REPORT OF THE COMMITTEE
Thursday, March 5, 2009
The Standing Senate Committee on National Finance has the honour to present its
THIRD REPORT
Your committee, to which were referred the Supplementary Estimates (C), 2008-2009, has, in obedience to the Order of Reference of Tuesday, February 24, 2009, examined the said estimates and herewith presents its report.
Respectfully submitted,
JOSEPH A. DAY
Chair
REPORT ON THE
SUPPLEMENTARY ESTIMATES (C), 2008-2009
The Standing Senate Committee on
National Finance
THIRD REPORT
Chair
The Honourable Joseph A. Day
Deputy Chair
The Honourable Irving R. Gerstein
March 2009
TABLE OF CONTENTS
THE SUPPLEMENTARY ESTIMATES (C), 2008-2009
OVERVIEW OF THE SUPPLEMENTARY ESTIMATES (C), 2008-2009
B. Major Items in Budgetary Spending
II) Statutory Budgetary Spending
EXAMINATION OF THE SUPPLEMENTARY ESTIMATES (C), 2008-2009
1. Savings arising from the Strategic review process
2. Canada Small Business Financing Act
4. Canadian International Development Agency
7. Road map for Canada’s linguistic duality
8. Agriculture and Agri-Food Canada
CONCLUSION AND SUMMARY OF COMMITTEE’S WORK IN 2008-2009
REPORT ON THE
SUPPLEMENTARY ESTIMATES (C), 2008-2009
The Supplementary Estimates (C), 2008-2009 were tabled in Parliament on February 12, 2009, and subsequently referred for review to the Standing Senate Committee on National Finance on February 24, 2009.
These Supplementary Estimates are the third set of Supplementary Estimates that were issued in the fiscal year ending on March 31, 2009. Unless otherwise stated, all page references are from the Supplementary Estimates (C), 2008-2009 document.
The committee held two meetings to review these Supplementary Estimates. On February 25, 2009, officials from the Treasury Board Secretariat of Canada, Alister Smith, Assistant Secretary, Expenditure Management Sector and Brian Pagan, Executive Director, Expenditure Operations and Estimates Division, Expenditure Management Sector, appeared before the committee to testify on the Supplementary Estimates (C), 2008-2009. On March 3, 2009, officials from Agriculture and Agri-Food Canada as well as Industry Canada met with the committee. The officials from Agriculture and Agri-Food Canada were Pierre Corriveau, Assistant Deputy Minister, Corporate Management, Andrew Marsland, Assistant Deputy Minister, Strategic Policy Branch, Greg Meredith, Assistant Deputy Minister, Farm Financial Programs Branch and Susie Miller, Director General, Food Value Chain Bureau. The officials from Industry Canada were John Connell, Director General, Small Business Policy Branch, Nathalie Poirier-Mizon, Director, Canada Small Business Financing Program Directorate and Steve Watton, Manager, Economic and Policy Analysis.
THE SUPPLEMENTARY ESTIMATES (C), 2008-2009
Supplementary Estimates are tabled in Parliament approximately one month in advance of the related Appropriation Act. They serve a number of purposes. First, they provide information on the government’s spending requirements that were not sufficiently developed when the 2008-2009 Main Estimates were tabled, or have been subsequently refined to account for new developments in particular programs or services. Second, they provide Parliament with information on changes in estimated statutory expenditures (i.e., those authorized by Parliament through enabling legislation). Finally, they are used to seek parliamentary approval for items such as: transfers of money between Votes; debt deletion; loan guarantees; new or increased grants; and changes to Vote wording.1
These Supplementary Estimates continue to reflect the government’s commitment to renew the Expenditure Management System (EMS). Normally there are at least two Supplementary Estimates documents tabled each year. Each document is identified alphabetically (A, B, C, etc.). In recent years, the first regular Supplementary Estimates document has been tabled in late October and the final document in February.
However, this year, in keeping with government commitments to renew the EMS, Supplementary Estimates (A), 2008-09 were tabled in May in order to facilitate a closer alignment of the Estimates to the Budget. These Supplementary Estimates represent the third opportunity for Parliamentary review of departmental program requirements this fiscal year.
Pages 34 to 49 of the estimates provide a preview of the related supply bill (Proposed Schedules 1 and 2 to the Appropriation Bill), and include, by department and organization, a list of Vote numbers, the Vote wording, and the requested funds that will be proposed to Parliament for approval.
OVERVIEW OF THE SUPPLEMENTARY ESTIMATES (C), 2008-2009
Treasury Board Secretariat officials began their testimony by providing senators with an overview of the $4.0 billion in planned spending under the Supplementary Estimates (C), 2008-2009. In the Estimates documents, planned spending is broken down by budgetary and non-budgetary expenditures and is displayed for both voted and statutory expenditures2 . As shown in Table 1 below, the Supplementary Estimates (C), 2008-2009 total $4.0 billion. Of this amount, the federal government is seeking Parliament’s approval to spend almost $1.5 billion, while statutory expenditures are expected to increase by $2.5 billion.
Table 1: Total Supplementary Estimates (C), 2008-2009
(In millions of dollars)
|
Budgetary |
Non-Budgetary |
Total |
Voted Appropriations |
1,475.2 |
2.0 |
1,477.2 |
Statutory Appropriations |
2,478.7 |
(18.6) |
2,460.1 |
Total |
3,953.9 |
(16.6) |
3,937.3 |
Source: Supplementary Estimates (C), 2008-2009, p. 8.
Total Estimates to-date for this fiscal year are $231.4 billion, including $221.0 billion under the 2008-2009 Main Estimates, $4.1 billion under the Supplementary Estimates (A), 2008-2009, $2.3 billion under the Supplementary Estimates (B), 2008-2009 and $4.0 billion under the Supplementary Estimates (C) 2008-2009. This spending is consistent with the planned expenses of $239.6 billion established in the March 2008 budget.
In his opening presentation, Mr. Smith informed the senators that the Supplementary Estimates currently before the committee are seeking Parliament's approval for the spending authority required to implement planned spending for items that have been approved by cabinet and Treasury Board but not yet proposed to Parliament, to realign or transfer some existing spending authority between voted appropriations and to allocate other spending that cannot be fully specified in earlier estimates, such as compensation adjustments, and to inform Parliament of updated projections of statutory spending. These estimates still reflect the 2008-2009 fiscal year and therefore do not represent the spending measures in Budget 2009. Mr. Smith also mentioned that with consideration of Supplementary Estimates (B) postponed due to prorogation, departments were instructed to manage within existing authorities and to curtail activities as necessary. He highlighted the fact that 75% of the total voted net requirements of $1.48 billion represents funding for the top three items presented in section B. Among the expenditures tabled for approval, he highlighted the expenditures listed below.
B. Major Items in Budgetary Spending
Pages 11 to 14 of the Supplementary Estimates (C), 2008-2009 contain an explanation of the major budgetary spending (both voted and statutory) relating to the $4.0 billion increase in expenditures.
I)Voted Budgetary Spending is forecasted to increase by $1.48 billion and includes:
- Funding to Treasury Board Secretariat for compensation for salary adjustments ($707.4 million).
- Funding to Agriculture and Agri-Food to facilitate the transition of Ontario flue-cured tobacco producers to exit the industry (Tobacco Transition Program - Buyout Element) ($288.9 million).
- Funding to Health to accelerate tripartite negotiations in British Columbia and begin negotiations with other provinces, supported by investments in health innovation and core health services for First Nations ($105.9 million).
- Funding to Atomic Energy of Canada Limited to support the completion of CANDU reactor refurbishment projects ($100.0 million).
- Funding to Finance to increase a debt payment to international organizations on behalf of poor countries as part of the Multilateral Debt Relief Initiative ($100.0 million).
- Funding to the Canadian International Development Agency for the Canadian contribution to the World Bank's Climate Investment Funds pilot program to support climate change adaptation ($85.0 million).
- Funding to the Canadian International Development Agency for humanitarian assistance and increased support in micronutrient programming with a particular focus on vulnerable regions such as the Horn of Africa and the Congo ($65.0 million).
- Funding to Agriculture and Agri-Food for the non-Business Risk Management Elements of Growing Forward ($58.2 million).
- Incremental funding to Indian Affairs and Northern Development to offset fuel price increases for the benefit of First Nation and Northern communities, under the Capital Facilities Maintenance Program ($53.8 million).
- Funding to the Canadian International Development Agency to match Canadian public donations to the international response to Cyclone Nargis in Burma and the earthquake in China ($53.4 million).
- Natural Resources for payments to the Newfoundland Offshore Petroleum Resource Revenue Fund ($1,569.5 million).
- Natural Resources for Newfoundland Fiscal Equalization Offset Payments ($399.0 million).
- Chief Electoral Officer to prepare and conduct the 40th General Election (October 14, 2008) and to prepare for the 41st General Election ($247.8 million).
- Natural Resources for payments to the Nova Scotia Offshore Revenue Account ($148.0 million).
- Human Resources and Skills Development for an increase to the forecast of Guaranteed Income Supplement benefit payments based on updated population and average monthly rate forecasts ($63.0 million).
- Human Resources and Skills Development for a decrease to the forecast of Old Age Security benefit payments based on updated population and average monthly rate forecasts (a decrease of $368.0 million).
Mr. Smith also brought to the senators’ attention that Supplementary Estimates (C) detail the savings realized as part of the first round of the Strategic reviews of departments and agencies3 that were included in Budget 2008. He mentioned that the savings were used to reduce or offset the amount of new appropriations sought by departments in these supplementary estimates. Savings for 2009-10 and future years will be reflected in Main Estimates.
Finally, Mr. Smith acknowledged that part of the stimulus measures announced in Budget 2009 will be included in the budget implementation act but that the critical piece of the government’s effort to implement these measures will be Supplementary Estimates (A), 2009-10, which should be tabled in May, and not the Main Estimates 2009-10. This is because the Main Estimates and the budget are not produced in a fashion that allows Main Estimates to fully reflect budget initiatives.
EXAMINATION OF THE SUPPLEMENTARY ESTIMATES (C), 2008-2009
During the committee’s hearing on the Supplementary Estimates (C), 2008-2009, senators raised a variety of questions related to the realized savings and planned spending as outlined above. Some of these are discussed below.
1. Savings arising from the Strategic review process
There was interest on the part of senators to understand the data provided in relation to the savings realized through the strategic review process. Mr. Smith began by explaining that the strategic review is an exercise by which every department identifies low-priority, low-performing programs and reallocates funds from those programs to other programs that are higher-priority and better-performing. As such, they must not be considered ‘cuts’ exercises. Some senators then expressed their interest in knowing which low priority programs were affected by the review and which better-performing programs benefitted from the ensuing savings. They also questioned why they cannot extract this information from the Supplementary Estimates documents. Both Mr. Smith and Mr. Pagan explained that it is possible to obtain information from the Supplementary Estimates about how savings were used if and only if the savings serve to offset increases in new appropriations by the departments that participated in the review, or if the savings are transferred between departments. They concluded by mentioning that individual ministers own their strategic reviews and are responsible for justifying and communicating them to the public. To obtain detailed information about specific savings and the affected programs, the committee would have to invite the respective ministers. Some senators suggested that the committee should follow-up on this issue at a later date.
2. Canada Small Business Financing Act
The attention of the committee then turned to Industry Canada, which requires an appropriation of $10 million to cover contractual obligations under the Canada Small Business Financing Act. This additional appropriation comes on top of an appropriation of $23 million in Supplementary Estimates (B). Total contractual obligations now stand at $115 million and senators wondered how much of this money is already spent and how much is related to potential claims. Mr. Smith explained that the incremental amounts required in Supplementary Estimates (B) and (C) reflect a deteriorating economy, which was not expected at the time that the Main Estimates were prepared. Mr. Smith, not knowing what share of the total amount represents actual claims and how much is yet to be experienced, undertook to look into the matter and report back to the committee.
On March 3 2009, officials from Industry Canada were present to answer additional questions in relation to the Canada Small Business Financing Program. Mr. Connell began by briefly describing the program, which seeks to increase the availability of loans for establishing, expanding, modernizing and improving small businesses. It does this by encouraging financial institutions to make their financing available to small businesses who would otherwise find it difficult to obtain financing. The Canada Small Business Financing Act was enacted in April 1999 to build on its predecessor, the Small Business Loans Act. It is a loan loss sharing program by which the Government of Canada guarantees some of the lender’s losses in the event of default. As emphasized by Mr. Connell, while Industry Canada is responsible for the administration of the Program, financial institutions are responsible for all credit decisions and for making the loans. Only firms with business carried on in Canada and with gross revenues less than $5 million are allowed to apply for the program. Annually, the program helps about 10,000 small and medium enterprises obtain about $1 billion in loans.
In relation to the additional $33 million appropriations required in Supplementary Estimates (B) and (C) for the fiscal year 2008-2009, Mr. Connell informed the committee that approximately $20 million of the increase is attributable to the actions of one major lender who began to lend money to more risky undertakings in recent years, a change in behaviour that could not be anticipated by the department. The officials informed the committee that to remedy the situation, Industry Canada has placed a ceiling on the amount a particular lender can claim. The additional $13 million in additional appropriations is a consequence of the deteriorating economy. Overall, senators were very pleased with the testimony from the officials of Industry Canada and left with a favourable impression of the Canada Small Business Financing Program.
The Department of Foreign Affairs and International Trade requested $23.1 million to offset foreign exchange losses incurred during missions. The committee wondered why the Government of Canada does not hedge its currency exposure, like large international corporations do. Mr. Smith informed the committee that he believes it was a deliberate choice of the Government of Canada not to try to hedge the currency exposure but to try to offset some of the expenses arising from currency fluctuations.
4. Canadian International Development Agency
The committee expressed an interest in obtaining a detailed explanation of the workings of the program through which CIDA matches Canadian public donations following disasters. The concern of the committee is that countries having a well-organized community in Canada will systematically benefit more from the program than other countries because their ability to raise money is greater. Mr. Smith undertook to obtain the required information from CIDA.
Some senators inquired about the existence of studies that would detail potential financial savings of the Government of Canada’s initiative to no longer allow women and others to take cases of pay equity to the Human Rights Commission, but rather to allow them to take these cases to an independent tribunal, the Public Service Labour Relations Board. This would force employers and unions to consider pay equity issues at the contract negotiation stage, as suggested in Bill C-10, the Budget Implementation Act 2009. Mr. Smith undertook to look into the matter and report back to the committee.
Some senators, believing that the government only has a limited number of climate related initiatives, expressed concerns about the delays encountered in the ecoAgriculture Biofuels Capital Initiative. In particular, they were worried that the related $45 million budget, which was put to alternative use because of the delays, might never be spent on the Initiative. Mr. Smith agreed to follow up on this question. Some senators indicated, on the other hand, that while this initiative is delayed, the Government of Canada requires an appropriation of $85 million to fund its share of the World Bank’s Climate Investment Fund pilot program to support climate change adaptation.
7. Road map for Canada’s linguistic duality
The committee questioned the officials from the Treasury Board Secretariat about the Roadmap for Canada’s Linguistic Duality. Specifically, why was it that some departments that were supposed to participate in the program were not asking for any appropriations. Mr. Pagan indicated to the committee that this initiative involves the cooperation of 14 agencies and that only seven of them identified a financial requirement for these Supplementary Estimates. Required appropriations from other partners in the initiative will likely be coming in the future.
8. Agriculture and Agri-Food Canada
In their meeting with officials from Agriculture and Agri-food Canada on March 3, 2009, the committee held an extensive discussion about the transition of Ontario flue-cured tobacco producers to exit the industry. Specifically, senators inquired about the $15 million community development initiatives that were announced by Agriculture and Agri-Food Canada on August 1, 2008 but for which no appropriation was required in Supplementary Estimates (C). Mr. Meredith informed the committee these funds will be targeted specifically at the communities affected by the tobacco transition program. As such, Agriculture and Agri-food Canada was still in the process of consulting with the aforementioned communities on the best ways to utilize these funds. The officials did not yet know the type of initiatives that would be favoured to facilitate the transition to alternative productions and consequently, no appropriations were required at this time. Mr. Meredith committed to respond to the committee in writing once details are in place to ensure senators are aware of the program details. Mr. Marsland also indicated to the committee that the province of Ontario has cooperated on a regulatory level to facilitate the implementation of the transition program; they are not cost-sharing in the program and are not funding a separate program.
The committee had some questions in relation to the Canadian Food Inspection Agency but were informed by the officials from Agriculture and Agri-food Canada that they could not speak on the behalf of the Agency. Senators expressed the desire to invite the Agency at a later date to answer their questions.
Senators noted that on page 88, the department was reducing its spending under Vote 1c by an amount of $3.6 million. Some senators inquired about the programs that had to be reduced to accommodate this transfer of funds to other departments or agencies. Mr. Marsland seemed to indicate that no programs from Agriculture and Agri-food Canada were affected because under the Going Forward policy framework, they identified important concerns that were under the ambit of Health Canada. Therefore, they sought and obtained resources that were now being transferred to Health Canada. Since departments do not typically require appropriations for the sole purpose of transferring the funds to another department, the committee may, at a later date, want to seek clarifications on this answer from the department.
CONCLUSION AND SUMMARY OF COMMITTEE’S WORK IN 2008-2009
During its hearings on the Supplementary Estimates (C), 2008-2009, the committee deliberated on these and other matters. In some circumstances, the Treasury Board officials and Agriculture and Agri-food Canada committed to following-up on their answers at a later date.
The Standing Senate Committee on National Finance, to which were referred the Supplementary Estimates (C), 2008-2009, has in obedience to the Order of Reference of February 24, 2009, examined the said Estimates and herewith submits its report.
Moreover, this report on the Supplementary Estimates (C), 2008-2009 is the committee’s final report on government expenditure plans for the fiscal year 2008-2009. Altogether, the committee completed 8 reports on government spending in this period.
As is customary with this committee, several meeting dates were set aside for the review of the Estimates during the spring of 2008. During this period the committee submitted the following reports:
In March 2008 a First interim report on the 2008-2009 Estimates, which outlined and explained the main features of this year’s Main Estimates;
On April 8, 2008 the committee submitted its report on The Human Resource Management Issues in the Public Service;
On May 28, 2008 its report on The Officers and Agents of Parliament Created or Modified under the Federal Accountability Act examined the mandates and roles of these newly created positions as well as the progress in filling the positions;
A report on the Supplementary Estimates (A), 2008-2009, was submitted on Tuesday, June 3, 2008 prior to consideration of final supply;
A Second interim report on the 2008-2009 Main Estimates, was submitted on Wednesday, June 4, 2008; and
A report on Infrastructure Programs and Regional Development Agencies, submitted in June 2008, reported on the committee’s examination of federal infrastructure initiatives.
The advent of an election in the fall of 2008 and the prorogation of Parliament in December 2008, did not allow the committee to resume its work until February 2009. Since that time the committee has completed a report on the Supplementary Estimates (B), 2008-2009, and the present report on the Supplementary Estimates (C), 2008-2009.
1 - The latter items often do not require additional appropriations and are included in the related supply bill by the notional amount of “one dollar” since in order to be listed in the bill, an item must have monetary value.
2 - Budgetary spending encompasses the cost of servicing the public debt; operating and capital expenditures; transfer payments and subsidies to other levels of government, organizations or individuals; and payments to Crown corporations; Non-budgetary expenditures (loans, investments and advances) are outlays that represent changes in the composition of the federal government’s financial assets; Voted expenditures are those for which parliamentary authority is sought through an appropriation bill; and Statutory expenditures are those authorized by Parliament through enabling legislation; they are included in the Estimates documents for information purposes only.
3 - For reference, these reviews were announced in Budget 2007.