Proceedings of the Standing Senate Committee on
National Finance
Issue 1 - Evidence - December 9, 2015
OTTAWA, Wednesday, December 9, 2015
The Standing Senate Committee on National Finance met this day at 12:17 p.m. to examine the expenditures set out in Supplementary Estimates (B) for the fiscal year ending March 31, 2016.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Good afternoon, honourable senators, ladies and gentlemen. This is the first meeting of the Finance Committee since the election, and the committee has been reconstituted to deal with the work that we have to do this week, arising out of Supplementary Estimates (B).
[Translation]
This afternoon, we are beginning our study of Supplementary Estimates (B) for the fiscal year ending March 31, 2016.
[English]
This committee considered the Main Estimates and the Supplementary Estimates (A) earlier in 2015, prior to the national election. Members have been reconvened this week in order to provide the Senate's input on Supplementary Estimates (B).
We anticipate a supply bill probably arriving Thursday or Friday of this week in the Senate, and this study of the estimates helps us prepare for and deal with that supply bill when it arrives.
From the Treasury Board of Canada, to start out our hearings, we are pleased to welcome back Brian Pagan, Assistant Secretary, Expenditure Management Sector of the Treasury Board of Canada Secretariat; and Renée LaFontaine, Assistant Secretary, Corporate Services Sector, and Chief Financial Officer.
We are very pleased. Who would be the spokesperson? Mr. Pagan, why don't you start us out and we will go to question and answer following your presentation?
[Translation]
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. I would like to begin with an overview of Supplementary Estimates (B), after which I would be happy to answer your questions.
I'll start with a brief description of how Supplementary Estimates (B) are organized. Then, I will discuss the dollar totals for these supplementary estimates specifically and for the entire fiscal year.
I will wrap up my presentation with a look at the most significant items in terms of dollar value.
[English]
I do have a presentation, which I will be speaking to as part of the introductory remarks, and I would be happy to respond to any questions on the presentation before we get into the structure of the document.
On page 3 of this presentation, we summarize for you the standard organization of supplementary estimates. In fact, there are no changes to this overall structure.
As you will recall, the estimates are generally presented in three parts. First there is an introduction, which provides context and a summary of authorities provided to date; in section 2, we look at detail by organization; and then in section 3, we have a proposed schedule to the appropriation bill which is, in fact, what the house and the Senate will vote on and approve.
In the introduction before us for Supplementary Estimates (B), we summarize estimates to date for the fiscal year and give the total of these estimates. We also describe the largest items in dollar terms, and we identify any new vote authorities or new organizations that are presented in the estimates.
In the second section, we move to the detail by organization. In these Supplementary Estimates (B), we have four departments identified for new appropriation authority: Citizenship and Immigration Canada, the House of Commons, the new Parliamentary Protective Service and the Treasury Board Secretariat.
At the back of the supplementary estimates document, you will find the proposed schedule to the appropriation bill, based on amounts that are presented in the estimates document.
As you will recall, additional information is provided in online annexes on the TBS website. These would include updates to statutory forecasts, estimates by strategic outcome and program, information by standard objects of expenditure and allocations from TB central votes.
Turning to page 4 of the deck, which summarizes the introduction to the supplementary estimates, we see a table in front of us that presents the totals in this document. These Supplementary Estimates (B) present voted requirements of $810.1 million, as well as updates to statutory forecasts related to employee benefit plans of $2.7 million, for total supplementary estimates of $812.8 million.
Page 5 of the deck simply presents a timeline of authorities provided by Parliament this year.
[Translation]
Including Supplementary Estimates (B), authorities for 2015-16 total $245.5 billion, and $92.1 billion of that represents voted appropriations, so approximately 35.5 per cent of the total.
[English]
Planned voted expenditures are similar to the previous two years at this point. Forecasts of statutory expenditures continue on an upward trend, driven by escalators to the Canada Health Transfer and increases to elderly benefits.
Turning to slide 6 of my presentation, this introduces the major items presented in the supplementary estimates. These major items comprise of requests from two sources. First, from the Treasury Board Secretariat, for funding to replenish the government contingencies vote in the amount of $519.6 million. This TB vote 5 for government contingencies resides in the Treasury Board Secretariat, but it is not a vote for our own use. It is managed by the Treasury Board Secretariat on behalf of the public service to address any cash flow pressures or to respond to urgencies or unforeseen requirements with respect to previously approved programs.
This committee will recall that during an election period, the normal business of supply, the business of Parliament, is interrupted. One of the mechanisms we have to continue to support government operations and provide sufficient flexibility to departments is the use of this government contingencies vote. It is a precondition that we would draw down the central authorities before we would resort to extraordinary mechanisms such as Governor General special warrants. In fact, in this election period we did not require the use of Governor General Warrants. We simply made allocations from vote 5 to meet departmental requirements between the dissolution of Parliament and its return on December 3.
The second major item is funding to implement the government's response to the Syrian refugee crisis. This represents a total of $277.9 million in this fiscal year.
Turning to slide 7, I summarize here the major items allocated from vote 5. Again, the total allocations were $519.6 million, and included in this amount were requirements for Atomic Energy of Canada in the amount of $232.8 million. This reflects the transfer to the government-owned, contractor-operated model for disposal of nuclear waste and remediation, as well as some operating funding that was provided in Budget 2015.
We have requirements of $98.8 million for health in support of the Aboriginal health programs. We have amounts related to an out-of-court settlement; operating funds for the Canadian Air Transport Security Authority; operating requirements and grant increases to the department of industry; funds for Indian Affairs and Northern Development Canada for the Canadian High Arctic Research Station; and Foreign Affairs, Trade and Development, for costs related to their pension and benefit obligations for staff overseas.
Turning to the conclusion on slide 8, this overview has provided the committee with a brief summary of key initiatives presented in the 2015-16 supplementary estimates. It is my understanding that a supply bill supporting the $810 million of voted funding will be presented in the house and then in the Senate later this week.
[Translation]
The last budget document for 2015-16 is Supplementary Estimates (C), which will be submitted either in February or at the beginning of March 2016. Mr. Chair, that brings my presentation to an end. My colleague and I would be pleased to answer the committee's questions regarding these supplementary estimates.
[English]
The Chair: Thank you very much, Mr. Pagan.
[Translation]
Ms. LaFontaine, would you like to add anything?
Renée LaFontaine, Assistant Secretary, Corporate Services Sector, Treasury Board of Canada Secretariat: No, thank you.
[English]
The Chair: Mr. Pagan, before I go to my list of senators, could you just expand for us on the contingency vote 5?
Mr. Pagan: Right.
The Chair: You say "to replenish," so this is money that you have spent out during the election period, as I understand it.
Mr. Pagan: Right. Thank you for the question, Mr. Chair.
Vote 5 government contingencies is a long-standing instrument that resides in the Treasury Board secretariat to provide departments with access to funding for previously approved programs and in advance of the next supply period.
If they run into pressures related to volume, service disruptions, or some sort of emergency, this is the mechanism by which Treasury Board ministers can allocate funds to that department in order to continue providing programs and services.
The authority for this vote is always included in our Main Estimates, and the level of this authority has stood at $750 million for several years now. The process is such that when we make allocations from that vote, it becomes a part of the departmental authority. They can now spend up to the amount of their program, plus what we provide to them from vote 5. That becomes their new authority. We draw down the amount of the contingencies vote.
We then generally seek to replenish that vote in each supply period so that we would always start a supply period with $750 million. It becomes the contingency, the way in which government can respond to any sort of emergency or unforeseen development with a program.
What is perhaps just a little bit unusual about this instance is the fact of the general election and the dissolution of Parliament. In circumstances where Parliament is dissolved for the purpose of a general election, the ability to seek parliamentary authorities for supply is obviously interrupted. So then there is a process, a very structured process, that departments would follow, that the Treasury Board Secretariat would follow, in terms of making sure that departments have the funds available to operate.
In the first instance, it is up to each department to identify and reallocate opportunities should they be facing the pressure, opportunities to reallocate funds from within their department. Now, they can't transfer money, as you know, between one vote and another without Parliament's authority, so, if a department is facing a pressure with an operating vote or a G and C vote, they have to do everything necessary to use all the authorities in their vote before they can do anything else.
At that point, they would approach the Treasury Board Secretariat, indicate the nature of their program requirement, a cash flow requirement. We would validate that, in fact, no other source of funds exists in the department, and then we would draw down our authorities that we manage on behalf of the public service, the central votes, of which we have vote 5 — government contingencies — and a number of other central votes related to carry- forward requirements, et cetera.
Then and only then, after having depleted the central votes, would we resort to the third and final step available to us while Parliament is dissolved for an election, and that is the use of Governor General Special Warrants. It is normal, in fact, during an election period that we would get to that point but this year, because of the timing and some advanced preparation with departments in terms of their Main Estimates authorities and their Supplementary Estimates (A) authorities, departments were in a very good position to be able, for the most part, to manage program requirements. Therefore, we did not get to the point where we required Governor General Special Warrants.
We did, as you note, allocate money from vote 5, in accordance with the criteria in our established practices. Again, that amount totalled $519.6 million.
So, Mr. Chair, that's the mechanism for each allocation, and we've got a list here. I would be happy to respond to any particular questions. But the key point is that it is in response to previously approved programs and services, in accordance with departmental mandates.
The Chair: The program was previously approved, but the expenditure was not previously approved. I think that's an important distinction we should be drawing.
Mr. Pagan: Right, and so there are several dimensions to this. It is a more complicated question than it may appear. In fact, first of all, the ability to make the expenditure is provided through Parliament's approval of the vote wording, or the terms and conditions of vote 5, if you will.
So, when Parliament provides authority for the Main Estimates, they are providing Treasury Board Secretariat with the authority to make these payments to departments in support of the approved programs and services. That would be my first point.
Second, in some cases — in several cases, in fact — the forecast of these additional expenditures was provided by the government through previous budget provisions or commitments.
So, for instance, with respect to Atomic Energy of Canada, Budget 2015 did include a provision or a forecast that the operating budget of Atomic Energy of Canada Limited would be increased, or a source of funds would be provided to increase the operating budget of AECL. Those funds were provided for, or provisioned for, in the fiscal framework.
The use of vote 5 was required because AECL had not had the opportunity to come forward and request that authority through a normal Supplementary Estimates. Our process was disrupted in the fall because of the general election. Therefore, there was a provision in the framework for this. It is an approved program. Parliament is not sitting, and therefore we use vote 5 to provide that authority.
And there are several others. CATSA, the Canadian Air Traffic Safety Agency, again had a provision in the budget to increase its operating budget this fiscal year in order to respect wait times to provide the same level of service as in past years. So there was a provision in the fiscal framework for this. We simply did not have the means by which to present this to Parliament through normal supplementary estimates, and therefore that explains the use of vote 5 for that purpose.
The Chair: Thank you. There are many more questions that I think honourable senators may want to explore in this particular matter because it goes to the essence of our role in approving expenditures and, if we give away too much authority, we want to know what the guidelines are and just what is being done and reporting back to us as quickly as possible.
I have a supplementary by Senator Eaton from Toronto.
Senator Eaton: Just to follow up on my chairman's questions, these agencies — AECL, CATSA — can just keep coming back to you? They don't have to justify why they need the extra money?
Mr. Pagan: Thank you for the question. There is always a challenge function of the Treasury Board Secretariat for any incremental ask by a department. The starting point for senators is that there's an approved program in place, so we will validate the program terms and conditions and then seek to understand what the pressure is in this program.
At times, again, these can be driven by changes in technology, volume, increases in service levels, et cetera. With respect to using CATSA as an example, in 2010-11 passenger traffic in Canada was approximately 47.7 million passengers a year. Last year, in 2014-15, that had increased to 57.3 million passengers. So that's close to a 20 per cent increase in passengers.
For CATSA to be able to respond to that increase in volume, they have had to introduce new technologies, new screening technologies, and in some cases they have had to add staff to reduce line-ups at airports.
That was their pressure. We knew what their operating budget was. A certain amount was transferred to them. The volume of their business is increasing such that they're facing these increases in operating costs. And, again, using that specific example, that was explained by the department, and it was known by the Department of Finance and provisioned in the budget. So there was an expectation that there would be a request to Parliament to increase their operating budget levels this fiscal year, but with the dissolution of Parliament and the disruption of supply — the normal Supplementary Estimates (B) — they didn't have that opportunity. Hence, we were able to allocate money for this purpose from vote 5.
I take the chair's point about parliamentary control of this and making sure that there's sufficient oversight. I should mention that we are where we are today with respect to the threshold of vote 5, the amount of $750 million and the specific restrictions around the use of the vote that are contained both in the vote wording provided by Parliament and in our own criteria within the Treasury Board Secretariat, as a result of an observation, a chapter, if you will, by the Auditor General in 2006, who outlined some observations, some potential challenges with respect to the use of vote 5, to make sure that there was sufficient transparency and control.
We have worked closely with the Auditor General, with this committee, in fact, to revise vote wording and the terms and conditions of that vote and the criteria that we use within the secretariat to make those allocations so that there is that appropriate balance of control, transparency and flexibility.
At the end of the day, this is a contingencies vote; it is the only means available to the executive to support programs and services that have been approved by the executive and by Parliament in advance of those limited opportunities that we have through the year to seek adjustments from Parliament of appropriations. As this committee knows, that happens three times a year in the supply periods ending June 23, December 10 and March 26.
We can only come to you three times a year looking for adjustments, but the nature of departmental business can sometimes be quite a bit more fluid than that and there could be cash-flow pressures or service pressures that warrant an adjustment to their authorities.
The Chair: Thank you.
I'll now go to my list of honourable senators who have asked to intervene with questions or comments. I will begin with the deputy chair of the committee.
Senator L. Smith: Mr. Pagan, regarding the second element of the ask from Citizenship and Immigration, could you give us background in terms of the past government to this new government about the organization and this type of ask of $277 million? Was that originally planned by the prior government when they had said they would bring in 10,000 Syrian refugees before the end of the calendar year?
I would like to get some understanding about that. The new government suggested they would spend $250 million to accommodate this initiative. I think we all around the table agree that this is a very important initiative for Canada and for Canadians to take in terms of showing its role in being humanitarian, in showing the world what we can do. The other issue, however, is that we have a certain amount of money to be able to do these things, and it's important that we manage as effectively as possible.
Could you give me a little background of how this evolved? I understood that the $750 million is a contingency for programs that had prior approval, so if you could give me some background that would be helpful.
Mr. Pagan: There are several dimensions to that question. The first thing is your last point about the $750 million for contingencies. In this case, there is a separate parliamentary authority for the requirements of Citizenship and Immigration Canada, and those will be voted directly to the department. There have not been any allocations from vote 5 to the department for this purpose.
I hope that's clear.
Senator L. Smith: It was not planned six months ago. Is that what you're saying?
Mr. Pagan: Citizenship and Immigration Canada does have a settlement program, and that had been provisioned for in their Main Estimates authorities. I think we're all aware that the previous government had made commitments in this regard.
Senator L. Smith: Do you remember the amount?
Mr. Pagan: I don't.
Senator L. Smith: That would be helpful.
Mr. Pagan: I do understand that Citizenship and Immigration has been invited to this committee, so I think that detail will be provided by the department.
But suffice to say, within the settlement and resettlement programs of CIC, there would have been some capacity to respond to previous commitments of the government.
I think the circumstances are, as we all know, that the situation changed over the summer with respect to the significant increase in refugees and some of the newspaper coverage of that, including drownings in the Mediterranean, et cetera. So there was a new program approved by the new government, and this is reflected in this separate item for CIC in these supplementary estimates.
Precise details about the requirements and how they are going to roll this out, I believe, would be best addressed by the department when they appear tomorrow.
Senator L. Smith: Just so I understand, when the department makes a request, don't they have to go through Treasury Board for approval?
Mr. Pagan: Yes, that's correct. In this case, there was a new commitment of government; in fact, I think it was one of the very first decisions. The process for new decisions on this or anything else would be that you confirm a source of funds. There is room in the fiscal framework to do this. Then, based on that source of funds, there would be deliberation by cabinet in terms of the overall policy design, such as "what are we trying to achieve?" and "what's this going to look like?"
Then, based on that policy approval — the security posture, et cetera — the department has what they need to be able to work with us at the Treasury Board Secretariat to develop the detailed program terms and conditions. Again, the security posture: Is it going to be done here; is it done overseas? Is the transportation charters or DND? How do we work this out?
So there was an intense process of working with the department to frame this and a challenge function on our part to make sure their cost assumptions are consistent with everything else they are doing in line with the source of funds. When those details are finalized, the Treasury Board Secretariat submission is presented to TB ministers for their review and decision, and that all would have happened before the presentation of these supplementary estimates. We are only presenting to Parliament those decisions that have been finalized by Treasury Board ministers. At this point, we have the requirement in front of us for Citizenship and Immigration.
I understand that there will be some additional requirements, that this is a whole-of-government approach and organizations such as CBSA, the RCMP and DND will also be involved in this. They are working out the final details of their involvement and support role, and I expect those will be presented in future estimates.
Senator L. Smith: That sort of leads me to another question, if I could ask it. The involvement of National Defence — I guess I am fortunate to be an honorary colonel of the Royal Canadian Hussars. The honoraries met with the generals in Quebec in the last month, and we were briefed on this issue of helping the refugees have temporary residence in army facilities.
Could you walk me through how they're planning their expenditures and whose budgets those come from? If there is a transfer through Citizenship and Immigration to Defence for the cost of housing folks for a period of time, can you explain how that works? Again, not trying to be a pit bull but I'm trying to make sure we understand the total costs of providing this outreach program to these folks.
Mr. Pagan: In respect of departments that may be providing support to this operation, as I said my understanding is that they're in the process of finalizing the way in which they will provide support and any resources that will be required for that. At this point, because it simply hasn't been finalized, it's not clear to us whether the support will be incremental or not, and therefore would require additional resources or not.
My understanding of the program is that approximately 40 per cent of the costs of processing will be incurred overseas for screening, security, et cetera, and that the other 60 per cent will relate to settlement here in Canada.
In between that processing and settlement, there is a transit point. My understanding is that a large number, if not most, refugees will temporarily be quartered in available Canadian Forces facilities, barracks. These properties exist. Therefore, it's not clear if there will be incremental costs to the department or not and whether the department can absorb those incremental costs or not.
This is part of the back and forth between departments and with the Treasury Board Secretariat to work out the modalities and then validate those with Treasury Board ministers.
I'm afraid, senator, I'm not in a position to provide any sort of insight into any potential costs for DND or the others. Those are being worked out by the departments at the moment.
Senator L. Smith: I anticipated your response, because the concern that the honoraries had when we met with the general was this is the Quebec division, so you have Valcartier, which would house 2,000 individuals, and there will be costs because the barracks are not necessarily insulated for regular humans as opposed to soldiers who are expected to put up with a certain amount of — I'm not saying pain, but not the same degree of comfort.
Again, I'm not trying to be antagonistic, but I'm trying to understand the costs. At that time, there was a sense that this was a sudden, evolving, fluid situation, which you've reinforced, but being the Treasury Board and, I guess, the ultimate overseer, I felt a cautionary note from listening to what was presented to us that there is going to be a lot of things falling through the cracks unless somebody is really monitoring, with extra resources, the expenditures that will take place.
Again, I believe in hope and good faith, but at the same time I also believe that hope and good faith with blind spending are not going to help taxpayers down the road. You're always direct and honest with us, Brian, which is fantastic, but we need more of that because you guys are the ultimate decision makers in terms of release of money; right?
Mr. Pagan: Right. Thank you, senator. Certainly the point about our responsibility to assess and challenge and provide the best advice and recommendation possible to Treasury Board ministers is not lost on us. We do this for each and every requirement and program presented by departments.
I think we all recognize this is a dynamic and fluid situation, but it's also a clear priority of the government. I think there are some expectations on the part of Canadians that the resources of the Government of Canada be realigned, if you will, to respond to this as a priority.
For this and for any other program of government, I can assure you that we take our challenge role very seriously. Departments have budgets. They're provided with authorities, and there is always an expectation that departments will adjust and realign authorities to be able to respond to new priorities. It's only where they cannot and where it's truly an incremental cost that we would be looking at a request for new funds, and that's the situation that we have now with CIC. This is a significant increase in both the number and the pace of refugee resettlement, and that reflects the new authorities requested of Parliament for that purpose.
Senator Eaton: We have known for a long time that First Nations' health, fresh water, housing and education is under par, substandard, with other Canadians'. I guess what I fail to understand — and perhaps you can explain it to me — is that every ministry comes forth, and you have here Health, Programme de santé des Autochtones, $98 million; Affaires autochtones et du Nord Canada, $16 million; and under every ministry there's an envelope for First Nations.
It's a lot of money. There doesn't seem to ever be any follow-up. In other words, last year we discussed Central Mortgage and Housing Corporation, $400 million. Well, they can't go on reserve to make sure that they're built to code.
I'm wondering, with $98 million here for health, are there standards? How do you know that that $98 million is going to actually do something concrete? Do we follow the money to see that it's not just given away and there are no standards met?
Mr. Pagan: Thank you for the question. I think there are two dimensions to that. You've talked about the horizontal nature of certain Aboriginal programming and then the performance or the results.
With respect to the former, horizontal programming, you're quite right. There are several departments that have responsibilities with respect to Aboriginal programming. It's not every ministry, but there are several involved.
I think it has been recognized by those departments that there does need to be better coordination of their different efforts so that there is an outcome or a result. That leads to the second dimension, and that is that outcome or result.
This is very early days of a new government, but they have clearly signalled in mandate letters to ministers an expectation that there be better performance information, better information provided to Parliament and evidence- based decisions respecting policies and programs.
My other job at the Treasury Board Secretariat is related to the way in which we organize our information for departmental planning and departmental performance reporting. We have a policy that provides guidance to departments in that respect. We will be working with ministers and cabinet committees to help them identify the results and the outcomes that they intend to achieve, and then working with departments so that we can better line up the programs, performance indicators and the reporting tools to be able to monitor and track progress in these areas.
We've been at the results-based measurement game for almost 20 years now in the Government of Canada and I think, as a consequence, there are some very useful building blocks. We have policies on evaluation. Every government program gets evaluated on a five-year cycle.
Senator Eaton: We had Fisheries here last year, and $45 million for indigenous fishing. "Oh?" "How many people are you teaching to fish?" "We don't know." "Are you buying boats?" "Don't know." "How many people are actually using the skills you've taught them to make a living?" "Oh, we don't know."
If you're sitting in our position or a taxpayer's position, yes, we want to help people, but $45 million is $45 million. Wouldn't it be nice if those building blocks you're talking about could come back and say to us, "Actually, 200 people are now making a living from fishing," with real results?
When I see here $98 million for health, yes, I want them to have everything that I have, but are they getting everything?
Mr. Pagan: Yes.
Senator Eaton: What are the results?
Mr. Pagan: We're aware of that appetite for performance information and results, and I personally see the articulation of expectations in the mandate letters as a very powerful incentive for us at the Treasury Board Secretariat and departments to work better to provide specific information that supports results.
If I may, senator, there are building blocks. There are certainly gaps, and because of that we've got some differences. In some areas we have really good information, and in some it's not so good or maybe non-existent.
With respect to employment and social development, there is an amount in the supplementary estimates for a vote 5 allocation of $3.75 million. This, in my mind, is an example of where we're striving to get to.
The request supports two grant payments: one is the Pathways to Education savings grant; the other is the Homelessness Partnering Strategy.
When we started the Pathways to Education grant in 2009-10 it served 2,500 at-risk youth in identified areas. Today, in the year just ended, we are at 5,000 students in 17 sites across the country, and the goal is to get to 10,000 students. Those are the numbers they're trying to reach. In reaching those numbers, they have doubled the high school graduation rate and they have increased the applications for post-secondary education by 300 percent. We see this as a practical, very desirable outcome.
I cite that simply as an example where a department does have good information and they're using that information to set goals. It is my expectation that that will be the expectation of all programs so that we can explain who they're serving, what their target is in terms of an outcome or achievement and then the actual performance against that target.
I think we all want that information, and we will be using the mandates provided to ministers to work with departments to revise policy and their ability to generate this information.
Senator Eaton: Thank you very much.
[Translation]
Senator Rivard: Before I get to the supplementary estimates, I'd like to discuss something else. Everyone is familiar with the budget tradition where the government would always set aside about $3 billion for emergencies. In the last budget, the government earmarked $1 billion.
The fiscal year, which we are two thirds of the way through, is coming to an end in a few months. And no calamities seem to have befallen us over the summer, no floods, no earthquakes, no explosions and no Lac-Mégantic-type train derailments. Is it safe to say that the $1 billion in contingency funding was not used?
The supplementary estimates could not have drawn from that $1 billion earmarked for emergencies since we are two thirds of the way through the fiscal year.
Mr. Pagan: Thank you for your question. I am going to try to highlight the difference between the amount you are referring to, which is provided for in the budget prepared by the Department of Finance, and the contingency vote allocations managed by the Treasury Board of Canada Secretariat.
In every budget it prepares, the Department of Finance has long set aside an amount, usually in the neighbourhood of $3 billion, for unforeseen fiscal and economic eventualities. It allows the department to take into account the difference between its projections and the current economic situation, in light of the exchange rate, interest rates, the price of oil and so forth. That amount is part of the fiscal framework.
[English]
TB vote 5, government contingencies, the $750 million, is a separate contingency. The $3 billion, which was $1 billion in Budget 2015, is simply a forecast by the Minister of Finance to account for any changes to the projections they're making with respect to employment, the Canadian dollar, the price of petrol, et cetera. It allows a cushion between their forecasted revenues and their forecasted expenditures.
The $750 million that is provided to us by Parliament is not necessarily a contingency on economic or fiscal developments, it responds to contingencies or changes in the approved programs of the government.
[Translation]
So, you see, it's important to understand the difference between the two amounts. Since the budget was tabled, the new finance department has revised its projections. If I'm not mistaken, I believe it has restored the fund to $3 billion.
Senator Rivard: For the next budget?
Mr. Pagan: Exactly.
Senator Rivard: Now I'll come back to the topic in hand. My apologies, but I wanted to make sure that I understood the difference.
For the Treasury Board Secretariat, I see that $12.5 million was allocated to an out-of-court settlement. And for Transport Canada, $75 million was allocated to an out-of-court settlement, as well. In the case of Transport Canada, does the settlement involve contracts for which an additional $75 million has to be paid out? Can you tell us what those amounts are for? Do they have to do with cost overruns? Do they involve one, two, three or four companies? Does it mean that some monumental errors were made leading up to the decision to allocate $75 million in additional funding to an out-of-court settlement?
Furthermore, does the statement "to make timely payments related to this legal obligation" refer to the overall amount, or is there a schedule where, for instance, this year's payment is $75 million and next year's payment is $30 million?
Reading the French version word for word gives the impression that it reflects only a portion. It doesn't refer to settlements but, rather, payments.
[English]
Mr. Pagan: With respect to the allocation from TB vote 5, an out-of-court settlement in the amount of $12.5 million, this responds to an adjustment to a previous settlement related to RCMP members' benefits.
In August 2014, the court approved a settlement related to RCMP benefits. If I recall the facts correctly, the previous policy was that pension benefits of injured RCMP and Canadian Forces members were reduced by the amount of disability payments that they were receiving.
A class-action suit was brought forward to challenge that policy and the court ruled in favour of the plaintiffs, I believe the word is, and the class action was upheld.
As a consequence, our policy changed so that we did not reduce pension benefits by the amount of the disability payment, and a settlement was made to refund that. My understanding at the time was that represented about $73 million. I don't have the exact number in front of me, but we did a forecast in terms of how many members this would impact and we made a payment on that basis.
Since that settlement additional claimants have stepped forward, so this is a volume thing. We forecast one number, but the actual number of retired RCMP members eligible for this is higher than we anticipated. This payment responds to that out-of-court settlement to provide them with the same policy benefits as had previously been provided.
[Translation]
Senator Rivard: My understanding, then, is that the $12.5 million has been allocated to the final settlement, not to a specific step.
Mr. Pagan: It's not a step.
Senator Rivard: It's the final amount.
Mr. Pagan: It reflects a change in the total number of eligible members.
Senator Rivard: To bring everything up to date, this means that there will be no further claims.
Mr. Pagan: Precisely.
Senator Rivard: What about the $75 million in the case of the Department of Transport?
Mr. Pagan: The case is still before the courts, so I can't give you any details on that.
Senator Rivard: So, even though the ruling is still pending, $75 million has been set aside or, rather, paid out? That amount has been set aside.
Mr. Pagan: That is correct.
Senator Rivard: Even though the ruling is pending, $75 million has been set aside or paid out.
Mr. Pagan: That's right.
Senator Rivard: You can't give us any details. Again, the $75-million allocation could increase, or the government could win the case.
The Chair: Thank you for your questions, Senator Rivard.
Senator Bellemare: I have a number of questions pertaining to immigration but I will wait until tomorrow, when we will have witnesses here able to answer those questions.
My questions today will be about Atomic Energy of Canada Limited, since Treasury Board allocated nearly half of its Contingencies Vote to the organization. Of the $232.8 million allocated to the organization, $160.5 million is for the transition to a contractor-operated model, and $72 million is for operations.
I'd like a few more details on that. What are the expenditures exactly? Why is the transition-related expenditure so large?
Mr. Pagan: Thank you for the question. As you mentioned, the Atomic Energy of Canada Limited funding request has two parts. The first is an amount of $72.3 million for operating costs. As I indicated in my opening remarks, in the 2015 budget, the Department of Finance anticipated an increase in Atomic Energy of Canada Limited's operating costs. That amount has been included in the fiscal framework, and we have allocated it under vote 5 so that Atomic Energy of Canada Limited can respond to its operational realities.
[English]
On those operating costs, as I understand it, it is essentially capital projects, such as labs and new infrastructure, to modernize facilities and the ability of AECL to carry out their mission.
[Translation]
Senator Bellemare: So that means we are talking about investments, not salary or lease operating costs.
[English]
Mr. Pagan: Yes, labs and infrastructure.
[Translation]
That is one dimension, and the other is the process of transitioning Atomic Energy of Canada Limited to a new model.
[English]
That is, a government-owned, contractor-operated model. Since 2012 the previous government was working on new approaches to managing AECL, and in June 2015 they announced details on a government-owned, contractor- operated model based in Chalk River.
[Translation]
Senator Bellemare: Does that mean that Atomic Energy of Canada Limited is going to become a government agency? In other words, is it becoming a government-owned institution that acts as a private organization, where it operates on a contractual basis? Are we to understand that it will act as an agency?
Mr. Pagan: I'm not sure whether the approach is the same as an agency's.
[English]
But it's an arm's length approach. The Canadian National Energy Alliance was selected, through a process, to become the operator of Chalk River and other facilities, and that alliance includes, as I understand it, SNC-Lavalin, Rolls-Royce and a number of other actors that will be working together, and their primary responsibilities are going to be on decommissioning and waste management disposal remediation.
So the idea here is that the best practices of these private sector operators and their efficiencies and technologies will provide the necessary security and expertise and a lower cost solution moving forward.
[Translation]
The $160.5 million is for AECL's transition towards that process and that mandate.
Senator Bellemare: In any case, we may, at some point, hear from Atomic Energy of Canada Limited representatives, who will be able to answer more specific questions about their operating model.
Senator Chaput: My questions pertain to vote 5 and the government contingencies allocations, since you are requesting funding to replenish that vote. You are asking for $519.6 million. This is along the lines of questions that have already been asked, but I was wondering, Mr. Pagan, whether the 17 organizations and departments on the list to receive that funding, as indicated, had to make a case and justify their needs in writing. In addition, will someone be making sure that the funding is used properly? If so, who is accountable to whom as far as the money is concerned?
Mr. Pagan: Thank you, senator, for your question. I can assure you that a very rigorous process is in place to oversee access to this special appropriation.
[English]
Perhaps the best example I can provide is, again, going back to the Canadian Air Transport Security Authority and the allocation of $26.8 million to CATSA for their operating costs. I cited some numbers previously, the increase in passenger traffic over the last five years, and I think anyone who has travelled through a Canadian airport has seen the impact of that as there can be lines — sometimes quite long — to go through screening.
The allocation to CATSA for this amount was a multistep process. First of all, they had to demonstrate a business need as part of the budget process. They identified the budget they had and the service that they were providing and made the case that that budget they had was based on volumes from five years ago. Volumes have increased, and they identified what it would take, in terms of staff and new technology, to be able to respond to the additional volumes.
So there was a budget decision to provide additional funding to CATSA but, as we all know, the budget this year was later than usual. It was in April, so it was after Main Estimates. It essentially coincided with the timing and tabling of Supplementary Estimates (A).
So CATSA simply did not have the time to take that new source of funds provided in the budget and translate it into a Treasury Board submission and then presentation in the estimates. That was the context.
Then we fast forward into the fall, we are now well past the halfway point in the fiscal year and they're still dealing with these increasing volumes. They're doing so with a budget that was based on previous volumes. Therefore, they came to us and made the request "can we have access to our money now?"
We looked at where they were at — the authorities available to them and their spend through the year — and we were satisfied that if they did not get the additional money they would soon run out of money or exceed their authorities. That becomes the process by which we authorized the allocation.
[Translation]
That is just one example. Every department has to follow more or less the same process: a need must exist and a program must already be in place to meet Canadians' needs and, if the resources available are not in line with the demand for service, when funding is available in the budget or the fiscal framework, vote 5 funding can be used to address that need.
Senator Chaput: Maybe I'm wrong; that's a great example. That situation is easier for me to understand because it reflects tangible realities. But how does that example apply to Indigenous and Northern Affairs Canada, which has a series of initiatives and measures to put in place? How does what you just explained in relation to transportation safety apply to a department such as Indigenous and Northern Affairs Canada? It's so complex. As Senator Eaton was saying earlier, there is so much money — it's not that I'm against this, quite the contrary — and I'm trying to wrap my head around how it's possible to really know how all this money is being spent, both in this case and in the case of the other amounts being requested in these estimates.
Mr. Pagan: As I mentioned, it's more or less the same process that applies to every request, but the circumstances are obviously specific to the department in question. In the case of Indigenous and Northern Affairs Canada, the $16.3 million is being sought for a number of programs, but the bulk of the money, $15.1 million, is for the Canadian High Arctic Research Station. That program reflects one of the priorities the government laid out in its 2015 budget, in other words, supporting economic development and environmental stewardship in the Arctic. In light of the short construction season up north, the Department of Indigenous and Northern Affairs made the project a priority after Supplementary Estimates (A) were tabled in May, so that construction progress in the Arctic could be made this year.
Senator Chaput: I see.
Mr. Pagan: The parliamentary cycle being what it is, the next opportunity to ask Parliament for this funding was in December, so obviously it would not have been possible to perform the work this year. In light of that, we paid out these amounts so that construction work could take place in the summer of 2015.
Senator Chaput: Thank you very much. I have another quick question.
As far as these contingency allocations are concerned, does Treasury Board do any forecasting? Do you anticipate requests that you may receive, or do you instead wait for the departments to submit their requests to you?
Mr. Pagan: Yes, we work closely with the departments to understand how their programs work and, thus, gain a sense of any potential difficulties that might arise, in order to present those situations to the cabinet ministers.
[English]
Senator Chaput: Is it a two-way?
Mr. Pagan: It is absolutely a two-way. We work very closely with departments to make sure they're managing within their authorities. We have systems that allow us to see how much is allocated and how much is spent. If we feel or they feel that there is a pressure point, we will have discussions with them to confirm or otherwise resolve the situation.
If it is a situation that requires some infusion of cash flow or an increase to their authority, then we take the department, as we say, "through the paces" — we challenge them — to make sure that it stands up to scrutiny by our ministers, by parliamentarians and this committee. It is then and only then that we would make our recommendation to ministers to permit the allocation.
The Chair: Could you look at the Supplementary Estimates (B), Mr. Pagan, at page 2-2, House of Commons? I don't think we're going to have a witness from the House of Commons, so anything you can tell us with respect to the $9.5 million extra that they're looking for would be helpful.
Mr. Pagan: Right.
The Chair: The first item I see under voted items is "carry-forward of operating budget." Does the House of Commons have a different percentage than other government departments, or are they treated like a department for the purposes of operating budget carry-forward?
Mr. Pagan: Thank you, Mr. Chair, for the question. I will respond to the best of my abilities. The starting point is to remind the committee that requirements for the House of Commons, the Senate and now the Parliamentary Protective Service are reviewed and authorized by the Board of Internal Economy, so it is the Speakers of the two houses that review and provide details in this respect.
That said, once the Board of Internal Economy reviews and approves those requirements, obviously these are reflected in our estimates. But these are not vetted by the Treasury Board Secretariat and are not approved by Treasury Board ministers. These organizations are subject to the Parliament of Canada Act, and we respect the difference between the executive and the legislative branches.
The requirements are itemized here for you.
The Chair: Yes. It's the carry-forward one, in particular, I'm interested in.
Mr. Pagan: Right. As a distinct entity and separate employer from the core public administration, it is my understanding that the House of Commons is not subject to our carry-forward limits of 5 per cent, but they do generally try to respect the spirit of that and manage their affairs accordingly. As I understand it, they have done so this year.
This carry-forward amount of $8.3 million, I understand, represents about 2.7 per cent of the authorities that have been provided in 2014-15, and they're now being brought forward into this year.
The Chair: They just didn't get around to spending it in operating. Now they have a lot more MPs, they will need all the extra money.
Mr. Pagan: Exactly. This is a normal occurrence, I believe, in any government organization. The authorities provided by Parliament, as we all know, are up to authorities. A department or an agency can spend up to the amount provided by Parliament, and it is bad form to exceed those authorities. There should generally always be a gap between what Parliament authorizes and what a department spends in order to make sure that the monies available are used in the most effective and efficient way forward.
The idea behind a carry-forward is that it reduces pressure — what used to be known as "March madness" — to simply spend the money, because if you didn't spend it you wouldn't have it available.
Now, departments — colleagues such as Renée LaFontaine and chief financial officers — can plan their business so that if a contract that had been scheduled to deliver on March 1 is now going to deliver on May 1, it is not the end of the world. We can simply use the money that was allocated for that contract and bring it forward into the next year to pay for it.
The Chair: Is it common to see a carry-forward reflected this late in the year? Is that because they haven't been able to calculate how much they actually spent until part of the next year has gone by?
Mr. Pagan: No, in fact, this is the time of year. It's later because our Supplementary Estimates (B) are later because of the election, but the process is such that the year ends March 31, budgets are finalized and the public accounts are prepared over the summer. We generally allocate the carry-forward provisions in early fall. You'll see in the online annex that we've used, the Senate and the House of Commons are not eligible for the central vote administered by Treasury Board Secretariat for carry-forward because that belongs to the executive, so you will generally see a unique carry-forward request from Parliament in the supplementary estimates so they can make those authorities available to them.
The Chair: Even though we approved it last year and they didn't spend it so it lapsed, they have to bring it back and we vote on it again.
Mr. Pagan: Correct.
The Chair: That's what we're doing here.
Now regarding Senator Rivard's question in relation to the $3 billion down to $1 billion, and that you indicated was part of budget planning, the executive says this is how much revenue we expect to have, and this is how much money we expect to spend and they try to create this fiscal picture for the year. If it turns out that revenue is less or if they need to supplement the spending with some of this $1 billion, can we expect to see that, because we're not voting on that $1 billion at the front end? It's just all part of planning. Can we expect to see whatever portion of the $1 billion has to be used in either a statutory or an estimate later on in the year?
Mr. Pagan: It's a great question, but it's a very difficult one because that contingency that finance establishes in the budget is simply prudence. It doesn't necessarily mean that there will be additional spending. It simply is a buffer to protect the revenue forecast and their expenditure forecast.
The Chair: I understand.
Mr. Pagan: Certainly, if there is new spending, which may or may not be part of the contingency, Parliament sees that. It goes through that process of a confirmed source of funds, a policy and a program decision — a policy decision from cabinet and a program decision from Treasury Board — and then it's reflected in the estimates and approved by Parliament. So anything related to increases in spending are presented to Parliament.
The Chair: The government can say it's still in our fiscal framework but we need your approval to expend this.
Mr. Pagan: Correct.
[Translation]
Senator Bellemare: Does the Parliamentary Budget Officer use the same fiscal framework in his comments about the deficit?
Mr. Pagan: As an agent of Parliament, the Parliamentary Budget Officer obviously operates independently from the Department of Finance and, therefore, does his own budget forecasting.
[English]
As I understand it, they generally work with the same basis of information and have access to private-sector economists, forecasts, et cetera. Either before or after a budget and before or after an economic and fiscal update, the PBO will provide its own assessment of the revenue and expenditure targets. I do know that the Department of Finance certainly considers that view and makes sure that it can either respond or incorporate that view in terms of its own projections.
The Chair: I want to talk about future business, but Senator Mockler has a question that he would like to pose.
Senator Mockler: The Minister of Immigration announces today new money to help resettlement assistance centres in Canada.
[Translation]
Is the funding he will be announcing included in the $277 million you are asking us to examine?
Mr. Pagan: You're talking about an announcement that the minister is making today?
Senator Mockler: Yes.
Mr. Pagan: I'm not aware of that announcement.
[English]
All I can speak to is what has been announced and approved as part of these supplementary estimates. I would understand or believe that what CIC is doing in terms of resettlement is in keeping or corresponds to the approvals of Treasury Board in the amounts reflected here in the supplementary estimates. I don't have any additional information.
Senator Mockler: Could you confirm to the chair that the announcement he is making will be subject to what we will approve in Supplementary Estimates (B) on the basis of the $277.9 million that you're requesting?
Mr. Pagan: I understand that officials from CIC will be appearing before the committee, and they'll certainly have additional and perhaps more detailed information. I will familiarize myself with the announcement to be made by the minister today, and if there is any change that impacts these authorities I will certainly respond to them.
Senator Mockler: If there are some changes to what is being asked, what is the window of opportunity for him to come back and ask for additional funds?
Mr. Pagan: Thank you, that's in fact a very good question. What we're talking about today and what I'm presenting today is our requests for Supplementary Estimates (B), and I understand there will be an appropriation act brought before Parliament and the Senate as early as this week.
These are not the final supplementary estimates of the year. While it is always possible that there could be a change between what's presented in the estimates and what's actually provided to Parliament to vote on, it would be very unusual to do so at this late juncture. If there was any change in the policy or program posture of the government, I would expect that would be presented in subsequent supplementary estimates.
[Translation]
As I indicated, we expect to table Supplementary Estimates (C) at the end of February or beginning of March.
[English]
The Chair: We will follow up with immigration tomorrow on some of these issues.
Transport, under vote 5 contingency, you were asked this question and I'm not sure I heard you say other than that you're sworn to secrecy here: $75 million under vote 5. We may be asked by our colleagues why we're approving $75 million.
Mr. Pagan: Mr. Chair, as is common practice, anything that's before the court, we can't speak to. My understanding is that a decision has been made, and the final terms and conditions of that settlement are being finalized now and that, as a consequence, there would be an expectation that the department would make a timely payment in response to that settlement.
The Chair: Is it in relation to a bridge, a railway crossing problem?
Mr. Pagan: I don't have that detail.
The Chair: You're not able to say.
Mr. Pagan: No.
The Chair: We'll have to decide whether we vote for $75 million without knowing anything about where it's going. That's our dilemma.
Mr. Pagan: Once settlements are made, in fact, there is full transparency in the public accounts that would explain the amount.
The Chair: It's sort of a "vote, trust us," kind of thing.
Mr. Pagan: Again, once the court rules, we have no discretion in this area. We make the payment, and I think the expectation is that we would be timely in making our settlement.
The Chair: Mr. Pagan, I'm teasing you a little bit here.
Ms. LaFontaine, and Mr. Pagan, thank you very much for being here. As usual, you have been very helpful, other than that last question. You have brought us up to speed on this in a way to help us on making a decision on how to vote.
Colleagues, before we adjourn we have 20 minutes to get over to the chamber.
We will meet this afternoon with the security people for Parliament Hill, and the timing for that is 2:30. I have had discussions with you before this meeting that it's difficult to come over from the Senate Chamber, and a lot of us have other business to do, so I'm proposing we meet at 2:30 in room 356-S, the same room we met in for organization.
Tomorrow we will begin at 12 o'clock, here in this room, with immigration. That's a big part of these matters that we're considering.
Thank you, the meeting is concluded.
(The committee adjourned.)