51 Elizabeth II, A.D. 2002, Canada

Journals of the Senate

1st Session, 37th Parliament

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Issue 97 - Appendix "A"

Thursday, March 14, 2002
1:30 p.m.

The Honourable Daniel Hays, Speaker

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Thursday, March 14, 2002

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

ELEVENTH REPORT

Your Committee, to which were referred the Supplementary Estimates ``B'', 2001-2002, has, in obedience to the Order of Reference of March 6, 2002, examined the said estimates and herewith presents its report.

Respectfully submitted,

LOWELL MURRAY

Chairman

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REPORT ON THE SUPPLEMENTARY
ESTIMATES ``B'' 2001-2002

INTRODUCTION

A. The Supplementary Estimates ``B'' 2001-2002

This is the second set of supplementary estimates for 2001-2002. The Supplementary Estimates ``B'' 2001-2002 were examined by the Committee on 6 March 2002. Present on behalf of the Treasury Board were Messrs Richard Neville, Deputy Comptroller General and David Bickerton, Executive Director, Expenditure Operations and Estimates Directorate. In their examination of the Supplementary Estimates Senators continued to express an interest in a wide range of issues relating to the Government's planned expenditures.

OVERVIEW

Table 1, below, entitled Summary of Expenditure Framework for 2001-2002 presents a broad summary of the contribution of the Supplementary Estimates to the current total estimate of government expenditures for fiscal 2001- 2002.

Table 1

SUMMARY OF EXPENDITURE FRAMEWORK
FOR 2001-2002

Budgetary Main Estimates $ 163.4 billion

Budgetary Estimates to Date $ 170.7 billion

Projected Budgetary Expenditures $ 169.7 billion

Source: Treasury Board

Table 2 entitled ``Summary of Estimates for 2001-2002,'' provides additional information on the budgetary and non- budgetary items of the changes proposed by these supplementary estimates. Overall, the estimates for this fiscal period have grown from $165.2 billion to 174.6 billion, an increase of $9.4 billion or 5.6%.

Generally, the bulk of the expenditures, are statutory expenditures that do not require a vote. However, in this instance the voted appropriations of $2.8 billion actually exceed the total amount of $2.2 billion requested for the Supplementary Estimates ``B.'' This situation arises because there is a reduction of $573.5 million in the statutory expenditures in Supplementary Estimates ``B.''

Table 3 below, entitled Supply to Date for 2001-2002 summarises the three appropriations that have been approved to date. Appropriation Act No. 1 approved $16.3 billion; Appropriation Act No. 2 approved another $36.1 billion; and Appropriation Act No. 3 approved expenditures of $4.8 billion, for a total approved to date of $57.2 billion. The current Supplementary Estimates ``B'' will add a further $2.8 billion through Appropriation Act No. 4, to increase the total appropriations to $60.0 billion.

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Table 2

ESTIMATES TO DATE FOR 2001-2002

	TO BE VOTED	STATUTORY	TOTAL
(in thousands of dollars)
Main Estimates
* Budgetary	52,334,585	111,021,552	163,356,137
Non-Budgetary	76,403	1,803,601	1,880,004
	$52,410,988	$112,825,153	$165,236,141
Supplementary Estimates (A)
Budgetary	4,823,998	1,946,387	6,770,385
Non-Budgetary	6,000	176,530	182,530
	$4,829,998	$2,122,917	$6,952,915
Supplementary Estimates (B)
Budgetary	2,751,214	(360,195)	2,391,019
Non-Budgetary	28,000	(213,265)	(185,265)
	$2,779,214	($573,460)	$2,205,754
** Unexpended Funds
Budgetary	204,112	-	204,112
Non-Budgetary	-	-	-
	$204,112	-	$204,112
*** Total Estimates To Date
Budgetary	60,113,909	112,607,744	172,721,653
Non-Budgetary	110,403	1,766,866	1,877,269
	$60,224,312	$114,374,610	$174,598,922

* Budgetary Estimates will always differ from Projected Budgetary Expenditures due to adjustments not reflected in Estimates for such items as anticipated lapses, budgetary reductions and those expenditures already recognized in prior years.

** This amount represents unexpended funds that were appropriated in 2000-2001 for CCRA and Parks Canada and which will have been spent in 2001-2002.

*** Totals may differ from those shown in the Blue Book due to rounding.

Source: Treasury Board

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Table 3

SUPPLY TO DATE FOR 2001-2002

Unexpended funds appropriated in 2000-2001, which will have been spent in 2001-2002

$204,111,562.00

Three Appropriation Acts have been approved in respect of the Estimates for 2001-2002
Supply Approved to Date:
Appropriation Act No. 1, 2001-2002
Granted Interim Supply for the 2001-2002 Main Estimates equal to an initial allocation of 3/12ths for all votes and 43 votes received additional proportions	$16,343,875,327.99
Appropriation Act No. 2, 2001-2002
Granted Full supply for the 2001-2002 Main Estimates	$36,067,113,419.01
Appropriation Act No. 3, 2001-2002
Granted Full supply for Supplementary Estimates (A) 2001-2002	$4,829,997,679.00
Total Approved to Date	$57,240,986,426.00
Supply Awaiting Approval:
For the whole of Supplementary Estimates (B) 2001-2002	$2,775,213,699.00
Total for 2001-2002	$60,016,200,125.00

Source: Treasury Board

Supplementary Estimates ``B'' 2001-2002 provide estimates of the spending requirements for departments and agencies of the federal government. Senators showed interest in both the general spending plans and specific items in these new estimates. Mr. Neville and Mr. Bickerton, outlined some of the significant changes in the Estimates and responded to questions from the Members of the Committee. The officials noted that these Supplementary Estimates seek Parliament's approval to spend $2.8 billion on expenditures (voted appropriations)for 2001-2002. They were provided for within the $169.7 billion in overall planning for 2001-2002 as set out in the Minister of Finance's December 2001 Budget. These Estimates were not included in the 2001-2002 Main Estimates.

These Estimates also provide information to Parliament about a net decrease of $573.5 million in projected statutory spending from amounts forecast in the Main Estimates. The two major changes are a reduction in public debt charges of $2.5 billion and an increase of $1.9 billion in Employment Insurance benefit payments to recipients.

Mr. Neville reminded the Committee that a major item in these Supplementary Estimates is $841.6 million in new funding dedicated to public security, combating terrorism, and ensuring the economic security of Canadians in the wake of the September 11 terrorist attacks. This means an increased investment in air travel safety, intelligence and policing, emergency preparedness, military support, participation in the international war on terrorism and more efficient screening of immigrants and refugees. Maintaining open borders requires enhancements to border operations and infrastructure. He noted that there are 18 separate departments and agencies that will have received funding to address needs. The leading recipients of funding for this purpose are: National Defence at $481.6 million, the Royal Canadian Mounted Police at $110.9 million and the Canada Customs and Revenue Agency at $56.6 million.

In addition to the public security and anti-terrorism initiatives, Mr. Neville outlined some of the most important items affecting more than one organization for which approval is required. These include:

- $ 392.0 million for compensation for collective agreements;

- $100.0 million to the Canadian International Development Agency for humanitarian and transition assistance in Afghanistan and surrounding countries;

- $98.9 million to the Canadian International Development Agency for payments to International Multilateral institutions; and

- $125.0 million to Environment Canada and Natural Resources Canada for grants to the Canadian Federation of Municipalities.

He also addressed a number of items affecting single organizations
such as:

- $207.7 million to National Defence for increased funding to cover the provision of health care services and recruitment, retention and training activities for the Canadian Forces;

- $199.9 million to Social Sciences and Humanities Research Council for indirect costs of University Research; and

- $273.5 million to Department of Industry for additional grants.

With respect to changes in projected statutory spending, Mr. Neville reported a $573.5 million decrease in spending previously authorized by Parliament. He reminded the Committee that the updates shown in these Supplementary Estimates are provided for information purposes only. The major statutory items to which there are changes in the projected spending amounts are:

- A decrease of $2.5 billion to Finance for a projected decrease in public debt charges;

- A decrease of $137.0 million to Human Resources Development Canada for the Canada Education Savings Grants; and

- A decrease of $60.0 million to Finance for a projected decrease in transfer payments to provincial and territorial governments.

On the non-budgetary side, there is a decrease of $217.0 million to Human Resources Development Canada for loans disbursed under the Canada Student Financial Assistance Act

The last item that Mr. Neville dealt with was the matter relating to the Speaker's ruling in the House of Commons on November 22, 2001 that no authority had been sought from Parliament for grants totaling $50 million made to the Foundation for Sustainable Development Technology in Canada, and that there remained ample time for the government to take corrective action by making the appropriate request of Parliament through the Supplementary Estimates process.

Mr. Neville stated that the Speaker's ruling has been fully addressed in the Supplementary Estimates (B) that were introduced in the Senate on March 5, 2002. Specifically, he noted that the Supplementary Estimates (B) now seek:

- Parliamentary authority for two new grants of $25 million, one in Natural Resources Canada and one in Environment Canada, each to be given to the Foundation for Sustainable Development Technology in Canada. These estimates match the payments made in April 2001.

- Treasury Board Vote 5 will be reimbursed by listing in the Explanation of Requirements sections for both Natural Resources Canada and Environment Canada the following entries:

- ``Grant to the Foundation for Sustainable Development Technology in Canada''

- ``Gross Program Supplement''

- ``Less: Funds available ... within Vote 10 due to reduced grant and contributions requirements''

- These entries are accompanied by a footnote that states: ``Funds in the amount of $25,000,000 were advanced from the Treasury Board Contingencies Vote to provide temporary funding for this Program. The inclusion of this item is in response to the ruling of the Speaker of the House of Commons on November 22, 2001.''

This last item continued to interest Senators who, although they understand the procedure employed to report the transactions, remain dissatisfied with the practice of creating organizations with large budgets without first presenting the initiative for consideration by Parliament. Furthermore, it is of concern to Senators that these organizations are not subject to on-going Parliamentary scrutiny.

A proposed grant of $125 million to the Pierre Elliott Trudeau Foundation, a private not for profit foundation, is causing similar concerns for Senators. Specifically, there were questions about the degree of transparency of the Foundation's activities and whether the Foundation would be subject to review by the Auditor -General. Mr. Neville explained that any such grant as is proposed in the Estimates, is subject to negotiation of a funding agreement that lays out the obligations of the Foundation and of the government. He noted that the negotiations, which are still ongoing in this instance, must strike a balance between government control and autonomy of the Foundation. If the government exerts too much control or influence, then the transaction is no longer a grant, but perhaps an investment by the government in a public entity. Senators also inquired whether it was possible to influence the mandate of the Foundation through this negotiation of a funding arrangement. Specifically, some Senators hoped that the Foundation might consider funding deserving Canadian students who were studying abroad. Mr. Neville explained that there were limits to the influence that the Treasury Board could exert in such matters. Some Senators also expressed the view that funding of this magnitude to a foundation for the purposes indicated ought to be sought by legislation rather than a single line item in Supplementary Estimates.

Interest was indicated in the estimates of the Office of the Superintendent of Financial Institutions. In particular, Senators wanted to know if the Office was involved in tracking illegal cross-border money transaction. Mr. Neville explained how the Office plans to use its new appropriations. He also explained that the Financial Transaction and Reports Analysis Centre of Canada, which reports to the Minister of Finance, has the primary responsibility for tracking these types of transactions.

In September 2001, the Committee had examined and reported on the accumulated deferred maintenance problems of Canada's universities. At the time it was explained by these institutions that it was increasingly difficult for them to accept research grants because such grants did not provide funds to cover the indirect or overhead costs of conducting research. The Senators were pleased to note that the government has begun to make funding available through the Social Sciences and Humanities Research Council to cover some of these indirect expenses. Mr. Neville outlined what indirect costs this program covers.

Mr. Neville was asked about the changes in the revolving funds at the Department of Public works and Government Services. He explained the way in which these funds operate and that the Board has recently reviewed the operations of these Funds to determine their appropriateness. As a result of this review, the number of funds was reduced in keeping with the needs of the Department.

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