Proceedings of the Standing Senate Committee on
National Finance
Issue No. 5 - Evidence - April 12, 2016
OTTAWA, Tuesday, April 12, 2016
The Standing Senate Committee on National Finance met this day at 9:34 a.m. to examine the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2017 (topic: overview of Main Estimates and briefing on Public Accounts).
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Good morning, everyone. Before I welcome our witnesses from the Treasury Board, I have to compliment the troops, because any of you watching us here or on television will notice how well groomed we all are, because we're so excited to be back. I want to compliment the ladies, including our clerk. Senators, you're looking very beautiful, as usual.
To our two senators on the left, in Quebec they used to say, "How much did your haircut cost?'' You would say, "Four bucks — a buck a side.'' So that meant you were a square head, or a tête carrée in French.
It's always great to start with a little comedy, and I hope the folks looking at us on the TV don't think we're totally out of our minds.
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, a senator from Quebec, and I chair the committee. Let me introduce briefly the other members of the committee.
First, to my left is the Honourable Senator Larry Campbell, the deputy chair. He's a 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 for British Columbia.
Welcome, senator.
Senator Grant Mitchell is beside Senator Campbell. He's a chartered financial analyst and has been representing Alberta in the Senate since 2005. He holds a Master of Arts in Political Science from Queen's University and a B.A. in Political Science from the University of Alberta. For 12 years, between 1986 and 1998, he was member of the Alberta Legislative Assembly, where he served as Opposition House Leader and, later, as Leader of the Official Opposition. He has also had careers in the public service and in business.
Senator Richard Neufeld is from British Columbia. Before his appointment to the Senate in 2008, he was actively involved in politics, both at town and provincial levels. Elected four times in the riding of Peace River North to the B.C. provincial legislature, he served on opposition and government sides. He was Minister of Energy, Mines and Petroleum Resources from 2001 to 2009. Of course, he has an interest in the gas pipeline to the West Coast.
Senator Elizabeth Marshall, from Newfoundland and Labrador, is a chartered accountant and has earned a B.Sc. 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 of that province. She ran twice successfully in provincial elections and was elected to the House of Assembly for the electoral district of Topsail, and she served as the provincial Minister of Health in 2003 and 2004.
Senator Nicole Eaton of Toronto represents Ontario in the Senate. She is a graduate of the National Film School, has worked in theatre and in television, and serves in different capacities with a number of key volunteer organizations, including the boards of St. Michael's Hospital Foundation and the National Ballet of Canada. She is a former trustee of the Royal Ontario Museum and is Chair of the Pontifical Institute of Medieval Studies. A former columnist in the National Post, she is also co-author of two books.
[Translation]
Senator Diane Bellemare represents Quebec. She holds a PhD in economics from McGill University and a master of economics 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 sat on the Economic Council of Canada and the National Statistics Council. She was also chief executive officer of the Société québécoise de développement de la main-d'œuvre and a strategic advisor to various organizations.
Welcome, everyone. Today, we are continuing our study on the Main Estimates for the fiscal year ending March 31, 2017. You will recall that, in March, we held five meetings and met with 12 departments and organizations on the subject. In fact, the Senate adopted the committee's first interim report on the Main Estimates on March 24.
[English]
Now, to go deeper into our study of the Main Estimates 2016-17, we're pleased to welcome back officials from the Expenditure Management Sector of the Treasury Board of Canada Secretariat. Before us, to answer all our questions regarding government-wide Main Estimates for 2016, we have Brian Pagan, Assistant Secretary, and Marcia Santiago, Executive Director.
We thank you both once again for being here with us. We understand that you're prepared to brief us on the key linkages between financial documents, the federal budget, public accounts and estimates. That is what we will be doing during the second part of our meeting, but let's start with an overview of the Main Estimates 2016-17.
After your opening statement, Mr. Pagan, we'll have a question period.
[Translation]
The floor is yours.
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Good morning, everyone. I am pleased to be here once again to give you an overview of the 2016-17 Main Estimates. We have prepared a brief presentation, which I would like to go over with you. We would then be happy to answer any questions you may have.
On page 2, you will find the highlights of this presentation: first, the purpose and structure of the Main Estimates and the budget cycle as a whole; second, the main sections of the document the President of the Treasury Board submitted to Parliament on February 23; a clarification on the Main Estimates for this fiscal year and the differences between this budget and the budgets of previous years; finally, I will highlight the most significant changes in some departments over the past 12 months and will explain a pilot project on the use of votes by program.
[English]
Slide 3 reminds the committee that the purpose of the Main Estimates is to present the spending requirements for each department, agency and appropriation-dependent Crown corporations for the fiscal year that began April 1. These amounts reflect funding decisions that have been taken by government over preceding years as they affect 2016- 17. The recent budget presented in the house in March represents new programs and visions. Those requirements will be brought forward in subsequent estimates exercises.
The information in the Main Estimates helps to explain the authorities set out in two different supply bills. Interim supply, which was approved in March, consists of the portion of Main Estimates required by departments to begin the fiscal year. The bill for full supply will be presented in the house later in May or June and in the Senate. It represents the full funding requirements for departments and agencies as set out in the Main Estimates. Again, those estimates, authorities, may be amended as the government brings forward new requirements that reflect Budget 2016 priorities and other priorities of government.
Slide 4 is a reminder of the parliamentary cycle for the business of supply, which is set out in three supply periods ending June 23, December 10 and March 26. Of course, we are in the first supply period of the year, April 1 to June 23, when typically committees review the Main Estimates and vote full supply. The government generally, and intends to again this year, brings forward a supplementary estimate, which would be the first opportunity to approve funding requirements for new budget priorities.
Slide 5 shows an overview or reminder of the structure of the Main Estimates. I will spend some time on this as it is very important.
Part I of the document is quite high level and simply presents the broad numbers of the Main Estimates totalling $250.1 billion for this fiscal year. It breaks that funding out by the annual voted requirements and our statutory forecasts based on pre-existing legislation.
Part II of the document in many respects is the guts or the heart and soul of the document because it provides the detail, voted and forecast statutory requirements, by each department, agency and appropriation-dependent Crown corporation of government. In this section, you'll find a great deal of information, which I'd like to walk you through quickly. I'll use a couple of examples.
If we turn to page II-84 of the document, we see the requirements for Citizenship and Immigration. We've selected this department because I have been to this committee quite recently speaking of requirements from Citizenship and Immigration as they relate to the government's commitment to Syrian refugees. Looking at II-84, we see an introduction to the department's mandate, raison d'être, and key obligations and priorities. Then we see a chart that depicts a spending trend, both budgetary and non-budgetary, over a three-year period, and a table that breaks out their spending requirement by the votes provided by Parliament. Citizenship and Immigration has an operating expenditure vote, vote 1; a new vote for their capital expenditures, vote 5; and they have a grants and contributions vote, which is a key mechanism by which they support their programming. We also see a forecast of their statutory requirements and total budgetary estimates. That chart presents the big numbers.
Turning the page, we see the additions and subtractions for this fiscal year that represent some of the key changes for the department. The very first line shows a net increase of $186 million for the department and the explanation of what constitutes that increase. There's a series of additions, subtractions, or "puts'' and "takes.'' The first line is $179.3 million to implement the government's response to the Syrian refugee crisis. This is consistent with the government's commitment in November 2015. They have transacted this business essentially in stages.
In Supplementary Estimates (B) last year, we saw their immediate requirements for that fiscal year. In the Main Estimates for the year, we're seeing the requirements to complete that program for this fiscal year. That page also sets out additions and subtractions. They represent the department's attempt to explain what constitutes the big number of $1.6 billion in budgetary spending.
That's an example of the detail provided in the document. It is replicated for each and every department in the Main Estimates.
Slide 7 simply speaks to a comparison of the Main Estimates year over year. As I mentioned previously, budgetary Main Estimates 2016-17 are $250.1 billion, which includes both voted and statutory items. Overall, this represents an increase of $8.6 billion, or 3.6 per cent, over the Main Estimates tabled for 2015-16.
This increase is broken down in two ways: Voted spending shows a planned increase of 1.9 per cent over last year and totals $89.8 billion; and statutory spending is set to increase by 4.5 per cent and totals $6.9 billion. This increase is linked largely to statutory programs for elderly benefits driven by both an increase in the number of recipients and the average benefit provided to each recipient, and increases in the Canada Health Transfer due to an escalator formula committing to a certain floor in payments to departments.
Slide 8 breaks down that number of $250.1 billion and slices it another way.
[Translation]
So $158.6 billion, or 63 per cent of the spending, goes to transfer payments. Those are payments made to the other levels of government, to taxpayers and to various organizations. That includes grant and contribution programs of many departments, as well as the major statutory payments, such as seniors' benefits and equalization payments. Transfer payments account for all of the growth in spending over the last five years.
Another $68.8 billion, or 28 per cent of the spending, is used to cover operating and capital expenditures. Finally, $22.8 billion, or 11 per cent of the total, is used to pay public debt charges. Debt cost continues to decrease as a result of low interest rates.
[English]
Slide 9 of the presentation highlights the five largest increases in voted items for the 2016-17 Main Estimates. At the top of the page, we see the amount of $728.4 million to AECL related to transitioning to a government-owned, contractor-operated model. The implementation of this model marked the completion of the restructuring of AECL and represents the full requirements for the organization for the fiscal year.
On this page, we see also requirements for three different departments — Parks Canada, Fisheries and Oceans, and National Defence — related to the November 2014 announcement of $5.9 billion in spending related to the support and refurbishment of federal infrastructure. For example, we see amounts going to National Defence totalling $232.3 million. This is to renew infrastructure, including a new peace support training centre in Kingston and repairs to airfields, hangars, armouries and barracks across the country.
Finally on that list is an item that should be familiar to this committee: a requirement for $236.9 million for Fisheries science vessels as part of the national shipbuilding program.
Slide 10 presents the major changes in expenditures. In Part II, each department explains their additions and subtractions. In this slide we've summarized for you the major increases that are reflected in Part II. We see increases in Employment and Social Development. This is largely related to the increases in statutory programs that I spoke to. We see AECL, as well, which I've just mentioned, as well as Parks Canada, and Fisheries and Oceans, related to their shipbuilding and federal infrastructure.
Then we see major decreases, including at Aboriginal Affairs and Northern Development Canada, Natural Resources Canada and Transport Canada. An explanation of these is provided by each department. These are primarily attributable to sunsetting programs — programs that have come to their natural end, such as the Truth and Reconciliation Commission at Aboriginal Affairs — or the reprofiling of funds, which are funds that had been available for a department to spend in this fiscal year but which are being moved out to future years because the terms of the program do not support a cash requirement for the amounts that had originally been intended this fiscal year.
Mr. Chair, before concluding, I would like to take a moment and explain to the committee a pilot project presented in these Main Estimates that is summarized on page 11.
In June 2012, a report by the House of Commons Standing Committee on Government Operations and Estimates stated that a control structure based on the purpose of expenditures, rather than the inputs of operating capital, grants and contributions, would better allow parliamentarians to review and scrutinize government expenditures. The report recommended the transition of estimates and appropriation acts to a program activity model.
The Department of Transport is the subject of the resulting pilot project through which its grants and contributions will appear in separate votes based on their existing program structure. Under the pilot, parliamentary control of appropriations is expanded to cover both the type of expenditure — the input of operating capital, and grants and contributions — and the purpose or goal of Transport's grants and contributions programs.
There are pros and cons to such an approach that we would like to address before determining a way forward. Therefore, through this pilot, TBS will be asking parliamentarians for feedback on the nature of parliamentary control. We will also be working with Transport to document challenges of the new vote structure. What we learn will help feed into our understanding of the estimates reform package moving forward. This includes our intention of better sequencing the timing of estimates documents and a clear focus on results.
My minister, Scott Brison, will be appearing before this committee in the next few weeks to discuss this initiative in greater detail.
Mr. Chair, that concludes my overview of the 2016-17 Main Estimates. I do have a separate slide that I'll speak to in the second half of the presentation that presents the sequencing of financial reports, and that might lay the groundwork for the appearance of the minister in the coming weeks.
Next steps in the treatment of Main Estimates: Committees will call witnesses so they can understand the requirements department by department. The full supply bill will be tabled later in May or June, and that will provide the full authority for departments to move forward with the program presented in these Main Estimates. As I mentioned earlier, new spending that was announced in Budget 2016 will be brought before Parliament in subsequent supplementary estimates, beginning with Supplementary Estimates (A), early in May.
[Translation]
We have provided you with an overview of the main estimates and compared this budget with the previous fiscal year's budget. I hope this has been useful. It would now be our pleasure to answer any questions the committee members may have. Thank you.
[English]
The Chair: Thank you very much, Mr. Pagan. We have a group of senators interested in asking questions, so we will begin.
Senator Eaton: When you're talking about new ways of being transparent, I find this interesting: decreases, Indian Affairs and Northern Development, $681 million. But I think in the budget, Indian Affairs got another $8 billion in spending. Perhaps it would be interesting for us — for certain departments like National Defence, which is another one, with a decrease of $300 million, but we know that's not really the case — if we could have some kind of horizontal thing. Another is Aboriginal Affairs and Northern Development Canada. Perhaps we could have it all by department so we could really see in the end how much we're spending on First Nations and on defence.
So, we have a decrease here of $300 million. It might be useful to know how much money has been reprofiled and what the overall budget is. It really doesn't tell us if there's an increase; it just tells us there's a decrease, as you say — $300 million. Is that a program that has been sunsetted?
Mr. Pagan: Senator, you've put your finger on one of the key challenges for us in terms of the alignment and coherence of our documents. Again, our minister is quite looking forward to engaging this committee on ideas for the way forward.
You're quite right with both examples. The challenge is really sequencing. The estimates present the approvals of the executive at a point in time. This document was tabled on February 23, and it reflected everything that had come before Treasury Board up until a few weeks before that tabling. So, in a sense, it represented the totality of known requirements at the time.
Then we have the budget that comes forward in March, which introduces new priorities or reconfirms the continuation of programming. So we've got this challenge where the documents are presented out of sequence. The budget presents a view of all planned spending, and the estimates will only present what has been approved up to a point in time. If programs are planned to sunset, we reflect that, and then if they're renewed through the budget, we have to bring them forward through a different document.
In the case of Indian Affairs, there was $284 million related to sunsetting initiatives for the Federal Contaminated Sites Action Plan and the First Nations Water and Wastewater Action Plan. That money came off the table in these Main Estimates and shows as a reduction. In Budget 2016, $1.8 billion was announced over the next five years to invest in water and waste water infrastructure on First Nations.
If we had a process where we were presenting the budget first with that commitment and the Mains Estimates after the budget, we would not show a reduction. In fact, we would show an increase in Aboriginal programming. You will see that increase in the supplementary estimates that the government will table through the year.
That is a key challenge for us for when we speak about alignment and coherence of the estimates; it's really about that timing.
Senator Eaton: Especially when you have some departments like Defence and Indian Affairs, which are spread over multiple ministries — health, corrections. It's all there; so that would be helpful.
Is all of the $8 billion going to Indian Affairs, or will some go to corrections and some to health, et cetera. Do you get my point?
Mr. Pagan: I do. I spent time speaking to the first issue, which is the timing.
On your second point about a more horizontal view, we're aware of those challenges. Right now we're organized by department, and we allocate resources by input, operating capital as well as grants and contributions. The intention of the pilot is to present a different view: the purpose of programming. We're going to look at that in some detail.
Coincident with that, we will re-examine our policies on results for the government and bring forward a policy that provides a sharper focus for departments on —
Senator Eaton: Trying to find the outcomes.
Mr. Pagan: Correct. What is the core responsibility of a department? If we can get that right, it would allow for a better understanding of the purpose of departments and where money goes. It would facilitate a more horizontal view. For departments that have a common purpose such as security, Aboriginal programming, energy or the environment, a structure based on that purpose would allow a better horizontal view.
Senator Eaton: Maybe I don't know how to read it.
In a new way of reporting, could there be somewhere, for instance with National Defence, that you could report money that has been reprofiled and is sitting there, or can't you do that?
Mr. Pagan: In Supplementary Estimates (C), the last estimates exercise of the year, the committee may recall that we brought forward a new initiative to forecast what we call the "frozen allotments'' — money that has been approved by Parliament but has been subsequently frozen by the executive so that it is no longer available to be spent by a department. There are various reasons why that might be, but generally the executive will freeze funds because a department has come forward and said that the terms and conditions of a program have changed. They cannot spend the money that has been provided to the department and so they would like to reprofile it to a future year. We'll freeze that money so that they can't use it in fiscal year 2015-16 and put it in the year where they forecast they'll require it, whether it's this year or subsequent fiscal years.
That was our initial attempt to provide that sort of view, that transparency. I believe it was remarked on by this committee and the Office of the Parliamentary Budget Officer as a welcome step forward. Parliament is seeing much earlier in the fiscal year information that would otherwise have been presented in the public accounts in the fall of 2016. We presented that information to Parliament a full six or seven months earlier than they would normally see it. We hope to build on that as we engage in the process of reforming the timing of our estimates documents and improving the process.
We'd like to engage parliamentarians in some additional measures, including the decreases. Right now we present to you only the increases. We always bring forward the new requirements that represent new funding for programs. If the programs change and less funding is required, all we do is freeze it. We don't actually reduce the appropriation. This would be something we would want to look at in terms of whether it's useful to us or not.
In the case of National Defence, you had a question about the reduction. In that annex on frozen allotments, we forecast a reduction in National Defence of over $600 million in Supplementary Estimates (C).
[Translation]
Senator Bellemare: I have some questions about the role we as parliamentarians play in the approval of appropriations, and this has to do with the transfer of voted appropriations to programs. I want to make sure to have understood what we have voted on so far. When we vote on the Main Estimates, if we take the example of the Canada Revenue Agency — on pages II-34 and II-35 in the English version — we can see vote 1, operating expenditures, and vote 5, capital expenditures. The next page contains the heading Expenditures by Strategic Outcome and Program, where we can see four strategic outcomes. We vote on votes 1 and 5. Does this mean that we also vote on major strategic outcomes by program?
Mr. Pagan: Yes.
Senator Bellemare: I will wrap up my question. Let's say that we have supplementary estimates, and a project has been approved that requires additional spending that does not fall under strategic outcomes. For example, in the case of immigration, I think there were expenditures that did not fall under strategic outcomes. So Parliament must vote on that spending as part of supplementary estimates. But if, for example, those expenditures are already under strategic outcomes, do we also have to vote on the increase of spending related to that new decision? Am I being clear?
Mr. Pagan: Yes, absolutely.
Senator Bellemare: My question also has to do with the discretion of the executive. Does the executive branch have the discretion, if it is asked to do a specific task, to decide to decrease spending for another task in order to do what is asked of it without discussing it and without putting it to a vote in Parliament? Or does Parliament absolutely have to be informed each time and has to vote on the impact of the decision or the bill?
Mr. Pagan: Thank you for the question. It is very important and it is exactly what we are currently studying in our pilot project. I would just like to say that Parliament is currently controlling expenditures through votes. In Canada Revenue Agency's case, we have vote 1 for operating expenditures and vote 5 for capital expenditures. There are all sorts of activities that come under vote 1. In the Canada Revenue Agency's example, four different strategic programs are presented, but only for information purposes. That is not a way for Parliament to control the agency's activities.
[English]
The Canada Revenue Agency, as we know, collects and processes tax returns, audits for compliance and issues benefits. All of that activity is presently within vote 1, and the department has the flexibility to move funding from one strategic program, such as reporting and compliance, to another program, taxpayer and business assistance, according to the needs of the department and the flow of business.
It's only if they propose to move money from their operating to their capital, or vice versa, that we would go back and seek parliamentary approval for that transfer.
It's a very important point. Parliament controls by existing votes. We present information by the strategic program or program activity so that there is greater insight or awareness of the different priorities of the department, but they are free to move funding between these programs, as long as it's within the vote. This happens regularly within departments, arguably as it should, because of the need to be flexible to respond to changing business.
Senator Bellemare: Do they need to go to Treasury Board? In other words, if, for instance, they move one expenditure from a big priority to another, do they need to go to Treasury Board?
Mr. Pagan: Not generally. If there is a fundamental change in their program, if they are going to stop doing something, such as a line of business, or if they need additional resources to continue doing with their mandate, then they would come to look for that authority.
But as a matter of business and of being able to be nimble to respond to the different demands in a very big organization, they would have the flexibility to move people and resources from one business line or one program activity to another.
[Translation]
Senator Bellemare: But if they need more money, will those additional amounts be part of supplementary estimates?
Mr. Pagan: Yes. If we are talking about a net increase, approval from the Department of Finance and the Treasury Board is needed, and then the envelope will appear in supplementary estimates. If it is a transfer of funds from one program to another, with zero net, we do not have to get approval from the Treasury Board or Parliament.
Senator Bellemare: When a priority has to be added while reallocating funds, it is not necessary — I have always thought that the structure of plans and priorities must be approved by the Treasury Board.
Mr. Pagan: Yes.
Senator Bellemare: So if the structure is modified — as in this case — if an element is added or changed in the structure, regardless of the financial impact, the Treasury Board must give its approval.
Mr. Pagan: Yes.
Senator Bellemare: But it is not necessary to come before Parliament and hold a vote.
Mr. Pagan: Exactly.
Senator Bellemare: On the other hand, with the transition, it may be necessary to hold a vote.
Mr. Pagan: That's right.
[English]
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: Let's take the case of Transport Canada and the new pilot project. If they are in a situation where they can't spend all of their transfer payments for gateways and corridors but they need it in one of the smaller programs that's now in vote 20 and others, they have to come back to Parliament to be able to reallocate those funds from one transfer payment vote to another transfer payment vote, where they didn't have to before.
[Translation]
Senator Bellemare: So this creates other parliamentary oversight activities and gives us additional tools to see how the money is being spent.
Ms. Santiago: Yes.
Senator Bellemare: Thank you very much.
[English]
Mr. Pagan: Senator Bellemare has introduced an important point here in terms of votes and programs. I want to remind the committee of the Report on Plans and Priorities that each department prepares as an accompaniment to the Mains Estimates. They can be quite useful in helping committees understand the nature of a department.
In the case of the Canada Revenue Agency, we're seeing total budgetary requirements of $4 billion, and that's broken out into two votes. Vote 1, which is approved by Parliament, is over $3 billion. To understand what's going on with that $3 billion, we present the program activities, approved by Treasury Board, that break out CRA's business lines or program activities around reporting compliance, collections, assessment and processing, and taxpayer and business assistance.
The RPP, the Report on Plans and Priorities, will be structured to provide a great deal of detail in terms of what exactly the CRA is doing on reporting compliance. It will talk about international and offshore, and it will talk about auditing of large-scale and medium enterprises.
On assessment of returns and payment processing, it will talk about their continual move to electronic processing and the ability to use technology to process returns faster. It will set specific objectives and targets in each program activity. For example, if you file electronically, you will get your return in 7 days or whatever their standard might be — their coverage of the audit universe.
So I simply remind the committee of the utility of those documents. If you are hearing witnesses from particular departments, you would want to have their RPP on hand to ask questions about their business, their targets and their indicators.
This will be an important part going forward of our reform. This government is quite intent on renewing the evidence base of programming and setting targets and specific outcomes for their programs. As I said, we'll be revising what is currently known as the program activity architecture. We're going to be adjusting that to have a clearer focus on those core responsibilities of departments, with specific results and indicators that will be used to better understand just what it is they're doing and trying to achieve with the resources provided by Parliament.
Senator Mitchell: This is a bit of a follow-up to Senator Bellemare's question.
There are no special warrants any longer; that's a thing of the long past. If the government needs to spend money quickly, they just have to anticipate it. There's no way they can go to the Governor General and get a special warrant as they once did.
Mr. Pagan: To be clear, the use of Governor General special warrants is a permanent tool of government. It can only be exercised when Parliament is dissolved for the purpose of a general election.
Last year, July to October — until the return of Parliament, 60 days after the writs — was the period in which we could have used Governor General special warrants had the need arisen, but we were in a very good situation last year with respect to supply. The election was called after approval of the full supply bill for Main Estimates and the supply bill for Supplementary Estimates (A), so departments had all of the authorities that had been provided by the executive up until that election call.
Before we would resort to warrants for any sort of development in terms of programming, we would have to draw down central votes and other reserves of government.
This committee will be familiar with Treasury Board vote 5, government contingencies. It's a contingency of $750 million available to Treasury Board ministers to allocate to departments if they have program pressures for approved program mandates that exceed the authorities provided by Parliament. It's a short-term temporary source of cash until departments can get the parliamentary authority they need for new spending. In the case of the election last year, we made modest allocations from vote 5 to support departmental operations, which obviated the need to use Governor General warrants.
Senator Mitchell: I note on your slide 8 that the total budgetary estimate is $250.1 billion for 2016-17. Yet I know that total government expenditures will be greater than that. Two years ago it was $280 billion, and it's $250 billion now. I think it will be around $300 billion. Is that not the case? What's the difference between the $250 billion I see here and the ultimate? Is it equalization payments? Maybe you've already covered this.
Mr. Pagan: There are two aspects to that question, senator, and they are both rather difficult.
First, the Main Estimates present approvals at a point in time. This was the forecast essentially as of the end of January. Then we have a budget that follows and introduces new requirements. We see requests from departments for new appropriation authorities to implement those government programs. That's one reason there's a difference between what we present in the Mains Estimates and in the budget's forecast of expenses. The budget presents the full view, and the estimates present the view as of a point in time.
Second, and more importantly, there is the difference in the accounting basis. The estimates are on an accrual basis, an expense basis, and consolidate essentially all spending, including elements that are simply not in the estimates because they're not part of the authorities provided by Parliament through statute or appropriations; whereas the estimates are on a modified basis of accrual, a near cash basis.
This has been a source of confusion, and we understand this. Again, as part of our program for alignment and better coherence, we intend to work with Finance to develop reconciliation from the expense forecast in the budget of, I believe, $291 billion to our cash basis. That's something the minister will be speaking to as well.
That said, the disconnect between those two headline numbers is reconciled in the different documents. Perhaps in the second part of the presentation this morning we'll speak in more detail about the budget in Volume I of the Public Accounts of Canada and the estimates in Volume II of the Public Accounts of Canada so that you can better understand how those line up.
Senator Mitchell: This is maybe a little bit tangential. Basically we're looking at a government budget of $300 billion, which is about 15 per cent of the GDP. If you add in provincial and municipal expenditures net of transfers from the feds so you don't double-count, what would be the total portion of GDP that is government expenditure in Canada? Would you know off-hand? Is that a fair question?
Mr. Pagan: It's a fair question, but I wouldn't know it off-hand. It's something we could get for you.
The Department of Finance produces what they call Fiscal Reference Tables that present both federal and provincial spending. I'd look at those in the first instance to see if they present total spending as a percentage of GDP. If it's not there, it's readily on hand from our friends in Finance, so we can get that for you.
Senator Mitchell: I would be interesting to see how that compares to other countries and what it means.
Mr. Pagan: The Fiscal Reference Tables provide comparisons country to country, especially on debt. I don't know for certain that they provide comparisons on total program spending, but we'll look at that.
The Chair: Would you rephrase exactly what you want? Mr. Pagan said he'd get us that information and I want to make sure we follow up.
Senator Mitchell: I'd be interested to know the percentage of Canada's GDP, which is about $2 trillion, that is government spending — federal, provincial and municipal governments — net of transfers from one to the other so we don't double-count.
Mr. Pagan: Ms. Santiago is reminding me that in addition to the Fiscal Reference Tables, Statistics Canada prepares the national accounts, which will be in there as well.
Senator Mitchell: It will be in there; okay.
Where are equalization payments in here? Are they under transfer payments? Are they that obvious?
Ms. Santiago: They're statutory payments. They would be part of the Department of Finance's total statutory authorities.
Senator Mitchell: How much are they now?
Mr. Pagan: While Ms. Santiago is looking for that, at page II-113, we see total statutory requirements for Finance of $89.4 billion. That's a headline number for all of their statutory programs.
Ms. Santiago: Fiscal equalization specifically is $17.9 billion.
Senator Mitchell: That doesn't include health care transfers.
Ms. Santiago: The Canada Health Transfer is $36 billion.
Senator Mitchell: So it's in addition to that. Thanks.
Mr. Pagan: As an annex to the Main Estimates, there's an online annex of the statutory forecast for every statutory program for each department. In the case of Finance, you'll see specifics around the Canada Health Transfer and the Canada Social Transfer payments, equalization and other fiscal arrangements.
Senator Mitchell: When are the equalization cheques signed and sent to the provinces so that a province like mine, Alberta, begins to go over — hopefully not but maybe — to the have-not column? At what point is that recognized so the flow of money goes the other way?
Mr. Pagan: That's a detail we'd have to get from our friends at Finance.
Senator Mitchell: Could you get that for us? That would be great.
Senator Marshall: Mr. Pagan, we spend a lot of the time on the Main Estimates. The expenditures included in the budget are significantly ahead of what's in the Mains Estimates. How will you transition from the numbers in the Main Estimates to the numbers in the budget? Is this an especially challenging year for Treasury Board? Will everything be in Supplementary Estimates (A)? Is that how the transition will be done?
Mr. Pagan: Two questions there. Every year is challenging for the Treasury Board Secretariat. Every budget has its own flavour and priorities. In the current construct where we're presenting the estimates first and then the budget, there is necessarily a catch-up process.
Senator Marshall: That's right.
Mr. Pagan: It's quite involved and complicated at our end and confusing at your end. This is something that we're quite intent on addressing to provide better clarity and transparency and, arguably, to make our job a little easier.
With respect to the details around Budget 2016, the fact that it was tabled in March of this year as opposed to April actually gives us more time to work with departments to bring forward those budget priorities for the estimates, and we're in the process of doing that now.
We had terrific cooperation with the Department of Finance and with departments on budget priorities. There was a clear sense going into the budget of what this government's priorities would be so departments were well positioned to begin work on programs related to infrastructure and Aboriginal programming, et cetera.
I can tell you that details are well advanced in terms of Treasury Board submissions and approvals, and that we will be bringing forward a significant chunk of Budget 2016 priorities in the Supplementary Estimates (A), which will be presented in early May. It won't be the totality of Budget 2016 priorities, but that remains our goal.
What we want to establish as a results focus moving forward is that as the expenditure authority of government, close to 100 per cent of the spending announced in the budget should be presented in the estimates in a reasonable period of time. That's a goal my minister would sign onto and what we want to do.
Senator Marshall: The expenditures in the budget are about 25 per cent higher than what are in the mains. It's quite a significant amount. Would we expect to see most of that or almost all of that when we get Supplementary Estimates (A)?
Mr. Pagan: I don't have an exact percentage for you at this point, but I think it's fair to say that you would see a significant portion of the Budget 2016 priorities in Supplementary Estimates (A).
Senator Marshall: And how would you treat the reductions, like National Defence? It seems that there's going to be a significant change in some of the departments. I can see where you're going to add money to the accounts because of the budget, but what about in areas where it's reduced, if certain projects are not going ahead or certain infrastructure not going ahead? How does that get handled?
Mr. Pagan: That's a great question.
Senator Marshall: I'll tell you why I'm asking. We've just gone through a process where we spent an extensive amount of time going through the mains. We had witnesses talk about different programs and what's anticipated in the coming year, and now some of those things are not going to happen. I'd like to know about the reductions.
But also in some areas, programs have been expanded significantly. That's an issue, but I guess we'll pick them up in Supplementary Estimates (A).
To go back to my original question, how will you account for the reductions?
Mr. Pagan: That's a terrific question, senator. Thank you.
The Main Estimates, as I said, present approvals at a point in time. So where there were known reductions to programs, such as programs that were sunsetting because they had ended their natural life or where a department was forecasting requirements in the future as opposed to in the fiscal year, we're seeing reductions in the spending. Slide 10 presented some of those reductions. It's important because that presents the revised spending requirements, we'll call it, as we knew them in the Main Estimates.
Budget 2016 has introduced new priorities and program intentions of the government, and signalled where they want to put new money. If there are programs or departments where they're also suggesting a reprofiling or a revision to forecast in outer years, those would be reflected in those outer years. They would not affect the 2016-17 process.
To my knowledge, Budget 2016 did not introduce any —
Senator Marshall: Those amounts would be left there? Would they be frozen?
Mr. Pagan: That's it. So the department has their Main Estimates authorities for this year, and if the budget has changed authorities or the profiling for future years, we would capture that in the Main Estimates for those subsequent years.
Senator Marshall: So we wouldn't see it in Supplementary Estimates (A)? If there are reductions in National Defence, when we get the Supplementary Estimates (A), will we see the reductions? We'll see the increases for First Nations, but are we going to see the reverse? How will we know, as parliamentarians?
Ms. Santiago: We will probably be in a position to publish the reductions in the same table of frozen allotments by Supplementary Estimates (C). So if amounts are being reduced because a program has just been shut down, if they're being reduced from the appropriation, we would do the same kind of disclosure next February that we did last February.
Senator Marshall: Not until February? We won't know until February?
Ms. Santiago: We don't have the specific numbers yet for a lot of those votes.
Senator Marshall: That seems kind of late. We'll know next month about the increases, but we won't know until February about the decreases.
Ms. Santiago: The most significant decrease that we'll be able to bring to you next month will be the ones on the statutory side; for example, where the new Canada child tax benefit is replacing some of the existing payments.
Senator Marshall: Those are increases?
Ms. Santiago: On the estimates side, it will actually show up as a decrease because it's moving into the tax expenditure world. So that kind of thing we have rough numbers on now. We will be able to show you that.
Senator Marshall: But the decreases —
Ms. Santiago: Below the vote level, we don't have those things.
Senator Marshall: That's a concern for me. I want to know about the increases, but I also want to know about the decreases. It's a 25 per cent increase overall, so some things are being increased more than 25 per cent, and then netted in there are things that are being decreased, probably significantly.
The other question I wanted to ask concerns the pilot project you talked about earlier. Why would you pick Transport Canada to be the pilot department? I saw an article in the paper probably about a month ago wherein I think Treasury Board has some people in there supervising because there's an issue with regard to them living within budget, and I think they said it was salaries.
Why would you pick a department for your pilot that's in the media or one that seems to be having problems managing its budget? It might be riskier to have a successful project.
Mr. Pagan: Senator, the situation that you refer to at Transport is a recent development, and there were specific circumstances contributing to that. Mr. Garneau appeared before a house committee in March to explain that situation. It was related to their operating budget vote. Quite simply, they hired additional staff in a number of different areas and have gotten into some pressures as a consequence of that.
With respect to details around what's presently happening at Transport, I'd have to direct you to the department.
In terms of why they were selected, which was some time ago — it goes back I think almost two years that we worked with Transport — we heard loud and clear the government operations committee interest in looking at program-based or purpose-based appropriations. To determine a way forward, it's very important to try something, to pilot it, so we were looking for a department that was representative of the reality, the complexity of departmental operations. Generally, that's a department that would have an operating vote, a capital vote and a grants and contributions vote. Transport fit that bill. The pilot is with respect to their grants and contributions program. Again, they have a very representative sampling of different types of grants and contributions and complexity.
Senator Marshall: That was the logic for picking them.
Ms. Santiago: We had some smaller organizations and realized it might be something trivial and then complicated organizations like Aboriginal Affairs and Foreign Affairs.
Senator Marshall: Get something in the middle.
Ms. Santiago: Yes.
Senator Marshall: Is there an end date for the pilot? When is the pilot going to be finished? Does it then go into some kind of evaluation?
Mr. Pagan: As I said in my introduction, we want to engage this committee and parliamentary committees in general on this so that they understand. We don't have a fixed date. If one year of experience is sufficient to give us a way forward, that would be fine.
There are a lot of moving pieces here, and it will be important to understand the implications of each of them. If you haven't been able to tell, it's very important to me, to the minister and I think to all parliamentarians that we get the sequencing of documents right. We understand the confusion that occurs when you have your Main Estimates before your budget, so we want to get that right. Getting that right opens up a better understanding of the other issues and challenges, for example, cash versus accrual that Senator Mitchell referred to, a results focus that Senator Eaton has referred to, and then control by input versus control by purpose. We want to make sure that we look at that in the context of all these other pieces.
Senator Marshall: For Transport, what's the objective? There's no finish date for Transport, but once you get a handle on what's happening in Transport, do you intend to go to all departments, or will you just phase it in in certain departments? Is that where you're going with this?
Mr. Pagan: We'll assess this. We'll take feedback from the committee and the department regarding what this means in terms of departmental systems and flexibility versus complexity. We will look at some of the other issues that parliamentarians have identified as priorities, including the timing and a results focus. Then we will present recommendations to the minister and to committees in terms of the way forward.
The last time that we did something like this might be very instructive. It's really some time ago; I'm going way back. In the 1990s, there was a structured program out of the Treasury Board Secretariat. It was called the Improved Reporting to Parliament Project. At that time, the challenge was all the information was in a single document. The Main Estimates were presented as a big brick, and it included the requirements for the fiscal year, a backward look at spending and performance, and a forward look at forecasts and plans. It simply became unintelligible for committees because the span was so great and it was really quite confusing.
So there was a pilot project to present separate documents: the Reports on Plans and Priorities, which I mentioned previously, that showed committees what a separate planning exercise might look like; and Departmental Performance Report, that were aligned with the public accounts and were intended to come out more or less in sequence with the public accounts.
Through that pilot project, the forerunner to OGGO — in fact, OGGO was created out of that pilot project — they determined that, yes, this was a better way of structuring the estimates. We should separate Part III and have a distinct planning window to accompany the Main Estimates and a performance window to support the public accounts. That process took about 18 months. That pilot project took about 18 months. I would see something similar here.
Senator Marshall: I realize that all of these projects are quite large, and the one you were talking about earlier, trying to bring the Supplementary Estimates (A), (B), (C) and the Main Estimates together so they're more reflective of the budget is going to be a big undertaking. I think this year, especially with the change in government and a big change in direction, you've got your work cut out for you.
The Chair: Mr. Pagan touched on some of the issues of the transformation that he wants to get involved with and with all of the parliamentarians. I want to make sure we have enough time to cover that, because I'd like to have a little meeting after with the steering group, or maybe with the whole committee, depending on what we want to do, for 10 or 15 minutes.
Senator Campbell has a question, to be followed by Senator Neufeld and Senator Mitchell. Then we can head into the second part of your presentation, Mr. Pagan.
Senator Campbell: My question has to do with vote 20. This is the Public Service Insurance to be increased by $87 million due to the sunset of reductions from the Vertical Review 2008. What was the Vertical Review 2008?
Mr. Pagan: Senator, that was a very structured look at spending in the area of pensions and benefits, and with respect to vote 20, the realization of efficiencies in terms of program support.
Senator Campbell: Could you give me an example of the efficiencies?
Ms. Santiago: The efficiencies that were achieved as a result of that review included things like increases in pension or contribution rates for dental plans, and the alignment of co-payments and deductibles related to pensioner and public service dental plans. Another aspect of the savings were things like cost management strategies, such as generic substitutions for drug benefits and electronic adjudication of transactions. So we mostly moved to an all-electronic arrangement for submitting and processing claims. There were further adjustments to pensioner contributions and also the elimination of employer health care premiums for federal health care workers.
Senator Campbell: Why were they sunsetted?
Ms. Santiago: It was a sunset of the savings. The idea was that we achieve the bulk of these savings in a short time frame, and the end of that time frame was prescribed to be 2015-16.
Senator Campbell: So these savings have been met. How do we ensure they continue to be met now that they've sunsetted?
Mr. Pagan: The co-payment or the increase in deductibles is a policy. It's an ongoing requirement by the employer, and that won't change.
Senator Campbell: In fact all of these are written into policy so that a creep doesn't come back into it.
Ms. Santiago: That's right. The growth in the planned expenses is just normal usage.
Senator Neufeld: I have a couple of questions following up on the question of Senator Mitchell about spending as a percentage of GDP and comparing it. How about debt as a percentage of GDP along the same lines? I think the debt- to-GDP federally is somewhere around 30 per cent. Is that correct?
Mr. Pagan: I believe it's a little bit higher than that.
Senator Neufeld: Could you give us that number?
Mr. Pagan: Yes.
Senator Neufeld: Is there some magic number that government should stay at? I go back to my province of British Columbia, and I know the premier I served under was saying, "You're not going to increase the debt-to-GDP by more than 15 per cent.'' We worked on that level. I don't know where they are at now. I think they're about 16 per cent. But is there some magic number we should be looking at, or does debt-to-GDP mean nothing? It must mean something. What's the rationale behind it, and what's a good number for debt-to-GDP, which we used to have in Alberta but not anymore?
Mr. Pagan: Senator, it's a fascinating question. I don't think there's any single answer. Arguably, a certain level of debt to incur an expense now to invest in the future is normal and desirable, but we're well aware that economists are all over the map in terms of what that level should be.
I mentioned the Fiscal Reference Tables earlier. They will show that Canada's debt-to-GDP is the best in the G7 or G8, so that suggests we are in a position of strength. I think there's consensus that the current debt is sustainable and can be managed over time.
To respond to your question, you would want to engage the economists at the Department of Finance in terms of their study of that matter and to hear their thinking. At the Treasury Board Secretariat, we really don't engage in that debate.
Marcia has just looked this up, and according to Budget 2016, the forecast for debt-to-GDP is 32.5 per cent. I think the next closest country would be Germany, and they're above 70 per cent. As we know, there are countries out there — Italy, Japan — that are above 100 per cent.
So there's no easy or common answer to that. But ours has been very stable, and has, in fact, been decreasing over the last number of years. I think there's a consensus that that is sustainable.
Senator Neufeld: I guess if we're the lowest in the G7 — when you talk about 100 per cent, I don't know whether that makes us really good at 30 per cent. That's what I wonder.
Second, Senator Marshall asked when we will see reductions in spending in different departments. I'm quite surprised that we can bring forward the increased expenditures, but you can't provide the numbers at the same time for the decreased expenditures in those same departments until February next year. Can you give me some rational explanation why you can show the increase but you can't show the decrease? That's got to be done by the departments when they provide that information to Treasury Board. I'm familiar with Treasury Board and the information that they ask, and if you go to Treasury Board and say, "We're not going to spend this much on this program, but we want to increase that one,'' those numbers are available. Is there some other reason it can't be provided?
Mr. Pagan: Again, in Supplementary Estimates (C), we did just that. We presented to Parliament the aggregate of all of what we'll call reductions in spending that resulted from decisions by the executive to freeze funding — to make that funding no longer available — to a department because of changing program conditions or requests that they reprofile money into outer years. So we can and we did do this.
If memory serves, that was about $5.1 billion or $5.2 billion in spending that we forecast would not occur, and we explained some of the different reasons for that. We've seen examples in this Main Estimates of departments explaining that in their own words — National Defence and Aboriginal Affairs.
That was acknowledged by this committee and by the Parliamentary Budget Officer as a good and positive step in terms of transparency, and we intend to build on that.
The question of the timing around when we can do this is a bit more difficult. Senator Marshall was speaking to specific decreases in Budget 2016. My friends at Finance will have more detail, but I'm not aware of a specific program at National Defence or at Aboriginal Affairs that was cut or reduced in Budget 2016. They may be out there, but I'm not aware of them.
Senator Marshall: But there were indications in the budget, for example, that certain funding wouldn't be given to National Defence for certain items.
Mr. Pagan: If there are funds currently in National Defence's reference levels and if programs have been approved by Treasury Board for which National Defence is anticipating to spend the money in the future, and the budget has changed that decision and those funds will no longer be available, we will freeze those funds and present them in our roll-up at Supplementary Estimates (C) as funds that are no longer available to the department. Those reductions will be reflected in subsequent estimates documents.
The bottom line is that as those decisions are taken — we presented that in Supplementary Estimates (C) for the first time —
Senator Neufeld: When?
Mr. Pagan: If you're saying "present these as available,'' we can do that; we can present this in Supplementary Estimates (A) and (B). We're not aware at this point of any reductions in Supplementary Estimates (A), so there would be no reduction to show for DND at this time. But if that changes and there's a decision to move money that's available to them into future years, or to simply take it off the table, we could replicate that annex that we had in Supplementary Estimates (C). We could do that in Supplementary Estimates (B).
Senator Neufeld: My life in budgets was that I had better put together a budget for the year that would actually get my ministry through the year. There was nothing like coming back with Supplementary Estimates (A), (B) or (C). You actually had to do it. If there were extenuating circumstances for something that took place, Treasury Board is there to help that process through.
Do you see a time when we'll actually get away from Supplementary Estimates (A), (B), and (C) and actually have a budget for a department that says, "This is how much money we're going to spend; this is where we're going to spend it''? Can the departments not start thinking a little bit more on a yearly basis instead of a few months each time, then taking another little bite and another little bite?
I understand the complexity. I understand how large it is compared to a provincial budget. But I think most provinces do it that way. You come in with a budget, or the city comes in with a budget, and this is what we're going to spend on it, and you better have a darn good reason if you want to spend more. You can spend less and they will pat you on the back, but if you spend more, they're likely to hit you with a two-by-four.
Mr. Pagan: That goes to the very heart of the issue and what we see as the primary challenge here in terms of coherence and alignment. I would argue that it's certainly not a departmental problem. Departments understand their business and know their requirements, and they are prepared to manage with the resources provided to them.
The challenge is the overall process, which is known here on the Hill as the business of supply. Treasury Board and Finance don't set those rules; that's been established by parliamentarians. There are house standing orders that determine when we have to present the Main Estimates. By house standing order, the President of the Treasury Board has to table the Main Estimates on or before March 1. The budget is generally tabled the last week in February to the first week in April. There's a six-week window. So right away, we have this disconnect.
It's not the fault of departments or the Treasury Board Secretariat. My job would be a lot easier if the estimates were after the budget. This is something that I think all parliamentarians should be aware of and concerned with. My minister did an information session to parliamentarians early in February. Senator Smith was there. I think that served as the starting point to get parliamentarians on a sort of common ground regarding the challenges of timing and sequencing.
If we can get that right, then your world — that utopian vision where you have a budget and estimates, and that's it — is very doable. They do it in Ontario and B.C. We consider Ontario and B.C. to be models of how we could better structure our process.
And it's not just provinces; national governments do this. Australia has a model that is quite coherent in comparison to our own. We're very keen on those examples and taking the best of different jurisdictions and applying them to our process here.
Senator Eaton: I keep going over the same thing. It's because I'm thick, I'm sure, but it's something the press have come up with in the past: "So much money was allocated to Defence, but it went unspent.'' I think it went unspent because there were delays, and the money was reprofiled. So perhaps if there was a line next to Defence in brackets: "money reprofiled.'' When the navy gentleman was here, he told us about the delays with the science ship and the delays in the Coast Guard. The money was reprofiled, obviously. The money is there to pay for them eventually.
Perhaps it should be said more clearly in a column next to Defence so people in the press don't say, "Oh, yes, you were allocated so much money but you're not spending it. You didn't even spend it.'' It has just been reprofiled, but they don't understand that. It's not clear.
Mr. Pagan: Again, it's a very important issue and one that does engender some confusion and frustration in terms of being able to follow the money.
We're structured in a process where things happen in parallel, but they are not as connected as they may appear. That's certainly the case with the estimates and the budget. The budget will present a view for the year, and the Department of Finance will profile spending in specific fiscal years. That becomes the starting point for engagement with departments to structure their programs to ensure that they use the funds provisioned for them in each of the years.
The problem is that the budget's done in January, February, March, based on the best information available, and it takes time for departments to conceive of their programs and stand up the terms and conditions of their programs so they can actually start to deliver.
Senator Eaton: Year to year, for instance, you know that some of those science festivals are delayed. Why wouldn't there be a footnote under Defence to say that X dollars are profiled to pay for those delays — in the bank, in other words?
Ms. Santiago: We can look at doing something like that. You're looking for a way of being able to say that the Main Estimates for Defence this year is $20 billion, but $6 billion of that is from previous years reprofiled to this year.
Senator Eaton: Or, you could say that the budget for this year for Defence is $15 million and add a footnote to say that there's $20 billion in their bank account to pay for the delays that will come on stream in year X so it doesn't look as if it's a decrease. Do you see what I'm saying?
Mr. Pagan: I do.
We can pick any program, such as shipbuilding, where a finite amount of money is available and parcelled out year by year. When they change the profile of that money, it's presented as a cut, but, in fact, over the life of the program, 10 or 15 years, more often than not they spend according to the budget or hopefully under the budget. What appears as a reduction is not necessarily so; it's just the way in which we present it year by year.
There are two aspects to this, as I said. Perhaps one is to get the estimates after the budget so we're not showing reductions when there are increases.
The other would be from two choices: one of presentation, where we might present signature initiatives, such as shipbuilding, contaminated sites and that sort of thing, over a horizon so that you can see the total programming and then the current forecast of spending within each allocation.
Senator Eaton: It's kind of esoteric. It has not really decreased, as you just haven't paid for the delivery, which will happen next year.
Mr. Pagan: There's a separate issue that's a bit more fundamental, which goes to our rules around supply. To a certain extent, some of these lapses are a function of our timing. If we've got three supply cycles, one of which ends on March 26, Parliament is effectively providing authority to a department to spend money in the last week of the fiscal year. We know that in large departments there are challenges in terms of hiring staff, completing contracts and making payments to deliverables. In some cases we're almost setting departments up to fail in the sense that we are giving them approval five days before the fiscal year ends.
We have seen over the last number of years that at the end of the year departments have actually spent less than their Mains Estimates authority, but they've added to authorities through the year to reflect budget priorities. Most recently in 2014-15, we received Royal Assent for Supplementary Estimates (C) on March 31, the last fiscal day of the year, after 6 p.m. I can't remember the number but some $2 billion in spending was approved essentially on the last business day after the close of business. Some of that, almost by definition, will lapse because the department didn't have sufficient time or space to complete the program.
There are ways we can deal with that, one being estimates after the budget. As you know, three departments — the Canadian Food Inspection Agency, Parks Canada and the Canada Revenue Agency — have two-year non-lapsing appropriations, so they have a bit more flexibility in moving their money over fiscal years. The March 31 deadline is not the boundary or the restriction that it is for other departments. That's something we will look at.
I said Canadian Food Inspection Agency, but the third is the Canada Border Services Agency, not the CFIA.
Senator Mitchell: Thank you for these detailed explanations.
I'm looking at debt and debt payments. It's interesting that from 2006 to 2015 the debt increased $150 billion, the net debt of the country, to $687 billion. Over that period of time, at least for part of it because I didn't go back to 2006, in the Mains Estimates we see that the debt payments have dropped from $29 billion to $23 billion, which is about 25 per cent — not quite but just about — or 22 per cent. Despite the fact that the debt has gone up, debt payments have gone down. Clearly that's because older debt at higher rates is rolling out and has been replaced by newer debt at lower rates.
Do we have a term-to-maturity table for the Canadian government's debt so we can see what terms are coming due and when, and what the net term to maturity, whether it's long or short?
Mr. Pagan: We wouldn't have a view on that, senator, from our Treasury Board Secretariat. Again, our friends at Finance manage the debt. They have a team that's very proactive and strategic in terms of managing our debt obligation to take advantage of interest rates and maturities. They issue a report, but I'm not familiar with it. It's something that I can direct the clerk to.
Senator Mitchell: That would be great. I would be interested to see it. We want to push our debt out as long as we can.
Mr. Pagan: As you've identified, there is a cost to managing the debt. It is incumbent on the government to be very strategic in managing that obligation so that they're doing it at the lowest sustainable cost.
I know enough about the program to know that they have been very active in pushing long-term bonds. The Government of Canada has issued a 50-year bond at remarkably low interest rates. It was oversubscribed because Canada is seen to be a country whose debt you want to own because we're going to pay our bills. The government has been able to finance the debt at quite astonishingly low rates. They look at this regularly to make sure they're managing the portfolio at the lowest cost possible.
The Chair: We'll move on to the next item. One thing raised by Senator Marshall earlier was the whole issue of public accounts. We had asked Mr. Pagan and Ms. Santiago if they could give us an overview in terms of ideas and concepts so that we could be better informed and take steps to learn more about how the public accounts functions within the government.
Mr. Pagan: A slide presentation that looks like this should have been provided to the committee. I'll speak for a couple of minutes about that overall process or context, and then I'd be happy to take your questions about the detail of the documents.
On this slide, what we present to you is the different documents, reports and processes that are presented to Parliament. I'll try to explain the link between them all.
If you count out the different boxes on this slide, there are 13 different steps — documents or approvals — presented to Parliament over a fiscal year that covers April 1 to March 31.
In the upper left-hand corner, we've got the Main Estimates 2016-17, and this was presented on February 23. So that's the first transaction with Parliament. As I've said, that represents the approvals of executive up to a point in time. It does not look ahead. It simply represents all of the approvals of Treasury Board up until that point in time. That presents the requirements of departments for the fiscal year.
We follow up that document with interim supply, which is a fraction of what departments need. It's essentially three or four twelfths of what they need to begin the fiscal year.
Generally later in March, we present the budget, which, as we know, is going to introduce new priorities and new plans. Everything that happens thereafter is a function of trying to catch up to the budget. The Reports on Plans and Priorities that are generally tabled later in March, and it's the intention of my president that they be tabled on the same day as the Main Estimates, which is something we're going to work towards. They provide the explanatory detail that sets out requirements by the programs that Senator Bellemare addressed, and they give you additional insight into what departments are planning as of that Main Estimates date. They do not reflect anything about the government's budget priorities. All of this happens before the fiscal year begins but is key to the fiscal year in which we're in.
Those are four things that happen before the fiscal year starts. We've got Main Estimates, tabling of the Reports on Plans and Priorities, the budget and interim supply.
Then we start the fiscal year. Treasury Board and other departments will appear before committees, explain their Main Estimates, but at the same time there is the backdrop of the budget: "This was your priority at that point in time, but now we've got a budget. What are you doing about the budget? When are we going to see that?''
The supplementary estimates are the way in which we bring forward these new requirements articulated in the recent budget and even budgets from previous fiscal years.
So we'll see, as we know, three exercises through the year: Supplementary Estimates (A) in the period ending June, Supplementary Estimates (B) in December, and then Supplementary Estimates (C) in February.
I think Senator Eaton asked about a way of rationalizing this. If we had the Main Estimates tabled after the budget, in my mind that would obviate the need for Supplementary Estimates (A). We wouldn't need a supplementary exercise in the spring because we would have the Main Estimates in the spring. By that very act, we're simplifying and rationalizing some of the transactions with government.
Arguably if we get the budget right and there's good coordination with the Department of Finance, we would be able to bring a significant portion of the budget, if not all of the budget, into the Main Estimates. So it would create the condition, as Senator Neufeld suggested, where you wouldn't need Supplementary Estimates (B), or (C) even.
Again, this is the practice in Ontario, in British Columbia and in federal jurisdictions, including Australia. It's generally accepted that there may be a single supplementary exercise in the year to do housekeeping and show you the reductions and maybe some unanticipated increases from the budget, but we could certainly go from three supplementary exercises down to two or even one if we got that sequencing right.
Senator Eaton: Profile overages.
Mr. Pagan: Right.
So that's the estimates process.
What you see at the bottom left of the illustration is the way in which we tie all this back together and provide an accounting of the actual dollars and cents and the results achieved.
The accounting for the authorities provided by Parliament is through the documents known as the public accounts. For television purposes, I'm showing everybody the public accounts. They are in three volumes. Volume I provides your reconciliation to the expense forecast in the budget. There is an accounting very early in Volume I of the public accounts — it's on page 1.5 — that shows you a summary of the actual accounting or reconciliation of the accounting back to the original budget forecast.
Volume II of the public accounts, like Part II of the Main Estimates, presents the detail by department, agency and Crown corporation. So we will see a reconciliation of the authorities provided through the estimates to the actual use of those authorities, and the final expenditures reported in Volume II of the public accounts.
Then Part III of the estimates includes a whole range of additional information related to the accounting of government, including information on our debts, obligations, claims written off or forgiven, remissions of taxes, fees. There's a whole range of information in that third volume.
That's the architecture of how we present forecasts in the case of the budget and appropriation requirements in the case of the estimates; how we have complementary information such as the Reports on Plans and Priorities and the Departmental Performance Reports to help explain that; and, finally, how we provide the accounting for that in the public accounts.
I'm sure this has generated a ton of questions. I'd be happy to take them to the best of our ability. But in doing that, I would make clear that what Marcia and I own at the Treasury Board Secretariat is that appropriations process, and we're presenting the estimates. Details on the public accounts are best provided by our colleagues in the Office of the Comptroller General. The Comptroller General himself, Bill Matthews, is a friend of this committee, having been in my current position previously. So if we get into too much detail, you may want to bring Mr. Matthews and his staff in to speak about the public accounts in detail.
Senator Marshall: Are the financial statements of all Crown corporations in one document? Is there a Volume V or VI to the public accounts that includes — are the financial statements of the Crowns all in one place somewhere?
Mr. Pagan: Of all the Crowns?
Senator Marshall: I was going to ask you how many Crowns there are.
Mr. Pagan: That's a great question. I have no idea.
Volume I is the consolidated financial document. It provides a consolidated view of all the expenses and revenues, including the Crown corporations, and I think we see detail on that in Volume III. That's something that we'd want to go back and check on.
Senator Marshall: Who keeps track of the Crown corporations? Would that be the Treasury Board, or is it in the different departments? Who makes sure that every Crown corporation has audited financial statements every year? Who oversees that?
Mr. Pagan: We have a team within the Treasury Board that looks at governance of Crown corporations to make sure that they are complying with standards.
Senator Marshall: That nobody slips through the cracks.
Mr. Pagan: As Crown corporations, there are degrees of independence from the government.
Senator Marshall: Yes, I realize that.
Mr. Pagan: Each Crown corporation will have their own legislative foundation or provisions which include requirements for audited financial statements, so they have boards of directors.
Senator Marshall: And annual reports and all of that.
[Translation]
Senator Bellemare: I would like to know what role the Senate has played, should play or plays when it comes to public accounts. I know that in the lower house, members have to vote on the report, the tabling of public accounts. Debates may even be held. At least since I have been here, we have never studied public accounts in the Standing Senate Committee on National Finance, and we have never debated public accounts or asked any questions about them. In the past, when the Senate had to, like the lower house, approve that increase — prior to the 2008 statutory amendment that abolished the obligation to approve government borrowing — a debate on public accounts may have been held.
I know that does not seem to be part of our official parliamentary mandate, but I would like to know if it had been part of it in the past.
Mr. Pagan: I am not familiar enough with various Senate committees' interests and issues to be able to answer your question. I believe that public accounts are a very important tool to better understand the use of votes and authorities provided by Parliament, and they can be used as a database to better understand what is happening in different departments. For example, when it comes to the Treasury Board of Canada Secretariat, in volume II of public accounts, we see a fairly large gap between appropriations approved by Parliament and the actual use. Supposedly, that gap represents the unused funds.
[English]
That lapsed funding owes to our ownership of the central votes of government, so to the extent that we are not using those authorities provided by Parliament, it gives you an understanding of how the year has unfolded with respect to the government contingencies vote. If we're lapsing that funding, then you'll understand that we have not had to use that and that departments have been able to manage their programs with their own authorities. We'll see differences between the forecasts for compensation and Public Service Insurance and carry forwards, and the amounts actually utilized.
That same dynamic occurs with all the departments, so you'll be able to ask, perhaps, more informed questions about where funds are lapsing and what's driving those lapses.
In the Mains Estimates we control the votes by input, and we present information by program. In the public accounts, we show the utilization by those votes and the actual expenditures by those programs, and so departments can ask questions.
At Canada Revenue Agency, on compliance, at the beginning of the year you said you thought you were going to spend this much money. You actually spent this much money, and what is happening in your business that accounts for that?
[Translation]
It is a source of information that can be used to better understand the issue and hold more informed discussions with departments.
[English]
The Chair: We distributed some information on public accounts to our members. Financial people will get involved more quickly with it, but from a reading perspective, Volume I provides a tremendous review and at least makes people who are not financial experts more financially literate in terms of understanding some of the base concepts.
I'd encourage all of our members, if you haven't had a chance to go over what was distributed to you, to please do so, because I think it will add a perspective and help us move forward as we go further into these details.
Senator Campbell: The last page of this, the glossary of terms, is probably as interesting as I have ever seen. It is a great help. Sometimes I have difficulty following the language because I'm not really financially with it. This has been of great help to me, and I thank the staff for putting this together. Thank you.
The Chair: Without any other questions at this particular time, I'd like to thank Mr. Pagan and Ms. Santiago. Your support of our group has been fantastic, and we look forward to continuing.
We know we have a minister coming in next week, Mr. Brison, to give us more in-depth and continuing education in the process about some of the changes and moving-forward approaches that the government wants to take. We're pleased to be part of that.
On this section of the meeting, we'll have a two-second suspension to say goodbye to Mr. Pagan and Ms. Santiago, and then we'll regroup for about five minutes max, in camera, to go over the introductory part of our infrastructure study.
(The committee continued in camera.)