Government Operations Committee on March 5th, 2009

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

The Minister for Infrastructure and Transport just told us that whatever is proposed in the $3 billion—and I'll get to the list in just a moment—will meet Treasury Board guidelines.

Can you tell us, since he doesn't know or won't tell and you don't know or cannot tell, how we know there's going to be implementation and proper procedure followed here under Treasury Board guidelines?

[Alister Smith]

There is actually no difference in the way we would treat an item charged to the central vote from supplementary estimates (A) items, for example. All these items would be required to pass all the due diligence tests at Treasury Board. They would require approval by Treasury Board ministers. They need to be in conformity with the Financial Administration Act, Treasury Board policies, and internal audit and evaluation. They will be audited. They will be reported. So all aspects of due diligence are followed.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

They'll be audited after the fact. I'm talking about what you know in advance.

[Alister Smith]

Actually, we have been in discussion with the Auditor General and we now have internal audit committees with external members in all departments who will already have started to conduct due diligence.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

We are looking for an idea of what is on the comprehensive list and where that $3 billion is going to be spent. Can you, or anyone here, provide any light as to where that money is to be spent? I appreciate it is a central vote; it's a block chunk of money.

It's not an insignificant amount. Does anybody know where this is going?

[Alister Smith]

We can say this. When you look at the budget, you have the entire economic action plan in chapter 3. The Budget Implementation Act contains a number of specific measures, and the remainder will either be in the supplementary estimates (A) or the central vote.

The central vote is a bridge to supplementary estimates. It allows money to flow as of April 1, if you approve interim supply. Some items indeed may receive the first installment from the central vote and the next installment in the supplementary estimates.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Chair, if you would, I'd like Ms. Hall Findlay to take the rest.

Thank you.

[The Chair, Liberal, Derek Lee]

Sure.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Smith.

We continue to have some challenge with the speed of the flow of funding and a continued lack of understanding of the specifics of where that money will go. I appreciate that this is a bridge to spending, but the whole point is to spend right away. If the money is to be spent right away, I, for one, and I think a lot of other parliamentarians, expect that there would be some knowledge about where that money is going. We only have a few weeks to deal with it.

We asked the minister earlier today if he had a list. After some effort, finally we got acknowledgement that indeed he does have a long list of projects that are ready to go.

Is it your understanding as well that internally there is a list of items that will have this money very quickly?

[Alister Smith]

Could I address the two questions?

I hear one being about the speed, and I will start with that. In a normal year cash would not flow until December. Last year we made a change. We introduced supplementary estimates (A) in June, and cash can now flow. Assuming we have supplementary estimates (A ) passed again in June, cash can flow in June.

In this particular case, with the passage of interim supply, cash can actually flow in April for those items that have gone through the due diligence procedure I just outlined and have Treasury Board approvals. There's no such list until Treasury Board actually approves these allocations, so funding could not apply. Money could not be allocated until April, in any case, with interim supply. There are eligible items, and those eligible items in chapter 3 are those that are not in the BIA, Budget Implementation Act, but which are ready to go earlier than items in the rest of chapter 3.

I don't want to get any more specific than that, because any list that would be provided could only be indicative at very best. It still requires all the due diligence and approvals by Treasury Board ministers.

[Martha Hall Findlay, Liberal, Willowdale, ON]

If I may pursue this, I'm a bit confused. We're being told that no money will flow unless all the due diligence has been done on any particular project, but the purpose of this is to ask us to allow the money to flow very quickly.

You don't do due diligence on a project that quickly. We have the Building Canada fund, for example, which has been absolutely dismal in getting money out the door. We're only dealing with a few weeks now. Given that due diligence does take a little while and given that the request would suggest there is an opportunity to spend money starting right away, how could there not be a pretty good idea of what projects are in the works and, I would think, ready to go?

[Alister Smith]

There are top-ups to existing programs where you have terms of reference--a functioning program that's been in place for some time--and it's quite easy to get the final approvals. That's quite different from new programs that may require longer.

The first allocations could start in April and may well continue to the end of June. You have to understand our internal process as well. For supplementary estimates (A) we shut the door on April 2. We need that much time to process them for supplementary estimates in June. So there are items that will not be ready for supplementary estimates--will not make that April 2 deadline. They may come in a little later in April or May. They will have gone through the full due diligence and will be ready for funding.

So the period from April 1 to June 30 is important for us--for money to flow in that period.

[Martha Hall Findlay, Liberal, Willowdale, ON]

But even if you're topping up a program or an existing project and you don't have to undergo a series of due diligence investigations and review, because we all know that takes a long time—I understand that and it makes sense—why would we not know what those are at this time if we expect that money to flow in a few weeks?

[Alister Smith]

We do know what's in chapter 3. There's a long list of items. I didn't have the benefit of hearing what Minister Baird said, but I'm sure he talked about infrastructure programs that will be available for the construction season. So there are some elements there that I think one could guess at. I just do not want to guess before ministers have made decisions.

[The Chair, Liberal, Derek Lee]

That's it for time.

Ms. Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Mr. Chairman.

Good afternoon, ladies and gentlemen.

First of all, can you explain the difference between vote 5 and vote 35 as listed in the documents we were given?

[Alister Smith]

I'd be happy to explain that.

Treasury Board vote 5 is a vote for contingency purposes. The vote wording deals with miscellaneous, urgent, or unforeseen items. There's a limit of $750 million, and departments use it as a line of credit to borrow under approvals from Treasury Board. They have to repay the vote, so it's zero at the end of the year.

In the case of Treasury Board vote 35, charges to that vote would simply be allocations. They would not be repaid to the vote. We don't want to continue to maintain a $3 billion fund. It's for a particular bridge financing purpose only to supplementary estimates.

Those are the essential differences.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

If I understand this correctly, the two amounts, one of $750 million and the other $3 billion, are amounts that the minister or Treasury Board can now allocate in an arbitrary fashion. This is done arbitrarily and they don't have to provide reasons for the use of those funds.

Is that correct?

[Alister Smith]

I don't think that's correct. I'll ask my colleague Mr. Pagan to describe more of the Treasury Board vote 5 procedure.

For vote 35, the items must be budget initiatives. They must be in the January 27 budget, so they are already confined to that budget. We also make other requirements internally. They must satisfy a cashflow requirement. If they can wait until supplementary estimates, that's fine; it will be in supplementary estimates (A). If they're ready, pass the due diligence tests, and there is a cashflow requirement for the department to move forward, they can be charged to the central vote.

I'll add one more element of perspective here. There's a lot of funding in that budget. It would be unreasonable to expect departments to be able to essentially cash manage and deliver those initiatives this fiscal year without some initial funding. So there's a rationale for this.

If you compare it to the past, departments did not have the ability to receive cash through supplementary estimates until December. That's fine in a normal year when you are trying to bring in a normal budget. You can cash manage until December. But if you're bringing in a large budget like this--and of course there's a need for timeliness--it's unreasonable to expect that departments will be able to make headway on such an ambitious and important program without some upfront funding. That's why we have supplementary estimates (A) in June, but it's also why we need the central vote.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Fine.

The funds under the budget implementation vote can only be allocated between April 1 and June 30. What will happen to funds that have not been spent, after June 30?

[Alister Smith]

The allocations have to occur within the period of time from the passage of interim supply--therefore it can't be before the beginning of April--to the end of June. Then the allocations are provided to departments in the same way that supplementary estimates are provided to departments. They're able to spend once they receive the funds. So they could receive the funds any time from the beginning of April to the end of June, depending on whether they passed all the tests.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

When he testified earlier, the minister seemed to be saying that with regard to infrastructure, a great deal of money was available. There even seems to be more than what is required by the number of projects submitted. We asked him if he could show some flexibility.

Let me use the example that my colleague used earlier. The mayor of one of the cities in my riding says that he waited before submitting his projects, because the city did not have the necessary funds. Before submitting a project, plans and specifications have to be prepared, and this city waited to do so.

With regard to cities that don't have the money and who cannot borrow from this fund that the minister is putting at their disposal, what will happen? Not all cities are interested in borrowing. Preparing plans and specifications and the time needed before a project is accepted can represent four to six months. What happens in a case like that? Do these cities have to give up their projects?

[Alister Smith]

I believe we are talking about a two-year plan here, and funding will indeed be provided throughout the two years to municipalities and provinces. It's a large plan that includes federal infrastructure spending by Public Works, Infrastructure Canada, and others, so there's a wide variety of different elements in this budget implementation plan.

In some cases I'm sure it will take time for municipalities and provinces to access the funds that are in the broad infrastructure plan. The Building Canada fund is a seven-year plan, in any case. I think the Minister of Finance was very clear in the budget that to the extent possible, for good economic reasons, we need to try to accelerate the spending early on as much as we can when the economy is at its weakest points. So there's good rationale for trying to move up that spending as much as we can.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

We mustn't confuse the Building Canada Fund and that $3 billion in additional funding that the Minister of Finance has just put in place.

[Alister Smith]

The minister has already spoken about this, so I don't want to add much more. But it's true that the Building Canada fund is a seven-year plan, and I think Infrastructure Canada and Transport Canada administer 14 different infrastructure funds. So there are different funds that can benefit from additional funding earlier, and there's still a good reason for accelerating that spending, as opposed to leaving it on the normal path, if I can put it that way.