53 Elizabeth II, A.D. 2004, Canada

Journals of the Senate

3rd Session, 37th Parliament

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Issue 19 - Appendix "A"

Wednesday, March 10, 2004
1:30 p.m.

The Honourable Daniel Hays, Speaker

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Wednesday, March 10, 2004

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

THIRD REPORT

Your Committee, to which was referred the Supplementary Estimates "B'' 2003-2004, has, in obedience to the Order of Reference of February 20, 2004, examined the said estimates and herewith presents its report.

Respectfully submitted,

LOWELL MURRAY

Chairman

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REPORT ON THE SUPPLEMENTARY ESTIMATES (B), 2003-2004

INTRODUCTION

The Committee examined the Supplementary Estimates (B), 2003-2004 on 24 February 2004. Prior to this hearing, the Committee examined the Main Estimates, 2003-2004 and issued two interim reports on its work, dated 25 March 2003 and 27 May 2003 respectively. The Committee also examined the Supplementary Estimates (A), 2003-2004 and reported on its work on 21 October 2003. The Supplementary Estimates (B), 2003-2004 is the subject of this report.

NEW MATERIAL

In response to Parliamentarians' requests for more accessibility to the information contained in the Estimates documents, the Treasury Board Secretariat has greatly increased the clarity, transparency and overall usefulness of the Supplementary Estimates (B), 2003-2004. A comprehensive Introduction to Supplementary Estimates provides general and structural information. The information on pages 7 through 13 explains the purpose of the Supplementary Estimates, the meaning of major terms used in the document and the significance of the summary tables that are presented on pages 20 to 56. Among these are two new tables that further explain changes in the federal government's spending plans. The first table, beginning on page 45, lists all the requests for additional funding on horizontal items — those items that involve more than one department and/or agency. This information has often been sought by the Committee and the inclusion of such a table in the document will facilitate the Committee's work. The second table, beginning on page 54, lists the major changes to votes and vote wording that are to be found in the Supplementary Estimates (B), 2003-2004, which is another area of long-standing interest to the Committee.

OVERVIEW

Present on behalf of the Treasury Board were Mr. Mike Joyce, Assistant Secretary, Expenditure Management & Strategies Sector, and Ms. Laura Danagher, Executive Director, Expenditure Operations & Estimates Directorate. In their examination of the Supplementary Estimates (B), 2003-2004, Senators continued to express an interest in a wide range of issues related to the federal government's planned expenditures.

The Supplementary Estimates (B), 2003-2004 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. Joyce and Ms. Danagher outlined some of the significant changes in the Supplementary Estimates (B), 2003-2004 and responded to questions from Senators. The officials noted that these Supplementary Estimates seek Parliament's approval to spend $1.98 billion on expenditures (voted appropriations) for 2003-2004. These were contemplated within the $178.3 billion in overall planned expenditures for 2003-2004 as set out in the Minister of Finance's 2003 Economic and Fiscal Update, but were not included in the Main Estimates, 2003-2004.

The Treasury Board Secretariat provided the Committee's staff with tables that together summarize changes proposed by these Supplementary Estimates. Table I, entitled "Summary of Expenditure Framework for 2003-2004,'' indicates that while the federal budget set out expenditures of $180.7 billion, the current estimate to date sets the figure at $187.1 billion.

TABLE I

Summary of Expenditure Framework and Estimates for 2003-2004

Expenditure Framework:

Budgetary Main Estimates	$ 178.3 billion*
Budgetary Estimates To Date	$ 187.1 billion
Projected Budgetary Expenditures	$ 180.7 billion

* 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

Source: Treasury Board Secretariat, February 2004.

Table II, "Estimates to Date for 2003-2004,'' reveals that total planned federal spending will increase from the $175.9 billion reported in the Main Estimates, 2003-2004 to $189.8 billion. The $13.9 billion increase is made up of $5.5 billion listed in the Supplementary Estimates (A), 2003-2004, $8.1 billion listed in the Supplementary Estimates (B), 2003-2004 and $0.2 billion in unexpended funds. As usual, the bulk of the expenditures, $123.2 billion or 64.9%, are statutory expenditures that do not require a vote. Approximately $2.0 billion of the Supplementary Estimates (B), 2003-2004 require Parliamentary approval. The $8.1 billion in additional spending proposed in these Supplementary Estimates, when combined with the $5.5 billion increase voted in the Supplementary Estimates (A), 2003-2004, represent a 7.7% increase in the original planned federal government expenditures for fiscal year 2003-2004. In comparison with final estimates for the 2002-2003 fiscal year, the 2003-2004 final estimates represent an increase of 6.8%.

TABLE II

Estimates to Date for 2003-2004

	To Be Voted	Statutory	Total
(in thousands of dollars)
Main Estimates
* Budgetary	58,828,853	114,226,324	173,055,177
Non-Budgetary	82,653	2,799,441	2,882,094
	58,911,506	117,025,765	175,937,271
Supplementary Estimates (A)
Budgetary	5,486,476	—	5,486,476
Non-Budgetary	15,100	—	15,100
	5,501,576	—	5,501,576
Supplementary Estimates (B)
Budgetary	1,981,558	6,324,659	8,306,217
Non-Budgetary	—	(164,634)	(164,634)
	1,981,558	6,160,025	8,141,583
** Unexpended Funds
Budgetary	203,121	—	203,121
Non-Budgetary	—	—	—
	203,121	—	203,121
*** Total Estimates To Date
Budgetary	66,500,008	120,550,983	187,050,991
Non-Budgetary	97,753	2,634,807	2,732,560
	64,597,761	123,185,790	189,783,551

Source: Treasury Board Secretariat, February 2004.

* 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 2001-2002 for CCRA and Parks Canada and which will be spent in 2002-2003.

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

These Supplementary Estimates also provide information to Parliament about a net increase of $6.2 billion in projected federal statutory spending from amounts forecast in the Main Estimates, 2003-2004. According to Mr. Joyce, some of the most important items for which approval is required include:

• $375.4 million in spending to cover the extraordinary expenditures in responding to the Severe Acute Respiratory Syndrome outbreak in Ontario;

• $107.3 million for compensation adjustments resulting from new collective agreements; and

• $145 million as interim resources to provide legal services to federal government clients currently subject to a cost recovery regime.

With respect to changes in projected federal statutory spending, Mr. Joyce reported a $6.16 billion increase to 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 statutory spending amounts are:

• $4,719 million for transfer payments to provincial/territorial governments;

• $1,174.2 million for funding to implement the new Business Risk Management Component of the Agricultural Policy Framework;

• $598.9 million for funding to assist producers in transition to a new Business Risk Management Component of the Agricultural Policy Framework;

• $375.2 million for activities to mitigate the impact of the Bovine Spongiform Encephalopathy (BSE) crisis;

• a $250 million grant in support of the development and demonstration of climate change and clean air technologies; and

• $223.6 million for Newfoundland Fiscal Equalization Offset Payments.

SUMMARY OF DISCUSSIONS

Senators were interested in the details of a number of issues contained in the Supplementary Estimates (B), 2003- 2004. The topics of discussion covered the federal departments of Industry, Justice, Environment, Finance, Natural Resources, Health, Foreign Affairs and International Trade, Treasury Board, Veterans Affairs and Human Resources Development.

A. Industry Canada

Under its Vote 1, Industry Canada proposes to provide funding of $2.69 million to help Canadian apparel and textiles industries adjust to the implementation of the Market Access for Least Developed Countries initiative. This request is part of a horizontal initiative listed on page 48 of the Supplementary Estimates (B), 2003-2004, for which the Canada Customs and Revenue Agency is seeking $2.68 million and the Economic Development Agency of Canada for the Regions of Quebec is seeking $386,000. Senators had a number of questions about this request. First, they wished to know whether the funding for this initiative was earmarked for the province of Quebec. Mr. Joyce reported that funding for the initiative reflected the distribution of apparel and textile activity across the country. Quebec accounts for approximately 55% of the national apparel and textiles industries, while Ontario represents roughly 26%, Alberta, Saskatchewan, and Manitoba together 9%, British Columbia 7% and the Atlantic provinces 3%.

Second, Senators asked which Least Developed Countries were expected to benefit from the Market Access initiative. Mr. Joyce told the Committee that 48 countries, which the United Nations has designated as least developed, were expected to benefit.

Finally, in response to Senators' questions on whether the financial assistance provided to Canadian apparel and textile companies would contravene any trade liberalization agreements, Mr. Joyce explained that domestic subsidies are acceptable unless they are clearly linked to exports. As the subsidies are not linked to exports in this case, the financial assistance under this initiative would not contravene any of Canada's trade agreements.

In another matter related to Industry Canada, Senators asked the officials from the Treasury Board Secretariat for the names of the companies whose loan guarantees are currently subject to a claim. New appropriations of more than $42.6 million are listed on page 116 of the Supplementary Estimates (B), 2003-2004 for loan guarantees pursuant to paragraph 14(1)(b) of the Department of Industry Act. Mr. Joyce revealed that the payment is related to a loan guarantee offered by the federal government as part of the financing arrangements in support of the Air Canada purchase of five regional jets from Bombardier.

B. Department of Justice

Senators asked Treasury Board Secretariat officials about a Department of Justice request for new appropriations of $145 million as "interim resources to provide legal services to Government clients currently subject to a cost recovery regime,'' listed on page 133 of the Supplementary Estimates (B), 2003-2004. Mr. Joyce told the Committee that this request did not represent a spending increase but rather a technical provision. The entry relates to a process known as "journal vouchering,'' whereby federal departments pay the Departments of Justice for the legal services they consume. Following a review, however, concerns arose as to whether the Department of Justice's method of internal journal vouchering was legal, since while money was being appropriated to other departments for the legal services, the lawyers were already salaried employees of the Department of Justice. Therefore, as an interim solution, $145 million in supplementary spending authority is being requested to legalize the current process and to ensure that the activities of the Department of Justice are approved by Parliament. Mr. Joyce stressed that the Treasury Board has put frozen allotments against the provision so that it does not represent a spending increase.

C. Environment Canada

Under its Vote 10b, Environment Canada is seeking an additional $30.7 million, which represents an increase of 44.4% over the previous estimate of $69.1 million for this Vote. According to the department's explanation of its requirements on page 80 of the Supplementary Estimates (B), 2003-2004, $28.0 million would be contributed to the acquisition of the Burns Bog to protect ecologically sensitive lands. Senators sought an explanation for the relatively high price for this land. Specifically, Senators wished to know if the planned contribution was to be used for more than the acquisition of the land and whether the property has any economic use or attributes that might justify such a high price.

Mr. Joyce replied that the money was to be used solely for the purpose of acquiring the land. The federal government's $28.0 million contribution represents 35% of the total $80 million purchase price, with the provincial government of British Columbia, the municipality of the greater Vancouver Regional District, and the municipality of Delta contributing the remainder of the cost. Mr. Joyce explained that the reason for the substantial cost is that the land is situated in a "high profile'' area in British Columbia's lower mainland and would be otherwise used for development purposes. In addition to the actual Burns Bog itself, which is 5,000 acres of land, there is an additional 422 acres of land that have been added to ensure that the area is well protected.

D. Fiscal Equalization (Departments of Finance and Natural Resources)

Senators requested clarification on certain figures published in the Supplementary Estimates (B), 2003-2004. For instance, on page 86, the Department of Finance lists a reduction in new appropriations of $694 million under the Fiscal Equalization transfer, which is not consistent with previous estimates. Officials from the Treasury Board Secretariat clarified that the figures listed in the Supplementary Estimates (B), 2003-2004 were the most recent figures from the Department of Finance and reflected a combination of population changes, variability in provincial revenues subject to Equalization and tax bases, and other floor and ceiling provisions. Senators also pointed to new appropriations of $223.6 million under Newfoundland Fiscal Equalization Offset Payments listed on page 144 under the Department of Natural Resources. Mr. Joyce explained that this item is a statutory authority under the Fiscal Equalization Offset Payment Provision of the Canada-Newfoundland Atlantic Accord Implementation Act. The purpose of this allocation is to provide Newfoundland with transitional protection from large reductions in Equalization that would otherwise result with the growth of the province's revenues as a result of off-shore economic development.

E. Assistance to Mitigate the Impact of Severe Acute Respiratory Syndrome (SARS)

Members of the Committee were interested in the federal government's assistance to mitigate the impact of Severe Acute Respiratory Syndrome (SARS), listed on page 46 of the Supplementary Estimates (B), 2003-2004. The section of the Supplementary Estimates detailing horizontal items lists a one-time grant to Ontario to cover extraordinary expenditures in responding to SARS. It includes $4 million sought by the Canadian Tourism Commission and $371.4 million sought by Health Canada. In response to Senators' questions about the specific expenditures that were covered by this one-time grant, Mr. Joyce told the Committee that $330 million represented a grant to the province of Ontario to cover 50% of SARS-related health care costs, which were calculated by an independent provincial examiner. This grant was considered to be a retroactive compensation payment to the province. In responding to questions related to the spending by the Canadian Tourism Commission, Mr. Joyce indicated that the $4 million was an additional sum for existing marketing programs aimed at stimulating tourism from the United Kingdom, France, the Netherlands and Germany. Mr. Joyce was not certain whether the federal government oversaw the province of Ontario's expenditures or whether any federal or provincial reports had been published that documented how the money was spent. After verifying information with the Canadian Tourism Commission, Mr. Joyce told the committee that he would provide a definite answer at a later date.

F. Department of Foreign Affairs and International Trade

Focusing on new appropriations of more than $35 million for the Canadian International Development Agency (CIDA), Senators wished to know the specific purposes and countries to which these funds would be allocated and whether the CIDA was accountable for the grants and contributions it made. The officials from the Treasury Board Secretariat told the Committee that the recipient of the funding is the World Food Programme, a United Nations organization, devoted to the provision of food assistance both in cases of emergencies and natural catastrophes, as well as for developmental purposes. The World Food Programme will use the funding according to its evaluation of the needs of countries experiencing emergencies or disasters. The Committee was also told that CIDA does continually monitor and assess the performance of all development initiatives under their control. The results are reported through country and institution program reports and through CIDA's annual Departmental Performance Report.

G. Western Economic Diversification (Industry Canada)

Senators questioned why a $27 million grant for the construction of the Canadian Museum for Human Rights in Winnipeg fell under the purview of Western Economic Diversification and not under the Department of Canadian Heritage. Senators also wondered why this grant was appearing in the Supplementary Estimates (B), 2003-2004 and whether any funding had been requested in the Main Estimates, 2003-2004. According to Mr. Joyce, although it will receive federal funding, the Canadian Museum for Human Rights in Winnipeg will not be owned or operated by the federal government. Therefore, in this case, it is an economic development project.

There was no provision for the grant in the Main Estimates, 2003-2004. Money for the grant is being found within Western Economic Diversification's existing funding.

H. Treasury Board

With respect to an additional $417,550 under Vote 10b for "government-wide initiatives ... to supplement other appropriations in support of the implementation of strategic management initiatives in the Public Service of Canada,'' Senators inquired about the nature of these initiatives and whether they were in support of the implementation of Bill C-25, the Public Service Modernization Act. Mr. Joyce replied that the initiative was not specifically related to Bill C- 25; the new appropriations are for a number of initiatives that include operational funding for the implementation of human resources modernization initiatives in the regions, an initiative aimed at the need for continuous learning. More specifically, Senators asked about funding to broaden the regional scope of federal public service competition and recruitment activities. Mr. Joyce told the Committee that funds to address the issue of national competitions were provided in the Supplementary Estimates (A), 2003-2004. A detailed account of $10.1 million in new appropriations under Vote 1b was also requested. Mr. Joyce explained to the Committee that these operating expenditures related to efforts to coordinate government-wide information technology systems and infrastructure.

I. The Department of Veterans Affairs

Under Vote 5b, the Veterans Affairs Program is seeking an additional $1.8 million to support the Juno Beach Centre in Normandy, France, which commemorates Canada's military and civilian contributions during the Second World War. Senators requested information on the total cost of the project and the federal government contribution towards that total. Mr. Joyce reported that the total cost of the Juno Beach Centre was $10.1 million. The federal government's share of the total cost for the Centre's construction was 23%. In addition to this amount, the federal government contributed $800,000 towards the opening ceremonies and first year operating costs. This results in a total federal contribution of $3.1 million.

J. Human Resources Development Canada

In response to questions on the Human Resources Development Canada's $21 million reduction in statutory expenditures for Guaranteed Income Supplement (GIS) payments, the officials from the Treasury Board Secretariat explained that two factors influenced the estimated decrease. First, a decrease in the forecast number of eligible recipients accounted for a cost reduction of $155 million; and second, an increase in the estimated average monthly benefit accounted for a total increase of $134 million.

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