53 Elizabeth II, A.D. 2004, Canada

Journals of the Senate

1st Session, 38th Parliament

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Issue 23 - Appendix

Tuesday, December 7, 2004
2:00 p.m.

The Honourable Shirley Maheu, Speaker pro tempore

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Tuesday, December 7, 2004

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

SECOND REPORT

Your Committee, to which was referred the Supplementary Estimates "A'' 2004-2005, has, in obedience to the Order of Reference of Tuesday, November 16, 2004, examined the said estimates and herewith presents its report.

Respectfully submitted,

DONALD H. OLIVER

Chairman

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REPORT ON THE SUPPLEMENTARY
ESTIMATES (A), 2004-2005

INTRODUCTION

The Senate Standing Committee on National Finance, to which were referred the Supplementary Estimates (A), 2004-2005 has, in obedience to the Order of Reference of 16 November 2004, examined the said estimates and herewith presents its report.

The Committee held two meetings to review these supplementary estimates. On 23 November 2004, officials of the Treasury Board Secretariat, Mr. Mike Joyce (Assistant Secretary, Expenditure and Management Strategies) and Ms. Laura Danagher (Executive Director, Expenditure Operations and Estimates Directorate) appeared as witnesses and provided explanations on the structure and content of these supplementary estimates. On 30 November 2004, the Honourable Reg Alcock, President of the Treasury Board, explained further the changes to the government's spending plans contained in the Supplementary Estimates (A), 2004-2005.

The Supplementary Estimates (A), 2004-2005 are the first of a set of supplementary estimates that will be issued in this fiscal year ending on 31 March 2005. Unless otherwise stated, all page references are from the document entitled Supplementary Estimates (A), 2004-2005.

OVERVIEW

The Committee was pleased to see that a number of changes to the format of the supplementary estimates have been introduced with the Supplementary Estimates (A), 2004-2005 to provide greater transparency and consistency of information in all Estimates documents. The principal changes in the format are:

• A ministry summary table preceding each ministry;

• An explanation of the gross funding requirements; and

• An explanation of funds available to offset new spending requirements.

The introduction and summary tables have also been enhanced with the addition of:

• A reconciliation of planned spending to total Estimates to date;

• An overview of the major items being requested in these supplementary estimates;

• A standard object of expenditure summary;

• A summary of horizontal initiatives;

• A summary of one dollar items included in these supplementary estimates; and

• A summary of changes reflected in these supplementary estimates since the tabling of the Main Estimates.

Two useful tables provided in the supplementary estimates documents are reproduced below. Together, they summarize the changes proposed by the Supplementary Estimates (A), 2004-2005.

Table 1 reveals that total budgetary expenditures will increase from $183.5 billion reported in the Main Estimates to $186.2 billion as a result of a net $2.7 billion of new appropriations requested in the Supplementary Estimates (A), 2004-2005.

TABLE 1
Budgetary Expenditures 2004-2005
(in Billions of Dollars)

Source: Supplementary Estimates (A), 2004-2005, p. 8.

The majority of the expenditures (63.9%) listed in Table 2 are made up of statutory expenditures, that is, spending that does not require a vote. However, all of the increases requested through supplementary estimates require parliamentary approval. The Supplementary Estimates (A), 2004-2005 seek Parliament's approval to spend $2.9 billion in voted expenditures. This represents a 1.56% increase over the 2004-2005 Main Estimates tabled in February 2004. The $2.9 billion amount is offset by a $0.2 billion decrease in projected statutory spending from amounts forecasted in the 2004-2005 Main Estimates. Thus, the net requirements for the Supplementary Estimates (A), 2004-2005 total $2.7 billion.

TABLE 2
Estimates To Date For 2004-2005
(in Thousands of Dollars)

	TO BE VOTED	STATUTORY	TOTAL
Main Estimates
Budgetary	65,252,204	118,302,991	183,555,195
Non-Budgetary	78,278	2,686,841	2,765,119
	65,330,482	120,989,832	186,320,314
Supplementary Estimates (A)
Budgetary	2,891,097	(232,574)	2,658,523
Non-Budgetary	—	—	—
	2,891,097	(232,574)	2,658,523
Total Estimates To Date
Budgetary	68,143,302	118,070,417	186,213,719
Non-Budgetary	78,278	2,686,841	2,765,119
	68,221,580	120,757,258	188,978,838

 Source: Supplementary Estimates (A), 2004-2005, pp. 28-29.

MAJOR ITEMS IN THE SUPPLEMENTARY ESTIMATES (A), 2004-2005

Pages 9 and 10 of the Supplementary Estimates (A), 2004-2005 contain an explanation of the major items included in these supplementary estimates. The following is a partial list.

A. Items Affecting More Than One Organization for Which Parliamentary Approval Is Sought

• $1,011 million in funds being carried forward from 2003-2004. This is an approved budget management practice that provides departments with some flexibility to manage and/or implement initiatives over a multi-year planning horizon — all eligible departments and agencies;

• $158 million in compensation adjustments to departments and agencies for recently negotiated collective agreements, up to 31 July 2004 — all eligible departments and agencies;

• $132 million for Public Security Initiatives (e.g., Marine Security, Smart Border Initiative, National Security Policy) — 8 departments and agencies;

• $131 million for initiatives to support the implementation of a common electronic infrastructure and multi- channel service delivery strategy (Government-on-Line) — 13 departments and agencies; and

• $109 million to foster social and economic advancement through the support of research, knowledge dissemination and the commercialization of initiatives — 3 agencies.

B. Items Affecting a Single Organization for Which Parliamentary Approval Is Sought

• $189 million for additional costs related to the Canadian Forces deployment in Afghanistan — National Defence;

• $162 million for international assistance in Haiti and Afghanistan, as well as to meet commitments related to combating malnutrition and disease — Canadian International Development Agency; and

• $92 million for three new UN peacekeeping operations in Burundi, Sudan and Haiti and for the increased costs of existing operations in the Democratic Republic of the Congo, in Ethiopia, in Eritrea, in Liberia and in Côte d'Ivoire — Foreign Affairs and International Trade (Foreign Affairs).

C. Statutory Items Increases

• $304 million increase for activities to mitigate the impact of the Bovine Spongiform Encephalopathy (BSE) crisis — Agriculture and Agri-Food, Canadian Food Inspection Agency, Health;

• $928 million increase in payments under the Transitional Industry Support Program, a program to assist the agricultural industry in its transition to new business risk management programming under the Agricultural Policy Framework — Agriculture and Agri-Food.

D. Statutory Items Decreases

• $800 million largely due to a decrease in expected public debt charges relating to lower than forecast interest rates — Finance; and

• $762 million relating to a revised forecast of transfer payments to provincial governments — Finance.

The overall decreases in all statutory items total $1.6 billion and the total increases in statutory items equal $1.4 billion, resulting in a net decrease of $0.2 billion in planned statutory expenditures. The specific details are included in the Supplementary Estimates (A), 2004-2005.

The Supplementary Estimates (A), 2004-2005 provides estimates of the spending requirements for all departments and agencies of the federal government. As usual, Senators showed interest in both the general spending plans and specific items in these new estimates.

SUMMARY OF HEARINGS

A. Format Changes to the Estimates

In past reviews of the Estimates documents by the Committee, Senators expressed concerns about the presentation and format of these documents. Specifically, they wanted to see, within the Part II of the Estimates, more information on what the figures represent in terms of activity or programs. While there are numerous figures, Senators felt that there was not enough information to enable Parliamentarians to understand the reasons for new appropriations. During previous hearings, officials from the Treasury Board Secretariat agreed that some of the information provided in the supplementary estimates was rather cryptic. At those earlier hearings, they assured the Committee that efforts were under way to improve the reporting process. Mr. Joyce drew the Committee's attention to some of the format changes introduced in the Supplementary Estimates (A), 2004-2005, which include new summary tables and more detailed information. Specifically, he noted that:

• The "Summary of Changes to Voted Appropriations'' tables are much more detailed and now contain information on new spending, the 2003 government-wide reallocation initiative, the net amount of spending authority being requested, and other information such as how offsets are being used;

• The "Ministry Summary'' section now provides information on transfers between votes and transfers between organizations due to restructuring, as well as details of information on new appropriations; and

• The departmental tables were revised so that gross requirements and the amounts of authorities available for each individual organization are now displayed on each organization's table.

Mr. Joyce described this last change as "probably the most fundamental change that is being introduced in these supplementary estimates.'' He noted that it had been a long-standing practice to maximize the use of existing spending authority when requesting supplementary spending authority from Parliament. This meant that in the past, when existing spending authorities were no longer needed, they simply were used to offset departmental requests for new spending authorities, but they were not displayed in supplementary estimates. This raised concerns regarding a lack of transparency in reporting to Parliament. The new format addresses this issue by making this practice quite clear.

In addition to these changes, the Committee was informed that the Treasury Board Secretariat is currently proposing to develop within a three-month period a comprehensive plan to improve reporting to Parliament. Improving the estimates documents would be part of this project. Mr. Joyce expressed the hope that the Secretariat would be able to consult with the Committee to seek its input into the development of this longer-term plan. In particular, he sought from the Committee an opportunity to consult with the Senators on how the Treasury Board Secretariat could best support the work of the Committee in examining the government's estimates.

The Committee is appreciative of the effort taken by the Treasury Board Secretariat to respond to the past desires of Senators to obtain in the estimates documents more information on the spending plans of the government. The Committee welcomes the Secretariat's invitation to consult the Senators on its work to enhance reporting to Parliament.

B. Treasury Board Vote 5 — Government Contingencies

Treasury Board may provide funding to departments and agencies for unforeseen expenditures. This type of funding is referred to as the Treasury Board Vote 5 funding or TB Vote 5 funding. There are two types of TB Vote 5 funding: permanent and temporary. Permanent funding is provided for pay list shortfalls such as severance pay and parental benefits, which cannot be predetermined. Temporary funding is provided for miscellaneous, minor and unforeseen expenditures which were not provided for in the Main Estimates and which are required before supplementary estimates are tabled. All TB Vote 5 items requested are listed in pages 62 and 63 of the Supplementary Estimates (A), 2004-2005.

The manner in which contingency funds are used under the TB Vote 5 has been a recurring concern for the Committee. In fact, on 6 June 2002, the Committee tabled a report containing nine recommendations regarding the working and implementation of TB Vote 5 funding of departments. In the spring of 2003, the Committee had on-going discussions with officials from the Treasury Board Secretariat on proposals to change the Treasury Board policy on the use of the TB Vote 5, on the vote wording and on the guidelines for its analysts. Minister Alcock told the Committee that he is now considering the following:

• Changes to the wording in the introduction of the Main Estimates to provide better context around the use of Vote 5;

• Alterations to the wording of the Vote, reflecting some of the suggestions included in the Committee's June 2002 report;

• An approved framework governing the use of Vote 5; and

• A set of Treasury Board approved guidelines or criteria to accompany the framework.

Minister Alcock explained that he is currently considering the draft paper and consulting with other Parliamentarians and the Auditor General on this issue. He stated his intention to release the report before the end of December.

Two particular items on the list of TB Vote 5 in the Supplementary Estimates (A), 2004-2005 drew the interest of some Senators: $16 million in payments to the Old Port of Montreal Corporation and $35 million in payments to Marine Atlantic Inc. Mr. Joyce explained that the Old Port of Montreal Corporation had need for additional cash funding before it could submit its requirements through the supplementary estimates. The required amount related to payroll and contractual obligations. The $35 million paid to Marine Atlantic was also authorized to cover a cash shortage in its operating budget that resulted from falling revenue due to a decrease in traffic and rising costs associated with fuel price increases.

C. Horizontal Initiatives

There is a new heading in the Supplementary Estimates (A), 2004-2005 for "horizontal items'', that is, the compilation of initiatives for which a number of departments are requesting funds. Pages 64 to 78 present a list of horizontal items for which additional funding is sought. The Committee commends the Treasury Board Secretariat for the improvement made in the supplementary estimates with respect to horizontal reporting. Senators believe that this is an important step in helping Parliamentarians to track information on initiatives undertaken by multiple departments.

Minister Alcock explained that the information provided on the horizontal items allows for better management. As he clearly pointed out: "You cannot manage what you do not see.'' The information on horizontal items allows for better decision making and improved governance. In his view, however, the real challenge remains a search for an appropriate mechanism of governance across departments. Minister Alcock informed the Committee that the Treasury Board Secretariat, under the leadership of Mr. Bill Austin, Assistant Secretary, remains committed to working on this issue.

Some Senators raised the concern that horizontal initiatives may lead to duplication in the use of funds dedicated to the same policy objective. For instance, in the Supplementary Estimates (A), 2004-2005, both the Canadian International Development Agency and the Department of Defence are requesting funding for activities in Afghanistan. Mr. Joyce told the Committee that the Treasury Board Secretariat is also concerned about possible duplication. More precisely, he stated that: "Horizontal issues are taking on increased prominence within the Secretariat.''

Mr. Joyce went on to explain that the need to track horizontal spending is one reason that the Secretariat has embarked on a number of reporting initiatives. For instance, one is an information technology project called the Expenditure Management Information System (EMIS), which will allow the Secretariat to categorize and track departmental funding. This new system, which will be introduced once Treasury Board approval is obtained, is expected to allow the Secretariat and, ultimately, Parliamentarians and the general public, to better understand not only how departments and agencies are allocating the money that Parliament has approved within a department, but also to track items involving horizontal issues.

D. One Dollar Items

On page 14 of the Supplementary Estimates (A), 2004-2005, it is explained that supplementary estimates often include what are known as "one dollar items.'' The one dollar item practice seeks an alteration in the existing allocation of funds that was initially authorized in the Main Estimates. The purpose of a one dollar item is not to seek new or additional funds, but rather to reallocate existing spending authorities between votes. According to the Supplementary Estimates (A), 2004-2005, since estimates are budgetary items, they must have a dollar value. Therefore, the one dollar is merely a symbolic amount, as no new funds are requested. Page 79 provides a list of the one dollar items requested in the Supplementary Estimates (A), 2004-2005 by nine federal departments and agencies.

Some Senators noticed that the dollar value of the reallocation of funds requested under the one dollar item practice is not mentioned in the table provided in page 79 for two agencies, namely the Canadian International Development Agency (CIDA) and the Canadian Institutes of Health Research (CIHR). Ms. Danagher explained that in the case of CIDA there is not necessarily a transfer. The agency is seeking to reduce the ceiling on a loan issuance through Vote L25. Parliamentary authority is required to get the authority to change a loan issuance ceiling; hence the reason for using the one dollar item. In the case of CIHR, the Institutes are transferring their authorities from a contribution program into a grant program; thus, in this case, it is within the original vote. However, because of the change in profile for the program (i.e., increasing their grants budget), they need the authority of Parliament, and hence the one dollar vote item.

E. 2003 Government-Wide Reallocation Initiative

In its February 2003 Budget, the federal government committed to reallocate $1 billion of existing non-statutory programs from lower to higher government priority areas in the fiscal year 2004-2005. Senators requested information on this reallocation initiative, as the contribution of each department and agency was not detailed in the Supplementary Estimates (A), 2004-2005. Mr. Joyce explained that the Supplementary Estimates (A), 2004-2005 reflects only the balance of the $1 billion government-wide reallocation initiative announced in the 2003 federal Budget; this amounts to some $438 million. When added to the $319 million already removed from departmental budgets in the 2004-2005 Main Estimates, and the $246 million in cancelled allocations to departments from funding that was earmarked for departmental spending initiatives, the full $1 billion has been achieved.

He also confirmed that the reallocated funding listed by department comes principally from within the affected departments and not from other departments. In addition, he confirmed that the Treasury Board Secretariat is monitoring the government-wide reallocation numbers closely to ensure that no misrepresentation of the spending plans arises. Part of the process is ensuring that departments change both their budgets and the authorities given by the Treasury Board and Parliament.

Mr. Joyce told the Committee that the $1 billion has contributed to financing about 15% of the total new spending priorities announced in the 2003 federal Budget. He indicated, however, that it is not correct to link specific reallocation decisions to specific new expenditure priorities. The two decisions were made at separate times. As he stated, "there is not a one-to-one relationship'' between the savings and the new priorities that were identified in the 2003 Budget.

Mr. Joyce explained that the savings that were identified by departments and agencies as part of their contribution towards the $1 billion reallocation initiative were put by the Treasury Board into a "frozen lapsing allotment''. As a result, the departments and agencies were not able to exercise their full spending authority as previously authorized by Parliament. The frozen lapsing allotment is a power of the Treasury Board over appropriations declared surplus by a ministry. It is a control, below the vote level, that the executive, through the Treasury Board, can exercise to prevent the misuse of surplus funding authorities. In the context of the Supplementary Estimates (A), 2004-2005, if the savings resulting from the reallocation initiative were the only transaction with respect to a ministry, then on pages 48 to 52 they appear as net contributors, as they have given up this amount. However, if the ministry at a later time in the supply cycle sought new appropriations through the supplementary estimates for an entirely unrelated matter, then the Treasury Board will offset the ministry's request by freeing the appropriation available in its frozen allotment. The request for new appropriations will then be net of the previously frozen allotment. In this situation, the savings identified will be used by the same department but for other purposes.

Some Senators raised questions about the impact of the 2003 government-wide reallocation initiative on employment in the federal public service. They had concerns that the Treasury Board Secretariat did not have any regional employment information for each individual department and agency. Mr. Joyce told the Committee that it was his understanding that there were no specific job losses as a result of the $1 billion reallocation. He also stressed that the reallocation initiative took place within the context of the 2003 Budget, which led to an overall increase in federal government spending; some of this funding might have translated into additional jobs.

Some Senators also raised concerns about the impact of the government-wide reallocation initiative on regional economic development initiatives, as the Atlantic Canada Opportunities Agency, the Economic Development Agency of Canada for the Regions of Quebec and Western Economic Diversification were required to reallocate funds amounting to $9 million, $5 million and $6 million respectively. Minister Alcock was asked to provide information on the percentage these three amounts represent in terms of the agencies' total budget. He was also asked to provide information on the low priorities that were affected by the reallocation. The Minister will provide a written response to these questions.

F. Sub-Committee of the Treasury Board on Expenditure Review

Senators were interested in the process of the Sub-Committee of the Treasury Board on Expenditure Review, which will result in $12 billion in savings over a five year period. Minister Alcock told the Committee that the Treasury Board Secretariat is working with departments and agencies to identify items that could be candidates for reallocation, either through reduced spending or increased efficiency. The Sub-Committee of the Treasury Board on Expenditure Review will then prepare a report detailing which spending on low-priority items should be reallocated. This report will be forwarded to Cabinet, which will then decide which higher-priority items will be funded. The Minister made it clear to the Committee that the decision on which priorities to fund is not his decision, nor is it that of the Treasury Board. It will be a decision of government.

G. Strategic Issues in the Improvement of the System of Reporting to Parliament

In his opening remarks, Minister Alcock focussed on some of the strategic issues concerning the supplementary estimates and the way the Treasury Board reports to parliamentary committees. He acknowledged that Parliamentarians face significant challenges in carrying out their duties. He observed that Parliament receives hundreds of statutory reports from over 200 government organizations on matters as diverse as privacy, sustainable development, employment equity, alternative fuels and others. Indeed, the list alone of these reports exceeds 100 pages. Although there is much detailed information provided to Parliament, it does not guarantee clarity or understanding. The Minister recognized that Parliamentarians have long indicated a need for simpler, more integrated information, with more explanatory contexts and offering the opportunity to obtain more details. He reiterated the intent of the Treasury Board to carry out a program of change that will enhance accountability in the government sector and increase the transparency of government spending decisions. He was especially interested in discussing the approach that is being taken by the Treasury Board Secretariat as it seeks to implement the required changes to the government reporting system.

Minister Alcock reminded the Committee that the Secretariat has begun to provide more detailed information in the supplementary estimates and in the public accounts. In addition, the Comptroller General is working to increase the number of reports that have auditable financial statements. In the short term, there are specific things that the Treasury Board Secretariat will do to improve the quality of reporting. For instance, it will soon provide an integrated set of guidelines to departments on the preparation of the Reports on Plans and Priorities and of the departmental Performance Reports. These guidelines will stress that these two reports must be better integrated and much more fact- based.

The Minister also highlighted a number of objectives that this exercise aims to achieve, including: the implementation of an approach to reporting that is intuitive, timely and easy to use; the creation of a system of cost information that is consistent and accessible, so that items can be tracked from one report to another; the development of a reporting structure that provides a balance between formal hard-copy reports and ongoing electronic updates; and the provision of information that is reflective of real performance and the real way that government is managed.

While numerous approaches will be used by the Secretariat to meet these objectives, one that is very promising, according to the Minister, is the provision of electronic reports that could be updated at any point in the year as new audits or evaluations are completed or as actual expenditure and performance data are updated in departmental systems. The use of electronic tools may also facilitate access to more detailed data and make it easier to identifying expenditures that involve government-wide initiatives (horizontal items).

However, the introduction of electronic reporting is not without complications. An electronic reporting system would have to be introduced gradually because it could prove disruptive to the public service, which is unaccustomed to providing information that is both current and transparent. Minister Alcock stressed that both the employees and the managers in the public service will require time to develop the mind-set that is compatible with a more dynamic "evergreen'' model of reporting government spending.

Another difficulty that could arise with the introduction of electronic reporting and the increasing ability of Parliamentarians, and perhaps citizens, to access detailed expenditure plans may be the tendency of everyone to want to micro-manage the public service. Although it is a good thing to provide details, because it provides transparency in government activities, there will always be a tendency to want to manage down to the lowest level. Minister Alcock believes that this tendency to micro-manage will manifest itself in ministers, at the Treasury Board Secretariat and in committees of Parliament. Many, armed with this new information, will want to second guess the spending decisions taken by public service managers. He suspects that the current work on defining accountability in government and the public service must establish clear objectives that will be used to assess the performance of deputies and senior staff.

H. Consultation with Parliament

Minister Alcock expressed the view that, as part of the process of reviewing the way in which the government reports its spending plans to Parliament, he would like to consult with the committees of Parliament. Rather than trying to devise a grand plan for consultation, he hopes to develop improved reporting practices through an ongoing dialogue with Parliamentarians. He informed the Committee that the Treasury Board Secretariat is currently examining the options available that present the most effective ways of engaging Parliamentarians in defining the information that Parliament needs.

In response to a Senator's question, the Minister acknowledged that the changes that he envisions will have a profound impact on the relationship among the various government departments. He is particularly aware that the application of information technology will have a major impact on the government. For instance, government has so many different operating arms that the first thing that is required is to develop a single government overview of all the organizations. He believes it is the role of the Treasury Board Secretariat to establish some level of standardization in the storage of information, and in ensuring its accessibility from one department to another. In contrast, specific operational activities, such as procurement, are best delivered through ministries such as Public Works and Government Services Canada. Meanwhile, Minister Alcock believes that Industry Canada's competence in the management of information needs to be replicated across all departments. The result of this exercise will be to move the public service into a new environment where employees become comfortable and able to functioning in a more transparent world. This is why, when the Treasury Board Secretariat implements initiatives such as "proactive disclosure'', it does not centre the activity at Treasury Board but instead creates the framework and the structures that allow each department to carry out its own proactive disclosure of information. Naturally, not all will be able to undertake all new initiatives. For the small agencies, it may be necessary to centralize some of the corporate functions. For the larger agencies, it is important that they not only develop the competence, but also adopt the underlying cultural change.

I. Internal Audits and the Role of Deputy Ministers

Internal audit is one of several tools that an organization may use to assess and monitor management practices and the achievement of its objectives. Within the federal government, internal audit is an important element in enabling deputy ministers to ensure that their departments have an effective internal control system. Internal auditors conduct risk-based audits and identify, when necessary, improvements in an organization's risk management strategy and practices, in its management control framework, and in the information systems it uses for decision making and reporting.

In recent months, the federal government has undertaken to bolster the internal audit across its departments and agencies. Effective 1 June 2004, the Office of the Comptroller General of Canada was re-established, with one of its key duties being to set or review financial, accounting and auditing standards and policies for the federal government. Then, on 18 November 2004, the President of the Treasury Board announced a multi-year initiative to strengthen the internal audit function across the federal government. This multi-year initiative, which was developed by the Comptroller General, will provide internal audit services to 63 departments and agencies that have limited or no internal audit resources.

Minister Alcock told the Committee that the Treasury Board Secretariat is committed to building the capacity needed for better independent and objective internal audit services. He also stated that the Secretariat is consulting key stakeholders, including the Canadian Institute of Chartered Accountants, on changes to internal audit policy and practices.

The Committee welcomes the multi-year initiative to strengthen the internal audit function in federal departments and agencies. However, some Senators remain concerned about the role of the deputy minister, which is not detailed in the new initiative. They asked questions about the role of the deputy minister in these major audit changes and restructuring that are taking place. Minister Alcock informed the Committee that the multi-year initiative seeks to make deputy ministers more accountable for the overall operations of their departments and to hold them to account for the outcomes.

J. Departmental Mandates

Some Senators were concerned that, over time, departments may have offered programs and services that did not clearly fall under their mandate. This tendency has been referred to by Minister Alcock as "mandate creep''. He explained that the growth in the mandate creep phenomenon may have occurred in response to legitimate demands. Nonetheless, Senators believe that it is worth asking whether departments are operating as efficiently as they could, because they are being asked to do more than they were originally intended to do.

Minister Alcock indicated that mandate creep may also be the way in which Parliament has chosen to fund initiatives. As Parliamentarians relaxed their vigilance in some of the budgeting processes, departments managed to obtain resources to implement more programs and services, albeit not necessarily within their mandates. In the end, some of the rigour of looking at the mandate and how it flows through a department's activities was lost. The Minister insisted that one of the outcomes of the Expenditure Review Initiative being carried out by Minister McCallum is a renewed budget process that allows government to look more rigorously at some of these issues. He also stressed that the management change that is under way at the Treasury Board recognizes that if the government is to build an accountability structure that holds the deputy ministers more directly to account, it must identify clearly the programs and objectives that they are being held accountable for.

K. User Fees

The federal government has, for many years, levied user fees for a number of services and programs it delivers. User fees allow for cost recovery (through the revenue generated) and economic efficiency (by making the best use of available public resources). The President of Treasury Board told the Committee that the current user fee legislation in Canada (Bill C-212, which came into force in March 2004) is unique in many aspects in comparison to that of other countries. In particular, this legislation highlights the need for more parliamentary oversight when user fees are introduced or changed. It also establishes standards to which federal departments and agencies must adhere, or else face a reduction in the user fee collected equivalent to the unachieved performance. With respect to this new user fee legislation, Minister Alcock stated: "Although it is radical, in some ways, it is a long overdue approach to bring some rigour to the setting of these fees and holding people to account for the activities they deliver in response to those fees.''

Minister Alcock informed the Committee that the Treasury Board Secretariat is currently developing a user fee policy reflective of the new legislation. He also indicated that the Secretariat has undertaken to rationalize the system, as there are currently thousands of fees. In addition, Mr. Joyce indicated that the Secretariat will make an announcement shortly concerning the establishment of service standards in relation to user fees.

Senators were also interested in the potential of making greater recourse to user fees than is the current practice; this would reward performance and allow departments and agencies to provide a greater level of services. Mr. Joyce explained that there are two categories of departments that levy user fees. In the first category, departments are allowed to practise "revenue retention''; this means that they can credit the revenues that they earn from the user fees to the vote that supports their appropriation (this is then reflected in net votes). In this situation, there is a sense that this particular user fee activity is self-contained; it is necessary to respond to the demand, and the department has the flexibility to basically add or shed costs according to the demand for service for which it is charging the fee. In the second category, the revenues generated from the user fees are deposited to the Consolidated Revenue Fund and, therefore, there is no direct link for the department between the service rendered and the fees levied. In this situation, there is no incentive in the department to increase or improve services because there is no effect on the level of funds available to the department.

Mr. Joyce acknowledged that the Secretariat tends to be conservative and risk-averse with respect to using user fees as an incentive to enhance performance. There is a fear that departments that levy user charges would be favoured over those that do not have a revenue-raising capacity and that may be in need of additional funding. There is also a concern over the lack of restrictions on the use of fees generated by some departments, which has the potential to alter the distribution of government activities in a way that might not reflect the government's priorities. For these reasons, the Secretariat prefers to set some limitations on the freedom of departments to tap into their revenue-raising capacity. In the view of Mr. Joyce, this ensures a sense of internal government equity across departments and agencies.

L. Environmental Remediation

Questions were raised about government spending on the assessment, management and remediation of federal contaminated sites. Specific questions related to the delay in commencing the clean-up of the Sydney tar ponds and coke ovens. Mr. Joyce explained that $580 million in operating expenditures and $4.2 million in grants and contribution have been earmarked for this project. Unfortunately, this project has not proceeded as quickly as planned and money earmarked for expenditures in the previous year was not spent. However, the project will still require this money, so the Treasury Board has "re-profiled'' the funding: it has carried forward the unspent funding into the next fiscal year. This re-profiling is one of the primary reasons why this funding is being sought in the Supplementary Estimates (A), 2004-2005. It reflects the fact that the progress was slower than planned, and that appropriations for planned spending in the previous year were not used by the Department of the Environment. It is the understanding of the Treasury Board Secretariat, through its own review of the spending proposal, that this project will proceed in the 2004-2005 fiscal year, or the Secretariat would not have proposed this supplementary appropriation to the Treasury Board.

Some Senators were interested in the proportion of the funding earmarked for environmental management, investigation and remediation that goes specifically to remediation work, as opposed to that which is used in the planning and organizing phase of the projects. Although Mr. Joyce did not have information on specific breakdowns of spending between administrative cost and program cost, he acknowledged that it is a concern in two ways. First, the Secretariat is concerned that in some cases the administration funds may not be sufficient for the due diligence that is required in administering programs. For instance, is there enough funding to support audit functions at the departmental level? Second, there is a concern that administration costs may be overstated. It is the function of the Program Sectors at the Treasury Board Secretariat to examine spending plans to ensure that a proper balance exists between administration expenditures and program expenditures.

Continuing with environmental remediation projects, some Senators noticed that on page 158 of the Supplementary Estimates (A), 2004-2005, in the Department of Indian Affairs and Northern Development is requesting a sum of approximately $45 million to conduct "Assessment, management and remediation of federal contaminated sites.'' This amount is in addition to $115 million spent over the last 10 years on sites on reserve lands. Mr. Joyce explained that the funds are needed for work on 15 federal contaminated sites, primarily abandoned mines in northern Canada. Money will also be used to undertake remediation projects on reserves where there are 12 additional suspected contaminated sites. The funding will be divided among the work that is necessary to assess a site to identify whether it is contaminated, the degree of contamination and the nature of the contamination. That work has to be completed before a decision can be made in terms of relative priority and the amount of money that is actually needed to then do the remediation work. Therefore, some of the funding will go to remedial work where an assessment is complete, and some will go to assess new sites that may require remediation.

M. Geographic Barriers to Employment

Some Senators were interested in the progress of the federal government's effort to remove geographic barriers to public service recruitment. Minister Alcock informed the Committee that he recently met with the President of the Public Service Commission, Ms. Maria Barrados, who is currently working on a project to address the issue of the hiring of public servants outside the Ottawa region. This project would allow for a more efficient screening of applicants, regardless of where they live.

Senators also asked whether funding was made available to remove the geographic barriers to federal public service recruitment. Mr. Joyce explained that the funding situation remains the same, in that the Public Service Commission has been funded as part of the implementation of Bill C-25. He reminded the Committee that the review of geographic barriers to public service recruitment still remains a government priority, and that it is now part of the Treasury Board President's portfolio. Mr. Joyce also told the Committee that he is not aware of any specific change in terms of the funding and that he believes the exercise remains a priority of the Public Service Commission.

N. BSE Funding

Some Senators expressed concern that funding from the BSE Recovery programs is not adequately assisting beef farmers. They are concerned that the $928 million program will end up in the hands of persons who are not the intended beneficiaries.

O. Sports Development Funding

Some Senators were interested in the $59.6 million listed under the Department of Canadian Heritage to assist Canadian athletes. Mr Joyce indicated that this was additional funding to increase participation and enhance excellence in sport to prepare for the Vancouver 2010 Olympic Games. The additional funding will go to increase the tax-free monthly allowance from $1,100 to $1,500 for senior-level athletes. That will increase the annual support from $13,200 to $18,000. The tax-free monthly allowance for developmental-level athletes will rise from $500 to $900.

P. The United States Congressional Budget Office

Some Senators wondered whether the quantity and quality of information available to Parliamentarians in conducting their estimates review functions could be improved if Parliament were to adopt a different process. In particular, they wanted to know if Canada could find some value in studying in the American system where a special agency — the Congressional Budget Office (CBO) — is utilized to examine the budget, to analyze alternative budget scenarios and generally to assist congressmen, senators and congressional committees in their budget oversight functions. The CBO is completely independent of the government's own agency — the Office of Management and the Budget. Mr. Alcock responded that he would support any change that would improve the oversight capacity of the House of Commons and the Senate. He believes that the issue is similar in some ways to the issue of reporting to Parliament: Parliamentarians have a large amount of information and few resources to deal with it, and models available elsewhere, including the CBO, are often considered as a potential solution. He also believes that Parliament benefits from a great deal of competence in the Parliamentary Information and Research Service (PIRS) of the Library of Parliament which serves all Parliamentarians. He is aware that some discussions have taken place in the House of Commons on how to enhance the capacity of PIRS analysts, especially with regard to developing expertise in areas of budget analysis. However, he believes that any major change in the research capacity of Parliament will have to be driven by Parliamentarians. It is not for the government to tell Parliament how to fund itself. In his opinion, the capacity to assist MPs and Senators already exists in the Parliamentary Information and Research Service of the Library of Parliament. With a small investment of funds and perhaps the introduction of a different management system, Parliament could actually create the kind of budget analysis system that would provide the support that Parliamentarians need in their estimates review work. The Minister insisted again on the fact that this initiative would have to come from the House of Commons and the Senate, and not from the government.

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