Proceedings of the Standing Senate Committee on
National Finance

Issue 6 - Evidence - Meeting of November 22, 2006


OTTAWA, Wednesday, November 22, 2006

The Standing Senate Committee on National Finance met this day at 6:15 p.m. to examine the expenditures set out in the Supplementary Estimates (A) for the fiscal year ending March 31, 2007.

Senator Joseph A. Day (Chairman) in the chair.

[English]

The Chairman: Honourable senators, I call this meeting to order. Welcome to another meeting of the Standing Senate Committee on National Finance. This one is a bit different from what we have been dealing with in the past. The committee begins its study of Supplementary Estimates (A), which were tabled in the Senate on October 30, 2006. The Supplementary Estimates (A) directly support an appropriation act. We sometimes refer to it as a supply bill. The estimates identify the spending authorities and the amount to be included in the subsequent appropriation bill or supply bill when it comes before the Senate. We deal with the supplementary estimates and then have a report, like a pre-study. You will see in the Supplementary Estimates (A) that there is a proposed Schedule 1 to the appropriation bill. When the supply bill comes down, that schedule will form part of it.

Today, we welcome Treasury Board Secretariat officials, Mr. David Moloney, Senior Assistant Secretary, Expenditure Management Sector; and Laura Danagher, Executive Director, Expenditure Operations and Estimates Division, Expenditure Management Sector. At a future meeting, we hope to hear from the President of the Treasury Board, the Honourable John Baird.

Mr. Moloney, please proceed.

David Moloney, Senior Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: My colleague, Laura Danagher and I are pleased to be here with you this evening to discuss the 2006-07 Supplementary Estimates (A).

With the committee's agreement, I will make short preliminary remarks, after which we will be happy to take your questions and comments.

We are here this evening, as the chair explained, in support of the government's request for additional expenditure authority from Parliament for this current fiscal year, 2006-07. The government must table documents, such as the Main Estimates, at the beginning of a fiscal year and supplementary estimates during the course of a fiscal year in order to seek and receive such expenditure authority.

As you know, in May of this year, Budget 2006, which was presented to Parliament by the Minister of Finance on behalf of the government, outlined the government's planned spending of $223.6 billion for this year, 2006-07. The Main Estimates, which were tabled by the president of the Treasury Board one week before the budget — unusually, as I will come back to — outlined specific spending plans of $198.7 billion. These plans were within the broader budget plan and requested appropriations or expenditure authority against these specific plans.

Together with the supplementary estimates that are now before you and before Parliament, the total amount requested to date for 2006-07 expenditure authority is now up to $207.9 billion.

The supplementary estimates that we are reviewing this evening reflect the total of $9.2 billion in budgetary expenditures. This includes $5 billion for which the government is now seeking Parliament's approval through, as the chair described, a supply bill. This latter figure represents new commitments made by the current government in the May 2006 budget and also through subsequent decisions that the government has taken, as well as policy initiatives from previous budgets that have been reconfirmed by the current government.

The remaining $4.2 billion that is displayed in these supplementary estimates represent statutory spending, that is, spending that is authorized by Parliament through separate legislation already given Royal Assent. This includes, for example, the Universal Child Care Benefit, the Guaranteed Income Supplement payments and transfers to other levels of government, such as health transfer payments.

In total, there are four key government commitments to Canadians' priorities that account for approximately 44 per cent of the total spending proposed in these supplementary estimates. For example: $1.6 billion for the Universal Child Care Benefits program; defence spending of $955.9 million; an investment of $873 million in the Canadian Agricultural Income Stabilization program; and transfers to provinces and territories for early learning and child care programs that amount to $650 million.

As well, in order to preserve and strengthen the health and security of Canadians, the government is proposing the following spending: $153 million dollars in funding for public security initiatives; $65.6 million to address issues relating to increasing passenger volumes in airports; and $52.9 million to respond to a potential avian or pandemic influenza.

Before concluding my opening statement, I would like to touch on a few specific details in order to make the most of our discussion period.

[Translation]

First, because the estimates must be tabled according to timelines approved by Parliament, it is always difficult to coordinate the timing of a budget, which sets outs the government's plans, and the estimates, which provide detailed information on these spending plans. This was further complicated this year by the timing of the election.

In particular, the Main Estimates were tabled the week before the budget and therefore could not reflect spending announced in that budget. Many of these plans are now being reflected in the supplementary estimates.

Second, Mr. Chairman, on September 25, a strategy was announced to secure one billion dollars in savings over the next two years, as promised in the May budget.

Savings are being achieved through a combination of tighter management of spending and savings from government programs.

These supplementary estimates reflect a number of specific Expenditure Restraint initiatives announced on September 25 and appear as offsets to supplementary spending authorities included in these supplementary estimates. The total amount reflected for expenditure restraint savings in these supplementary estimates is 223.6 million dollars. The balance of the two-year Expenditure Restraint Exercise, in the amount of 777.3 million, will be reflected in future estimates or in reductions to planned spending that had not yet been proposed to Parliament for addition to departmental reference levels.

Third, machinery changes made to government organizations earlier this year are also reflected in these supplementary estimates.

While some were reflected in the 2006-07 Main Estimates, tabled in April 2006, others required further approvals and were deferred to future estimates. To the extent possible, these additional machinery changes are included as transfers in these supplementary estimates.

However, since, to date, we have only interim supply in place for 2006-07, the balance of the transfers will appear in the Supplementary Estimates (B), assuming that full supply for the Main Estimates is approved in December.

[English]

Mr. Chairman, I will conclude my remarks at this point. I will be pleased to address your questions or comments at this time.

The Chairman: You talk about the restraint savings of $223 million that appears in these supplementary estimates, and you indicate there will be a further $777.3 million later on. That $1 billion in restraints and reallocation over two years is not statutory, is it? It is not absolute. It is just a target. Is that a good way to put it? You say there will be $777 million, if they proceed and meet the target, I presume?

Mr. Moloney: It is correct to say they are not statutory. The other $777.3 million is, however, more than a target. If I could try to explain: The budget presented in May committed the government to find $1 billion in each of this year and next year, within existing planned spending, as a partial source of funding the new initiatives that were set out in that budget.

On September 25, the president of the Treasury Board and the Minister of Finance announced $1 billion of specific measures over two years. We are saying here that of that $1 billion in specific measures, which are not a target but were set out and are specifically listed in a news release put out at that time and on the website, a little over $200 million are specifically shown in these supplementary estimates. Those represent specific amounts where the government had come in the Main Estimates and had requested spending authority. The government is now coming back to Parliament and indicating, ``We no longer plan to spend that $223 million; because we have decided to save those amounts and use them elsewhere; and because we have already asked Parliament to authorize that spending, we are coming back to show those amounts will not be spent as they had been indicated. Being that we have appropriations authority, they are a source of funds within a vote, should the government be proposing new spending.''

What happens with the balance of the $1 billion? First, the $1 billion was over two years, not one. Thus, some of those amounts, as we are indicating, could be reflected in future estimates. Importantly, though, some of the amounts — the $1 billion that was identified — were planned, cabinet had approved, Treasury Board had approved, but the government had not gone so far as to come to Parliament and include those in an appropriation bill. Therefore this was planned spending that we will not go ahead with and is available in the fiscal framework for another purpose. That is why we have a double explanation.

The Chairman: There was an expenditure review program in place before the change of government. Is some of that planned reduction a part of that earlier expenditure review exercise?

Mr. Moloney: No, this is an additional round of measures. In Budget 2005, which announced savings totalling $11.9 billion over five years, those amounts were in the case of the departmental savings and were already removed from reference levels. Therefore, that spending was not proposed to Parliament in respect of this year. Certain amounts have been reflected in the supplementary estimates, but one portion of those savings — procurement savings — had not yet been detailed by the department so we are coming back to Parliament to show how that savings target will be met.

The amounts referred to in this budget and on September 25 are additional measures over and above.

The Chairman: That earlier program has about three years to run. Will it continue?

Mr. Moloney: Yes. It has three more years beyond this year to run.

Senator Mitchell: I am interested in the lack of funding by this government for the environment, Kyoto and climate change. We have been told by various people in the House and by the Leader of the Government in the Senate that the climate change programs were cut because they were inefficient and were not working. I have a Memorandum of Understanding to the Minister of Natural Resources Canada as a result of an Access to Information and Privacy, ATIP, request on February 24, 2006, which states all Natural Resources Canada programs were assessed to be on track to meet or surpass their objectives. The energy conservation and renewal programs were found to be effective in stimulating emission reductions. They will contribute over 20 megatons in reductions by 2010, mainly at a cost of less than $10 per tonne, which is extremely cost effective.

This is the information that the minister seems to have received, in spite of the fact that we have been told differently in the Senate. I know that is not your concern, but could you tell me whether you are aware of any documentation generated by departments to support the cutting of climate change programs that would contradict this memorandum to the Minister of Natural Resources Canada, which clearly supported these programs?

Mr. Moloney: I am not in a position, senator, to comment, because I have not been involved in the area of the advice provided to ministers or the basis of decisions.

Senator Mitchell: It is a financially-driven decision.

Mr. Moloney: A portion of the climate change programming has been provided with interim funding, which has been requested in these supplementary estimates, a total of $82.8 million, as the government transitions from the existing climate change programming in place toward implementing its clean air and other policies.

Senator Mitchell: What was that figure last year? I do not see it in the estimates before us. How much of a reduction does that represent?

Mr. Moloney: I am sorry, senator, we do not have that figure but we will obtain it for you.

Senator Mitchell: Thank you.

On page 223, I notice that contributions in support of electricity distributors to promote the sale of electricity from emerging renewable energy sources have been cut by $10.5 million. As well, contributions in support of Technology and Innovation Initiative have been cut by $10 million. I find that very distressing. Clearly, one of the huge alternatives for a knowledge-based economy of the future would be technology and innovation, and yet the funding has been slashed. Is there any way to find out what the support was for that kind of decision? Were there any studies or was there an objective evaluation or analysis to support that kind of cut in such an important area?

Mr. Moloney: Clearly, that question will have to be directed to the Minister of Natural Resources Canada.

The Chairman: Could you provide an explanatory note on that?

Mr. Moloney: We do not provide specifically on that.

The Chairman: They might have something in terms of the background, senator.

Senator Mitchell: That is what I am looking for.

Mr. Moloney: I am sorry; we will have to come back to you on that. It is not specifically shown here, as I understand it. It is not part of the $1 billion exercise of this year. If there was a change in funding level, it would have been pursuant to the government's climate change policy decisions.

Senator Mitchell: I would like to see if there is some documentation to support that.

The minister had made a great deal of this idea that we need a made-in-Canada environmental policy, and then we got the Clean Air Act, which was not any kind of policy at all, really. Now, we find that we are getting a made-in- Nairobi Canadian energy policy because the minister is making it up as she goes along. She has said suddenly that now we are committed to Kyoto. Would it be fair to say that there is no budgetary commitment in these estimates for this new, yet undefined, commitment to Kyoto-type programs or strategies? She made that announcement somehow in Nairobi, Kenya, as a result of international pressure, not pressure from Canadians — although there is plenty of that.

Mr. Moloney: There is no funding request in these supplementary estimates for new environmental programming.

Senator Mitchell: The minister has made a great deal of this idea that she will consult with Canadians and with industry to develop targets, although we have been consulting for 15 or 20 years. Where, in this budget, is such a consultative process to be funded? I notice that the National Roundtable on the Environment and the Economy program expenditure is $4.8 million. That may seem like a lot of money in some senses, but to consult to get the kind of detail and policy that she is implying she would like to get, it seems to be a relatively small amount of money. Is that because she really does not have to consult much, because all the consulting has been done?

Mr. Moloney: The only relevant comment I would make is that the department has an existing reference level from the Main Estimates. What is in front of you is only asking for extra amounts for specific uses.

Senator Mitchell: The previous estimate is $4.7 million and they are asking for $82,000 more to make it $4.8 million.

Mr. Moloney: Yes, it is for that particular agency.

The Chairman: I do not have to remind Mr. Moloney and Ms. Danagher that they do not have to answer any government policy questions, and these questions are close to policy issues.

Senator Di Nino: They are pretty well all policy questions, Mr. Chairman.

Senator Mitchell: I would like to ask the questions, whether they want to answer them or not. We would like to hear from the minister before the committee, but she would not come. If she had a policy, I suppose she would come.

Senator Nancy Ruth: I have been interested in the cuts to Status of Women Canada, which seems to have brought some controversy in the country. That is strange for a budget line item that is only $25 million — half the budget of the National Gallery of Canada per annum. However it has done so.

What was the experience of Treasury Board around the magnitude of administrative cuts? When there is a percentage cut to a program, such as Status of Women Canada, although it is not much money, do you have any history of how effective a program can be when such a slice is taken out of it?

Treasury Board must have been doing this for decades, I would assume. I am wondering what kind of experience you have of how well programs can run when these kinds of cuts are continually sliced out; there will be more next year, I understand.

Mr. Moloney: It may be important to clarify that there were no specific targets applied, so there was not a percentage cut that was applied through that exercise. Information is brought before Parliament by the government regarding decisions it has taken to reduce specific budgets in specific areas. There is no across-the-board aspect here.

Senator Nancy Ruth: Do you have a historical understanding that when you slice off too much of that, programs cannot run?

Mr. Moloney: It is fair to say we have the historical experience of a need, over much of the current decade, of departments coming forward and requiring additions to their operating funds, where those funds had been reduced more than was sustainable in the long run. We refer to that in the Treasury Board Secretariat, TBS, as program integrity funding. Certainly, TBS spends a fair bit of time assessing the need of departments for operating funds for all sorts of purposes.

Senator Nancy Ruth: There was an article in The Globe and Mail — in September, I believe — about the costs of the administration of the child care benefit, which was estimated at something like $41 million for this year and then reduced amounts for the next several years. There was allusion that part of that funding was for advertising: the existence of the program, the need to apply, et cetera. I believe I am correct in understanding that maybe 90 per cent of parents have applied for this. It is a huge amount. It is almost universal, I believe. I was wondering about the administrative costs in a program such as that. Where will they go and how much of that $1.6 billion will be sliced off in those administrative costs? How does one get efficient and where does one cut? How does it all work when slicing of administrative costs starts?

Mr. Moloney: These supplementary estimates indicate $1.6 billion of statutory benefits to Canadian families that began on July 1, 2006 for the Universal Child Care Benefit. There are separate voted amounts requested that total $27.1 million now, which will be all of the administration costs associated with that benefit program, including advertising.

It is true that most parents do not need to apply, and 95 per cent of eligible families automatically receive the benefit by virtue of being registered in the Canada Child Tax Benefit database, but there are a remaining 5 per cent of families who must actively apply for this benefit, so there has been some advertising.

Senator Murray: Is it higher incomes?

Mr. Moloney: For one reason or another, families are not eligible.

Senator Ringuette: It is always a pleasure to have both of you here. I have three questions. If you would go to the booklet on page 166, about the middle of the page, it says, ``Additional resources related to a reallocation of the Ministry's regional responsibility, $275,000.'' What is that for?

Mr. Moloney: This amount refers to the fact that the Minister of Foreign Affairs is tasked by the government with regional representation for Nova Scotia and Prince Edward Island, so these are funds that are associated with an additional ministerial role in the amount of $275,000. These are operating funds.

Senator Ringuette: It is my understanding that there are regional ministries and, just like in the previous government, they have a budget allocation for functioning. Are you saying to us today that this additional $275,000 is specifically for only one minister, Minister MacKay?

Mr. Moloney: Again, this minister has responsibility for a regional agency as well.

Senator Murray: Surely that would be covered under Atlantic Canada Opportunities Agency, ACOA.

Mr. Moloney: It is not. These are provided through a minister's principal department, if you like.

Senator Ringuette: We both have the same question on this one.

Senator Murray: I looked quickly under Public Works and Government Services to see whether Senator Fortier likewise had regional responsibilities.

They are not giving him anything. I took a quick look under ministry summary; maybe I should be looking somewhere else. Is there anything in the supplementary estimates booklet for Senator Fortier for his regional responsibilities for the Island of Montreal? I do not see it. Are there other ministers who have this kind of vote? Is this something new?

Mr. Moloney: This is not new. Some of these items would have been reflected in the Main Estimates, and there would have been changes.

Senator Murray: I thought the reference in the Main Estimates had to do with the fact that Mr. MacKay was also the ACOA minister, but perhaps not. This has to do with the fact that he has a political responsibility as regional minister for Prince Edward Island and Nova Scotia; right?

The Chairman: Do you have page 243? You see the regional office, $275,000, about halfway down the left-hand side. That would be for Senator Fortier's regional office, so he can do his work as minister responsible.

Senator Murray: I suppose this was in previous estimates under previous governments, was it? I know there have been regional offices. Do they come out of the departmental estimate this way?

Mr. Moloney: Yes.

Senator Murray: I would have thought they come under Privy Council Office, PCO, or something. It has nothing to do with Public Works. It is quite incidental.

Senator Ringuette: It is political responsibility.

Mr. Moloney: Another example would be, under Justice Canada, the regional responsibilities for Manitoba that the previous Minister of Justice had not had.

Senator Murray: Because he or she did not come from Manitoba, but he or she came from somewhere. Who was it?

Senator Stratton: Then we had the Treasury Board minister.

Mr. Moloney: Under the guidelines for a minister's office, ministers who are assigned regional responsibilities in addition to a portfolio by the Prime Minister are entitled to a certain amount of extra salary.

Senator Murray: Salary?

Mr. Moloney: To cover staff: a regional affairs director, a communications adviser, who will assist the minister in their role of senior government spokesman for the region.

Senator Murray: It is odd. I am sure it was the same way under previous governments, but I would have thought some central vote like PCO would have covered it.

The Chairman: I have a further question on that. We asked the same question last time you were here, and my recollection was that that was Minister MacKay's responsibilities for ACOA, but that is not so.

Mr. Moloney: There would be such amounts reflected in the Main Estimates.

Senator Ringuette: Under ACOA?

Mr. Moloney: Yes. This is an additional amount. It would be on a principle of accountability for the funds; but it is not requested centrally, it is shown to the individual minister.

Senator Ringuette: I was looking at that additional amount, and I found that odd, because we were looking at cuts to the status of women, to literacy programs, and most especially we are having cuts for student employment programs. When considering this additional $275,000, I was thinking, ``How can we, on one hand, add more money for political responsibility and, on the other hand, remove funds from very important programs?''

On page 183, 10a and 15a and (S), operating expenditure to authorize a transfer of $3.5 million from Human Resources and Skills Development, HRSD, vote 15; and $2.3 million from Human Resources and Skills Development again, under vote 1, for the purpose of this vote, but transfer where? We are looking at almost $15 million.

Laura Danagher, Executive Director, Expenditure Operations and Estimates Division, Expenditure Management Sector, Treasury Board of Canada Secretariat: On page 188, essentially money is being transferred from HRSD into Social Development for a specific purpose. You will see at the bottom of the page, under the section called ``Transfers,'' that they detail the purpose for which the money is being transferred. It is actually money being transferred from one organization to another.

Senator Ringuette: For what purpose? Could you read it, please?

Ms. Danagher: Yes, it says that the $2.3 million is for ``the training of employees to achieve high service delivery standards for Canadians less funding for the administration of the assistance to victims of abuse programs.'' There has been a positive increase of $2.4 million, less about $68,000, so it nets out to $2.325 million. They also have a reallocation of resources from their vote 15 into vote 10. It is going between votes.

Senator Ringuette: And that means what?

Ms. Danagher: Within the organization, their spending falls under their operating expenditures as opposed to a contribution program or a grant program.

Senator Ringuette: What is the purpose of those two different votes?

Ms. Danagher: In this case, it relates to the fact that the early learning and child care program became a statutory program as opposed to a voted program, as a result of a decision of the government. That money, because it was under a contribution program and is now treated as statutory, was surplus funding in contributions; so they have transferred it over to offset operating costs. It is just a realignment between two votes.

Senator Ringuette: Earlier this week, we heard about a problem with regard to transfer for training in Ontario. I was wondering if some of these monies were for that purpose.

Ms. Danagher: As far as I know, no.

Senator Ringuette: No. We have nothing in these supplementary estimates for the training agreement for Ontario?

Mr. Moloney: There is an amount that is funding related to work force adjustment costs for the transfer of employees to the provinces as a result of a labour market development agreement with Ontario in an amount totalling $8.5 million. That is not the training, but that is the transfer to Ontario that you might be thinking about.

Senator Ringuette: I find the amount to be very odd. That would be an additional amount, probably.

Ms. Danagher: This is related to the transfer of the actual agreement over to Ontario. It has become a provincial responsibility. The funds, the $8.5 million, will be used for employee separation costs according to the federal workforce adjustment directive and the costs of financial and pension counselling offered to employees. This agreement will transfer effective January 1, 2007. It is for the design and delivery of part 2 of the Employment Insurance, EI, funded programs and services. It is not the training that you are talking about.

Senator Ringuette: No; it has nothing to do with the agreement with the Province of Ontario to supply training to unemployed workers. Looking at the amount, $8.2 million was like ``mission impossible'' from the start.

Mr. Moloney: There is a small amount relating to some of the operating expenditures associated with that transfer of responsibilities. It is not the amount in respect of the actual training, no.

Senator Ringuette: That is understandable.

On page 188, the last item is ``Transfer to Canada Revenue Agency — For the National Collection Services and Collection Litigation and Advisory Services as a result of government restructuring.'' That is over $18 million. We have heard in this committee, from the Auditor General's report, that a huge amount of money was going uncollected. Canada Revenue Agency, CRA, said that they needed additional staff. Why are we removing $18 million for the purpose of collecting unpaid taxes?

Mr. Moloney: Effective August of 2005, control and supervision of the National Collection Services and the Collection Litigations and Advisory Services was transferred from Social Development Canada, within HRSD, to the Canada Revenue Agency. Resources are being transferred further to that transfer. Currently, approximately 95 per cent of all of the government's collection activities have now been centralized within CRA. This was an arrangement. There is a matching amount, which you will find received by Canada Revenue Agency, at page 127. We are doing this in the supplementary estimates since that transfer took place.

Senator Ringuette: We are now saying that CRA is responsible to collect, essentially, payroll deductions for EI.

I am trying to see the link here. What would be the amount of money that HRDC would need to collect, which would now be referred to the collection services of CRA? This is very practical; I am trying to identify what that would be.

Mr. Moloney: In fact, senator, I believe that we are talking about management of the government's receivables or debts that are owed to the government. That is, these organizations or services had the task of trying to recover amounts that were owed to the government in respect of the programs that Social Development Canada was operating.

Senator Ringuette: Such as Canada Pension Plan, CPP, and EI?

Mr. Moloney: Yes, the various benefits programs. If there happened to be an overpayment or mistaken payment, that function has been centralized, broadly speaking, in Canada Revenue Agency across all of the various kinds of collection activities, or 95 per cent of them.

Senator Ringuette: I suppose the staff assigned to do that within HRSDC have also been moved with the funds under this vote?

Mr. Moloney: That is correct.

Senator Ringuette: To do the task?

Mr. Moloney: That is correct.

Senator Di Nino: Mr. Moloney, Ms. Danagher, good evening. You listed four key government commitments, the Universal Child Care Benefit program, defence spending, the Canadian Agricultural Income Stabilization, CAIS, program, and the transfer to the provinces and territories. Is that for the present fiscal year, or are these one-offs that may require some additional funding as we go forth?

Mr. Moloney: Each of these amounts is only in respect of the current fiscal year, 2006-07. Each of these items is part of an ongoing commitment or program. Two of them, in fact, are statutory in nature. A multi-year defence spending plan has been outlined in each of the last two budgets. This is the last year of the early learning and child care programs. The new benefit that we spoke of earlier is going forward from there.

Senator Di Nino: That is from April 1. Is this up to March 31, or expenditures one would expect to require up until March 31?

Mr. Moloney: Yes, only.

Senator Di Nino: I want to inquire about the cost of the repatriation of Canadians from Lebanon. I thought I had found it under Foreign Affairs and International Trade at page 166. There is the funding of the cost of evacuating Canadians from Lebanon, $63 million or more. Is that a final figure to a degree that you can tell us, or do we expect it to be something different?

Mr. Moloney: Those are amounts that the department of Foreign Affairs and International Trade is seeking in addition to the amounts that it had available to it through the Main Estimates, which it needed for this specific purpose. That department is still assessing whether there are any other amounts that it would be required to pay out subsequent to when we finalize these supplementary estimates. The department is conducting an accounting of the total amount of spending that it would have taken out of its existing resources. This amount also does not have any bearing on any amounts that other departments would have incurred, such as the Canadian International Development Agency, Citizenship and Immigration Canada and National Defence. This is an important but partial amount, in terms of what the overall cost of the exercise would be.

Senator Di Nino: Would we have any idea what the total cost would be?

Mr. Moloney: I do not believe that such an accounting has been finalized, no.

Senator Di Nino: Would it be possible to get a number?

Mr. Moloney: That accounting certainly is underway. I am reasonably certain, although we will double-check this for you, Senator Di Nino. We will inquire as to the status of when the departments believe that they may have such a number, but they do not yet, to my knowledge.

The Chairman: Who decides when to do a horizontal item? Could you decide to do a horizontal item for Senator Di Nino and his colleagues on that?

Mr. Moloney: Our practice has been, and actually it was Ms. Danagher who put this in place a few years ago, that any time more than one department or agency comes forward for a linked purpose, we are now in the practice of flagging this for Parliament.

The Chairman: That is very helpful.

Mr. Moloney: In these particular supplementary estimates, no other department has come forward for extra resources for that purpose.

Senator Di Nino: Surely we would have a better idea of the total cost if there was some way of commingling these costs from the different departments. You made a comment that this is over and above the funds already available to them through the Main Estimates. It would be nice to get an idea of what these total costs would be.

Mr. Moloney: That is a fair statement, and I do believe the ministers in question would likely be coming forward with such an overall cost estimate. They are still finalizing the bills, ensuring, for example, that there are no remaining liabilities.

Senator Di Nino: Thank you. I appreciate that.

The Chairman: This horizontal idea is very helpful to us.

Senator Di Nino: As opposed to vertical.

The Chairman: Horizontal goes from department to department, and it is back at the front end. Perhaps our viewers at home do not understand that, and we should not use jargon or lingo. Supplementary Estimates (B) come out at the end of the year. If you decided to do a horizontal item for us, so that we could see the full cost through all the departments, do we, ourselves, have to remember that in Supplementary Estimates (A) there was $63 million that got hidden away, or because it is a yearly thing, will you pick that up for us?

Mr. Moloney: Mr. Chairman, the convention, in terms of the documents we bring forward, is to support the actual amounts that are being requested to be voted upon. Should two or three departments come forward in Supplementary Estimates (B) to ask for funds for that purpose, we would bring those together, but we would not normally look back to Supplementary Estimates (A) or Main Estimates. We could, for example, in the text, draw that to Parliament's attention. The alternative would be that in the departmental performance reports, which will come forward next fall to summarize operations, that that will be an opportunity for the government, in the case perhaps of the departmental performance report for the lead department, to bring that kind of information together.

Senator Di Nino: I would appreciate a follow-up on that through you, through the staff, Mr. Chairman.

I have a question again on the four key government commitments that were referred to before. You have defence spending of $955 million. I wondered if you had a breakdown of that. What does that represent? If you could tell me the page number, I will look for it.

Mr. Moloney: Page 13 shows the principal items that were included within the $955.9 million. It puts it into the context of the budget commitments, and then sets out funding for a total of $418.1 million, for funding to strengthen the Canadian Forces' independent capacity to defend Canada's national sovereignty and security, referred to as Canada First.

A number of funding gaps are identified: training and operational readiness; repairs and maintenance of vehicles and equipment; rising fuel and utility costs; aging infrastructure; and supporting the expansion of the targets for the regular force staffing levels, as well as the reservist staffing levels. There is an additional amount of $202.6 million for support for the Canadian Forces' role in Afghanistan, $89 million of which is for Canada's continued leadership role in Afghanistan for the Canadian Forces and $113.6 million of which is for enhancements to the mission. This amount is devoted to providing additional protection for military and civilian personnel, transportation of heavier tanks, motor systems, et cetera.

There is a further amount of $177 million for increases to pay and allowances for Canadian Forces members, effective this year. Finally, there is $158.1 million to address the initial elements of some major capital acquisitions, such as strategic airlift capability, medium-sized military trucks, medium-to-heavy lift helicopters and tactical airlift capability.

Senator Di Nino: Thank you for that answer. Mr. Chairman, I am delighted that I asked the question, because I was hoping that the answer would be exactly what we got: It is being spent to support our troops in Afghanistan. That is probably one of the more appropriate expenses in this whole presentation.

Senator Murray: I do not have any profound questions or policy questions. It is simply a matter of your trying to help satisfy my curiosity on some small points and/or to jog my memory.

I see a note in the Library of Parliament briefing notes that in the Main Estimates for 2006-07, $198.7 million includes $100.7 million for the Canada Revenue Agency and $42.8 million for Parks Canada Agency from the 2005-06 non-lapsing appropriations. In other words, they were able to carry over money that they did not spend.

I should know this, but you will have to tell me. Does the ability to carry over funds extend to all departments and agencies of government, or is this something unique to these two agencies, which we set up a few years ago?

Mr. Moloney: Yes, and yes. Ms. Danagher can explain it better than I.

Ms. Danagher: Parks Canada and the Canada Revenue Agency have a two-year appropriation authority. They are in Schedule 2, the appropriation bill, which allows them to carry over any unexpended funds into the next fiscal year. If you look at the proposed Schedule 2, page 63, you will see that the appropriation authority for this year expires at the end of March 31, 2008, whereas for every other department, the appropriation authority expires at the end of March 31, 2007.

Ms. Danagher: The operating budget carry-forward flexibility provided to all departments allows them to carry forward up to a maximum of 5 per cent of their Main Estimates voted amounts, but only in their operating vote. There is also a capital carry-forward mechanism.

Senator Murray: How does that work, in your opinion as managers?

Ms. Danagher: It works very well.

Senator Murray: It is an improvement, in terms of financial management.

Ms. Danagher: Yes.

Mr. Moloney: The idea is to avoid the incentive to expend money that happens to be on hand, the so-called ``March madness.'' If a manager is able to carry forward, and 5 per cent is an appreciable amount, it promotes better financial management.

Senator Murray: Has it worked so well that you are thinking of giving them even more latitude in that respect, or is the current latitude sufficient?

Mr. Moloney: We would typically see something around 3 per cent of the maximum amounts on average across the government. It is not always used to the maximum, so we do not see an automatic float. We see evidence that it is an important tool and is used.

Senator Murray: It is a force for economy. Does it apply to our vote for the Senate and the House of Commons?

Ms. Danagher: As long as it is a voted authority, yes it does apply.

Senator Murray: I have been interested in the Canada Revenue Agency and Parks Canada since former Senator Bolduc and I spoke and voted against the creation of those agencies in the first place.

Senator Mitchell: Some of the things we remember!

Senator Murray: At page 127, under Canada Revenue Agency, we have $26 million under vote 1, ``Funding to address legislative, policy, and operational initiatives arising from 2005 Federal Budget. Below that, we have $1 million to ``address legislative, policy, and operational initiatives arising from the 2004 Federal Budget.'' What is that all about? I cannot remember any of the legislative, policy and operational initiatives arising from the 2005 budget and, I do not think anyone else can remember, not to mention the 2004, which is ancient history.

What does it mean, ``to address'' them?

Mr. Moloney: There were a number of specific measures contained in Budget 2005 and the Canada Revenue Agency has requested funding for the actual implementation. The most significant of these, dollar-wise, is to discourage what is referred to as ``aggressive international tax planning,'' through international transactions and the use of tax havens.

Senator Murray: Do you remember the retroactive legislation they brought in? You were defending it at the time because it was your government.

The Chairman: That is why I am so strongly against it now. You convinced me.

Senator Murray: What is this again?

Mr. Moloney: It is aggressive international tax planning, which refers to international transactions in the nature of tax havens.

Senator Murray: What does that mean? Does it mean investigating them?

Mr. Moloney: There will be additional audit and enforcement activity. The expectation is that that audit and enforcement activity will bring back sufficient revenues to the government to offset this expenditure. However, the government must come forward to Parliament to request the funds to engage in those activities.

Senator Murray: Do you mean the specific activities? They are asking for $26 million?

Mr. Moloney: Yes.

Senator Murray: Once we vote, it is voted.

Mr. Moloney: Yes, and the government is asking for this money, the largest portion of which will be for activities around this aggressive international tax planning activity auditing and enforcement related to that. There are other measures from the 2005 budget, one of which included a range of disability tax measures contained in the budget. There is requirement for funding to administer the disability tax credit that was designed to improve fairness of tax measures for persons with disabilities. At least 85,000 additional disability tax credit applications are expected to be filed over a period of four years. There were measures related to tobacco compliance enforcement, such as intensification of the audit program of tobacco manufacturers, increase in monitoring of growers, and introduction of tracking mechanisms. The CRA is also seeking funding within this amount to address initiatives related to some previous budget measures, including completing the operation of the relief for heating expenses, from Economic Statement 2000, and for operating the Saskatchewan sales tax credit.

Senator Murray: The Saskatchewan what?

Mr. Moloney: The Saskatchewan sales tax credit, which is a provincial credit modeled on the federal GST and harmonized sales tax credit. CRA implemented this credit in 2000-01 as part of the federal government's harmonization activities with the provinces and territories.

Senator Murray: Saskatchewan has not harmonized, have they?

Mr. Moloney: CRA is implementing this on behalf of the province, so there are system requirements present.

Senator Murray: Let us come back to aggressive international tax planning.

Mr. Moloney: Yes.

Senator Murray: The argument of the government is that this aggressive international tax plan will bring in spending money.

Mr. Moloney: The expectation is that the increased audit and enforcement that would be funded by these monies would in fact find the government more tax revenues that would otherwise escape.

Senator Murray: Maybe we should flag that and get a review of it in a year's time.

The Chairman: Funding 2004 initiatives seem like retrospective budgeting. Why would we budget that way? If these are operating, why not just put it in as operating? Why do we have to refer back to something you do not tell us much about, except that it is three years old? There are lots of programs in many departments that have been ongoing for three years, but they do not go back the three years.

Mr. Moloney: This has been a convention based on the fact that there tends to be a collection of smaller items, in terms of tax administration, that Canada Revenue Agency brings forward.

In the case of the 2004 measure, in fact, the item is for contributions funding provided under the charities regulatory reform. This would be further operating funding that the department had not seen the need for up until now and is coming forward in implementing that particular measure.

Senator Murray: Coming back to CRA, one of the items is the funding for the administration and delivery of the Universal Child Care Benefit to Canadian families with young children, horizontal item, $16 million.

Of course, if we go to HRSDC on page 188, there is funding for the administration and delivery of the Universal Child Care Benefit to Canadian families with young children, horizontal item, $1.9 million there and below, under ``Statutory Appropriations,'' funding for the Universal Child Care Benefit, horizontal item, $1.6 billion.

I suppose I vaguely understand how the administration and delivery is a horizontal item because the responsibility would be spread out over a number of departments. I presume you have a note somewhere for this where this horizontal item appears. Is it on page 90?

Mr. Moloney: As an example, the Universal Child Care Benefit, as the chair points out, the bottom part of page 90, brings together the statutory payment, but there are in fact four departments that have operating costs in relation to that benefit.

Senator Murray: Is the $1.6 billion the money that goes out?

Mr. Moloney: Those are the actual payments to individuals.

Senator Murray: It started on July 1. Are we talking about $1.6 billion for three quarters of the fiscal year, July 1 to March 31?

Mr. Moloney: That is right. Those payments started to flow as of July.

Senator Murray: There is one other matter I wanted to address.

Under Parks Canada Agency on page 152, under ``Voted Appropriations,'' ``Funding for a settlement agreement with the Deh Cho First Nation that provides direction for land, resource and governance negotiations under the Deh Cho Process and which cooperatively resolves issues related to the review of the Mackenzie Gas Project,'' the figure is $233,000.

It is not indicated whether that is a horizontal item, but I seem to recall there is money elsewhere. I have not had a chance to look through the supplementary estimates. They are certainly in the Main Estimates. There must be money elsewhere for issues related to the review of the Mackenzie Gas Project.

I wonder, first of all, why Parks Canada is involved in this and where the rest of the money is. I am not begrudging a nickel of it, but I would like to know where it is. Why is Parks Canada being dinged for $233,000? I know what the Mackenzie Gas Project is and what the review is, I believe.

On page 222, there is a transfer to the Canadian Environmental Assessment Agency. The figure is $167,000 — in brackets — ``to increase federal, regional and science capacity in order to respond to the Mackenzie Gas Project and related resource development.'' It is not marked as a horizontal item. What do you have by way of notes on that?

Mr. Moloney: That was not a new appropriation. In the case of what appears on page 222, Natural Resources Canada transferring to the Canadian Environmental Assessment Agency, we had not picked that up as a horizontal item because it is not a new appropriation.

Parks Canada is the only part of the government coming forward and asking for new appropriations in respect of this particular project. There were amounts provided for under the Main Estimates.

The $233,000 that is being requested for Parks Canada is funding for a settlement agreement with the Deh Cho First Nation. In April, cabinet approved an extension of Parks Canada funding authorities to honour Canada's political commitment to implement an interim measures agreement with the Deh Cho First Nation. There would be related activities both this fiscal year and next fiscal year.

Senator Murray: Why are they completing this through Parks Canada?

Mr. Moloney: Five years ago, in 2001, as part of signing this interim measures agreement, there was a group created called the Nahanni National Park Reserve Consensus Team. This comprised of four Deh Cho appointees and three Parks Canada appointees.

The purpose of this team is to advise the minister responsible for Parks Canada on the management of the Nahanni National Park Reserve until a final agreement is reached with the Deh Cho and the reserve can be converted to full national park status.

Therefore, the funding this year will be used by Parks Canada to continue participating on the federal negotiations team in relation to negotiating the final agreement chapters on these national parks protected areas. It extends to wildlife, harvesting management regimes, water management, as well as consulting with the affected Aboriginal groups. This is one part of the broader exercise.

Senator Murray: Is it all part of the Mackenzie Gas Project?

Mr. Moloney: It is part of the work associated with this specific aspect and with the peoples.

Senator Murray: What happens if the Mackenzie Gas Project does not go ahead?

Mr. Moloney: This is pursuant to an interim measures agreement that is in place.

Senator Murray: I feel you have satisfied my curiosity very well. Thank you.

Senator Di Nino: On page 2 of your presentation, Mr. Moloney, you talk about health and security. I think I understand the first two bullets. The third bullet is for response to a potential avian or pandemic influenza. Although I applaud that, is this money being set aside in case there is such an event, or have we actually spent this money or part of it? If so, what have we spent it on?

Mr. Moloney: This, again, is a horizontal measure. The government is requesting funding to improve capacity to detect, as well as improve, readiness to respond to a potential avian or pandemic influenza outbreak. This extends to emergency preparedness, research, anti-viral stockpiling, and rapid vaccine development technology. The budget announced that $1 billion over five years would be allocated for this purpose and that $600 million over five years would go to specific measures. The Public Health Agency of Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research and Health Canada would be those administering the $600 million, with the balance being set aside for contingencies. These supplementary estimates are allowing departments to begin this process, which was provided for over five years in the budget.

Senator Di Nino: When you say ``stockpiling,'' have we begun to stockpile?

Mr. Moloney: Within this amount, there would be an amount of just over $20 million going to the Public Health Agency of Canada and $19.5 million to purchase additional antiviral drugs for the national stockpile. Included in that amount would be funds for some laboratory enhancement and research, improvements in vaccine readiness and emergency preparedness.

The Chairman: I would like to follow up on one question before I go to Senator Mitchell, and that is with respect to the almost $1 billion more for National Defence, which you discussed earlier.

In Budget 2005, there was $12.8 billion for the Department of National Defence, additional money for five years; in May of 2006, there was a further commitment of $5.3 billion over five years. We asked questions about this after the new government was in place, and they said that was in addition to that amount, so the $5.3 billion was in addition to the $12.8 billion. That is $18.1 billion more going to national defence.

With the $955.9 billion that is now being sought, where are we to date with respect to the additional $18.1 billion commitment by the government to provide for national defence? Do you have some information in that regard?

Mr. Moloney: I have some information. I am afraid to say that it is complicated by the wonders of accounting practices. The two amounts that you mentioned between the two budgets, Mr. Chair, cannot strictly be added one to the other. One was a cash amount that was provided in Budget 2005. The amount of $12.8 billion was the amount of cash outlays that were being committed to, because a number of years ago the government moved to, what is referred to as, accrual accounting for the purposes of our overall fiscal framework. In fact, in Budget 2006 the $5.3 billion was actually the budgetary amount over five years.

To be specific, the Budget 2005 figure of $12.8 billion represented a cash outlay to cover $7 billion over five years in budgetary spending. We actually need to add the $7 billion to $5.3 billion, so a total, over five years, of $12.3 billion in budgetary spending between the two budgets. There was $7 billion in Budget 2005; $5.3 billion in Budget 2006. Of those amounts, to date, DND has accessed a total of $1.1 billion of the budgetary authority. To date, the Department of National Defence has received $1.7 billion for cash expenditures in 2005-06 and 2006-07.

We have two ways that we need to look at cash and accrual amounts. Unfortunately, those two budgets referred to kind of headline numbers that were different. The bottom line again is that last year and this year there was $1.7 billion in cash; $1.1 billion in budgetary authority. Over the future years, there is still a remaining amount of $11.2 billion in budgetary spending.

The Chairman: I thank you for that. You indicated $7 billion over five years in order to achieve the promise of $12.8 billion over five years. Can you explain that in layman's language for me?

Mr. Moloney: The notion here is that when the government — and this would be the case for a private corporation as well — acquires a capital asset, such as a piece of equipment that perhaps costs $100 million, traditionally budgets are done on a cash basis. In fact, parliamentary appropriations are still on a cash basis. The government asks for $100 million, spends $100 million and books that amount. However, since a piece of equipment has a long life, the use of that equipment over a number of years is a more informative piece of information to a manager or to the national balance sheet, since we still have the piece of equipment there. If we have used it for a few years, generally speaking it still has a market value. The difference between the larger amount, or the cash outlay, versus what the government puts on its books as a cost part way through the life of that asset is the difference between those two numbers. If that asset is a plane or a truck, or whatever, and you run to the useful end of the asset, the two accounting systems come to the same number, but you would have spent $100 million on a piece of equipment in year one. That might have a value to you, which you recognize over, let us say, a 10-year life of a car, for example. That is the difference in the accrual approach. You might book, for example, $10 million a year and recognize that as the cost to the government of using that car, let us say, and the government still has the remaining amount as a useful asset on its balance sheet.

The Chairman: Why did you not discount the $5.3 billion in the same manner?

Mr. Moloney: That had already been done. It was reported that way initially.

The Chairman: That is quite interesting. Thank you very much for that explanation. It is helpful.

Senator Mitchell: I have a couple of questions on the Department of Finance Canada, page 153. I notice that, amidst the expenditures of millions and millions of dollars, there is an entry here for $1. I think it is $1. It is vote 10, on page 153, below the gap.

Ms. Danagher: Are you talking about the $1 amount that is in vote 10?

Senator Mitchell: It is just $1.

Ms. Danagher: It was voted already in the Main Estimates.

Senator Mitchell: Why would we vote for something that small, that is all?

Ms. Danagher: It is the nominal amount, because for dollar items you are trying to get the authority that is in the vote wording itself. The vote wording here talks about authorizing the minister to guarantee payments to the holders of mortgages. Essentially, to get something into an appropriation bill to approve that authority, it has to be assigned a nominal value; because an appropriation bill is a budget bill, it has to have a dollar value, so they assign a nominal value of $1.

Senator Mitchell: The guarantees have no actual expenditure.

Ms. Danagher: They do, because it is in the appropriation bill, and when the appropriation bill is approved and it gets Royal Assent, then that authority is there.

Senator Mitchell: They will be able to do it, but there is no actual expenditure of guarantees unless we lose some money?

Ms. Danagher: That is right. This is just recognizing there is a change in the liabilities of the Government of Canada and at this juncture there is no cash outlay.

Senator Mitchell: This must have been done before, so presumably there must be reserves against previous guarantees. Is there some experience that would indicate what portion you expect to lose or have to guarantee?

Ms. Danagher: I would have to refer you to the Department of Finance for the specifics of that.

Senator Mitchell: It must be somewhere in here.

Senator Murray: Is it one of those new initiatives?

Ms. Danagher: This is something that is in every year. The appropriations authorities are annual; they have to be re- voted every year. This authority expires at the end of March, 2007.

Senator Murray: Therefore, there is a dollar item.

Ms. Danagher: Every year there is a dollar item.

Senator Murray: I want to see the whole picture.

Ms. Danagher: For the picture of the liability, you would have to look into the public accounts.

Senator Mitchell: It looks like CMHC guarantees mortgage insurance. If at some point some of that mortgage insurance has to be realized, then the Government of Canada has to back that guarantee and then there would be an expenditure. Given that this is probably not the first time, this is not a new program, there must be experience with it. Either we have reserves set aside based on the experience of losses and/or there is actual expenditure to cover losses somewhere in this budget. Is that right?

Mr. Moloney: There is not in these supplementary estimates, nor necessarily in the Main Estimates if there were no expenditures required. As Ms. Danagher pointed out, the public accounts of Canada, which would normally be tabled in September, would record, in a balance sheet sense, any contingencies that the government has set aside against such obligations.

Senator Mitchell: Would that be in September?

Mr. Moloney: It would be each September, public accounts.

Senator Mitchell: In the case of the Department of Finance, salary and motor car allowance is $72,922. What portion of that is to pay the minister, and what portion of that is for car allowance? I would just be interested to know.

Mr. Moloney: I am sorry, we do not know.

Senator Mitchell: Purchase of domestic coinage, which is further down, is $83 million in the previous estimate and then we have added $42.9 million, for a total estimate of $126 million. What are we buying when we say domestic coinage? Is that the minting of coins? Why the extra $42 million all of a sudden? You would think that would be relatively predictable.

Mr. Moloney: Yes, it is the purchase of coinage.

Senator Mitchell: Would that be for loonies and toonies?

Mr. Moloney: I believe we have a note on that. Our understanding is that, essentially, the Royal Canadian Mint and the Department of Finance have been surprised by the extent of private sector demand for coinage this year. They have determined that about half of this can be met through new coin purchases by the department and about half through the Mint's coin recycling program, which has costs that are also charged to the department.

Senator Mitchell: Below that we have interest and other costs, an increase of $393 million. Is that because interest rates went up in the first part of the year? How much short term money do we have? Why would that be? Is this a prediction of what will happen? Are interest rates likely to stay the same or go down the rest of the year? Who knows? That is on about $34 billion of interest costs in total.

Mr. Moloney: The Main Estimates were prepared during the course of the winter. Between that time and essentially the time of the budget forecast, the Department of Finance has determined that short-term interest rates, in particular, are likely to be higher this year than they had been expected to be as of last fall, last winter.

Senator Mitchell: Are they saying 1 per cent higher?

Mr. Moloney: I am sorry, I do not have the specific number.

Senator Mitchell: This is a little less than 1 per cent of $34 billion.

Mr. Moloney: The economic and fiscal update tomorrow will doubtless show us a detailed comparison.

Senator Mitchell: Down below it looks like there are almost $3 billion of expenditures cut from federal-provincial fiscal arrangements, under the alternative payments for standing programs. It appears they cut $2.9 billion at the beginning of the year and just added in $125 million. What is that cut?

Ms. Danagher: That is not a cut. That is a recovery from the Province of Quebec for additional tax point transfers above and beyond the Canada Health Transfer, CHT, and Canada Social Transfer, CST. It is a recovery amount. Essentially they are suggesting that the recovery will not be as high as they had anticipated, based on the estimates available right now.

Senator Mitchell: How do they recover money from Quebec?

Ms. Danagher: It is part of the tax system. It relates to the personal tax points between the federal government and the provinces.

Senator Mitchell: Going back to 1977, this is the tax points?

Ms. Danagher: Yes.

Senator Mitchell: On page 166, I am intrigued that there is actually funding for existing climate change programs pending the finalization of a new environmental agenda. That funding will now be $3.2 million. Why would that be under Foreign Affairs and International Trade? It is not because the minister spent all that time chairing meetings at these.

Mr. Moloney: Foreign Affairs and International Trade is receiving funding for the Clean Development Mechanism and Joint Implementation activity and for international policy and related activities as well. There is the Joint Implementation Office that will continue in place until March 31, 2007, with this funding, and also technical and policy support for Canada's participation in various negotiations.

Senator Mitchell: For Justice Canada, on page 211 and 212, where would I find funding for the new drug driving program?

Mr. Moloney: There has been no funding request brought forward.

Senator Mitchell: That is just an announcement; there is no funding request?

Mr. Moloney: There is not at this point.

Senator Mitchell: Do you know when there might be, or was that part of the announcement?

Mr. Moloney: I do not know, sorry.

Senator Mitchell: Where would we find the savings on gun control? I understand, after all this toing and froing about, it might be $3 million a year. I am wondering where that is taken out of the budget.

Mr. Moloney: That organization is now part of the RCMP.

Senator Mitchell: Would it still be under the Minister of Justice?

Mr. Moloney: It would be under Public Safety and Emergency Preparedness Canada.

Senator Mitchell: Royal Canadian Mounted Police, Commission for Public Complaints, public review; where would that money be?

Mr. Moloney: Turn to page 240.

Senator Mitchell: Yes. I do not see any reduction there.

Mr. Moloney: There is a transfer from the firearms centre for the control and supervision as a result of government restructuring.

Senator Mitchell: Where is that?

Mr. Moloney: On page 240, about two thirds of the way down, there is a heading, ``Transfers in Statutory Appropriations,'' and on the previous page there is a larger amount, under transfers. Turning to page 239 again, in the second half, there are two amounts totalling $49 million, transferred from the firearms centre.

Senator Mitchell: This does not tell us what was being spent last year. We cannot tell from this whether it is a reduction.

Ms. Danagher: You probably would have seen that in the Main Estimates when they were tabled, because it would have shown you the comparison from one year to the next. All we are doing now is transferring the money. It used to be a separate organization and now it is moving to the RCMP, so all you will see in these supplementary estimates is that reorganization.

Senator Mitchell: On page 244, there is a list of new major capital projects; it says ``information only.'' This is not by way of criticism, but it focuses on the Atlantic, Quebec, Ottawa parliamentary and national capital areas, Ontario, and a very little bit in the West; Regina and Winnipeg. This cannot be the extent of capital projects.

Ms. Danagher: This would be the new major capital projects since the Main Estimates were done. Essentially, the protocol is to list provincially by project, so these would just be the new ones. To get a complete listing, if you look in the reports on plans and priorities, RPP, for Public Works and Government Services Canada, you would get a more complete picture.

Senator Mitchell: We might find information for Alberta there?

Ms. Danagher: You would definitely find information for Alberta.

Senator Mitchell: Under, ``Ottawa — National Archives,'' eight entries from the bottom, ``Portrait Gallery of Canada,'' there is $32.3 million voted and a statutory at $855,000 so over $33 million. I thought they had cancelled that. Does this mean they have already spent $33 million and now they are stopping this project?

Ms. Danagher: This is not money voted; this is telling you what the projects are in terms of spending. This would be money that has probably already been voted, but it is a commitment.

Senator Mitchell: It may or may not already have been spent? We do not know.

Ms. Danagher: We would have to get back to you.

Senator Mitchell: Could you let me know? I would really be interested because that is a lot of money to spend and then stop the project.

Senator Murray: I do not believe they have said there is never going to be a portrait galley; there will not be one in the old U.S. embassy.

The Chairman: They want to make new offices for senators from Alberta in that building.

Senator Mitchell: We would not want those; we are happy with the old offices we have.

Back to Justice Canada; we know it will cost a lot of money to begin meeting the demands of mandatory minimums in the construction of new jails and the accommodation for extended stays. Is there any extra budget to reflect the mandatory minimums?

Mr. Moloney: To the extent that it was in respect of prisons, that would be under Correctional Service Canada. They have not come forward for any supplementary amounts for anything.

Senator Mitchell: That might be something we have to anticipate, though the bill has not passed.

I am just wondering, if you look on page 146, 10a, we are authorizing a transfer from the Department of National Defence vote 1 to Environment Canada. How would you explain that? Is that dealing with some form of dangerous armament material; or does there have to be a link between the transfer from one vote to another; or does it just have to be declared?

Ms. Danagher: Under Environment vote 10?

Senator Mitchell: 10a, about the third paragraph.

Ms. Danagher: Thirty million?

Senator Mitchell: No, it is below that. It becomes $47.8 million; $47,070,000 is the previous estimate.

Mr. Moloney: Three pages later, page 149 gives an explanation around this specific transfer. It shows transfers from National Defence for investments in search and rescue coordination initiatives across Canada, $1.2 million and $284,000, and then a further transfer from National Defence, which is a different line.

Senator Ringuette: On page 153, on the lower part of the page, ``Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964).'' That is almost $700 million.

Senator Mitchell: They recovered $69 million or something.

Mr. Moloney: It is a recovery based on tax abatements from the Province of Quebec, and relates back a significant amount of time. This is an amount of $69 million, representing a decrease in the amount expected to be recovered from Quebec. It is related to a decrease in the value of personal income tax points compared to what the expectations had been, originally provided for in the Main Estimates. The revised tax data represent the impact of tax reductions announced in November 2005, but do not yet include the Budget 2006 tax reductions.

There are a variety of these tax point transfers historically in abatements. Each time tax rates change the value of the abatement changes, so there needs to be a corresponding change in the value of these arrangements that is being reported.

Senator Ringuette: Are these tax points directly related to the fiscal imbalance and the transfer?

Mr. Moloney: No, these are related to historical transfers of tax points, in this case, in 1964, related to youth allowances. Then, depending on the value of the tax points in question, there are recoveries thereafter.

Senator Ringuette: There were tax points also in regard to Medicare, to health. Do you have to do the same kind of accounting?

Mr. Moloney: Yes. In fact, the alternative payments for standing programs, under Part 6 of the Federal-Provincial Fiscal Arrangements Act, is $125 million. This is again related to integration of tax point transfers, the Canada Health Transfer and the Canada Social Transfer.

Senator Ringuette: All those points.

Mr. Moloney: Very complicated. There is a constant adjustment of values based on the value of a tax point, which is one of the key parameters of these calculations.

Senator Ringuette: This amount of almost $700 million is a reduction?

Mr. Moloney: The $125 million is a decrease in the amount to be recovered under the alternative payments.

Senator Ringuette: I am back at page 153. This would be about 10 per cent.

Mr. Moloney: We now expect to recover $630 million as opposed to the original $699 million.

Senator Ringuette: Would it be possible, for the benefit of this committee, to have a report in regard to these estimates and the supplementary; and all these tax points, the value of the taxes, the different scheme of tax point transfers? Would it be possible to have some kind of report or numbers where we can see the whole picture?

For instance, in this particular item, we are looking at $69 million less to the federal government. You have indicated that this is only in regard to the fiscal arrangement with Quebec.

Under the youth allowances recovery, where would we find the same situation for the other provinces?

Mr. Moloney: Let me provide, first, a caveat on what I am about to say. I would suggest directing such questions to the Department of Finance and the Minister of Finance.

I believe it is the case that there are no such parallel tax point transfer histories in these specific cases with the other provinces. There are, certainly, tax point transfers that took place more generally, but there are some cases that were for Quebec only. All of these are statutory in nature and presented for the information of Parliament.

Senator Ringuette: I understand that. I find it is very valuable information in regard to the context of what this committee is looking at concerning vertical and horizontal transfers and the situation of tax points.

You have directed us to the Minister of Finance.

The Chairman: We will ask the researcher to help us. If we get bogged down on it, then we will have to bring the Minister of Finance in to help us.

We have kept our guests from the Treasury Board Secretariat a long time. I would like you to go to page 225, which is for Parliament. There, you will see that the House of Commons has an adjustment to appropriations of another $3 million. Yet there is nothing in the Senate. Do you have any explanation as to that adjustment?

We usually try to track the House of Commons in terms of our percentage. We are usually a small percentage of them; you will see the Senate program expenditures at $53 million, versus $256 million for the House of Commons. Yet they have a $3 million increase that we did not know about. Could you tell us what that is, so we will be able to remind them about that?

Mr. Moloney: I am sorry to say that it is the Boards of Internal Economy in each place that determine these amounts. With regard to these amounts in respect of the House of Commons, we can only respectfully suggest that you direct the question to the Clerk of the House of Commons. We are not involved in it.

The Chairman: You have no explanation as to what extraordinary expenditure this might be for?

Mr. Moloney: The information provided to us is ``additional operating costs.''

Senator Di Nino: They have submitted this amount as supplementary. Yet at this particular time we have not. From time to time, the Senate may submit a supplementary request or request additional funds and the House may not. This is only a reflection of this period of time that we are talking about with these supplementary estimates.

Mr. Moloney: That is indeed correct.

I should just amplify what I said. As I said, the amount of $2.906 million is additional operating costs for the House of Commons. There is a second amount of $2.3 million, which is statutory in nature and related to salaries and allowances, as well as contributions to retiring allowances.

The Chairman: We may see, in Supplementary Estimates (B), adjustments to the Senate and not the House of Commons as well. We will keep our eye out for that.

On behalf of the Standing Senate Committee on National Finance, I would like to thank you, Mr. Moloney and Ms. Danagher. Each time you come, you enlighten us a little bit more.

Thank you for the innovations that you have made and the advice that you have been able to provide to us so that we can do our job to hold the government accountable on expenditures.

The committee adjourned.