let me thank you both for today. As always, you have been
Honourable senators, I am informed that we could have a draft report to consider
by this time next week. I suggest that we meet in camera next Tuesday at 9:30
to consider that draft report on Supplementary Estimates (A).
Senator Cools: Perhaps we should have a motion to approve these estimates?
The Chairman: Our approval is not required. We may approve the draft report when
it comes forward.
Senator Cools: There are two issues: One is to approve the Estimates; the other
is to report the approval.
The Chairman: No, I think not, senator. I asked specifically whether a motion is
required to approve the Supplementary Estimates. What gets approved is the
appropriations legislation that follows, is it not?
Senator Cools: I am under the impression that, when we report back, somehow or
other we must express the opinion of the committee.
The Chairman: We will do that.
Senator Cools: I would call that an approval. I would be very distressed if the
committee expressed disapproval.
The Chairman: At our next meeting we will vote on whether to approve the draft