48 Elizabeth II, A.D. 1999, Canada

Journals of the Senate

Issue 120 - Appendix "A"

Tuesday, March 16, 1999
2:00 p.m.

The Honourable Gildas L. Molgat, Speaker

TUESDAY, March 16, 1999

The Standing Senate Committee on National Finance has the honour to present its

TENTH REPORT

Your Committee, to which were referred the Supplementary Estimates (C), 1998-99, has, in obedience to the Order of Reference of Wednesday, March 10, 1999, examined the said estimates and herewith presents its report.

Your Committee examined the Supplementary Estimates "C" 1998-99, at two meeting held on the 10 and 11 March 1999. The broad changes to the government's spending plans are summarised in the two tables attached to this report. The first, entitled Supply to Date for 1998-99 summarises the appropriations that have been approved to date and the new appropriations sought in the current Supplementary Estimates. Appropriation Act No 1 has approved $14.7 billion, while Appropriation Act No. 2 added a further $27.9 billion and Appropriation Act No. 3 gave approval for an amount of $1.3 billion. Appropriation Act No. 4 granted supply of $3.1 billion. In these Supplementary Estimates "C" 1998-1999 approval is sought for an additional $1.8 billion. If approved this amount will raise total appropriations for fiscal 1998-99 to $48.6 billion.

The second table at the end of this report, entitled "Summary of Expenditure Framework and Estimates for 1998-99," provides a quick view of the changes proposed by these Supplementary Estimates. Total planned spending for this fiscal year is now expected to come in at about $153.5 billion, which is $8 billion more than the original amount listed in the Main Estimates last spring. Most of the extra spending sought is accounted for by a $1.4 billion increase in budgetary expenditures. This budgetary expense could have been significantly higher if not for a $329.6 million decrease in statutory budgetary expenditures.

Mr. R. Neville and Mr. A. Lieff, officials of the Treasury Board appeared before the Committee on 10 and 11 of March 1999 to explain the requirements for additional appropriations contained in the Supplementary Estimates "C" 1998-99. Mr. Neville highlighted a number of large expenditures. Specifically, the estimates report that $522.1 million is required by 76 departments and agencies to cover compensation matters relating to the collective agreements that have been signed since negotiations have resumed in the Public Service. Mr. Neville explained that about 85% of the federal workforce has now achieved a first negotiated agreement since the freeze on negotiations was lifted. The settlements have averaged 2.5% and 2% respectively for the first and second years of contracts.

The Department of Industry is seeking authorisation for a net increase of $190.8 million in its budget. However, under Vote 5, members noted that there is an increased requirement in the amount of $200.0 million for a grant to the Canada Foundation for Innovation to modernise research infrastructure. Mr. Neville explained that the Foundation was originally endowed with $800 million in 1997 and is seeking in this Supplementary Estimate an additional $200 million. To date the Foundation has awarded $66 million and expects over the coming year to award a further $420 million.

The Department of Justice is also seeking an additional $13.7 million for the Firearm Control Program. Members continue to be interested in the overall cost of the Registry system. The Treasury Board officials explained that the original estimate of the start-up costs for the Canadian Firearm Registry Service has increased from $85 million to $120 million and might now even attain $133 million. This number could increase further as the program continues.

The Latin American programs of the Canadian International Development Agency continue to interest the Committee. The Agency is seeking approval under Section 24.1 of the Financial Administration Act to forgive certain debts and obligations amounting to $24.6 million. Four debtors are involved: Honduras, Costa Rica, Colombia, and the Dominican Republic. Mr. Neville explained that these debts are being forgiven in accordance with the Latin American Debt Initiative launched at the 1992 Rio Summit on the environment. Under this agreement, the debts are reduced if the debtor country undertakes specified expenses within their own borders that will preserve or enhance the environment.

The Committee expressed interest in the mechanisms for supervising expenditures on grants and contributions of the Canadian International Development Agency. Mr. Neville explained that project expenditures are evaluated within CIDA, then at the Treasury Board and finally, within Cabinet. He also reminded the Committee that much useful information on the spending habits of federal organisations is contained in the relevant Report on Plans and Priorities and in the Departmental Performance Reports. In spite of these answers, members remain concerned about grant and subsidy activities at CIDA. Your Committee may, at a later date, examine in greater detail the spending plans of the Agency.

Program review and the ensuing departure incentive costs incurred to reduce the size of the Public Service continue to show up in federal spending estimates. The Committee was informed that to date the annual expenditures for departure incentives were: $2.3 billion in fiscal 1994-95, $0.7 billion in 1995-96, $0.2 billion in 1996-97, and $0.5 billion in 1997-98 for a total expenditure to date of $3.7 billion. The figures for the current fiscal year (the last year of the program) are not yet finalised.

The number of departments and agencies that are making requests under Supplementary Estimates "C" struck members as unusually high. It is the members' feelings that there may be an over reliance on the part of government organisations on the Supplementary Estimates system. Members would like to see more effort on the part of the Treasury Board to get departments and agencies to stick to their original spending budgets. Members can understand the need for additional appropriation in the face of unforeseen disasters and other emergencies. However, the Committee questions the urgency that drives many departments to submit new spending plans before the Main Estimates of the next fiscal year.

The Committee is also concerned about the overall accuracy of the initial Main Estimates. Your Committee has suggested that the Treasury Board officials prepare a document that would allow members to review the difference between the Main Estimates at the beginning of a given fiscal period, and the Main Estimates after the Supplementary Estimates have been approved. There is a concern in the Committee that spending may be rising and that the current system does not allow Parliamentarians to properly assess the direction of federal spending plans.

Mr. Neville reviewed the current state of the government's preparations for the dealing with the year 2000 compliance problem. He stated that the work is 84% complete and that he expects the federal government to meet its objective. The current estimate of the cost of achieving year 2000 compliance stands at about $2 billion.

Your Committee is concerned about the potential massive loss of Public Service personnel in coming years. Although the Committee acknowledges the desirability of programs like La Relève, it remains uncomfortable with current efforts to ensure that experienced and knowledgeable employees will be available to administer government services in the near future. The Committee has clearly expressed its concerns to the Treasury Board and has asked the officials to be prepared to provide a regular update on government efforts to deal with this problem.

Respectfully submitted,

TERRY STRATTON

Chairman