Journals of the Senate
54 Elizabeth II, A.D. 2005, Canada
Journals of the Senate
1st Session, 38th Parliament
Issue 46 - Appendix "D"
Tuesday, March 22, 2005
2:00 p.m.
The Honourable Daniel Hays, Speaker
Tuesday, March 22, 2005
The Standing Senate Committee on National Finance has the honour to present its
FIFTH REPORT
Your Committee, to which was referred the Estimates 2004-2005, has in obedience to the Order of Reference of Wednesday, October 20, 2004, examined the said estimates and herewith presents its report.
Respectfully submitted,
DONALD H. OLIVER
Chair
STANDING SENATE COMMITTEE ON NATIONAL FINANCE:
FINAL REPORT ON MAIN ESTIMATES 2004-2005
INTRODUCTION
1. As is customary, the Standing Senate Committee on National Finance held several meetings to examine various aspects of the government’s planned expenditures, including numerous meetings on the 2004-2005 Main Estimates, two hearings on the Supplementary Estimates (A), 2004-2005 and one on the Supplementary Estimates (B), 2004-2005. Three ministers appeared before the Committee to explain the government’s spending plans. The Honourable Reg Alcock, President of the Treasury Board, appeared on three occasions, while the Honourable John McCallum, Minister of National Revenue, and the Honourable Scott Brison, Minister of Public Works and Government Services, each appeared once.
PREVIOUS REPORTS
2. As a result of these meetings, the Committee has already submitted three reports during the year:
· A First Interim Report on the 2004-2005 Main Estimates, dated March 2004.
· A Report on the 2004-2005 Supplementary Estimates (A), dated December 2004.
· A Report on the 2004-2005 Supplementary Estimates (B), which the Committee submits concurrently with this Final Report on the 2004-2005 Main Estimates.
A. First Interim Report on 2004-2005 Main Estimates
3. The First Interim Report on the 2004-2005 Estimates noted that the Treasury Board intended to submit two sets of Estimates for 2004-2005: one in March and a second set before the end of June 2004. Some Senators questioned whether the Treasury Board Secretariat’s new timetable with respect to the Estimates would fit in with the traditional Estimates schedule of Parliament. A specific concern at that time was that, notwithstanding the possibility of a federal election in the spring of 2004, by the time the Reports on Plans and Priorities and the revised 2004-2005 Estimates were made available, the initial 2004-2005 Estimates would have been examined by the relevant Parliamentary committees, and, according to the House of Commons, would be deemed to have been reported. In the end the government decided not to issue a revised version of the 2004-2005 Estimates. After the election, in the fall, the government chose to reissue the original estimates for 2004-2005.
4. The Interim Report questioned a $493.8 million request by the Department of Justice to increase its Vote 1 allocation by 92.7%. Officials of the Treasury Board Secretariat explained that the increase was related to granting, to the Department of Justice, parliamentary authority to spend revenues it received from other federal departments and agencies for legal services. They explained that, following an expenditure and management review conducted by the Treasury Board Secretariat in 2003, it was discovered that the Department of Justice’s practice of spending the revenues it received from federal clients resulted in the department spending more than its annual appropriation. In order to address the need for an authority to re-spend these revenues but continue to provide legal services to other federal departments, the Treasury Board Secretariat proposed an interim solution that would see the Department of Justice deposit all recovered revenues to the federal Consolidated Revenue Fund. Only upon proof of deposit would the Department of Justice be able to draw against this increased appropriation. Officials from the Treasury Board Secretariat insisted that although this measure does appear in the 2004-2005 Estimates as an increase to the appropriation for the Department of Justice, the measure is revenue-neutral.
5. The Interim Report also noted that the President of the Treasury Board spoke at length about the restructuring of the Treasury Board Secretariat, particularly as to how it relates to the strengthening of the Office of the Comptroller. He also announced that the Treasury Board Secretariat would be undertaking three studies apart from the work undertaken for the Expenditure Review Sub-Committee. The first involved the governance of the Crown corporations over which the Auditor General expressed concerns in her report about the oversight and policy structures of the Crown. The second was a study of the provisions of the Financial Administration Act, with specific attention given to the issues of accountability and discipline, that were again raised in the Auditor General's report. The third study would examine the nature of accountability and ethical behaviour in the senior public service. At the time he had hoped to employ the services of Donald Savoie, who had agreed to join the department for almost a year.
6. The Minister expressed an interest in developing a dialogue with Parliamentarians on all three areas of study. He wanted to better define the nature of accountability in a modern government, particularly the nature of ministerial accountability. Unfortunately, the Minister has not yet consulted with the Committee on these topics. A possibly reason may be that the Treasury Board Secretariat is awaiting the completion of Mr. Justice Gomery’s work in this area before it issues its reports.
7. Finally, the Interim Report summarized the discussions between Minister Alcock and the Senators on the work of the Expenditure Review Committee. More detail on the work of the Expenditure Review Committee is provided in paragraphs 16 to 20 below.
B. Report on the Supplementary Estimates (A), 2004-2005
8. The Report on the Supplementary Estimates (A), 2004-2005 explained that a number of changes to the format of the supplementary estimates have been introduced with the Supplementary Estimates (A), 2004-2005. These changes provide greater transparency and consistency of information in all Estimates documents.
9. The Report also touched upon the discussion between some Senators and Minister Alcock on the manner in which contingency funds are used under the TB Vote 5. This practice 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. Since that time, the Committee has had ongoing 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 changes to the vote wording and on revised guidelines for Treasury Board Secretariat analysts. Minister Alcock explained that he was considering the draft paper and would consult with other Parliamentarians and the Auditor General on this issue before making his views public. Nonetheless, he stated his intention to release the report before the end of December 2004.
10. The Committee commended 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 also explained that the information provided on the horizontal items allows for better management.
C. Report on Supplementary Estimates (B), 2004-2005
11. On 8 March 2005, the Committee met with the officials of the Treasury Board Secretariat to discuss various matters contained in the Supplementary Estimates (B), 2004-2005. These supplementary estimates sought Parliament’s approval to spend a total of $1.5 billion on expenditures that were not sufficiently developed or known when the 2004-2005 Main Estimates or the Supplementary Estimates (A), 2004-2005 were tabled. They also provide information about reductions totalling $0.9 billion in projected statutory spending that Parliament has already approved in legislation, for a net Supplementary Estimates of about $0.6 billion. As mentioned above, the Committee has issued a report on the Supplementary Estimates (B), 2004-2005 concurrently with this final report.
OTHER MATTERS
12. In the course of its examination of the 2004-2005 Estimates, the Committee held several meetings on which it has yet to report. These hearings are described below.
A. Meeting with the Honourable Reg Alcock, President of the Treasury Board
13. As a result of the 38th General Election, the 2004-2005 Main Estimates were submitted to Parliament a second time and again referred to the Standing Senate Committee on National Finance. On 27 October 2004, the Committee resumed its examination of the estimates with the appearance of the Honourable Reg Alcock. The Minister listed the reasons why the government chose not to submit a new set of estimates as announced in March 2004. These include: 1) the legislation to finalize the machinery of government changes was still not in place by the fall of 2004; 2) there were no new substantial adjustments required because of the restructuring; and 3) the $1-billion reallocation targets were still being finalized, although he expected that they would be ready in time for the release of the 2004-2005 Supplementary Estimates (A). The Minister also acknowledged that the suggestion to issue a second set of estimates was not well received by Parliamentarians in both houses of Parliament.
14. While the Committee examined a number of issues, there are several that stand out. First, the Senators expressed interest in the Ministers announcement of ongoing efforts by the Treasury Board Secretariat to provide clearer and more transparent information to Parliamentarians. Many of these changes stem from suggestions made by the Committee in previous years.
15. The Minister also discussed at length some of the changes in government organization that will have major effects on the governance of the federal public service. Foremost is the strengthening of the functions of the Office of the Comptroller General. Mr. St.-Jean, the Comptroller General of Canada, who accompanied the Minister, explained his plans to upgrade the function of the Comptroller General in the government.
B. Meeting with the Honourable John McCallum, Minister of National Revenue
16. On 17 November 2004, the Committee heard from Minister McCullum who is the Chair of the Expenditure Review Committee. This Cabinet-level committee was established by the Prime Minister in December 2003 with the mandate of reviewing all federal spending in order to ensure that “spending remains under control, is accountable, is closely aligned with the priorities of Canadians, and that every tax dollar is invested with care to achieve results for Canadians.” The Expenditure Review Committee was expected to reallocate some $12 billion over a period of five years (2005-2006 through 2009-2010).
17. When he appeared before the Committee, Minister McCallum explained that about half of the targeted reallocations identified by the Expenditure Review Committee would come from departments’ identification of their lowest 5% of spending priorities, while the other half would come from cost savings on central government activities through improvements in management efficiency. He noted that:
At the level of central government activities we are focusing on three areas. The first is procurement (…). Use the federal government's purchasing power to get better prices and require departments to buy at those prices. That will save us billions. The second is property management. Manage the federal government property more efficiently. The third is service delivery. That is to say, provide better service to Canadians and also at lower cost, initially involving HRSD. We have examined those three initiatives in detail, and I think they will generate approximately half of the required $12 billion.([1])
18. Later during his testimony, he highlighted that: “(…) the departments are offering up 5% in addition to what they are offering on the central initiatives.”([2])
19. Subsequently, the Committee learned that the February 2005 federal budget provided the details of this expenditure review exercise. The savings anticipated over the next five years will amount to approximately $0.8 billion in 2005-2006, $1.5 billion in 2006-2007, $2.6 billion in 2007-2008, $2.9 billion in 2008-2009 and $3.1 billion in 2009-2010 (for a total of $10.9 billion).([3])
20. The Committee realizes that this is a large shift in resources that signals a major redirection in government priorities and acknowledges, as clearly noted by Minister McCallum, that the decision on which priorities to fund was not his decision, nor was it that of the Treasury Board; it was a decision of government.
C. Meeting with the Honourable Scott Brison, Minister of Public Works and Government Services and the Honourable Walt Lastewka, Parliamentary Secretary
21. On 8 December 2004, the Honourable Scott Brison appeared before the Committee to explain how the government expected to realise savings of almost $6 billion over 5 years in the purchasing and delivery of services to Canadians. Mr Brison explained that he believed significant savings could be achieved by centralizing the purchasing functions of government departments. Additional savings could be realised through the implementation of centralized delivery mechanisms for government services.
22. There were three components to the government’s cost saving approach. First, they expected to achieve a 10% saving on government purchases of $10 billion through coordination of buying activities which should result in economy of scale savings.
23. The second part of the government’s strategy focuses on the real property held through Public Works Canada. Currently, the government spends about $3 billion per year on real estate and related services. He is looking at ways to provide good, safe and accessible accommodation for government workers at lower cost to Canadians.
24. The third element of the government plan is to improve the business of government by continuing to modernize its information technology systems. This will make it easier for Canadian citizens and businesses to interact with the Government of Canada on-line, 24 hours a day and 7 days a week, from the convenience of their homes. He also believes that this will result in significant cost savings.
D. Hearings with the Officers of Parliament
25. The Committee began, in 2004, a series of hearings on the financial operations of the Officers of Parliament. A recurring theme among Officers of Parliament was the difficulty that they experience in determining their budget. They shared the view that an inadequate level of funding has resulted in a weakened ability to do the work Parliament has asked them to do. For example, Mr. John Reid, Information Commissioner, stated:
I think there is a real problem in terms of the way in which parliamentary officers are funded. It is a very difficult proposition, I believe, for the government itself to deal with this sort of a hybrid organization that is in a sense part of the civil service and yet has no reporting responsibilities to the civil service. There has to be a considerable amount of thinking about how these officers are to be financed in the future.([4])
26. One suggestion made to the Committee would be to have the Officers of Parliament to propose a budget to both Speakers of the House of Commons and Senate, subject to a review by their Boards of Internal Economy. The proposal would then be forwarded to Treasury Board which would include the proposed funding level into the Estimates. The overarching argument would be that Parliament should be responsible for approving the funding of its Officers.
27. Another proposal that was discussed involved setting up a panel of experts to determine the appropriate level of funding for each Officer of Parliament. This so-called “blue ribbon panel” approach had less general support.
28. The Committee’s work on this matter is not yet complete, and the Committee expects to submit a more complete report on this aspect of its work in 2005-2006. In the interim, the Committee offers the following brief highlight of its hearings with the Officers of Parliament.
1. Office of the Auditor General of Canada
29. Ms. Sheila Fraser, Auditor General of Canada, appeared before the Committee on several occasions. When she appeared on 3 November 2004, she discussed a number of government initiatives designed to improve the accountability of government officials and to improve the transparency of government transactions. At that meeting she also touched upon the subject of government created foundations and endowment funds (these are discussed in more details below).
30. On 1 December 2004, the Auditor General discussed the various aspects of the work of her Office, her staff requirements and spending plans for the fiscal period 2004-2005. She answered questions about her Office’s 2003-2004 Performance Report and its 2004-2005 Report on Plans and Priorities. Like other government departments, the Office of the Auditor General submits annual spending estimates and an annual performance report to Parliament and is asked to explain before Parliamentary Committees its estimates and management practices.
31. The Committee learned that each year, the Office of the Auditor General is the subjected to an external financial audit by an auditor appointed by the Treasury Board. The office is also subject to scrutiny by the Public Service Commission, the Official Languages Commission, the Privacy Commission, and the Canadian Human Rights Commission. Furthermore, the institutes of chartered accountants of Ontario, British Columbia, Alberta and Nova Scotia, as well as the Ordre des comptables agréés du Québec, conduct reviews of the office’s practices to provide assurance that it meets professional standards in the conduct of its financial audit work. Finally, Ms. Fraser reminded the Committee that the Office of the Auditor General has voluntarily subjected itself to external reviews of the quality of its audits.
32. For example, in 1999, a review of its financial audits was conducted by a major accounting firm. In 2003-2004, a performance audit practice was reviewed by an international team of legislative auditors led by the United Kingdom’s National Audit Office. In both cases, the quality management system of the Office of the Auditor General was found to be suitably designed and operating effectively.
33. On 22 February 2005, Ms. Fraser returned to discuss the content of her February 2005 Status Report. While several topics were discussed, the main interest of Senators at the time was on the federal government’s creation of foundations and endowment funds. That topic is discussed further below.
2. The Public Service Commission
34. Ms. Maria Barrados, the president of the Public Service Commission, appeared before the Committee on 2 November 2004 to discuss the Commission’s annual report tabled 19 October 2004 as well as two audit reports released at the same time. She also reviewed the content of the Commission’s 2004-2005 Estimates documents, which contained items of interests to some Senators. In particular, Ms Barrados discussed numerous issues currently affecting the federal public service and the variations in her resource requirements as a result of the recent changes in the laws governing public service administration. Specifically, she explained some of her current resource requirements given the new emphasis in her Office on auditing the staffing activities of the government departments.
3. Office of the Commissioner of Official Languages
35. Ms. Dyane Adam, Commissioner of Official Languages, appeared on 8 February 2005. She spoke about the mandate, strategic objectives and achievements of the Office of Official Languages. She also reported on her activities and the state of official language policy in Canada. Furthermore, she explained the funding needs of her Office and the different resource requirements across the country.
4. Elections Canada
36. Mr. Jean-Pierre Kingsley, Chief Electoral Officer of Canada, appeared before the Committee on 8 February 2005. Mr Kingsley explained the financing of Elections Canada and outlined Elections Canada’s 2004-2005 Estimates. He also discussed the cost factors that determined the cost of the National Register of Electors and the cost of the 38th general election held in 2004. Some Senators expressed concern and remain skeptical regarding the overall cost and effectiveness of the permanent voters list. Finally, Mr. Kingsley reviewed the audits of activities of Elections Canada that were conducted by the Office of the Auditor General of Canada.
5. Office of the Privacy Commissioner
37. The Privacy Commissioner, Ms. Jennifer Stoddart, met with the Committee on 16 February 2005. Ms Stoddart provided an overview of the work of her Office and highlighted some key privacy issues of concern in both the public and private sectors. In addition, she discussed at length her budget concerns, particularly resource shortages affecting her ability to carry out portions of her mandate. She noted that her Office’s most immediate priorities are to stabilize its resource base, to complete its institutional renewal strategy and to submit a business plan with a formal submission to the Treasury Board by next summer.
6. Office of the Information Commissioner
38. The Information Commissioner, Mr. John Reid, appeared before the Committee on 15 February 2005 and spoke on several challenges facing his Office. First is the need to modernize and strengthen the Access to Information Act, which is currently under review by the Minister. Mr. Reid cautioned Senators against readily accepting changes to the Act. In his view, government reform too often weakens the rights of access of requesters, weakens the oversight powers of the Information Commissioner, adds new justifications for secrecy and makes the access process slower and more expensive for users.
39. Mr. Reid also drew attention to the serious under funding of his Office. Resources are so strained that the Commissioner described the situation as a financial crisis. With respect to the investigator group of employees, his Office has not been able to replace retiring or departing investigators. Consequently, there is a growing backlog of incomplete investigations, which is now equivalent to a year’s workload for the Office.
40. This resource crisis was a matter of discussion in other committee’s but as yet no resolution is in sight. Mr. Reid explained that his budget is determined by the Treasury Board and that to date the Board has not seem fit to provide him with the resources to carry out his tasks.
41. Mr. Reid believes that the under funding issue could be resolved if some individual or committee of Parliament, rather than the Treasury Board, was entrusted with the responsibility to determine the budget of the Information Commissioner.
E. Government Sponsored Foundations and Endowment Funds
42. In 2004-2005, the Committee held four different meetings on foundations and endowments funds. These entities provide an alternative method for delivering certain governmental programs and services. In April 2002 and again in February 2005, the Office of the Auditor General raised concerns about the accountability of foundations and endowment funds and questioned the accounting of the transfer of federal funds to those entities.
43. In the fiscal year 2004-2005 the Committee met with the Auditor General on three occasions to discuss these concerns on 3 November 2004, 1 December 2004 and in February 2005. The Committee also held hearings on 2 February 2005 with representatives of two foundations – the Canadian Foundation for Innovation and Canada Health Infoway Inc. – and one endowment fund – the Green Municipal Fund.
44. The Auditor General noted that, while the federal government has made progress in improving the accountability of foundations and endowment funds in recent years, she remains concerned about ministerial oversight, performance audit and evaluation, and the accounting of transfers of federal funds.
45. The Committee intends to hold additional hearings and report on the issues raised by foundations and endowment funds in 2005-2006.
CONCLUDING COMMENT
46. These and other matters as listed in earlier reports were discussed during the Committee’s examination of the 2004-2005 Main Estimates, the Supplementary Estimates (A), 2004-2005 and the Supplementary Estimates (B), 2004-2005.
47. The Standing Senate Committee of National Finance respectfully submits its final report on the 2004-2005 Estimates.
([1]) Committee Proceedings, Issue 3, 17 November 2004.
([2]) Ibid.
([3]) Department of Finance Canada, “Expenditure Review for Sound Financial Management,” Booklet, The Budget Plan 2005, 23 February 2005.
([4]) Committee Proceedings, 16 February 2005.