Proceedings of the Standing Senate Committee on
National Finance
Issue 3 - Evidence - Meeting of November 23, 2004
OTTAWA, Tuesday, November 23, 2004
The Standing Senate Committee on National Finance met this day at 9:34 a.m. to examine the expenditures set out in the Supplementary Estimates (A) for the fiscal year ending March 31, 2005.
[English]
Senator Joseph A. Day (Deputy Chairman) in the Chair.
The Deputy Chairman: Honourable senators, we will get under way. I thank my honourable colleagues who have arrived. We have others that we anticipate arriving, but in the interests of time, we will begin.
We have with us today to deal with the Supplementary Estimates (A) for the fiscal year ending March 31, 2005, from Treasury Board Secretariat, Mr. Joyce and Ms. Danagher.
Without any further ado, Mr. Joyce and Ms. Danagher, thank you very much for being here. We look forward to your brief presentation, after which we will go into questions.
Mr. Mike Joyce, Assistant Secretary, Expenditure and Management Strategies Sector, Treasury Board of Canada: Honourable senators, I appear before you today to discuss the government's Supplementary Estimates (A) for the fiscal year 2004-05 introduced in Parliament on November 4. I am pleased that Ms. Danagher, my executive director, is joining me today to help me respond to your questions.
[Translation]
Let me begin by stating that from a fiscal planning perspective, these Supplementary Estimates seek Parliament's approval to spend $2.9 billion on expenditures for 2004-05 that were not sufficiently developed or known when the Main Estimates were prepared. This amount is offset by the $0.2-billion decrease in projected statutory spending from amounts forecasted in the 2004-05 Main Estimates. These expenditures were provided for within the planned spending set out by the Minister of Finance in his March 2004 Budget.
[English]
Mr. Deputy Chairman, with your permission, I will not read out the next part of my prepared statement, which is just a list of the major items. It is, for the record, also in the backgrounder. To respond to your comment that this presentation be brief, I will then move on to the more substantive part of my presentation, with your permission. I think that will be a more effective use of your time.
The Deputy Chairman: You have my permission. I believe we are just in receipt of your presentation, so if there is anything that needs to be highlighted, feel free to do so; but by all means, you make the presentation.
Mr. Joyce: I think it is self-explanatory; senators can read it. There is no single line that I would particularly want to pick out. I could certainly read it, but I thought it might be a more effective use of time if the committee members read it.
The Deputy Chairman: Thank you for your consideration.
Mr. Joyce: These supplementary estimates also reflect the balance of the $1-billion reallocation amounts announced in budget 2003. This amounts to some $438 million. When added to the $319 million already removed from departmental budgets in the 2004-05 Main Estimates, and the $246 million in cancelled allocations to departments from funding that was earmarked for departmental spending initiatives, the full $1 billion has been achieved.
[Translation]
As the honourable Senators are aware, the reallocation of the $1 billion was necessary to fund, in part, the new funding priorities announced in Budget 2003 — some of these priorities were already reflected in the 2004-2005 Main Estimates. In Budget 2004, additional measures were announced aimed at instituting a new management culture in the government.
To this end, the Expenditure Review Committee was established with the mandate to conduct a fundamental review of all programs and expenditures. These reviews are expected to generate further savings of some $12 billion over a five-year period.
[English]
Finally, I would like to draw your attention to some of the format changes introduced in the supplementary estimates. New summary tables have been added and others have been changed to provide more detailed information. For example, the summary of changes to voted appropriations contains information on new spending, the government-wide reallocation initiative, the net amount of spending authority being requested, and other information such as how offsets are being used.
The ministry summary section has also been improved. Information on transfers between votes and between organizations due to restructuring, as well as details of information on new appropriations, is now presented in two columns for ease of reference. In addition, departmental plates were revised so that gross requirements and the amounts of authorities available for each individual organization are now displayed on each organization's plate.
This latter change is probably the most fundamental that is being introduced in these supplementary estimates. It has been a long-standing practice to maximize the use of existing spending authority when requesting supplementary spending authority from Parliament. Consistent with this practice, existing spending authorities that are no longer needed are used to offset departmental requests for new spending authorities. No spending authority is being sought for items that are offset in this way, and so in the past, they have not been displayed in supplementary estimates. Concerns have been frequently raised regarding this lack of transparency. We are hoping that this change in presentation is making progress toward addressing that criticism.
While these changes are an important step, they are just one piece of the secretariat's commitment to improving reporting to Parliament. The secretariat is currently proposing to establish a small but dedicated team to develop within three months a comprehensive plan to set about improving reporting over the longer term. Improving the estimates would form a major part of this project. We hope that we will be able to consult with this committee to seek your input into the development of this longer-term plan.
We would also appreciate the opportunity to consult with you on how the Treasury Board Secretariat can best support the work of this committee in examining the government's estimates. Ironically, as we provide or make available increasing amounts of information in estimates documents, our capacity to respond to certain of your questions in committee hearings decreases.
If I could just digress, with your permission, Mr. Deputy Chairman, for a minute from my text, I was struck by one member's comment to me in a previous appearance before this committee when that senator said, ``You know, Mr. Joyce, it might be just as easy if you handed over to me all of those briefing books that you have in front of you.''
The Deputy Chairman: I remember that comment.
Senator Mercer: Where are they?
Mr. Joyce: I was struck by that because there is clearly some logical merit in that proposal in terms of the nature of the support that we can provide this committee, but more particularly, how you would like to deal with us both inside and outside of committee. There is an opportunity for dialogue. To be candid with you, it is difficult to have a dialogue when I am being asked questions and flipping through my briefing book for the answers, after having plumbed the depths of my knowledge on that particular subject. It is not a structure for a dialogue on that particular issue but is probably a dialogue that is better had with departments. On the other hand, there are things on which we can dialogue with you. I think it is also useful in these committee hearings when we actually provide a conduit for you to departments for additional information.
I use those examples of how we would like to get a sense from you of how we can best support you, both in a committee and as a committee, as we move forward and change the estimates. I would like to signal that if you are willing, then we would like to include that in the consultations as we move forward on improving the reporting of the estimates.
[Translation]
Accordingly, working with you to find ways in which we can continue our efforts to provide you with effective support is also one of our priorities.
[English]
Mr. Deputy Chairman, honourable senators, this concludes my preliminary remarks. I would be happy to respond to your questions on the supplementary estimates.
The Deputy Chairman: Thank you for your comments, Mr. Joyce, and for clearly listening to our pleas for more information in respect of the estimates. It is always heartening when you appear and relate anecdotes, information, questions and suggestions that you have received from the committee. We see then that those comments are reflected in the work that you put before us. We thank you for that attention. We will accept your invitation to participate in the consultations with your committee in going forward on this. We will discuss with you the best manner of doing that, whether it is a formal or an informal meeting initially.
Senator Ringuette: Mr. Joyce, I come back again to the financial requirements of the Public Service Commission to remove the geographic barriers to employment, which we have discussed previously. What is the progress with regard to the funding needed to remove these barriers?
Mr. Joyce: The funding situation remains the same, in that the Public Service Commission has been funded as part of the implementation of Bill C-25. I believe that when the president appeared before this committee in respect of the Main Estimates, he indicated that this still remains a priority and now that is part of the president's portfolio. There has been no specific change that I am aware of in terms of the funding because it is in place. My understanding is that it remains a priority of the Public Service Commission and they are making some progress. I do not believe that we have any additional details. If you wish, I can ask the Public Service Commission to provide any additional and specific information they have about the progress they have made.
Senator Ringuette: With regard to that being a priority of the Public Service Commission, and taking into context the entire review process, moving from lower to higher priorities, where does that priority stand?
Mr. Joyce: I am not able to respond on behalf of the Public Service Commission. I could take that question on notice and pass it along to the Public Service Commission for a response. However, I am not able to respond on behalf of the Public Service Commission because I do not work for the commission. It would be inappropriate for me to speculate on how they would order their priorities in the current circumstances.
Senator Ringuette: Has the Public Service Commission gone through the priority review process? Perhaps you could provide that information in your written response.
Mr. Joyce: Having spoken to Minister McCallum, you are aware that, in some respects, all departments are doing that as part of the response to the Expenditure Review Committee exercise. Certainly, it has stimulated all departments to look at that, although it is more in the context of their capacity to deliver what the Expenditure Review Committee has asked for.
I do not think that would address your question, so I would have to get that question more specifically addressed to the Public Service Commission, and I will undertake to do that.
Senator Ringuette: In regard to the health care agreement that was reached last August, for, I think, $42 billion or $43 billion, where would we find this in your supplementary estimates?
Mr. Joyce: That, honourable senator, is not in these supplementary estimates. The most recent information on that would have been in the fiscal update tabled by the Minister of Finance recently. I would look for more detail on that in the upcoming budget, which, if the Minister of Finance follows his normal schedule, will be tabled in the spring. There is nothing in the supplementary estimates specifically related to the implementation of that accord.
Senator Ringuette: Are you saying, regarding the additional elements of that accord, that the provinces will not see any money until the next fiscal year, April?
Mr. Joyce: To the extent that those payments are statutory, that would require changes to the legislation; so, no, there would be nothing in terms of anything that required a new statutory provision to implement. I am not familiar enough with the plans for implementing that to give you a specific response. All I can tell you is that there has not been any specific, additional voted funding sought in the supplementary estimates; and to the best of my knowledge, there has been no revision to the statutory forecast provided in the Main Estimates specifically with respect to the health accord. That is the situation as it stands.
What would transpire, I would have to ask somebody who is more knowledgeable about the specific plans to implement that health accord. I am not aware of anything that would affect this current fiscal year, but there are months to go, so I cannot say definitively that there would not be anything.
Senator Ringuette: Would it be the same kind of situation in regard to the equalization agreement, where you have increased the floor and have now an escalating clause? Would that also need legislation, and would we only see those items in the next budget?
Mr. Joyce: If there is a change to the equalization formula, my understanding is, yes, that would require legislative change to implement. Clearly, in the current statutory provision, the payments are made according to the rules and the formulae that are set out in the existing legislative agreement. If there is going to be a change to that, then it would require legislation to implement; that is my understanding.
Senator Ringuette: Therefore, I suppose there is no anticipation of additional payments to the provinces for either the new health care agreement or the new equalization accord.
Mr. Joyce: Not that is signalled in the supplementary estimates, but I cannot definitively speak on behalf of the government in terms of the plans to do that. All I can tell you is what is in the supplementary estimates, and there are no provisions in addition to the existing arrangements.
The Deputy Chairman: Could I ask you, because of this table that you have given us, if you could look at your Supplementary Estimates (A), page 50, and explain this to us so that we understand? This table deals with the 2003 budget expenditure reallocation.
Senator Murray: It starts on page 48, Mr. Deputy Chairman.
The Deputy Chairman: It does. I want to direct him to one particular department so we can all understand it. What I thought we might do is look at page 50, National Defence voted items 1a, 5a and 10a, which are toward the bottom of page 50. Take 1a, for example, which, I understand, is the National Defence operating expenditures vote. Could you go through these various columns and explain to our committee how we should read this?
Mr. Joyce: I will stick with your Department of National Defence vote 1a; the first column shows the gross amount of the additional funding that is actually sought by the department.
The Deputy Chairman: In this sup?
Mr. Joyce: Let me be careful about my wording here. This is a change. Normally, we would only show you the net amount for which parliamentary spending authority is being provided. The change in this display shows you the gross amount that is the incremental spending authority that the government has authorized for the Department of National Defence.
Normally, because we offset that amount by existing authorities, you only see the net amount in the supplementary estimates. This table shows you what we normally have never displayed this way. What this says is that for the Department of National Defence, the government has authorized additional spending authorities of $502 million. That is what the government, the executive, has authorized as incremental spending over and above its planned spending that was in the budget at the beginning of this fiscal year.
The Deputy Chairman: For this fiscal year.
Senator Murray: Subject to parliamentary approval.
Mr. Joyce: Yes, thank you, senator. I did say ``the executive has authorized.''
The Deputy Chairman: They have suggested.
Mr. Joyce: On behalf of the executive, I am now part of the process of seeking that parliamentary authority. The next two columns show —
Senator Murray: Excuse me. If I may, before you leave that column, the $502 million is the gross amount being sought in the supplementary estimates for the Department of National Defence — in 1a.
Mr. Joyce: That is not quite correct. Could I just go through and come back to that? I will try to tell you the story behind these numbers. The executive, and again subject to parliamentary approval, has authorized or approved increased operating expenditures for the Department of National Defence of, in round numbers, $503 million, $502,867,000.
There are two sets of existing parliamentary spending authorities that are no longer required. The first is due to the fact that the department has committed $89 million to the $1-billion reallocation initiative. That is the first column. Because that is the amount of money it was decided that the Department of National Defence would contribute, that represents an existing parliamentary spending authority that was in the Main Estimates that is no longer required.
The next column shows some other existing spending authorities that, for a number of reasons, are no longer required. In total, therefore, that reduces the $502 million by $90,140,000. The actual parliamentary authority being sought in these supplementary estimates is the net amount of $412 million.
In the past, you would have never seen these first three columns. We would have just shown you the net amount, which is the only additional authority that the government is seeking from Parliament through these supplementary estimates.
The Deputy Chairman: Do I understand correctly that the $89 million is part of the government-wide reallocation initiative? That is a previously authorized $89 million for National Defence under that particular vote 1a, is that correct?
Mr. Joyce: That is correct.
The Deputy Chairman: Any other questions on that item?
Senator Murray: As a matter of fact, you opened the subject that I was planning to discuss. I think it has been explained very well. What I did not fully appreciate until now is that the government-wide reallocation initiative money actually comes out of the department concerned. I had an idea that it was being added to the department concerned from some central pot. They have asked, and the government has agreed, to spend an extra $502 million, but they have already — we are talking about National Defence vote 1a — given up $89 million.
Mr. Joyce: That is correct.
Senator Murray: Somewhere there is another $1.1 million that has come out of their hides.
Mr. Joyce: Typically, the other spending authorities available are because of technical adjustments, in that there may be a kind of transfer between votes or we may have put a frozen allotment in place to effect a transfer. Those technical adjustments may have caused a particular part of a vote to be no longer needed.
Senator Murray: Between column 2, ``government-wide reallocation initiative'' and column 3, ``other'' there should be a plus sign to indicate $89 million plus $1 million, which then equals roughly $90 million.
Mr. Joyce: The fourth column is the total of the $90 million.
Senator Murray: That is what I mean. When you subtract that $90 million from the $502 million in column 1, the net is $412 million, vote 1a, which is the amount of Supplementary Estimate (A).
Mr. Joyce: That is correct.
Senator Murray: Is there the possibility that departments could manipulate the Treasury Board in this process or has the thought ever occurred to you?
Mr. Joyce: The thought has occurred to me, senator, but no, in this case these numbers are fairly tightly controlled. Certainly, the government-wide reallocation numbers were a specific decision of the Treasury Board. We are in the process of implementing them and this is part of that. The other spending authorities available are tightly controlled. Many people in the secretariat track those numbers to ensure that they are recorded. Part of the process is ensuring that as departments change their budgets and the authorities given by Treasury Board and Parliament change, we have a fairly elaborate method of tracking those changes.
Senator Murray: You know then from where the $89 million has been given up by the Department of National Defence.
Mr. Joyce: In this case, they have taken that particular amount out of their operating vote.
Senator Murray: Mr. Joyce, I wonder what incentive there is for program managers to give up $89 million if they know that come supplementary estimate time, they will be able to call successfully for another $412 million.
Mr. Joyce: I appreciate that this does look rather odd on the surface, because in one table we are displaying the results of decisions that have been taken and implemented at different times and that represent quite different actions.
Senator Murray: One would have to know the chronology.
Mr. Joyce: Keep in mind that the commitment to deliver the $1 billion was made in the 2003 budget. It is simply that it has taken us a long time in terms of the details to bring this information to Parliament. The additional $502.867 million is a more recent decision by the government that responds to current priorities in the current situation.
Senator Murray: I thought you would say that, and I think that is right. By the way, that information is helpful to the committee and I thank you for that.
It is summarized on page 52 at ``amounts already included in the 2004-05 Main Estimates of $319 million.'' Would that be the total of column 2 under ``government-wide reallocation initiative?''
Mr. Joyce: No, senator. Now that I read the wording, perhaps it should say ``amounts that were taken out in the preparation of 2004-05 Main Estimates.''
Senator Murray: I cannot find that $319 million if I go to the Mains.
Mr. Joyce: You can find it at another table in the press material, where it shows how we arrive at the figure of $1 billion.
Senator Murray: I cannot find the figure of $319 million in the Main Estimates.
Mr. Joyce: No, but information was released at the time of the Main Estimates that did show that figure.
Senator Murray: It is notional, Mr. Joyce, not to argue with you, that the figure of $319 million shows up in a press release.
Mr. Joyce: It is not notional.
Senator Murray: You are saying that the expression ``amounts already included in the 2004-05 Main Estimates,'' should read ``amounts already taken out.''
Mr. Joyce: That is correct.
Senator Murray: However, they were never there, except in the preparatory sense. Parliament has never seen that figure of $319 million.
Mr. Joyce: They have seen it only by way of the background information released at the time of the Main Estimates. I cannot remember the level of detail but I could obtain that for the committee. It is a very real reduction because the process inside the government is such that the Treasury Board Secretariat establishes each year what we call ``reference levels,'' which are the executive-approved spending levels for each department and agency. Because we were only able to do part of it in time for the Main Estimates, Treasury Board removed from those approved reference levels a total of $319 million. It was a true reduction through an internal process.
Senator Murray: That is not a process for parliamentarians.
Mr. Joyce: That is correct.
Senator Murray: The next item in the summary of the $319 million already removed from the reference numbers is the cancelled funding that had been earmarked in the fiscal framework; that accounts for $245 million. Parliament does not see a document headed ``fiscal framework.'' Is that right?
Mr. Joyce: It is seen only in the budget of the Minister of Finance, which is at a fairly high level of generality.
Senator Murray: We cannot look behind that figure either, can we?
Mr. Joyce: Again, we have broken out that number in a table and so we can provide that information for you.
Senator Murray: That would be interesting and would provide us with a better understanding of it. The Department of Finance public debt program is just a reduction in the estimates because of lower interest rates. In total, you have the $1 billion.
I would like to ask a question or two about Treasury Board vote 5 at this time. Mr. Joyce, I refer to page 62. The initial level Treasury Board contingency is $687.5 million but I thought that it was $750 million.
Mr. Joyce: That is because it was nine-twelfths of supply in the interim supply bill.
Senator Murray: What can you tell us about these items, although I do not want to go through them one by one? I believe the heading is ``miscellaneous, minor and unforeseen.'' In respect of any of these, I might wonder how something could have been unforeseen or what could be so minor about a payment, et cetera. The payment to the Old Port of Montreal Corporation jumps off the page. It is funding to address incremental costs related to changes in mandate and responsibilities due to government restructuring — payments of $10 million and $6 million to address incremental costs. What is that about?
Mr. Joyce: I will speak to the first figure of $10 million, which represents the fact that at the time we compiled the Main Estimates we put in an amount of money related to the funding required for that Crown corporation. Subsequently, that amount was insufficient. The minister responsible came before Treasury Board to seek additional funding for the operations of that Crown corporation. It represented, in relative terms, an immediate cash requirement in excess of the Main Estimates' authority before the Supplementary Estimates supply bill would be approved.
Senator Murray: What was the date of that, Mr. Joyce?
Mr. Joyce: I do not have that information.
Senator Murray: Was it authorized?
Mr. Joyce: It would have been authorized some time in May.
Senator Murray: It was mid-election campaign.
Mr. Joyce: It would have been before the election.
Senator Murray: Of course.
The Deputy Chairman: You are not implying anything are you, Senator Murray?
Senator Murray: No, I am just asking.
Under ``Marine Atlantic'' for operating requirements there is a figure of $35 million.
Mr. Joyce: Again, the amount of money that was provided in the authority in the Main Estimates was insufficient, and that is an operating Crown corporation; it would have been a cash issue had we not given them access to vote 5.
Senator Murray: I presume somewhere in your notes you have some indication of what the $16 million that went to the Old Port of Montreal Corporation was for. I understand the principle that they were short of money and you had to top them up; and likewise for Marine Atlantic. I presume you have some explanation of what the occasion was for that top-up.
Mr. Joyce: The only information I have on the Old Port of Montreal is that it related to payroll and contractual obligations. If you did want more detail, senator, I would have to get that.
Senator Murray: I would appreciate it if you would, and likewise the increased payments to Marine Atlantic.
Mr. Joyce: That one I have a something on. This was a result of decreases in traffic, and therefore revenues, as well as emerging costs due to increased fuel.
Senator Mercer: First, thank you for coming before the committee. I have a comment before questions. I am fascinated by the discussion in this government, in public and committees, and Treasury Board about the expenditure review and the assumption that the targets will be met. I do not think Treasury Board should assume that the expenditure review process will yield what you are planning, because there is a large contingent of the government caucus from Atlantic Canada who, when they see expenditure review, do not read ``expenditure review,'' but program review, and we read ``program cuts.'' If there are any program cuts associated with the projected monies that the expenditure review is supposed to produce, the $12 billion over five years, then there will be pretty serious opposition within government. I am sure that the opposition would be quite happy to help us with that, or at least some of the opposition would, so it is just a word of caution to those in Treasury Board not to make the assumption that it will happen. There is a very active and aggressive group of people in the Atlantic caucus of the government caucus who will be watching like hawks to ensure programs that we hold near and dear are not touched, and that certain programs that need to be enhanced are indeed enhanced and not whittled away.
In your presentation, in the part which you did not read, I found a couple of items of interest. You have $95 million for the assessment, management and remediation of federal contaminated sites. Do those contaminated sites include the Sydney tar ponds?
Mr. Joyce: Yes, they do. I can confirm that for you, but from memory, I am almost certain they do.
Senator Mercer: On that note, any time that the Sydney tar ponds come up, I ask this one question. When will a shovel be put in the ground to do something instead of us sitting around here talking about this damn thing?
Mr. Joyce: I know I have some information in my briefing material on that. The money that has been allocated —
Senator Mercer: If you could tell me how much of that $95 million goes to the tar ponds, it would be helpful as well.
While you are looking that up, I will continue on with the next question. Well, you go ahead, I will wait.
Mr. Joyce: To avoid delays, perhaps my staff can help me with this.
Senator Mercer: I will ask another question. With respect to the $65 million for contribution payments under the Canada Farm Income Program to protect producers against dramatic drops in farm income, is this BSE related?
Mr. Joyce: There is separate money for BSE, I believe. There are a large number of items in Agriculture; the one that concerns BSE is actually a statutory payment of $928 million. This is a program that has two discrete components; one is payments to cattle producers to help address the BSE crisis, as well as a general payment to all agricultural producers for transition to new programming under the Agricultural Policy Framework. I do not have a breakdown between those two components, but the BSE is funded out of a statutory part of Agriculture's vote.
Senator Mercer: I have written to the Auditor General several times about tracing money that government has spent on BSE, where it goes. In the last six months of 2003, the three major beef processors in this country reported a whopping 281 per cent increase in profits. One of the American companies, in a report to their shareholders, pointed directly to the BSE recovery program as the reason why their profits are up. In this very room, when I asked the president of the federation of agriculture to comment on it, he said that the BSE recovery program was the easiest money that the meat packers have ever made. I am very concerned that since we have more money in the program — you talked about the $928 million — if we do not have enough controls on that, we will end up padding the bottom lines of more American companies.
I am really quite concerned that the Auditor General's response to me was that since these are private companies, she could not follow the money. It is not private money; it is public money. She should be able to follow it, and she should be ashamed of herself for giving a parliamentarian that kind of answer. She is aggressive enough on everything else around here. She should be aggressive in finding money that was supposed to go to farmers.
The third question I have concerns the $60 million to enhance Canadian sport development, excellence and participation. Is that the money that goes to our Olympic program? Is that the extra money we put into the Olympic program?
Mr. Joyce: This is the Department of Canadian Heritage. There is $59.6 million in additional funding to increase participation and enhance excellence in sport to prepare for the Vancouver 2010 Olympic Games.
Senator Mercer: Is this the 2010 athlete development money?
Mr. Joyce: That would be correct. That is my understanding.
Senator Mercer: I have written down a couple of questions here, though I suppose the easy way to answer them is to wait until the event happens. How do we manage that money and measure success? Do we measure success by medals that we collect?
Mr. Joyce: I have a little more information on the athlete assistance program. The additional funding will go to increase the tax-free monthly allowance from $1,100 to $1,500 for senior-level athletes. That will be an increase from $13,200 to $18,000 annually, and there will be an increase from $500 to $900 in the tax-free monthly allowance for developmental-level athletes. That is specifically how this money will be used.
Senator Mercer: I find it a little confusing, perhaps because I am not a permanent member of the committee and thus do not analyze these figures regularly, that we have reference in at least two places to our activities in Haiti, as well as two different references to our activities in Afghanistan. I think that sometimes it would be simpler if we knew more about the programs and associated costs for Afghanistan and Haiti, as well as which departments are allocated the funds. I realize that there is CIDA money and military money, et cetera, being spent. When I see the same name in two or three different line items, I wonder whether we are duplicating efforts or whether we truly know what we are doing.
Mr. Joyce: Shall I respond to that point? We ask that inside the Treasury Board Secretariat. It addresses the ``horizontal issues,'' which has become a particular label that we use increasingly. The concern is exactly as you have identified. You can see in the supplementary estimates that we have increasingly highlighted what we identify as ``horizontal issues,'' whereby the money being sought is being allocated to more than one department for the same policy objective of the federal government. Inside the Treasury Board Secretariat we have the same concern to ensure there is not duplication and that the existing spending that may contribute to the policy objective is taken into account. Horizontal issues are taking on increased prominence within the secretariat. This might sound like another advertisement for what we would like to talk to you about, but this gets back to the improved parliamentary reporting project and some of the initiatives that we are taking within the secretariat to support that, and which will be an essential platform if we are to do that. One is an information technology project called the ``expenditure management information system.'' Again, a suggestion to the committee, should it be interested, is that we brief you on a new initiative that we have taken in terms of Treasury Board policy in respect of how we categorize and track departmental funding. We are about to introduce, after Treasury Board approval, a management resources and results structure that will include a program activity architecture. It would take me too long to explain, but the implementation of that will improve the basis on which the Main Estimates and estimates documents are displayed — the basic structure — and, more importantly, will give us a more granular access to information. That not only allows us to understand better how departments are allocating the money that Parliament has approved within a department but also to track exactly what you have just identified — horizontal issues. We will be able to tag activities at a fairly low level within a department with ``horizontal codes.'' We are in the process of implementing this project and we will not be able to achieve the improved reporting to Parliament that you want without it. I suggest that as part of the consultation, if the committee is interested, we could present an explanation of the project and the program activity architecture. It does address exactly the kind of issue that you have raised, senator.
Senator Mercer: Thank you.
Mr. Joyce: We have found the information on the Sydney tar ponds.
Senator Mercer: That is good.
Mr. Joyce: The funding is for the environmental cleanup of the Sydney tar ponds and coke ovens in the Muggah Creek Watershed. The total is $580,000 in operating expenditures and $4,248,000 in grants and contributions. This brings us to your point about the field work and putting the spade in the ground. This project has not proceeded quickly and so part of this funding is in recognition of the fact that money earmarked for expenditure in the previous year was not spent. Therefore, we re-profile the funding. It is carried forward and that is one of the primary reasons that this funding is being sought in the supplementary estimates. It reflects the fact that the progress was slower than planned. It had been planned to be spent in the previous year. Our understanding, and we have reviewed this or we would not have been proposing it to the Treasury Board, is that this project will proceed this fiscal year.
Senator Murray: What department is that?
Mr. Joyce: It is Environment Canada.
Senator Mercer: Those of us from Nova Scotia will believe it when we see it.
Mr. Joyce: My information, subject to your seeing it, is that you will see progress this year; that is our understanding. Obviously, the department would have to provide you with the details.
Senator Mercer: Thank you.
The Deputy Chairman: I want to ask a question in respect of environmental management investigation and remediation. I believe that terminology has been used in a number of departments when looking at the horizontal summary. I was looking at the figures for the Department of Indian Affairs and Northern Development. Does the secretariat have enough detail to determine how much goes to planning, organizing and management, and how much actually goes to remediation? I am reminded of our neighbours to the south, where they had a program for environmental remediation a number of years ago called the super fund. It was worth billions of dollars, but when it was audited, it turned out that a small amount of that actually went to remediation while the balance was spent on examination, assessment and management. Do you have that kind of detail or will we have to go to the department to ask how much is being used to do the actual work?
Mr. Joyce: I do not have that specific information with me but it would be best to obtain it from the departments concerned, of the many involved. The matter of the breakdown between administration and programming costs is of particular concern but, to be candid, in two directions. We have concerns that in some cases the administration funds may not be sufficient for the due diligence that is required in administering programs. When the President of Treasury Board Secretariat appeared before you on the Main Estimates, he had the new Comptroller General, Charles-Antoine St-Jean, with him. I believe that he outlined some of his concerns in terms of the capacity of departments, particularly in the area of audit. Of course, it is through audit that you will have such questions answered by the department's management, and by the Treasury Board Secretariat in terms of the oversight that we have. Thus, there is a balance in looking at the issues from both sides.
That being said, there is an obvious concern that the administration is not padded beyond, perhaps, the audit and the management capacity required to ensure prudent spending of the funds in an effective and efficient way. The program sectors look at that when submissions such as this come through the Treasury Board.
There are limits on the secretariat in terms of how far we can reach because we are not the police and we do not have the capacity to monitor every individual program at that level of detail. In fact, audit is one of the key elements of our oversight strategy. I can only signal that we share the concern you have expressed and so we do look at it carefully.
The Deputy Chairman: You said that you do not have that information with you. However, you do have some information, and will you have information from the comptroller and from the audits in each department? Will that information be part of your database in the secretariat in the future?
Mr. Joyce: Yes, it will be, and in fact it is currently part of our database.
They are required actually to be made public and are provided to the Treasury Board Secretariat. We have a process inside the secretariat where all the audits that we receive are reviewed by a centre that is responsible for audit policy. As part of that review, if there are particular issues, they are drawn to the attention of the program sectors, which, on their own, do not always have the time to read each and every audit report in the detail required. We have that process inside the secretariat but that is ongoing. It is part of the oversight role.
The Deputy Chairman: Let me finish this supplementary question by asking you if you will get me this information. At page 158 of the estimate book, under ``explanation of requirements, assessment management and remediation of federal contaminated sites,'' it lists $45 million as the amount required to operate the contaminated sites management program. This is under Indian Affairs and Northern Development.
Mr. Joyce: Yes.
The Deputy Chairman: According to the information provided by the department, in the last 10 years over $115 million has been spent on the assessment and remediation of contaminated sites on reserve lands; this is Indian reserve lands. In this case, why is there a requirement for this additional amount under supplementary estimates of $45 million? What is going on here?
Mr. Joyce: The information I have, senator, is that this is for work on 15 federal contaminated sites. Primarily, they are abandoned mines in the north of Canada. The money will also be used to undertake remediation projects on reserves. The money will support funding for 12 additional suspected contaminated sites. The funding — I do not have a breakdown or an example — is a balance between the work that is necessary to assess a site to detect whether it is contaminated, the degree of contamination and the nature of the contamination. That work has to be completed before a decision can be made in terms of relative priority and the amount of money that is actually needed to then do the remediation work. The information I have is that this money is for both. I do not have enough detail to be precise about the exact balance between the two.
The Deputy Chairman: If there has been an ongoing program for the last 10 years with respect to reserves, why would you have to come forward in a supplementary appropriation and ask for an additional $45 million, unless there has been some new initiative or if this is for newly found contaminated sites off reserve?
Mr. Joyce: Mr. Deputy Chairman, I believe it is a balance of both. Some of the funding is being provided now to do remediation work because the assessment has been done. The other part of the supplementary funds is because of a need to do assessment of new sites.
I do not have enough detail to know whether these are new in the sense of the potential for contamination having just been discovered, or if this is a process of looking at priorities and progress. The practice of the secretariat for this is only to approve the money and seek parliamentary approval once it is satisfied that the department has a specific plan and we can assess that that is, in fact, an appropriate amount to give it.
The nature of this is that we do give out the money a little at a time rather than establishing it in advance when we do not have enough detail from the department to know precisely how much money it needs.
The Deputy Chairman: I appreciate your speculation. I wonder if you would provide us with what information the secretariat has on that, and we will determine whether we should pursue it further with the specific department.
Senator Harb: Mr. Joyce, I have many questions on the estimates, but for today I want to pick one department so that we can have a dialogue to outline and identify whether or not the system as it is now is working, in terms of the process of bringing the estimates to a parliamentary committee, and whether the public interest, by having this public debate, is meeting its objective, which is transparency in the way government operates.
Your estimate reports are bilingual and probably about one and a half to two inches thick, taking the supplementary estimates with the Main Estimates book. Before Treasury Board decides what to release to Parliament, what do you do? What is the process that goes into this document before it is made public? Do you go through it line by line? Does a department come forward with boxes of projects and how much each will cost, and you say, ``Now we have 15 boxes here; we will combine two of these boxes and call them box A and put them in chapter 4 or 5 under Foreign Affairs and International Trade,'' for example, ``and this is the amount we will allot to it,'' or is there some other magic that takes place at Treasury Board before you decide on how you will release it to parliamentarians and, therefore, to the public?
Mr. Joyce: Senator, that is a very challenging question to answer in a reasonably short time. There is no magic. I sometimes wish there was. I could characterize the process we go through this way.
In the fall — and it is an exercise that we have embarked on right now, as we do every year — we do what we call the annual reference level update, where each department submits to the Treasury Board Secretariat what it believes are the adjustments it needs to the reference levels that were established by the Treasury Board the previous year. It is an annual exercise in updating.
The updates really fall into what I would characterize as three categories. One is where the government has made a specific policy decision to add or subtract money from the department's funding base. That is a largely technical part of the exercise because usually the decisions are very clear-cut. It is an amount of money, a dollar item. It either has to be removed from or added to the department's reference level.
We have another area that we refer to as quasi-statutory. This is funding that has the attributes of a statutory program but is not authorized in legislation the way a statutory program is. An example of that would be Correctional Service Canada, where a large part of the costs are driven by the inmate population. If it has more inmates in a particular year, those inmates must be housed and fed; the correctional programs, in some cases, have to be increased to have the capacity to deal with those inmates. Every year we review the funding level of Correctional Service Canada on that basis. It is statutory-like in the sense that it is not quite a formula, but it is very clear. The costs are driven by the number of projected inmates, so it goes up or down according to the projections of inmate growth, and it is checked each year to make sure we have not given money unnecessarily.
The bills from Public Works and Government Services, in terms of the lease costs for federal buildings, and heat and light, are non-discretionary. The Department of Public Works has to pay them. If lease costs have gone up, its funding has to be increased. That is a second category where the secretariat examines the case made by the department, of which there are not many. That, again, is funding that is adjusted in that annual reference level update process.
The third part of that process would be what we call re-profiling. There has been one example that we have already talked about, where a department had planned to spend on the Sydney tar ponds. It was unable to for a number of reasons. It is a project that still needs to proceed. Therefore, we will adjust the future year reference levels in respect of funding that has lapsed for reasons that are in some cases beyond the department's control.
That is the basic process that we go through in putting the Main Estimates together. The results of the annual reference level update actually feed two separate audiences. They form the numbers that are the basis of the Main Estimates. We also feed those numbers into the Department of Finance, because they form part of the fiscal framework that underpins the development of the budget.
Treasury Board currently approves those reference levels for three years. Departments have a basis from which they can develop medium-term plans; even though the estimates are for one year, because of parliamentary tradition, departments have reference levels that are approved for three years, and they appear in the reports, plans and priorities for each department that support the Main Estimates.
As for supplementary estimates, if I am not taking up too much time, we have, to be candid, a dilemma. Our practice currently is that if we feel that a department has not characterized an increment to its spending, a government decision to increase its spending, in sufficient detail, we will not recommend to Parliament that those numbers be included in the Main Estimates until the department has come to the Treasury Board with a submission that provides that information, so that the secretariat is able to do the analysis required. You will typically have programs where the implementation is in phases. Even if the policy approval happened some years ago, we may be still waiting for information from a department to analyze a particular phase that impacts on the Main Estimates' year, so that money may not be in the Main Estimates. When the department provides the information, Treasury Board considers it and we use the supplementary estimates to recommend that to Parliament for approval.
The last example in the third category is new policy approvals that form part of the budget. The budget and the Main Estimates are tabled very close together. Because of budget secrecy, it is impossible for us, even if we were able to do the analysis, to include most budget items in the Main Estimates. Typically, you will see them in the supplementary estimates for the same reason, that neither the departments nor the secretariat have had time to analyze the program details, and so those form part of the supplementary estimates.
There is always a part of the fiscal framework in the budget that is not in the Main Estimates for those two reasons I have described.
Senator Harb: Let me ask you a specific question about both supplementary estimates and the Main Estimates for CIDA, for example. I am quite interested in finding out, either in the supplementaries or in the Main Estimates, the breakdown between the expenditure on staffing — that is, staff who are hired by CIDA to work for the department — and money that is spent on others, people who are on contract at CIDA. As well, I am interested in finding out how much actual money that is allocated to CIDA to do projects abroad goes into the specific areas of interest, and how much of it is spent on staffing.
When I look at the Main Estimates, I see one line, which is on page 10-2 under Foreign Affairs and International Trade — L25, issuance and payment of notes through the International Financial Institution Fund Account — and there is nothing under that. Then when I go to the supplementaries, on page 139, which also deals with CIDA, under ``contributions,'' and under a subtitle, ``geographic programs,'' suddenly I find this line that is in the Main Estimates, L25.
To tell you the truth, I am an engineer and I sat on the Public Accounts Committee in the House of Commons for a number of years, but I am, not confused, but just wondering how I relate what is in the Main Estimates to what is in the supplementaries.
Secondly, if you will bear with me, the amount in the supplementaries, on the top of that page where it reads ``explanation of requirement in thousands of dollars,'' if I were to take that, then 640,000 would make it $640 million. If that is $640 million, it is a substantial sum of money that we are spending on one line in a budget of probably over $2.67 billion to be put into the estimates, unless there is a mistake here. If so, maybe you can correct it for me. Can you give me an explanation on that? Then I will wrap up with my third and final question.
Mr. Joyce: The last question, if I can address that first, senator, is easy. It is confusing, I must admit. I suddenly had a question myself, but the transfer payments are shown in dollar amounts whereas the explanation of requirements is shown in thousands. Unfortunately, the two different denominations are juxtaposed on the same page. If you look at the explanation of requirements, it is $640,000. Then the explanation is given below, and that is given in the full dollar amount — $640,000 is still a substantial amount of money, but it is not $640 million.
If I understand your question, it is in terms of the amount of money that is spent on contract staff and the amount that effectively gets into the hands of the country. First of all, I apologize that I do not have the Main Estimates with me. I came prepared to speak to the supplementary estimates, which is a narrower focus. However, that really is an issue that is best dealt with by the department. We could undertake to ask that question of the agency, but if you wish to pursue a dialogue, it would be better if you did that directly with the agency. I can still undertake to take that initial question from you to the agency and get you a response.
Senator Harb: If I have time for a couple of more questions, I will ask them. If not, I am interested in these horizontal reallocations of resources between departments. I am also interested in the reallocation of resources within the same department. Say, for example, a department comes to you with its plans for the expenditures for 2004-05, and we are talking about the boxes. They will tell you they want ``X'' amount of money for this box and ``Y'' amount of money for that box. You look at it, and on the surface it looks okay. You have so many departments with which to deal. You trust the submission and proceed, only to find out a year or two later that even though the money was allocated for box ``A,'' in fact money was spent on box ``X.'' Suddenly, those who might be the beneficiaries of a program that was supposed to have been in box ``A'' or box ``X'' found themselves in a situation where nothing really has happened. They have to go again through the process of lobbying members of Parliament or knocking on the doors of the administrations, trying to ensure that what was promised to them quite some time ago, which did not materialize, actually takes place.
I wanted to find out whether or not there was any way for Treasury Board to say, ``Okay, when we have a process and we approve a budget item or an estimate package, unless you have absolutely unequivocally clear reasons why you did not follow through with the expenditures on that item, that will not happen; we will not allow that to happen.''
I want to find out what are the checks and balances at Treasury Board in terms of horizontal reallocation — though it sounds quite interesting on the surface, it may have some damaging side effect. If they are not working, what do you plan to do to make sure that they do work?
Mr. Joyce: Senator, that is an excellent question. It is very much an issue that we are focusing on right now. Your characterization of the boxes is actually a good way of describing our approach to the program activity architecture, which was something that I suggested we come back to the committee to describe.
That is exactly what we want to do, is to have a more granular knowledge of how a department, at the beginning of the year, intends to allocate the money that the government and Parliament has approved to various activities, sub- activities, down to a fairly low level of detail, and to understand the particular results that that department is planning to achieve with each of those sub-allocations. Your characterization of the boxes is absolutely correct.
The issue that you have raised is again currently being actively debated, which is the degree to which the Treasury Board and the Treasury Board Secretariat should be controlling money that is allocated to a department and to what extent a department should be free to make reallocation decisions.
We feel — and I think I can characterize this as certainly the current position of the secretariat — that our focus is very much on accountability. That accountability, even in terms of characterizing the result and then rendering account at the end of the year on whether or not that result has been achieved, if not, why not, if money has been reallocated, why was it reallocated, and did that reallocation achieve the intended objective, is currently where we plan to put our focus.
Our belief is that having the Treasury Board Secretariat get involved in control is really micromanagement. I know this goes back to previous commissions that are germane today, that the managers should be allowed to manage, given the framework to manage and required to manage, and should be required to be accountable.
Our focus in terms of implementing the program activity architecture is exactly what you have just said. I should stress this is something that will probably take two or three years to implement. We do not have three boxes, but many boxes for a department as large as CIDA. Our intent is that this information would be accessible to committees such as this.
There is an issue in terms of level of detail, but our plan is that this information would be available to committees such as yours, and individual members, so that you do not have to ask an official like me to get you the answer.
I stress that that is a very specific plan of ours, but it remains a plan. We do not have that detailed information at the current time.
Senator Harb: You have done some outstanding work through Treasury Board that I would say puts Canada on the leading edge internationally. I do not think there is any other country in Europe or elsewhere that has the kind of system that is being implemented by Treasury Board now; that is, dealing with information, information management and the ability of an individual citizen to access information through government. In large part, that is due to your leadership at Treasury Board and that of the Auditor General and others who have encouraged the government to move forward with this type of information system that you have in place. To a large extent, I think it was timely and you are in the process of implementing it throughout government.
Would you talk about the notion of the Government of Canada collecting money for a service that is provided? Say, for example, we take the Employment Insurance program, where we do collect revenues that go to the General Revenue Fund. Those monies do not go to a specific EI account per se, with checks and balances whereby you receive the money and you spend the money in terms of the account. Rather, even those funds designated as part of the EI account are really part of the general revenues of Canada; it goes to the General Revenue Fund. Therefore, it is, magically, an account that exists but really it does not.
The reason I say this is because I want to move to the next issue. More and more, we are seeing governments charge user fees for services. I use the example of Immigration, for example, charging immigrants who apply to come to the country, or visitor's visas, for which we charge $40, $60 or $70. That money goes to the General Revenue Fund.
In the spirit of fairness, would it not be a good idea if Treasury Board were to, at some time, sit down with all these departments that are charging these fees? I will use the example of India, where there are 200,000 or 300,000 applicants a year; they generate over $15 million or $20 million, but they are stret ceterahed to the limit. When the department comes forward with an application to Treasury Board or Finance, they want an increase in their funding, ``Well, no, I am sorry, this cap is government policy; this is how far we can go.'' That is the end of it.
I would say the same thing applies to other departments in the government. I wanted to find out if there is any kind of thinking in Treasury Board to allow two things. First, for part of that money to be reinvested in the department where it is generated so they can improve the services they provide to Canadians that Canadians are paying for and expect. Second, at the end of every fiscal year in past years — I do not know what happened recently — because of the way the system works, the departments cannot carry a substantial amount of money from one year to the next. You see the rush to spend. Treasury Board has been on alert about that and I think you have taken some measures. Canadians would be quite interested in finding out, first, what you have done to deal with this issue. The second issue is whether or not there has been thinking to say to a department that has performed well, delivered the program or service to Canadians on time and on budget, but at the end of the year has a surplus, ``You have been good, you can carry forward that budget to the next year and we will not penalize you just because you are an efficient department.'' In this way you create a culture of efficiencies within the government. You are providing better service to Canadians, and at the same time, you are rewarding those who are doing good work. Maybe you could comment on that.
Mr. Joyce: That is another challenging series of questions, senator.
If I could just respond to the issue of user fees, I hope I do not get into trouble for saying this, but there will be an announcement shortly to the effect that one of the particular focuses for those fees is in terms of establishing service standards. That is something the secretariat has been focusing on in the approach to user fees.
In terms of reinvestment, there are basically two categories of departments with user fees. There are some that have what we call revenue retention, and sometimes that is reflected in what we call net votes, where departments actually do credit the revenues that they earn to the vote. That is clearly where there is a sense that that particular user-fee activity is self-contained, you need to respond to the demand, and the department has the flexibility to add or shed costs according to the demand for the service for which they are charging the fee.
There are many other areas of the government where the money is deposited to the Consolidated Revenue Fund, and therefore there is no direct link for the department and that incentive is lacking.
The point about incentives is an excellent one. It is probably something, to be candid, about which the secretariat tends to be conservative and risk-averse. There is an issue that just because a department is able to earn money, perhaps there still needs to be some discipline attached to that, in terms of if the revenues go up a department should get access to those. Clearly, in terms of the capacity needed to administer, that would be a factor.
In terms of the rational analysis that you have suggested, if the demand is going up, then clearly, although the revenue is not credited to the vote, we effectively bring that about by looking at other departmental requests.
We are probably not as responsive as departments would like. Your issue about the incentives is a good one. It is one that we struggle with — I will be candid — in the government and the secretariat in terms of what the right balance of incentives is.
One of the issues is are you favouring departments that have a revenue-raising capacity when departments that do not may still have issues for which additional funding is required. There is almost a sense of internal government equity that has to be taken into account.
We are aware of the issue of incentives. I do not think that we have yet moved into quite making that explicit link that you have described, but it is certainly on the table. Your comments on that are appreciated.
Senator Murray: I have several, I hope, brief comments and two specific questions to ask.
First, with regard to user fees, this committee in the previous Parliament passed a private member's bill from the House of Commons. That bill was studied by this committee and passed in the Senate, and I believe it received Royal Assent. That bill sought to increase the involvement of Parliament in the accountability of the government departments and agencies to Parliament with regard to user fees.
We may want to look at that to see how it is working and whether it is adequate or needs some amendment.
Second, with regard to budget secrecy, which was invoked by Mr. Joyce earlier, I cannot forbear to mention that I think there is precious little budget secrecy left. There was a time when one would defer immediately to any official or minister of the government who invoked budget secrecy, but no more. The government itself, the Department of Finance and the House of Commons committee, engage in a consultative process that is extremely elaborate and very specific and it does not take much imagination to be able to discern the outlines of what is going on in the budget preparation process. Further to that, the government, as we know, engages communications consultants and polling firms to test-market various changes that they have in mind in budgetary and fiscal policy all the time, and that is a matter of public record.
Third, in the days leading up to the presentation of the budget, there are calculated leaks by the government as part of its political strategy to prepare the groundwork for major changes, or perhaps even minor ones, to the budget. I know that the minister himself and the department keep close to their vests tax and other changes from which someone could make a personal profit if they knew about it, but those are in the minority of measures that are brought in by the budget.
Finally, there was a discussion here a while ago about equalization. I can tell you there will definitely be legislation because the Prime Minister said so. A little while ago he announced that he was increasing the base amount of equalization for the present fiscal year and that there would be incremental increases over the next 10 years. For 2005- 06 he simply set aside the formula that is in the present legislation and decided, or the government decided, on what the allocation of that increase would be among the provinces. It is fair to say that the formula has simply been set aside for the succeeding eight or nine years, and he has appointed a panel to recommend how this will be done. If I were from the Atlantic provinces, which I am not officially any more, I would be viewing all these developments with great apprehension, but that is another subject. We will have an opportunity to debate it in the Senate before long.
Mr. Joyce, at page 46, statutory items, in these supplementary estimates, I see a negative amount, I suppose you would call it. It says:
CANADA CUSTOMS AND REVENUE AGENCY
Department
Spending of revenues received through the conduct of its operations pursuant to section 60 of the Canada Customs and Revenue Agency Act.
I look over here and sure enough, the item, which is $12.1 million, is listed under ``statutory,'' under ``ministry summary.'' What is that? What is section 60 of the CCRA Act?
Mr. Joyce: I do not have an answer for you in terms of that specific section, but the actual amount relates to the transfer of that function.
Senator Murray: What function? There is a previous estimate of $31 million, I think it is, spending of revenues, and then zero under ``transfer.'' Then, new appropriation, $12.1 million; total estimates to date, $19 million.
Ms. Laura Danagher, Executive Director, Expenditure Operations and Estimates Directorate, Treasury Board of Canada: With the restructuring, the border activities have been moved to a separate agency. This relates to the revenue that can be re-spent due to the collection of customs duties. That activity is being transferred to the border agency. It is a reduction in the amount that is forecast for that activity.
Senator Murray: The amount of revenue?
Ms. Danagher: That is right.
Senator Murray: The previous estimate is $31.1 million.
Ms. Danagher: They have just decreased the forecast to take out that portion.
Senator Murray: The total estimate is no longer $31.1 million but $19 million?
Ms. Danagher: That is correct.
Senator Murray: Mr. Joyce, bring us up to date. We raised this with Mr. Alcock when he was here. What is happening with vote 5 now? I know that it is on the tip of your tongue to tell us how complex this issue is, and I am here to tell you that in our view it is not complex at all. We have put forward a number of recommendations that have great clarity and simplicity to them, and we cannot understand why the government is not acting on them or coming back and telling us what the flaws are. We would like to put this concern to bed and put the whole vote 5 issue on a better basis.
Mr. Joyce: The president will be speaking about this when he appears before you next week. I believe that you will find his response will actually address your concerns.
Senator Murray: It is now in the draft stage, one assumes.
Mr. Joyce: Yes, as you pointed out on a couple of occasions at least, we had a very specific proposal that was discussed with you, which we could implement with the next Main Estimates, and that is something that the president will be talking about next week. There are broader issues with respect not to vote 5 but the way it is used that I am hoping will be addressed as part of this reporting project, the improved reporting in the estimates. The fact that we might actually implement the specific recommendations we discussed with you I hope will not be an impediment to looking at some of the more fundamental issues that bring about the need to use vote 5 the way we do.
There are still, in my mind, two sets of issues, but the president will be addressing the specific one that you have raised, which is the clarification to the vote wording.
Senator Murray: We will see about the larger longer-term issue. As you know, we were recommending some changes in the wording of the vote itself and, second, in the guidelines that have been issued, some of them by the board, and some by the secretariat on its own initiative, to departments. Some of the guidelines are regulations, as it were. They have been approved by the board, by the ministers; and others are administrative supplements put in by the secretariat. We thought all of them should be visited and approved by the board.
Mr. Joyce: That is something of which I was not aware. I thought they all had the same status, but we could regularize that.
Senator Murray: We thought it was of some importance if we are intending to hold the government accountable, not just for what its officials do but for what ministers say and do.
Thank you, Mr. Joyce.
The Deputy Chairman: I have two or three points for clarification. The first is with respect to the comment just made by Senator Murray in relation to the equalization formula and the public debate that has been going on between the premiers and the Prime Minister.
Are you aware, Mr. Joyce, as to whether that issue has been resolved, the distribution of the additional amount, whether it will be according to the proportions determined by the formula or on a per-capita basis? I understood that that issue is still outstanding.
Senator Murray: Not for 2005-06. The government has decided, and it was announced, at least to the provinces, that half of the increment for 2005-06 will be based on a three-year average of what they received under the existing formula, and the other half is on a per-capita basis, and that after 2005-06 we are in the hands of an expert panel, four members of which will be appointed by the federal government and two by the provinces, none of whom have been appointed yet, as far as I know.
The Deputy Chairman: That will be an interesting opportunity for us to revisit the comprehensive study that we did on equalization. This clearly moves away from the old established formula into something else.
Senator Murray: Into something else, we know not what.
The Deputy Chairman: I think that could be an interesting subject for us to delve into again.
Senator Murray: The sooner the better.
The Deputy Chairman: The other point of clarification is with respect to the boxes that you were talking about during your discussion with Senator Harb. I should not assume that the boxes are within a particular vote, should I? Are you suggesting that the manager can move appropriated funds from one vote to another within his department?
Mr. Joyce: No, senator, that was not what I was suggesting, but in many cases the reallocations the departments make are within a vote and within their authorities, even in terms of any additional controls that the Treasury Board may have put in place. This is clearly something we encourage.
To give an example of that, when we announced the first $1 billion, we actually surveyed departments to get a sense of how much they actually move money around. It is a substantial amount of money, but in many cases it is done within votes, and in some cases, as you can see here, departments actually come to the Treasury Board to seek approval to recommend to Parliament transfers between votes. Both do occur. However, clearly, a department cannot move money between votes without getting parliamentary approval to do so.
The Deputy Chairman: That had been my understanding, so I think the confusion was the analogy to boxes. I tend to think of boxes as being votes, and that is not the way you were describing the boxes in this particular discussion.
Mr. Joyce: That is correct, we were not. In some cases, a box may have money in it from more than one vote. In some cases, one of the boxes may have money that is only in one vote. It will vary, because the focus of the boxes, if I can continue to use Senator Harb's analogy, is to look at how a department manages its programs and program activity. It does not necessarily follow clean vote lines because one activity may use, for instance, both capital and operating or, in fact, capital, operating, and grants and contributions. The focus is on how a department manages its programs and program activities.
The Deputy Chairman: If I understand matters correctly, if a manager, a minister or a deputy minister wishes to move funds from one vote to another, it would require that $1 indication in the supplementary estimates. Is that correct?
Mr. Joyce: That is correct.
The Deputy Chairman: I refer you to page 79 of the Supplementary Estimates (A). You give us a very helpful $1-item table. I find what you have done here to be helpful. For example, in the top one on page 79, you have shown, in the Economic Development Agency of Canada for the region of Quebec, funds moving from vote 2a to vote 6a.
Can you explain to me what is happening with respect to the Canadian International Development Agency, that reduced ceiling on issuance, et cetera? Where is that money going?
With respect to the next item, Canadian Institutes of Health Research, grants for research projects and personnel support, vote item 15a, you are moving that somewhere else.
Mr. Joyce: Ms. Danagher will respond to the specifics, but you are absolutely correct. In the first one that you mentioned, the Economic Development Agency of Canada, the reallocation or transfer between votes is between 2a in that agency and vote 60 in Industry. It is not from 2a to 6a.
The Deputy Chairman: Yes.
Ms. Danagher: On CIDA, what you are looking at there is not necessarily a transfer. They are coming in to reduce the ceiling on an issuance, which is like a loan. Vote L25 is for the issuance, so they are coming in to reduce the ceiling. It is a dollar item just to get the authority to reduce it. It is not necessarily a vote transfer.
The Deputy Chairman: To reduce the ceiling they require approval?
Ms. Danagher: Parliamentary authority, that is right.
The Deputy Chairman: With respect to grants for research projects and personnel, to reduce the grants they have to get approval?
Ms. Danagher: Basically, they are transferring money from a contribution program into a grant program, so it is within a vote. Instead of offering the program as a contribution, they will be doing it as a grant. In this specific case, they are changing the profile of their grants and contributions, because within that vote they are doing both.
Again, since they are increasing grants in this case and you need the authority of Parliament to change your grants because they are listed in the estimates, they have to come in for the dollar item.
The Deputy Chairman: Thank you. This is the first time I have seen this kind of summary.
Ms. Danagher: That is the first time we have done it.
The Deputy Chairman: It is very helpful. I was asking some questions just to clarify what you were saying.
Can you move funds from department to department with a $1-item entry as well?
Ms. Danagher: Yes, you could.
The Deputy Chairman: That is permissible as long as they show $1 here and somewhere else? This would have to be through the supplementary process?
Ms. Danagher: Yes.
The Deputy Chairman: With respect to the 2002 exercise for expenditure review and reallocation, were any funds transferred from one department to another, or were they all within the same department?
Mr. Joyce: There is not a one-on-one relationship. The 2003 budget made a commitment that the government would find $1 billion in ongoing savings for reallocation. The 2003 budget in fact set out the new spending priorities of the government that were premised on delivery of that $1 billion, and that has now been done. There is not a one-on-one relationship between the savings and the new priorities that were announced in the 2003 budget, but the $1 billion in ongoing savings were required in order to fund about 15 per cent of the total new spending priorities. You cannot point to one particular saving that contributed to the $1 billion and say that went to this particular new priority in the budget because the new priorities were announced in advance of the specific savings being identified.
The Deputy Chairman: We were discussing the Department of National Defence earlier, at page 180. We were looking at the summary of the reallocation of $1 billion. Now I am asking you to go to the Department of National Defence section and look at the specific department. The department is asking for $502 million in additional funding, and you reduced that by roughly $90 million. Then you come before us for the reduced amount of $412 million, and it will presumably be in the appropriations bill that is based on the Supplementary Estimates (A). Was that $89 million saved from vote 1 that was already approved in the Main Estimates, or did that come from some other source?
Mr. Joyce: It came from vote 1.
The Deputy Chairman: It came from vote 1. If it came from some other source, how would we know that? It looks to me like all of these savings came from the same department and the same vote — that is the way I am following your savings table — and that there were no transfers of funds between departments.
Mr. Joyce: I am trying to think how to explain this succinctly. The savings that are shown here in terms of the contributions to the reallocation initiative represent reductions that the department offered up and were accepted by the Treasury Board as their contribution towards the $1 billion. That was the discrete and separate decision made by the Treasury Board based on what the Minister of National Defence proposed at that time. If that were the only transaction with respect to National Defence, you would not have seen a supplementary estimate for the department, but we would, in the secretariat, have actually put what we call a frozen lapsing allotment around that $89 million, so that the department, even though its printed authority was whatever it was, would not be able to exercise the full spending that Parliament had authorized. We would have sequestered $89 million of that. That is the first transaction. If that had been the only transaction with respect to Defence, you would not see a supplementary estimate here, but you would if you had asked us. If you asked, ``Where is it?'' we would have said, ``The executive of the government, the Treasury Board, has actually sequestered it by separating that out in what we call a frozen lapsing allotment.'' That is a power of the Treasury Board, to place allotments on the votes. It is a control below the vote level that the executive, through the Treasury Board, can exercise.
The subsequent transaction is the one you have just mentioned. Subsequently, the department looks at the situation as it is now and says that National Defence needs new money because of the particular environment and the particular current priorities, so it authorizes an increase. That requires a supplementary estimate, but because we have $89 million that has been sequestered, we go to Parliament with the lesser amount — that is, the net amount of money.
The Deputy Chairman: If that amount of money had not been sequestered within the same vote and in fact was a reallocation from another department, we would have seen a different accounting here?
Mr. Joyce: It would have been accounted for differently. This is hypothetical so I am almost reluctant to use it. The Department of National Defence has offered up savings from vote 5. Let us say, for example, that the entire amount had been from vote 5. We would have printed in the supplementary estimates the gross amount of funds requested for operating.
The Deputy Chairman: I think I understand that. Thank you.
One other area that I would like to talk about from a point of view of clarification is this carry-forward that Senator Harb was discussing with you. You have a guideline of 5 per cent from one year to the next. It has to be within the same vote?
Mr. Joyce: There are two broad types of carry-forward. The one you are referring to is called the operating budget carry-forward, which, as you have said, is 5 per cent. That is available to all departments and agencies and, because it is operating, it is always in the operating vote. We also look at other carry-forwards and the annual reference level update. A specific one is capital; that is handled on a different basis because it is done on an assessment of ``as needed.'' Although this is less common, we also look at other areas where the government has allocated funding. It is either on a project basis — it may not be for capital — or it represents something that is, effectively, almost a legal commitment. There are occasions when those commitments are in a transfer payment vote. If the government has not been able to deliver on its commitment one year and still needs to deliver on it in the next year, then we will also permit a carry- forward, which could impact on a transfer payment vote.
The Deputy Chairman: Do you have a set of guidelines for operating and another set for capital that you could share with us? Presumably, these were developed by your secretariat?
Mr. Joyce: Yes, we could. The operating budget carry-forward is a very simple premise. We have some rather detailed rules in terms of how the calculation is done. We can certainly make those available to you, but the basic principle approved by the Treasury Board is exactly what you articulated, namely, that each department and agency is allowed to carry forward up to 5 per cent of its operating vote, provided that money is unused at the end of the previous year. In terms of capital, I would have to check whether we have an up-to-date set. They may need to be updated. Frequently, as we put out instructions to departments each year for the annual reference level update, we use those to adjust the guidelines that we give them. We will give you whatever we have, including whatever changes are being made in the current instructions given to departments.
The Deputy Chairman: How long has this policy been in place? Do not misunderstand me. We do not think this is wrong, because it is a good management tool and it does allow the manager to manage. Therefore, we do not see that rush at the end of the fiscal year to spend all the money because it will be lost. We believe the concept is good. We want to test the parameters of it.
Mr. Joyce: It was put in place in 1992-93 at a level of 2 per cent and then was subsequently increased to 5 per cent based on that experience.
The Deputy Chairman: Has there been any assessment, review or discussion as to whether 5 per cent is sufficient?
Mr. Joyce: There has been some discussion — I would not say a particularly focused discussion. Other countries have different practices. The United Kingdom, for instance, though I have not had a recent conversation with the person who told me this, actually has 100 per cent carry-forward, which I find rather startling. I asked my counterpart if he lost any sleep at night over the possible impact that could have from year to year. He did admit that when they introduced it he was a little nervous. That is one country that has given a far greater flexibility than we have. I do not think we would be willing to move in that direction, but there are arguments for and against increasing it.
The Deputy Chairman: Maybe we should investigate those arguments.
Mr. Joyce: It would be a useful discussion.
The Deputy Chairman: Thank you. We have time for one more question from Senator Harb.
Senator Harb: I want to correct the record with regard to a comment that was made about the Auditor General, an unfortunate comment. A statement was made that the Auditor General should investigate private companies when it comes to funding for the mad cow disease. In fact, the Auditor General cannot do that. Under the parliamentary act, she does not have the authority to follow the money right into the private sector hands. She is not here to defend herself and I think it is only fair to correct that for my colleague who raised it.
I have a question about the relationship between the Comptroller General of Canada and Treasury Board. The minister responsible for Treasury Board issued a statement November 20 about strengthening the internal audit as an important part of the government agenda to improve public sector management and ensure rigorous stewardship of public funds.
First, I would like to know where the comptroller general fits in respect of the Treasury Board Secretariat.
Second, Senator Day raised the matter of the capital budget and the operating budget. The financial management system is more efficient than ever, and a parliamentary committee examines estimates on a regular basis. I would like to know whether there is an intention in Treasury Board to proceed with a document that would break down the estimates into capital, operating, and grant and contribution costs, whereby a parliamentary member or member of the public would be able to look at the document and follow it through line by line to truly understand the message contained therein from a department through Treasury Board to the public domain. If I were to choose a report from any one department, I would find it a bit difficult to follow through in terms of a breakdown of its expenditures for staffing, consulting, capital costs, et cetera. Is Treasury Board contemplating such a breakdown of the expenditures?
Mr. Joyce: Thank you for the question, senator. The Comptroller General of Canada is a deputy-level position within the Treasury Board Secretariat and reports to the board. That is where the Comptroller General of Canada fits into the organization. The change is that the position was upgraded to the deputy level.
Concerning the breakdown of expenditures, you are correct in your assessment of the current one. The intention of Main Estimates in Part 2 is that there are limitations on how much we can give. The document that currently does give the breakdown is the individual report on plans and priorities. This goes back to your analogy of the boxes and the program activity architecture. Our intent is that that program activity architecture will form the basis, not just for the Main Estimates, but also for the reports on plans and priorities. That will give you information by program activity. For each program activity, one of the breakdowns will be the kind of expenditure — capital, operating, personnel, et cetera. There are limits on the details that can be put in the report.
One issue that we would like to discuss with you when we consult is the balance between the amount of detail we proactively include in a printed document, which, with the best of intentions, can make the document incomprehensible by the sheer volume of documentation, and giving parliamentarians and others access to information.
One of the approaches we would like to pursue, which we have made a start on, is having the document available electronically, with links to that further information, so that a printed document is available and you can expand on that by going to a website that will lead you to additional information. Thus, the information would be available on demand. That is definitely the direction we would like to take. Part of the project I outlined in my introductory statements is to consult with people to scope that out. The three-month project is looking at our blueprint for progressing. Once we have an agreement on priorities and directions, then implementing that would be a three-year project, at least, to achieve the progress we want.
The Deputy Chairman: I thank Mr. Joyce and Ms. Danagher for an informative and helpful session.
The committee adjourned.