Proceedings of the Standing Senate Committee on
National Finance
Issue 13 - Evidence - March 7, 2012
OTTAWA, Wednesday, March 7, 2012
The Standing Senate Committee on National Finance met this day at 6:37 p.m. to study the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2013.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this evening we start our study of the Main Estimates for the fiscal year ending March 31, 2013 referred to the committee.
[English]
This constitutes the beginning of our examination of the government's spending plans for the coming fiscal year, which begins on April 1. We will set the stage for our work in the coming months. We are now seized of the estimates for 2012-13 and we can study those throughout the year as part of the mandate that we are given by the Senate.
We are pleased to welcome back, from the Expenditure Management Sector of the Treasury Board of Canada Secretariat, who were with us recently with respect to Supplementary Estimates (C) for ending off this fiscal year, Mr. Bill Matthews, Assistant Secretary; Sally Thornton, Executive Director; Marcia Santiago, Senior Director; and Darryl Sprecher, Director.
Honourable senators, we have our full sitting time for this session, so there will be a bit more time to develop your questions and get more fulsome answers than we had with respect to Supplementary Estimates (C).
Mr. Matthews, would you like to lead us through your introduction?
[Translation]
Bill Matthews, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Mr. Chairman, I am pleased to be here tonight to discuss the Main Estimates for the year 2012-13.
[English]
As you mentioned, I have several colleagues with me.
[Translation]
We have prepared a short presentation to give you an overview of these Main Estimates.
[English]
After we have gone through this presentation, it would be our pleasure to answer any questions you might have.
I will start with slide 2. We have three objectives that we would like to cover off with this presentation, and I may add a fourth, time permitting. The first is to touch on the purpose of the Main Estimates. We will use this presentation as a bit of a refresher on some of the terminology, as I know the committee has a few new members. We will talk about the supply cycle and how Main Estimates relate to the budget, including the concept of accrual versus cash accounting.
We will give a brief walk-through of the document itself in terms of what you can find in the document because I am aware, as you mentioned, that the committee does like to study this document throughout the year.
Third, we will go into some specifics about Main Estimates 2012-13 versus the previous year and give you a quick highlight of some of the changes.
The fourth thing I will do, time permitting, is, you may be aware that the House of Commons Standing Committee on Government Operations and Estimates is currently studying the estimates, as are you, but they are also studying the process of the estimates and asking the questions about what types of information Parliament should get to help to study the estimates. I may touch on the study. It is early days of their study but some themes seem to be emerging and I thought it might be interesting for the senators to hear what seems to be happening there.
Slide 3, the purpose of the Main Estimates, is essentially a reminder that the Senate and the House of Commons do not approve the estimates. The estimates are provided to help the study of the appropriation act, but it is actually the appropriation acts themselves that get approved by Parliament and the Senate.
We do understand and appreciate that the estimates are a key document in the study, but when it comes time to approve things, the estimates are there to support the forthcoming requests to Parliament for voted authority to spend funds. That manifests itself in interim supply and full supply. I will speak later about the difference between those things, but the Main Estimates — the funding — is broken into two pieces: Interim supply and full supply.
We do go through the spending authorities sought by the individual departments, as well as agencies and appropriation- dependent Crowns — they are all in here for the upcoming year — as well as a description of their activities and strategic outcomes.
Third, we provide information to Parliament on projected statutory spending, which is not voted on but makes up a significant piece of government expenses and expenditures, so it is important to know what those numbers are looking like.
Let us have a reminder of the key terms. There is "budgetary " versus "non-budgetary. " The best way to think of "budgetary " is something that hits the government's income statement, for lack of better words; it has an impact on the expenses of the government. The best way to think of "non-budgetary " is something that affects the balance sheet of the Government of Canada, so we are looking at loans and investments. Those are some distinctions.
The other terms you will bump into are "statutory " and "voted. " "Voted " means the department needs the approval of Parliament through an appropriation act to spend the money. "Statutory " is for information purposes only, and it is statutory because there is a previous piece of legislation that gives the department the authority to spend money. The best example there is Employment Insurance. If you qualify for the benefits, you get the payment. There is no consideration given to whether the department has enough budget left. If you are dealing with voted appropriation, an absolutely key consideration is how much budget is left. That is the distinction between "statutory " and "voted. "
Finally, let us have a reminder of how Parliament and departments are actually controlled. There is lots of information in the estimates. It is by program activity. There is information by standard object out there. However, the control is based on votes, and votes for most departments are three things: Operating and maintenance, capital, and grants and contributions.
If there is a need to transfer money between votes, that needs the approval of Parliament. When we hit supplementary estimates, which we did yesterday, you will see some transfers from one vote to another. To move money between programs does not require the approval of Parliament. The program information is for information only; Parliament controls on votes.
Those smaller organizations that do not have sufficient budget to warrant separate votes have what is called the program vote. That is a combination of capital operating and maintenance, and Gs and Cs. Generally speaking, the threshold we look at when deciding whether to establish a separate capital and operating vote versus a program vote is roughly about $5 million in spending, in each vote, on an ongoing basis. We can deal with the odd exception, but that is the rule of thumb.
There is another point on Main Estimates. To get into the estimates documents requires a few things: The item needs to have been included in a previous budget; it needs to be approved by the appropriate cabinet committee; and the final step is that it must have been approved by Treasury Board.
Therefore, there are things that might appear in the Main Estimates that may date back a few budgets. Sometimes the budget provides funding for multiple years and may take a year or two to get to Treasury Board for approval. Those Treasury Board approvals are collected up as the year goes on. Once an item is approved by Treasury Board, the question then becomes: When does the department intend to spend money? If it is in the middle of the year and the department wants to spend money that fiscal year, they end up coming to Supplementary Estimates. If they can wait until the next fiscal year, then we just wait until the next Main Estimates. Therefore, the Main Estimates are very much a collection of approvals.
Just to give you a sense of timing and how our lovely system works sometimes, to get into these Main Estimates, items had to have been approved by Treasury Board by around Christmas time. Anything after that did not allow for sufficient time to get into these documents. That is the time lag we are looking at. I will mention specific items later that will drive home this example of the delays showing up in Main Estimates.
On slide 4 we have a famous diagram we like to use that shows a few things. We have the supply periods themselves — the supply cycle. We have three supply periods, and we are obviously on the left-hand side of the page right now, just approaching March 26. In that cycle, you will typically see Supplementary Estimates (C).
You will also see the tabling of Main Estimates, which need to be tabled on or before March 1 every year. That makes perfect sense because our funding that is voted in the system is annual. Funding expires as of April 1. Departments need parliamentary approval to start spending again on April 1, so it is important that the Main Estimates be tabled by March 1 so that the interim supply bill can be passed by April 1 so departments can actually have authority to spend.
The Supplementary Estimates (C) already comes in there. The April 1 to June period, you are typically dealing with Supplementary Estimates (A), as well as the approval of the Main Estimates related to full supply appropriation bills and if there is one for Supplementary Estimates (A).
There are another two periods. In the December period, you can have Supplementary Estimates (B). However, the other thing this diagram is useful for is that it shows many of the important reports that are produced by the government throughout the year to help understand both the spending plans and the actuals of the government as a whole and the departments.
I will lay out the basic concept. We have two types of reports: Whole of government and departmental. We typically start with plans. Whenever a plan is produced, there is a corresponding actual report produced. If you think about the federal budget, it is a planning document for the whole of government. The corresponding piece of actuals that goes with that is Public Accounts Volume I, which is typically tabled in Parliament around October after the fiscal year — six or seven months later.
If you think about the estimates, they are a planning document. You get information on what was actually spent by going to Public Accounts Volume II. That is you will actually see the authorities for each department and what was actually spent during the fiscal year. That is the corollary there.
At the departmental level, we have the reports on plans and priorities. They are followed up by departmental performance reports. That is at the departmental level.
The only document I should mention that is not on here is the departmental level report. Departments started producing last year quarterly financial reports, which many members of this committee would be familiar with because I think some of the legislation that started that whole discussion actually started at this committee. Those statements are appropriation based, so every department produces those for the first three quarters of the year. They do not do one for the fourth quarter because public accounts take their place.
They are based on appropriations, so if you are wondering how a department's spending is tracking during a fiscal year, they produce these things for the three quarters. They are not tabled but are made public on websites, and there is a narrative that goes along with these numbers and they also show the comparative piece to the previous year. If you are interested to know how a particular department is spending money, that is your best vehicle.
The whole of government equivalent to that is The Fiscal Monitor produced by the Department of Finance on a monthly basis. It is done on an accrual basis of accounting, to the extent they can, and it will show you how the fiscal year for the government as a whole is shaping up.
On this schedule, we are anticipating a supply bill for interim supply mid March, because it needs to be passed before April 1. Then the full supply bill will be tabled in mid June in the normal course of business.
On slide 5 we have the Main Estimates versus the budget. A lot of discussion here and I will touch on this later when I talk about the work of the House of Commons committee I mentioned. I have touched on this a bit already but to get into the Main Estimates, you do need previous cabinet approval; you need to have been in a budget; and you need Treasury Board approval, which is around a program design. Instantly, you will see a delay.
Legally speaking, estimates have to be tabled on or before March 1. There is no legal requirement to table a budget. A budget can come any time, or not at all, but we typically do have one. February to March is the normal time frame. This year we have March 29 as the date.
Obviously, we have tabled Main Estimates before the budget is produced. Therefore, there is no room in Main Estimates for new items in the budget. The timing does not allow for it.
One of the questions you should ask when you see items in estimates — when you see something new — is "What budget was that in? " It is never from the most recent budget because of the time lag between the estimates and budget; we just do not have time to get new spending items in the estimates.
Supplementary Estimates (A) exists if there is something in the budget that requires urgent spending approval for departments. We can come back to Parliament for something new in the budget if there is a need to spend immediately. Conversely, you could also see it come in Supplementary Estimates (B). If you do see a new item — and this is more appropriate when you are studying supplementary estimates — a good question to ask is, "Which budget is this in? " because it is often two or three budgets ago. Therefore, you do see that disconnect.
The other thing I will mention is this whole basis of accounting. The budget is done on a full accrual basis of accounting. The estimates and Parliamentary control over spending is done on what we call a near-cash basis. For purposes today, it is really a cash basis of accounting but I will explain why we say "near-cash. "
The reason we use that term is because it is the cash spent during the year, but if a department receives something on March 31 — a new tank is delivered — and they do not pay the bill for 30 to 45 days, they have to count what was delivered by March 31. A department cannot avoid exceeding their budget by sticking an invoice in a drawer and waiting for the new fiscal year to start. That is the basic reason we use the term "near cash. " It is what a department receives by March 31, but it is the cash value of that.
The easiest example I could use to explain this — I have mentioned tanks already, so I will use DND — if DND is procuring and receiving new equipment, from an accrual basis of accounting, they would show the new tank or helicopter on the balance sheet as an asset. It would be amortized or depreciated over 20 years, and that is how the expense would be calculated. From an estimates perspective, the bill for that new tank or helicopter is what gets charged to the appropriation the year it is delivered. That is the difference between the cash and the accrual basis. Over time, they equal out.
There has been a lot of discussion over the years as to what the appropriate bases for estimates are. Is accrual better? I will tell you that the Australians, who are always our starting point, went to accrual a few years back, and the Government of Canada and the Auditor General were pushed by a few committees to move to accrual basis for estimates as well. Australia has come full circle and gone back to cash because Parliament just did not understand what they were voting on. Accrual accounting can be quite complex, with pensions, environmental liabilities and other things, and they just basically discovered that Parliament did not understand what they were voting on. They have gone back to cash, the logic being that everyone understands cash.
Australia was quite a difficult situation because their theory was they were giving departments money for depreciation. Australia has quite a different system from Canada in that every department has its own bank account. Here we have one bank account, the Consolidated Revenue Fund. The theory was departments would save up this money for depreciation, and when they needed a new building, they would have money in their bank accounts.
What actually happened was departments spent on operations, and when it came to buy a new building, there was no money in the bank. The sad thing was that Parliament said, "Wait a second, we did not know we were voting money for depreciation, " and that is why they went back to cash.
I mentioned the other committee studying these issues, but that is one of the key questions they will be looking at, whether accrual or cash is the right model. These estimates are on a near cash basis.
On slide 6, we talk about the structure of the document itself. It has two parts. Part I is what we call the Government Expenditure Plan, and that is where you will see the overview of federal spending. You will see the key elements in the Main Estimates as distinctions between voted and statutory, budgetary and non-budgetary.
Part II is the piece that actually supports the Appropriation Act itself. That is important to look at because it is the appropriation act that the Senate will eventually be dealing with when it comes time to vote supply. You will see summary tables that link back to the Appropriation Act.
If you are wondering what types of expenses we describe in there, you will see a list of principal transfer payments, or the main transfer payments, as well as a breakdown between capital and operating. It gives you a sense of the themes, and I will touch on that later.
On slide 7, we talk about Part II of the Main Estimates, and that is the biggest part of the document. This is one section that is in response to comments from both senators and parliamentarians; we have improved over the last couple of years in terms of what we provide here. You will see for each organization a raison d'être that describes the main objectives and program activities of the organizations. Then you will see a comparison about what is being sought this year compared to the previous year and a list of what we call "highlights. " The highlights were new last year. This is the second time doing this on a department-by-department basis.
In the highlights, you should see increases for new programs not included in the previous estimates. If you see a spike in spending, you will see a description as to why. You will see changes because of different funding profiles; you will see decreases because certain programs may have sunset or their time has run out; and you will also see an overview for the department's plans for 2012-13. If you are looking for an explanation as to why something is different between 2012-13 versus 2011-12, which is the key piece.
One warning, and I will use Environment Canada as example, if you look at Environment Canada for 2012-13 versus 2011-12, it looks like the spending has increased. The reason for that is there was funding that was renewed for Environment Canada in Budget 2011. It was around the Clean Air Agenda and the Chemical Management Plan. Because it was renewed in the budget, we could not get it into last year's Main Estimates. This is money the department has had in the past, but it was not in last year's Main Estimates; it came to them in Supplementary Estimates (A), if I recall correctly. This year, it is back in the Main Estimates. You have to understand the history of what has happened in each department.
Environment Canada looks like it has new money this year; in fact, it is money that was renewed from a previous year, but last year, it showed up in one of the supplementary estimates. It is not always a perfect system, but it gives you some information as to what has changed.
Since we were here yesterday talking about supplementary estimates, one item we should touch on is that supplementary estimates are very different from Main Estimates. Supplementary estimates are much easier to explain because they are incremental. You can say, "A department is seeking new money for the following reasons. " Main Estimates represent an aggregation of all the authorities the department has. It is kind of the accumulated authorities the department has; it is not on an incremental basis. To understand Main Estimates, you have to look at the programs the department is delivering.
It is much easier from my perspective to come here and talk about supplementary estimates because I can talk about individual initiatives, whereas with Main Estimates, you are talking about an accumulation of authorities, which makes them a greater challenge to study.
Part III of the estimates is the final part. It is the departmental piece that links their report on plans and priorities as one part, and that is followed up typically in the fall by the Departmental Performance Report, which explains what happened to the department during the year.
On slide 9, we finally have numbers for you, which I expect is more interesting than what I have been talking about for the last few minutes.
If you compare 2012-13 to 2011-12, voted versus statutory, you will see it is very stable. For 2012-13, we are looking for voted budgetary of $91.9 billion and the previous year was $91.8 billion, so a very small change there. That is not to say there has not been movement, but the grand total is roughly the same.
On the statutory front, again a similar story: In 2012-13 we are looking at $160 billion and 2011-12 had $159 billion, so not much in the way of change there. Budgetary Main Estimates are up 0.4 per cent over the 2011-12 numbers.
We all know these numbers do not reflect, as I have said before, any decisions that are to come in the budget; they will be impacted through future estimates documents.
With respect to the split between statutory and voted, roughly 65 per cent of expenses are statutory and 35 per cent are voted.
On slide 10, we have the federal spending overview. This just gives you a sense of where the dollars are actually spent. You will see the vast majority of spending in government is transfer payments, and that is both to individuals or other, such as provinces, et cetera. 61 per cent of the spending is the blue part there.
The next largest piece is operating and capital, which combined is about 27 per cent planned for 2012-13, and the public debt interest makes up 12 per cent.
If you are looking at how that compares to previous years, we have a chart for you on the bottom of that page that shows you the split between 2012-13 and 2011-12. You will see that in 2012-13 the plan is to spend more on transfer payments than in the previous year. One of the reasons you can look to explain that — and I will touch on it again later — is the increase in the health transfers, which are planned to go up by 6 per cent. Operating and capital is down slightly, and public debt charges are down slightly as well. Public debt charges are down for the same reasons I mentioned yesterday in that the interest rates forecasted are lower than planned.
On slide 11, we will talk about some of the major changes to be seen in 2012-13 versus 2011-12. A couple of items to highlight for you, you will see in here a $650 million increase for the Gateways and Border Crossings Fund, and that is based on their planned spending for the year. There is a $612 million increase for the Building Canada Fund.
Going in the other direction, you will see a wind-down of the Pulp and Paper Green Transformation. That is in Natural Resources Canada's estimates. There is a $525 million decrease for National Defence based on the 2010 round of strategic reviews. You will see those described in here.
If you are looking for some of the major changes on the statutory side — again, these are just for information purposes — you will see a $2 billion increase in forecast for elderly benefits. I should stop briefly here on Old Age Security because you may recall that yesterday I was here on Supplementary Estimates (C) explaining that there was a forecasted decrease for the current fiscal year based on the projections they had.
If you look to what is planned in 2012-13, it is forecasted to be increased over the 2011-12 number. That may seem a little strange. How can you be here one day saying it is going down for the current fiscal year and going up next year? The easiest explanation is around the OAS numbers are indexed. Those rates are adjusted quarterly for inflation. Private sector economists are projecting about a 2.2 increase in 2012-13, based on that indexing. That has been factored into the 2012-13 numbers, and in addition, the actuaries, makes and estimates around eligibility based on ages in population, mortality rates, and those types of things. That is their best estimate. The largest reason is the indexing and it results in an estimated 2.2 per cent increase over the fiscal year.
OAS was increased in January for the same reason. Rates went up by 0.4 per cent for indexing. That factored into the tail end of the fiscal year.
On National Defence, I mentioned I would touch on some of the funny things in the way the system works. Yesterday on Supplementary Estimates (C), there was money for National Defence for its new training mission in Afghanistan. You may have seen that. Even though that money is available — or planned to be spent for the current year — these Main Estimates do not include that. It was through Treasury Board in time to get into Supplementary Estimates (C), but it did not make it into the Main Estimates. Even though that money will be spent this year, National Defence will be coming forward in a future supplementary estimate to get that funding for the upcoming fiscal year, even though they have it for the current fiscal year. You saw it yesterday. That is one of the quirks of our system in terms of putting our documents together.
The Chair: The amount we saw in Supplementary Estimates (C) will be used in the fiscal year ending though, and they will be looking for more money to continue that program?
Mr. Matthews: Exactly.
On slide 12, we thought we should highlight a few changes in terms of machinery that are in these documents. We spent a bit of time yesterday on Supplementary Estimates (C) speaking about Shared Services Canada. In this document you will see where departments are explaining the major changes in their Main Estimates, with a sentence for each of them who are transferring money to Shared Services Canada. You will see the explained decrease is transfer of funds to Shared Services Canada for email data centres and networks. Shared Services Canada now has its own space in these estimates.
On a similar line, Communications Security Establishment, which used to be part of National Defence, now has its own votes and will be appropriated directly. This is the first time that those appropriations will show up here in 2012- 13. If you looked at National Defence, one of the explanations for their drop in estimates 2012-13 versus 2011-12 is in addition to shifting money to Shared Services Canada, they are shifting money to the Communications Security Establishment. That is another change we will highlight for you.
We have a new organization in here for the first time, the Canadian Museum of Immigration at Pier 21. It received funding in 2011-12 through Supplementary Estimates (A), but this is the first time it is showing up in Main Estimates.
On slide 13, just a reminder that you will be seeing the interim supply bill before the end of this fiscal year so departments can begin to get spending authority for April 1. The full supply bill will be tabled in June. Our rule of thumb around interim supply — the whole logic behind interim supply — is to get departments some spending authority while the study of the Main Estimates continues. The rule of thumb is three-twelfths. April, May and June are what we generally put out as our starting point for interim supply. Departments will get the balance of their money that is in Main Estimates through the Appropriation Act that is in June, which is called full supply.
There are some departments that have what we call rather lumpy spending profiles, which means they spend more in one part of the fiscal year than the other, for major transfer payments or contribution agreements. If a department has heavy planned spending in April, May or June, they can ask for more than three-twelfths of interim supply, and we will give it to them. The going in position is three-twelfths. If they need more they tell us and that is reflected in the Appropriation Act.
Given the supply calendar for the parliamentary cycle there is room for three supplementary estimates. That is the plan. They take a fair amount of time to put together. We always plan on doing three. If we do not need them, that is fine, but the plan is always to have three. We may see you again fairly soon on Supplementary Estimates (A).
Before concluding, I mentioned that I would not mind spending two minutes on the study that the other parliamentary committee is doing. They have had four witnesses to date, I believe. There are themes emerging. These are in no particular order.
First is the disconnect between the budget and the Main Estimates. Is there a way that disconnect can be fixed? It does not help the study of the estimates that there are items that were recently announced in a budget — or are coming in a budget in a few weeks — that are not included in the Main Estimates. That question of the disconnect has been asked. One of the ideas is that has been suggested is tabling a fall budget. You make it mandatory to table a budget in the fall. That would give time for any new items to be included in the estimates. There are people on both sides of the fence in terms of whether that is a good idea or not, but that is one idea.
A second theme they seem to be fixed on is how departmental spending should be controlled. I mentioned capital operating and G and C as the three buckets that Parliament votes on and that is the control feature. There is some thought that controlling spending based on programs is a more relevant split, because when people think of departments they certainly think of programs. Right now we provide information on program spending; we just do not control on it. If you were to contemplate that type of shift, the great thing about the current system is we all know that a pencil is operating and a tank is capital. If you are into controlling by program, it would have to be accepted that some allocations are involved. You have a person who works on multiple programs and you have to come up with some sort of formula to split their salary across programs. It is not a problem. It just means it is a less exact science than you have now.
That is the second question they seem to be discussing.
The third one that has come up is this question of accrual versus cash. What is the right model? It has been around for many years, but I suspect they will comment on that.
There are a lot of documents produced by departments, and by ourselves, to support the estimates. If there are things in the documents that people do not find useful — either the document as a whole or parts of it — it would be good for us to know, because we will stop producing it. We are hoping to get comments back on the utility of some of the documents that are produced. That is kind of a quick snapshot of what they are up to. I do not have a sense of their time frame in terms of completing the study.
I will leave it there and I look forward to your questions.
The Chair: Mr. Matthews, that was very helpful. Could you comment on the budget itself, where costs are included in the budget? The budget has a lot of other things like long-term predictions and the government's plan as to where they are going and how they will raise funds, but there are also indications of how much things cost. Is that an accrual basis or is that on a cash basis?
Mr. Matthews: The budget is on an accrual basis; the expenses. You would see depreciation and amortization in there. That is a full accrual basis.
The Chair: The cost, if we are going to buy a tank, funny I should think of that —
Mr. Matthews: When the numbers are presented, they are on an accrual basis. You may find in the text that there is cash numbers used in some of the text to describe how much they are willing to spend, but the actual numbers in the statements are accrual based. You may see a mix in terms of the budget.
The Chair: Over how many years? Who determines over how many years the asset should be accrued and written down?
Mr. Matthews: It is based on the estimated useful life, which is particularly challenging on military assets. They look at the planned usage. We plan on flying this plane for so many hours per year over the next 20 years, and with this maintenance program, here is how long it will last. You then have to periodically reassess and say, "Is this asset holding up to the extent we thought it would? " The auditors will ask those questions.
If you think about the assets that were deployed in Afghanistan — since we have a military theme here — questions were asked. Being in the desert, is that harder on tanks and does it shorten their useful life? That is one of the questions that National Defence had to take into account when doing their accounting adjustments. The same question was asked for their planes. As luck would have it, planes and ships from a dollars perspective are the bulk of DND's assets. It does not matter where ships are sitting. They are in water all the time, whether they are sailing or in dock it does not seem to matter; no change there. I think there was a conclusion that being in that type of theatre did shorten the useful life of some of the vehicles.
The next question: Is it significant enough to adjust for? Those questions are questions that the auditors will frequently ask. It is all about the planned useful life and then whether your plan is holding up.
The Chair: Is it your secretariat that asks those questions?
Mr. Matthews: The Office of the Comptroller General puts forward the accounting policies for the Government of Canada, and they will put out some guidelines for vehicles, the useful life should be 20 to 40 years or something, and then it is up to the departments to look at that range and figure out what the most appropriate range is.
It is important as government that we have consistency where it makes sense in producing those, and whatever accounting policy the Office of the Comptroller General puts forth, they do comply with the standards set by an independent standards-setting body, the Public Sector Accounting Board, and that is what the auditor would check against.
Senator Neufeld: We are using Defence. Let us say they left things behind in Afghanistan — I do not know this, but I am sure that probably happened, because it might be easier to leave it behind and it is not worth bringing it all the way back home — how is that treated?
Mr. Matthews: From a financial accounting perspective, they will look at what is called the book value, which is what you paid for it, less the depreciation you have taken. If they decide to leave something behind, they write off the asset. Their decision to write it off or to leave it behind I assume would be based on what this thing is actually worth and how much it will cost us to get it back. If it is an asset that needs significant repairs, they may very well have decided to leave it behind. I am not saying they did. If there is a decision to leave it behind, it is written off and they would basically remove the value of the asset from the books and that then would be reflected in the government's expenses.
Senator Neufeld: It would not show up identified as any particular thing; it would just be an asset write-off. An asset write-off for 50 items would be whatever.
Mr. Matthews: It would be whatever is in the books.
Senator Nancy Ruth: I need more teaching. I want to ask about the transparency of spending on horizontal initiatives, which are those that involve more than one federal entity. The estimates are organized by entities, so how do people like me, or interested Canadians, satisfy themselves that monies committed to horizontal initiatives are spent and spent appropriately? That is one part of it.
Treasury Board says it has a complete inventory of all Government of Canada programs and that this inventory can be searched by subject. Can one do that across horizontal initiatives then? I would like to see, actually, a list of all these horizontal initiatives that are under way in 2012-13. In particular, I want to know about the maternal health initiative. This is a global initiative. It is in many departments, I understand. The government committed $1.1 billion in new funding and $1.75 billion in renewed funding over five years. However, I cannot find this in the estimates. How would I go about doing that?
Mr. Matthews: There were a few questions there. I will do my best to take them in order.
There is some judgment involved in terms of what is a horizontal initiative. We are looking at items where there are significant dollars and there are multiple departments involved in their spending. You will see in the Supplementary Estimates (C) we had yesterday that there were horizontal items listed. I am looking to Ms. Thornton to tell me what we do in Main Estimates.
Marcia Santiago, Senior Director, Expenditure Information Division, Treasury Board of Canada Secretariat: For Part III, there is a list that is posted. Over the course of the year there is a list of horizontal initiatives associated with Part III of the estimates, for the RPP and DPR. It is maintained. You probably will have to wait for the 2012-13 list, but we can certainly provide the one for the year before.
Senator Nancy Ruth: Would the one for the year before tell me what has happened to the maternal and child health initiative of the government?
Ms. Santiago: I cannot speak to the specific item, but we will give you the list of what we do have and we will see what we can give you on maternal benefits.
Mr. Matthews: On the second question, around the inventory of programs, the reason we say we have a complete inventory is that that relates to a Treasury Board policy called MRRS, but it is really our performance management policy. I believe MRRS stands for management results and resources structure. Every department has to have a list of programs, program activities and strategic outcomes. Historically, if they have wanted to make changes to those items, they have had to go through Treasury Board. That is how we know we have a central inventory.
You can find those online. I cannot speak to how easily searchable it is. I will say that one of the themes around the open data initiative is posting these things in a way that makes them more searchable and I hope we can improve on that front in the future.
Senator Nancy Ruth: It says that this inventory of programs can be searched by subject. What if the subject is maternal health?
Mr. Matthews: You could search on that, absolutely.
Senator Nancy Ruth: Would it show it across departments?
Mr. Matthews: It would show any program that has maternal health in the name.
Senator Nancy Ruth: Am I correct that departmental performance reports are overseen by the Treasury Board Secretariat as part of the estimates and supply process? I understand from the Departmental Action Plan on Gender- based Analysis that Treasury Board Secretariat has been working with Status of Women Canada to define guidelines on how to report in departmental performance reports whether differential impacts were observed in the development initiatives.
Can you confirm that this work between you and Status of Women Canada is complete, that these guidelines are in place now, and that I can expect to see the results in Part III of the Main Estimates? Will there be an explicit and transparent link between spending and gender impacts? I am told that when the budget is prepared there is a series of columns with check boxes and GBA is one of those check boxes. Sometimes it is checked, sometimes it is not, particularly on tax measures, which may be a problem with the Finance Department, which does not think tax measures have a gender-based analysis issue in them, but a check is not exactly a transparent means to see it. How do I know it has been done and what has been done and what the impact of what has been done is?
Mr. Matthews: To answer your question, we will have to get back to you on the specifics of the work with Status of Women Canada, but the role of Treasury Board when it comes to departmental performance reports is that guidance is issued to departments in terms of what content should be there, but also linked to that, I mentioned on your last question, this policy we have on MRRS, which defines performance measures for programs. The objective is to help departments define measurable outcomes for their programs upfront, then through the departmental performance reports and evaluations you report on how they are doing.
I am speaking generally here. When a department comes in with performance measures for their programs, we work with the department to make sure those measures are relevant and solid, and the way we assess them is through the management accountability framework. Every year departments get a scorecard on a number of fronts in terms of how they are doing on the management front. It is everything from financial management to performance measurements to HR management. There are many others in there as well. You could find out how a given department scored on that front. If you were to look at Status of Women Canada, we do make those results public.
To answer specifically your question on the work with Status of Women Canada, we will have to get back to you on the status of that work.
Senator Nancy Ruth: If a department on any particular measure within a department had done a gender-based analysis, how would I know what the conclusion of it was, what decision was made, and what the impact on women and men was?
Mr. Matthews: I would have to check. On the math we do some scoring, but it would not answer those specific questions about what the outcomes and decisions were. We will have to get back to you. I am sorry.
Senator Nancy Ruth: In the Auditor General's 2009 report on gender-based analysis, at page 22, and in the Departmental Action Plan on Gender-based Analysis, Treasury Board confirmed that it was preparing a new desktop tool on the gender-based analysis review function for use by Treasury Board program analysis. Can you confirm that the new tool has been fully implemented? Was it utilized in the work leading up to these estimates? Can we see a demonstration of it?
Sally Thornton, Executive Director, Expenditure Operations and Estimates, Expenditure Management Sector, Treasury Board of Canada Secretariat: We would have to check on the tool. What goes in the estimates is an aggregate of things from departments.
Senator Nancy Ruth: Would it have been in Supplementary Estimates (C)?
Ms. Thornton: No. Again, what we are doing is pulling in things from different departments and organizations. Having said that, the use of those tools typically goes in the development of those policies or programs that are subsequently approved and reflected here, but not actually in this end state of just aggregating. We will have to get back to you on the status of that.
Senator Nancy Ruth: I think Status of Women says that the tool has been completed. I just want to know whether you are implementing it.
Ms. Thornton: We would not have it on our desktops because of the nature of our job, but it may well be elsewhere in the Treasury Board Secretariat.
Senator Nancy Ruth: You will let us know?
Ms. Thornton: Yes.
Senator Nancy Ruth: Thank you.
The Chair: Could we find the types of questions that are being asked in the reports on plans and priorities? If gender-based analysis was not an item that was discussed there, we could bring in the department and say, "Why are you not putting that in as part of your plans? "
Senator Nancy Ruth: It is Treasury Board that has the challenge function for all of government. In the end, it is in their bailiwick.
The Chair: This committee has a challenge function as well. We can bring any department in at any time, on the Main Estimates or any of the estimates, and ask them. Could you tell me: Should we expect to see, in the plans and priorities, a report on how well they have done under departmental performance in the fall?
Mr. Matthews: I am not sure because I think the question is: Was gender-based analysis done in designing a program? In the performance measures, there may be some in which it is evident, because of the nature of the measure, that it was done. There may be others where it is less evident. If you are looking for a section in a departmental performance report called "Gender-based Analysis, " I do not think you would see one. It really revolves around the design of the program, what — I do not want to put words in the senator's mouth — analysis was done in the design of the program to factor in gender-based analysis, and then what the performance measures would flow out of that.
The Chair: Have you implemented gender-based analysis in your planning and priorities?
Mr. Matthews: Where applicable, yes. I think there are some departments that those issues are more relevant to than others.
The Chair: Thank you. We will keep that line of questioning in mind.
Senator Ringuette: On your slide 10 you indicate that there is an increase, with regard to the total expenditure, of $1.1 billion. You highlight, on the next slide, the major issue with regard to that expenditure. I was under the impression that, last year, cabinet and Treasury Board were going through program review and program reductions and looking at efficiencies. I look at what is being proposed as to spending for the next fiscal year, and there is an increase of 1.1, notwithstanding the upcoming budget. What I would like to see is what the result of that program review has been. Which programs have been reviewed, decreased, and so forth? Work has been done in the last year, and the numbers that I see here do not indicate any kind of reduction.
Mr. Matthews: There are a few things going on. The results will be made public, in the upcoming budget, of the Deficit Reduction Action Plan, and we all know that is not in here. However, you are quite right that there was an exercise that predated that, called Strategic Review, which has been in effect for the past four years. Strategic Review involved bringing in a group of departments, each year, to look at, on a program basis, which of their programs were performing and which of them were not. Over the course of four years, all major departments were brought in. We had 25 per cent per year.
When that exercise started, the government was actually still in a surplus position. It was not a cost-cutting exercise. It was more of a management exercise to say which programs were not performing. For those that were not, you could actually propose to have the funds reinvested into a program that was performing.
If you look back at the four years of Strategic Review, in 2007, there was ongoing savings from that group of departments of about $400 million a year. In 2008, there was about $600 million a year. Again, those exercises were not looking at cost cutting as the main driver. It was about reinvesting, finding out which programs were performing.
By 2010, there were $287 million. By then, it had very much become a cost- cutting exercise. The government was in deficit at that point. There were no proposals to reinvest money. They were actually taking the cuts and putting them back towards the Consolidated Revenue Fund.
If you looked at Budget 2011, there was roughly 1.5 billion in ongoing savings identified for the 2010 group. If you look, department by department, in the highlights in these estimates, you will see disclosure as to how much money has been reduced from their estimates because of Strategic Review. I mentioned National Defence earlier. You will see that, in their text, they highlight $500 million in reductions because of Strategic Review. At the same time, though, other costs are increasing. There have been new programs added. There is inflation. We already mentioned that the Canada Health Transfer has grown by 6 per cent. It is a reduction of some things, while other things are increasing. You are quite right; in 2012-13 estimates, as we presented, there is a slight increase, However, it is because some reduction was achieved, but other things are growing.
Senator Ringuette: I will go to your slide 11. I look at the Building Canada Fund that you indicate has increased by $612 million. Was it just last night that we heard you say that the Economic Action Plan, which includes the Building Canada Fund, had wound down with Supplementary Estimates (C)? Now we see, all of a sudden, that there is a $612 billion.
Mr. Matthews: Some of our programs existed before the Economic Action Plan, and the Economic Action Plan was used to top up and add additional funds to those programs. I cannot recall if the Building Canada Fund was one of those funds, but I believe it was. I will rely on my colleagues to check that while I speak.
The Building Canada Fund was designed to run from 2007 to 2014, so it predated the Economic Action Plan. There are two major components. There is the major infrastructure, and then there is a second piece focused on communities. The communities piece is focused on communities that have less than 100,000 citizens. It is aimed at smaller-sized cities. That funding predated the Economic Action Plan, so it was not impacted by the wind-down piece. It was not eliminated. What they are saying here is that they are planning on executing spending, in 2012-13, that is over and above what they spent in 2011-12. It is just the nature of the agreements they reached. Here, they are dealing with reaching agreements with municipal and provincial governments. Sometimes that is slow going. Basically, when the estimates come along, they assess where they are in terms of negotiations and spending, and they make their best estimate as to what they will spend in the current fiscal year. These types of programs are often prone to re-profiles because they make their best estimate and things change. It is not uncommon to see amounts re-profiled from one year to the next. I will ask my colleagues if they want to add anything.
Ms. Thornton: Just to confirm, it was a seven-year initiative, from 2007 to 2014. It was originally $1 billion. The Economic Action Plan topped it up by another $500 million. That is the component that is closed, but the balance continues.
Senator Ringuette: It does not add up.
[Translation]
Senator Hervieux-Payette: Where can we find this billion dollars in our document?
Mr. Matthews: To find those figures, you have to look in the budget.
[English]
It would have been Budget 2006-07 where the actual billion was outlayed, and that $1 billion was to be spent over seven years.
[Translation]
Senator Hervieux-Payette: It is nowhere here?
Mr. Matthews: No, because these documents only cover one year.
[English]
Here, you will only find the spending plan for one fiscal year. That program, as was said, was a billion over seven years, and it was topped up, during the Economic Action Plan, with an additional $500 million. What you are seeing in these estimates documents is just the piece planned to be spent in the next fiscal year.
Senator Hervieux-Payette: We can see one part of it?
Mr. Matthews: You see one part of it.
Senator Hervieux-Payette: Where is it?
Mr. Matthews: If you look at the departmental performance reports, frequently you will see an update on what has been spent over the life of the program.
The Chair: The question is can you direct us in the Main Estimates to what we are talking about here?
Mr. Matthews: Oh, this year? Sorry.
You can look at Infrastructure Canada, which is under Transport, page 325 in the English version.
If you look at page 326, you will see the first line of figures, Building Canada Fund, major infrastructure component. You will see the numbers for 2012-13 versus 2011-12, and the number on the far right 694,690 represents the planned spending for the 2012-13 increase over 2011-12.
Senator Ringuette: I understand it was a seven-year commitment for "X " amount of dollars, and probably the first two years there was a ramping up because of the applications coming in to receive those grants.
However, I do not understand why we would be increasing by $650 million from last year, which is by almost 50 per cent from last year in this budget year. Why all of a sudden do we go from a program last year running at $1.27 billion on a seven-year span to this year growing by almost 50 per cent?
Mr. Matthews: Again, it is the timing of the agreements they sign. There is a maximum amount for the program set out at the time of the budget. In this case there was a budget amount that was then topped up. There is then flexibility for the department in terms of how it spends the money over those seven years, so some years will be higher than others. What is key is over the life of the program they do not exceed what has been allocated through the budget process. Depending on the nature of the agreements and the spending pattern, you will see for these major infrastructure programs spending in one year that is significantly different from another because they could have major new projects starting, but the key is to ensure that over the life of the program they do not exceed the funds set aside in the various budgets.
Senator Ringuette: I understand that, but in a given year, an increase of 50 per cent? I have a tough time accepting that, which leads to my other question.
[Translation]
The Chair: Senator Hervieux-Payette, it is at page 370 in the French version.
[English]
In the English we are looking at page 326.
Senator Ringuette: This leads to my other question, which you will probably not be able to answer. Are we looking in these estimates as an overall increase of $1.1 billion in those different scenarios to receive on March 27 a budgetary measure that will, for instance, decrease by 50 per cent the Building Canada Fund from last year's number? They will then say, "Oh, boy, we have cut program expenditure by 50 per cent, " which is not the reality. It is a false reality.
I know you cannot supply us with any budget issue or government policy things, but I can tell you one thing, I will be looking at this extremely carefully, program by program, at what we are being asked here to agree to, the increase of $1.1 billion, and at the end of the month, in three week's time, if the general population will be told that the government is cutting their budget by 10 per cent based on these that include an increase, for example of this specific program of 50 per cent, that will be a false reality, and I will certainly highlight that. I understand you cannot reply to my comments.
The Chair: Thank you, Senator Ringuette.
Senator Marshall: Mr. Matthews, just to clarify, you were talking about the sequence of events in one of the charts we went through in your presentation. It is possible that some of the budget decisions that will come down March 29 might be reflected in Supplementary Estimates (A); that is correct, is it?
Mr. Matthews: It could, although I will say it will be a challenge this year just because of the supply cycle. It is not uncommon to have new budget initiatives in a Supplementary Estimates (A). That is more common when you are dealing with a February budget because you have additional time.
We are dealing with an end-of-March budget, and Supplementary Estimates (A), our timelines do not allow us a lot of time after that before we close things off. I cannot say there will be nothing, but it will be a challenge this year to get something in Supplementary Estimates (A) that is new in the budget. Supplementary Estimates (B) would be another option.
Senator Marshall: So it might come in Supplementary Estimates (B).
For the document we are looking at now, we are really comparing estimates last year and estimates this year, so Supplementary Estimates (A), (B) and (C) we have looked at are not reflected in the numbers; is that correct?
Mr. Matthews: Correct, we have presented comparisons of mains to mains.
Senator Marshall: Yesterday when you were here I was asking about the public debt charges. In the document we are saying last year it was $30.3 billion and this year is $28.9, but that $30.3 billion has subsequently been reduced through Supplementary Estimates (B) and (C).
Mr. Matthews: The estimates of public debt have been absolutely reduced; you are right.
Senator Marshall: You were talking about a committee and they were looking at the sequence of events with regard to interim supply and main supply. Is that a parliamentary committee?
Mr. Matthews: It is the House of Commons Standing Committee on Government Operations and Estimates, or OGGO as it is called. They are looking at the whole nature of Parliament's job in scrutinizing the estimates and can it be improved.
Senator Marshall: You just put out some options that they were looking at some considerations, but has anybody considered doing interim supply first and then doing the budget and then doing the estimates after the budget?
Mr. Matthews: I think, number one, all options are on the table for them, so they are free to go where they want, and what I highlighted was some themes that came out of the first few witnesses. Is that an option? Absolutely it is an option.
Senator Marshall: That would seem more logical to me.
Could you talk about on page 7 of the document, the last paragraph, where we are talking about net receipts? I know it is not part of budgetary expenditures but is part of the non-budgetary category. We are talking about the net receipts are expected to increase significantly from $600 million to almost $2 billion. Could you give an explanation of that and also tell us where we can find that in the estimates document?
Mr. Matthews: You will have to go department by department to find it.
Senator Marshall: I thought so.
Mr. Matthews: The reason typically is that these estimates are based on planned or scheduled repayments of loans. That would be the reason that would drive a change.
I cannot speak to which loans or investments are expected to increase over this year. I do not have that information, but it would be based on the plan schedule.
Some departments, because of the nature of their work, are more logical to look at than others. You can look at Industry Canada, you can look at numbers related to the Canada Student Loans Program, so any of the programs that would have heavy loan components would be suspects, I guess.
Senator Marshall: If I wanted to see where the $1.9 billion comes from, I would have to go through every page of the estimates?
Mr. Matthews: I was going to say yes, but my colleagues have found it for you, so I will let them speak.
Ms. Thornton: One of the largest ones is really CMHC when we are talking about the non-budgetary decrease.
Senator Marshall: Let us look at page 177. I just want to make sure I am following the document. Would these be some of the examples? Let us take the last one on the page, for example.
Ms. Thornton: It would. You have your set of non-budgetary decreases of $818 million, and that includes the direct lending activity reduction and the scheduled repayments under CMHC.
Senator Marshall: If those repayments do not materialize, what happens? Are they written off?
Mr. Matthews: Not immediately, but there will come a point, if they do not materialize after a certain number of years where they are formally written off. When they are written off in that manner, they will show up in the estimates, much like the Canada Student Loans write-offs we saw yesterday in Supplementary Estimates (C).
I know you have an accounting background, senator, so you are probably wondering about the financial impact to the budget. There is an estimate made on the repayment of these from an accounting perspective but, when they are formally written off, you will see them in the estimates.
Senator Marshall: As Treasury Board, you are tracking the expenditures to $250 billion. Do you track the $1.9 billion coming in? Do you do that during the year?
Mr. Matthews: The centre, through the Receiver General, gets monthly reports from all departments on their full financial situation. It would include the receipts, so that comes due.
Senator Marshall: Therefore it is not Treasury Board.
Mr. Matthews: The Receiver General runs the detailed financial systems. The Office of the Comptroller General and the Department of Finance get that information and they are the ones who actually analyze it in terms of what the financial statements are looking like.
Senator Marshall: Would you know, historically, what the actual performance is compared to what is budgeted? Historically.
Mr. Matthews: Not for this particular program, I would not, no. We can try and find out for you if that is of interest.
Senator Marshall: No, I think that is fine.
The Chair: Thank you very much. We have mentioned the Comptroller General a number of times this evening, but we have not had the Comptroller General before us for some time. We might want to think about that in the future.
Senator Gerstein: Thank you, Mr. Chair. Thank you, witnesses. I think this will be a skill-testing question for myself to see if I understood what you said, Mr. Matthews.
I will refer you to page 281: The Chief Electoral Officer expense. Under program activity, it shows an estimate of $144 million, at $21,900,000 increase — 15 per cent. Since you say this is estimates to estimates — and this is totally a non- partisan comment, but we had an election last year — am I correct that the election is not in the $122 million figure?
Mr. Matthews: The election should be in the previous fiscal year, but I believe there are activities —
Senator Gerstein: Are you saying that the election of 2011-12 — the 41st general election — is in the $122 million? In that case, since we do have a majority government — there is no election this year — how much was the cost to run the election, and are you saying the increase in the Chief Electoral Officer's department is not only the 15 per cent but the decrease because there is no election this year?
Ms. Thornton: When we were here on Supplementary Estimates (C) yesterday, you would have noticed that, under the statutory spending for the Chief Electoral Officer, there was an additional item for this last fiscal year. It was $233 million. That was for the current fiscal year.
Senator Gerstein: It is in Supplementary Estimates (C) that you will see the actual amount that the department would have spent.
Ms. Thornton: That would have been the up-to amount appropriated for those purposes.
Senator Gerstein: How far out do you have to go to find what the actual expenditure was? I am just taking the CEO's office there.
Mr. Matthews: You will have to wait until October; it will be in the Public Accounts of Canada.
Senator Gerstein: It is in the public accounts, not in estimates or supplementary estimates; is that right?
Mr. Matthews: Estimates are all about planned spending, to an up-to — to a threshold. When you are asking questions about what was actually spent, you have to look to public accounts.
Senator Gerstein: Thank you for the explanation.
The Chair: I suppose we could always bring in the Chief Electoral Officer and ask him, too.
Senator Gerstein: That is also a possibility.
[Translation]
Senator Hervieux-Payette: It may be by chance but, by flipping through the pages, I saw references to the Jacques-Cartier and Champlain bridges. You will see why I am asking questions. I cannot give you the page number. It is under "Transport."
I have the feeling that the amount would not even allow to pay for staff and for maintenance of the bridge. It may be that the $100 million is for maintenance. What does it include?
[English]
Mr. Matthews: The bridge is a bit of a challenge when you look at the history of estimates here because it has received funding in past budgets. What you will see here is only what has been approved so far.
I cannot actually comment on what this money would be enough to cover. I wonder if my colleagues have additional information. No, they do not. I am sorry; we do not have information here.
[Translation]
Senator Hervieux-Payette: So, there is not one cent in here for planning the construction of a new bridge. This means that, in the year 2012-13, there will be nothing in these estimates for starting a feasibility study on building a new bridge, or doing an environmental assessment? When I look at the highlights, I see nothing relating to any work beginning next year. Yes, there will be repairs, but nothing else.
[English]
Mr. Matthews: In the document is indicated the increase over the previous year for major maintenance, but in terms of the specific questions you have asked in terms of feasibility studies, et cetera, I cannot speak to what is actually in here.
[Translation]
Senator Hervieux-Payette: That appears nowhere else?
[English]
Mr. Matthews: You would be able to find it in Reports on Plans and Priorities and departmental performance reports, so I would point you toward specific departmental information when it is available to get more details.
Senator Hervieux-Payette: When will it be available?
Mr. Matthews: We have not yet determined exactly when; we are still working with the RPP schedule to determine when that will be produced, but that will be a good place to look. The Reports on Plans and Priorities do support the Main Estimates, so it is normal to have them tabled before the study of estimates is complete.
[Translation]
Senator Hervieux-Payette: I have two completely different questions. What is the rate of interest that you have used for the total of $28.9 billion?
Mr. Matthews: I am unable to give you the exact figure.
[English]
However, the Department of Finance has a debt management plan on their website. The challenge with the debt management with the Department of Finance is that it is three pieces: Short-term debt, debt that is much longer term in nature, and they also have interest on pension plan liabilities. It is the weighted average of those three things together. To forecast the interest rate for longer-term debt, they use forecasts from private-sector economics. They take a weighted average of private-sector economists' figures to actually develop that forecast, but I am sorry I cannot give you the exact number, but it is on their website.
[Translation]
Senator Hervieux-Payette: My second question might make you laugh. As military equipment has been mentioned here earlier, can you tell us who is able to give us the definitive value of our submarines, how long we are going to keep them, and what amount has been allocated if they sink, burn down or get stuck at the bottom of the sea? I know this may seem crazy but, if I remember correctly, we paid $600 million for submarines that do not seem to have been our best investment.
I wonder where we could find that in the documents and under which vote money was set aside to make sure that we would have at least one or two operating submarines.
[English]
Mr. Matthews: In terms of their worth, I would point you to each department's financial statements each year. National Defence has many assets but the submarines would be included in the assets of National Defence. You would not see them in public accounts. They are in there but not as a distinct item. I suggest you go to the Department of National Defence financial statements in the fall time frame. You will get a sense of the asset base they are carrying and what the values are. If I recall correctly, they break it down between the various major categories of equipment.
[Translation]
Senator Hervieux-Payette: May I presume that this rule also applies to all other sectors? The distribution of the funds, whether it be for the Building Canada Fund or any other, will be in the detailed estimates of the department, in order to know where, when and how?
[English]
Mr. Matthews: Every department produces financial statements and will group assets together to display their worth. The Building Canada Fund is different because you are not dealing with assets there. They are signing agreements to give money to other organizations, so they are not actually building assets the government owns. You would not see similar assets on their financial statements. If you are wondering about where to look look for assets, Departmental financial statements is a good place.
[Translation]
Senator Hervieux-Payette: So, this would include the studies done to accept the project, to audit the implementation of the project, to audit the payments — because we do not just send a cheque without supervising the implementation of the project, I suppose? Does that include staff? Where is that staff coming from? There must be a detailed budget for that. The billboards on the sites, where do I find that?
[English]
Mr. Matthews: I do not know if you will find all of that in one document, but the reports on plans and priorities and departmental performance reports are good places to look for detailed explanations of what is going on with the programs. The wide range of information you are looking for I cannot imagine you would find in one spot; but the detailed departmental documents are the best ones to look at.
[Translation]
Senator Hervieux-Payette: As a new member of this committee, I would like to make a brief comment.
We have to look in four different places to see how money is spent. This should be an issue for a future recommendation because, if I do not know, you do not know either, and I am pretty sure that no Canadian will know because we cannot expect people to be able to do such in-depth research. I do not know of any private sector company that would survive if its financial information was so scattered that it would be unable to control its expenditures.
These are probably good documents but their problem is that they only give us part of the information, or no information at all, in which case we have to look for it somewhere else. I do not want to complain but I believe that, contrary to our Australian colleagues, we do not have to change the system because there is only one person issuing the cheques, I hope, in our organization.
[English]
The Chair: Do you have any comments with respect to that frustration expressed?
Ms. Thornton: I appreciate the frustration. With regard to certain things like the Building Canada Fund or many infrastructure funds, the Infrastructure Canada website maintains a good list. For example, on the Building Canada Fund, you can see that there have been over 1,400 projects approved. Most of these are cost shared. You can see the dollar value. It is matching. One of the reasons for the delays is that you have to get the incoming commitments from the municipalities or whoever the partners are. They have the list, and it is usually broken down by geographic region with the dollar value. It does not give you many of the other details you asked about but if you want to get a good sense of the commitments made out there and that are in play, those do not show up until the partners meet the criteria and there is a commitment to go ahead. The monies are pooled in the reference levels, which you are seeing now, and they get going. They have very good lists broken down by detail of project.
Senator Hervieux-Payette: I like value for money. If we do not have the details, we do not know about the value. We spend the money but how much are the administrative costs and the planning costs and so on?
Mr. Matthews: You probably do not want me to refer you to one other document but there is one.
Senator Hervieux-Payette: There is another one?
Mr. Matthews: All of our programs are evaluated periodically, and evaluations are public as are any internal audits conducted on any of the projects. That information is public and available. It is fairly easy to find, but you have to go to the departmental website. It is useful information and it is one more source.
Senator Hervieux-Payette: What is the name of the report?
Mr. Matthews: It is the evaluation, and there is the report on plans and priorities.
Senator Hervieux-Payette: Besides that and this one. Do we have a fourth one?
Mr. Matthews: We mentioned the departmental performance reports, which are actuals. If you are looking for information on one department, that is easy to find on the website. It is plans, actuals and evaluations as well as internal audits. It is a lot to go through.
Senator Hervieux-Payette: I know, but why would we approve large sums not knowing how it is being spent. Otherwise, the exercise is a bit strange.
Mr. Matthews: It is a reasonable question to ask the department, when they put an amount forward here, which projects it represents. That is a perfectly reasonable question; I just do not know the answer.
Senator Peterson: I am new to this committee. HR is seeking $591 million for student loans. Just a week or so ago, we wrote off $300 million and some. Do you make allowances for that or do you intend to get that back?
Mr. Matthews: That is the amount of new loans they plan to issue this year. The write-offs are old loans — many over seven years old. What you see here is the amount of loans to be issued. When the government's financial statements are prepared, they take allowance on those because they know that not 100 per cent will be. The amount you see here is the amount of loans that they are forecasting to issue. No allowance, no nothing; this is just the money going out the door.
Senator Peterson: CMHC have been cut back on their expenditures considerably. I read somewhere where they almost hit the ceiling on mortgage insurance. If they have, does that put them out of the picture such that they cannot do any more, or can they get money somewhere else?
Mr. Matthews: If they are hitting specific financial ceilings, they can approach the Department of Finance to get them raised. That is the key relationship in terms of changing the ceilings. The reason you are seeing CMHC decrease is largely related to the wind down of some of the activity under the economic action plan, which was much targeted. You may recall that measures were put in place to, often through CMHC, to ease the borrowing during the economic crisis. Those measures are being wound down. I am not aware of CMHC bumping into any ceiling that will prevent them from doing business.
Ms. Santiago: On page 169 in English, the Canada Mortgage and Housing Corporation budgetary expenditures are actually increasing slightly. You might have been looking at the decrease in the non-budgetary items on page 170. Those are the loan outlays. The two pages are saying that their budgetary expenditures are going up slightly, even though the amount of repayment — I guess this is a repayment — is showing a negative.
Senator Peterson: Is that ceiling high? Obviously, it has been established by someone. Can they say, "We are up to it and we need more money. We will take it from here. " Does something have to happen?
Mr. Matthews: I would have to check on the rules on mortgage insurance and the ceiling. I believe they may actually be put in legislation, so we would have to check on how the ceilings for CMHC mortgage insurance work. I am not aware that they have bumped into any ceilings.
Senator Peterson: They are close. That would have a dramatic impact on house building.
Indian Affairs and Northern Development has $137.8 million for site remediation. Where are these sites located? Would this be 100 per cent of the remediation? Would this amount finish it?
Mr. Matthews: Actually, this relates to environmental liabilities. It is the amount that is planned to be spent this fiscal year by that department to clean up those sites. In terms of finding out where those sites are, there is an inventory that is public of contaminated sites owned by the federal government. You can see the list of which departments and where the location is.
The actual environmental liabilities on the government's financial statements are quite significant. I believe there is $4.4 billion or $4.5 billion in liabilities sitting out there on the Government of Canada's financial statement. In terms of remediation, this is a drop in the bucket of the total liability.
Those liability amounts will change every year as a better estimate is made of what the clean-up costs will be, but this is not the completion of their remediation activity; it is just what they plan on spending in fiscal year 2012-13.
Senator Peterson: This total amount, this 4 point some billion, we could find that somewhere?
Mr. Matthews: Again, these are actual, so if you went to the Public Accounts of Canada, you would see that disclosed in Volume I.
Senator Peterson: Something like this looks good, but it is really —
Mr. Matthews: It is important to understand what their plans are for the upcoming fiscal year, and that is what this is. This is how much they plan on spending for the upcoming fiscal year. There is a Federal Contaminated Sites Action Plan that gives you additional detail on the planned remediation. The number of sites is extensive.
Senator Peterson: I believe they started in 1956.
Senator Nancy Ruth: Are any costs of those sites recoverable from the companies that caused them?
Mr. Matthews: Some are. When the government puts a liability on its books, they put on the portion they are accepting responsibility for. You have some sites where the government has pursued recoveries from someone else, you have other sites where there is shared liability with another jurisdiction, but the 4.4 figure I mentioned, that is the amount the government feels it is liable for.
Senator Callbeck: Thank you for coming this evening. I want to go back to the strategic review that Senator Ringuette asked about. As I understand it, it has been going on for four years. Every year for the past four years you have done 25 per cent of the departments. In the first three years, a program that was not effective was cancelled and the department could put the money into another program that was producing, right? In 2010, you started taking the savings and putting them into the Consolidated Revenue Fund. Is that right?
Mr. Matthews: You are mostly correct, senator. For the first three years, departments had the option to propose a reinvestment scheme, but it was up to Treasury Board ministers and the Minister of Finance to accept it. They were allowed to make proposals for reinvestment, and based on the savings that were achieved, many proposals for reinvestment were accepted.
By the last year, you are quite right, there were no reinvestment proposals. The money was actually lifted and put towards the deficit. My point is, it was not up to the department to say, "We want to reinvest that. " They could make the request, but it was not their decision.
Senator Callbeck: When do we get the details of these savings? When I look at ACOA, which I am extremely interested in, it says here there was a $10.8 million decrease resulting from savings identified as a result of strategic review.
Mr. Matthews: Right.
Senator Callbeck: When do we get the details?
Mr. Matthews: The initial detail came out in the budget, which outlined how much for each department was actually being saved or proposed to be saved.
The best way to find details is actually through those quarterly financial reports I mentioned. Every department actually does a narrative comparing this year to the previous year. If I recall correctly, a few months back ACOA made an announcement on the impact of their strategic review, and I will turn to my colleague to share information on that.
Ms. Thornton: They had actually provided information about the impact. For 2011-12, they were looking at a reduction of $5.9 million; for 2012-13, $10.8 million; and 2013-14, $15.2 million. Then they talk about the specific areas they realized some of those in. They reduced internal services and other operating costs, and they have that listing available.
Senator Callbeck: I have to go to the quarterly report to get that?
Mr. Matthews: That is a good place to start. You could also look to Departmental Performance Reports. I have seen disclosure in the quarterly reports, which is a good place to go.
The Chair: As a supplement, that is the strategic review that was a few years ago?
Mr. Matthews: Correct, a few years ago.
The Chair: We may see another impact as a result of the strategic and operational review that will be forthcoming?
Mr. Matthews: Correct.
Senator Callbeck: On page 112, there is a reduction of $10 million for the purchase of domestic coinage. Is that because of the increased usage of electronic payments? Why is that? Or maybe it has something to do with the study we did on the penny?
Mr. Matthews: My understanding is that is just an estimate on what they plan on spending this year, and it happens to be less than the previous year. I cannot speak to why that is. That would be a question for the Department of Finance through the Mint, I think, to ask. I am sorry I cannot help you with the details there.
Senator Callbeck: On page 286, there is the Public Appointments Commission Secretariat. I have asked about this before because there is still no commissioner or commission, but they are still spending money. I asked about it last fall. I believe it was up to $2.5 million they had already spent, and now they are asking for another million. I was told they are doing reports.
Is it possible for this committee to get a copy of the reports they have done? That is a lot of money when there is no commissioner and no commission.
Mr. Matthews: Again, the best source for information on the activities are through the Report on Plans and Priorities. I am not clear on whether the actual reports they have done are available through access to information or not. I am not sure if they are protected.
Senator Ringuette: Who would have those reports, then? If public money is being spent to create those reports, it should be available to the public.
Mr. Matthews: It may be available; I am just not certain.
Senator Callbeck: On page 177, two thirds of the way down the page, there is a decrease of $3.8 million to reflect adjustments to the funding profile requirements for the Residential Rehabilitation Assistance Program, the RRAP, based on expected program delivery.
I cannot figure out why there is a decrease based on expected program delivery. The last time I checked in my province, there was a waiting list of six years. This is a program whereby the government will help you bring your house up to standard.
Mr. Matthews: Right. I am not certain why they are forecasting a decrease there. We will have to get back to you on that one.
Senator Callbeck: All right. I would like to know that.
On page 325, two thirds of the way down the page, there is a net decrease of $349 million of contribution funds under the Green Infrastructure Fund. When that fund was set up, it was for $200 million per year for five years. As far as I can determine, the government has only spent $40 million to date. It was announced in Budget 2009. I am wondering why.
Mr. Matthews: There are a couple of things. It was a billion, as you said, in 2009, over five years. Some of that money has been transferred to other departments for certain projects, so you may be able to follow the history there. However, with respect to some of the transfers to other departments, $14.5 million went to the Economic Development Agency for Quebec related to a gas pipeline at Thetford Mines; $6 million went to Aboriginal affairs for the Beaufort Regional Environmental Assessment; there was $25 million for NRCan related to the forestry industry; and another $15 million went to the Economic Development Agency in Quebec related to forestry as well. There are those pieces.
The other piece mentioned here is $58.7 million being used by infrastructure to actually cover off operating costs, so that is additional monies as well. I do know that on their website they have a list of the projects they have actually funded, but again, it is a mix. Some have been funded directly by the department and others have been transferred to other organizations.
Senator Callbeck: The fund was set up, a Green Infrastructure Fund. Those projects that you are talking about, what do they have to do with green infrastructure?
Mr. Matthews: Some, as I said, relate to the forestry industry and affected areas, but the transfer to actually move resources from this organization to other departments, I am not certain as to what the criteria would be to actually allow for that transfer.
Senator Callbeck: Would you find out? As I say, it was to be $200 million a year for five years. What I have been told is that the government has only spent $40 million on that infrastructure fund, that money has been transferred here and transferred there, and I am wondering what the story is.
Ms. Thornton: We have about $617 million that has been committed to 17 projects. A list of those projects is available on their website. A series of them are biomethanization projects in a number of areas, as well as waste water treatment plants, sewage upgrades and some pollution control centre upgrades. That is available. It is certainly more than the number that you have indicated that has gone out, but I do not know the full amount.
Senator Callbeck: What is the total there?
Ms. Thornton: About $617 million has been committed to 17 projects. That was before Christmas. Then some other monies were transferred to other departments for specific projects, and that is about 170.
Senator Callbeck: That list is on what website?
Ms. Thornton: I think this is the infrastructure website. They have lists of their projects.
Senator Callbeck: I think that is it, Mr. Chair.
The Chair: I think what we are seeing is that we will have to have a secretariat like you to just help us trace all these expenditures and where they are going. We do not have the resources to do the job that we would like to be able to do, I think is what a lot of the frustration that is being expressed here is.
Senator Nancy Ruth asked to go on round 2, and that is the only name I have on round 2.
Senator Nancy Ruth: Page 9, the pie chart of public debt, says there is nearly $29 billion in public debt. It says that public debt charges are comprised of interest and unmatured debt at $19.7 billion and other interest charges at $9.2 billion; interest on unmatured debt is the interest resulting from certificates of indebtedness issued by the Government of Canada that have not yet become due.
This includes debt to China, Canada Savings Bonds? What is that sum of money? Then I want to know what the other thing is, because it talks about the Public Service Pension Plans.
Mr. Matthews: Right. The debt interest here, or public debt interest, that is disclosed is an estimate of amounts owed that are not yet due, so everything from, as you mentioned, Canada Savings Bonds to short- and long-term debt. The debt holders, there is a mix of foreign and domestic, so it is some to other countries and some is held in Canada.
Senator Nancy Ruth: Held by our banks?
Mr. Matthews: I am not certain of that. There is a fair amount of bonds. I am not certain whether there are any Canadian banks that hold it. The Department of Finance actually has a debt management report on its website that discloses the mix of who holds what and what their objectives are. That is kind of the debt held by outside, and then there is interest calculated on liabilities related to the public sector pension plan, which are significant as well. That is kind of the split there. As you mentioned, it is a mix of both foreign and domestic debt.
Senator Nancy Ruth: I look for the public sector debt on Department of Finance?
Mr. Matthews: "Department of Finance public sector debt management strategy " I think are the keywords. The other place I will refer you, if you are interested in doing some heavy-duty research, is Volume I of the public accounts has a fair amount of detail on the debt.
Senator Peterson: Where would I go to find the current status of the bailout of General Motors and Chrysler?
Mr. Matthews: We touched on this yesterday as well. I do not know that you will find it all in one place. EDC, Export Development Corporation, is the best place to look. However, the story is not yet finished there, because what happened is the government, as you know, helps with assistance to both General Motors and Chrysler in terms of loans. Some of those loans were repaid. Some were turned into shares that the Government of Canada still holds. I believe the government has now divested itself of all the shares in Chrysler. They have sold off some of the shares in General Motors, but I believe they are still sharing.
At the end of the day, if you are wondering what was the financial cost of that deal, you will not know until all those shares are sold, but those shares have a market value and EDC is the best place to look for that.
There is some older disclosure in Public Accounts of Canada when the deal was first done around how much was actually given in assistance to those companies.
Senator Ringuette: We did not record the market value when we bought them. It was reported as the value of one dollar.
Mr. Matthews: At that stage, you may recall that both of those organizations were in some sort of bankruptcy protection, so you make your best bet. As time has gone on, they have increased in value. Accounting standards will not let them actually put on the books the value of those shares, because you do not actually recognize that until you realize it. However, the market value can be tracked through the markets as long as you know how many shares they have. It has been quite complex. I think the shares themselves have split two or three times, so 10 shares became 20, then 40. It has been complex to track through.
The Chair: Presumably this would be an increase in non-budgetary entries.
Mr. Matthews: In part.
The Chair: Thank you very much, Treasury Board Secretariat, Mr. Sprecher, Ms. Thornton, Mr. Matthews and Ms. Santiago. There is a lot of information here, but we very much appreciate your patience and understanding with our team here.
The next meeting is tomorrow afternoon for one hour and 15 minutes. Keep note of the announcements as to where the meetings are. When we are meeting when the Senate is sitting, we try to meet as close to the chamber as we can in case someone has to attend the chamber.
Thank you very much. The meeting is now concluded.
(The committee adjourned.)