56 Elizabeth II, A.D. 2007, Canada

Journals of the Senate
(Unrevised)

1st Session, 39th Parliament

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Issue 79- Appendix "A"

Wednesday, March 21, 2007
1:30 p.m.

The Honourable Noël A. Kinsella, Speaker

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Wednesday, March 21, 2007

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

ELEVENTH REPORT

Your Committee, to which were referred the Supplementary Estimates (B), 2006-2007, has, in obedience to the Order of Reference of Thursday, February 22, 2007, examined the said Estimates and herewith presents its report.

Respectfully submitted,

JOSEPH A. DAY

Chair

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REPORT ON THE SUPPLEMENTARY ESTIMATES (B), 2006-2007

The Standing Senate Committee on National Finance, to which were referred the Supplementary Estimates (B), 2006-2007,⁽¹⁾ has in obedience to the Order of Reference of 22 February 2007, examined the said estimates and herewith presents its report.

The Committee held one meeting to review these Supplementary Estimates. On 27 February 2007, it heard from the President of the Treasury Board, the Honorable Vic Toews. He was accompanied by two officials from the Treasury Board Secretariat of Canada: David Moloney, Senior Assistant Secretary, Expenditure Management Sector; and Laura Danagher, Executive Director, Expenditure Operations and Estimates Division, Expenditure Management Sector.

The Supplementary Estimates (B), 2006-2007 are the second and final set of Supplementary Estimates that will be issued in this fiscal year ending on 31 March 2007. Unless otherwise stated, all page references are from the Supplementary Estimates (B), 2006-2007 document.

INTRODUCTION

Each year, the federal government tables Parts I and II of its Estimates documents for the next fiscal year, which begins 1 April and ends 31 March. Part I ("The Government Expense Plan'') and Part II ("The Main Estimates'') provide information on the spending plans of the federal government. During the year, changes to the government's spending plans are listed in the "Supplementary Estimates.'' There are normally two sets of Supplementary Estimates: Supplementary Estimates (A) are usually tabled in November, while the Supplementary Estimates (B) are tabled in February or March. Supplementary Estimates are tabled in Parliament approximately one month in advance of the related appropriation bill in order to provide parliamentary committees sufficient time to review the proposed spending plans before voting on the appropriation bill.

The Supplementary Estimates serve a number of purposes. First, they seek authority for revised spending levels that Parliament will be asked to approve in an appropriation bill. Second, they provide Parliament with information on changes in the estimated expenditures to be made under the authority of statutes previously approved by Parliament. Finally, they are used to seek parliamentary approval for items such as: transfers of money between votes both within and between organizations; loan guarantees; approval of new grants; and changes to vote wording.

OVERVIEW OF THE SUPPLEMENTARY
ESTIMATES (B), 2006-2007

A. Planned Spending

The President of the Treasury Board began his testimony by highlighting a number of improvements that have been made to the Estimates documents in recent years to enhance transparency and accountability. These include providing clearer summary tables, and a depiction of gross funding requirements for each organization with an explanation of the funds available to offset new spending requirements. In addition, a table was added to each organization's page to reflect all transfers between votes, both within and across organizations.

In the Estimates documents, planned spending is broken down by budgetary and non-budgetary expenditures and is displayed for both voted and statutory expenditures.⁽²⁾ The President explained that these Supplementary Estimates (B), 2006-2007 seek Parliament's approval to spend a total of $424.5 million, representing expenditures that were not sufficiently developed or known at the time of the 2006-2007 Main Estimates or the Supplementary Estimates (A), 2006-2007. These expenditures are offset by reductions to projected statutory spending totalling $314.4 million, for a net Supplementary Estimates of $110.1 million. This is summarized in Table 1.

Table 1

Total Supplementary Estimates (B), 2006-2007
(in millions of dollars)

Source: Supplementary Estimates (B), 2006-2007, p. 8.

B. Major Changes to Spending

The President noted that through these Estimates, the government is moving forward with priorities announced in the 2006 Speech from the Throne, Budget 2006, and the November 2006 Economic and Fiscal Update. Among the expenditures tabled for approval by Parliament in these Supplementary Estimates (B), he highlighted the following:

• Agriculture and Agri-Food ($74.2 million):

• Increase in funding in support of the Cover Crop Protection Program in response to flood damage in 2005 and 2006 ($40.4 million); and

• Funding for New Opportunities for Agriculture Initiatives to foster investments that support the transition of farmers, agri-food and agri-products into new areas of opportunity ($33.8 million).

• Youth Justice ($32.6 million):

• Funding to provincial and territorial governments for the delivery of youth justice services and programs.

• Measures related to personal tax credits ($30.7 million):

• Funding to implement the Goods and Services Tax rate reduction and for measures related to personal tax credits.

STRENGTHENING ACCOUNTABILITY

Noting the interest of Senators in matters of accountability, the President reviewed the progress that has been made in implementing the Federal Accountability Act since it received Royal Assent on 12 December 2006. As he explained, the Act contains dozens of measures and makes substantive changes to over 45 federal statutes in addition to creating two new ones. As with other complex legislation, different sections of the Act will come into force at different times. For example, the designation of deputy ministers and deputy heads as accounting officers and the new mandate for the Auditor General of Canada to "follow-the-money'' came into force on Royal Assent, while other provisions, such as the new electoral financing rules, will come into force at a later date.

The President noted the following progress on implementing the Act and the accompanying Action Plan:⁽³⁾

• The introduction of new penalties and sanctions for anyone who commits fraud against the Crown;

• The expansion of the Access to Information Act to cover several Agents of Parliament, five foundations and the Canadian Wheat Board;

• The launch of consultations on the new Lobbying Act; and

• Steps to implement the government's response to the report by the Blue Ribbon Panel on Grants and Contributions.

The President committed to bringing the remaining provisions of the Act into force as expeditiously as possible.

EXPENDITURE MANAGEMENT SYSTEM

As the President explained, implementing the Federal Accountability Act is only one of many steps in improving government financial management. He outlined how, once fully implemented, a new initiative, the Expenditure Management System,⁽⁴⁾ is expected to ensure that government programs are effective, efficient, focus on results, and provide value for money. The new approach to expenditure management will support managing for results, decision- making for results, and reporting for results. Senators were very interested in this initiative which was discussed in- depth during the meeting.

EXAMINATION OF THE SUPPLEMENTARY
ESTIMATES (B), 2006-2007

During the Committee's hearing on the Supplementary Estimates (B), 2006-2007, Senators raised a number of issues, some of which are discussed below.

A. The Reliance on Supplementary Estimates

The Committee has a long-standing interest in the use of Supplementary Estimates by departments. Reflecting this interest, some Senators questioned the President about the November 2006 report by the Auditor General in which she expressed concern over the increased reliance on Supplementary Estimates by departments as government finances improve. For example, between the fiscal years 1989-1990 and 1996-1997, years in which there were deficits, Supplementary Estimates made up an average of 4.5% of the total Estimates submitted to Parliament. Between the fiscal years 1997-1998 and 2005-2006, years in which there were surpluses, the percentage more than doubled to 10.4%.⁽⁵⁾

The President explained that budget surpluses have allowed governments to introduce new spending proposals and that the increased use of the Supplementary Estimates is due to the practice of announcing these proposals in the budget. Timing constraints do not allow these decisions to be incorporated into the Main Estimates, Mr. Moloney added:

It is unfortunately the case that with budgets that take place in late winter, with the standing orders which require that the Main Estimates must be tabled by 1 March, we do not physically have the time to be able to reflect in the Main Estimates to be tabled in late February those initiatives that may be decided around that time... Hence, we have a number of policy-related initiatives that come forward only in Supplementary Estimates. If those are multi-year initiatives, the second year of that spending will be found in the Main Estimates going forward. That is indeed the case with the initiatives the current government brought forward in the Supplementary Estimates (A) last fall. The ongoing amounts in respect of those initiatives are in fact captured in the Main Estimates that were tabled today for next year.

While understanding these constraints, some Senators expressed concern over this trend and felt that the Committee should continue to examine this issue.

B. Expenditure Management System

Senators were interested in the expenditure management initiative's focus on results and how this relates to two specific areas: the environment and gender-based analysis.

1. Environment

Some Senators noted that the government has cancelled several climate change programs that a previous Treasury Board Secretariat evaluation found both effective and efficient. In light of this, some members were concerned that the Treasury Board Secretariat may not be making sufficient progress in implementing its new approach of managing for results and decision-making for results. The President responded that while new programs may seem to be effective and efficient at the outset, once a program is underway further evaluation may prove otherwise. For this reason, reporting for results is important as it provides information that can be used in the ongoing spending decision process.

When asked if the government would be reporting for results on all programs, the President indicated that he is in discussions with the Minster of Finance regarding establishing a system that would determine how often programs are reviewed, and the costs of such a system. Senators suggested that any program review schedule should be made public and, given the importance of climate change, include an ongoing evaluation of all climate change programs.

2. Gender-based Analysis

Senators were interested in understanding how the Expenditure Management System supports results for issues other than measuring how tax dollars are spent, such as gender-based analysis. Specifically, could the Expenditure Management System measure the impact of budget decisions based on race or gender

issues? The President noted that the recently implemented Management, Resources and Results Structure (MRRS) policy requires that departments define appropriate expected results and related measures of performance for all their programs.⁽⁶⁾ If a specific program has a gender-based outcome, the MRRS policy states that departments must establish a target and a time-line to reach that target, as well as indicators to inform program managers whether they are on track.

Questions arose as to how such a policy is implemented. For example, Senators questioned who would be evaluating gender-based outcomes and targets, and whose criteria would be used in the assessment. Mr. Moloney responded that under the MRRS policy, departments are responsible for reporting to Parliament on how gender-based outcomes are being achieved. As a specific example of how departments implement and integrate gender-based analysis into their management, Mr. Moloney described a policy renewal initiative that the Treasury Board Secretariat is currently carrying out. Among other criteria, it is evaluating each of its policies in order to identify intended or inadvertent impacts relating to gender issues. Mr. Moloney committed to providing the Committee with concrete examples of how gender-based analysis is being implemented at the Treasury Board Secretariat.

C. Canadian Biotechnology Strategy

Some Senators expressed interest in the Canadian Biotechnology Strategy (CBS), which is requesting $1.9 million through these Supplementary Estimates. The President of the Treasury Board explained that funds transferred from Supplementary Estimates (B) will be used to strengthen interdepartmental collaboration to deliver Canada's regulatory responsibilities for biotechnology products, to develop a federal bioeconomy and bioproducts policy agenda, to address opportunities for Canadian companies in the health sector to meet regulatory challenges such as aquatic biotechnology and plant molecular farming, to advance Canada's international regulatory interests related to biosafety, to deliver biotechnology communications projects for Canadians and decision-makers, and to implement a biotechnology statistics program that provides metrics for Canadian performance. As this is very technical language, the President encouraged Senators to direct more detailed inquiries to Industry Canada, which has been designated as the lead department for this horizontal initiative that currently involves ten federal government departments and agencies.

D. Canada Revenue Agency

Senators noted that the Canada Revenue Agency is requesting $30.7 million for the implementation of the GST reduction introduced in Budget 2006. The President of the Treasury Board explained that the funding will also be used to implement a number of other new personal tax credits, including the Canada employment credit, the textbook tax credit, the tax credit for public transit passes, and the children's fitness tax credit. In addition, it will be used to implement tax measures related to corporations (the apprenticeship job creation tax credit) and changes to excise duties in tobacco and alcohol. In those areas, workloads will increase as a result of new tax rulings, information technology changes, and additional audits, for example.

Senators noted that the government has committed to further reductions of the GST and expressed interest in following-up on the cost of implementing this next reduction, should it occur.

E. Canada Learning Bond and Canada Education Savings Grant Programs

Senators were concerned that these Supplemental Estimates reflect a decrease of $65 million in the forecast of Canada Education Savings Grant (CESG) payments⁽⁷⁾ due to lower than expected take-up rates for the enhanced program, and a decrease of $23 million in payments under the Canada Learning Bond (CLB) program.⁽⁸⁾ The latter represents an almost 50% reduction in the original forecast of $45 million for the program over the fiscal year 2006- 2007. This is of particular concern to Senators as both of these programs and the related enhancements are to assist low and modest income families in providing for their children's post-secondary education.

Mr. Moloney explained that the low subscription rates were due to a number of factors. First, the strict restrictions against conducting public opinion research when Parliament is dissolved for the purpose of a general election affected the degree to which the government had been able to publicize the enhancements to the CESG. Second, he noted that there have been some issues surrounding the involvement of private sector RESP providers. He indicated that the government is aware of these problems and that work is underway to improve service to low and modest income families and increase program awareness among those target groups. He noted two recent enhancements to the CLB program: an increased matching rate for children from low income families; and an extension of program eligibility to children in care.

F. Public Security Initiatives

These Estimates seek $16 million for additional public security and anti-terrorism initiatives. As some Senators noted, this is in addition to the $153 million requested for this purpose in the Supplementary Estimates (A), 2006-2007 and, since Budget 2001, the government has announced incremental funding totalling $12.5 billion towards public security and anti-terrorism initiatives.

With respect to the current request for funding, Mr. Moloney explained that two main initiatives are involved. The first relates to improving the flow of trade in a higher security environment. A total of $5.8 million is being sought by the Canada Border Services Agency for an information management/information technology project that will enhance Canada's container security partnership with the U.S. Second, $10.1 million is being sought by Public Security and Emergency Preparedness Canada in order to increase the government's emergency management capacity in both the national capital region and across the provinces and territories. As an example, the funding will be used to implement disaster planning and communication strategies.

CONCLUSION

During its meeting on the Supplementary Estimates (B), 2006-2007, the Committee deliberated on these and other matters, including: the removal of geographic barriers for public service jobs; the ongoing cost of implementing and administering the Canada-U.S. softwood lumber agreement; funding for the R.C.M.P. towards hiring additional staff and for Justice Canada towards hiring new federal prosecutors; the status of the $200 million that was recently committed by the government towards reconstruction in Afghanistan; and progress on appointing the new Public Appointments Commissioner. The President of the Treasury Board committed to following-up on a number of these and other issues.

The Standing Senate Committee of National Finance respectfully presents its report on the Supplementary Estimates (B), 2006-2007.

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⁽¹⁾ This document is available online at the Treasury Board Secretariat of Canada website at: http://www.tbs-sct.gc.ca/ est-pre/20062007/sups/A/pub/ME-001_e.pdf.

⁽²⁾ Budgetary spending encompasses the cost of servicing the public debt; operating and capital expenditures; transfer payments and subsidies to other levels of government, organizations or individuals; and payments to Crown corporations and separate legal entities; Non-budgetary expenditures (loans, investments and advances) are outlays that represent changes in the composition of the federal government's financial assets; Voted expenditures are those for which parliamentary authority is sought through an appropriation bill; and Statutory expenditures are those authorized by Parliament through enabling legislation; they are included in the Estimates documents for information purposes only.

⁽³⁾ Turning a New Leaf — Federal Accountability Act and Action Plan can be found online at: http://www.faa-lfi.gc.ca/ index_e.asp.

⁽⁴⁾ The Expenditure Management System is the process through which the government allocates resources and manages expenditures.

⁽⁵⁾ Office of the Auditor General, "Chapter 1 — Expenditure Management System at the Government Centre,'' 2006 Report of the Auditor General, November 2006, Exhibit 1.1, http://www.oag-bvg.gc.ca/domino/reports.nsf/html/ 20061101ce.html/$file/20061101ce.pdf.

⁽⁶⁾ The Management, Resources and Results Structure (MRRS) Policy leads departments through the development of a Management, Resources and Results Structure that is intended to provide departments, central agencies and parliamentarians with the framework needed to: support results-based management practices across the federal government; demonstrate value for money; and provide key stakeholders with the information necessary to support decision-making. Information gathered from departments under the MRRS Policy will help the Expenditure Management System achieve its goals.

⁽⁷⁾ A CESG is a grant offered by the Government of Canada to encourage saving for a child's education after high school. A CESG is paid by Human Resources and Skills Development Canada directly into a Registered Education Savings Plan (RESP) in which the child is a named beneficiary. The maximum annual grant is $500 per beneficiary, to a maximum lifetime grant of $7,200.
The enhanced program was introduced in July 2005 and targets low- and middle-income families. Under the program, families with an annual net income of less than $36,378 receive 40% of the first $500 contributed yearly to the child's RESP while families with an annual net income of $36,378 to $72,756 receive 30% of the first $500 contributed yearly to the child's RESP; above that level, they receive 20%.

⁽⁸⁾ Introduced in Budget 2004, the CLB provides up to $2,000 for children born after 2003 in families entitled to the National Child Benefit supplement. The CLB is put directly into an RESP in which the child is named as a beneficiary.

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