Evidence of meeting #6 for Government Operations and Estimates in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was billion.
A video is available from Parliament.
The Chair NDP Pierre-Luc Dusseault
I now call to order the committee's sixth meeting. We are studying supplementary estimates (B) and the departmental performance reports for 2012-13.
We have witnesses from the Treasury Board Secretariat. They'll start us off with a presentation covering both topics, after which, committee members will be free to ask questions.
Ms. Zeman, Ms. Walker, Ms. Santiago, Mr. Matthews and Mr. Tremblay, thank you all for being here. The floor is now yours.
Bill Matthews Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
Mr. Chair, thank you for inviting us to appear before the committee this afternoon to assist you in your study of supplementary estimates (B) for 2013-14.
I will spend 25 minutes going over the highlights across government, and then I will turn things over to Ms. Walker, who will discuss the Treasury Board Secretariat as a department. After that, we'd be pleased to answer your questions.
Maybe I can start with slide two, just to give you a brief overview of the supplementary estimates (B) and the largest amounts that are included in this year's package.
First, though, I'll give you a little bit on how the actual document itself is organized, because I believe this will be some members' first time going through supplementary estimates.
After that, I will give some highlights of the largest dollar amounts and a review of where we are, in terms of voted and statutory funding, at this stage of the year after supplementary estimates (B).
Turning to slide three, I would offer a quick reminder to members, Mr. Chair, that the supplementary estimates and estimates are prepared on a modified cash basis. Appropriations are an annual amount, in most cases. This is spending for the current fiscal year. I will cover off what happens if the money is not spent.
An important point to remember is that it is illegal to overspend your vote. It's against the law. So it is important that departments don't overspend their vote.
With regard to votes, in the current stage for most departments, we have a vote for operations, a vote for capital, and a vote for grants and contributions. I did mention that it is illegal to overspend your votes. Having said that, there is no obligation for departments to spend the entire amount of money allocated. It's an “up to” amount, with no obligation to spend the whole thing. If departments do not spend their votes or the entire amount—there's been a fair amount of attention on that recently—three possible things can happen.
The first thing that can happen, which you'll see in these supplementary estimates, is something called operating budgets and capital budgets carry forward, where departments can carry forward 5% of their unspent operating and up to 20% of their unspent capital into the next fiscal year. So if the amounts unspent are within that range, they can carry those forward.
If they are outside that range, a request can be made to reprofile the money, which is to bring it back for the next fiscal year, in which case Parliament would have to re-approve it because the previous fiscal year has passed.
There is something in these supplementary estimates that has been through this process before, and the money did not get spent, and it's back again. I'll mention it now, but I'll talk about it again later: National Defence Manuge is a great example of that. Last year we thought the money would be spent. It was in the estimates. The money was not spent, but there is still an ongoing requirement for that money so it's back again, because the parliamentary authority to spend that money lapsed at the end of the fiscal year.
The final possibility if the money is unspent is that it goes back to the fiscal framework. It is indeed unspent and it does not get spent in future years.
I can tell you a little bit about this document itself and the highlights for you. The estimates to date are included in the introduction section, which is kind of the upfront piece, and we do talk about the purpose of the document.
I would like to highlight for members a very useful section that starts on page 12. You can see for each minister, each department, what they had spent in 2011-12.
It's page 14 in the French version and page 12 in the English.
You can see what they spent in 2011-12; what they had for authorities in 2012-13; and where they are so far this year, including supplementary estimates (B). It's a nice snapshot of each organization.
I highlight that for members because that improvement is one of the results that came out of a recommendation from this committee, if I recall correctly, to get all the information at a glance.
The largest part of the supplementary estimates is the details by organization. That's where you will go through and find for each department what their request is, included in supplementary estimates (B).
In addition to this document, there is substantial information available online on the Treasury Board Secretariat's website. That includes such things as the statutory forecasts, so details on the statutory items, and a reminder for members that statutory items are for information only. That's why they are not presented in here, not part of the voted package but still important nonetheless.
There's been a lot of discussion here at this committee about estimated spending by strategic outcome and program, so that information is available online for each department. You will also get additional information on transfers between organizations and allocations from Treasury Board's central votes.
After that little bit of an overview, perhaps you could turn to slide four.
Supplementary estimates (B) detail $5.4 billion in budgetary voted expenditures for 62 departments and agencies. Parliament will approve those votes by way of a supply bill that you'll see in December.
What you're going to see here is 62 organizations requesting funds, a total of $5.4 billion. You will see on slide 4 budgetary versus non-budgetary. You'll notice there's nothing in the non-budgetary column but I'm happy to explain what that means if that's of interest to members, and also the split between voted and statutory. The statutory is just for information purposes. I will provide some information on another slide about the statutory items because there are some bigger items that are in fact netting each other off to get down to a very small number but there are some large dollars in there.
If I could take you to slide 5, this is where we take a look at estimates for this current fiscal year, 2013-14, versus the previous years. So you'll see on this slide a column for main estimates for this year, supplementary estimates (A), which were in the spring, (B), which is what we have before us today, and (C), which is obviously still to come.
If you were to look at the current fiscal year versus previous fiscal years, you'll notice two things. Number one is the spending in total after supplementary estimates (B), in terms of authorities, is basically in line with what it was the previous fiscal year, but you're seeing a different split between voted and statutory. Voted spending is down slightly. Statutory spending is up. If you're curious as to why statutory spending, or at least estimates of statutory spending, is up, there are two big reasons. There's an aging population, so our statutory programs related to old age security and the guaranteed income supplement, those amounts are up by about $1.8 billion over the previous fiscal year. The other big item I will flag for you is the health transfer which, as members would know, is up by 6% over the previous fiscal year, which is an additional $1.7 billion. Those two things combined would cause your statutory forecast to go up by about $3.5 billion. So I thought I would highlight that for you at this stage.
Slide number 6 is where I will spend some time highlighting the major items for you in the supplementary estimates (B). There's a list here of the amounts over $100 million and I will talk to a few of them. First on this list is Treasury Board Secretariat accumulated severance pay benefits of $955 million. This is a whole-of-government issue. Members who have been here in the past will be familiar with this. The issue here, the money involved, is because accumulated severance is being negotiated out of collective agreements as they expire. This is severance for voluntary departure from the public service. That being said, employees are allowed to keep the severance that they had already earned and they have been given an option to either leave the money with the government and take it on retirement, or if they want their accumulated severance early, they are in fact able to cash it out now.
So as collective agreements have been expiring and renegotiated, there's an amount that has been set aside over the last few estimates to provide for the payment of severance for those individuals who are wishing to effectively cash out their severance earned to date. This is for voluntary severance. The amount we have is $955 million, largely related to National Defence, our CS category which is our computer folks, and our audit and commerce group. So those are the collective agreements involved there.
The second item on this list, public safety, disaster financial assistance arrangements, $689 million, is largely related to the funding committed to provide relief for the flooding in southern Alberta back in June. The total government commitment, as members would know, is in the neighbourhood of just under $3 billion. It's $2.8 billion, I believe. This amount is simply a top-up to that. This program is a complicated one, in that the amount of money provided by the federal government is based on the amount of money the province spends to effectively clean up the disaster on a per capita basis. What happens normally is provinces will clean up the disaster and then eventually invoice for reimbursement to the federal government. So there's often a two-year or a three-year time lag between the disaster itself and when the federal government flows the money to the provinces.
So in this amount, also for the current fiscal year, there is money for Manitoba and for the Maritime provinces for some flooding and storms that happened between 2010 and 2012. I thought I would highlight that for you.
National Defence, Canadian Forces service income security insurance—Manuge, as I referred to it earlier—that is money that will go to Manulife for distribution to proper recipients. That money was in fact in last year's estimates. It was thought the money would flow last fiscal year. It did not, so it's back again this year.
This relates to a lawsuit that was launched against the government involving a clawback of benefits based on receipt of a pension. It was agreed that the clawback was not appropriate, so this money is flowing to Manulife for future distribution.
Specific claims under Indian Affairs are a three-year budget commitment from the budget of roughly $1.4 billion in total. This is this year's supplementary (B)s portion.
We have $400 million for Canada First Defence Strategy. That's related to readiness capability for our forces.
For Health Canada, for first nations and Inuit health there is $285 million. That is from budget 2013. It's a three-year commitment of $1.8 billion in total.
I mentioned the operating budget carry forward earlier. This is $275 million, and it is money that Treasury Board Secretariat is allocating to departments based on the amount they did not spend last year for operating. This is the allocation we mentioned earlier.
Under National Defence there is an item for ships for Arctic patrol. There will eventually be six to eight ships. The money you will see here is basically just for project definition and infrastructure implementation. As to what we mean by infrastructure implementation, there are three projects in particular that I would highlight: some work in Halifax to improve a jetty; similar work in Esquimalt on the west coast to improve a jetty there; and finally there is a port in Nunavut, up north, and this money is to basically get that facility ready for the work that will come later. This is the infrastructure piece of it.
The Infrastructure Canada gas tax fund is another example of a reprofiling of money from a previous year that was not spent. Two provinces and one territory were a little behind the others in their reporting, so to get the money in the current fiscal year, it was reprofiled.
Lastly I'll mention Foreign Affairs, the crisis pool of $120 million. That is not for any crisis in particular; it is in case there is an international disaster. There is a program whereby Foreign Affairs has money in its reference levels that would allow it to respond without waiting for supplementary estimates or something like that—to have some cash. It allows for a quick response.
I mentioned that I would spend a bit of time on statutory forecasts, because while the netting results in a rather small number, you'll see that there are some rather significant components on slide 7. I will highlight just a few for you.
There is one for employer contributions under the Public Service Superannuation Act, for $443 million. You also have some money in there for fiscal equalization payments for total transfer protection, at $55.8 million. The decrease I will highlight for you relates to Finance's downward revision of its forecasted interest on mature debt; it is revised $556 million down.
As I mentioned, the net result is a very small amount, but these are some of the bigger items making up that small item.
Slides 8 and 9 are about horizontal items. We have had some discussion at this committee about horizontal items in the past. Horizontal items are areas in which more departments than one are working together to achieve a common outcome. We have listed here the horizontal items that are included in supplementary estimates. What is interesting about the horizontal items is that the money is still voted to each department. What we're showing you here is the whole picture for all the departments working together.
The first one on this list, just to give you an example, is the community infrastructure fund. This is a reprofile from previous years, but ACOA, CEDQ, FedDev Ontario, and Western Economic Diversification are all receiving money under that program.
If you go further down the list, you'll see money for Public Works and Shared Services Canada around modernizing the federal government's pay administration system. That system itself is 40 years old, and it will be replaced. This is a six-year project that started in 2010. There are two departments getting money there.
I'm not going to go through the whole list, but I'm happy to take questions as we go.
The last one on this list, you'll see, is for Veterans Affairs; it is related to advertising. I will highlight that one for you. That is because it is the 60th anniversary of the Korean War. Veterans Affairs is planning to do some work to commemorate the veterans from the Korean War this fiscal year, so you are seeing some funds there.
The second page of horizontal items is all grouped around items related to immigration and border issues. You will see, here on slide 9, a theme of CBSA and citizenship. Members are probably aware that the Government of Canada does not collect data when people leave the country via U.S. border crossings. This would allow the government to collect information on people leaving the country. It would enable a better job to be done of tracking temporary residents, who have to leave the country after a certain point in time.
There's a similar list of horizontal items here but, as I mentioned, all around immigration and border issues.
The last one on the list I will highlight as well: CBSA and the Canadian Food Inspection Agency. There's funding here for CBSA around NEXUS and fast lanes, to improve the speed of clearing the border, and money for CFIA around products that are regulated in the U.S., to enable speedier approval into Canada for those products that are regulated by the U.S.
I will now turn over to my colleague, Christine Walker, to speak specifically about Treasury Board Secretariat as a department.
Christine Walker Assistant Secretary and Chief Financial Officer, Corporate Services, Treasury Board Secretariat
Bonjour.
For the Secretariat as a department, the total supplementary estimates amount to $1.8 billion.
In terms of program expenditures, we have a number of items in supplementary estimates (B). One, the first one, is for the workspace renewal initiative. This is a six-year project that started in 2011-12 to consolidate ten office locations of the Treasury Board Secretariat into two, to modernize the offices, and to reduce office space by over 30%.
On slide 8 you'll also note that this is a horizontal initiative, because both our department and Shared Services Canada are receiving money. We get $4 million, and Shared Services Canada will receive $3 million, because they are responsible for the IT infrastructure in our new workspace.
The second point is funding to renew the joint learning program. This is a joint program between the Treasury Board Secretariat and the Public Service Alliance of Canada that has been in place since 2001 to do co-development of training for employees.
You will also see a transfer from the Treasury Board Secretariat to Public Works and Government Services. This is an extension, which started in 2011-12, of the human resources modernization project that we've been working on for many years. The Treasury Board has developed a pilot solution, and this will be transferred to Public Works and Government Services to fully implement the solution.
The other two transfers are very small.
The last item is a travel reduction of $107,000. That is a cut of 5% of our total travel budget from 2012-13.
On the next slide there are a number of central votes, which are managed out of Bill Matthews' area. He has already covered the first two, and I'll let him cover the balance of the slide until the last one.
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
Thank you.
As mentioned, there is $955 million for severance, which we have already covered, and we have already spoken about what the additional requirements for the operating budget carry forward are, but I will highlight the next item on the list.
This is a transfer between the capital budget carry forward and the operating budget carry forward, which is a bit of an unusual item. It requires discussion here because it does, effectively, involve a vote transfer. When I mention operating budget carry forward and capital budget carry forward, I want to emphasize that there are two caps in place. One is 5% of your unspent money, if it's operating money, and 20%, if it's capital. But there was also a government-wide maximum that was set through main estimates when the central votes for operating budget carry forwards and capital budget carry forwards were established.
When we finished the results for 2012-13 and added up all the unspent 5% amounts in departmental budgets, they exceeded the operating budget carry forward vote. So we had to put some more money into that vote to allow departments to get their full carry forward. That's what this is.
This, then, explains the transfer between the two votes. There was lots of money left in capital budget carry forwards, so there was no issue there, but the money was moved from the capital budget carry forward vote over to the operating budget carry forward votes to allow departments to get their 5% carry forward.
Compensation adjustments is the second-last item on this list. These are for cases in which collective agreements are reached. Departments are basically held harmless for any wage increases. They have their existing base reference levels, and if a collective agreement is reached wherein there is a salary increase for a certain group, some calculations are done to determine how much the total cost is for each department. That money is transferred to each department to cover off the wage increase. They're effectively held whole for those things.
There are some exceptions to this. You may recall that there have been years when we've had an operating budget freeze, and an operating budget freeze has been announced for the upcoming fiscal year, 2014-15. But in the current year there is no such freeze, so for the agreements that were negotiated during the year, this is the way we transfer money to departments' reference levels to hold them basically harmless for those raises.
The groups that would be involved here include: our lawyers; our computer folks, as I mentioned earlier; our applied science and patent research folks; and finally, our researchers. Those are the big groups in the $94.1 million.
Lastly comes the statutory item that I've already spoken to, the payments under the Public Service Superannuation Act.
That's the balance of central votes.
Did you want to speak to the next slide, Christine?
Assistant Secretary and Chief Financial Officer, Corporate Services, Treasury Board Secretariat
On the next slide you have a table that shows all of the votes that are under the responsibility of the Treasury Board Secretariat, their main estimates, what they've received in supplementary estimates (B), any technical adjustments, and what the proposed authorities are to date.
That really concludes our remarks.
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
Thank you, Mr. Chair. We would be pleased to answer your questions. But first, I just want to give you a little reminder.
We changed the estimates format a few years ago to list organizations in alphabetical order. What that means is that the order in English and French is different. If you are asking a question about a specific page of the estimates document, I would ask that you give us the page number but also give us a few seconds so we can find the equivalent page number in the other language and allow all members to view the material.
Thank you.
NDP
The Chair NDP Pierre-Luc Dusseault
Thank you for your presentation.
Without further ado, I'll turn the floor over to the members of the committee.
Mr. Blanchette, you can get things rolling.
NDP
Denis Blanchette NDP Louis-Hébert, QC
Thank you, Mr. Chair.
Thank you to our witnesses. It's always a pleasure to see you.
My first question has to do with the reports. You mentioned that last year's reports exceeded the authorized ceiling? What was the ceiling?
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
On the votes, specifically, I'll turn things over to my colleague Ms. Santiago.
Marcia Santiago Acting Executive Director, Expenditure Management Sector, Treasury Board Secretariat
We start at $1.2 billion in main estimates. The amounts that you see in these supplementary estimates are to raise the ceiling government-wide from $1.2 to...sorry, I'm doing the arithmetic in my head.
We're increasing it by the value of the transfer and by the new $275 billion.
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
For clarity, there was no amount that was exceeded. The point is that if we were to give each department their 5%, there was not enough in the vote that was approved as part of main estimates. We are increasing it to allow us to give the 5%.
NDP
Denis Blanchette NDP Louis-Hébert, QC
In the reports, how much do the 5% and 20% come to government-wide? You calculated it because you mentioned it in your presentation. How much is it?
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
The amount we're transferring is in the neighbourhood of $170 million, but I could maybe speak to the root of the issue, which is the unspent amounts if you look on a government-wide basis in terms of what was not spent in the year 2012-13.
We're only dealing on the voted amounts here, not the statutory, and it's in the neighbourhood of just over $10 billion in authority that was available that was not spent. That's roughly about 10.3%. If you are curious about what the previous year looked like, 2011-12 would have been about $9.5 billion. It was more than we're used to.
That is not abnormal in a time when departments are still implementing budget cuts. Because it's illegal to overspend your vote, departments tend to be very careful, and rightfully so. It's not uncommon to see large lapses, as we call them, in times of budget cuts. The key question for me when I looked at that—there's really two types of unspent money—is whether it was planned or unplanned.
To give you a very simple example, in main estimates there was money that is in departments' reference levels. The budget came along after main estimates, and it reduced the amount of money that each department could spend on travel. That money was already in departments' reference levels, so it was already out there. Basically, we then prevent departments from spending that money. We call that a planned lapse because that's money they have available that they're no longer allowed to spend. That's easy to explain. It was about half of the unspent funds last year that were what we call “planned”.
With regard to the other half, I'd be happy to go into detail in terms of explaining what that is.
NDP
Denis Blanchette NDP Louis-Hébert, QC
Year after year, the unspent amounts keep going up. Over the past four to six years, we've seen an upward trend in unspent amounts.
What does Treasury Board intend to do? Do you intend to keep up the practice of carrying forward certain amounts and trying to recover others? If not, do you plan to tighten up the amounts allocated?
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
That's a good question.
You're right, Mr. Blanchette. There really is a trend
of amounts that have increased in terms of lapses, I would say this. You have to look at the reasons why. If you looked department by department, Infrastructure is always a heavy lapser of money. The reason is, as I said, departments cannot overspend. They have to plan for negotiating deals and all these things. In fact, they often don't negotiate as many deals as they would expect so the moneys lapse. That gets reprofiled.
National Defence is a very high lapser year after year largely because military procurement is complicated and it's often delayed. So you can ask yourself from a planning perspective: Should less money be set aside to kind of...more realistic assumptions? The other bit I will say is we have some programs that are demand-driven. For instance, Natural Resources Canada has a program where you can apply for an energy rebate if you do certain things. Well, the government is takers in that front. We make a best estimate as to what might happen. If fewer people apply than we expect, so be it. We have similar programs for insurance for agriculture. That's kind of a second theme.
The third one I would mention concerns major project delays on bridges and things like that. That can slow down spending as well. Spending is still necessary, just the profile is sometimes difficult to accurately predict.
NDP
The Chair NDP Pierre-Luc Dusseault
Thank you, Mr. Blanchette. Your time is up.
Mr. O'Connor, you have five minutes.
Conservative
Gordon O'Connor Conservative Carleton—Mississippi Mills, ON
Mr. Matthews and colleagues, I'm pleased to have you here today.
I have a few questions. My understanding is that the PBO has made a comment that Treasury Board is not spending enough. I've looked at your estimates running for the three-year period and I don't seem to have a problem, but maybe you can explain if we're not, whether we are spending too much money.
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
Thank you, Mr. Chair.
I think the PBO's comment was related to the government as a whole and it was wondering if Treasury Board was approving too much in terms of planned spending. I will come back to this point a few times, I think.
The amounts that departments have authority to spend is a maximum. They don't have to spend it because it's kind of the maximum, and given that it's illegal to overspend they have to plan for the best-case or worst-case scenario, depending on your perspective. If you're in the business of procuring military assets you have to ask what's the maximum that might get procured this year and make sure you have enough money to cover that off.
In fact, reality often turns out to be less than what they planned. So there's a cushion there. For me the question is not, especially with supplementary estimates (B), did we approve too much? It's more, is there good value for the money that's being spent? In that case you look to specific programs and their evaluations to say “yes there's good value there” or “no there's not”.
What I would say in terms of practice for Treasury Board going forward is this. I would pay attention to supplementary estimates (C). It comes along in the winter. It's money that goes into departments' reference levels very late in the year; you know, there's not much time left to spend it. We should really be taking a hard look at money in supplementary estimates (C) and say, “prove that you need this, prove that you can spend it this fiscal year”. So if there's one thing that we should do differently, that's what I would I say.
Conservative
Gordon O'Connor Conservative Carleton—Mississippi Mills, ON
Along the same lines, the finance minister has predicted that in the next budget year, the one beyond this, he will hopefully arrive at a surplus of $3.7 billion. I'm wondering if the actions of the Treasury Board to make sure that people at the end of the year don't just waste their money will have an effect on the $3.7 billion.
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
It absolutely will. When the Department of Finance is preparing its budget they know how much Treasury Board will likely approve in the upcoming fiscal year. They know how much Treasury Board has already approved, and they always make adjustments for approvals, but they also know that departments do not spend 100% of what they are allowed to spend. So they factor in an adjustment because they're aware the departments will spend 100% less something. The Department of Finance has quite likely noticed the trend as well of decreasing spending against authorities. We work very closely with them in terms of their spending forecast.
So for the Minister of Finance to project a surplus it would be based on spending patterns that they've seen in the past, as well as planned spending going forward from budgets that we've seen recently.
Conservative
Gordon O'Connor Conservative Carleton—Mississippi Mills, ON
You've noted a carry forward budget. What I'd like to know is: on what basis is this carry forward budget calculated? I did a calculation and it was at $11.5 billion. I understand we spend in cash $90 billion. Is the 5% based on the $90 billion or some other amount?
Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
I'll have my colleagues supplement my answer, but basically the 5% is on unspent, so it's what was available less what was spent, and you get 5% of that.
Have I got that right? I don't, do I?
Acting Executive Director, Expenditure Management Sector, Treasury Board Secretariat
For the operating budget carry forward, the current method is to use 5% of the operating budget established in the main estimates as a department maximum. So if you have a vote 1, operating expenditures, that is $100 million, then your maximum that you could carry forward into next fiscal year would be $5 million. So, for example, if that was last year into this year, this year we would allocate up to $5 million, based on what you actually lapsed. Again, using from last year to this year as an example, most departments lapsed right around 5%. So if you were the department that lapsed $4.5 million, then you would get that. If you lapsed $6 million, you would still only get $5 million. So it's 5% of your main estimates' operating budget.
NDP
The Chair NDP Pierre-Luc Dusseault
Thank you, Mr. O'Connor.
Thank you for your answer.
Ms. Day, you have five minutes.
NDP
Anne-Marie Day NDP Charlesbourg—Haute-Saint-Charles, QC
Thank you, Mr. Chair.
I'd like to follow up on Mr. Blanchette's question. If we consider Treasury Board's cost savings, we're looking at $1.2 billion. Were the various directorates given a clear mandate to cut their budget by a certain percentage this year, in order to carry forward what they're allowed to carry forward? Were they given clear direction to that effect, or were the amounts not spent simply because they weren't?