ARCHIVED - 2006-2007 Governor General Special Warrants

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Section Three

Issue of Governor General Special Warrants in

2006-2007

Section Three - Issue of Governor General Special Warrants in 2006-2007

Introduction

A fourth and final Special Warrant was issued on April 1, 2006 to cover the core operations of government for the first 45 days of the 2006-2007 fiscal year.

The 45-day period for this final Special Warrant has been used to allow Parliament sufficient time, following its return on April 3, 2006, to proceed with normal supply procedures such as the tabling of the 2006-2007 Main Estimates and the introduction and passage of interim supply.

In total this Special Warrant represents $11.5 billion or 17.4% of the total voted Main Estimates tabled in 2005-2006. This is also consistent with normal interim supply requirements approved by Parliament for the initial 3 months of a fiscal year. Some 31% of organizations account for 63% of the total Special Warrants issued, with National Defence representing the most significant portion.

		Total Special
		Warrant		% of
Ministry		($ millions)		Total
National Defence (3 organizations)		3,031.9		26.4
Indian Affairs and Northern Development (3 organizations)		1,189.8		10.4
Human Resources and Skills Development (6 organizations)		933.2		8.1
Public Safety and Emergency Preparedness (10 organizations)		901.7		7.9
Industry (10 organizations)		625.0		5.4
Foreign Affairs and International Trade (7 organizations)		583.7		5.1
Subtotal		7,265.3		63.3
Other (83 organizations)		4,204.9		36.7
Total (122 organizations)		11,470.2		100.0

Process

Spending authorities:

In addition to spending authority, other specific authorities are provided through an Appropriation Act and lapse at the end of a fiscal year. The annual renewal of those authorities will not be available until Parliament has approved the first Appropriation Act for 2006-2007 (i.e., the interim supply bill for 2006-2007). This includes authorities such as:

• respending revenues;
• making recoverable expenditures;
• forgiving or writing off debts; and,
• issuing loans or guarantees.

In addition, as grant payments are approved by Parliament (as listed annually in the Estimates), as of April 1, 2006, Parliament would not have the opportunity to approve them.

However, many grant payments are in the form of a sustaining payment for continuing programs and, in some cases, there is a legal obligation to make a payment (even if it is an instalment) within the first 45 days of the 2006-2007 fiscal year. For example:

• international assistance;
• aboriginal claims;
• health research and development (e.g., blood safety and effectiveness); and,
• provincial agreements (e.g., the Canada-Quebec Accord on Immigration).

Precedents to make grant payments through Special Warrants also exist in similar situations (i.e., in 1980 and 1990) when payments were required for core and continuing grant programs at the start of a fiscal period.

Consequently, organizations were advised that:

• special care must be taken to ensure that payments in the form or nature of grants that can reasonably be deferred until Parliament has had the opportunity to consider an Appropriation Act should not be included in the Special Warrant; and,
• only those grants that were demonstrably for a sustaining payment for continuing programs and were already listed in the 2005-2006 Main Estimates, should be included in the Special Warrant.

Consistent with this, therefore, any funding for grant payments that would be new programs in the 2006-2007 fiscal year (or increases to the amount of grants that were listed in the 2005-2006 Main Estimates) was not to be included in the Special Warrants unless a separate Governor in Council approval had been provided. In these circumstances, the payments would be approved as ex gratia payments and would represent an operating expenditure not a grant payment. The only situation where this occurred was in Veterans Affairs and the payment related to disability pensions for veterans.

The individual organizational pages display all grant payments that were urgently required within the 45-day period April 1 through May 15, 2006.

Interim supply requirements:

Organizations were also advised that their requests were to be consistent with their normal interim supply requirements. Consequently, one would expect to see requirements representing roughly 12.5% of the Main Estimates (45 days representing 12.5% of the full year). For the most part, this is the case, but there are exceptions. For example, for organizations that need to:

• meet capital requirements that are contractual or seasonal and would require payments early in the fiscal year;
• make grant or contribution payments in whole, or by instalment, on April 1, where the legal obligation requires the upfront payment; or,
• make payments at the beginning of each month.

In addition, there were two other issues that affected the amount of the Special Warrants: one, relating to revenue respending authority; and the other, relating to commitments.

Revenue respending authorities:

Revenue respending authority is, for most organizations, provided annually through their vote wording and is approved through the Appropriation Act . This authority allows an organization that collects revenue directly to respend those monies on their core operations. Accordingly, in some cases, the amount appropriated from

Parliament represents a fraction of an organization's total, or gross, operating requirement. In other cases, the organization does not rely on an appropriation at all as it is completely dependent on the revenues they collect. However, until such time as an Appropriation Act for 2006-2007 can be approved by Parliament, organizations that rely on an Appropriation Act to provide this authority do not have the authority to respend the revenues collected in 2006-2007. Consequently, organizations were advised to cover their gross operating requirements through Special Warrants. Amounts advanced through Special Warrants will be recovered once full supply is approved.

Contractual commitments:

Section 32 of the Financial Administration Act provides the regulations regarding commitments. Section 32 (1) requires that organizations do not enter into contracts or other arrangements providing for a payment during a fiscal year unless there is a sufficient unencumbered balance available out of the appropriation (or tabled Estimates). And, while Section 32 (2) requires organizations to have a process in place to control commitments chargeable to an appropriation, under the Special Warrant regime, the only control required by Section 32 (1) that must apply is to new contracts that are entered into on or after (not before) April 1. Contractual commitments entered into prior to April 1 do not need to be included in the Special Warrant issued.

This application is illustrated by the following examples:

• If a contract is entered into on April 1, 2006 to pay $1 million/month for the next 24 months, then legally the Special Warrant needs to be sufficient to cover the 2006-2007 commitment, or $12 million; however,
• If a contract is entered into on April 1, 2005 to pay $1 million/month for 24 months, then legally the Special Warrant is not required to cover any commitments for that item other than the two monthly payments that could due in the 45-day period, or $2 million.

Since the Special Warrant is, therefore, required to be of sufficient size to cover that portion of contractual commitments entered into between April 1 and May 15, 2006, this affected the amount being requested by some organizations, particularly if they normally enter into a large number of contracts at the beginning of the fiscal year once the Main Estimates are tabled, (i.e., National Defence contracts). However, in order to mitigate the impact that this would have on the Special Warrants, organizations were asked to delay entering into new contractual commitments until the 2006-2007 Main Estimates were tabled in the House of Commons.

Machinery changes:

The fourth Special Warrant also reflects the machinery changes to government that were announced on

February 6, 2006 even though some of these changes will not be reflected in Estimates until later this year due to their complexity and the need to finalize the transfer of resources. Since the Minister responsible must attest to the urgency of the payment, the ministry in question had to provide a forecast of cash requirements not the originating organization as reflected in the Main Estimates. And although vote numbers may have been assigned to the payments displayed in this section, they have no legal significance and have been provided for sequencing and consistency. The two examples in this report related to payments for Toronto Waterfront Revitalization (under the Treasury Board Secretariat) and the Office of the Lobbyist Registrar (a new and separate agency under the Treasury Board portfolio).

Finally, given the nature of TB Vote 5, which is to cover contingencies, no Special Warrant was provided for this purpose. Nor, given the purpose of TB Vote 10, is any Special Warrant provided to cover its requirements. The consequence of this is that, in the event of an emergency that occurs before interim supply occurs, Parliament will be required to adopt other measures to ensure that the emergencies are managed.

Summary

The fourth and final Special Warrant totalled $11.5 billion. The following table provides a summary by organization of all funds issued through Special Warrants for this period. This table is followed by individual organizational pages that provide additional detail on the spending requirements of organizations. As noted, the display of information in this section is modelled on the Main Estimates and provides information by program activity.

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