Proceedings of the Standing Senate Committee on
Issue 19 - Evidence
OTTAWA, Wednesday, November 18, 1998
The Standing Senate Committee on National Finance met this day at 5:15 p.m. to examine the Supplementary Estimates (B) laid before Parliament for the fiscal year ending March 31, 1999.
Senator Terry Stratton (Chairman) in the Chair.
The Chairman: This is the first meeting of the committee on the Supplementary Estimates (B) for 1998-99. Everybody has received copies of the Estimates (B) and briefing notes prepared by the library. The witnesses are from the Treasury Board Secretariat.
We would like to welcome from Griffith University, Centre for Australian Public Sector Management, Professor John Wanna and Joanne Kelly. Welcome.
If there is a need for a further meeting to this one, we will have it on November 26 at 11:00. Please proceed.
Mr. Richard J. Neville, Assistant Secretary, Expenditure Analysis and Operation Sector, Treasury Board Secretariat: Honourable senators, I am appearing before you today to discuss the government Supplementary Estimates (B) for the fiscal year 1998-99, which were introduced in Parliament on October 29, 1998. I am joined by Mr. Andrew Lieff, Acting Director, Expenditure Operations, Expenditure Analysis and Operations Sector.
From a fiscal planning perspective, these amounts seek Parliament's approval to spend $3 billion on expenditures not specifically identified or sufficiently developed in time to ask Parliament's approval in 1998-99 Main Estimates. They also provide information to Parliament about $2.3 billion in changes to projected statutory spending that Parliament has already approved in legislation. These items include for example, $874 million for an increase of the Canada Health and Social Transfer to the provinces.
These Supplementary Estimates represent requests for funding over and above the appropriations sought in the February 24, 1998 Main Estimates. They include expenditures committed for fisheries adjustment and restructuring in the Maritimes and in British Columbia.
However, senators should know that the Main Estimates and the Supplementary Estimates provide only a partial picture of the situation. Other adjustments will be made during the course of the fiscal year. Moreover, the Supplementary Estimates include expenditures incurred for economic activities occurring during the previous fiscal year, for example, the ice storm of January 1998. These expenditures are charged to the net balance for these fiscal years, that is to the deficit or surplus recorded, not to the 1998-1999 budget. These adjustments, including a full update on statutory requirements, will be presented in the 1999 budget.
Two departments, Fisheries and Oceans and Human Resources Development, are requesting $628.1 in additional funding for two important programs.
The Canadian Fisheries Adjustments and Restructuring Plan is designed to offset the impact of the elimination of the Atlantic Groundfish Strategy for East Coast fishermen and to put in place adjustment and restructuring measures for the West Coast salmon fishery.
Appropriations totalling $473.7 million are being sought by 76 departments and agencies to meet various operational requirements originally projected for 1997-1998.
These requests are designed to reduce year-end expenditures and to improve management of the federal treasury.
They enable managers to carry forward from one fiscal year to the next up to 5 per cent of their operating budget for the previous fiscal year. Operating budgets include salaries, operating expenses and minor capital expenditures.
A total of $272.4 million is being requested by 19 departments and agencies to address the Y2K problem and specifically to make government systems compatible.
The primary objective is to eliminate financial obstacles that prevent departments and agencies from ensuring system compliance for the year 2000.
There is $236 million for National Defence for partial payments to the provinces for assistance related to natural disasters, including the January 1998 ice storm and floods in several provinces under the disaster financial assistance arrangements. There is $180.5 for 55 organizations for compensation for collective agreements concluded to date and related adjustments. Collective bargaining resumed in early 1997, and funding represents retroactive and ongoing incremental salary costs for 1998-99. There is $98.3 million for Human Resources Development Canada for the Canadian Opportunity Strategy announced in the 1998 budget.
Funding is included for the operating cost of the strategy and contribution for the youth at risk component. There is $88.4 million for the Canadian Broadcasting Corporation for separation payments under the early departure incentive and early retirement incentive programs. There is $69.6 million for the Canadian Space Agency for further investments in three major space projects, such as the Radar Sat 2 program.
There is $63 million for the Department of Foreign Affairs and International Trade to provide certain provinces with a share of the revenues collected from fees paid by exporters of softwood lumber. There is $60 million for five organizations, for "Gathering Strength," Canada's aboriginal action plan announced in January 1998 as the federal government's comprehensive response to the Royal Commission on Aboriginal People. These funds will help support strong communities, strengthen aboriginal governance, and build new partnerships and fiscal relationships with aboriginal people.
There is $58.5 million for Industry Canada for Schoolnet, the Community Access Program and related initiatives for connecting Canadians to the information highway.
Appropriations of $58 million are being sought by Health Canada for priority health programs such as the Tobacco Control Initiative, the Canadian Health Info-structure, the strengthening of Canada's Blood Safety System and the implementation of the Aboriginal Head Start On-Reserve Program.
These principal items represent $2.28 billion of the $3 billion in appropriations sought. The remainder is spread among various departments and agencies. Specific details are provided in these Supplementary Estimates.
The statutory adjustments included in the Supplementary Estimates (B) reflect a net increase in expenditures of approximately $2.3 billion from the amount in the 1998-99 Main Estimates. The major statutory items to which there are changes in the projected spending amounts are, under "Budgetary," $874 million for the Department of Finance Canada to increase the Canada Health and Social Transfer cash entitlement from $11.6 billion to $12.5 billion in accordance with legislation enacted on June 18, 1998. There is $605 million for the Department of Finance Canada to increase equalization payments to provinces and territories in response to changes in provincial tax levels, population and tax revenues. There is $56.2 million for the Canadian International Development Agency for accelerated encashment of promissory notes to the Asian Development Bank to compensate for the bank's additional lending, requirements of over $4.1 billion as part of Canada's response for assistance in the Asian financial crisis, and $53.7 million for the Department of Finance Canada to adjust the accounts of Canada to reflect the December 9, 1997, sale of the government's shares of National Sea Products Limited.
With respect to non-budgetary costs, there is $626 million for the Department of Finance in respect of a loan to Thailand in cooperation with the IMF as part of Canada's strategy to help stabilize Thailand's economy and to promote economic growth and stability. These items account for $2.21 billion of the $2.25 billion requested for statutory requirements.
That concludes my opening remarks. I will be happy to answer your questions concerning Supplementary Estimates (B).
The Chairman: With these changes, do you still anticipate meeting or keeping program spending for this fiscal year to the $104.5 billion set out in the budget?
Mr. Neville: I would like to lead you through a reconciliation of the budgetary estimates to date which, if you add the Main Estimates, the Supplementary Estimates (A) and (B), now add up to $151.4 billion, with the forecast budgetary spending of $148 billion as noted by the Minister of Finance in his February 1998 budget. It should be noted that planned spending as per the 1998 budget did not include an amount for the fisheries adjustments and restructuring plan, which amounts to $628 million.
As such, forecast budget spending should now be increased to $148.6 billion to reflect this initiative. Other differences between budgetary estimates to date and the 1998 budget can be explained by those amounts which, for accounting purposes, have been charged to prior years and to which there is an equal and offsetting adjustment that recognizes this. I would like to look at the macro level, if I could.
The budgetary estimates in total now add up to $151.4 billion. However, we would have to subtract from that prior year expenditures reflected in the Supplementary Estimates put forward, as an example, healing strategy, equalization, disaster financial assistance and a number of others, which add up to $1.4 billion. If you take away the $1.4 billion, that gives you a subtotal of $150 billion.
If you were also to take out the prior year expenditures, which were reflected in the Main Estimates themselves, as an example of the multilateral debt relief and international financial institution notes that add up to point 9, and a number of other adjustments that are not reflected in the Estimates which add up to point 5, that would bring us down to $148.6 billion. In effect, at this point, the $148.6 billion is the number that we should be comparing against the $148 billion in the Minister of Finance's budget.
All that is to say that these Supplementary Estimates (B) are, as of today, supplementary; we still have the balance of the year. There may be adjustments that come into play, and so at that point, we would be in a better position to give you a final position. That is at the macro level.
If you want to bring it down to program spending in the budgetary estimates, which is at $107.9 billion, and again with a number of adjustments at this point, you would be looking at an adjusted plan program spending of $105.1 billion. Again, that is $600 million more than the $104.5 billion, which was in the Minister of Finance's February 1998 budget for program spending itself.
The Chairman: You are essentially saying that you are not far off the mark and that we should wait to hear from the final report on the balance of the year as to where we end up.
Mr. Neville: Right. It is also fair to say that we are $600 million over the planned spending, whether it be for the forecast budget spending or for the program spending, and that $600 million is the same $600 million.
The Chairman: Will you save money elsewhere to recover that $600 million?
Mr. Neville: It is a good question, but we do not know.
The Chairman: That is what I thought.
Senator Bolduc: That does not include the additional amount you might have to pay because of the lowering of the Canadian dollar, the interest rate, for example. Even though it is statutory, you must pay it.
Mr. Neville: That could go either way.
Senator Bolduc: Actually, that moves down and the budget moves up.
Mr. Neville: Correct.
The Chairman: On page 57, is that the statutory item pertaining to a $500 million loan in financial assistance to the Bank of Thailand? It is shown on our estimates as a $625.9 million loan, however, at recent exchange rates the US$500 million that was loaned to Thailand would equal about CAN$750 million to CAN$775 million. How do you rationalize the difference between the $625.9 million and the $775 million that appears to be the real number?
Mr. Neville: The $625.9 million for the loan to the Bank of Thailand is non-budgetary, therefore, that does not come into the discussion we had a few moments ago.
The Chairman: I understand that. The trigger was the Canadian dollar, so it reminded me about this loan that we have outstanding to Thailand of US$500 million.
Mr. Neville: The loan to Thailand is planned to occur over nine disbursements, with a total principal of about US$500 million or thereabouts. We have made some disbursements to date, $362 million in August, and eight subdisbursements of about US$17.25 million are conditional on the approval of parallel draws under Thailand's International Monetary Fund. The final disbursements are to occur in June 2000.
That being said, the interest rate payable is the six-month U.S. dollar. I will not go into a long complicated formula, but it is that rate minus 10 basis points, so there is obviously a factor that comes into play, which is the difference of what you are referring to. However, in terms of the budgetary component of the Supplementary Estimates (B), it does not calculate or factor into the budgetary side. We treat that separate and it is statutory, non-budgetary.
The Chairman: For clarification, what you are essentially saying -- and I am not trying to put words in your mouth, but I want to ensure myself and others in the room that we understand this -- the US$500 million loan is translated into CAN$625.9 million. If you did not take the interest paid by Thailand into account, it translates into a fact that our dollar must be worth 80 cents. Are you saying that because of the interest repayment, we can now, with assurance, feel comfortable with the $625.9 million?
Mr. Neville: That is in fact what we are stating.
Mr. Andrew Lieff, Acting Director, Expenditure Operations, Expenditure Analysis and Operations Sector, Treasury Board Secretariat: For the statutory items, in order to print this book in time, we took a snapshot at that particular point in time with the forecast we received from the Department of Finance. If it changes throughout the course of the year, we will be coming back to you with Supplementary (C) and you will receive an update on where that stands.
The Chairman: Are you not supposed to hedge?
Senator Lynch-Staunton: On page 118, regarding the $7 million for the Swissair requirements of the Safety Board, is any of that money recoverable from the airline or any other interested party, or does the Safety Board assume all costs of its investigations?
Mr. Neville: I will check my notes. We certainly have a lot of information on it.
Senator Lynch-Staunton: I want to know what the policy is, if there is one, regarding the recovery of costs incurred by the Safety Board from the major interested parties, whether it be an airline or a railway or whatever party is involved in an accident that the board is called on to investigate?
Mr. Neville: At this point, I stand to be corrected, but it does not appear that we will be recovering those particular costs, although it does say that with respect to the compensation of third parties and business losses and other losses, Swissair has engaged a legal agent in Canada to entertain claims. It does not state whether we would be recovering those costs from any third party, so I must think at this point that we are not planning on doing that.
Senator Lynch-Staunton: I hope that there is a valid reason behind it. It seems to me that when the board is called on to recover pieces of aircraft, as it did in this case, and bring in special ships from the United States -- at least one anyway, which they did at great cost -- that the airline and the plane's manufacturer, which have an advantage in finding out the cause of the crash, should be called on to contribute to the investigation, which is basically for their benefit.
Mr. Neville: Carrying out investigations is the mandate, the raison d'être, of the Canadian Transportation Accident and Investigation Safety Board. We fund them accordingly. Hence, I would think that the Treasury Board would in this case fund their costs.
Are the costs reimbursable in this particular instance? My documentation does not show that it is. It is quite complete in the sense that it has a lot of information. It does not specify yes or no. I will get back to you on that.
Senator Lynch-Staunton: Perhaps it is something we should pursue with the board itself.
Mr. Neville: If you do not hear from us in the next 48 hours, it will be that it is as stated, not recoverable.
The Chairman: If we do not hear back from you, then the international recognition of such events, if they occur in a country, is at the expense of the country that such an event occurred --
Mr. Neville: That would be the logical conclusion of the statement, yes. Are you interested in knowing what the expenses are?
Senator Lynch-Staunton: No, I do not think so. Are the Americans charging us for the use of that ship?
Mr. Neville: No.
Senator Lynch-Staunton: Do the armed forces charge the Safety Board?
Mr. Neville: Let me tell you the departments that are concerned; National Defence provides platforms for diving, the divers, search and rescue and air support; the RCMP provides security and laboratory testing; the Department of Fisheries and Oceans and the Canadian Coast Guard again provide platforms for diving, divers, search and rescue, health and family crisis management; and Environment Canada, the weather services. Those are just some of the departments.
Senator Bolduc: Those are the ones involved, but do they recover their own costs?
Mr. Neville: No, they would be funded directly. They charge and we propose to increase their votes accordingly.
The Chairman: Do they do that in every instance? For example, if the armed forces fight a forest fire in Manitoba, are they not reimbursed?
Mr. Neville: It all depends. There are agreements with the provinces.
The Chairman: What if the provinces do not live up to the agreement?
Mr. Neville: At the end of the day, National Defence has an account that has a number of receivables with the individual provinces.
The Chairman: In the paper two weeks ago, I read that National Defence wrote them off. Why?
Mr. Neville: Some of those claims went back to 1955 and 1960, and it was inappropriate to pursue the collection thereof.
The Chairman: If a province stonewalls you long enough, then they do not have to pay?
Mr. Neville: In all fairness, the recoveries are pretty current with the provinces. These were specific items that occurred way back in time. They were out of the norm. There was no memorandum of understanding (MOU) at the time, and they were disputed right from day one, and there was a good rationale.
Senator Bolduc: That was in the 1950s, when the provinces were poor like the countries in Africa?
Mr. Neville: It was hard to sustain the argument to collect.
Senator Cools: When the provinces were poor.
Senator Bolduc: They took all the money in Ottawa.
Senator Cools: Now they are rich, is that it?
Mr. Neville: With respect to the question that was raised about the salvage vessel, you should be aware that in this case the Transportation Safety Board has contracted for the services of the salvage vessel Sea Sorceress, and these were the highest costs to be involved. This is not free on the part of the Americans.
The Chairman: We have no idea what this will cost in the end. Has there been any stab at an overall cost of this recovery? Normally, you do that kind of thing. I would hope that you would estimate the cost, or do you accept it blindly?
Mr. Neville: No. They have provided us with sufficient details that support their request for costs at this point. One would expect, based on the write-up, that the majority of the costs have already been incurred to do the salvage. To date, approximately 70 per cent of the aircraft has been recovered and 151 of the 229 victims. DNA profiles have now been established for the 229 victims, so the majority of the work has been done.
The Chairman: Nobody is giving you an estimated cost to complete this?
Mr. Neville: Sometimes they do. In this case, some ongoing work is still required. Again, it appears that the majority of the costs have been recovered.
The Chairman: Have 70 per cent of the costs been recovered?
Mr. Neville: Yes, assuming they have about 70 per cent of the aircraft recovered and close to the same percentage in terms of the victims identified, I would think that is where they are at, at this point.
Senator Lynch-Staunton: The second matter, on page 105, has to do with the National Defence contributions to the provinces of $236 million. What are those contributions made up of? What is the reasoning behind that? What is this item? It comes under National Defence. I am intrigued.
Mr. Neville: There is $236 million for the Department of National Defence. Basically, this is for assistance related to Canadian natural disasters under the Disaster Financial Assistance Arrangement. This item provides the department with funds for payments to provinces for eligible expenses incurred under the Disaster Financial Assistance Arrangements Contribution Program in 1998.
I would like to explain it to you. Think of all the major disasters over the last several years going back to 1991 in British Columbia, where there was a flood. We have them here for each province and they may be repetitive, based on the disasters. For the Alberta 1995 flooding, for example, we had already paid $19.9 million, and the 1998-99 requirements are $11 million.
In Alberta there was also a flood in 1996, and in this case the payments were a little less. For all the provinces, there is a listing of the disaster plus the payments. For the year 1998-99, the total amounts up to this point, the anticipated requirements, were $273 million, less what was provided for in Supplementary Estimates (A), which was approximately $36.3 million. Therefore, these Supplementary Estimates (B) are for $236 million.
Now, that being said, I could again spend a lot of time giving you some background, but I would like to lead you to the formula because it is most interesting. The formula that kicks in to reimburse these costs is that once the eligible costs are determined -- there is a memorandum of understanding as to what constitutes an eligible cost -- the Minister of National Defence, who is responsible for Emergency Preparedness Canada, pays the amount based on the per capita formula as defined in the DFAA guidelines.
Now, no sharing occurs unless the provincial expenditures exceed an amount equal to $1 dollar per capita for the provincial population. For example, if Alberta has a population of 5 million and there is a natural disaster of $4,990,000, there is no sharing of cost because you must have at least $1 for every individual in that particular province. Hence, until you have a $5 million natural disaster, there is no sharing of costs.
However, when a province's eligible expenditures exceed this level, the amount of federal financial assistance shared with the province is determined as follows: staying with the Alberta example, for the first dollar per capita up to $5 million in this case, the federal share would be zero and the provincial share would be 100 per cent. For the next $2 of capita, so that is between $1 and $3, the federal share is 50 per cent and the provincial share is 50 per cent.
If you had a $7 million natural disaster, then the difference between seven and five is two, and you split that one-one. After that, for the next $2, from $3 to $5, you split 75 per cent for the federal share and 25 per cent for the provincial. Then the remainder, $5 and up, is 90 per cent for the federal share and 10 per cent for the provincial share. Hence, if you read in the newspaper that a natural disaster in Alberta is costing $12 million, some reporters will say that the federal government is picking up 90 per cent of the share of the cost. It is not 90 per cent of that particular amount, it is 90 per cent of the amount over $10 million.
For the part between five and seven it is 50/50; for the part between 7 and 10 it is 75/25; and the part over 10 is 90 per cent. Hence, generally speaking, there could be a 60 per cent split at the end of the day. I wanted to share that with you because when you hear 90 per cent, it is not always 90 per cent of that amount, it is 90 per cent of a certain percentage of that.
In that case, that is what that particular $236 million is about.
Senator Bolduc: In addition to all the natural disasters in the past --
Mr. Neville: There are not that many.
The Chairman: Could you give us that in that documentation? We are looking at studying disasters in Canada and preparedness. That would be very helpful.
Mr. Neville: We would be pleased to share this list with you: Alberta, 1995 flood; Alberta, 1996 flood; British Columbia, 1995 flood, 1995 flood, 1996 snow storm; Manitoba, 1993 flood, 1995 flood, 1996 flood; New Brunswick, the 1998 ice storm, the 1998 flood; Newfoundland, 1995 flood; Ontario, the 1998 ice storm; Quebec, the 1988 earthquake and 1996 flood; Saskatchewan, the 1995 flood. That list gives you an idea of the natural disasters that are covered off by this.
Senator Lynch-Staunton: These then are moneys paid to the governments.
Mr. Neville: Correct.
Senator Lynch-Staunton: Do they have their own formula for estimating the costs? Are these verified by the federal government?
Mr. Neville: Yes, and there is an audit.
Senator Lynch-Staunton: Would Hydro Quebec be reimbursed for the damage done to its transmission lines under this programming?
Mr. Neville: It would have to go through the Quebec government, and if it qualifies based on the memorandum of understanding in the DFAA guidelines, then it would be reimbursed. If it does not fall under the guidelines, it would not be reimbursed. The guidelines are specific as to what is reimbursed and what is not.
Senator Lynch-Staunton: Do you know the guidelines offhand?
Mr. Neville: No, Emergency Preparedness Canada would have the guidelines.
Senator Lynch-Staunton: Can one assume that most of the moneys will go to individuals for damage to property?
Mr. Neville: Usually it is for private citizens, farms and small businesses.
The Chairman: Does some of the money go towards provincial highways and bridges?
Mr. Neville: Under the DFAA, the federal government provides, at the request of the province or territory, financial assistance in accordance with the formula based on the provincial population. Generally, payments cover non-insurable costs or costs not otherwise covered by other government programs that are incurred to restore public works to their pre-disaster condition and to facilitate the restoration of essential and personal property of private citizens, farmstead and small businesses.
We do not cover provincial Crown corporations, and since Hydro Quebec is a provincial Crown corporation, it would not be covered.
Senator Lynch-Staunton: It is mainly for uninsured individuals. What about the highways?
Mr. Neville: Yes, that is public infrastructure.
Senator Lynch-Staunton: I am surprised that it comes under National Defence.
Mr. Neville: It comes under Emergency Preparedness Canada, which probably has the right ring to it, I think.
Senator Lynch-Staunton: Does it answer to National Defence?
Mr. Neville: It goes right to the minister, yes.
Senator Bolduc: It is a division in the department.
The Chairman: For an expense like a flood or the ice storm, would National Defence get reimbursed from the $3.3 billion contingency reserve?
Mr. Neville: Correct. To be more precise, it would be Emergency Preparedness Canada.
Senator Lynch-Staunton: On the year 2000 compliance requirements, which we see quite a few times in the book, there is $272.4 million for organizations to deal with the year 2000 date problem. I would like to know how this is being handled. Is each department doing its own adjustment separately or is it being coordinated?
I would like to think that those who manufactured computers, who developed these bugs, should be called on for some compensation. Is that wishful thinking or is that in the government's dealings with the problem?
Mr. Neville: I feel more comfortable answering the first question.
Senator Lynch-Staunton: I feel more comfortable asking the second one.
Mr. Neville: To meet Y2K compliance requirements, there is $272.4 million for mission critical systems. This money is given to 19 organizations to deal with the Y2K date problem. The term in the news releases is -- it is an international term so I would like you to try to remember if you could -- government-wide mission critical systems, or GWMCS.
The primary objective is to remove the financial impediments of departments and agencies resolving the Y2K compliance issues. Basically the $272.4 million is made up of a number of components: one is the government wide mission critical systems. We have set up a loan fund. There are 15 organizations that participate in that particular endeavour and that adds up to $259 million. There are other sources, again under government wide mission critical systems, for $3.4 million, and then another item for $200,000 and then there are funds for horizontal management of year 2000 initiatives. There are two departments submitting a claim for that, and that is $9.8 million. That gives you the make-up of the $272.4 million. The $259 million is with respect to the loan.
It is an important issue. The Department of Finance has established a provisional interest-free loan fund of an initially estimated amount of $400 million to deal with the Y2K date problem, specifically for GWMCS. The primary objective is to remove the financial impediments in carrying that out.
GWMCS are those that would have a significant impact on the health, safety, security and economic well-being of Canadians, should they fail. In a report on federal Y2K readiness, TBS requires that departments and agencies seeking access to the loan fund must have IT systems on the GWMCS list. They must also have exhausted all reasonable internal reallocation options and have deferred discretionary spending.
Y2K date-fix resources could not be included in the 1998-99 Main Estimates, as a presentation on the government's Y2K readiness first had to be made to Treasury Board and then to Cabinet in order to secure a source of funding. This again could not be done within the time frame of the Main Estimates production schedule, so departments and agencies also needed time to develop, repair and implement their strategies. These strategies where access to loan funding is required are now being received in the form of Treasury Board submissions. As we speak, we are still receiving some.
The Treasury Board Secretariat developed a two-prong plan for addressing departmental Y2K pressures, given that inclusion in Main Estimates was not feasible. The underlying strategy was to provide for or remove other significant pressures in order to free up cash that departments could apply towards their Y2K issues until such time as supply from the regular supplementary estimates was approved.
Loan fund requests from organizations with GWMCS systems are expected to total approximately $515 million, with some $373 million applying to 1998-99. That is higher than we anticipated. The majority of the Treasury Board submissions requesting funding are in these Supplementary Estimates (B) submissions. Now I could go on and on, but that gives you an overview as to what is occurring.
I would have to say that this problem has seized us. It has seized the Minister of Finance and the government, and we are taking the necessary action to try to remedy it. I could go on and say that we have a government system in play. Contacts with the provinces have been set up. Each department in its own sector, whether it is health, industry or the environment, is dealing with its communities and is trying to determine the impact that this could have on Canadians across the country. A lot of work has been done, and a lot more work still must be done.
We must also provide for training. We are very concerned that we may be putting the fixes in play, but we must have people trained on the new systems or remedial action must be taken. We must try this out, for example, by having a testing period. For that reason we have given ourselves six months, from June 30 to December 31, 1999, to have the testing done to ensure that we are Y2K compliant.
In our own department this past weekend, our systems people have gone through each one of our offices and tested our PCs, and those that are Y2K compliant now have a sticker that indicates that they are. You can rest assured that we will not have a problem with these PCs. There are a number of other issues to be dealt with, but you can see some examples that are evolving in terms of moving towards having it done.
We could spend some more time on National Defence and on what they have done in a peculiar case, and what has been deemed to be a new organization within defence to deal with a fallback position for Canada as a whole, should we have serious problems. Maybe that is a separate question. However, I want you to know that work is being done within National Defence at a very macro level.
To deal with the second question, I do not know whether we will be requesting compensation from those computer companies that have not produced their equipment in such a way that it is Y2K compliant.
Senator Lynch-Staunton: What is the main component of the amount? Is it outside consultants, software?
Mr. Neville: It is a combination of many components. In some cases it is buying a new system, which a lot of departments have chosen to do. Rather than keep the old systems, they have decided to purchase the new systems, so in that case it is purchasing the software. In other cases, it is purchasing hardware because the hardware that is currently being used does not comply. A third component is consultants.
The federal government has come up with a first in terms of a concept. We have contracted for up to $100 million of professional services to ensure that we can have the people here in Canada available for doing work on Y2K. That $100 million was a bit of a risk, not having done this before. We went to the market and said that we guarantee $100 million, and that means that we would have to pay it even if we did not utilize it, which was a risk component of that decision. It is now up to $104 million in terms of utilization. We have already surpassed the $100 million and obviously it is not over yet. By carrying out an initiative that guaranteed $100 million of expertise, it has probably bought us a lot of time in terms of coming up to speed on the Y2K issue.
We have not talked about imbedded chips, which are also on the GWMCS list. Imbedded chips are the next step, and they should concern us all. We must determine whether they are in any electrical device that we have because it is harder to determine if they are Y2K compliant. Again, I am just giving you the overview here, but we are dealing with that and we are also dealing with departmental systems. These are government-wide critical systems, but there are also departmental systems that are sensitive and important. It is three tier: the first tier is GWMCS; the second is imbedded chips, wherever they may be, in reading laboratory equipment or whatever; and the third is departmental systems.
Senator Bolduc: The amount of $100 million is for various consultants all over the place.
Mr. Neville: It is 7 or 10 firms, yes.
Senator Bolduc: It is possible that you have two or three firms working for the Department of Defence, because it is a huge area with many systems, for example. How about the problem of security? If you have a lot of outside consultants that come to know the inside knowledge of a department, is there not a security problem?
Mr. Neville: In the request proposal that went out, there was a requirement that security had to be ensured. The consultants had to be cleared for security before they could have access to specific locations. In the case of National Defence, they would not allow consultants to come in and work on this unless they had the necessary security clearance.
Senator Bolduc: I understand that you are thinking about security in terms of defence, but I am talking about the security of the system itself in various departments. If you have two or three consultants looking into your internal game, it is a lot of people.
Mr. Neville: Yes. One must rely on the expertise in the department and the responsibility of the IT component within that department to make decisions as to who would be working on which of their internal systems. I would like to think that departments are knowledgeable about their own internal affairs and what can and cannot be worked on without having a detrimental effect. There could very well be two consultants in the Department of Transport working on their systems, but that is a call they would make in terms of how things proceed.
Senator Bolduc: Do you feel confident that all the suppliers, for example in the various departments, would be also up-to-date in their own systems?
Mr. Neville: Yes. Maybe I could read what has been put forward as to how the government is minimizing the risk to its security, based on the computer systems that it has. Each department agency has its own plans to make its systems Y2K compliant. One key factor of these is in fact security. The Y2K procurement contract, which I was referring to, includes security as a key component of hiring consultants, which we just talked about.
Independent assessments have also been conducted in many organizations, and departmental internal audit groups have been encouraged to assist managers in this regard. Deputy heads who have not already done so have been encouraged to do so and to conduct independent assessments. So TBS has asked departments to prepare risk assessments and complete business resumption planning before the end of 1998. Security is a key component of such assessments and planning.
Having said all that, it is fair to say that these actions include security as a key element and should at least be treated.
Senator Bolduc: You will not be afraid to take the blame on January 2, 2000?
Mr. Neville: It has certainly crossed my mind. This is a very serious issue, and we must do everything we can, but I am not sure we have everything nailed down at this point. There certainly are some risks.
The Chairman: If one of your consultants wanted to build a back door into one of your systems, they could do that without your knowledge and you would not be able to find that. They can do it.
Mr. Neville: Departments have a responsibility to monitor the work that is being done by consultants.
Senator Eyton: I have a supplementary question. The whole area is fascinating. Do you consider all of this activity timely?The problem was known four years ago. It was being dealt with two and three years ago. The better-managed companies are signing off their systems as now being compliant. They have already provided that assurance to their customers and suppliers and everybody else.
It worries me that your testing of them will take place next year. If I understand you correctly, the testing period would end on December 31 next year, which is none too soon because you will then have a minute or two to find out what happens if it does not work. Is it timely? If it is not, what kind of "reliabilities" might we be looking at or what other kind of supplemental estimates might we expect?
Second, you talked about the foresight in setting aside a whole bunch of money and acquiring a whole lot of consultants, which is useful. However, a whole lot of consultants from different firms working together concern me. Who ensures that they are working in the same way and are establishing the same standards?What you are trying to do is come up with systems that are reliable and complementary and will carry on. The challenge is to do it within departments, first of all; secondly within government; and thirdly, outside of government in dealing with the people. Systems are interdependent.
If I superimpose on that the example of 10 different firms working within the Department of Defence, who has the oversight to make sure that they are all working in a consistent and coordinated way so that you end up with a consistent and coordinated product that will work for everybody?
Mr. Neville: I would not want to leave you with the impression that we have just started to work on this. It has been known for a few years, and there are departments that have taken the initiative and have moved further than others.
Treasury Board ministers have been really interested to the point where the Treasury Board requests on a monthly basis an update as to where we are at. The chief information officers (CIO) branch is within the Treasury Board Secretariat. A whole dedicated unit there has a broad mandate to ensure that systems within government are well coordinated, but they also have the responsibility of ensuring that the Y2K issue is dealt with.
That sub-unit organization within the CIO is headed up by an assistant secretary. Its primary mandate is to look into each department and find out where they are in terms of their progress, to take the departmental plans that have been submitted, to vet them very carefully, to challenge them and then to allow for a percentage rating.
Each month for each department they arrive at a rating based on a U.S.-based corporation's model that has been accepted internationally as being the model to use. Based on that model, they determine the percentage of progress to date. Hence, some departments may be at 40 per cent, some may be at 60 per cent, some may be at 70 per cent. The key is identifying the problem. Afterwards, the testing is just as important. Some departments have already started, but we are putting forward as a mandate that testing start no later than June 30. It could take as long as six months. Some systems will obviously take less than six months.
It is anticipated that if everybody starts at the latest on June 30, 1999, then we should be okay. If some have already started and have already finished, then that is great. For those that have not though, there is that requirement.
I must say that based on the departmental plans that have been submitted, the challenge to them, the vetting, the review, the actual interaction that takes place each month between the CIO and the department concerned on those systems provides us with a certainty as to where we are at as a percentage in terms of progress. We are monitoring it each month. So are Treasury Board ministers.
That being said, there are safeguards and fall-back positions. We are, in those instances where it is appropriate, asking those departments to initiate a fall-back plan and to try to come up with alternate sources of services, if so required. That could be moving to off-sight locations. That could be piggybacking on another organization that has a similar kind of infrastructure. That could be having a brand-new system in place, ready to go if in fact the current one does not function. A number of fall-backs are being discussed with departments, where it is appropriate to do so.
In terms of standards where there are several consultants in the department, again the CIO has a role to play in vetting what is occurring across the government. They interact with the consulting firms on an ongoing basis to determine the skills, the competencies, what is happening in the industry, what is happening internationally. I should have added that the Minister of Foreign Affairs is involved on the international scene to ensure that there is consistency in our approach.
The CIO works closely to determine specifically what new trends are in play, and therefore what should take place within the Canadian scene to try and minimize the impact. As well, they work with the departments to ensure that the work that is being done is appropriate. There is a vetting at a very senior level outside the department to ensure that there is consistency in terms of the standards being used.
The Chairman: On April 1, 1999, you will begin to deal with the 1999-2000 budget. Will that simple event not affect any of your systems?
Mr. Neville: Not that we know of.
Mr. Lieff: When we do our planning, we plan three years ahead. In our systems now we are already dealing with the years 2000 and 2001 and so far we are fine.
Mr. Neville: As of today, the system that looks after that comes under my responsibility, and we have just heard from our consultants that it looks good, that we do not have a Y2K problem. I have a system that was subject to Y2K concerns obviously. It involves the actual estimates and the data base to prepare the estimates. We had it vetted by outside consultants and the consultants told us this month that we are Y2K compliant. Some small items may remain to be done, but basically we are Y2K compliant. We are not waiting till June 1999; we already know the answer today.
Senator Ferretti Barth: There is something that I do not understand on page 70 of the Supplementary Estimates. Could you explain to me why almost $120 million in new appropriations are being sought by Health Canada to cover the period until March 31? Is that the correct figure?
Mr. Neville: The figure of $120.6 million is correct.
Senator Ferretti Barth: The department is requesting an additional $8 million for an HIV/AIDS Assistance Plan. Is that right?
Mr. Neville: Yes, $8.9 million.
Senator Ferretti Barth: Other large amounts are also requested on page 70.
Mr. Neville: First of all, the request for $120 million represents an increase of 13.7 per cent over and above the $869,009,000 originally requested in March.
Senator Ferretti Barth: How do you explain this request for additional funding? You list additional operating costs totalling $10 million. Is that right?
Mr. Neville: With respect to the HIV/AIDS Assistance Plan, an additional $8,983,000 is being sought. This represents amounts to be awarded to persons afflicted with AIDS and to spouses or children who were infected by a partner or by a parent.
Senator Ferretti Barth: Is the public aware of Health Canada's AIDS Assistance Plan?
Mr. Neville: I believe Health Canada promoted this program within communities that are affected by this disease and those who are infected are familiar with it. I cannot see why those who should know about this program would not be aware of it.
Senator Ferretti Barth: Could you kindly explain your request for additional funding for professional and special services? The department is far enough along in its work to have had all of the research done by professionals. I find this request somewhat unreasonable. Could you break these expenditures down for me?
Mr. Neville: First of all, these expenditures cover 1998-1999 in full. With respect to professional services, these are needed to ensure that Health Canada's plans and strategies are properly implemented, including an action plan for the year 2000, as it just mentioned. The department wants an action plan drawn up as soon as possible and tobacco control initiatives and a Canadian Health Info-structure put in place.
Specific expenditures are listed here. Under technological information, we have experts who provide opinions, scientists who do research and analysis work and professionals who develop new initiatives and communications plan. These Supplementary Estimates would cover these activities.
Senator Bolduc: I read in the newspaper in the last two or three months that the Minister of Health has various new health program initiatives. One day it is $100,000 for one hospital, another day it is for another hospital, for the University of Manitoba, or somewhere else. Are we not coming back to what I call "discretionary conditional grants" by the Ministry of Health? The unconditional transfers to the provinces are being cut, but at the same time, they are putting back some $100,000 here, $200,000 there, or $1 million here, $1 million there, on a conditional basis. I am very much puzzled by that, since you do not appear to have any criteria for making decisions. Treasury Board receives the department's request, and the explanations are highly technical, highly scientific. The medical authorities talk about current problems, or a new innovation in Alberta, and ask for money. I do not think that this is the way to run the country.
Mr. Neville: One must put this in perspective. Basically, when the Minister of Finance put forward the budget speech in February 1998, additional documents were distributed, including the budget plan. That particular document refers to improving Canada's health care system with a number of initiatives, such as programs to reduce tobacco utilization and to help the self-employed with health and dental insurance costs. I am listing a few examples.
Several initiatives were put forward in the Supplementary Estimates, and in each case, it depends on how the expenditures will be made, whether for consultants, equipment, or additional salary costs. One must study the proposed initiative. The only thing I should have added in regard to the $120 million is that almost half of it, $50 million, is a carry-over from the previous year. We allow a 5 per cent carry-over from one budget year to the next. One should discount that particular item because it is an administrative arrangement allowing departments to transfer money from one year to the other, and therefore it does not show the projected year-end spending. Then the balance is made up of a number of components that were listed previously.
Senator Bolduc: My question was too political.
Mr. Neville: It is a valid question, but you must look at the specific program.
Senator Bolduc: What I said is true.
Mr. Neville: It all depends on the program. It may be appropriate in some cases, but not in others.
The Chairman: Why do you not do that at the end of the fiscal year, when you know the amount to be carried forward?
Mr. Neville: If you spend only $92 million of a $100 million budget because you are prudent and wise, we do not want to punish you for that.
The Chairman: I understand that, but why not report it at the end of the fiscal year rather than now in the Supplementary Estimates (B)?
Mr. Neville: It can be reported in the Public Accounts, but the mechanism used to inform Parliament, and seek authority from Parliament for the transfer, is the Supplementary Estimates, usually (B). This is the vehicle that allows you to do that. I still feel uncomfortable with the response.
Is there anything else you would like to know, Senator Ferretti Barth?
Senator Ferretti Barth: I would like to ask you many more questions about Health Canada, but I have to leave. Will you be coming back next Thursday?
Mr. Neville: Yes.
Senator Cools: The Deputy Minister of Justice, Mr. Morris Rosenberg, was before this committee on November 5, 1998, and we asked him about the issue of payments to lawyers. The department sometimes hires outside legal assistance when the Crown is being sued, or even in instances where it uses agents in the prosecution of narcotics cases.
In any event, the assistant deputy minister, Mr. Dion, told us that the department spends $40 million annually for this purpose. Can you provide us with an itemized list of such expenditures in any given year, preferably the year of Airbus? How does one go about obtaining that?
The Chairman: It should be in the Public Accounts of Canada.
Mr. Neville: I was about to recommend consulting the Public Accounts of Canada, which has a listing of the expenditures, but that would not include all the details of the full $40 million. Having been a senior financial officer in a department prior to this current appointment, I know that providing that kind of detail would be a very onerous task, requiring a lot of time and effort.
The Chairman: For example, our researcher could go to the Public Accounts for the year affected by Airbus and find those expenditures, could he not?
Mr. Neville: All expenditures on consulting firms and other professionals over a specified amount are listed.
The Chairman: Are they listed by name, so that we could then look at that list and ask you about the details?
Mr. Neville: Or you could ask the department.
The Chairman: I am not sure how easy it would be to trigger that list, because it would be a relatively significant number.
Mr. Neville: However, if you do not take the first step you will never come to your destination. You must take the first step.
Senator Bolduc: I have a supplementary question. I want to come back to some of our statutory obligations under the Bretton Woods and Related Agreements Act. Every time there is a major international problem, because of the interdependence of global finances, we must foot part of the bill. At that time it was for the Bank of Thailand. I want to know if, under the provisions of the Bretton Woods and Related Agreements Act, Canada is obligated to provide assistance.
Canada is a fairly small country, unlike the United States or Japan or Germany, so I suspect that our contribution is based on a percentage of the gross national product, or the government budget, or perhaps the national revenue. I would like to know that because here it is approximately $600 million, mostly for the Bank of Thailand. What if it is the Bank of Indonesia tomorrow, and the next day the Bank of Malaysia, and maybe the Philippines or Brazil or Russia? At half a billion dollars, that becomes a fairly heavy expenditure.
As a parliamentarian, I am not at all at ease with that, firstly because it is statutory, and therefore not subject to parliamentary review. I can understand that the Ministry of Finance needs mechanisms to deal with international financial situations. I agree with that, but we do not see any limits here.
Because it is related, I will ask the same question about CIDA, which is not governed by statute. An order in council was passed after the war, some time in the 1940s or 1950s. They are asking for another $186 million for international financial institution fund accounts. They spend $2 billion a year and they do not have any criteria for that expenditure.
As a parliamentarian, I feel that there are probably good people in these institutions, but sometimes crashes occur, and one day the Minister of Finance and CIDA and also Foreign Affairs may be in the same situation. We do not have any criteria, so that this is the policy of the government one day, and the next day it is something else. Actually 70 per cent of the government's budget is outside of parliamentary control, unless we decide to go through one bill after another, looking for examples.
The way we are headed, there is no doubt that expenditures for international problems will get heavier and heavier. One day, there must be some declaration, some policy established that we can discuss and debate. For example, I am talking about $700 million. We ask one question once a year. There are competent people at CIDA and Finance, but nobody foresaw the collapse of that bank.
Mr. Neville: I will deal first with the loan to the Bank of Thailand, and then I will come back to CIDA. Under the Department of Finance's statutory obligation, there is a request for $625.9 million. This statutory requirement stems from section 8.31 of the Bretton Woods and Related Agreements Act, which requires Canada to provide financial assistance to the Bank of Thailand in that amount.
Canada is joining with the governments of Japan, Singapore, Malaysia, China, Hong Kong, Australia and Korea. These government-to-government loans are parallel to, and in conjunction with, loans from the IMF. The IMF is putting in US$4 billion, the World Bank is putting in US$1.5 billion, and the Asian Development Bank is putting in US$1.2 billion.
Now Canada has chosen to participate in other activities to support the stability of the international financial system, and each instance is considered on a case-by-case basis, weighing Canada's interest in each circumstance.
Now there are limits in the Bretton Woods and Related Agreements Act on Canada's obligations to provide assistance. In Section 8.35 of that act, Canada's financial assistance obligation is limited to a maximum of US$2.5 billion in respect to any particular foreign state, and to US$5 billion in total, so there is a maximum or cap.
At this point, this is the only loan that has been extended under this act.
Senator Bolduc: This the first one, but there will be others.
Mr. Neville: However, you are aware that there is a maximum. With respect to the IFIs, which is how we refer to international financial institutions, CIDA is requesting an additional $56 million for those, which represents a 30 per cent increase in the cost of the statutory requirement. Bear in mind that this is statutory.
All the regional development banks provide cash projections on an annual basis, which may not be consistent with the federal fiscal cycle. Therefore, it is usually necessary to use provisional numbers and make in-year adjustments to Supplementary Estimates once the banks submit their firm projections.
For the 1998 calendar year, which the regional development banks operate on, a $56.2 million increase in encashment authority must be obtained through this Supplementary Estimates (B). This represents a 30 per cent increase over the prior encashment projection.
Now variations in encashment from year to year occur for a number of reasons. This year's variation was largely a result of increased demands from the Asian Development Bank arising from the economic crisis in Asia. As a result of accounting changes introduced by the government this year, the required level of resources for the international assistance envelope is calculated on the basis of promissory notes issued to the regional development banks, and not on the actual encashment.
Therefore, this increase in encashment authority does not represent an increase to the IAE per se. That explains why there is this increase from CIDA.
Mr. Lieff: With regard to parliamentary control, when we issue the line of credit per se, that is a non-budgetary vote in the Main Estimates; what you are seeing now is statutory. Parliament has already provided the funds for when countries actually draw down against that line of credit, so in fact you as a Member of Parliament, through the Estimates process, vote on the overall amount of the line of credit in the first place.
Senator Lynch-Staunton: Is that $500 million an optional amount that we do not necessarily have to expend? Do I understand you correctly?
Mr. Neville: It is on a case-by-case basis, yes.
Senator Lynch-Staunton: In this case, we felt we should support it, but if we did not want to, we did not have to?
Mr. Neville: That is correct.
Senator Lynch-Staunton: I was hoping to see funds reserved for those who contracted hepatitis C through tainted blood or blood products, following the agreement, contested as it may be, between most of the provinces and the federal government to compensate at least those who contracted it between 1986 and 1990. Maybe those amounts are in the Main Estimates, which I did not bring with me, but certainly I can find nothing in the Supplementary Estimates.
Mr. Neville: I do not have any notes on the issue of hepatitis C in here, so I take it there is no reference. There is a news release that my colleague has suggested we might want to share with you.
Senator Lynch-Staunton: I have seen the news release, issued in September, I think. However, that just reconfirms the 1986-1990 time frame and adds that there will be additional medical services provided to those outside that time frame. Was provision made for those payments, and if so, where? The total amount is over a billion dollars.
Mr. Neville: They are either in the Main Estimates, or they will be in future Supplementary Estimates, but they are not in these Supplementary Estimates (B).
Senator Lynch-Staunton: They are not in the Main Estimates.
Mr. Neville: Then they were probably in Supplementary Estimates (A)
Senator Lynch-Staunton: Does that mean the government cannot pay anything out?
Mr. Neville: It can if it has funds, but it is a question of whether it requires a new funding arrangement.
Senator Lynch-Staunton: We caught you by surprise with these questions, so I do not expect detailed answers immediately, but I know you are good at providing them within 48 hours.
Mr. Neville: In September 1998, these incremental funds were set aside as a comprehensive federal proposal to prevent and treat hepatitis C, significantly strengthen blood safety, and help Canadians infected with hepatitis C through the blood system. See the press release.
Senator Lynch-Staunton: We are familiar with the press release. Since you are coming back next week, could you bring information then, because we are coming to the end of our session? Are there amounts available in this fiscal year to cover at least part of the compensation package that was agreed to by most of the provinces and the federal government?
Mr. Neville: I am glad you were more precise. I thought the question was whether funds are specifically earmarked in the Supplementary Estimates (B)?
Senator Lynch-Staunton: I thought perhaps we would find something in here, but we did not.
Mr. Neville: Are funds being provided in the 1998-99 fiscal year for hepatitis C, and if not in the Supplementary Estimates (B), then are they in some other document?
Senator Lynch-Staunton: Where are they?
Mr. Neville: I am glad you made it clearer.
Senator Lynch-Staunton: I want to move to page 54, to the Environment Department. A $17.7 million payment is to be made to Ethyl Corporation as a result of the government's decision to settle a claim made against it following the passage of legislation banning the importation of MMT, a manganese-based additive for gasoline designed to increase its octane. What is in your notes to justify that payment?
Mr. Neville: There is a payment of $17.7 million that is related to the regulation of MMT under the Manganese-based Fuel Additives Act. In response to a recommendation by a dispute settlement panel established under the Agreement on Internal Trade, the federal government lifted restrictions on the interprovincial trade and import of a gasoline additive, MMT. Trade in MMT was restricted under the Manganese-based Fuel Additives Act, which went into effect in June 1997. Since then, MMT from existing stocks has continued to be used in gasoline in some provinces.
In July 1998, the government agreed to a payment of up to US$13 million, or CAN$19.7 million, to Ethyl Corporation for its reasonable legal costs and lost profit in Canada as a result of the MMT ban, which the company challenged under NAFTA.
Ethyl's costs were independently verified, and the government paid Ethyl U.S. $13 million at the end of July. Environment Canada will internally reallocate $2 million of the $19.7 million, leaving the required appropriation of $17.7 million. Okay?
Senator Lynch-Staunton: What is a dispute settlement mechanism? Under what authority is it established?
Mr. Neville: This is under the Agreement on Internal Trade. They do have a dispute settlement mechanism.
Senator Lynch-Staunton: Is this interprovincial trade? You said internal trade?
Mr. Neville: Free trade.
Senator Lynch-Staunton: International trade. The provinces contested the bill, too. They felt it was an infringement of the interprovincial trade agreement. Did this go to NAFTA and to the dispute settlement board?
Mr. Neville: This went to the Agreement on Internal Trade, so that would be basically NAFTA.
Senator Bolduc: Are you sure your information is exact?It is under FTA.
Mr. Neville: Yes, but in July 1998. I thought the question was, where is the $17 million coming from? In July, the government agreed to a payment of up to $13 million. The company challenged the legislation under NAFTA, and so it was dealt with there. Hence, as I said, it was the NAFTA tribunal that required us to pay the US$13 million.
Senator Eyton: Only it never got there.
Senator Lynch-Staunton: I do not think so, either. If it did, are there minutes available and can we get a transcript of the hearings? NAFTA tribunals take a long time to come to a decision. First of all, it takes a long time to even appoint the board, since both countries and the plaintiff must agree on the membership.
Senator Bolduc: It is much faster than it used to be.
Senator Lynch-Staunton: I am reassured to hear that it is faster now. Can you bring some clarification on that next Thursday?
Mr. Neville: It says, challenged under NAFTA. It does not say that it was ruled on under NAFTA, so it could have been settled because it had been challenged.
Senator Lynch-Staunton: I would like it confirmed.
The Chairman: Was it an out-of-court settlement?
Senator Lynch-Staunton: Yes.
Mr. Neville: We will come back to you with that.
Senator Eyton: I am looking at page 110 of the English version, and there is a reference there to the regulation of pressure-retaining components in nuclear facilities in Ontario, and there is an amount set aside. What is the ongoing obligation of the Atomic Energy Control Board (AECB) to Ontario Hydro relative to the nuclear facilities that are currently much in the news because of the restructuring? There is a lot of concern about a number of the facilities, some of which have been closed down. Is this amount that is set aside one of regular disbursements?
Mr. Neville: As you are aware, the AECB has a mission to ensure that the use of nuclear energy in Canada does not pose undue risk to health, safety, security, and the environment. To answer your question, its jurisdiction extends to the regulation of Ontario Hydro's nuclear reactor program.
As part of its mandate, the AECB is responsible for ensuring that pressure-retaining systems and other components in nuclear facilities are regularly inspected. Until now, this inspection work has been carried out for nuclear facilities in Ontario through the AECB, the Ontario Ministry of Consumer and Commercial Relations, and the nuclear facilities themselves.
The AECB is also relying on provincial regulations to inspect the pressure vessels within nuclear facilities until new regulations of the Nuclear Safety and Control Act come into force in 1999. As of May 5, 1997, the nuclear facility inspection functions of the Ontario Ministry of Consumer and Commercial Relations are now being carried out by a non-profit corporation, the Technical Standards and Safety Authority (TSSA). The AECB is continuing to use the specialized services of TSSA under contractual arrangement, and moreover, the AECB will now recover the costs related to pressure vessel inspections directly from Ontario Hydro. This was previously done by the provincial agent. These payments from Ontario Hydro are credited to a consolidated revenue fund and an equivalent amount is released to the AECB for their incurred costs.
Senator Eyton: Does that mean that that kind of number or allocation will continue?
Mr. Neville: Yes.
Senator Eyton: Turn to page 112. There is an amount here, $22 million for out-of-court settlements. I wondered who benefitted from that. It seems like a large amount of money, at least by Canadian terms.
Mr. Neville: I know what it is. According to the National Energy Board Cost Recovery Regulations approved by Treasury Board in 1990, the NEB must recover the cost of its operations from the companies it regulates.
Now in 1991, cabinet agreed to relocate NEB's offices from Ottawa to Calgary and a budget of $25 million was approved. The total cost for the relocation amounted to $18.2 million as of December 1996. Of that, $2.7 was considered non-recoverable since it was incurred in relocating the former Canada Oil and Gas Lands Administration, therefore the NEB charged a total amount of $15.5 million to regulated companies from 1991 to 1996.
Now Ontario Hydro filed a statement of claim with the Federal Court of Canada in 1996. The trial division ruled in favour of the Crown. Ontario Hydro filed an appeal with the Federal Court of Appeal, which on June 10, 1997, declared that the costs incurred by the NEB in relocating its head office from Ottawa to Calgary are not costs that can be recovered pursuant to the NEB Act and the NEB cost recovery regulations. Further to this judgment on July 7, 1998, NEB paid Ontario Hydro $254,307.
NEB is now proposing a series of out-of-court settlements using similar terms and conditions as the ones used for Ontario Hydro court settlement, including accrued interest as of August 31, 1998. The total out-of-court settlements are estimated at $21.9 million. This is a one-time expenditure. NEB intends to pay the out-of-court settlement as soon as its clients sign a release letter stating that no further legal suits will be made or that lawsuits already commenced will be discontinued. NEB intends to cash-manage internally the balance of the cost ($2 million) and to fund internally any interest charges after August 31, 1998.
Senator Lynch-Staunton: The board collected the money that went to court and the money must be reimbursed. Where is the money they collected? How come they are not reimbursing the $22 million they collected? Why do they need new money to reimburse?
Mr. Neville: The money collected was to credit the consolidated revenue fund in the year it was collected.
Senator Lynch-Staunton: It did not stay with the board; it went into the pot.
Mr. Neville: You must now pay it out again.
Senator Lynch-Staunton: It is not new money.
Mr. Neville: It is new money for the 1998-99 fiscal year, but in the fiscal framework it is not new money.
Senator Lynch-Staunton: Except for the interest.
Senator Bolduc: I know that we have about $3 billion additional on that $110 million, not taking account of the services of the debt. Is it normal that the Supplementary Estimates (B) be about 3 per cent of the budget?
Mr. Neville: Each year it is different. It depends on the needs of the government of that particular year. It does not have to be 3 per cent, nor even 1 per cent. It is based on whatever requirements the government has at that time.
We had a significant amount in terms of carry-over as well, so that could be in Supplementary Estimates (A) or Supplementary Estimates (C). In prior years, we have had the carry-overs predominantly in Supplementary Estimates (C) in the final Supplementaries, so it would be unfair to make a comparison.
Senator Bolduc: Could you furnish us a table of the Supplementary Estimates (A), (B), (C) of the last five years?
Mr. Neville: Yes, I think we can do that. By the way, in most of those years there would not have been a Supplementary (C). There would have been a Supplementary (A) and (B).
Senator Bolduc: There is always one in March and there is another one in the fall.
Mr. Neville: It is hard to compare because if you want to take the (B)s, the old (B)s, it would probably be year end, like March, whereas this is November.
Senator Bolduc: We will interpret it.
Mr. Neville: I would like to show you Main Estimates, Sup (A), Sup (B), Sup (C) if any, and so on and so forth for each year.
The Chairman: Thank you gentlemen very much for your patience and helpfulness. We would like to reconvene a week Thursday, at 11 o'clock here to discuss the Y2K problem. It would help us and help the public regarding the public safety issue that you had talked about or eluded to concerning National Defence. I would like to hear more about their level of preparedness. Transportation is another department that must be prepared, with all the radar and landing systems. I do not think that anybody will fly on January 1, 2000. I think that will be a dead day. I would like to hear myself as to how the planning is proceeding with those two particular areas because I am sure that is a whole topic that would help us immensely.
Second, with the Department of Justice, regarding APEC, it is kind of sad that we must wait until the fiscal year is over before we finally receive an accounting for a particular issue in the public accounts of Canada. Is it possible to determine at this stage what the public RCMP complaints commission has cost to date regarding APEC? I am sure you would have that on file because there are costs being accumulated and invoices being received, so that I would appreciate having information on that.
Those are the two major issues, plus the other information that has been requested, and then we will move on from there.
The committee adjourned.