Proceedings of the Standing Senate Committee on
National Finance
Issue 38 - Evidence
OTTAWA, Wednesday, May 1, 2002
The Standing Senate Committee on National Finance met this day at 5:45 p.m. to examine the Main Estimates for the fiscal year ending March 31, 2003 Treasury Board Vote 5 — Government Contingencies.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Last week, honourable senators, we heard from the Auditor General pursuant to a report she had tabled in the House of Commons and we are continuing tonight with our friends from the Treasury Board Secretariat.
A week from tonight the now outgoing secretary of the Treasury Board, Mr. Frank Clayton, will be here with officials who are well known to you.
I understand that Mr. Neville will make an opening statement.
Mr. Richard J. Neville, Deputy Comptroller General, Comptrollership Branch, Treasury Board Secretariat: Mr. Chairman, honourable senators, thank you for the opportunity to meet with you today to participate in your deliberations surrounding the use of Treasury Board Vote 5.
At the same time, given its currency, I would like to respond to the recent report of the Auditor General, in particular, her audit note in chapter 8 relating to the use of the government's contingencies vote, TB Vote 5.
With me today is Mr. David Bickerton, Executive Director, Expenditure Operations & Estimates Directorate, who recently met with you to answer your questions related to the Main Estimates for 2002-03 and the related appropriation bill for interim supply.
Having appeared before your committee on a number of occasions over the years, I am familiar with some of your interests and concerns relating to the use of Treasury Board Vote 5, Government Contingencies. The interest of committees in the other place has also been noted.
In her recent report, the Auditor General outlines a chronology of events relating to past and present issues stemming from the use of TB Vote 5, as well as her observations and those of her predecessors. I thought it would be useful to describe the meaning of the elements of the wording associated with TB Vote 5. This might help focus the discussion and help explain what we believe Parliament has approved through this vote wording.
While I may paraphrase the actual wording, I will cover all the elements. The vote wording allows, subject to approval of the Treasury Board, for two basic situations. The first is the supplementing of other appropriations on a permanent basis to cover pay list shortfalls and other requirements generally at year-end. The second is to provide temporary authority and financing during the course of the fiscal year for miscellaneous, minor and unforeseen expenses not otherwise provided for.
A third element of the vote allows for awards made under the Public Service Inventions Act. This is a seldom-used mechanism whereby the government can make payments to public servants for inventions made during their employment in the public service and which were patented by the government.
The vote wording also provides the authority to reuse any sums allotted for temporary requirements by ensuring that this appropriation is repaid from other appropriations once Parliament's approval is obtained.
While this may appear to be a long explanation, it is nevertheless critical to the understanding of the use of this vote by the government.
[Translation]
The use of the authority granted through Vote 5 has always been more restrictive than the uses authorized by Parliament. The vote wording is broad to allow the government to respond to unforeseen circumstances.
There are many things that could be permanently charged to Vote 5, but the government has used it as a temporary financing mechanism to deal with urgent and unforeseen matters that require government financing. Most of the monies appropriated to this vote on an annual basis actually lapse at the end of the year. I will return to this point later in my remarks.
The Treasury Board Secretariat has always considered the interests of all parties in any area of its responsibilities with the utmost seriousness. As in the past, we will continue to deal with the issues and concerns that are being raised.
Treasury Board Vote 5 was established as a vehicle to provide flexibility to deal with required adjustments to planned government spending during the fiscal year. In the majority of cases, access to Vote 5 is intended to provided temporary financing of departmental requests to meet urgent cash requirements. As such, it is an integral part of the parliamentary supply process.
[English]
The Treasury Board and its secretariat respects the parliamentary supply process and reviews each and every case where departments request access to TB Vote 5. There were a number of instances in the past where concerns have been raised on the use of Vote 5 and the Treasury Board Secretariat has responded to each instance.
Access to Vote 5 is carefully controlled, particularly in the case of new grants or increases to existing grants. These requests are approved only in exceptional circumstances when it is demonstrated that there is a need for government action, such as in the case of the response to the crisis in the airline industry. I will provide more background on that case in a moment.
The Treasury Board Secretariat uses specific criteria to judge the validity of these requests. I believe the Treasury Board Secretariat has managed this fund with an appropriate level of scrutiny and diligence and has always obtained the approval of the Treasury Board for requests to access Treasury Board Vote 5.
While recommending actions to be taken regarding the appropriate use of TB Vote 5, the Auditor General does acknowledge that the Treasury Board Secretariat has developed criteria to guide its staff. The criteria that were identified in a report to this committee in 1989 have evolved based on changing events.
I would like to describe the criteria used by the Treasury Board Secretariat in assessing requests for access to Vote 5. These are presented in exhibit 8.5 in the report published by the Auditor General in April 2002.
First, as the authority for payments out of the contingencies fund is contained in Vote 5 wording, all such payments must be fully consistent with that wording itself. That is, if necessary, they could be legitimate charges to Vote 5.
Second, as a general rule, permanent charges will not be made to the vote for requirements other than pay list shortfalls or awards under the Public Service Inventions Act. All other advances from the contingencies vote should be considered temporary advances to be covered by items included in subsequent Supplementary Estimates and reimbursed when the associated appropriation act is passed.
Third, when cash advances are requested to meet a financial requirement, Treasury Board must be assured that the payment is within the legal mandate of the department and that there is a valid cash requirement that must be met before Supplementary Estimates are approved.
Fourth, when making a transfer to provide authority for a payment, the Treasury Board must be satisfied that there is valid and sufficient reason why the payment must be made before normal parliamentary approval is received. If the payment could reasonably be deferred until Supplementary Estimates are tabled and parliamentary authority granted by an appropriation act, then the contingency funding should not be provided to grant such authority.
In 1996, the Treasury Board Secretariat added the following guidelines, and this is the fifth item in my list, Mr. Chairman: Sufficient funds must be available within Treasury Board Vote 5. Sixth, the existing departmental appropriated authority must be insufficient to cover existing requirements and those of the new initiatives — excluding grant items — until the end of the current supply period. Seventh, there must be a sense of urgency related to the initiative, such that the expenditure must be made prior to Parliament's approval of the item in an appropriation act. Finally, there must be a valid legally incorporated recipient in existence to which the grant is to be paid.
[Translation]
At this point, I would like to provide the committee with some context surrounding the evolution of the government Contingencies Vote. This vote has been around virtually since the time of Confederation. Furthermore, it has existed, with minor modifications, in its current form, since the mid-1970s.
First and foremost, I would like to point out that there are limits to what can be done. While the vote wording is broad, it should be noted that all transactions are subject to the approval of the Treasury Board. All requests for access to Treasury Board Vote 5 are based on submissions coming from departments that have been approved by their respective ministers.
The Treasury Board Secretariat, using the criteria that the Auditor General details in her note, assesses the requests and makes recommendations to the Treasury Board when the individual cases are considered. These were the circumstances with the three cases studies by the Auditor General for this note.
The criteria used by the Treasury Board Secretariat have, as a core, the criteria that were included in a report that was submitted to the Chair of this Committee in 1989. These criteria were specifically considered and approved by the Treasury Board of the day.
Additional criteria have been added over the years as issues and events warranted, and have been provided to the analysts of the Treasury Board Secretariat to assist them in their assessment of departmental requests.
[English]
I would like to address the second — and probably more essential — issue identified by the Auditor General, namely the use of Treasury Board Vote 5 to authorize the payment of grants in advance of the approval of Parliament.
As you are aware, Parliament deals with the issue of supply only three times during the course of the fiscal year. The first supply period ends on June 23. The government will shortly be introducing a supply bill to obtain the balance of the funds for the Main Estimates for 2002-03. The second period ends on December 10 and normally provides supply for the first Supplementary Estimates. The last supply period ends on March 26 and deals with final Supplementary Estimates and interim supply for the upcoming fiscal year.
While the government has an elaborate planning process that ensures that the majority of requirements are included in the Main Estimates in any given year, it is not always practical. Supplementary Estimates are, therefore, intended to provide additional spending for new programs or revisions to existing programs, including grants and contributions that occur too late for or outside of the main process.
Based on precedents established over decades, the government has, on occasion, used the authority in the vote wording to authorize new grants or increase existing grants. Ministers may request temporary authority access to Vote 5 funding on the basis that these payments are urgently required and cannot wait until the next Supplementary Estimates.
Accordingly, the Treasury Board Secretariat uses the criteria to determine if the item is a legitimate case and needs to be paid on an urgent basis. It also assesses the amount required to meet this urgent need. The amount available in Treasury Board Vote 5 is limited, and managed by the Treasury Board Secretariat.
In the case of submissions for new grants or increases to existing grants beyond the amounts existing in the Main Estimates, the practice has been to seek authority from Parliament in the next Supplementary Estimate.
The Auditor General, in the past, has expressed concerns about the use of Vote 5 and has asked that the government provide additional information on the payments made in advance of Parliamentarians' consideration of these items. In response to this concern, the government now provides a listing in each Supplementary Estimates of the amounts advanced from Vote 5. The references in the individual departments, including grant items, specify the fund were provided from Vote 5. This practice has been followed for more than 20 years.
I will cite one example that the Auditor General studied for this audit note. In October 2001, the Minister of Transport requested assistance to provide assistance to the airline industry to recover losses related to closure of Canadian air space as a result of the tragic events of September 11. This event was unforeseen. Reflecting the government's concern for the financial viability of the airline industry, the request was made and approved toprovide immediate cash payments to the airline industry to meet the ongoing operating costs during the six-day period in September when the cash flow was interrupted.
As the Auditor General said in her note, the Treasury Board Secretariat reviewed the request using the criteria and recommended access to Treasury Board Vote 5. This request was included in Supplementary Estimates (A) that were tabled in Parliament and passed by the Senate on December 10, 2001. The fact that this item was funded through access to Vote 5 was noted both in an explanatory note at the beginning of the Supplementary Estimates (A) and in the listing of the Transport Canada items. This is just one example of the type of review that goes on in assessing requests from departments.
[Translation]
The Treasury Board Secretariat currently has an approved total of $750 million for allocation through Vote 5, Government Contingencies. This amount is temporarily allocated to departments based on specific approvals. Not all requests are approved. Any items so financed are identified separately and included in the next available Supplementary Estimates for Parliament's consideration and approval. Once the Supplementary Estimates are approved, these temporary amounts are returned to Treasury Board Vote 5.
I believe it is fair to say that the majority of the $750 million annual appropriation actually lapses at the end of the fiscal year. The only permanent allocation that is made from Vote 5 is for pay-list shortfalls and other minor items.
For the Fiscal Year 2001-2002, it is expected that approximately 90 per cent of the annual appropriation of $750 million will actually lapse. This reality is factored into the government's fiscal plan.
[English]
Finally, even the Auditor General indicates the special nature of this vote. She says in her note that the wording of Vote 5 recognizes that it is impossible to provide specific spending authority for every type of expenditure and that the government needs some flexibility to cover unforeseen expenses.
The Treasury Board Secretariat accepts the recommendation by the Auditor General and will review the criteria used to assess these types of requests and present a policy to Treasury Board ministers for approval. This will be available throughout the Treasury Board Secretariat, departments and agencies to assist everyone in their work.
This concludes my opening remarks. I will be pleased to answer any questions that you may have concerning the use of Treasury Board Vote 5, Government Contingencies.
Senator Lynch-Staunton: Could you tell me what the relation of the secretariat is to Treasury Board?
Mr. Neville: It is a separate committee of cabinet. That is very important. It is a separate committee of cabinet comprising the President of the Treasury Board and a number of other ministers, including the Deputy Prime Minister and the minister of Finance as an ex officio member.
The Treasury Board ministers are responsible for approving a number of Treasury Board submissions before they are presented in different formats to Parliament or for the overall general administration of the government, to which we now refer as a management board.
The Treasury Board Secretariat is the department that is in support of the Treasury Board ministers and is headed up by a secretary and comptroller general — both titles are assigned to the same individual. There are number of branches and sectors that report to the secretary and comptroller general who carry out the various components, which would include the human resources management function for the Government of the Canada, the chief information office functions, the program sectors that receive the various submissions from departments, and official languages as a separate sector. There are many components, including our branch. Some of these are policy centres with specific areas of expertise, and there are operational areas that deal with day-to-day transactions that must be carried out by Parliament.
Senator Lynch-Staunton: It is important to know the distinction between Treasury Board and Treasury Board Secretariat.
You mentioned in your opening statement that Vote 5 had been around since Confederation. Where do we find Vote 5? Is it in an act of Parliament?
Mr. Neville: Vote 5 is under the departmental heading of Treasury Board. It is a vote just as other departments have votes, whether it is Vote 1, Vote 5 or Vote 10. In our case Vote 5 is a separate vote for government contingencies.
Senator Lynch-Staunton: Under what authority does Vote 5 exist?
Mr. Neville: It is an appropriation act.
Senator Lynch-Staunton: Do we vote for Vote 5 every year?
Mr. Neville: Yes.
Senator Lynch-Staunton: When the Auditor General appeared before this committee — you have read her presentation — she made a statement that confused me a bit. Ms Fraser said that if the Treasury Board — in respect of a particular Supplementary Estimate — had paid the money directly from Vote 5, it would have had the authority to do so. However, because it was supplementing a departmental vote, the department has to have the spending authority and, in some cases, that would be questionable. What authority gives Treasury Board the right to advance the funds directly, but if it goes through a department, then it has to follow certain criteria?
Mr. Neville: The criteria require that the department making the request already has the legislative authority that provides for the payment to be made, but obviously does not have the funds within the vote to do so. Hence, they are asking for access to TB Vote 5.
Senator Lynch-Staunton: I understand that part, but the Auditor General intimated — when we talked about the $150 million to those affected by the stoppage of air traffic after September 11 — that if Treasury Board had paid the amounts directly, it would have been fine.
Mr. Neville: The Aeronautics Act, under which the Department of Transport operates, allows for those kinds of payments.
Senator Lynch-Staunton: I do not want to get into that argument. She said that if the Treasury Board had paid that money directly from TB Vote 5, it would have had the authority to do so. The question is: What authority is she referring to that would have allowed Treasury Board to transfer the money directly?
Mr. Neville: The vote wording for the Department of Transport does allow for those payments to be made. In that case, the issue was that they did not have the funds available. Furthermore, we were not in a supplementary estimate mode at that time, and because there was requirement for an urgent payment, it was made through access to Vote 5. The process was as follows: Access to Vote 5 went to Treasury Board ministers for approval; access to TB Vote 5 was approved and reimbursement was made through Supplementary Estimates.
Senator Lynch-Staunton: Had the department not had the authority to make that payment, could Treasury Board have made that payment?
Mr. David Bickerton, Senior Director, Expenditure Operations and Estimates Directorate, Comptrollership Branch, Treasury Board Secretariat: The senator is asking if the payment would have been allowed under Treasury Board Vote 5. The vote wording within the Treasury Board is broad and as such, it does permit it. The Treasury Board's practice in the past — with very few exceptions — has been not to make any permanent payments or charges against Vote 5.
In his opening remarks, Mr. Neville made reference to the incidents that could warrant charges. It is because of the wording within Vote 5 that the Auditor General made that observation.
Mr. Neville: Further clarification could be had through the legal interpretation, apparently held by the Auditor General, that Vote 5 wording does allow permanent transfers. However, we do not use it this way.
Senator Lynch-Staunton: The Auditor General also said that there was no written definition of the phrase ``miscellaneous, minor and unforeseen expense not otherwise provided for.'' Is that correct? Do you a written definition of that term?
Mr. Neville: I do not think we have it written in black and white, but we have been following a number of practices that I have already enunciated. One has to keep in mind, though, that there are options that provide the government with some flexibility, and we have to leave that flexibility available. We also have to consider the amount of TB Vote 5. The total Main Estimates for 2002-03 is approximately $172 billion and TB Vote 5, which is $750 million, represents a little less than one half of 1 per cent of the total Main Estimates. If you wish to look at total budgetary amounts voted by Parliament — which is approximately $50 billion — it would represent a little less than 1.5 per cent. In that context, it is fair to say that those numbers are small and not excessive, as percentages. To maintain the flexibility, we do not specify an amount that we use on a daily basis to indicate what constitutes miscellaneous/minor expenses.
Senator Lynch-Staunton: I do not like to argue with officials because I know their responsibility is to carry out the policy of their elected superiors. However, I restrain myself from commenting on your last assessment.
Is there not a contradiction between ``miscellaneous, minor and unforeseen expenses'' and, on the same page, ``urgent and unforeseen'' matters that require government financing? It seems to me that Vote 5 is more ``urgent and unforeseen'' than ``miscellaneous, minor and unforeseen,'' which is being interpreted in a liberal fashion. I like the word ``urgent'' and I like the word ``unforeseen.'' I do not like the way ``miscellaneous, minor'' is being interpreted. To look into the Aeronautics Act and to think that Parliament, at the time that it passed the act, ever thought that act would allow the minister to include the aftermath of a tragedy such as we saw, is stretching it a bit.
Mr. Neville: In some instances, ``urgent'' may be the operative word; in some cases, it may be ``unforeseen.'' In other cases, it may be ``miscellaneous minor.'' We must examine each transaction on its own merit, which we do.
Senator Lynch-Staunton: It is done on a case-by-case basis, I see.
Senator Banks: When I first bumped into this — which was some time ago in another committee — I was much exercised about it. I think that I was, perhaps, more exercised than I would have been had I read carefully. I am learning to do that.
I would like to refer to the legal authority for Treasury Board Vote 5. Could you tell me whether I am right in my interpretation? I read, ``subject to the approval of the Treasury Board, its use is to supplement other appropriations for pay list and other requirements...'' — that is one set of things for which the Treasury Board Vote 5 can be used — and, ``to provide for miscellaneous minor and unforeseen expenses.'' I agree with the interpretation of what I have just read that the words ``miscellaneous minor and unforeseen'' do not modify the words ``appropriations for pay list and other requirements.''
Do you understand that to be the meaning?
Mr. Neville: When we talk about ``pay list,'' we are putting a different orientation on the discussion.
Senator Banks: Leave it as ``other requirements.''
Mr. Neville: It allows us the flexibility at year-end to put through some transactions that otherwise would not have been dealt with by the government of the day.
Senator Banks: Do you agree with my view that the words ``miscellaneous, minor and unforeseen'' do not modify or even apply to the words ``and other requirements''?
Mr. Neville: Yes.
Senator Banks: You said that Treasury Board wants to ensure that when Vote 5 is used altogether, it is for a valid and sufficient reason — that was a blanket which would apply to all of these things — and that if it was an expense that could be reasonably deferred, then contingency funding ought not to be provided to it.
Mr. Neville: Correct.
Senator Banks: There is the matter of what was then called the Canada Foundation for Sustainable Development Technology, the not-for-profit corporation that was formed by four private individuals and to which a large sum of money was transferred. I take it that the reason that money was transferred was to avoid the difficulty that would have occurred with the intention of spending that money because of the arrival, shortly thereafter, of the end of the fiscal year, and we would have had to start all over again. Is that a fair interpretation of a valid and sufficient reason?
Mr. Neville: I am not sure I understand the question fully, Mr. Chairman.
Senator Banks: I have a budget that expires on March 31 and, if I have not spent some of it, I do not get to carry it over into the next year. That is generally true with most government budgets. The government had a budget. I think that the government wanted to ensure — I am guessing at this — that some of the money that had not expended was not going to go into a column called ``surplus'' and therefore be delivered, as a matter of law, to pay down long-term debt. To remove some of that money, which would have otherwise been a surplus, and to provide funding out of an existing budget, without having to get that money approved again in the following fiscal year, the money was in effect put on the sidetrack for a moment to get past the end of the fiscal year. I am wondering if you agree that that is the reason for that amount of some $50 million, I think, being transferred?
Mr. Neville: Thank you for that clarification. I now feel comfortable in answering. There are two parts to the answer. First, you mentioned that departments are not entitled to carry forward amounts of money from one year to a next based on their budget. As a point of clarification for the record: Departments are entitled to carry forward up to 5 per cent of their operating vote. So there is some flexibility on the part of departments to carry over some funds.
More important, is the following response to your specific question on the STTF: The answer is ``no,'' it was not for that reason that it was put forward. The money was not advanced at the end of the year; it was advanced at the beginning of the next fiscal year but in effect, it was charged back to the previous year. The transfer of funds was not for the reason you enunciated.
Senator Banks: What was then the valid and sufficient reason that the Treasury Board saw in spending that money before there was a spending authority to spend that money?
Mr. Neville: The program had lagged in terms of being delivered and the government of the day wanted to ensure payments would be made to the recipients. It did not wish to wait until the next Supplementary Estimate or supply period. Therefore, the appropriate way of handling it in those circumstances would be to have access to TB vote 5. It was a legitimate reason.
Senator Banks: Thank you.
Senator Cools: On a point of clarification because I think I am detecting a mixture of the languages, and perhaps Senator Lynch-Staunton can clarify because it is confusing me. My understanding is that the language in Treasury Board Vote 5 is ``unforeseen, miscellaneous and minor'' and does not include the word ``urgent.''
The Chairman: Let us come back to that.
Senator Cools: The word ``urgent'' that we will come back to concerns the section of the Financial Administration Act that addresses the question of Governor General special warrants. Senator Lynch-Staunton kept referring to ``urgency.''
The Chairman: That may be so, but the question is whether it is relevant. When my turn comes, I intend to ask for some clarification of the wording of the vote. If you look in the briefing book that has been provided, the Auditor General traces the evolution of the wording of vote 5. I will have questions to ask the witnesses shortly.
Senator Cools: His language was confusing me. That is all.
The Chairman: All will become clearer as we proceed.
[Translation]
Senator Bolduc: Mr. Neville, it is always a pleasure to welcome you to the committee, because I have always found you to be a little more frank than your predecessors.
I would like to pursue the matter of the definition of the vote, as it currently exists, which of course has the force of law. Historically, shall we say over the past 25 years, has there not been a tendency to expand the number of circumstances under which funds could be made available for unforeseen expenses?
Mr. Neville: To my knowledge, and based on the research and what my colleagues have told me, no, that is not the case.
[English]
Senator Bolduc: Then I would like to come back to your policy guidelines. The third one reads:
[Translation]
When cash advances are requested to meet a financial requirement, Treasury Board must be assured that the payment is within the legal mandate of the department and that there is a valid cash requirement which must be met before Supplementary Estimates are approved.
[English]
Now that you are not in a position as assistant secretary of the Treasury Board but on the comptrollership side, you may have a view that is more serene about the office of the Treasury Board. How do you see that article that I just read? Do you not think that instead of saying:
[Translation]
...must be assured that the payment is within the legal mandate...
[English]
we should say more precisely, ``in conformity with the program already statutorily established.'' In other words, we would have a legislative authority. This is what we have here:
[Translation]
...that the payment is within the legal mandate...
[English]
It is very general. That is my first question.
[Translation]
Mr. Neville: I am not a lawyer, but when I read criterion number 3, and even when I look at the English version, it says:
[English]
...within the legal mandate of the department.
[Translation]
That suggests to me that if the department does not have the legal and parliamentary authority to make that payment, it should not be accepted as a legitimate charge against the Treasury Board Vote 5.
[English]
Senator Bolduc: Yet you would not go so far as to change the policy guideline in that sense?
[Translation]
Mr. Neville: I am glad you raise that question. I believe I clearly stated in my opening remarks that we agree with the Auditor General's recommendation that we should take a closer look at our policy guidelines. We have agreed to say publicly that we are prepared to carry out that review. In that context, we would first go to the Treasury Board Department for approval, depending on the decisions and recommendations we may want to bring forward. So, yes, we do intend to review each of those guidelines, and we will subsequently request Treasury Board approval.
[English]
Senator Bolduc: That would be my first question. The second one is in the same paragraph:
[Translation]
...that there is a valid cash requirement which must be met ...
[English]
It seems to me that it would be better if you would say ``urgent'' because if you say it in French, who is not ``legitimate today''? The government is spending money on every kind of thing.
[Translation]
Mr. Neville: You raise a good point. We will look at that.
[English]
In the fourth policy guideline:
[Translation]
When making a transfer to provide authority for a payment, the Treasury Board must be satisfied that there is valid and sufficient reason why the payment must be made...
[English]
Do you not think that instead of saying ``valable et suffisant,'' which is so vague, you should say:
[Translation]
...a compelling reason, because the principle involved here is that no expenses shall be incurred without Parliament's authorization. That is the basic principle.
[English]
We have a tendency to play with the words so that finally a man is not a man. The principle is that there is no expenditure without approval by Parliament.
[Translation]
Mr. Neville: Yes, we agree on the principle. There is no question about that.
[English]
Senator Bolduc: If you would say ``impérieuse'' instead of ``valable et suffisante,'' it seems to me that it would be a big improvement — for your own office as well.
[Translation]
Mr. Neville: We will look at that as well.
Senator Bolduc: I would like to keep going, because this is extremely important in terms of parliamentary oversight.
[English]
Those are the four policy guidelines that are approved by the ministers. We must not forget that the ministers here are not in conflict of interest. However, they have a tendency, before the election to, see a legitimate expenditure here, a project. We all play that game and the civil servants are there to tell the minister to have a mid-term view of the day. That is why the follies in government usually happen at the end of June and at the end of December. We see that every year. It is the same thing for the budget, before an election.
I insist that you look at that carefully. You knew that the original criteria were not sufficient so you added the additional four guidelines: 5, 6, 7 and 8. What you have done is not bad, but these do not have the same authority as the fourth criterion because the Treasury Board did not formalize them.
[Translation]
Mr. Neville: The four other guidelines are more axiomatic than the first four.
[English]
Senator Bolduc: Even there, in the seventh one, you say....
[Translation]
``There must be a sense of urgency...''
[English]
It seems to me there is always a ``sentiment d'urgence'' five or three months before the election. Why do you not say...
[Translation]
``a demonstrated sense of urgency.''
[English]
A demonstration of it must be done, in my opinion. Part of our work here is to work with you to try to improve the guidelines and the administrative policies of the government. That is why I make this intervention.
Finally, why should the last four guidelines not also be approved by the Treasury Board? It is good that the ministers put breaks on themselves sometimes, because human nature is so feeble sometimes. It is good for any party. I do not care about parties. I am talking about the government.
[Translation]
Mr. Neville: Our intention is to carry out a detailed review of each of these guidelines. I have already spoken of that. We have to get Treasury Board approval for everyone of the guidelines. And that is our intention as we speak.
[English]
Senator Tunney: I would like to know whether you have authority to keep the spending authority in line. Does the secretariat check to see that expenditures have had authority, and if they do not, do you have authority to say ``no''? Is it the secretariat, and if not, who, has authority to say ``no''?
Mr. Neville: It is a complex answer, Senator Tunney. Perhaps I can begin by saying that ministers within their own departments have authorities that have been delegated throughout the department to ensure the expenditures are appropriate. It is a departmental responsibility as a first call.
However, the Treasury Board ministers, along with the Treasury Board Secretariat, also have responsibilities to ensure that there are systems and controls, and that some active monitoring does take place to ensure that that is carried out. That is done through a review of the departmental internal audit reports and through a number of other means. However, at the end of day, it is the Treasury Board ministers who have some responsibilities and it is the ministers themselves who have some as well.
All of that is in the context of Parliament's overall authority and we should not lose sight of that. I would like to state, though, that for every transaction that is approved through TB vote 5, there is a review process that takes place within the Treasury Board Secretariat. A number of individuals are involved in assessing the requests coming in from the department, from a program perspective as well as from a financial management comptrollership perspective.
There are a number of checks and balances that protect the interests of Parliament in ensuring the expenditures are appropriate. There are many levels in terms of the controls that are applied.
Senator Tunney: My question was whether someone has authority to prohibit the expenditure or the transfer of funds?
Mr. Neville: Mr. Chairman, yes. Every department has a senior financial officer who reports, I believe in almost all circumstances, to the deputy head. That individual has staff who have sole responsibility for signing under various sections of the Financial Administration Act to ensure that transactions are appropriate.
If a transaction in any department does not appear appropriate — as happens from time to time — it would be the responsibility of the delegated officer in the department to say ``no,'' or for the senior financial officer in that department at the end of day to say ``no'' to that particular transaction.
Senator Tunney: That is exactly the answer I wanted to clear up the matter.
Senator Stratton: When the Auditor General prepares her reports, does she in any way consult with you at all?
Mr. Neville: Does she consult with us?
Senator Stratton: I am trying to determine the relationship between her group and yours.
Mr. Neville: The relationship is warm but not cosy. However, it is getting better.
Senator Stratton: I would have expected the relationship to cool off after the report.
Mr. Neville: In all fairness, we have a good professional relationship. I think she would agree.
To answer your question about reports, I will go through the process. At the outset, three or four times a year we have an important meeting of the most senior officials from the Office of the Auditor General and TBS. We discuss the updates as to what is occurring and coming down the pike for the next months in a strategic sense.
At these meetings, we hear for the first time the plans for the Auditor General's report. For example, we are now in May 2002; this Friday, we will be hearing the plans for the report for June 2003. We already know the plans for December 2002. We will hear what their intentions are in terms of the various chapters.
Based on our discussions, I probably have 90 per cent of what they will likely tell us already formulated. However, they will confirm that at this meeting.
The Office of the Auditor General will then write us officially to inform us which chapters will be reported upon. Similar letters will go to concerned departments to advise them that the audit is beginning. There is a legal process involved. The Office of the Auditor General informs the department as well as Treasury Board Secretariat of their plan.
The audit then takes place in the department concerned or in the Treasury Board Secretariat. The first draft is prepared and vetted by a number of individuals at the Office of the Auditor General. In some cases, they have their own external advisory panel. A copy is then sent to the department for vetting inaccuracies and making comments.
A more formal report is then sent to the assistant deputy minister or the associate deputy minister and they ask for an official position of the department or official position of the Treasury Board Secretariat, at which point a final report is sent to the deputy minister for validation. That is signed off by the deputy and then returned to the Office of the Auditor General for printing thereafter.
A formal process of consultation and discussion does take place prior to the report actually being issued.
Senator Stratton: Subsequent to the publishing of the report, is there a follow-through? What happens?
Mr. Neville: Subsequent to publication of a report, the Office of the Auditor General, on a regular basis, carries out follow-up audits. We saw a number of those in the most recent report, where they will look at the action plans that may have been developed by departments, they will look at what was stated in previous audit reports. Then we will do a follow up and state the progress.
In the most recent report, I am pleased to state that the Auditor General's comments are that almost all of the promised audit work was carried out. That was a very constructive comment.
The Auditor General has also informed us that she will do something that no other Auditor General has done in many years: In the near future, she will devote an entire report to follow-ups of8previous audits. This shows the intent of the present Auditor General to follow through on previous audits to ensure that departments are doing what they said they would be doing.
Senator Stratton: The public perception of the definition of ``miscellaneous, minor and unforeseen'' is that a truck could be driven through it. You could apply that definition to anything if you wanted to — including the kitchen sink.
To a layperson, on the scale of things that you deal with, it is very difficult to put down ``miscellaneous, minor or unforeseen'' when the figure involved is a few hundred million dollars. There is a problem out there with public perception and the Auditor General appears to have a similar problem. Are you looking to address that issue?
Mr. Neville: That is a good question but it depends on the transaction that is being put before us for consideration. I understand that some individuals would consider some amounts that are included under that definition as hardly ``miscellaneous,'' ``minor'' or even ``unforeseen.'' However, one must look at the facts of the situation of the Treasury Board submission being presented. Based on the proposal, they must take a decision.
We will be considering options that provide clarity but will also retain the government's flexibility. If ever we were in a situation where the government required a significant amount of money on quick notice, I want to ensure that the government has that flexibility.
Senator Stratton: They must have that, I agree.
Senator Cools: I would thank the witnesses for coming before us. To the extent that they have been doing a thorough job of explaining the process and its history, I thought perhaps they could clarify their own roles for the sake of the record and to build on some of the questions asked. By their own roles, I would call the attention of honourable senators to the fact that Mr. Neville is the Deputy Comptroller General. In this business that they are in, comptrolling has a particular meaning.
Would the witnesses take a few minutes and explain to us the history and the role of the Comptroller General in the Treasury Board Secretariat and funding process?
Mr. Neville: Mr. Chairman, I do not know how much time we have. That is a loaded question. I will explain my responsibilities and I will ask my colleague, Mr. Bickerton, to explain his.
I see the role of the Deputy Comptroller General to support the Comptroller General. We work together to ensure that financial management responsibilities of the Government of Canada are carried out across government. That includes all departments and agencies that total approximately 103 at this point. I look at the expenditures as being the amount that is in the Estimates — approximately $173 billion per annum.
We provide frameworks and look at the Financial Administration Act as being the legal parliamentary document that controls all expenditures of the government, and puts in place the various policies, guidelines and procedures that will allow departments to work within those policies in such a way that they can do the business of the government.
That implies, to a large extent, working with policy centres. We have nine directorates, the majority of which have specific policy centres that are specialized in their own areas. For example, the centre can be in the area of financial management, contracting, internal audit, evaluation or real property, material management, and so forth. We try to ensure that each policy centres develops appropriate policies for its area, that this is done in consultation with departments and are approved by Treasury Board ministers.
We also have a number of responsibilities that are what we refer to as ``operational responsibilities.'' That is, they are not policy-centred but, rather, operationally based. For example, we are responsible for the supply bill process. On that, I will ask Mr. Bickerton to share his responsibilities.
Mr. Bickerton: I support the Deputy Comptroller General. Mr. Neville indicated that he is responsible for the supply process and all of the documents related to that. That falls into my area of responsibilities. There are about two or three other principal things for which I am responsible. One is keeping track of the approvals that are being made by the government for the expenditures under the fiscal framework leading to the preparation of the estimates documents. I am also responsible for the plans and priorities documents and the guidelines that are prepared for these documents, which are tabled in Parliament.
I am also responsible for preparing the advice and guidance to the managers and senior management of the Treasury Board Secretariat on expenditures management issues and developing some of the policies related to that, including making inputs to the recommendations for Vote 5.
Senator Cools: I think I would add to that, because my understanding of the history of the Office of the Comptroller General is that it accompanied or was close to the revised Auditor General's Act in 1977. Could you give us some insight into that development?
Mr. Neville: The Office of the Comptroller General and the Treasury Board Secretariat as we know it today was part of the Department of Finance in the 1960s. It was split from the Department of Finance and called the Treasury Board Secretariat. In the 1970s, based on an Auditor General's report that was negative in terms of the Auditor General's view at that time of the financial management within the Government of Canada, a decision was taken by the government to take a component of the Treasury Board Secretariat and create what was called the Office of the Comptroller General. It had equal status to the Treasury Board Secretariat and both deputy heads reported to the President of the Treasury Board. That continued for a couple of decades.
In the 1980s, it was agreed that they would be reintegrated into the Treasury Board Secretariat and that the secretariat of the Treasury Board would also assume the responsibilities of the Office of the Comptroller General and that the title would then be Secretariat of the Treasury Board and Comptroller General.
Since that time, we have been working in tandem with colleagues in the secretariat — that is, program sectors and other areas such as the Chief Information Officers Branch, as well as the Chief Information Human Resource Officers Branch. Does that help?
Senator Cools: Very much. I was trying to bring out that historical aspect and the preoccupation the government had with the external and the internal audit elements. Perhaps we can have our researcher dig up that particular Auditor General's report, because I believe it contains his famous statement that Parliament has lost control of the public purse. I think the Auditor General in question was Mr. MacDonnell. We should bring that forward and take a look at that.
The Chairman: We will do that. Some of us are old enough to remember it.
Before we move to our second round of questions, there are a couple of things I want to clear up with the witnesses.
Mr. Neville and Mr. Bickerton, in 1989, Treasury Board provided this committee with a table showing an historical review of the contingency fund. I think you have it in front of you. It is in all of your briefing books and we have furnished the witnesses with copies. It provided historical review from fiscal year 1974-75 up to and including fiscal year 1987-88. It showed the level of the vote in each of those fiscal years, then Vote 5, as a percentage of the Main Estimates. It then shows the allocations pay list, non-pay list and total.
Would it be possible to have that historical review updated for this committee to take us from fiscal 1988-89 to the present time?
Mr. Neville: Is there a specific timeline for this? That factors into our response, I think.
The Chairman: Is it a major problem to compile this? What is the problem about compiling that information?
Mr. Neville: Time and effort, Mr. Chairman.
The Chairman: I wonder if there is a way of making it simpler. The numbers that interest me — and I can only speak for myself — are the level of vote, which is easily obtained and then what is called the ``non-pay list allocation.'' There does not seem to be controversy about the pay list allocations. The controversy seems to centre on what we call the non-pay list.
To put all my cards on the table, I was having difficulty obtaining this through usual channels. Our friends from the library tried to put something together for me and I discovered a change in the wording. Instead of ``pay list'' and ``non-pay list,'' I find the wording ``permanent allocations'' in the one case and ``items included in estimates'' in the other case.
What is the meaning of that? Is there significance to that change in the wording? It is somewhat confusing.
Mr. Bickerton: What is the second reference to which you are referring?
The Chairman: When I could not get this information directly from you, our people at the library put a table together for me. It has the Treasury Board Vote 5 level — $750 million for the fiscal year just ended. In the columns that in your table read, respectively, ``pay list'' and ``non-pay list,'' the heading is ``permanent allocations'' and ``items included in estimates.'' In other words, instead of ``pay list,'' it says ``permanent allocations'' and instead of ``non-pay list,'' it says, ``items included in estimates.'' You do not have that. I have been trying to get the information so that it could be distributed to honourable senators.
Is there a real problem of providing this basic information to update this table? I would have thought it was basic information.
Mr. Bickerton: We did have this discussion with the research officials to try and point them in the right direction. We do not have a database readily available where you could push a button and produce the information. It really does entail going back through each Supplementary Estimate over the course of the last 10 or 12 years. As Mr. Neville said, it is a question of time and effort.
The term ``permanent allocation,'' I would probably say with 95 per cent certainty, refers directly to the pay list.
The Chairman: What about items included in the other? Is that non-pay list?
Mr. Bickerton: That would be non-pay list.
The Chairman: We will give you the table that our friends from the library worked up. Your people can look at it and let us know whether they think we are in the ballpark here. They can compare the methodology and so on. It would be useful to have this information.
What I am interested in — and I think this is relevant — when you look at the Vote 5 level in your table from 1974- 75 up to 1987-88 and then look at the allocations, in all but one fiscal year the allocations are considerably in excess of the amount of vote. We understand that is because it is a revolving fund, as it were. However, it does speak, to some extent, to the frequency or the intensity of the use of the contingencies vote.
Mr. Bickerton: We can look at that. When you look at the non-pay list items, there are a number of instances — probably the vast majority — where we are providing temporary financing to operational components of departments. It does not relate only to grants that have been current in recent months.
The Chairman: I will take that point. That is fine. I am glad to have that on the record.
To come to Senator Cools' point about what we are doing here in terms of legal authorization, you will need to explain this again. I look at the Main Estimates for the fiscal year that has just begun, and under Treasury Board, Ministry Summary, Vote 5, Government Contingencies, we see $750 million. Parliament votes that. Where is ``miscellaneous, minor and unforeseen''?
Senator Bolduc: It is in the bill, at the beginning.
Mr. Neville: It is at the beginning of the appropriations section.
The Chairman: In the introduction to part two, under subsection (i), Government Contingencies Vote, it says:
This Vote supplements other appropriations to provide the Government with the flexibility to meet unforeseen expenditures until Parliamentary approval can be obtained and to meet additional paylist costs such as severance pay and maternity benefits which are not provided for in departmental estimates.
That is just bumph; right? That has no legal status?
Mr. Neville: I would not use the word ``bumph.'' I would prefer the word ``information.'' The legal wording is in the appropriation bill.
The Chairman: That is where we have miscellaneous, minor and unforeseen expenses. I raise that because the Auditor General did and that confused me. If you look at Tab 12 of the briefing book and then go over to page 27 of her report, down at the bottom, under the heading ``A history of the use of Treasury Board Vote 5 for grant payments'' she says, ``Wording of Treasury Board Vote 5 has evolved.'' Then she begins for us with 1964-65, where I see miscellaneous, minor and unforeseen, then she takes us to 1966-67, and then finally she takes us to 2001-02 Main Estimates.
Frankly, the description is irrelevant, is it not? What really counts for Parliament's purposes is the legal wording of the vote. You have told us that you are working on — you did not say tightening up — defining more precisely, clarifying, miscellaneous, minor and unforeseen. With Senator Bolduc's help, perhaps the committee can assist you in that process.
Mr. Neville: Would it be a conflict of interest if we asked Senator Bolduc to be a consultant on this?
The Chairman: He works for free.
Now, what about the issue that Senator Lynch-Staunton raised earlier and that the Auditor General mentioned? I was startled to hear her say it twice, talking about the foundation. Theoretically, she said, if the funds for the foundation had been paid directly by Treasury Board from this vote to the recipient corporation, we would not have an authority question because, as Senator Banks has pointed out, that wording is indeed extremely broad. It just comes to an analysis of whether it is minor, miscellaneous or unforeseen. I understand you said you would have the legal authority to write a cheque yourselves, but it is not your practise to do so.
Mr. Neville: Correct.
The Chairman: This is a door that we may want to try bar while we go about our work. We do not want to leave temptation unnecessarily in your way.
Mr. Neville: It is interesting that the Auditor General has made that statement and is of the view that we have that authority.
The Chairman: Why is that interesting?
Mr. Neville: Normally, the Office of the Auditor General or the Auditor General herself does not usually say we have that kind of authority.
The Chairman: That is why I am saying we may want to bar the door before something goes through it.
Senator Cools: May I ask to what you are referring?
The Chairman: I am looking at her testimony to the committee last week.
The other point is also a legal point that I wanted to ask you about. In your brief to the committee back in 1989, you make the point, and I quoted from it the other day, that,
In theory, the Treasury Board has complete authority to use the Contingencies Vote within the restrictions of the Vote wording itself, without returning for further Parliamentary authority. Parliament would of course be advised of the use made of the Contingencies Vote in Public Accounts, but all such charges could be made as permanent charges to the Vote. Although a later section of the vote provides authority to reuse sums which are repaid from other appropriations, there is no requirement that such sums be repaid or that the items funded be included in Supplementary Estimates. An opinion from the Treasury Board Acting General Counsel on July 18, 1978, stated `... that it would still be perfectly competent in law to pay out money in terms of the preceding words of the vote up to the amount voted. At that stage, as in the case of any other Vote, the appropriation would be exhausted and no more payments permissible, but there would be no need in law to replace the money from Supplementary Estimates.'
That is what you said in 1989. I want to ask you whether that legal view is still operative at the board.
Mr. Neville: Yes, it is, Mr. Chairman.
The Chairman: We may also want to look at that area.
Senator Bolduc: I have some questions about that. Is that why the Treasury Board guidelines say:
[Translation]
``There must be a valid, legally incorporated recipient in existence to which the grant is to be paid.''
[English]
If it is true that you can do that, then you should add:
[Translation]
``[...] in accordance with the rules respecting grants.''
[English]
Otherwise it is:
[Translation]
...an open door.
[English]
Mr. Neville: Mr. Chairman, point taken.
The Chairman: The other point that the Auditor General made when she was here — and honourable senators may have alluded to this — related to grants for which there is no vote in that department's estimates. She said that she did not contest that the departments of Natural Resources and Environment are the right departments to handle funds for sustainable development. Nevertheless, there is no vote there that authorized them to pay out the money that they paid out.
Should we wait for the secretary to address that? We will be getting into specific examples.
Mr. Neville: Your choice. Would you like me to answer?
The Chairman: Please.
Mr. Neville: I am of the view that the vote wording is appropriate. We have had this discussion on numerous occasions and we are confident that the authority was there beforehand.
Senator Lynch-Staunton: I have three quick questions and one of them follows on what Senator Murray just brought up, and that is that the Auditor General had made a point differentiating between spending authority and legislative authority. You have read her presentation and you know exactly what I mean. She is quite firm in saying that in the case of the sustainable development fund, there was a legislative authority but there was no spending authority; and if there is spending authority, where is it?
Mr. Neville: In Supplementary Estimates (B), we corrected that, and Parliament and the Senate approved it; therefore, the appropriate authorities are now in place.
Senator Lynch-Staunton: So you disagree when she says: In our view, the $25 million in grants that the two departments pay for sustainable development technology had not received spending authority from Parliament when the payments were made?
Mr. Neville: We disagree with the Office of the Auditor General.
Senator Lynch-Staunton: This is quite a serious statement that she has made. I am not taking sides here. I want clarification. If she is wrong, then she is wrong; but then you have to prove her wrong.
Mr. Neville: We made that statement previously.
Senator Lynch-Staunton: Where is the spending authority?
Senator Cools: Mr. Chairman, Senator Lynch-Staunton is reading from something. Can we know what it is?
Senator Lynch-Staunton: I am reading from the transcript of the meeting with the Auditor General, from her formal presentation.
Senator Cools: Perhaps some of us are not as clear. What is the difference between spending authority and legislative authority?
Senator Lynch-Staunton: The Auditor General said in her view Environment Canada and Natural Resources had the legislative authority to enter into arrangements but did not have the spending authority to do so. Only Parliament can give the spending authority.
Senator Cools: It seems to me that Parliament gives the legislative authority as well.
Senator Lynch-Staunton: Are you asking a supplementary or are you acting as a witness? I am asking questions of Mr. Neville and Mr. Bickerton.
Senator Cools: I was trying to get a clarification from the chairman.
Senator Lynch-Staunton: Can you wait until I am through? Then you can ask for clarification.
Senator Cools: I will do it on a point of order then.
Senator Lynch-Staunton: I am not raising a point of order.
Senator Cools: I did. I would like to know, chairman, for the sake of the record and for the sake of the debate, what is the difference between legislative authority and spending authority?
The Chairman: I cannot help you on that for the moment, senator, but I will do some research. Meanwhile, Senator Lynch-Staunton can complete his questions with the witnesses.
Senator Lynch-Staunton: The word ``urgent,'' which I use and which I would hope to see if you are going to reword the authority which now is defined as anything which is ``miscellaneous, minor and unforeseen'' comes from your text, Mr. Neville. That was the intent all along: urgent and unforeseen. ``Minor'' I think is passé right now; who can define ``minor''?
My last question is, perhaps, hypothetical. What would happen — and has it happened — if Supplementary Estimates are turned down by Parliament? For example, a supply bill is turned down. What happens then?
Mr. Neville: We have had that discussion. It is a hypothetical question.
Senator Lynch-Staunton: It has never happened?
Mr. Neville: It has never happened. We just keep praying that it will not happen. There is no precedent for that.
Senator Lynch-Staunton: There is no precedent at any time?
The Chairman: The defeat of a supply bill is a confidence matter.
Mr. Neville: It is a non-confidence vote and Parliament falls. It is not the way you have expressed it, that the supply bill is not voted per se and that life goes on. At that moment in time, something else kicks in.
Senator Lynch-Staunton: The payments have all been made.
Mr. Neville: We would probably have to go back and collect those payments because they have not been authorized by Parliament in that sense.
Senator Lynch-Staunton: I have one question on foundations, but you might rule me out of order.
The Chairman: I will. The witness will be back.
Senator Lynch-Staunton: They are excellent witnesses, Mr. Chairman, and I want to thank them for returning. Thank you very much for the frank exchange.
Senator Banks: I want to echo the Leader of the Opposition. I wish, Mr. Neville and Mr. Bickerton, that all witnesses who appear before us were possessed of your encyclopaedic knowledge and so expert and forthcoming in their responses to our questions. It is a great pleasure.
I will return to the same subject that was just discussed.
Am I right in assuming that the legislative authority to make the payments to the private company existed in the fact that (a) the government had entered into an agreement with that private company and, (b) that the contingency Vote 5 existed and that the government has the right to spend that money? Is that where the legislative authority that has been referred to derives?
Mr. Bickerton: My response will give me an opportunity to respond to one of Senator Lynch-Staunton's earlier questions that went unanswered.
The legislative authority for the payments that we have been discussing with respect to sustainable development derives from the legislation within the departments of Energy, Natural Resources, and Environment. I believe one was the Energy Efficiency and Alternative Energy Act, but I would have to look for the exact references. I think it was discussed earlier.
Vote 5 was used as the authority to provide the cash and to provide the legislative authority pending the passage of Supplementary Estimates. It comes back to Senator Lynch-Staunton's question.
Mr. Chairman, you were reading from the report of 1989, page 3. Two paragraphs further down go to the heart of the question. If you will allow me to quote:
There are two basic situations in which a department will seek funding from the Contingencies Vote at the same time as it receives approval to include an item in Supplementary Estimates. The first is the situation in which a department has a cash requirement which must be met before Supplementary Estimates are approved and for which there is an insufficient balance remaining in the applicable departmental appropriation.
The other is the situation in which is the department does not have sufficient authority to make a specific payment — but can be granted that authority through an Appropriation Act — and that the payment will be required before Supply is approved. In both these cases, Treasury Board can authorize access to the Contingencies Vote pending passage of the Appropriation Act.
That is the principle under which we have been operating since that time and it was based on information that was done in responding to the committee in 1989.
Senator Banks: That means that Treasury Board is presuming, at least, that Parliament will pass the bill. Is that the case?
My corollary question was in the specific case here. What began as Bill C-46 before the previous Parliament was dissolved — I see Mr. Neville is quite correct, the first payment was made eight days after the beginning of the new fiscal year. The new bill had not yet been passed, but the money was paid to the private corporation. What would have happened if Bill C-4 had not passed and there was no sustainable development? I suppose we would have had to collect the money.
Mr. Neville: I would like to answer two questions at the same time. Senator Lynch-Staunton raised the question of what would happen if Parliament did not approve the Supplementary Estimates. We talked of a non-confidence vote, which is an option. As well, according to the office of the Auditor General, legal counsel, we have the authority under Treasury Board Vote 5 to allow payments to be permanent. Not that we have done this, and it is not our practice, but we could, if required for a specific reason, deem that payment to be appropriate under Treasury Board Vote 5, and on an ongoing basis.
Senator Banks: Notwithstanding that Parliament might subsequently defeat the bill for which the expenditure was allocated?
Mr. Neville: You are asking me the question. It is a fair question. The authority that we have under Treasury Board Vote 5 today would allow you to do that. You understand that.
The Chairman: I think you are right, if the matter is what I think it is.
Mr. Neville: However, that is not our practice.
The Chairman: I know that, but the question the committee will want to consider seriously is whether it is appropriate that you have that authority.
Mr. Neville: I wanted to bring that up because I would like to ensure that the record does pick up on this point and clarifies the question that was previously answered and the response provided.
The Chairman: To come back to Mr. Bickerton's point — the situation in which the department will seek funding from the contingency vote, et cetera. The other is a situation in which the department does not have sufficient authority to make a specific payment, but can be granted that authority through an appropriation act and that payment will be required before supply is approved. That is your interpretation of the legal authority that you get with Treasury Board Vote 5, correct?
Mr. Bickerton: That is correct.
The Chairman: Do you not make the same distinction that the Auditor General makes and, as she points out, the Speaker of the House of Commons makes, between legislative authority and spending authority?
Mr. Bickerton: At this point in time you can say we agree to disagree with the Auditor General.
The Chairman: You do not make the same distinction she makes?
Mr. Bickerton: In this particular instance, we do not make that distinction. It does allow us a temporary authority to make those payments provided certain criteria are met, and you see the criteria identified further down that page: ``...pending the passage of an Appropriation Act at the earliest opportunity.''
The Chairman: If I follow you, and if I follow her interpretation of what is being done here, the existence of a department with a certain legislated general mandate — be it foreign affairs or environment or natural resources — is sufficient in a case like this. There does not have to be a particular vote that authorizes payment for sustainable development. Provided it meets the other criteria that the Treasury Board has set out, it is legitimate.
Mr. Bickerton: Provided the department has a legal mandate to make those types of payments or operate those types of programs. That is the authority.
The Chairman: That is a major disagreement that you have with the Auditor General, and perhaps with the speaker of the House of Commons and Parliament in general.
Senator Lynch-Staunton: In the case of the sustainable development fund, what was the urgency? The other day, we got a press release from both ministers from both departments that the director had finally been named. This is months after the monies had been transferred. What was the urgency?
Mr. Neville: Our understanding is that the departments and ministers, having signed the individual Treasury Board submissions, made the case that it was starting the new fiscal year and they wanted to get the program going. There had been some delays, which we have discussed on a number of occasions around this table, and that it was imperative for the program to be put in place, hence the required funding was to be put forward.
Senator Lynch-Staunton: The money was put in place but the program has yet to be implemented. Why not transfer the money over a three or four-year period? The innovative fund had $1 billion transferred in the last Supplementary Estimates.
Mr. Neville: Hindsight is 20-20. At that point in time the individual ministers were making the case that the funds were required immediately.
Senator Lynch-Staunton: These questions should be addressed elsewhere then. Thank you Mr. Neville.
Senator Banks: Just so I can understand the terms — and I understand we are talking hypothetically — here is a situation where we sent $50 million in total from two different departments to a privately held not-for-profit corporation that had an agreement with the government as to how that money would be spent. However, it does not say that when it ceases to exist or function the money will be returned to the government. The act does not say that, so I am presuming that the agreement did not say that. Maybe that is a leap.
Continuing the hypothetical argument, if Bill C-4 had failed, and the foundation that supplanted the not-for-profit corporation, which always had to become a foundation, did not exist, how would we recover the $50 million?
Mr. Neville: That is a hypothetical question and we have discussed it. However, being in the business that we are, it is intellectually stimulating to have those kinds of discussions. We would have had to collect the money. That was our understanding at that point in time.
Senator Banks: Did we have the recourse in the agreement with that corporation to do so?
Mr. Neville: I think we would have to look at the exact wording of that agreement to see if we had the recourse.
Senator Lynch-Staunton: With many of these foundations, in the case of winding up, the monies, instead of being returned to the government, are allocated on a pro rata basis to those who have received grants.
Mr. Neville: We have a number of foundations and there are as many variations on the agreements as we have foundations. That is how we have been transacting business over the last several years. As of the last several months, we have been much more diligent in how we deal with agreements for each of the new foundations. I believe that there has been a significant improvement in the controls and accountability in those individual agreements.
The Chairman: Mr. Neville, in your statement describing this process you said:
All requests for access to Treasury Board Vote 5 are based on submissions coming from departments that have been approved by their respective Ministers. The Treasury Board Secretariat, using the criteria that the Auditor General details in her note, assesses the requests and makes recommendations to the Treasury Board when the individual cases are considered. These were the circumstances with the three cases studied by the Auditor General for this note.
Why are you telling us this? Should I ask you whether, in all three cases, the secretariat recommended that the vote be used for the purposes submitted by the minister?
Mr. Neville: In all fairness, that proves that we had carried out our own analysis prior to the Auditor General's audit, and she confirmed that the approach we took was appropriate under the circumstances. As a result, there were no negative audit observations vis-à-vis those three transactions.
Mr. Bickerton: For clarification, in the Auditor General's notes she indicates that in all three cases all of the criteria were followed in reviewing the cases.
The Chairman: However, she still thinks the whole process needs to be tightened up considerably.
Mr. Neville: But in none of those three instances did she find any deviation from our principles and guidelines.
The Chairman: She does, however, raise some questions about the clarity of them, of the vote and of the use to which the vote is put in those cases.
Mr. Neville: Agreed.
The Chairman: I was searching for the relevance of the points you make in that paragraph.
Senator Banks: I do not want to ascribe any mistake to the Auditor General, but you said earlier that the only thing that remains is the question of whether the payments were miscellaneous, minor and unforeseen. It is my view that if the Auditor General believes — although I am not suggesting she does — that those words apply to the words ``and other requirements,'' that is a mistaken view and those words do not apply to those other requirements the way this is worded now. I think that ``and other requirements,'' under which many of these things fall, are not controlled or modified or referred to by ``miscellaneous, minor and unforeseen.''
The Chairman: The question is whether they should be.
Mr. Neville and Mr. Bickerton, thank you very much. As always, this has been a most interesting evening.
The committee adjourned.