Government Operations Committee on Feb. 15th, 2018

[The Vice-Chair, Liberal, Yasmin Ratansi]

Ladies and gentlemen, it's 11 o'clock. Today's meeting, as you know, is on supplementary estimates and interim estimates. I know that the Library of Parliament's briefing notes came in a little late, so if anybody is looking for them, we have printed copies available.

As you know, the first panel will be from the Treasury Board Secretariat. It's going to be 11 to 12 o'clock, so I guess we'll be able to finish the whole round.

We have Madam Renée LaFontaine, chief financial officer and assistant secretary. We have Mr. Pagan, assistant secretary, and Marcia Santiago, executive director.

Welcome, all. Do you have any opening remarks?

[Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat]

I do.

[The Vice-Chair, Liberal, Yasmin Ratansi]

Do you know the 10-minute limit?

[Brian Pagan]

I appreciate the 10 minutes.

Thank you.

It is a pleasure to be here again to explain the process surrounding the supplementary estimates (C), and, to introduce the 2018-19 interim estimates.

We have a number of things to discuss today. First of all, I will talk about the changes made to the main estimates to better align with the federal budget. I will then turn to certain aspects of the last supplementary estimates, 2018-19. Third, we will briefly examine the first interim estimates, where you'll find the initial requirements for 2018-19. Finally, I will point out the organizations that are mentioned for the first time in these estimates.

On page 3 of the PowerPoint presentation, we simply set out some of the challenges that this committee would be very familiar with, with respect to their study of the estimates. You will recall that the President of the Treasury Board appeared before you last year on a number of occasions to begin the process of aligning the budget and the estimates and to reform the estimates process. This committee has been very active in that process, including the 2012 study of estimates and supply.

Page 4 is just a very brief summary, a reminder to the committee of the proposals made by the president to improve transparency and alignment. The most common complaint that we've heard about the estimates is the difficulty caused by having a main estimate showing much different planned spending than the federal budget, and there have been two causes for that. The first is that, under previous orders of the House of Commons, the main estimates were tabled on or before March 1, whereas there is no fixed timing for the budget. What has happened over the preceding years is that we were tabling the certainty of the main estimates in advance of the budget. Then we were using supplementary estimate exercises to catch up and to reflect the government's budget priorities for Parliament.

As a result of discussion at this committee and agreement of parties in the House, there has been a change to the Standing Orders so that, for the next two years, we will table the main estimates on or before April 16, and that is to say, after the budget. Timing has been a very important factor in the confusion between the documents.

Another challenge has been the differing scope and accounting methods of the two documents. The budget is comprehensive. It is inclusive of all expenditures of the Government of Canada, including tax expenditures, crown corporations, and consolidated special purpose accounts such as the employment insurance account. It presents parliamentarians with a full view of all federal expenses.

The estimates, in contrast, represent a subset of that federal spending. They represent the cash requirements of departments for a specific fiscal year to deliver the programs and services of government. We understand the challenge, and we have identified means of addressing this, most notably through a reconciliation table that has appeared in the last two exercises in the spring in our supplementary estimates (A), where we do a crosswalk between the expenses in the budget and the expenditures in the supplementary estimates, accounting for accrual differences, tax expenditures, crown corporations, etc.

The third idea advanced by the president was to better use our new focus on results to perhaps identify changes to the vote structure approved by Parliament. Currently, funds are approved by Parliament according to individual votes for departments, and these votes are organized according to function: operating expenses, capital expenses, and grants and contributions expenses.

Our focus on results is bringing some clarity in terms of what departments' core responsibilities are and the specific programs supporting those core responsibilities. We currently have a pilot with Transport Canada to look at their grants and contributions vote and to break that out by purpose. It was proposed by the president that we might expand on that and try additional pilots according to purpose.

The fourth pillar is better reporting. I believe we have improved the format of departmental plans and departmental results reports, and we have presented much more detail online on what we call GC InfoBase.

That is an overview of the proposals, and where we're at.

This year, as a result of the changes to the Standing Orders, we have tabled for the first time the document entitled “2018-19 Interim Estimates”. This allows departments to begin the fiscal year with authorities until full supply for main estimates is voted on in the House in June.

On April 16 we will be tabling the main estimates, which will include as many budget items as we can bring forward for approval. Coinciding with that will be the departmental plans that I mentioned.

Turning to the details of the two documents tabled earlier this week, the first is the supplementary estimates (C), which concludes fiscal year 2017-18. The supplementary estimates (C) provide information on $4 billion in voted budgetary appropriations for 48 organizations. This funding supports many initiatives announced in budget 2017, as well as spending set out in prior budgets, and updated by the Minister of Finance in his fall statement.

The estimates also provide an update on forecasted statutory spending, and through these estimates we are forecasting a reduction in statutory spending of $336 million.

The front end of the supplementary estimates (C) provides an introduction and some detail, including highlighting the major items, the major areas of expenditure over $150 million. These include $622.9 million for the service income security insurance plan, $435 million for defence spending in support of the new defence policy, $277.6 million for military missions, and then a number of other programs and priorities of the government, including the G7 summit and increased spending for veterans.

If we group all the $4 billion according to certain themes, we see that wages and benefits comprise about 25%, or just over a billion dollars; defence totals $746 million, or almost 20%; then we have climate change and the environment at $438.9 million; and indigenous programming at $337.6 million.

I'll be happy to address more questions on supplementary estimates (C).

Before concluding, Madam Chair, just a word on these interim estimates that we tabled. It introduces the interim authorities of 122 organizations, totalling $30.9 billion. Again, this will be complemented by the main estimates to be tabled on April 16. When we compare the interim authorities of $30.9 billion this year to last year, it's very close to what was sought last year as an interim authority of $30.1 billion.

This concludes my introductory comments.

[The Vice-Chair, Liberal, Yasmin Ratansi]

Thank you very much.

We'll start the first seven-minute round with Monsieur Ayoub.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you, Madam Chair.

My thanks to the witnesses. I am happy to see you again with us.

I enjoyed the presentation very much. I think I understand it well, though I only received it quite recently.

I have a question that is perhaps trivial. This year, the budget will be brought down on February 27. Usually, it is brought down towards the end of March. Does bringing down the budget several weeks in advance allow the Treasury Board a little more time to better identify and plan for expenditures, when compared to past budgets?

[Brian Pagan]

Thank you for your question, Mr. Ayoub.

The fact that the budget will be brought down to Parliament on February 27 will help us enormously, because it will give us time to work with our colleagues in the departments and the Treasury Board to approve the necessary authorities for fulfilling the priorities in the budget after it is brought down, and before the main estimates are introduced on April 16.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

In the future, it would therefore be ideal to table the federal budget a few weeks before March 1, which is normally the deadline for introducing the main estimates.

[Brian Pagan]

The idea to postpone the release date of the main estimates comes from the fact that there is no fixed date for the federal budget. Under the current circumstances, the deadline was extended to April 16, because the federal budget is always brought down before then. For us, it's a good thing.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

That's excellent.

Let's go a little more into detail for certain requested additional expenditures.

The supplementary estimates show the 10 major items, each of which represent over $150 million. In many cases, these are military expenditures. In the House, we are often told that we are not investing enough in veterans particularly. Recently, this seems to be the opposition's leitmotif. However, I can see that over $177 million is to be allocated to support services for eligible veterans and their families.

Can you tell us a little more about these expenditures, namely what will they offer veterans, and the additional services veterans will benefit from?

[Brian Pagan]

Thank you, Mr. Ayoub.

In fact, close to 98% of this sum of more than $177 million will be allocated to the three following programs:

disability awards, earnings loss benefit, and other health and purchased services.

These programs already exist.

I am sure that you know that the government announced new programs in the 2017 budget. These programs were presented to Parliament in the supplementary estimates (B), so in November. This will be reflected in the main estimates, 2018-19.

This sum of more than $177 million is for programs that already exist. These increases are due to demographic factors. As the number of veterans increase, so do the costs for mental health services.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Have you planned to include additional funding to address these needs? We're now talking about the current year, but how will we support our veterans, particularly concerning mental health, in the medium term, for the next two or three years? I am specifically thinking about to the issue of post-traumatic stress disorder, which another committee studied.

[Brian Pagan]

In terms of details on the specific programs, I would obviously defer to the department. I'm not familiar with the committee you mentioned that may have also looked at this.

In terms of forecasting costs, we work with the department to look at their pattern of historical spending, the actual spend, and then we look at demographic information and cost drivers to extrapolate into the future to get a sense of demand for these programs. In many cases, we work closely with the chief actuary and his staff to make sure that our projections with respect to certain benefit plans are rigorous and conform to forecasting standards in the actuarial area.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you for your answer. My colleagues will perhaps go into further detail on this issue. As for me, I have one more question.

A significant amount, more than $622 million, has been allocated for the service income security insurance plan. This was done to address a deficit. What will be the expected deficit of this plan?

Is this situation temporary or recurrent? Interest rates, as we have seen with pension plans, aren't necessarily co-operating. So, there is a deficit.

[Renée LaFontaine, Chief Financial Officer and Assistant Secretary, Corporate Services Sector, Treasury Board Secretariat]

I can start the response. I have three points to make. We've been to this committee before in terms of this program and looking for one-time funding, because the volume of Canadian Armed Forces members who are returning, falling ill, and being medically released has been increasing. The biggest portion of the funding that's required this time around, so of that $623 million, is related to an increase in volume. That's what's driving the cost.

One of the reasons we have to make this lump sum payment now is that actually there's the contract we have with Manulife, which provides the benefits to these medically released Canadian Armed Forces members. There's a condition in the contract that in order for it to be financially sustainable, they need to keep at least 40% of all of the premiums they're going to receive for this plan in a reserve. The reserve has gone into deficit, because more and more CAF members are falling ill and becoming medically released, and are taking advantage of these benefits. Manulife has paid out their claims, so we are now in deficit. The point of this one is to top up that deficit.

[The Vice-Chair, Liberal, Yasmin Ratansi]

Thank you.

Mr. McCauley, you have seven minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's good to see you. It's been a long time, Mr. Pagan and Ms. Santiago.

A couple of days ago, when we were having the estimates briefing, we were talking about the departmental reports and the departmental results reports. Who is responsible for the editorial content of those and in the estimates? The reason I ask is that some of the items here.... We talked about pillar four being to provide higher-quality information on performance targets and results, and we talked about the difficulty in making our way through the estimates and understanding them. I want to read a couple of the items here.

We have $3.5 million to ensure the smooth functioning of courts and greater access to justice for all. We have money for grant payments for strengthening Canadian identity, amplifying the office of the Governor General, and helping build a stronger Canada. Who is writing this stuff?

It doesn't make it very transparent what the money is being used for. I want to get back to the departmental reports and why I'm asking who is responsible for them. The former PBO Kevin Page commented that they're merely communication vehicles for the government, and that no one uses them because there's no value to them. I point you to the Public Services departmental plan, where it doesn't even mention Phoenix, but it talks about one of their achievements being the Canada Post report, where we spent a long time travelling across the country and spent $500,000 of taxpayers' money.

The government didn't even respond to the report, but among her achievements she notes that she thanked the committee for the report and the hard work. We spend $500,000 travelling the country for Canada Post—whether they broke their promise or not is beside the point here—but in the departmental report there's no real comment about what they're actually doing or their achievements. Who is responsible for ensuring that you're actually fulfilling pillar number 4? If it should be the minister, let me know and we'll skip to other questions.

[Brian Pagan]

Thank you, Mr. McCauley. In fact there are two dimensions to your question. The first, in terms of the language used in these documents to explain initiatives, that's our language, but to the greatest extent possible we work with Finance to make sure we're using the same language to describe funding that might be in the budget and then in the estimates.

[Kelly McCauley, Conservative, Edmonton West, AB]

If the language isn't clear and our whole goal is to make the estimates more understandable, why are we using...? I want to read something to you, “Funding to implement the Impact Canada initiative to accelerate efforts toward solving Canada’s big challenges”. It's $1.4 million, so our big challenge is not the issues with the vets who are protesting, or that right now we're fixing Phoenix. It's $1.4 million.

I have to again ask, why even bother putting this dribble in if our whole goal is to make it more transparent to Canadians and parliamentarians?

[Brian Pagan]

I certainly share that objective, Mr. McCauley, but again the starting point is that if the government is articulating a priority in the budget, to the greatest extent possible we try to use the same language so that parliamentarians and stakeholders can follow the money. I take your point and I'll go back to my colleagues at the Department of Finance and ask for that consideration.

[Kelly McCauley, Conservative, Edmonton West, AB]

For the DPs and the DRPs, who is ultimately responsible? Is it the individual ministers, the DMs, or Treasury Board?

[Brian Pagan]

The ministers themselves sign off on their departmental plans. Those are owned by the departments. My team at the Treasury Board Secretariat has a role in terms of shaping content. We provide guidelines to departments in terms of content. We set out templates in terms of the financial detail and type of information.

[Kelly McCauley, Conservative, Edmonton West, AB]

To match pillar four, do you provide instructions to your counterparts in other departments that say, “Here is the goal that the Treasury Board president is working towards,” so that we have clarity?

[Brian Pagan]

Yes, we do.

[Kelly McCauley, Conservative, Edmonton West, AB]

Do you go back and point out, “This isn't clear” or “You're missing this”? Should that be the minister...?