Proceedings of the Standing Senate Committee on
National Finance
Issue No. 3 - Evidence - February 24, 2016
OTTAWA, Wednesday, February 24, 2016
The Standing Senate Committee on National Finance met this day at 6:46 p.m. to examine the expenditures set out in Supplementary Estimates (C) for the fiscal year ending March 31, 2016.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Good evening, and welcome to the Standing Senate Committee on National Finance, colleagues and members of the viewing public. The mandate of this committee is to examine matters relating to federal estimates generally as well as government finance.
My name is Larry Smith, Senator from Quebec and chair of the committee. I will introduce briefly other members of our committee: The Honourable Larry Campbell, deputy chair of the committee and former Mayor of Vancouver, where he managed a budget of approximately $1.2 billion. Previously, he served in the RCMP, notably in the force's drug squad. He was later instrumental in the establishment of the first Vancouver district coroner's office, where he eventually reached the position of Chief Coroner of British Columbia. Welcome, Senator Campbell.
The Honourable Senator Grant Mitchell, a chartered financial analyst, has been representing Alberta in the Senate since 2005. He holds a master's degree in political science studies from Queen's University and a BA in political science from the University of Alberta. For 12 years, between 1986 and 1998, he was a member of the Alberta Legislative Assembly, where he served as the Opposition House Leader and later Leader of the Official Opposition. He has also had careers in the public service and in business. Welcome, Senator Mitchell.
[Translation]
The Honourable Senator Diane Bellemare represents Quebec. She holds a doctorate in economics from McGill University and a master's degree from the University of Western Ontario. Previously a professor of economics at the University of Quebec in Montreal, she has published a number of works on employment issues and has sat on the Economic Council of Canada and the National Statistics Council. She has also been chief executive officer of the Société québécoise de développement de la main-d'oeuvre and a strategic advisor to various organizations. Welcome.
[English]
The Honourable Elizabeth Marshall is from Newfoundland and Labrador. She is a chartered accountant and earned a BSc in math from Memorial University of Newfoundland. Before her appointment to the Senate in 2010, she spent 30 years with the provincial public service in a number of senior positions, including Auditor General of Newfoundland and Labrador for 10 years, Deputy Minister of Transportation and Works and Deputy Minister of Social Services. She ran twice successfully in provincial elections and was elected to the House of Assembly for the district of Topsail and served as the province's Minister of Health in 2003 and 2004. Welcome, Senator Marshall.
The Honourable Senator Nicole Eaton, originally from Montreal, now represents Ontario in the Senate. She has been very active in the social and cultural environment, serving in different capacities as in a number of organizations, including St. Michael's Hospital Foundation, the National Ballet of Canada, the Pontifical Institute of Mediaeval Studies and the Royal Ontario Museum, just to name a few. Welcome, Senator Eaton.
Our guests tonight are from Treasury Board, Brian Pagan and Marcia Santiago.
Mr. Pagan, would you like to start with any opening comments?
[Translation]
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. I am happy to be here once again. I would first like to give you an overview of Supplementary Estimates (C) for the fiscal year ending March 31, 2016. I would then be pleased to answer your questions.
To start things off, I will briefly describe the way Supplementary Estimates (C) are organized. Afterwards, we will look at the total amounts set out in these supplementary estimates, and for the entire fiscal year. Then, I will go over the main items in dollar terms, as well as horizontal initiatives.
[English]
Turning to page 3 of the presentation that I hope has been shared with you, I will walk you very quickly through an organization of the supplementary estimates. There are no changes to the format of the book, which is organized in four parts.
Part 1 is a brief introduction that provides a summary of estimates to date and comparisons with fiscal years.
In the second part of the summary, we see a fair bit of detail outlining those major items over a certain dollar threshold, net changes to individual votes, any new or statutory authorities and horizontal items.
The third and largest section of the supplementary estimates is the detail by organization where we outline the detailed requirements by department and agency according to the votes provided by Parliament. Information is also included on transfers as well as a breakdown of additional grant and contribution funding by program.
Finally, toward the back, in the fourth and final part of these estimates you will find the proposed schedule to the appropriation bill based on the amounts presented in these supplementary estimates.
In addition to the tabled document there is a wealth of additional information in annexes and on line. On the Treasury Board Secretariat website, one can find information on statutory forecasts, estimates by strategic outcome and program, planned expenditures by standard object and allocations by Treasury Board central votes.
Turning to slide 4, page 4 of the presentation, where we will see the high-level details of the Supplementary Estimates (C), for a total of 58 organizations requesting expenditure authority totaling $2.8 billion. In addition, we have updated our statutory forecasts with an increase of $2.3 billion for a total Supplementary Estimates (C) of $5.1 billion.
Turning to slide 5, we present this amount in contrast or comparison to previous fiscal years.
With these supplementary estimates, total estimates for 2015-16 are $250.7 billion. Of this amount, $95 billion is voted, or roughly 38 per cent of the total. Planned expenditures for both voted and statutory forecasts are higher than previous years. Statutory expenditures continue on an upward trend driven by the annual escalator to the Canada Health Transfer and increases to elderly benefits.
You will recall that as a consequence of the narrow parliamentary window available in December when the house was recalled, and the fact that house committees had not yet been reconstituted, the Supplementary Estimates (B) presented to Parliament in December were limited to the immediate requirements of Immigration, Refugees and Citizenship Canada, as well as replenishment of TB Vote 5 government contingencies. As a consequence, this explains the relatively larger amount for these supplementary estimates in comparison to previous years.
Turning to slide 6 of the presentation, again this is detail summarized in the introduction to the estimates, in the document itself starting —
The Chair: Will you hold on for one second? We are going to hand out information that our colleagues do not have.
We welcome Senator Enverga. Thank you very much for sitting in for Senator Mockler.
Does everyone have the papers required? If you would continue, Mr. Pagan, that would be great.
Mr. Pagan: In the introduction to the supplementary estimates and the document itself starting on page 5, and page 6 here on the deck, we see information on the largest voted amounts in these supplementary estimates. We have highlighted 13 initiatives of $15 million or more. The 13 initiatives total approximately $1.75 billion, which equates to 63 per cent of the voted amount in the supplementary estimates.
On slide 6, we will see the seven largest of these initiatives, each of which is in excess of $100 million. For example, Fisheries and Oceans presents requirements of $116.1 million for the offshore fisheries science vessels. This funding is for the construction of three new offshore fisheries science vessels to replace an aging fleet. The new vessels will be used for scientific work that supports sustainable development and conservation of Canada's fisheries and oceans. The funding of $147.1 million for the government's response to the Syrian refugee crisis will be used to support departments in the rapid resettlement of 25,000 Syrian refugees.
Senator Eaton: Could you repeat the number of Syrian refugees?
Mr. Pagan: The government's commitment was 25,000. Supporting activities include security screening of refugees abroad, processing at Canadian ports of entry, diplomatic engagement, interim lodging sites, and public health surveillance.
[Translation]
On page 1-14 of Supplementary Estimates (C) — page 1-15 in the French version — you will find a description of the 17 initiatives that concern more than one department and that we refer to as horizontal items. That section of the budget provides funding requirements that are part of Supplementary Estimates (C) for each organization concerned, including forecasts of statutory expenditures, such as employee benefit plans.
[English]
On slide 7 we show the five largest horizontal initiatives in terms of funding amounts in the Supplementary Estimates (C). The first item presented is for the government's response to the Syrian refugee crisis. Funding will be used to support rapid resettlement of the government's commitment to 25,000 refugees in this fiscal year.
The $49.4 million in funding for the Canada First Research Excellence Fund will support activities to help Canadian post-secondary institutions attract top research talent, seize emerging opportunities and leverage their key strengths into world-leading capabilities generating benefits for Canadians.
Turning to slide 8, parliamentary authority typically expires at the end of the fiscal year. In these estimates, for the first time, we are presenting to Parliament an online annex to summarize permanent frozen allotments in the authorities provided by Parliament, which will not be required this fiscal year.
This is a very important point, senators, so I will take a moment to elaborate. As we know, departments, to the best of their ability, will forecast their requirements, and we at the Treasury Board of Canada Secretariat undertake a challenge function to make sure those costs are legitimate and valid based on the best information available at the time. Subsequent to TB approvals and parliamentary approvals, there are processes related to contracting, the hiring of staff and engagement of partners.
These processes can change the dynamics of delivering a program or service such that some of the initial costs anticipated do not come to fruition. The departments do not need all the authorities provided to them by Parliament. Parliament provides "up to'' authority, a department can provide up to the dollar figure approved by Parliament, but they cannot spend more than that. Any funds not spent are lapsed. Typically, up until this point, those lapsed funds are reported in the Public Accounts some six months after the fiscal year ends.
However, we know and are aware of instances where those plans change. We know now that the funds won't be spent, and so rather than waiting until the Public Accounts are finalized in September or October, this process is presenting to Parliament, for the first time, information on what we anticipate the lapse to be.
If, for example, a department is engaged in a major project and has been provided with a budget of $100 million and now knows that it will spend only $50 million, there is a process by which they can come to the Department of Finance and Treasury Board Secretariat and ask to re-profile that money into the year when they need it. They don't need it this year; they need it next year.
We freeze these funds so they can't spend them for any other purpose, and we do make them available in the next fiscal year. The process by which we do that at the Treasury Board Secretariat is called the frozen allotment. We identify the money and freeze it so it can't be used for anything else, and it lapses.
The information presented here on slide 8 summarizes the way in which we are making that information known to Parliament.
For 2015-16, the current year, and this can change almost by the day, but at this point we can identify some $5.1 billion of the authorities provided by Parliament that will not be required this fiscal year. We're freezing this money and anticipate that this becomes the floor, if you will, for the ultimate lapsed funds that will be presented in the Public Accounts next fiscal year.
I hope you'll understand or agree that this reflects the government's commitment and intention to provide better information to Parliament to be more transparent about the information provided to Parliament. We have information now that we know is relevant to departmental authorities, and this online annex makes that detail available to committees.
The Chair: That money is frozen; you said $5.1 billion. If your total number now with the incremental amounts is $250 billion, where were you at the same time last year?
Mr. Pagan: That's a very good question. From memory, we have what we call a gross lapse and a net lapse. This is very complicated. The gross lapse, in fact, would include the funds that we knew were frozen and shouldn't have lapsed in that fiscal year as they'd been re-profiled into a subsequent year.
From memory, it was about $10 billion last year in a gross lapse, but when we subtracted the funds that were re- profiled or from central votes that were not required, the net lapse was approximately $4.3 billion. So we're in the same ballpark of about $5.1 billion to $5.3 billion in funds that we know will not be required because they have been frozen. We're presenting that information now so that ultimately the lapse we calculate next year will take that off the board. Our gross lapse will be much less and the net lapse will be smaller. The gross will be the same.
Ms. Santiago is correcting me, as she should. We are showing you this information now, but because we are not reducing parliamentary authorities — we're simply showing you the information — the gross lapse doesn't change. The gross lapse will be the big number, but we know that $5.1 billion of it is related to decisions by Treasury Board to freeze funds, which will come off the top in terms of calculation of a net lapse.
Senator Eaton: When you freeze something for Fisheries and Oceans, you've taken $5 billion out and you freeze it for me because I have a project next year, that money doesn't show up anywhere again? In other words, Finance doesn't look at that and say they have $5 million frozen there and another $10 million frozen for another department. It doesn't go into their overall calculations? It is basically stored money for that department.
Mr. Pagan: These are funds for which the government has already made a decision to commit. Taking that hypothetical example, they want to provide the Department of Fisheries with funding for a project to replace their fleet. Fisheries is telling us now that they cannot use the money for that purpose because the contract has not been completed or what have you. This is the process by which we take that dedicated funding, isolate it, if you will, and make it available to the department in a subsequent year for the purpose intended.
Senator Eaton: For the military you must do that all the time in procurement?
Mr. Pagan: Yes. In fact, most if not all departments at some point or another will seek to re-profile funding. We are in a process by which Parliament provides authority on an annual basis. Many projects are multi-year in nature, and even the best project plans will have adjustments related to contracting, staffing, environmental assessments and working with other jurisdictions. So rather than losing that money or using that money for another purpose, it is frozen and re-profiled for the original purpose intended.
Senator Eaton: Thank you.
The Chair: Maybe our esteemed former colleague, Senator Gerstein, might have discovered that concept of re- profiling with the tanks through his questions. It was confusing to understand the re-profiling concept.
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: That is part of the reason that we thought it would be a good idea to provide the information now so there is some indication of the re-profiling to come instead of waiting until the supplementary estimates next fall, which is when you see the money coming back into reference level, as if out of the sky.
[Translation]
Senator Bellemare: I wanted to make sure I have understood the fisheries example properly. I will repeat it, so as to make sure that my understanding is correct. When a department makes forecasts for a given year and it has budgets, but it cannot carry out the project immediately, instead of taking away their funding on March 31, we keep it for the next year. That way, the department can spend the projected budget the following year, as well as any money frozen from one year to the next. That is a way to reprofile unspent funding, and it is referred to as fund freezing.
Ms. Santiago: Exactly.
[English]
Senator Mitchell: These are good questions by my colleagues.
I'm trying to put it in perspective, as we all are. If a government, for example, had declared a surplus of $2 billion this year and the frozen $5.1 billion had actually been spent, they would have had a deficit of $3 billion. Is that not true?
Mr. Pagan: Senator, that's a very pointed and good question. I will answer it to the best of my abilities. When the Department of Finance prepares a budget, they include in their forecast provisions a lapse forecast. They take what they understand to be departmental spending and do their best forecast of what won't be spent. That is something known to economists who advise on the budget and to keen observers of the budget. They will adjust that forecast up and down, based on the stock of government spending.
We know, for instance, that infrastructure spending is prone to more lapses than the hiring of staff. When there are particularly large infrastructure projects, they may increase their lapsed forecast as a consequence. The PBO has studied this area and concluded that there is a reasonable attempt to forecast what that lapse is.
Every budget will include a lapse forecast, but it is just a forecast in February or March, before the fiscal year ends, of something that will happen 14 months down the road. As we know, there are 130 organizations and innumerable projects, and each project goes up and down based on the dynamics of that program.
The Department of Finance does not control the lapse. It is controlled by departmental program managers managing their programs and by Treasury Board and Finance agreeing or not to re-profile funds if there is a good business case for it.
Senator Mitchell: Without attempting to be too cynical, would this create a situation where a government would get its cake and eat it too? It could make promises at the beginning of the year that by the end of the year it determines it won't fulfill, and look like it's getting benefit from making all these promises and then in the end balancing the budget because it didn't spend what it promised.
Mr. Pagan: Again, to be totally frank with you, the budget does include a forecast of a lapse. But after that budget the Department of Finance has no control or levers over what happens.
Senator Mitchell: No, departments do.
Mr. Pagan: Right. For the most part I would suggest that there is an incentive to deliver the program. There are stakeholders out there expecting programs and services. Re-profiling funds is never a guarantee. There has to be some sort of business case. It is generally harder to re-profile operating funds, for instance, because there is already a mechanism to carry forward 5 per cent. It is really the big projects for which there is some consideration of re-profiling.
The other point I would make is I believe when I was here last in late January or early February we were talking about the President of the Treasury Board's mandate to better align estimates, budget processes and information to Parliament. I believe I made the point then about some of the dysfunction that happens when we have a Main Estimates tabled before the budget and then having to catch up.
This year is an example of that. We tabled the Main Estimates yesterday. It includes the best information available about approved programs as of essentially mid-January, but we know that a budget is coming that will change programming almost certainly in the area of infrastructure, Aboriginal programming, innovation and the government's other priorities.
Departments will run quickly to catch up to that budget and bring programs to Treasury Board for consideration and approval, and then ultimately to Parliament. That information is based on the best information they have at that time, which can be different from when the budget was done. This contributes to some of the pressures in managing programs on an annual cycle and that, in itself, can contribute to lapsing as well.
We are certainly aware of some of the dysfunction, and the President of the Treasury Board has a keen interest in making this more coherent and very much looks forward to working with parliamentarians to do that.
The Chair: Working with members of Parliament and senators back at that particular time to initiate that process, Brian, if I understand correctly. You were the speaker.
Mr. Pagan: Right.
Senator Marshall: I want to make sure I understand you. If you have funds in a particular year for a big project, and you're not going to use it and you want to re-profile it and bring it into the budget next year, does it show up in the Main Estimates?
Ms. Santiago: Sometimes, if we have the re-profiling request made and approved. For example, some of the re- profiling is significant in this table for National Defence. We were aware of those early enough in the year that we could make these adjustments in 2015-16 and also reflect it in the amounts that were being adjusted into their Main Estimates for next year.
Senator Marshall: And if not they would go into Supplementary Estimates (A) or Supplementary Estimates (B).
Ms. Santiago: Yes. I will add a bit to the conversation around the relationship between the forecast lapse, the "frozen'' and the surplus and deficit position.
I would like to remind honourable senators that the figures that we're looking at here are a cash lapse. For example, for a large capital project, just because you have a year-to-year change in the amount of cash that is going out the door — if the delivery of something was delayed from this year into next — there is usually not a lot of impact on the anticipated amortization of that.
Just because you're seeing large amounts of movement on the cash side doesn't mean that there is necessarily the same quantum of impact in terms of the accrual hit on the fiscal framework.
Senator Marshall: But if you are going to lapse funds, the carryover that you allow, the re-profile, is not just for office supplies; it has to be something like a multi-year contract or something. It has to be something major. It can't be office supplies.
Ms. Santiago: Yes.
Senator Enverga: Thank you for your presentation. I'm sorry I was a bit late.
I don't know if this has been asked, but the supplementary estimates, can you tell me where the money is coming from? Is it part of the budget from previous years? How do you come up with this particular money? Where do you get this money from?
Mr. Pagan: Thank you for the question, senator. It is an important one.
Any item that is presented here in the supplementary estimates has been approved by Treasury Board ministers. There is a program behind it.
Senator Enverga: The previous government, I guess?
Mr. Pagan: No. In fact, what we are presenting in these supplementary estimates would be approvals of Treasury Board ministers from both this government and the previous one.
There are terms and conditions defining the program: where the point of service is, how many people, who they are working with, that sort of thing. That is step 1.
Behind that, before it can come to Treasury Board for approval, there has to be what we call an approved source of funds. There has to be a commitment by the government to undertake programs or services in this area. Typically that source of funds is provided in the budget. The government will announce its intentions, its plans, and they will allocate sums of money for these. This is done at a high level, and it's the details that are worked out by departments with Treasury Board in terms of the structure of that.
I say for the most part your source of funds is provided in the budget, but we know that it's difficult to capture everything in a single document at one point in time. So there will be decisions off cycle from a budget where the government will commit funding. They will provide a source of funds. The Minister of Finance will confirm that there is room in the fiscal framework, and then that can proceed to Treasury Board and to Parliament.
The example of Syrian refugee resettlement is an example of an off-cycle budget decision. It was not known or anticipated when the government did Budget 2015, but by the fall of 2015 circumstances had changed and the new government wanted to do something in this area. They confirmed funding was available in the framework and it went to cabinet for policy approval, the Treasury Board for program approval and ultimately to Parliament for approval of the appropriation.
Everything that we present here has funding allocated for it in the fiscal framework.
Senator Enverga: Did you pull that money from somewhere or it just came from some big pot? You decided to take it away?
I was thinking that when the government puts a budget in place it allocates money to particular projects. Did you pull this money from another project?
Mr. Pagan: Every program is different and has its own terms and conditions but there will be an earmark, if you will, in the fiscal framework for that requirement. In the budget-making process the Department of Finance will do the best job they can in anticipating revenues, how much the government is going to collect in taxes, duties, et cetera. They then look at their existing spending obligations, statutory transfers to persons and provinces, and then they look at the operating requirements of departments, both those that have previously been approved and then those that they want to consider in the future. They do their analysis and they make decisions.
All of the revenue goes into the Consolidated Revenue Fund and a program or service, once earmarked in the budget, the expenses from that, approved by Parliament, are drawn from the Consolidated Revenue Fund. It's one pot, but it's a very elaborate fiscal framework that has earmarks for literally thousands of individual programs and services. It is quite an elaborate process.
Senator Enverga: It is quite elaborate. Did it come from a deficit or just something allotted for this?
Mr. Pagan: Every year they will make a different forecast of their budgetary balance. As we know, there was a march towards a balanced budget that was announced in Budget 2015. Since that time the underlying assumptions around that budget, the underlying economic conditions, have changed. The dollar has gone down, interest rates have remained flat and oil is down. These have a number of impacts on both revenues and program expenses.
Then we have a new government with a new mandate and new programs. The funding for those will be brought forward in Budget 2016. I believe the Minister of Finance has already forecast he is starting from a deficit position and has made clear that the government intends on moving forward with some of their platform commitments and mandate items, so we expect that the deficit will be bigger.
Senator Enverga: This supplementary right now is not coming from the deficit? That is what I want to know.
Mr. Pagan: The requirements presented to Parliament are for items that have already been factored into the fiscal framework and confirmed in previous budgets. These items in and of themselves will have no impact on any future deficit planning.
Senator Enverga: It is already taken care of?
Mr. Pagan: Yes.
The Chair: If you take the mains from 2015-16 and the Supplementary Estimates (A), (B) and (C), the total number comes out to $250,686,000,000, et cetera.
For 2014-15, what is the comparable total? Do you have that number? Just to see, with all the adjustments, if you have a total number at the end of 2014-15? You then have your projected number for 2015-16. I am trying to understand.
Mr. Pagan: Ms. Santiago will pull that up for us. Of course, the 2014-15 numbers are now closed, as the fiscal year is complete. That was a forecast of authorities but, as we were talking earlier with lapsed and re-profiled funding, the actual expenditures should always be lower than the forecast to Parliament, because it is an "up to'' amount.
Ms. Santiago: Was the question what is the comparable?
The Chair: I have a paper here that says 2015-16 estimates and you have Main Estimates at $241 billion, then you add on Supplementary Estimates (A), (B) and (C) and it comes to $250,686,000,000. Is it worthwhile looking at what the comparable for 2014-15 was to show a position of the government?
Mr. Pagan: Right. Senator Mitchell is correct in saying that for 2014-15 the comparable estimates number is $241.4 billion. That would have summarized the estimates to date for that year. I understood your question was the actual rather than the estimates, and that would be in the Public Accounts which we do not have before us, but Ms. Santiago may be able to pull it up.
Senator Mitchell: I think your answer was complete when you said, "Senator Mitchell is correct.''
The Chair: As you can tell, Mr. Pagan, the committee is interested in trying to grasp and understand exactly where we are and where we are going, because this is a critical time in the history of our country and the world in terms of economics. We see the news being so volatile every day and there is a very sincere interest among us all in trying to understand it in the best possible way.
Do you want to continue and then we will ask you some more questions? I think we will fill up our list pretty quickly.
Mr. Pagan: That essentially concludes the formal presentation. We went off on a tangent there because we were introducing this new online annex, but I think it was an important discussion around lapses and re-profiles.
The Chair: Can you tell us about the $250 million that you seem to be taking back under non-budgetary items? Under statutory there is $250 million. Just explain that.
Mr. Pagan: Right. That is an important distinction, because in the conversation we just had about lapsing and re- profiling we are presenting the lapse information at this point because we know that it won't be used, as I said. There is no such thing in our present construct as a negative supplementary estimate. For the budgetary voted requirements, we don't come to Parliament and request that you reduce a department's authorities. If we know they are not going to use it, we freeze it.
In our non-budgetary world, it is a bit different because these aren't cash outlays of government departments requiring expenditure authority. They are underlying loans, investments and advances that represent changes to the composition of the financial assets of the Government of Canada.
In this case, it is not a negative authority. It simply is updating the fact that there is a statutory program, and I believe it's at Employment and Social Development Canada. ESDC has a loan portfolio for Canada Student Loans. As that underlying portfolio changes, if they write off amounts and it changes the underlying value of that base, we will update the non-budgetary component of the estimates to reflect that. In this case I understand that that amount represents a write off.
Ms. Santiago: It is a reduced requirement.
Senator Marshall: Mr. Chair, I think what you are talking about is the $250 million that shows up on page 2-27. It is referred to as statutory. I don't think it is the writeoff. That certainly wasn't my understanding. I thought that the writeoff was in the area of $176 million. This is $250 million.
Ms. Santiago: That is correct. The writeoff is voted. It requires parliamentary authority.
Senator Marshall: Right, because it is an expenditure.
Ms. Santiago: This is just a reduced forecast of the loans required under the Canada Student Financial Assistance Act and the Apprentice Loans Act.
Senator Marshall: Where is the explanation? It just shows up on page 2-27 without one. The explanation must be elsewhere else, is it?
Ms. Santiago: We don't usually provide a lot of explanation on statutory items. The voted items are the ones that have more explanation in them.
Senator Mitchell: Money that is carried over, or re-profiled, isn't always added as additional money to what would have otherwise been budgeted next year. To your point, it wasn't spent this year, it is still the same project and it still requires the same amount of money, so it doesn't add to expenditures necessarily. It doesn't make them higher.
Ms. Santiago: It doesn't necessarily add to expenses.
Senator Mitchell: Yes. Expenses over a two to three year period, it all works out. It just happens that it didn't get spent in the year that they originally thought it would.
Ms. Santiago: For things like capital and large loan settlements. We don't usually allow large re-profiling and operating. It is limited to the 5 per cent in the operating budget carry-forward. The only other place where there is significant re-profiling that would affect the expenditure and expense forecast for future years are things like transfer payments. Contributions, programs in places like Foreign Affairs, or some of the contribution programs at Aboriginal Affairs, for example.
Senator Mitchell: That would be just because they didn't get around to writing the cheque before March 31? They were processing things and they didn't get processed quickly enough?
Ms. Santiago: Things like that, or the agreements couldn't have even been started. There are really large re-profiles for infrastructure programs, for example, because it takes a long time to get contributions concluded and then projects will run into weather delays and other sorts of things. Those payments can get dragged out over many years.
Senator Mitchell: On the Foreign Affairs section, there is an allocation of $168 million for the Green Climate Fund. I think that relates to a commitment that was made in November of 2015. That $168 million happens to be there because it was a commitment that was made mid-year that wasn't anticipated in the budget, and therefore provision had to be made to catch up and make sure we had the money to pay it. That cheque will be written before the end of this fiscal year?
Mr. Pagan: That is right, senator. As you say, in November 2015, the Prime Minister announced $2.65 billion over the next five years to help developing countries tackle climate change. This $168 million in the Supplementary Estimates (C) for 2015-16 is that initial tranche to that contribution.
The Chair: Senator Marshall, you had a supplementary question?
Senator Marshall: No, I didn't. I wanted to go back to the accounts receivable.
The Chair: Would you like to ask that question now?
Senator Marshall: Yes, I would. For the student loans that we were speaking about earlier, for the writeoffs would you know what the collection rate is on student loans? Every year we see the writeoffs, but do we collect 90 per cent or 85 per cent of the student loans? What is our collection rate?
Mr. Pagan: I'm not sure. I have a wealth of information here about student loans, including breakdown by province. I'm actually looking for the collection rate, and I don't have anything on hand. So I think that that's something that we would have to get back to you on.
Senator Marshall: Yes, could you get back to us on that?
That would be for the student loans. The departments kind of fall under Treasury Board, so would Treasury Board have any involvement in how the department collects these accounts? Would you be monitoring and seeing, for example, that they are not collecting a sufficient percentage, and therefore you would provide some direction to the department?
Mr. Pagan: No, not directly, senator. Treasury Board and cabinet in general would monitor programs of this nature, and they would consider policy changes if they felt that present modalities no longer fit circumstances or needs.
The student loans program is an example of a program that has changed over time, according to information and changing those. For the period 1964 to 1995, there were guaranteed loans. From 1995 to 2000, we went to risk-shared loans, where the government was working with financial institutions to issue and collect. Since 2000, the government has made direct loans through ESDC, and the collection against those loans is actually managed by the Canada Revenue Agency. So there is a process by which the Canada Revenue Agency will identify accounts. Anything over 270 days is considered to be uncollectible, and then there would be a process, both internal to CRA and with ESDC, to confirm that that amount should be uncollectible.
Senator Marshall: So that kind of brings me to the next question I had. For the Canada Revenue Agency, when they write off accounts do they show up as a direct charge, as an expenditure similar to the writeoff of the student loans, or are they a separate agency and it rolls into their financial statements?
Mr. Pagan: If I understand correctly, does this writeoff show up in CRA's financial statements?
Senator Marshall: No, I've jumped right over now to CRA. They are collecting taxes. For taxes that are uncollectible, will that show up as an expenditure in either Main Estimates or Supplementary Estimates (A), (B) or (C)?
Mr. Pagan: Anything that is not collectible, that is being written off —
Senator Marshall: Written off by Canada Revenue Agency that's not a student loan. That's like taxes.
The Chair: Would it not be written up under Employment and Social Development? Aren't they the ones that issue the student loans?
Senator Marshall: Not student loans. I'm just wondering about the collection of income taxes.
Mr. Pagan: That question would best be directed to CRA. I'm generally aware of a process by which CRA will write off uncollectible taxes, but I'm not equipped to speak to that today.
Senator Marshall: Okay. What about the lending agencies, like Export Development Canada or ACOA? Would their writeoffs show up as expenditure in Main Estimates or Supplementary Estimates (A), (B) or (C)?
Mr. Pagan: Any time there is a debt to the Crown, be it taxes, student loans or industrial loans, if that loan is to be written off that requires the approval of Parliament.
Senator Marshall: It would show up as an expenditure here?
Mr. Pagan: Yes, it would.
If I may, Senator Marshall, I've found information on the default rate. The total value of the loan portfolio exceeds $18 billion, and the default rate in 2011 was 12 per cent. That's the most recent information we have.
Also, I misspoke; the initial collection of loans is actually done by ESDC. Anything over 270 days that they can't collect they transfer to CRA, and then CRA takes the process over from there and would combine their efforts with the tax-collection process.
Senator Marshall: If they end up writing it off, it would show up in Main Estimates or Supplementary Estimates (A), (B) or (C)? It would show up as a line item like the writeoff for student loans?
Mr. Pagan: Yes. Writing off a loan requires the authority of Parliament.
Senator Marshall: Okay. I haven't seen one yet, but I'll go looking now.
Senator Eaton: I was looking at your Report on Plans and Priorities, and coming from a background of sitting on charitable boards where one is very conscious of how much money one spends to deliver the goods, does each government department or do you specifically know what it costs, for instance, to deliver some of the major programs? Have you broken that down? Is it 14 cents on the dollar or 15 cents on the dollar, 20 cents on the dollar?
Mr. Pagan: Right. Senator, there is such a wide range of programs and services out there that, not surprisingly, there is a wide range of program costs.
Senator Eaton: But each department, as they come before us, would know what it costs them to deliver their programs?
Mr. Pagan: Yes, generally speaking. For each program presented to Treasury Board they would outline the elements of their costing, so how much is direct salary, how much is for real property, how much is for partnering with third parties, how much is what we call internal services, back office support for finance, human resources and IT services.
In the Main Estimates, when we present information by department, Parliament controls by the vote — Vote 1, Vote 5, Vote 10 — but we also break out information by the program activities. I believe it was in 2010 or 2011 that we worked with departments to segregate internal services, which are a proxy for that sort of overhead of operating a department. So what you will see in the Main Estimates is the internal services, or the overhead, if you will, for the department as a whole, and then each program will make a draw on those internal services. That's part of the Treasury Board submission process where they identify how much is direct service and how much is internal.
Senator Eaton: Do we compare ourselves? Does each department or you set goals? In other words, do you look at programs and say that you're not doing a good enough job or that it's too expensive to deliver? What do you compare yourselves to? How does that work?
Mr. Pagan: The starting point for us was to essentially isolate or segregate internal services, and that became a common reference point. We have been, since then, working with departments. We've issued guidance on how to categorize or classify internal services, and we now have absolute numbers or aggregate numbers. We are actually working, in the Treasury Board Secretariat, to develop efficiency and effectiveness indicators for internal services that would allow comparison or benchmarking. One of our considerations will be comparing, as you say, like with like, so a big department like CRA and another big department like ESDC would share many similar business practices, processing of and collection of payments, et cetera. Then we would expect that there would be some commonality in costs for those organizations.
Then, likewise, for a small, science-based department, we would find common comparators there.
So this has been a multi-year effort to provide better information on internal services, and we expect to be moving forward with these effectiveness and efficiency indicators as early as this coming fiscal year.
The other point I would draw to your attention is that in recent review and reduction exercises, the strategic and operating review announced in Budget 2012, particular attention and interest were paid to those overhead and back office costs. A good number of reductions came from streamlining operations. I can give you a specific example at the Department of Fisheries and Oceans, as it happened.
They are organized at present in six regions as a department. Each region had their own finance function, doing their own contracting and paying their own bills. They had six managers of accounts payable centres. The department looked at best practices in other departments, and I believe they used NRCan as an example where they had consolidated their accounts payable in a single region. The Department of Fisheries and Oceans brought forward a proposal to do the same. If I'm not mistaken, they located it in Fredericton and were able to achieve savings related to internal services by consolidating that function.
Senator Eaton: Following on that function, at Fisheries and Oceans, and you brought up that ministry, I remember last year something came up where there was $45 million to teach people to fish, I believe on the West Coast. When I asked the witnesses how many people they had taught to fish and did this include boats and what the results were, they couldn't answer the question. That is fair, but do you think now that you're into these management practices they will follow through so when they come before us they can say, yes, we taught X number of people and this was the success rate? Canada Mortgage and Housing Corporation last year was $400 million for First Nation housing, but they couldn't inspect them as they couldn't go on reserve, but they couldn't tell us how many houses or where they were being built. Do you think that follow-up will happen eventually?
Mr. Pagan: I do for the simple reason that this new government has clearly signalled a commitment to evidence- based decision-making and resource allocation.
Results matter to the Prime Minister. He has made that clear. He has appointed a deputy secretary in the Privy Council Office to lead his results agenda. There is a great deal of activity going on now looking at successful practices, especially in the United Kingdom where they have adopted what they call a "deliverology'' lens and driving programs and services to deliver clearly articulated results.
At Treasury Board Secretariat we are supporting that work by looking at our enabling policies and our Treasury Board submission requirements to make sure that there is a results lens, a clear articulation of what is to be achieved and how it will be measured. I think you should expect to see better information in that regard in the near future.
The Chair: Could I ask Mr. Pagan to go through your top 10, which you did briefly, to give us an indication of this $5.3 million? Do we have a heavy reliance on spending on military issues, i.e. whether for disabilities, Ukraine or Iraq and Syria? These are individual issues but there are also horizontal issues and numbers for us to understand.
For example, with a Syrian refugee program, we at the Senate voted for $260 million and I think there is now another $100 million on top. Where is this leading, as a best estimate? How much we will spend in total on these things so we have some knowledge, moving forward, of where some of the big projects will go.
[Translation]
Senator Bellemare: There is a lot of movement in the current supplementary estimates, especially in terms of statutory appropriations. For example, $4.9 billion is added for the Department of Employment and Social Development. Actually, it is $4.7 billion under statutory appropriations. I would like to know why this envelope has increased so much in these supplementary estimates. It is on page 2-26.
For the Department of Finance, there is a $2.4-billion negative adjustment under statutory appropriations. What is the error?
In the Treasury Board's case, $511 million is still forecast for an adjustment to the funding of employee insurance programs. Does that have anything to do with sick days? Is it really about insurance programs?
So those are my three questions, and I would like to get some clarifications.
Mr. Pagan: When it comes to Employment and Social Development, the $4.7-billion increase in statutory appropriations is mainly intended for seniors.
[English]
The Old Age Security and Guaranteed Income Supplement.
[Translation]
Senator Bellemare: Okay — and it was not forecast.
[English]
Mr. Pagan: They are changes to the underlying forecast. In the budget process, the Department of Finance will prepare their best estimate of program costs. These are based on a number of economic factors.
[Translation]
Senator Bellemare: So the unemployment rate has increased or the economic situation —
[English]
Mr. Pagan: There are also certain demographic factors. As I understand, for Employment and Skills Development Canada, the primary driver is changes to the Universal Child Care Benefit. This reflects both some underlying demographics and, if I'm not mistaken, commitments of the new government to increase assistance in the area of child care. There are also adjustments at ESDC to the Guaranteed Income Supplement.
The Chair: These could be aligned to new policies that the new government is initiating.
Mr. Pagan: Right.
[Translation]
Senator Bellemare: Okay. What about the Department of Finance?
[English]
Ms. Santiago: I'll just remind honourable senators that one of our online annexes, which is not part of the tabled document, itemizes all the changes to the statutory forecasts reflected in a particular estimate. It is a bit of a nuisance to have so many documents but, because there are so many, we have to publish them separately.
For the Department of Finance, the big reduction in the statutory forecast is in public debt charges. We actually have this kind of adjustment every year. It's the estimates and expenditure side catching up with the budget forecast. Because we had a reduced Supplementary Estimates (B) this year, we didn't make very many additional adjustments. We didn't get the opportunity we would normally have to make this $2 billion adjustment. Yes, the significant reduction is entirely interest on matured debt and other interest costs of the government.
[Translation]
Mr. Pagan: Finally, let's move on to the Treasury Board, or vote 20.
[English]
Within TB vote 20, public service insurance, Treasury Board as the employer supports a number of obligations for employee and benefit plans for the public service as a whole: Health care, dental care, including something called the Service Income Security Insurance Plan, or SISIP, which is a long-term disability benefit to medically-released members of the Canadian Armed Forces.
SISIP is in a deficit position. There has been an increase in the number of claims against SISIP, primarily as a result of our mission in Afghanistan. With this funding the government is making that plan whole and sustainable, supported by best actuarial forecasts from the Office of the Chief Actuary. They have looked at both current and anticipated membership or adherence to that benefit plan, and we've worked with the service provider, which is Manulife Financial, to put in place the funding necessary to make sure that that plan is sustainable going forward.
Senator Enverga: My question is about 2-44, Indian Affairs and Northern Development. I was looking at the figures, especially the transfers. When I look at it, it looks like we have transferred a lot of money from Indian Affairs to different departments. Is it normal to get money from one department and put it in another's expenses?
Mr. Pagan: It is a normal practice of government, senator. What we do again with the programs and services approved by Treasury Board is we take the best information available by the department in terms of how they will provide that program or service. In doing so, in implementing the program, there are often situations where support is required from another government agency or department that is either best positioned, or has the appropriate mandate, to provide that support.
Every transfer from one department to another, going from one vote approved by Parliament to another vote, requires Parliament's approval so we list all of the transfers, all of the puts and takes, if you will. What we see here is typical of any one year. What is different is that this reflects all of the transfers required essentially since Supplementary Estimates (A) last May.
Normally we would update this list in November or December with Supplementary Estimates (B), but because of the unique circumstances around the election and the short parliamentary window in December, as I said at the outset, Supplementary Estimates (B), this past year, was limited to the immediate cash requirements for Immigration, Refugee and Citizenship Canada related to Syria. All of the other transfers the departments were looking for or expecting have been rolled up and presented in this document.
Senator Enverga: That's the reason why I asked the earlier question. A lot of money is coming from another department and you just reallocate it, so it's more like getting some from Peter and paying Paul. Is that how it works?
Ms. Santiago: Not precisely. There are a lot of programs at places like Indian Affairs and Northern Development, and also Foreign Affairs, where there are many partner departments who are working together on one initiative.
An example from Indian Affairs is where National Defence is transferring funds to Indian Affairs to deal with unexploded ordnance on some reserves. It's not really taking from one program to fund another. It's that National Defence has a responsibility to deal with the ordnance left behind in an area and Indian Affairs happens to be there and they hold the agreement with the First Nation. Rather than two departments entering into separate agreements with a First Nation, there is one agreement with funds from many sources.
Senator Enverga: From your example, you are giving from National Defence to remove unexploded bombs?
Ms. Santiago: Unexploded ordnance.
Senator Enverga: Do you mean that Indian Affairs are doing the job now, to clean up the ordnance?
Ms. Santiago: They have the agreement with the First Nation and the First Nation does a lot of work on site. In the list of transfers it shows which vote it's going into. In most cases it shows that it's going into the Indian Affairs contribution vote, which means it's not the department itself doing the work. They have agreement and the agreement is with the First Nation, and they transfer funds to the First Nation that does all of the on-the-ground activity.
Senator Enverga: I'd be concerned if you asked Indian Affairs to clean up those bombs. But that's not the case.
Ms. Santiago: It's not the case.
The Chair: Is that the horizontal items, where departments get together and they have joint projects and you will see two or three departments sometimes involved with a transaction?
Ms. Santiago: It's a form of a horizontal initiative. Because there are so many of those, the things we list in the supplementary estimates as horizontal initiatives are limited to the ones that go to Treasury Board as a specific submission with many signatory ministers. That is as opposed to these ones which are just agreements between the departments to get the job done.
The Chair: Mr. Pagan, would you kindly walk us through your top 10 here? I know you gave us a summary earlier, but if you could just give us a little more feedback in terms of specifically what is the amount of monies? Will there be another ask on this particular subject? Will this become part of the ongoing budgetary process in fiscal years? Is there a total in two or three of these areas so we can get a better handle on spending patterns?
Mr. Pagan: I would be glad to do that. You also had a question regarding horizontal initiatives, and I believe you specifically mentioned Syria. Perhaps I'll start with an explanation of that initiative, which is found in our document on page 1-14. I'll explain that horizontal initiative and then I will explain the top 10, if you will, items in these Supplementary Estimates (C).
On page 1-14 in the English version of the document, we see what we are calling a horizontal item to implement the government's response to the Syrian refugee crisis. The cumulative total for 2015-16 is $429.8 million, and that is broken out according to requirements for Citizenship and Immigration, which was included in the 2015-16 Supplementary Estimates (B), totalling $280.2 million. In the Supplementary Estimates (C), requirements for the Canada Border Services Agency, Citizenship and Immigration, Foreign Affairs, Trade and Development Canada, the Public Health Agency of Canada and Shared Services Canada. These Supplementary Estimates (C) requirements total $149.6 million for a total in fiscal year 2015-16 of $429.8 million.
Again, we are on an annual approval cycle from Parliament, so this represents the government's best estimates of the costs for this fiscal year. The total commitment by the government was $678 million over six years, and that was to resettle, I believe they said as a minimum, 25,000 refugees by February 28 or 29.
According to IRCC's website, as of today, 23,394 refugees have landed and been resettled in Canada, and 27,600 have been accepted and are essentially awaiting transit or are in transit. These refugees are located now in 249 communities across the country.
That's the requirement for this fiscal year. The Main Estimates that have just been tabled include IRCC's requirements for 2015-16, but because the approvals for its partner departments — Public Health, CBSA, et cetera — were not approved in time for main estimates, those will be presented to Parliament in the Supplementary Estimates (A) in the spring.
This is an example of a horizontal initiative involving multiple departments, and the way in which funding can transcend fiscal years and extend out a number of years.
The Chair: We are looking at the Syrian refugee issue, and $670 million was the forecast. Is there any way we can anticipate where we are today and where we will be within the designated period of that $676 million, or will this be one of those situations where there could be "Oops. We are humanitarian and want to do more good things and bring in more people, but it will cost more money''? Obviously if it will cost more money that will put for pressure on our deficit, right?
Mr. Pagan: Right. Citizenship and Immigration Canada has a website that is dedicated to the Syrian refugee resettlement program. There is a wealth of information on that website: maps of the communities; where they are located; and the numbers are updated by the day in terms of refugees resettled.
To my knowledge there is no spending information on that website — how much has been spent to date. I can tell you that there have been no changes to the forecast spend at this time. There have not been any instances where the department has asked to freeze or re-profile funds into a fiscal year.
Our best estimate right now for 2015-16 is $429 million, and those numbers will be finalized when the Public Accounts are finalized. That is what I have at this time.
Senator Eaton: I have a question for clarification. When you present us with a horizontal thing, as with the Syrians — so Citizenship and Immigration Canada, $17.7 million — that must go under Citizenship and Immigration Canada, right? That turns up in their budget. Then when you do a horizontal line, it is just for information but it goes under their budget to start with?
Mr. Pagan: Correct. Thank you, senator. That is an important point.
In the information we are presenting here, the numbers that you see — Canada Border Services Agency, $13.6 million. If you turn to the page for Canada Border Services Agency, you will see a line item for that.
What we are going here in presenting the horizontal information is that, some years ago, committees — most notably this one — expressed some frustration that what would seem to be the same item or funding for the same initiative was appearing in different departments, and they couldn't quite understand what all that meant. So we make a point now in these estimates documents to draw your attention to those initiatives where departments are working together in a horizontal way.
Senator Eaton: Will you do that for, say, First Nations, which has a lot of different departments? Is that ever possible?
Ms. Santiago: That kind of horizontal is a lot harder. These ones are easier to bind because sometimes it is only one submission that comes to Treasury Board, so we can draw our lines around it. In this case, they were separate submissions, but they all came in the same three- or four-week period.
With things like Aboriginal Affairs, it is more like a thematic horizontal, so there are many policy decisions and Treasury Board submissions involved. Every so often we try to do something that is that broad, but it is a bit harder than this kind of thing.
The Chair: I just have a simple question that comes from the questions that have been asked. If the original target was for 25,000 folks to come over, either privately or through government sponsorship, and suddenly we have 23,300 et cetera here and 27,200 accepted, there are 2,000 folks over the original target. Is this a moving target? If the target moves, then the total amount moves.
I am not trying to be rude or anything. I am just trying to understand the financial implication within government expenditures.
Mr. Pagan: The government made a commitment to resettle a certain number of refugees, but there are also community groups across the country that privately, of their own volition, are engaged in this effort. My understanding is that the number presented here is the cumulative total of refugees, which includes the privately sponsored refugees.
The Chair: Okay. I just wanted to make sure we keep a total on these various departments so we know where they are going.
Senator Marshall: Why is Atomic Energy of Canada funded so much in Main Estimates, so much in Supplementary Estimates (A) and Supplementary Estimates (B)? Why aren't they given their budgets at the beginning of the year? Looking at it, it looks like they are not quite sure how much it will cost to operate each year.
Why does it vary so much?
Mr. Pagan: Thank you, senator, for that question. I am just going back to our list of main items here, and AECL should show up at some point.
Senator Marshall: It is on page 1-9. That is the summary.
Mr. Pagan: Right. This is a difficult one. The AECL file has been quite a challenge for the government over the last number of years.
As we know, AECL is responsible for the legacy nuclear waste liabilities, which are currently valued at about $6.5 billion in the Public Accounts.
There was a commitment a few years ago to transition AECL to a new model of program delivery, a government- owned, contractor-operated model. The contract for that model was approved in the spring, after Main Estimates were tabled. What we are seeing here is a variety of requirements, including funding to transition AECL to this new government-owned, contractor-operated model. That is some $14.6 million on that.
Ms. Santiago: That is the trailing end of the funds.
Senator Marshall: What would you expect to see in the new fiscal year? Would you expect to see the Main Estimates with the amount for Atomic Energy and then not much more in Supplementary Estimates (A), (B) and (C)?
Ms. Santiago: The issue with timing with AECL is a combination of when the funding decision is taken but also their own cash flow projections, and when they need these big balloons of cash.
If you look on page 1-9, we are showing that they had already received over $500 million this year.
Senator Marshall: Yes, and they are getting another 10 per cent.
Ms. Santiago: It is another small amount. The reason for that strange distribution is that we flowed that $516 million from the contingency vote during the election period. We wanted them to be very sure that they needed that cash to meet specific obligations as opposed to giving them the full amount that they could have asked for, because there was only a certain amount of money available.
Senator Marshall: When I was on the Finance Committee a number of years ago, there was a similar situation. They would get their Main Estimates funding, and then they would get more in Supplementary Estimates (A), (B) and (C). I would have thought now, since several years have passed, they would just get their Main Estimates and not much after that, but it seems like it hasn't changed. The impression being left is that they can't quite control their expenditures or operations or something.
I will look for them next year in the Main Estimates and Supplementary Estimates (A).
Mr. Pagan: Can I take you through those major items?
The Chair: That would be great.
Mr. Pagan: On page 1-5 of the English version of the supplementary estimates we itemized those major items over $50 million. Again, this responds to questions and suggestions from the committee that we are looking to better understand where the money is. As I said in my introduction, the items presented here on pages 5 and 6 represent almost 65 per cent of the overall requirements in these supplementary estimates.
Senator, you had a question: Is this it or is this part of a bigger piece? It really does vary by initiative. In some cases the government's commitment is one time; this is what it will take to do this program or service, and that is it. In other initiatives, like the Green Climate Fund, I believe it was a $2.6-billion commitment over — I can't recall whether it was five or ten years. So we can only present to Parliament the cash requirements for the fiscal year.
From Foreign Affairs you will see requirements for the Green Climate Fund in their Main Estimates or supplementary estimates, as the case may be, for each of the remaining years of the government's commitment.
With that context, I will go through this quickly. However, I will be happy to take questions as I address these.
The first item presented, the biggest item in these supplementary estimates, is $435.2 million for the Service Income Security Insurance Plan that we discussed previously. This is a central vote for employee benefits that is administered by the Treasury Board Secretariat on behalf of the public service. The cost driver here relates to increased demand for these benefits as a result of an increase in the number of medically discharged members of the Canadian Forces. What I know now, or to the best of our knowledge, is that this is a one-time top-up to the fund. This is a component of Vote 20. We regularly present the aggregate of that public service insurance plan in Main Estimates in each year. We would not expect to see a particular item increase on SISIP as a result of what we hope is a one-time increase.
The Chair: Was there any controversy behind this of military folks complaining that it related to post-traumatic stress syndrome, et cetera? Was it tied to events or was it just that the fund itself, for whatever reason, over time the amount was whittled down and they needed to restock, refinance or replenish the funds?
Mr. Pagan: Senator, this goes back to a policy decision of the government back in 2011, 2012, if memory serves. In fact, there was a court case. It was a class-action challenge to the government. Under the previous policy, benefits were decreased. There was an offset that decreased the amount of benefit based on the pension received. I believe it was called Manuge. As a result of the Manuge decision, the government agreed to waive that offset and to provide medically discharged members with the full benefit.
My understanding is that since then there have been no challenges or issues. This reflects just an increase in the numbers.
The second item on page 1-5 is $215.5 million for National Defence. This is funding related to two separate missions: Canada's assistance to Ukraine, known as Operation UNIFIER; and operations against the Islamic State in Iraq and Syria, which is known as Operation IMPACT. Funding for these initiatives was announced in Budget 2015. As we know, the current government is changing its posture with respect to Operation IMPACT. I expect that you will see requirements for that new posture from National Defence in estimates in fiscal year 2016-17.
The third item is something that we have touched on, and that is the $176 million for Employment and Social Development relating to writeoff of debts owed to the Crown for Canada Student Loans. We talked about the writeoff rate, which is about 12 per cent.
The Chair: So was the 176 just to cover the 12 per cent?
Mr. Pagan: That 12 per cent was 2011. That is the most recent information I have. That $176 million is for the current portion of debts that are deemed to be unrecoverable. Again, that is against that base of $18 billion.
The Chair: The fact that they got to $18 billion, was that because for many years people didn't do any writeoffs and it accumulated into bad debt? Is that what happened?
Mr. Pagan: That is just for the loan program. I will search for some numbers here. For the most part those are performing loans, and those loans will be collected. There has been a process where they try to keep the loan program clean and up to date. I think over the last three years we've consistently brought an item related to the writeoff of unrecoverable loans.
Senator Eaton: Is it always about the same or does it go up and down with the number of students? Has it declined or increased?
Mr. Pagan: I have that information. It does vary.
In December 2014, which is the last time there was a writeoff, it was $294 million, and that was 63,000 different loans that were written off. In 2012, which was the next last time, it was $231 million.
Senator Eaton: But it is always about an $18-billion figure?
Mr. Pagan: I believe the value of the loan figure has increased. There are more students, but the writeoff is fairly constant.
The next major item presented is, again, one that we have discussed, and that is the government response to the refugee crisis. This is presented both as a major item and a horizontal item. The total here, as we said, for that horizontal item was $149 million. It is presented as a major item here as well.
The next item at the bottom of page 1-5 is funding to Foreign Affairs for currency fluctuations against assessed contributions. As you know, Foreign Affairs is the organization through which we hold the large majority of our international memberships: UN, different science organizations, et cetera. With the depreciation of the Canadian dollar, most contributions are paid in U.S. funds, and the department is held harmless for that exchange rate issue as a consequence of this.
The Chair: Just a quick question on the Green Climate Fund, the $2.65 billion. How many countries is that money going to? Have we prioritized the countries? Do we know exactly where it is going at this particular time?
Mr. Pagan: I don't have that information.
The Chair: Maybe between you and Ms. Santiago you could provide that to the clerk. It would be interesting to know, because it is a big chunk of dough.
Senator Eaton: Or do we just give it to the United Nations?
The Chair: Maybe that is the answer: It is given to the United Nations in a five- or ten-year payout. It would be nice to know where our money goes, that we are good citizens and good people trying to help people throughout the world. It would certainly be nice to have a story.
Ms. Santiago: There is only one agreement with the fund, but we will provide more details.
Mr. Pagan: Turning to page 1-6, we have Fisheries and Oceans, $116.1 million for construction of three offshore science vessels. This will be a multi-year initiative. It is part of a multi-year commitment on the part of the government. What we're seeing in these Supplementary Estimates (C) is the requirements for this fiscal year. The requirements for this project will have been included in the department's Main Estimates for 2016-17.
The Chair: Do we know how many vessels will be completed?
Mr. Pagan: The delivery of these three is expected in 2017-18.
Senator Eaton: I guess you have money frozen, or you will. You'll have pots of money frozen year to year if they don't use it up?
Mr. Pagan: If they don't use it, yes. If they don't require the money this year we would freeze it to the next or subsequent.
The Chair: Okay, moving along.
Mr. Pagan: The next item up, item 8, is $81.3 million for Veterans Affairs, and these are benefits under the Disability Award and allowance program and increased demand — this is volume driven — for health, rehabilitation and support services. There is a brief explanation here of the requirement. These funds are required to support an increase in the number of disability benefit applications that have been processed and increased requirements for health services support provided by the department, including prescription drugs and mental health care services.
The next item on our list is $64.5 million for funding for an out-of-court settlement. Out-of-court settlements reduce the liability of the government in a manner that is less adversarial than through a court process. Funds will be directed toward concluding an out-of-court settlement with a Quebec First Nation that relates to alleged errors in the management of reserve lands.
The Chair: Do you know how many? I remember when we had the Deputy Minister of Indian Affairs, who is now on the Privy Council. We asked him how many grievances there are and how many settlements there have been. He gave us a number. Do you folks happen to know how many outstanding grievances there are on an ongoing basis? Would that be something that you could find out relatively easily? Not now, obviously.
Ms. Santiago: We can get you figures for the total liability for claims related to Aboriginal litigation and specific claims and that sort of thing.
The Chair: Just to know whether there is going to be an end in the tunnel and if this is just going to be ongoing till we're all kind of gone.
Mr. Pagan: Item 10 on the list is $61.8 million to the office of Infrastructure Canada for funding of a new bridge for the St. Lawrence Corridor Project. This is to replace the existing Champlain Bridge in Montreal. The new bridge for the St. Lawrence is expected to be completed and open to traffic by December 2018. This is the tranche for requirements in 2015-16 and, again, requirements for 2016-17 will have been included in the Main Estimates for the office of Infrastructure Canada that were tabled yesterday.
[Translation]
Senator Bellemare: What is the total cost of that bridge? Is it $61.8 million for this year?
Mr. Pagan: Yes, exactly. It is absolutely for this year. Give me a moment. The total cost of that project is $4.3 billion.
Senator Bellemare: Thank you very much.
[English]
Mr. Pagan: Item No. 11 is, again, another example of a horizontal initiative. It is $58.9 million going to Canada Border Services Agency, Citizenship and Immigration Canada and Employment and Social Development for funding to continue to administer reforms to the Temporary Foreign Worker Program and the International Mobility Program.
Item 12 is $54.6 million for the Canada Revenue Agency. This is funding to implement and administer changes to the tax code and enhanced compliance measures that were announced in Budget 2015.
The legislative components include enhanced Universal Child Care Benefit and the Family Tax Cut. The compliance measures include augmenting and strengthening audit and review capacity in areas such as the underground economy, offshore tax evasion and aggressive tax avoidance.
Finally, rounding out the list of major items is $50.4 million for the RCMP, funding required to support the federal costs of contract policing services for all contract jurisdictions. This is where the RCMP is providing policing services to Canadian provinces and territories.
That is an overview of the major items. We draw your attention to that because it reflects well over 50 per cent of the overall requirements. There is a line item in the relevant page for each department setting that out, as well as any other requirements for that department or agency.
The Chair: Are there other questions? I think we want to ask ourselves if we have worn down our two witnesses enough.
Senator Campbell: I am ready for three or four more hours, chair.
The Chair: Are there any other questions for Mr. Pagan and Ms. Santiago?
Senator Marshall: I don't have a question, but I want to make a comment. I realize that these are the estimates, and I understand the difference between statutory and the budgetary.
But, when I was going through it, I identified a number of statutory items where there was no information on it, but the budgetary you can find. There is lots of information there, and it starts at a high level. As you go through, it digs down deeper and deeper and deeper, but the statutory is just like one big number. If you were looking at improving the estimates or Supplementary Estimates (A) and (B), I think you should look at that. I know you have said the information was online, but it would be great to have a bit extra in here.
Senator Enverga: I know you two have worked really hard today, so my question is: What does it cost? I see that these are all costs, right? Is there a chance that there is going to be revenue on any of these projects, any of these expenses? There is always corresponding revenue, right?
Ms. Santiago: In some cases. There are some organizations that have authority where the services that they provide generate revenue, and in some cases that revenue can be re-spent by the organization. However, our estimates are presented on a net basis. That has already been taken into account in the amount that we are seeking from Parliament.
Senator Enverga: That is what I wanted to know.
Mr. Pagan: As an example of that, for the item that we spoke of just recently, changes to the Temporary Foreign Worker Program, the department charges employers for labour market assessments or for nationals for the right to a work permit. Changes to the program are designed to generate some revenue: increase the application fee, as an example.
Senator Enverga: They would be taken into account?
Mr. Pagan: Yes.
Senator Enverga: Thank you. That is what I wanted to know.
The Chair: Any other questions before we wrap this up? Mr. Pagan and Ms. Santiago, do you have any final words of wisdom that you would like to share with us tonight about the work that you have done for the Supplementary Estimates (C)?
Mr. Pagan: Thank you for the opportunity to explain. I hope that we have given you sufficient context that will support your ability to call witnesses from other departments and dig into this.
I wanted to close on the point about coherence and better information to Parliament, as Senator Marshall has just laid out.
My minister has a very clear mandate and interest in providing better information to Parliament. We believe that that includes the timing of documents so that Main Estimates might come after the budget.
There is a lot of information in the estimates process. By feedback from committees over the last number of years, we focus more and more on the voted budgetary expenditures rather than the stat, but that is not, in any way, to diminish their importance. In fact, most of the spending is statutory. I would encourage the committee to dig into those issues and engage with the departments delivering those programs. They are subject to their own enabling legislation, so they are well beyond our control at the Treasury Board of Secretariat. It is important, but what is most important to us is that you have the information you need to support the new appropriation act that's coming on the budgetary information.
Our statutory items here are presented for information, but we can't change them. We can't influence program design, but Parliament does have a role to play in terms of understanding the new incremental spending coming and making sure that departments are set up to deliver the programs and services. To Senator Eaton's point, what are we achieving with the incremental spending? That's something that we hope to sharpen the focus of in the months and years ahead.
Ms. Santiago: We do actually have a better treatment of statutory items in the front part of Main Estimates, and we can look at doing something along those lines in the future.
Senator Marshall: I realize that they are statutory, but with the additional information you gave us tonight, change in demographics, it would be just for our information. We realize we can't vote on it, but it would be informative because they are large amounts of money.
The Chair: We have three questions that we asked you folks to give us feedback on, and we would really appreciate getting that feedback on a timely basis.
On behalf of all of us here, I'd like to thank you two for coming in. You are very courageous and good in dealing with us. We certainly appreciate your time and look forward to seeing you next time.
We have a minute to go amongst ourselves to plan for the next period of time. We will continue the meeting in camera.
(The committee continued in camera.)