AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 13, 1999

• 0902

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): Members, we'll bring the meeting to order.

We have the pleasure again of hearing from the Auditor General of Canada. Welcome again, Mr. Desautels; nice to see you. With him is Neil Maxwell, who is the principal of the Audit Operations Branch, and John Rossetti, director of the Audit Operations Branch.

We also have a couple of people from the Department of Agriculture. We certainly have the familiar face of Howard Migie, who is director general of the Adaptation and Grain Policy Directorate, and Gilles Lavoie, director general, Agricultural Industry Services Directorate, Market and Industries Services Branch.

I understand the Auditor General has a short statement to make, and then we'll get to the first round of questions. Welcome again.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman, for inviting us here again this morning. We very much appreciated the opportunity last month to appear before this committee and discuss our work on the Canadian Food Inspection Agency. We're here today to discuss our audits of Agriculture and Agri-Food Canada. My opening statement will touch on the variety of work that we do in Agriculture and Agri-Food Canada, in particular our audits of the cash advance program and the western grain transition payments program.

The cash advance program is one vehicle the government makes available to producers of storable crops to provide additional flexibility in making marketing decisions. It consists of a short-term loan made available at harvest, a time when financial obligations of producers are often at their peak. The financing provides a bridge for producers until they market their crops and begin to earn revenue. In recent years these loans have annually totalled between $730 million and $1.2 billion.

We highlighted two main areas of concern in our report of September 1998. The first was the need to prepare for the five-year review required in 2001, and the second was the need to better alert parliamentarians and other stakeholders about the results of evaluations and other studies the department conducts on the impacts of its programs. I'll briefly comment on each of these areas.

[Translation]

Mr. Chairman, the first was the need to start to prepare for the five-year review.

When the program's legislation was renewed in 1997, it included a requirement for a legislative review during the fifth year of operation, which begins in 2001.

• 0905

I believe very strongly in the value of provisions like this, as they provide parliamentarians with an important tool for scrutinizing ongoing programs. However, we contend that if the review is to be valuable, preparation must start now to ensure that needed data are gathered in time. That requires a decision now on what questions the review will examine. We suggested a number of issues the review should address—for example, whether the program as presently designed provides producers with significant additional access to credit.

We also believe it is critical that the government reveal the objectives of the program's interest-free element, specifically, whether its purpose is income support or some other goal.

The chapter also highlighted the need to develop better information and performance targets for the management of the program's loan defaults.

We also concluded that the department needs to better alert parliamentarians and other stakeholders about the results of evaluations and other departmental studies of its programs. These studies can help contribute to informed public debate about the merits of agriculture programs. A number of concerned stakeholders told us that in recent years the department had not been forthcoming in making such studies public. We recommended that the department find ways to better alert interested stakeholders to the existence and the findings of these studies.

At the time of our report last September, the department made a number of commitments to address these issues. Your committee may wish to ask about its progress.

[English]

The western grain transition payments program provided a total of $1.6 billion to prairie landowners to compensate for the anticipated decline in land values following the termination of the Crow benefit in 1995. One of our findings was that the department had learned from past problems experienced in similar programs of other departments, notably the northern cod adjustment and recovery program. It took appropriate steps to avoid repeating these problems.

With the new agricultural income disaster assistance program, AIDA, the department again faces the challenge of developing a program delivery apparatus under tight time pressures. The challenge is to ensure that producers receive benefits without delay but in amounts no higher or lower than their entitlement. In the report on our follow-up of that audit, we encouraged the department to establish a target date earlier than 2007 for analysing the extent to which the prairie economy is progressing toward a goal of crop diversification and value-added processing. We also encouraged it to consider a broader assessment that could incorporate social and environmental impacts of these changes.

I would now like to turn, Mr. Chairman, to a brief mention of our other recent work in Agriculture and Agri-Food Canada.

In 1997 we reported on an audit of the Prairie Farm Rehabilitation Administration. We stressed that the PFRA needed to clarify its strategic direction and priorities. We also said it needed to reassess its geographic distribution of resources and offices, taking into account the areas of the prairie landscape at greatest risk and most in need. We pointed out that the department should play a catalytic role of leadership with other levels of government to eliminate gaps in program delivery. And we also recommended that it examine opportunities for cost recovery.

[Translation]

One of our audits last year examined action by four departments, including Agriculture and Agri-Food Canada, to implement the 1996 Federal Science and Technology Strategy. We found that the department was in the middle of the pack in putting the principles of the strategy into practice. I expressed concern that, across government, the strategy was at risk of losing its momentum.

As part of the May 1998 report of the Commissioner of the Environment and Sustainable Development, we examined Agriculture and Agri-Food Canada's Biodiversity Action Plan. We noted that the department had produced, with limited resources, an action plan that sets out ways for the agriculture and agri-food sector to take advantage of biodiversity while raising its awareness of biodiversity issues and conservation. However, we concluded that an overall national strategy was needed, which would require better integration of the agriculture plan with plans from other departments. We also concluded that the usefulness of the plan was limited because it lacked time frames, expected results, performance indicators and resource requirements.

• 0910

[English]

Turning now to ongoing work, as I mentioned at our last appearance before this committee, Mr. Chairman, we're now completing an audit of user charges in the Agriculture and Agri-Food portfolio. We take as a given that the government has made a policy decision to impose user charges. Our objective is to determine whether the organizations in the portfolio have implemented the policy properly. As part of a broader audit of new governance arrangements across the government, we are also examining the accountability and control mechanisms the department has established for the Canadian adaptation and rural development fund. Agriculture and Agri-Food Canada also figures in a number of environmental audits included in the report of the commissioner of the environment and sustainable development, which is expected to be tabled on May 25 this year.

In closing, I would again welcome hearing about any issue the committee thinks we should examine in future audits of Agriculture and Agri-Food Canada.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Desautels.

I understand Mr. Migie and Mr. Lavoie want to say something. Go ahead, Mr. Lavoie.

Mr. Gilles Lavoie (Director General, Agricultural Industry Services Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food): Thank you very much, Mr. Chairman.

[Translation]

I'd like to thank the Auditor General's Office for its efforts in reviewing the cash advance program and for its comments further to the review.

As noted in its official response, the department concurs with the recommendation contained in the chapter. In his report, the Auditor General noted that the cash advance program had been well received by producers, producer organizations and elected officials and that it was seen as an important sign of government support to the industry.

[English]

The audit report did state, however, that the policy rationale for the program needed to be clarified and that additional information was needed, particularly related to program effectiveness. The report further recommended that these issues be addressed for the legislated review of the program in the year 2002. As a first step in addressing these issues, the department has completed a review framework that outlines the steps needed to ensure a thorough review of the program, including an investigation of the questions raised in the chapter. I have provided copies of the existing summary of the review framework to the clerk for the information of the members of this committee.

The department is committed to working through the steps outlined in the framework to provide a comprehensive report to Parliament no later than the year 2002. The work will include a thorough consultation with the stakeholders and the department will ensure that all information coming out of the elements of the framework is shared with the stakeholders and parliamentarians. As information for the 1998-99 crop year, 38,000 producers do participate in the advanced program. The advances issued to date are at $800 million and we have participation in all provinces.

Thank you very much, Mr. Chairman.

The Chairman: Thank you.

Mr. Migie.

Mr. Howard Migie (Director General, Adaptation and Grain Policy Directorate, Policy Branch, Department of Agriculture and Agri-Food): Thank you, Mr. Chairman.

The department is very pleased with the 1996 audit of the western grain transition payments program. We felt it did acknowledge the efforts we made to implement that program, right from the beginning taking into account good financial management practices.

There were two recommendations that came out from the report. The first one was that we evaluate the $1.6 billion program to capture the lessons learned, and also do an assessment of the impacts, intended and unintended. The second recommendation was to assess over the long term the changes related to crop diversification and value-added. We did complete the “lessons learned” study and we've made that study available. We're quite proud of that program. We want to use a lot of the ideas we developed at that time for other programming.

In terms of the long-term economic impacts, we had planned to do this long-term assessment of diversification of value-added after we had two census periods of information, which was literally a ten-year period, because it's not clear what is due to the changing in the WGTA and what's due to other factors. Based on the comments made recently, we have decided to move that up five years. We'll do it after the first census. So we'll do a study in the year 2002, and then we'll do a follow-up five years later. It's not just looking at the $1.6 billion program, but also the removal of the subsidy and the associated changes, which are important. As suggested by the Auditor General, we will expand it beyond the economic issues and cover off environmental and social impacts as well.

• 0915

Thank you.

The Chairman: Thank you, Mr. Migie.

That should give us a start for the first round of questioning. We start with Mr. Hilstrom.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chairman.

Welcome again, gentlemen. Certainly there are a thousand issues we could talk about. Before we get to the cash advance, user fees, and so on, could the government decide that the interest-free portion of the cash advance be turned into a user fee and start charging interest on that? What's the difference between a user fee for a service a farmer gets and an interest-free cash advance, which is like a service cost? Is there a difference there? Do you get what I mean? If I borrow money for nothing, normally I would have to pay for that. If I get my grain weighed and analysed by a private company, I have to pay for that. Now the Canadian Grain Commission is trying to charge for that. Is the government going to move toward the interest on that cash advance?

Mr. Denis Desautels: Mr. Chairman, I think there's a fine line between what is a fee, a recovery of a cost, and what one might consider an income support measure, or a form of subsidy. This is part of what we have to sort out here in terms of analysing this particular program. I think the interest-free element of that program hasn't been explained clearly to us, as far as we are concerned. It can be interpreted by some as being an income support or subsidy and defined by others as an incentive or compensation for something else, and that's the part that hasn't been clear. But on the face of it, an interest-free loan looks to most people like a form of support or subsidy.

Mr. Howard Hilstrom: Traditionally, government didn't have a lot of user fees. They felt they passed legislation and provided a service, and they paid for that because they passed the legislation.

Now we see the government moving toward more of these user fees and special status types of sub-departments. I'll give you an example. The Farm Credit Corporation holds a tremendous amount of land in western Canada, and some in eastern Canada, I assume. In many instances where the farmers got into trouble, the Farm Credit Corporation took the land back because they had the mortgage on it. Now when the farmer is in a little better position and wants to buy his land back, they're demanding a 40% down payment from the farmer before he can even buy his land back. If the government is going to be shifting its departments to be more like private businesses, it's like a half-assed kind of a deal. The Farm Credit Corporation is not operating like a real financial institution in that case because I don't know of any financial institution that requires a 40% down payment on a land purchase. Are you aware of that? Have you looked into that area of it at all?

Mr. Denis Desautels: Mr. Chairman, I'm not aware of the particular practice Mr. Hilstrom is raising now. We do, of course, do the audit of the Farm Credit Corporation and look at their practices, but what you're raising now is news to me. As a crown corporation, the Farm Credit Corporation has its own mandate, which it has to operate within, and it is accountable as well. So I think whatever practices they are implementing are fair in terms of questions that could be asked of them by members of the House.

• 0920

Mr. Howard Hilstrom: With regard to the cash advance program, I believe Mr. Lavoie said there are $800 million out. That's half of the potential $1.6 billion. Is the reason only half of it is out because it's at the optimum level for a farmer to take out, or is there something wrong with the program? Why wouldn't they take that out? I think maybe you can answer that, Mr. Lavoie.

To Mr. Desautels, in your examination, what did the farmers feel were the problems in the program so that they wouldn't just automatically access $50,000 interest free? Why is that?

Mr. Gilles Lavoie: You're right that the amount authorized for advances is around $1.6 billion. It is a general practice—for example, when the Canadian Wheat Board at the beginning of the crop year asks for an amount of guarantee—that under the agreement the government authorizes up to, and normally we try not to have that high but to cover the expectation in such a way that we don't have to go back three or four times during the year to raise it by increments of $50 million or so. We want to be able to cover the likely clientele.

The 1998 participation was very close to what we had the year before. Of course you have the fact that the wheat and barley prices are relatively low in comparison to previous years. Consequently, you are taking an advance on a lower value crop, which of course reduced the amount that could be advanced because under the act we cannot advance more than 50% of the anticipated value of the crop. Then each time the expected value of the crop does reduce, our guarantee is automatically reduced at the same time. You also have the fact that the interest rates these days are not necessarily high. Therefore, you may have farmers who will not take an advance given the fact that they can finance their operation at a relatively reasonable rate of interest. When they take advantage of the program, they also pay a user fee or a charge to their association for the administration of the association. So unless you have a fairly good amount of money to borrow, you will not necessarily take advantage of the program.

Mr. Howard Hilstrom: The administration fee is only $150, and if I were borrowing an interest-free loan of $50,000, that wouldn't stop me.

But I don't know if I've really got quite the answer as to why there isn't maximum use made of this by the farmers to take the interest-free cash out.

Mr. Neil Maxwell (Principal, Audit Operations Branch, Office of the Auditor General of Canada): Mr. Chairman, there are two more points I would make about this. One is that we found that the extent to which the program is used varies a lot depending on the commodity. These programs are delivered by the producer organizations, so no doubt there are some issues that really relate to the individual producer organization and how aggressive that producer organization is, how much outreach it does, etc. That's one factor.

The other point I would make—and I'd echo Mr. Lavoie's comments on this—is that a lot of it depends on the availability of other financing. During the course of this study we sat at the kitchen tables in the farm houses of a number of different producers talking about this program. Quite often, as Mr. Lavoie said, it comes down to the issue of whether or not for that producer it's worth the effort to access this source of financing if the producer does have an operating line or has been extended supplier credits from the feed or seed suppliers.

Mr. Howard Hilstrom: I think the program has to be looked at.

I have just one last question.

The Chairman: You went over a minute. I've given you an extra minute. Thank you.

Mr. Howard Hilstrom: Okay. You need a gong.

The Chairman: Madam Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Is the interest-free component of the program in line with WTO rules? Has anyone thought about this?

Mr. Gilles Lavoie: Yes. We fully comply with our international obligations under the WTO. The legislation does not differentiate between crops. All crops grown in Canada are eligible, without exception. This program is available to all Canadian producers who sow and harvest crops. In terms of WTO compliance, there is no problem.

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Ms. Hélène Alarie: My second question will show my lack of knowledge of the subject. Do program rules apply across the country? Of course, Western producers are the main users of the program, but can producers in other parts of the country also avail themselves of this program?

Mr. Gilles Lavoie: Yes, they can. The same legislation and the same program apply to all crops grown in Canada. As Mr. Maxwell pointed out, the program is administered by producer organizations. We enter into agreements with producer organizations who, in turn, conclude agreements with lending institutions, generally banks or credit unions, and issue advances to their members.

The program operates in all provinces. In Quebec, for example, a total of eight producer organizations participate in the program. Thus far, $62.7 million has been advanced to Quebec producers for the 1998 crop year. Unfortunately, I don't have the figures on the actual number of producers involved. A total of $7 million has been advanced under the program to producers in PEI, and $125 million to producers in Ontario. Total figures vary from region to region.

Mrs. Hélène Alarie: I'd now like to comment briefly on the upcoming audits you have planned. You indicated that as part of your ongoing work, an audit of the Canadian Adaptation and Rural Development Fund was under way. Are you simply doing a financial audit of the fund, or are you in fact also conducting an audit to determine whether the fund objectives have been met?

Mr. Denis Desautels: Mr. Chairman, we are not doing a financial audit as such, but rather checking into the overall management of the program. The unique thing about this fund is that it is part of the new formulas used to deliver certain government programs. We want to verify how successful partners have been in delivering the program in a satisfactory manner. We're doing much more than a financial audit.

Ms. Hélène Alarie: Are we being asked to comment on this program, even though the audit is ongoing, or should we wait until later to do that?

Mr. Denis Desautels: As I said earlier, I do take note of the comments made by members during our meetings. It's not too late for us to make some adjustments in the case of this particular audit.

Ms. Hélène Alarie: Thank you.

[English]

The Chairman: Thank you, Madame Alarie.

We now go to Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman. I'll go along with the cash advances and the interest exemption option here, too.

I was part of the 1993 election. One of the things you have to understand is that interest exemptions on the advances were clearly part of the election platform. They were a plank. They were in our red book. You've stated that the government has not made clear why advances are provided interest-free. I think we made it pretty clear in our red book.

Given the fact that eighty farming groups agree with the government on this point, I'm wondering whether or not you've put yourself in a difficult position by not taking into account, one, that this was an election promise that was made and kept; and two, that the cost-recovery program has been a major burden for farmers because it comes at them from a whole bunch of different angles. As far as I'm concerned, an interest free advance is a tool that helps lessen that burden. It's also one that helps young farmers stay on the land.

I'd like your comments on those things.

• 0930

Mr. Neil Maxwell: The start of this was in an election platform. By way of clarification, we weren't trying to say in the audit that we thought this program was a bad program, or for that matter that we thought this program was a good program. What we tried to lay out were the arguments as we heard them from producers, from departmental officials, and from studies that have been done, and what the strengths and weaknesses of the program were. We did that because we thought there were some important things that we wanted put forward as suggestions about how this program and other agricultural programs can be discussed in terms of the public forum. We saw an opportunity here by which the process of public debate about programs like this could be improved.

We had several things we put forward in this audit as suggestions. One was that when the department has available information about effectiveness, it should make it available and alert parliamentarians to the information when, for example, committees like your own are looking at agricultural programs. We also recommended that they put more effort into making sure studies of agricultural effectiveness and impacts and the like are made available, and that stakeholders and parliamentarians are alerted to those when they're completed.

The second thing we had to say—and this has been part of your question and other members' questions—was the objective of the program needs to be clarified. That's not to say that there haven't been public statements about that, but what we didn't find was a clear statement by the department about how it is in fact managing that, how it's moving forward.

We noted that the departmental evaluators in 1993 made the same comment that the program's objectives need to be clarified. The department's internal auditors came in with a later study that said the same thing. And I also noted that in the document that the department has provided to the committee members—the executive summary of their most recent evaluation—they've again returned to this. One of their three main conclusions in terms of the issues that they think need to be addressed is that issue of clarifying the objectives. We think that's important in terms of assisting the public debate.

The third thing we have to say—and the Auditor General mentioned this in his opening statement—is that we see a very good opportunity for the department to use the provision in the legislation that requires a review after five years of operation. This can be a very good opportunity for the department to again look at the program, to see what kind of experience has been gained with the 1997 amendments to the program, and to review that in 2001 and 2002.

Mr. Murray Calder: The reason I asked that question is that on page 11-14 you have exhibit 11.7, “Key Extracts from the 1993 Evaluation”. There are a couple of lines in here that, quite frankly, I find offensive as a farmer. I started farming in 1973, and I started out with a heavy debt load and a mortgage. Nine times out of ten, my operating loan was maxed out. Any break in the storm, any light at the end of the tunnel, was something I welcomed, because it kept me viable and kept me on the farm.

When I read statements that say “Analysts showed that there is little economic justification for making advances interest-free”, and other statements like the one at the bottom, “In either case, the need for government subsidized advance payment programs is questionable”, I find those things offensive. In such a situation, it's a program that has been put forward by the government and is a break for farmers. It gives us a chance and keeps us on the farm in hard times or when we're starting out. I've been farming since 1973, and I don't really need programs like this now because I'm established. But I'll tell you, by God, a young farmer needs every chance and every opportunity and every little bit of help he can get.

Mr. Neil Maxwell: Yes, thank you.

Mr. Chairman, just as a point of clarification, the excerpts the member was referring to are in fact from the departmental evaluation, so our colleagues from the department may want to comment further.

• 0935

In terms of this issue of clarifying the objective, I would just say that there is nothing that would be inappropriate, in our view, if indeed the intent of the program is to reduce input costs. I've heard the member mention that and talk about that in terms of the original statement in the election platform. And if indeed this is about reducing input costs, I think many people would argue that it's laudable. We don't see our role as being to endorse certain policy positions or be contrary to certain policy positions. At the bottom line, all we're looking for, which we thought awfully important in terms of managing this program, is clarification about what that is.

The Chairman: We'll leave it there. Thank you.

Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thanks very much, Mr. Chairman.

I noticed, gentlemen, that one of the items you're looking at for ongoing work is the Canadian Grain Commission. I wondered if you could tell us when you expect to have that audit done and whether there are any interim comments you can make now.

Mr. Neil Maxwell: Mr. Chairman, the work we're doing in the Canadian Grain Commission is part of the broader look at user charges within the agriculture portfolio. It is work that is now being completed, and our expectation is it would be included in one of the Auditor General's reports this fall.

Mr. Dick Proctor: This fall?

Mr. Neil Maxwell: This fall.

Mr. Dick Proctor: Because we're very concerned—and I hope you will have heard as well—that there are significant changes in the way in which the CGC is doing business. There's a reduction in the amount of money that's available from the Canadian government, and more user fees affecting farmers. This seems to be changing the way the Grain Commission is going to do business or is doing business. So there are some real concerns. We'll look forward with interest to that.

The other thing, Mr. Desautels, and this is really more of an answer to your question rather than a question, but you said at the end, “any area you think my office should be looking at”. I would say there are two things your office should be looking at, and I trust you will be. One is the AIDA program, because certainly after a two-week recess I can tell you that farmers just do not believe what they're seeing out there and the difficulty they're having in filling out the forms for this program.

Recalling that the Minister of Agriculture said that it would be a bankable announcement, we're now hearing from banking officials that it's in fact not a bankable announcement and they simply don't know. Some accountants are simply shying away from wanting to assist farmers because they fear there will not be any money at the end of the day and they will just have alienated a producer by charging him several hundred dollars to complete the form. So certainly that is one area I would strongly encourage you to look at quickly.

The other area, unfortunately, is that when the Rural Secretariat was here recently, I think all of us felt it was a less than impressive performance. We would encourage you to have a look. For example—and I'm working from memory—I think they said they had 25 employees on staff and there are actually only six who work outside Ottawa. I don't know how you can have a rural secretariat where everybody is based in the nation's capital.

So those are comments, not questions, but I think it's important for your office to follow up. Thank you.

Mr. Denis Desautels: Mr. Chairman, I appreciate those comments. I will take them under good advisement.

The Chairman: Thank you.

Mr. Borotsik, five minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

First of all, about Mr. Calder, I appreciate where he's coming from, but I would suggest that rather than seeing those comments as being offensive, I would see them as being an opportunity to try to delve into the program itself to see the usefulness and the benefits of the particular program. Are they in fact doing what Mr. Calder has suggested they should be doing? And quite frankly, when there's a small number of producers—I think 38,000 was the number of producers who are taking advantage—of the total number of producers, that would be what percentage? Do we have a percentage of producers being involved in the program?

Mr. Gilles Lavoie: No, but I think it's around 30%. It's difficult to know who exactly is eligible, or who has enough clout to make it work. But it's maybe around 30%.

Mr. Rick Borotsik: And that's my point. When you have 30% of the producers who are taking advantage of what I consider to be a very attractive program.... Quite frankly, I shake my head when I see producers not taking advantage of interest-free money; it amazes me that they wouldn't do this. I guess one has to look deeply into the program to see if in fact it's achieving what it set out to achieve. So I wouldn't want to be, as I said, offended about those particular comments; I would see that as being positive and trying to look into it.

As for the cash advance program itself, I think it's been dealt with quite well in the financials from the audit statements.

• 0940

Mr. Desautels, one of my serious concerns, and I know each one of the members of this committee has seen this first-hand over the last little while, is the protectionism that's growing in our major market area the United States. There are comments continually coming forward that these types of subsidies.... And they do see this as being a subsidy.

Mr. Lavoie, you had said that in your opinion and your department's opinion, it is not seen as a subsidy. I can tell you honestly that in their minds, it is seen as just that: a support payment and a subsidy. How far have you gone in the department, or Mr. Desautels in your department, to effectively research this and show it unequivocally as being a non-subsidy or non-support payment so that when we go to our trading partners we are not going to be continually hammered with this particular program?

Mr. Gilles Lavoie: Maybe, Mr. Chairman, I should make a clarification here. Yes, it is a subsidy, but it is not a subsidy that is contrary to our GATT or WTO obligations.

Mr. Rick Borotsik: You are aware that they will be having this as a negotiating point at the next WTO round?

Mr. Gilles Lavoie: In previous investigations, for example, for countervail purpose or so on, the program has not been targeted by the U.S. Department of Commerce or others as providing an unfair advantage to producers for trade purposes.

Mr. Rick Borotsik: Mr. Desautels, in your opinion that's a fair comment?

Mr. Neil Maxwell: We don't as matter of course look at the questions of.... We're certainly aware of and we've talked to Mr. Lavoie and his colleagues about the extent to which this is permissible under WTO and NAFTA rules. I don't have too much that I would add to what Mr. Lavoie has said.

Mr. Rick Borotsik: Mr. Chairman, if I can, Mr. Proctor had mentioned the AIDA program, and I have no doubt that the Auditor General's department will be looking at AIDA and how not only it's funded but also how it's being distributed over the next year or two years.

I would ask Mr. Desautels, and again maybe it's beyond his mandate.... I have some difficulty with an AIDA program that is unofficially termed as an ad hoc program. I see a longer-term vision required for support programs to be put into place in agriculture. I hate to continue to harp on this issue, but the GRIP program, which was in place prior to 1995, seemed to have that long-term vision. It was cancelled, obviously, in 1995. Do you see, Mr. Desautels, that more of a long-term philosophy being laid down by the department is necessary rather than just simply ad hoc programs that as they come up and are required are put into place? If so, have you seen that particular long-term philosophy being demonstrated in Agriculture Canada and its direction right now?

Mr. Denis Desautels: Mr. Chairman, that's a question we've been actually considering looking into for the last seven or eight years. We've done a number of reviews of the programs of Agriculture and Agri-Food Canada. Of course we don't necessarily question government policy as such, but we do encourage departments to evaluate their programs, and not only evaluate them on a piecemeal basis but in terms of how they fit together. We looked at all the income support programs that do exist in Agriculture and Agri-Food Canada.

Mr. Rick Borotsik: If I can interrupt you, it's more than just income support. It's more a philosophical look as to.... You talked about diversification, you talked about farming in general in terms of what's going to happen in the next 20 years. Do you see any of that vision, any of that long-term planning?

Mr. Denis Desautels: I thought Agriculture and Agri-Food Canada was planning in that fashion. We will continue to expect that this is the way the department will operate. We're basically supporters or defenders of good evaluation of programs, and good evaluation doesn't mean just looking at one aspect of a program one day, another aspect another day. It means a global view of all of those programs, if there's a linkage between those programs. We will continue to encourage the departments to go in that direction. My impression in the last five or six years was that the department was thinking more globally than it used to prior to that. We'll continue to encourage the department to think that way.

Mr. Rick Borotsik: Thank you.

• 0945

The Chairman: We'll get to Mr. Hoeppner.

Can I get one clarification on this question about cash advance being a marketing program or an income security program? If it's supposed to be a marketing program and yet the money for it comes out of income security, is that offending only accounting ethics or imperatives, or does it go beyond the sensitivities of accountants like yourself?

Mr. Denis Desautels: I think it goes beyond the sensitivities of accountants. Our essential message is that the objective of any program should be clear enough, and when we do the evaluation of these programs, it should be made against these objectives.

When you look around all of government, I can think of a number of situations where objectives are a little fuzzy, and over time they lose their sharpness. I think that's why a periodic assessment of programs like that is absolutely healthy. It's not just an accounting issue or conformity with a particular rule; I think it's more an issue of looking at those programs periodically and assuring ourselves that they're delivering good value for the money, that you get good bang for the buck.

The Chairman: According to the stated objectives.

Mr. Denis Desautels: Yes, and make sure we all agree on the objectives.

The Chairman: Mr. Hoeppner.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

While it's interesting to sit and listen to all the comments on the cash advance program, I would like to say to Mr. Calder that if he were in Manitoba and tried to take a cash advance, he might get about half the worth of his grain in the cash advance, and then it would depend on whether the Wheat Board decided to call in the contract on which he took the cash advance.

I can point you to a number of farmers who took a cash advance and their wheat graded a number two while the call was for number one wheat—I think it was in 1994. So they took in millions of tonnes of number one wheat because it was short—they needed it—and then, come the new crop year, all of a sudden that wheat became a number one but the Wheat Board just wanted number two wheat. So again they couldn't deliver grain. This has happened time and time again, and people get so fed up with the bureaucratic system of that Wheat Board that they'd rather pay twice the interest than get it cash-free from the Wheat Board.

I'll give you a very good example. A couple of months ago we had Mr. Hehn here before us, and I got talking about the initial price of durum wheat or grain that all of sudden had gone from a number three to a number five when we started moving it. Well, good Lord, something happened to it in the bin. Right now we're moving it for number two durum.

This is the frustration that farmers feel with this whole system of government intervention and the marketing system. So in my area, when the cash advance became prevalent the first years, only the rich farmers took it, because they could afford to invest it and get a return on it. The poor farmers could only borrow about half the value of their grain, and then the banks wouldn't look at the rest. They wouldn't take it as security because he could be short; he may have overestimated. So it was very hard to get a bank loan then, once you had a cash advance.

So those are things that affect the farmer, and he has to have that cashflow. That is why the cash program isn't advanced. And the other thing is, we have so many special crops now that you can market at the time of harvest that they'd rather do that, take their cash and let the grain sit without any loan on it, because then they have something to fall on later.

I'm not condemning the government for giving this cash advance to some young farmers, but it hasn't been the tool that farmers have needed. They need a better marketing system. That's what they need, and that's what they're demanding.

So I wonder if you're going to look into the system. I've said it a number of times: If I were the government, I would fire the Grain Commission and the Wheat Board. They think I'm very harsh, but they have been instrumental in really interfering with farmers' own system of cashflow. In my opinion, that's where your problem is. I'd like to hear you comment on that.

Mr. Denis Desautels: Well, Mr. Chairman—

The Chairman: You don't have to answer. Those are pretty policy-oriented questions. Add whatever you want.

Mr. Denis Desautels: I'll be very brief.

We're not very familiar with the Wheat Board because we haven't been auditing the Wheat Board; it has been outside our purview for all these years.

As you know, Parliament has approved a change in the legislation and we'll be able to look at the Wheat Board in the future, and we'll be able to come back to Parliament with some more-informed observations.

Mr. Jake Hoeppner: I appreciate that very much.

The Chairman: Is that the end of your soliloquy?

• 0950

Mr. Jake Hoeppner: I just wanted to make a comment as to why farmers aren't accessing that program. It was designed to help farmers, but they found out it was interfering more with their operation than helping. Farmers are somewhat independent. They don't like government bureaucracy telling them every day what to do.

The Chairman: Mr. Hilstrom.

Mr. Howard Hilstrom: When you did the examination of the cash advance there, you had to contact the Wheat Board, didn't you?

Mr. Denis Desautels: Yes, we did.

Mr. Howard Hilstrom: So how much information did you get, or how far did you look into what the Wheat Board was doing as it had an effect on the cash advance system?

Mr. Neil Maxwell: Mr. Chairman, the Wheat Board is a very major player. In fact, in terms of number of participants, the vast majority of people accessing cash advances are through the Canadian Wheat Board.

I can say we had excellent cooperation from the Wheat Board with this work, and they were very forthcoming in terms of answering our questions and assisting us.

Mr. Howard Hilstrom: So that was just collecting information. You weren't in there examining those portions of their books that related to grain and inventory and market prices and what their mandate was.

Did they tell you what their mandate was?

Mr. Neil Maxwell: During the course of that work, we were really just talking to the Wheat Board in its role as, in a sense, one of many producer organizations. So it was much the same as when we went and talked to the Prince Edward Island Potato Board. We were really there talking to them about their role in terms of delivering the cash advance program.

Mr. Howard Hilstrom: Do you consider the Wheat Board to be a producers' organization?

Mr. Neil Maxwell: Only in the broad sense.

When you think about it in terms of this program, it is filling the same role that other producer organizations do for other commodities. So in many respects it's not like the other organizations that deliver this program, but it is filling that role for cash advance programs.

The Chairman: Okay, we're out of time for this round.

Mr. McGuire.

Mr. Joe McGuire (Egmont, Lib.): Thanks, Mr. Chairman.

Just as a point, I missed the Auditor General's opening statement, and maybe Howard can correct me if I'm wrong, but I thought this program of cash advances for farmers went back to John Diefenbaker's time.

Mr. Gilles Lavoie: It was 1959.

Mr. Joe McGuire: And it was cancelled in 1989 by the previous government.

Mr. Gilles Lavoie: The interest-free part was terminated, not the program.

Mr. Joe McGuire: There was such a reaction from the farming community, both east and west, that our government reinstated it.

Mr. Gilles Lavoie: The interest provision was reintroduced in 1990 under the cashflow enhancement program. That was one of the programs of the various safety net initiatives that had been taken at the beginning of the 1990s.

Mr. Joe McGuire: So I'm surprised that the Auditor General is even looking at this. This is something that has been around a very long time, and it has just been reinstituted in, what, 1994 or 1995?

Mr. Gilles Lavoie: It was reinstituted in 1997.

Mr. Joe McGuire: That was at the behest of the farming community. I'm not really sure why we're looking at this as a real problem area. Is this cash advance program to farmers the biggest problem we have in the country?

Mr. Denis Desautels: Mr. Chairman, we have an obligation to review on a cyclical basis all government expenditures, and there are no exceptions to that. That program falls within our purview.

Mr. Joe McGuire: Did you pick that on your own, or did somebody suggest that you look at this?

Mr. Denis Desautels: We always pick our own areas to look at. We ourselves decide what we look at.

Mr. Joe McGuire: So you felt this was an important one to look at, obviously.

Mr. Denis Desautels: Mr. Chairman, everything we look at we feel is important. There's taxpayers' money involved in all of the programs, and we have an obligation to look at all expenditures of taxpayers' money. I think it's quite important.

Mr. Joe McGuire: I wonder why you would pick this one. This is a fairly innocuous program to help, as my colleague said, the poorer farmers who need an advance after the crop is harvested. It didn't seem to be hurting too many people, in my mind, or affecting too many people. I wonder why you would choose it to investigate.

Mr. Denis Desautels: Mr. Chairman, I am surprised by the question.

The Chairman: I think he's basically asking whether there aren't other greater priorities.

Mr. Denis Desautels: There are priorities all over the place. But we have an obligation, over time, to review all government expenditures. We determine that following a particular schedule that we plan ahead. This program involves the spending of taxpayers' dollars, so it should not be exempt because it's a popular program. It does cost a certain amount of money in terms of the interest subsidy, it does cost money in terms of loans that are not collected and the guarantees that are therefore called upon, and it's a relatively new program that requires review in a few years' time. So we feel it's appropriate for all of those reasons to look at it, and I don't see any reason not to look at it.

• 0955

Mr. Joe McGuire: But the loans that are defaulted on are not the responsibility of say the P.E.I. Potato Board, which handles the program for the government, or the Wheat Board, which handles the program for the western farmers. They are responsible for collecting the cash advance, aren't they? So what losses are we incurring as a government, except...?

Mr. Denis Desautels: Who makes good in the end on the loans that are not collected?

Mr. Joe McGuire: On the issue of the Potato Board, I understand the Potato Board has to come up with it. They're responsible for collecting the loan. Is that true or not?

Mr. Denis Desautels: Mr. Maxwell?

Mr. Neil Maxwell: Thank you.

In the first instance, the producer organization does work to try to, if there's a collectibility problem.... And in fact one of the things that was a sign of progress, in our view, of the new legislation was that it made clear that was the case and created a number of incentives for producer organizations to do their homework and do their job well. Nonetheless, if there is a default, the financial institution has recourse back to the federal government. So there is a federal government guarantee. And defaults—we have the numbers in our report—have gone up and down. I think the most recent year was in excess of $20 million.

Mr. Lavoie might want to add something.

The Chairman: Mr. Lavoie.

Mr. Gilles Lavoie: Yes. Last year it was around $16 million; this year, so far, it's around $13.3 million. For the 1997-98 crop year it was 1.5% of the total amount of advances.

Mr. Joe McGuire: Compared to any other financial institution, it would be a pretty low default rate.

Mr. Gilles Lavoie: Yes, for this type of advance, given the fact that the collateral you have is a crop, not a building.

The Chairman: Mr. Rossetti.

Mr. John Rossetti (Director, Audit Operations Branch, Office of the Auditor General of Canada): I wanted to add that under the new legislation, the producer organizations bear a certain responsibility for loan losses. It varies between, I believe, 2% and 15%. The remainder of any defaulted loans are the liability of the federal government.

The Chairman: The interest portion on $800 million for the last fiscal year was a little over $12 million. That's what it cost the taxpayer to provide this interest-free cash advance to the farmers. How much have you set aside for the next fiscal year? Another $12 million? How do you guess, because it could be that they take in $600 million, or it could be $1 billion. How do you do that?

Mr. Gilles Lavoie: Mr. Chairman, there is an amount in the budget of $40 million provided for the payment of the interest and the administrative cost.

The Chairman: Forty million?

Mr. Gilles Lavoie: Yes.

The Chairman: Even though last year—

Mr. Gilles Lavoie: This was set at the time the interest rates were higher than they are today.

The Chairman: Oh, I see.

Mr. Gilles Lavoie: But should we go back to higher interest rates than what we have—hopefully not, but we don't know—then there will be enough provision under the budget to pay the interest on behalf of farmers.

The Chairman: So right now you have a sizeable amount set aside there?

Mr. Gilles Lavoie: Yes.

The Chairman: That's good news.

Mr. Borotsik.

Mr. Rick Borotsik: Thank you, Mr. Chairman.

I have difficulty understanding the line of questioning Mr. McGuire had. I think any type of government money that's at risk can certainly.... With defaults of somewhere in the neighbourhood of $16 million and interest payments of up to $40 million, I think it's important that the Auditor General look at the program, as opposed to just simply going someplace else. So I would defend you on that.

Let's go outside of that. You talked about the department not being terribly forthcoming with studies they have done within their own department. You suggested those studies should in fact be made more public, not only to parliamentarians, but also to the stakeholders. Would you go further and give me some understanding as to how you would see that happening from the department?

• 1000

There was a study that Mr. Migie had suggested, their “lessons learned” study. Can you comment on whether it's available or not through the Auditor General and whether it has been?

Mr. Neil Maxwell: In terms of the last part of your question, yes, that study was made available to us. I stand to be corrected, but I believe it was quite widely distributed. I recall that the department, when it completed its “lessons learned” study, provided that to other federal departments that it felt could learn from its experience delivering that program. So that's certainly the type of good practice we were looking for.

In terms of other ideas, what we had to say in our report is we thought there was quite a bit of room for the department, which conducts quite extensive studies of the impacts of different programs and what are the good things and bad things about the programs it's delivering. It does a lot of that type of work, and we thought it important that it get that out and alert parliamentarians, stakeholders, and others with an interest in this topic to the work it has done and the findings it has made.

In terms of specific ideas—and the departmental officials may want to comment further, because I understand they have made some progress on this recommendation of ours—we talked about the usefulness of the Internet. You know, the Internet is of growing use, and we see the department has made some important strides forward in terms of getting its studies available through that means.

Mr. Rick Borotsik: Perhaps I can ask Mr. Lavoie, why is it that you haven't in past practice wanted to get the studies out to stakeholders and parliamentarians?

Mr. Gilles Lavoie: The existence of the studies has always been mentioned and referred to. In fact, as mentioned in the chapter, a summary of the study of 1983, for example, was given in part III of the main estimates. Then all Parliament knew not only that the study existed, but they had a summary. The question is, was there enough information in such a summary? It is an issue that was raised in the chapter.

Mr. Rick Borotsik: Studies that have been completed in this year, in 1998—have you issued all of those studies publicly?

Mr. Gilles Lavoie: At the moment, what we plan to do is to put on our website all the studies as they are completed to indicate clearly that we have carried out these studies. They are completed, and now they are available.

We have also initiated a two-phase consultation process in the last quarter with the various stakeholders to determine client feedback regarding the usability of the present content, accessibility, ease of use and so on of the information that is put on our website. Phase two will go into more in-depth consultation, using focus groups and so on to identify any problem areas, any other areas where the farmers' organizations or parliamentarians—

Mr. Rick Borotsik: Do you inform outside of the department what studies are in progress at this point in time? Is there any way of accessing that type of information?

Mr. Gilles Lavoie: I believe it is, but I would have to check if we have the list of ongoing studies. We make it available for sure to the—

Mr. Rick Borotsik: Okay, if I can just jump in.... I only have one minute left, Mr. Lavoie, and I'd make one comment, which Mr. Proctor brought up with respect to the Rural Secretariat. It seems to me that particular department within a department has a mandate for more than what it is now trying to achieve. It seems to me their focus is on projects more than it is to actually go in and do assessment studies that I believe are required, when they affect rural communities particularly. It seems the majority of their time spent here was telling us how wonderful they were and how much money they spent on projects. That's a duplication, quite frankly, of other agencies that are now available to do those projects. So I think it's important that they be looked at.

PFRA you'd mentioned very briefly in your report. You also said the PFRA has to reassess its mandate and to reassign or reassess its infrastructure, its own ability to develop that program and deliver that program.

Maybe, Mr. Lavoie, you'd like to answer the comment that was made by Mr. Desautels with respect to PFRA. Because PFRA is a wonderful agency, but I think maybe it's lost itself in the shuffle. What have you got planned with PFRA?

Mr. Gilles Lavoie: Thank you very much. Yes, a lot of action has been taken following the comments made by the Auditor General. We have with us, Mr. Chairman, Mr. Peter Fehr from PFRA. With your permission I will ask him to give you more details on what has been done following the recommendations made by the Auditor General.

The Chairman: Fine.

Mr. Rick Borotsik: I'd love to hear.

The Chairman: It puts you well over your time, but we'll be nice to you.

• 1005

Mr. Rick Borotsik: I'll use Madame Alarie's time; she gave it to me.

Ms. Hélène Alarie: Take care.

The Chairman: Go ahead, sir.

Mr. Peter E. Fehr (Director, Ottawa Affairs, Prairie Farm Rehabilitation Administration, Department of Agriculture and Agri-Food): Thank you, Mr. Chairman.

Yes, we have looked at the documentation of the Auditor General subsequent to the report issued in 1997. We took seriously his comments about the strategic direction of PFRA. We have subsequently, in the last two years, worked very diligently at trying to refocus the efforts of PFRA. For the information of parliamentarians, we have a strategic framework for the years 1999 to 2002 that I think would probably outline a little more clearly the direction in which we're trying to go.

With respect to the actual direction, we're trying to focus on environmental sustainability and rural adaptation and growth as the two main areas of business we're involved in.

Mr. Rick Borotsik: Did you ever discuss this with the Rural Secretariat, by any chance?

The Chairman: We're out of time, thank you.

Could you distribute that document or make copies of it for the committee?

Mr. Rick Borotsik: I'm serious. Have you had any conversations with the Rural Secretariat?

Mr. Peter Fehr: Yes.

Mr. Rick Borotsik: Thank you.

The Chairman: We can continue with this, Rick.

Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

All of these programs floating around in departments of the government.... I mean, one of the biggest problems we have in the country is this overlapping of mandates and money flowing here and there. Did you ever have a chance to look at the Office of Western Diversification?

Mr. Denis Desautels: Yes, we have, Mr. Chairman.

Mr. Howard Hilstrom: Okay. Now, the Office of Western Diversification, PFRA, and the rural adaptation program all seem to have overlapping mandates. Is that true? In my riding, for instance, the PFRA is funding a gas project up in the area. We appreciate the gas project, but I'm asking if that is their mandate, or should it be western diversification's, or rural adaptation's? Is that clear?

I'll just clarify this a little bit. In your PFRA you said you have to clarify strategic direction priorities. Is it also true that with the cash advance, you said something to the effect that the objectives of the program are not well defined? Does that apply to WD too, those types of statements?

Mr. Denis Desautels: Mr. Chairman, the comments we made on western diversification go back about three or four years, and they weren't exactly along those lines. I think those were regional economic development programs. We looked at those at the same time as we looked at the others around the country. The issues there were slightly different from just lack of focus and clarity of objectives.

Mr. Howard Hilstrom: Okay. The problem is, if we're going to deliver a service to the agriculture sector, it should be one-stop shopping for the agriculture sector. We've got rural communities.... I know there are other things besides agriculture in rural Canada, but when you're delivering services there, the PFRA, for instance, charges—and they increase it every year—our pasture fees and our breeding fees for our pastures. Now that's what they're supposed to be in. They're supposed to be in the area of water development and this sort of thing. But what are they doing in the area of natural gas? Do you think that's part of their mandate? Maybe you don't even know they're in that.

Mr. Denis Desautels: That's a detail I wasn't aware of, actually. But when you look at our PFRA chapter, you see a lot of the issues you're raising now. There's a need for refocusing the organization. For instance, we say in one of our paragraphs that not only is there the risk that you mentioned of overlapping with other federal programs, but there are also provincial, regional, and municipal programs at work in some of the districts where they're involved. So there's a need to make sure the landscape is clear enough between the various players and we avoid the kind of overlap you're talking about.

Mr. Howard Hilstrom: In trying to help any taxpayers, but I guess farmers in particular, it seems that on the one hand the government is developing these programs to get money out to farmers, and on the other hand they're taking taking money back on user fees and such things. Isn't there a simpler way of doing this? Jeepers creepers, it really drives me nuts. Have you ever made a recommendation in regard to the simplicity of delivering programs to farmers?

• 1010

Mr. Denis Desautels: Well, our objective, our focus, is to encourage government, through periodic review of its programs, to ensure the objectives it sets are clear enough that we can manage these programs afterwards in a sound, economical fashion.

I think our focus is not to interfere in the policy decision. As I said earlier, when you talk about cost recovery, that's the policy decision that is made by government with the support of Parliament, so we don't question that. What we will look at is how well that is being implemented by the various agencies. We'll stay out of policy, but we would encourage departments to review their programs periodically to make sure the policy remains clear and the program is in keeping with the initial intent.

Mr. Howard Hilstrom: My last short question here is.... We recognize there's a problem in this overlapping duplication of program delivery, but to get back to the cash advances, the bankers actually advance the money to the farmer. Is there a problem with the tied-selling thing in here? Did you examine that, when the banker says “Okay, Mr. Farmer, I think it would be really nice if you actually didn't take that cash advance, because if you don't do that, I'm not going to give you this”? Did you examine that tied-selling concept, or did it come up?

Mr. Neil Maxwell: No, we didn't look at that issue per se. Very clearly, though, in terms of the delivery of the program, there's a very important.... When that producer walks into the bank branch and is looking for financing, the bank is in the position of putting forward options, and the deal they strike really becomes an issue between the producer and the bank.

The Chairman: We'll leave it at that and go to Madam Alarie.

I'm sorry, did you want to say something?

Mr. Gilles Lavoie: Mr. Chairman, I just want to complement the previous question. The producer organizations enter into a loan agreement with one bank—one lending institution, I should say—and then it's this bank that will advance individually. It's not each individual farmer that deals with a series of banks. It is the bank that's entering into an agreement with the producer organization that does the administration of the program on our behalf and on behalf of its members.

Then at the individual level, the type of situation you described will not likely happen.

The Chairman: Sorry, Madam Alarie. You can go ahead now.

[Translation]

Ms. Hélène Alarie: Mr. Chairman, we've talked a little about the issue under consideration, but at times, we've strayed from the subject at hand. We've had a very friendly discussion, but these are questions that we should put to the minister when he meets with the committee in late May. I have no further questions about this particular topic. Thank you.

[English]

The Chairman: Thank you.

Mr. Hoeppner.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I want to go back to the advance issue. I think Mr. Lavoie brought up a very interesting issue. I know for myself, if you go to a bank—I think at that time it was the Royal Bank that advanced the money—they're very hesitant to advance you any more money on your grain stocks. If you have machinery or anything else, they will, but it ties up all your grain, with about 50% of its value being advanced.

The canola growers have their own advance program. The potato growers have theirs. The question I have to ask is what is the default rate on these individual areas? Are they different from the Wheat Board advances? The other thing I'd like to ask is what percentage of the gross crop do farmers really take advance on? You know, canola is king right now in western Canada. It produces more money than Wheat Board grains. Is the advance spread around evenly, or are the defaults equally the same on these crops?

• 1015

Mr. Gilles Lavoie: Mr. Chairman, as I have mentioned before, the maximum that could be advanced by a producers' organization to one of its members is up to 50% of the value of the crop, as determined under the agreement. Before we sign the agreement with the producers' organization, we consult with experts and so on, including the producers, and agree on a reasonable expectation of the value of the crop. This is what is written down under the agreement to fix this 50%. Obviously, it does not fluctuate on a daily basis.

The same formula is applied to all producers across the board, whatever organization they belong to. As you mentioned, the Canadian Canola Growers Association is a very important participant in the program. I believe they are the second-most important after the Canadian Wheat Board. The formula is the same. Obviously canola is a higher value crop than wheat.

Mr. Jake Hoeppner: Are canola growers taking, per bushel or per value of crop, the same amount of advance as the Wheat Board grains, or are they in the position that they don't need these advances? What is the default rate? That's the question I have. I know there is a tremendous amount of pressure sometimes to take the advances. Then you market the grain and it's gone again. Does it affect different grains differently?

Mr. Gilles Lavoie: In 1998, 3,530 producers took advances through the Canadian Canola Growers Association. Obviously, some of these people also took advances through the Canadian Wheat Board—they may also grow wheat. It's not necessarily the total of the advances available to them; it's the total of advances they have taken through the Canadian Canola Growers Association. They may have taken advances through other organizations as well. We don't have the individual totals because we deal with the producers' organizations, not necessarily with the individual producers.

Mr. Jake Hoeppner: What about the percentage of default?

Mr. Gilles Lavoie: I don't have the individual rate of default by association with me. I mentioned 1.5% a few minutes ago. This is for the total advances for 1998. I do not have the percentage by association. When it is available, we can make it available to you. It's too early at the moment.

Mr. Jake Hoeppner: Do you have those figures?

Mr. Gilles Lavoie: I do not have them with me. I don't think they're available yet because all the books have not been audited yet. When they are, I will be pleased to share them with you.

Mr. Jake Hoeppner: Okay. I have a quick question on the PFRA. I get a lot of complaints that PFRA have changed their mandate from providing better water for individual farm sites, to community projects. Is that a fact, or is it just the feeling among farmers?

Mr. Gilles Lavoie: Mr. Chairman, with your permission, Mr. Fehr will answer.

Mr. Peter Fehr: Yes, indeed, the focus has changed to a greater emphasis on community water supplies, as opposed to individual farmers' water supplies. That doesn't mean an individual farmer can't access this, but it's done through community water supplies and pipelines, as opposed to wells or dugouts.

This is done mainly as a matter of better efficiency and more long-term sustainability of the water supply. We deal with individual water supplies in areas where community water supplies are not available, particularly in areas in eastern Alberta, where there a very few major water supplies, wells, and dugouts.

Mr. Jake Hoeppner: I hear this complaint from my constituency because there are some farmers who do not have access to major water supplies. Now they're being cut out of even trying to get their own better water supplies. It upsets them, and I don't think it's quite fair.

Mr. Peter Fehr: We understand that, and we try to deal with those situations. It's a matter of resources, of course, so we try to prioritize as best we can. We still provide individual assistance where we can.

Mr. Jake Hoeppner: Thank you very much.

The Chairman: Are there any more questions?

Mr. Howard Hilstrom: You mentioned that the western grain transition payments program provided a total of $1.6 billion to prairie landowners. When was the last time you looked at the status of that program? The money's all gone.

• 1020

Mr. Neil Maxwell: Mr. Chairman, our original work was done in 1996, at the time the interim payments had been made but before the final payments had been made. We then looked at it again in December 1998, and it was at that time we commented on what we saw as the two remaining outstanding pieces of business, which were, as Mr. Migie referred to earlier, to look at the impacts the program had in terms of movement toward value-added production and diversification and to expand that beyond just economic issues to look at both environmental and social issues. So those were the two areas we highlighted in our most recent work in December 1998.

Mr. Howard Hilstrom: But the money has all been given out, has it not? There is no more money to come through that program.

Mr. Neil Maxwell: Yes, Mr. Chairman, that is the case.

The Chairman: Mr. Hoeppner.

Mr. Jake Hoeppner: I'd like to go back to the PFRA and ask the gentleman a question. I've been getting complaints that there's a new short list every year for these funds, and a lot of these individual farmers say that they're always at the bottom of that list. Are they doing something wrong? Do you start a new list every year, or do you continue that short list into the new funding year?

Mr. Peter Fehr: Generally, the list of eligible projects is reviewed on an annual basis, and commitments are made based on the total amount of funding Parliament allocates us for a given year. Because we do not know if Parliament will reallocate the funding each year, we cannot commit any projects or approve any projects beyond the end of the fiscal year. So each year the list has to be re-evaluated. If they apply for this year, their name is automatically on the list for the following year, and they are reviewed against all other applications that come in. They still have to be priorized against all applications.

Mr. Jake Hoeppner: But it's not necessarily that they'd move up and be priorized the next year.

Mr. Peter Fehr: No.

Mr. Jake Hoeppner: Why isn't that done? The farmers in these water-short areas will never get water.

Mr. Murray Calder: Just tell Monte to quit opposing us.

Mr. Jake Hoeppner: I don't think that's quite fair. Maybe these complaints I get are legitimate.

Mr. Peter Fehr: That's a good question. I'm not sure I could answer that other than to say that all projects are evaluated in total, and we try to fund those projects that have the most benefit to the individual and/or the community.

Mr. Jake Hoeppner: To me it looks as if there could be a lot of political involvement if that's the case. I don't think that should be run that way. That's just an observation, and I'd like to see you address that problem.

The Chairman: Could I just jump in here, Mr. Hoeppner, to help you?

Mr. Jake Hoeppner: Yes.

The Chairman: Under the estimates there will be an opportunity to put questions to the appropriate assistant deputy minister some time after the minister's appearance. I just point out that there will be an opportunity to pursue this.

Mr. Jake Hoeppner: I'm just planting a little seed here to see whether or not it will grow.

The Chairman: Just before we close, I would like to bring to the attention of members that from April 18 to 20 the federal and provincial governments will host a very important conference at the Ottawa Congress Centre. I'm sure you're familiar with it. I'm holding up a brochure on it. The name of the conference is “Toward an Agricultural Trade Position: Dialogue with Canadian Industry”.

This is what you should listen to: All members of the committee are invited to the dinner on Monday night. Also, you are invited to participate in or at least attend the plenary sessions during the conference. You won't be charged the $100 registration fee for either the plenary sessions or the dinner. I think there are some behind-the-door meetings. We wouldn't be able to go to them. I guess that would be available only to registrants. But we can go to the plenary sessions and the dinner. There is also a reception Sunday night. I'm not exactly sure who is invited to that. If you're not familiar with the full schedule, I have a copy here in my hand.

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One other thing, because of this conference, everybody and his dog—if I can use a slang phrase—is going to be there, so we won't have a meeting next Tuesday, but we will have one next Thursday. It's about something I'm sure will be of interest to people such as Mr. Hilstrom—that is, cost recovery, which is an important issue these days.

Yes, Howard.

Mr. Howard Hilstrom: Who's appearing here next Wednesday?

The Chairman: No, it's next Thursday.

Mr. Howard Hilstrom: With regard to this agriculture trade position, which appears on the agenda, I contacted the minister's office and asked what I could attend. I'm happy to pay my registration fee in order to be involved with the whole program, but I was told, as you just told me, that I'm invited to the opening and I can have dinner and I can come in at the closing. I don't intend to attend any of it, because I wanted to be a little more involved with the idea of seeing what's actually going on. I can have dinner at a restaurant uptown here. So I'm very disappointed, and I'd like to make known to you the way parliamentarians are being treated on this particular agenda. You brought it up, I made my comment, and that's it.

The Chairman: I understand that if you do pay the registration fee, then you're entitled to attend all the meetings.

Mr. Howard Hilstrom: Maybe I misunderstood, then, but that's what I thought I was told.

The Chairman: That's my understanding. Just hang on while I talk to my researcher.

It was just pointed out to me that the thrust of the conference is really to consult with the stakeholders in the industry across the country, and I think the focus is not so much on politicians. Anyway, that's my understanding, Mr. Hilstrom.

Mr. Jake Hoeppner: Which is minor anyhow. Nobody—

The Chairman: I'm sorry that we ignored you for a moment, Mr. Desautels. As usual, we welcome your appearance, and I'm sure we'll have you back in the near future. Thank you.

Mr. Denis Desautels: Fine, Mr. Chairman. You're welcome.

The Chairman: This meeting is adjourned.