Government Operations Committee on March 1st, 2011

[The Vice-Chair, Conservative, Chris Warkentin]

Pursuant to Standing Order 108(3)(c), we are undertaking a study of the effectiveness of management of the operations together with operational expenditure plans arising from supplementary estimates (C). We have three different groups that are bringing in testimony today. We have the Treasury Board Secretariat, Privy Council Office, and the Department of Public Works.

Colleagues, we did want Treasury Board to be prepared to speak not only on their own estimates that are being referred to this committee but also on a larger perspective as well. I believe that representatives from Treasury Board are prepared to do some of that, so direct your comments that are in the broad scope to Treasury Board officials. Privy Council and Public Works officials are here to respond to their own estimates. Just keep that in mind, folks, when you are questioning. We do have limited time.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you. That's exactly my point, Chair. Thank you very much.

I recall having an interview with The Hill Times not too long ago, and one of the things I talked about was the issue of the estimates. Since it is one of the key pieces of this committee's raison d'être, we wanted to give it full and proper service.

I know we've been delayed today by virtue of the votes, and it may be premature, but I would ask the committee to consider if it may be necessary to consider having them back to complete the balance of questions that we may have, because we're going to probably go through a round.

[The Vice-Chair, Conservative, Chris Warkentin]

Let's see where we get to, and let's start off right away. I think there's a general consensus that it's something that's necessary to do. Let's start with the folks from Treasury Board.

Thanks, Mr. Smith.

[Alister Smith, Associate Secretary, Treasury Board Secretariat]

Thank you, Chair.

I'm pleased to be here with my colleagues from Treasury Board to present the supplementary estimates (C). We'll start with that, and if you wish, we would be happy to answer any questions you may have after that.

My colleagues include Christine Walker, who is the assistant secretary and chief financial officer at Treasury Board; David Enns, who is the deputy assistant secretary of expenditure management sector; Sally Thornton, who is the executive director of expenditure operations; and Marcia Santiago, who is the senior director in the same area of expenditure operations.

I'm happy to take any questions you may have on the production of the estimates, the actual supplementary (C). Let me just provide a quick overview of the supplementary estimates (C). These are the third and final estimates for the fiscal year, 2010-2011. They were tabled in the House on February 8.

These supplementary estimates seek authority from Parliament for increases to spending for the fiscal year 2010-2011. The spending will be for items that were based on Budget 2010 expenditure plans, and are now being brought forward for funding approval.

The supplementary estimates also seek authority to transfer existing spending authority from one organization to another, or from one vote to another within an organization, in accordance with the evolving requirements of government.

These supplementary estimates also provide information to Parliament on a net increase of $886 million in statutory spending. Statutory spending, as you know, is spending authorized by the legislation already approved by Parliament, such as major transfers to individuals or provinces.

This is the third consecutive year in which we have had annual supply cycles with three supplementary estimates: supplementary estimates (A), (B), and (C). Supplementary estimates (C) presented near the end of the fiscal year tend to be smaller than supplementary estimates (A) or (B). By their nature they deal largely with year-end pressures and the final budget items that were not ready for earlier supplementary estimates. In terms of voted items, 2010-11 is the smallest supplementary estimates (C) of the last three years. This year the government is seeking approval for $920 million in voted items for 48 organizations. In 2009-10 it sought $1.8 billion and in 2008-09 it sought $1.5 billion. These supplementary estimates bring the total estimates for 2010-11 to about $267 billion.

There are six major items, accounting for about 90% of the $920 million that's sought here, or about $824 million of that total. The first item is the purchase by Public Works of the Nortel Carling campus in Ottawa, which was announced on December 17, 2010. The second item is support for the operations of Atomic Energy of Canada Limited. The third item is funding for the payment of disability awards to recognize and compensate veterans for the non-economic impacts of a service-related disability such as pain and suffering or reduced quality of life. The fourth item is approval to write off debts owed to the crown for unrecoverable loans from the Canada student loans portfolio. The fifth item is for a short-term increase in expenditures in the claim payments as a result of the introduction of the pay direct card. This card, introduced in November 2010, allows for immediate claim processing of prescription drug purchases covered under the public service health care plan. The final item I would just note here, the sixth item, is for the Canada Revenue Agency, which requires resources to administer the harmonized sales tax program for Ontario and B.C. and the affordable living tax credit for Nova Scotia.

On the statutory spending side, the $886 million net increase in statutory spending will not form part of the appropriations bill. In supporting the supplementary estimates, the department will be asked to approve the net increases due to a series of increases in certain programs--for example, fiscal equalization offset payments to Newfoundland and Labrador and payments in response to prairie drought conditions, offset by decreases in other programs--for example, reductions in total payments for the old age security and guaranteed income supplement from amounts previously forecast.

In conclusion, Mr. Chairman, this presents a broad brief overview of the supplementary estimates (C), and my colleagues and I would be happy to respond to your detailed questions.

[The Vice-Chair, Conservative, Chris Warkentin]

Thank you, Mr. Smith.

We'll now hear from representatives from the Privy Council Office.

Ms. MacPherson.

[Marilyn MacPherson, Assistant Deputy Minister, Corporate Services Branch, Privy Council Office]

Good morning, Mr. Chairman.

I am pleased to meet with the members of the Standing Committee on Government Operations and Estimates. I am accompanied by Mr. Bill Pentney, Deputy Secretary to the Cabinet, Plans and Consultations. My introductory comments pertain to the 2010-11 supplementary estimates (C) for the Privy Council Office, PCO, and, as we have three distinct items totalling $1.9 million, I will speak to each of these.

The first request in the amount of $1.6 million is for the panel of arbiters created to review documents related to the transfer of Afghan detainees by the Canadian Forces, pursuant to the House order of December 10, 2009 and the subsequent memorandum of understanding between the government and two opposition parties, dated June 15, 2010. The panel, composed of three eminent jurists, the Honourable Frank Iacobucci, the Honourable Claire L'Heureux-Dubé and the Honourable Donald I. Brenner, was created to review privileges asserted by the Crown with regard to the documents identified for disclosure under the House order. The panel is supported in its work by counsel from the law firm Torys LLP. They are providing essential research assistance to facilitate the panel's review. The funding requested is for the remuneration of the panel members, including disbursements, as well as professional fees and disbursements for counsel from Torys LLP.

The second request, in the amount of $0.8 million, is for the office of the special adviser on human smuggling and illegal migration. This office was created to coordinate the government's strategy and response to migrant smuggling by sea, particularly through engagement with key domestic and international partners, as well as with governments in source, transit, and destination countries. Key domestic partners, which will assist the special adviser to coordinate Canada's strategy, include the Canada Border Services Agency, the Canadian Security Intelligence Service, the Department of Foreign Affairs and International Trade, the office of the Communications Security Establishment commissioner, Public Safety Canada, and the Royal Canadian Mounted Police.

The funding request for the office of the special adviser is for the salaries of the special adviser himself and for the services of three full-time staff. The special adviser is also being supported by employees seconded from various departments, whose salaries are paid by the home department or agency. Funding requested is also for travel. In order to advance Canada's strategy to combat human smuggling, the special adviser will need to work with a wide array of international partners and engage in international and regional fora. Funding is also requested for incremental costs for corporate services support and translation.

The third item is a budget reduction of $0.5 million for cost-containment measures identified in the day-to-day operations of the Prime Minister's Office for 2010-11. The PMO is committed to leading by example and has cut its budget by approximately 5%, or $480,000, for 2010-11.

PMO achieved this budget reduction as follows. First, there was an office reorganization. Staff positions were realigned to better fit with organizational needs and a new office structure. Some positions were eliminated entirely; other efficiencies were found within specific jobs. Second, at the beginning of the fiscal year, each division within PMO was allocated a reduced budget, both for operating and salary expenses, and requested to find ways to live within that budget. Cost containment was therefore an office-wide exercise. Third, cost-containment measures on the operating side included reduced staff by up to 50% on many tour advance trips; increased usage of flight passes; and increased level of scrutiny and assessment of the most cost-effective options for expenditures.

In closing, I would like to thank you for giving me this time to inform you of the ongoing initiatives in the 2010-11 supplementary estimates (C). We would be pleased to respond to your questions.

[The Vice-Chair, Conservative, Chris Warkentin]

Thank you, Ms. MacPherson.

The representatives from the Department of Public Works.

[Alex Lakroni, Chief Financial Officer, Finance Branch, Department of Public Works and Government Services]

Mr. Chair and members of the committee, good morning.

My name is Alex Lakroni, and I am the Chief Financial Officer at Public Works and Government Services Canada. With me is John McBain, Assistant Deputy Minister of the Real Property Branch.

We appeared before this committee to discuss supplementary estimates (B) on November 25, and we are pleased to return today as part of your review of the supplementary estimates (C), which were tabled in the House of Commons on February 28.

With these estimates, our appropriations will increase from $3.1 billion to $3.3 billion.

The supplementary estimates (C) identify a total requirement of $261.4 million. This amount is reduced by $58.7 million as a result of funding available within our existing budgets. Thus, the net funding required for PWGSC is $202.7 million.

As the first three items in supplementary estimates (C) constitute over 95% of the funding sought, these will be the focus of my initial remarks. I will address these three items by order of magnitude and will then be happy to answer any questions you may have on the remaining items.

PWGSC is responsible for, among other things, the accommodation needs of federal employees across Canada. To ensure the effective delivery of accommodation services, the first item in these supplementary estimates (C) is the department's $216.8 million acquisition of the former Nortel Carling campus located at 3500 Carling Avenue.

While the purchase of the campus offered a significant real estate opportunity, this acquisition was made by PWGSC to enable the consolidation of the Department of National Defence in the national capital area. At present DND is distributed across 48 locations. Upon completion of the fit-up and move to the Carling location, DND will be concentrated in approximately 10 locations, offering significant operational efficiencies.

As taxpayers rightly expect with a purchase of this scope, PWGSC undertook rigorous due diligence prior to bidding on this property. The department first canvassed for potential sites across the national capital area. Once the Nortel building was determined to be the optimal option, a third-party engineering firm was engaged to assess the condition of the building and campus infrastructure. Prior to entering the bidding process itself, the department engaged third-party real estate professionals to assess and advise on the market value of the property. Individually and collectively, the third-party independent analyses confirmed that this acquisition represents exceptional value for money for Canadians.

Over a 25-year period, this purchase represents savings of approximately $600 million, compared with sustaining status quo accommodations, and more than $300 million over the next-lowest cost option.

Beyond the outstanding value of this purchase, it is also important to recognize that no other potential site offered the immediate capacity, the security capability, or the existing municipal infrastructure offered by the Carling campus. My colleague John McBain will respond to any questions you may have about the advantages of this purchase.

It should be noted that this purchase in no way affects our commitment to the 75-to-25 target ratio of division of office space between Ottawa and Gatineau.

The second notable item in these supplementary estimates (C) is funding of $17.5 million that will be used to renovate and recapitalize a portion of our real property portfolio. Finally, $16 million is required to address the increasing cost of providing office accommodations, attributable to the renewal or growth of programs government-wide.

Mr. Chair, we would be happy to answer your questions on the items I have discussed as well as other items in these supplementary estimates (C).

Thank you.

[The Vice-Chair, Conservative, Chris Warkentin]

Thank you, Mr. Lakroni.

We're going to start with eight-minute rounds.

Ms. Coady, you're up.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

We certainly appreciate your being here this morning and answering our questions, and your waiting for us while we attended the vote.

My first question is an overall question, and I think Treasury Board has been designated to answer it.

We've been studying the operating budget freeze plan, and we've known that there is going to be about $300 million in savings to be identified in this fiscal year. We've been studying where those savings will come from. I note in these supplementary estimates that there are only two real reductions that relate to the operating budget freeze: one is with the Office of the Information and Privacy Commissioner, a small amount; and the other is Veterans Affairs Canada, where there is a vote.

When you combine the 51 items—I think it's worth about $181 million in the earlier supplementary estimates (B)—we're still short a bit. We need about $117 million in operating budget freeze savings in order to meet that $300-million target. And we need to know which departments are going to be affected, and how severely those departments will be affected. Will it have an impact on Canadians and consumers?

The Parliamentary Budget Officer's report said that “the spokesperson for the President of the Treasury Board indicated that the residual $117 million in operating budget freeze reductions would be accounted for in lower compensation adjustments and therefore would not appear in the government’s estimates”.

That's of concern to me and I'm sure to my colleagues around this table. We have a fiduciary responsibility. We've been following through, trying to get information on the impact of $300 million in cuts this year. Perhaps you could talk to us about this.

[Alister Smith]

Certainly I will try.

As you said, the operating budget freeze for the 2010-11 fiscal year will result in savings of $300 million. Some of the savings have been taken and essentially clawed back within the estimates, and some of the savings are due to the fact that we are not asking for the funding. So the additional $117 million we're not asking for. With appropriations, we simply use this document to ask Parliament for approval of new spending. So when we don't need to ask for new spending, we don't ask for it in supplementary estimates. That's why it doesn't appear. So what we are not doing is—

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Can I ask you a question on that, then? We're still getting the $117 million in savings. Is that what you're telling me?

[Alister Smith]

That's correct.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

You're just not asking for the reductions.

[Alister Smith]

We're not asking for the additional funding to compensate departments.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay. So for clarity, please advise this committee where those reductions are coming from. We have a responsibility to the people of Canada here. Where are those cuts coming from? From which departments? How much, by department?

[Alister Smith]

The reductions have to do with the 1.5% wage increase, which departments would otherwise have been compensated for. For this 1.5% applied under the Expenditure Restraint Act, we would normally compensate departments. We're not compensating them for that. Therefore, they have to absorb that reduction from their operating budgets. That's the way it works. And that will apply across all appropriated departments that have salaried staff.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

So that I'm clear on this, what you're telling me is that in the 2010 budget we said that the 1.5% in salary increases would have to be found in departmental budgets. We all know that. But in addition to that, you were looking for $300 million in savings.

[Alister Smith]

No, that is the $300 million.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

So it's one and the same.

[Alister Smith]

That is it—it's one in the same.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

That's what you're telling us. So where we could find these reductions is in human resources.

[Alister Smith]

Well, not exactly. As you heard from the deputies you brought before the committee, each deputy, as the accounting officer for their department, has the flexibility to determine how the savings will be achieved. So they may want to continue to hire in some cases or refrain from hiring, or they may find savings in contracting or in other areas of operating spending. That's for them to determine.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

It's frustrating, I guess, for the members around this committee to get different answers at different times. We were told by others who appeared before that this would be in supplementary estimates, and now we're hearing, no, it's just the savings are coming out of that 1.5%. So we don't know exactly how that impacts people. We know how it impacts departments, in that it's a 1.5% reduction they have to find. We just don't know how they're finding it. That's the frustration.

I'm going to go on to my next question. It comes out of our main estimates, which were tabled today, as you well know. The minister has been saying it's a $10-billion reduction. I just want to make sure we're all clear on this. The main estimates in 2010 were $267.3 billion, but at the end of the cycle, with supplementary estimates (A), (B), and (C), we're actually at $277.8 billion, which is a $10.5 billion increase, really, at the end of this whole cycle. That's quite something. And then to hear that we're going to be saving that $10.5 billion again, I thought it was interesting.

I read David Akin's article. He talked about “Ottawa cuts billions in 2012 spending plan”. He goes on to talk about “Overall government spending grew by more than 6% in Harper’s first year in office, by nearly 5% in year two, and by about 2.6% in year three”, and that this rollback, even if it is to $250 billion next year, “will still be $11 billion higher than what was spent in fiscal 2009”.

My question to you is, knowing that the main estimates come out around budget time, they are changed throughout the year—(A), (B), (C) supplements—and as you've pointed out, this is a couple of years now that we've gone to supplementary (C)s. We have a fiscal responsibility to the people of Canada. How can we as a committee be assured of that spending control you talk about?

[Alister Smith]

First, just let me mention that the $10-billion reduction in main estimates that was cited is a comparison of the main estimates for this year coming, 2011-2012, with the previous year, 2010-2011. Of that, $6 billion is due to a reduction in voted spending, $4 billion in statutory spending. Of those four statutory estimates—because we always estimate statutory spending and then the reductions from the estimates of statutory spending—$7 billion of that total $10 billion is probably due to the wind-down of the EAP. Some of what you're referring to in terms of the patterns of spending over time has indeed reflected a very large program spending, the economic action plan, which is now winding down at the end of this fiscal year. That's what shows up in the estimates.