SECOND INTERIM REPORT ON THE 2003-2004 ESTIMATES
Standing Senate Committee on National Finance
SIXTH REPORT
Chair:
The Honourable Lowell Murray, P.C.
Deputy Chair: The Honourable Joseph A.
Day
May 2003
THE HEARINGS - THE PRESIDENT OF THE TREASURY BOARD
1. The 2003-2004 Estimates were tabled in the Senate on 27 February 2003 and referred for review to the Standing Senate Committee on National Finance. As is customary with this Committee, several meeting dates were set aside for the review of the 2003-2004 Estimates. The Committee’s examination began on 19 March 2003 when Treasury Board officials outlined and explained the main features of the 2003-2004 Estimates. They also answered several questions at that time and, through written responses, at a later date. The details of the Interim Supply Bill were made available for the Committee’s consideration before the end of March 2003 and an interim report (the Committee’s Fifth) was tabled in the Senate in March 2003. Since that date, the Committee has continued its examination of the 2003-2004 Estimates.
2. On the 23 April 2002, the Committee initiated hearings on the use of the Treasury Board Vote 5 – Government Contingencies. The first witness was Ms. Sheila Fraser, the Auditor General of Canada, who explained the findings of her recent audit of the use of Treasury Board Vote 5. The hearings continued on 1 May 2002, when Mr. Richard J. Neville (Deputy Comptroller General, Comptrollership Branch) and Mr. David Bickerton (Executive Director, Expenditure Operations and Estimates Directorate, Comptrollership Branch) answered a number of technical questions on Vote 5. On 8 May 2002, Mr. Frank Claydon, Secretary of the Treasury Board and Comptroller General, explained the Treasury Board policy on the use of Treasury Board Vote 5. The Committee’s findings and recommendations on the use of Treasury Board Vote 5 are contained in a separate report (the Committee’s Seventeenth Report of the 37th Parliament, 1st Session). The Treasury Board Secretariat has considered the Committee’s recommendations and has prepared a Discussion Paper on its proposed changes to the use of Treasury Board Vote 5. At a meeting on 13 May 2003, officials of the Treasury Board Secretariat sought the Committee’s views on the proposed changes to the Treasury Board policy on the use of Treasury Board Vote 5, on the Vote wording and on the guidelines for their analysts. The Committee appreciates the opportunity to comment on the Secretariat’s proposals and understands that there will be further meetings on this issue at a later date.
3. On 7 May 2003, the Committee heard from the Honourable Lucienne Robillard, President of the Treasury Board. The Minister was accompanied by several officials, principally Mr. Richard J. Neville (Deputy Comptroller General, Comptrollership Branch) and Mr. David Bickerton (Executive Director, Expenditure Operations and Estimates Directorate, Comptrollership Branch), who provided additional information. The meeting provided Senators with an opportunity to discuss both policy issues and technical aspects of government expenditures listed in the 2003-2004 Estimates. Although much was learned in this meeting, the Committee intends to examine further certain items of the 2003-2004 Estimates at a later date and to report on all of its work before the end of the fiscal year 2003-2004.
THE HEARINGS – THE PRESIDENT OF THE TREASURY BOARD
4. In her opening remarks to the Committee, Minister Robillard outlined a number of significant changes in the 2003-2004 Estimates, and highlighted several initiatives of the federal government.
5. She noted that the 2003-2004 Estimates amount to $175.9 billion in federal government expenditures, including $173 billion in budgetary spending and $2.9 billion in non-budgetary expenditures. This amount is consistent with, and reflects, most of the $180.7 billion in planned budgetary spending for 2003-2004 as set out in Budget 2003. It is anticipated that additional spending authority will be sought from Parliament through Supplementary Estimates during this fiscal year.
6. In total, the 2003-2004 Estimates have increased by $5.6 billion, mostly in budgetary spending. This year’s planned spending represents a 3.3% increase over the planned expenditures listed in the 2002-2003 Estimates presented to Parliament in March 2002. Minister Robillard highlighted important new spending investments. In the area of health care, she pointed out the additional $700 million this year for the Canada Health and Social Transfer program. This amount reflects the accord reached by the First Ministers on 5 February 2003 and is the first expenditure of an eventual $34.8 billion commitment over five years.
7. Minister Robillard also noted that the federal government has set aside an additional $450 million for direct transfers to individuals due to increases in Old Age Security payments and the Guaranteed Income Supplement, reflecting an increase in the average rate of payments and in the expected number of beneficiaries. With respect to security issues, she noted the new spending at Transport Canada as well as the $402 million for the Department of National Defence, including $204 million for pay and benefit adjustments approved for military and civilian personnel, $148 million to partially compensate for the loss of purchasing power due to price increases, and $50 million relating to the sustainability funding announced in Budget 2000.
8. Finally, Minister Robillard reminded the Committee of ongoing efforts within her department to reinforce accountability and transparency in reporting to Parliament. Notably, efforts were made to improve the preparation of departmental Reports on Plans and Priorities and the Performance Reports. The federal government also continues to implement the revised policies on internal audit and evaluation. The initiative is half way into its four-year implementation plan and the Treasury Board has approved the continuation of financial assistance to departments and agencies. Over four years, the plan is expected to cost $90 million.
9. Senators were interested in a number of items contained in the 2003-2004 Estimates. For instance, Minister Robillard was asked to explain the large increase in planned spending for the Treasury Board Secretariat, which is expected to rise by 12.4% in the fiscal year 2003-2004 as compared to the previous period. A large portion of the increase, about $249 million out of a total net increase of $267 million, is earmarked for Treasury Board Vote 20, Public Service Insurance. She explained that there have been substantial changes in the federal government’s cost of providing various insurance benefits to the public service because of the exhaustion of an earlier surplus and recent increases arising out of collective agreements. Hence, insurance premiums are expected to rise significantly. A second source of increase in spending involves the Government on Line initiative which will require a large expenditure on professional and special services.
10. Another concern of Senators is the continued delays experienced by the trucking industry at the Canada-U.S border. These delays are costly and have a serious effect on the economy’s overall performance because Canada relies heavily on its trade relations with the United States. The Senators questioned when the federal government plans to upgrade the infrastructure of bridges and roadways across the border in order to ensure a larger flow of goods between the two countries. Minister Robillard explained that there already exists, in current and previous federal budgets, an allocation of funds intended to deal with the security of border crossings. Included are a number of initiatives that could eventually reduce the delays that are now being experienced by the transportation industry. She reminded the Committee that there was one element set aside to deal specifically with infrastructure requirements.
11. Senators expressed an interest in the $402 million additional funding allocated to the Department of National Defence. Mr. Neville explained that the amount is made up of several components. First, there is an increase of $204 million for pay and benefit adjustments approved for military and civilian personnel, including the related employee benefit costs. Moreover, there is $148 million to partially compensate for the loss of purchasing power due to price increases. Finally, $50 million has been allocated to the sustainability funding announced in Budget 2000.
12. Senators revisited the issue of the Canadian Firearms Program, which has long been of interest to the Committee. In particular, the Senators sought assurance that the 2003-2004 Estimates provide a reasonable prediction of planned expenditures on this program and that there will not be requests for further funding in Supplementary Estimates. Minister Robillard acknowledged that there have been difficulties in the past regarding program cost. Although she could not guarantee that there will not be additional funding requirements sought through Supplementary Estimates, she did state that the current amount sought in the 2003-2004 Estimates was prepared with great care and should be adequate.
13.
Some Senators were interested in the decline in the federal funding of
student loans. Specifically, they
noted that there is a reduction of $220 million in loans from the last fiscal
period. Minister Robillard
explained that the decline in student loans is the result of a legislative
change and a reduction in the overall portfolio of past student loans. There have also been accounting changes that result in a
lower forecast of expenditures on student loans.
However, she assured the Committee that there is no decline in the actual
amount loaned to students, only in the amount forecast in the 2003-2004
Estimates. In the past,
predicted loan requirements often exceeded the actual take-up of loans by
students. The new procedure is
expected to predict more accurately actual loan disbursements and costs.
14. Senators questioned Minister Robillard about the use of grant money by community groups to hire lobbyists on political issues. Specifically, it was pointed out that one non-government organization may have used some of its grant money to hire professionals to lobby Parliamentarians on Canadien Firearms Program. Senators were uncomfortable knowing that federal assistance to community groups would be used to support lobbying efforts. While she was not aware of the particular cases, she agreed to look into the matter.
15. Senators observed that a $7 million decline in the Income Security grants of the Department of Human Resources Development is expected. In light of the aging population and an increase in benefits, some Senators questioned why these planned expenditures are declining. Mr. Neville explained that the $7 million amount is a net change in the planned expenditures of the Spouses Allowance, and results from a decline in the eligible population from 92,006 individuals to 89,162 persons. This decline in the number of eligible persons accounts for a decrease in required funding of $13 million. This decrease is partly offset by an increase in benefit payouts of $6 million, which results in a net decline of $7 million.
16. Some Senators wanted information on the process of moving funds from one account to another. Specifically, the Minister of Canadian Heritage announced she was going to advance $130 million to the Canadian Television Fund by transferring funds from Telefilm Canada, from the Canadian Television Fund’s contingency fund and from additional private sector contributions, based on an increase in cable and satellite subscribers. Minister Robillard assured the Committee that Heritage Canada could not do this without Parliamentary approval and that, at this time, no such application for the transfer of funds has been received by the Treasury Board.
17. The federal government is seeking to reallocate $1 billion of spending pursuant to the February 2003 Budget. Every department is to provide some portion of the required amount. Some Senators estimated that the Treasury Board Secretariat’s portion would amount to $42 million. Minister Robillard indicated that the Secretariat has begun the process of identifying sources of funds available to meet its obligations under the reallocation initiatives. She could not, at this time, disclose any details of its work on this matter.
18. The Auditor General of Canada has asked that the federal government develop guidelines for determining the level of compensation for the senior executives of agencies and Crown corporations. Senators questioned whether any work has been undertaken to develop such guidelines. In particular, some Senators were sceptical about the comparability of senior public service compensation with senior private sector management positions. Minister Robillard explained that, for some years, the Treasury Board has relied on the advice of an external committee in setting the level of compensation in the senior public service. Nonetheless, Senators questioned whether private sector consultants could be objective when called upon to make recommendations on the level of appropriate compensation for the senior public service.
19.
As is customary, your Committee expects, at a later date, to examine in
greater detail these and other aspects of the federal government’s spending
plans.