Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 11 - Evidence - Meeting of April 26, 2012
OTTAWA, Thursday, April 26, 2012
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:34 a.m. to examine the document entitled: Passport Canada's Fee-for-Service Proposal to Parliament, dated March 2012, pursuant to the User Fees Act, S.C. 2004, c. 6, sbs. 4(2).
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, today the Standing Senate Committee on Foreign Affairs and International Trade will be starting its examination of the document entitled: Passport Canada's Fee-for-Service Proposal to Parliament dated March 2012, pursuant to the User Fees Act.
Under the act, both the committee in the house and the Senate are seized of this matter. We are the committee that was requested by our leadership to study the fee-for-service proposal from Passport Canada.
We are starting today with the officials from Passport Canada. Christine Desloges, President and Chief Executive Officer of Passport Canada, will be making a presentation. Welcome to the committee. Please start by introducing the members of your team that are here and their capacities. Welcome to the committee, and we await your comments.
Christine Desloges, President and Chief Executive Officer, Passport Canada: Thank you very much, Madam Chair. First, I would like to introduce my colleagues. Lisa Pezzack is director general in charge of policy research and consultations.
[Translation]
I would also like to introduce Michel Brunette, Director of Resource Management and Compliance at Passport Canada.
[English]
Madam Chair and honourable members of the committee, I am delighted to be here today to speak to you about Passport Canada's fee-for-service proposal, the result of two years of inclusive public consultations under the User Fees Act. I will begin with an overview of Passport Canada's operating environment and the challenges that we face from a business point of view. I will then outline our achievements in preparing and consulting on our fee-for-service proposal.
[Translation]
Passport Canada is one of the most visible services offered by the Government of Canada. Last year we issued more than 4.8 million passports to Canadians, and more than 99 per cent of our clients received their passport on time or earlier.
Passport Canada is a self-funding special operating agency working on a 100 per cent cost-recovery basis. We are funded solely through the fees paid by passport applicants. These fees have not increased since 2001 — except for a $2 postal fee increase in 2005.
Yet the business of issuing passports is much different today than in 2001. Over the past decade, Passport Canada has more than doubled the number of passports issued annually. Today, 67 per cent of Canadians hold a passport.
[English]
Passport Canada runs a deficit on every booklet that is issued. A fee increase is needed to support our move to the ePassport, to bolster our ongoing fight against identity fraud and to support our shift from a five-year to a ten-year business cycle.
When I talk about a business cycle, it is because, as a cost-recovery agency, Passport Canada functions more like a business than a conventional government organization. We used activity-based management to monitor and to track the actual cost of each part of our operations.
Over the past decade, we have streamlined our business processes, making effective use of technologies, and found operating efficiencies wherever we could. However, the existing fee structure has fallen out of step with our business realities. It cannot support the investments that are needed to keep pace with the advances in technology, the international standards and the recommended practices.
These concerns were raised by the office of the Auditor General in 2005 and reiterated by the Public Accounts Committee in 2006 and in 2008.
[Translation]
The national roll-out of the ePassport and the implementation of its associated technology is a very complex project. Adopting the ePassport requires the creation of an entirely new passport booklet. We must build up an operating inventory of blank booklets.
Producing the ePassport also means replacing our printing technology across Canada, as well as IT system changes.
Moreover, to ensure consistent quality service to Canadians, staff here in Canada and in our missions abroad must be trained in the new technology.
[English]
I will now move on to a snapshot of our User Fees Act process. We began by consulting Canadians about our services through a website questionnaire, and we received input from more than 7,000 Canadians. We involved external stakeholders by organizing round table sessions with representatives from consumer and industry groups. More than 70 non-governmental, potential interest groups were also invited to provide input through a letter campaign.
We believe that these consultations and outreach initiatives provided an accurate overview of Canadians' opinions and preferences. Madam Chair, I can assure you that we listened very closely to what our clients and stakeholders told us during our consultation.
I am pleased to report that the results highlighted Canadians' satisfaction with Passport Canada's services. Further, there is widespread support for the 10-year ePassport. About 80 per cent of Canadians say that they will opt for a 10- year validity booklet, but many still want to have the option of a 5-year ePassport booklet as well, so we will also continue to offer Canadians the option of a five-year validity booklet at a lower upfront cost.
Canadians told us that they value being able to travel freely to many destinations around the world without the need for costly visas. That is why, once the technology and the new security features were explained, most Canadians expressed favourable views of the ePassport, citing the need to comply with international practices and to stay at the forefront of passport security.
[Translation]
Canadians clearly indicated they support a reduced price for children's passports and this is reflected in our proposal. Children's passports will still be valid for five years and fees will remain at 60 per cent of adult 5-year passport fees.
In preparing our proposal, our goal was to keep the fee for the 10-year ePassport as low as possible. Under our proposed new fee structure, the 10-year ePassport will cost $160, meaning that it will actually cost less per year than the current passport. The 5-year ePassport will however cost more per year.
In addition to our consultations, we conducted an international comparison. With this proposal, Canada compares favourably to other countries despite being in the unique position of operating on a fully cost-recovery basis, contrary to our international counterparts.
[English]
After listening to everything Canadians told us, consulting with consumer and industry organizations and evaluating passport services in other countries, we published our fee-for-service proposal on November 10, 2011. We invited Canadians to provide input on the proposal until November 25. During this period, over 7,000 people visited our web page, and 56 provided input. Passport Canada replied to all of the input by mid-December, within the prescribed deadlines. Per the User Fees Act, those who submitted input were also allowed to request independent advisory panels if they were unsatisfied with our responses. No requests were received.
This brings us to the parliamentary tabling of our proposal, one that we believe will best serve the interests of the millions of Canadians who depend on Passport Canada for reliable, secure and internationally respected travel documents.
Our organization prepared a balanced and comprehensive fee-for-service proposal. The proposal accurately reflects our costs and puts forward a fee structure that will allow us to move to a 10-year business cycle.
[Translation]
After more than a decade without increasing passport fees, the new fee and service structure will allow us to modernize services and improve the security of the passport program, while ensuring the financial sustainability of the organization.
Thanks to the implementation of the ePassport, Passport Canada is ensuring that Canadians will have travel documents that are secure and highly respected the world over.
Passport Canada is working closely with its public- and private- sector partners. In order to ensure a timely deployment of the ePassport, the months ahead will be critical. Passport Canada will ensure that services to Canadians will not be affected as we transition to the new technology.
Thank you, Madam Chair. I will be pleased to answer any questions you and the committee members may have.
[English]
The Chair: Thank you. There are just a few questions. You are talking a lot about transitioning to the ten-year ePassport and the five-year, but will the regular type of application of passports in our normal form now continue, or is there some cut-off date that you will move to only ePassports?
Ms. Desloges: Perhaps I can explain that the ePassport is actually very similar to the passport that you have today. The difference is that it has a chip in the passport. That means that at the back of the passport, you have a little chip. What is on the chip is actually the same information as you see here on page 2 of the passport. It has the picture as well as the biographical data that you would see on page 2.
When you present yourself at Immigration, the immigration officer actually puts the passport down, as he or she does now, and reads what we call the machine readable zone here. The passport goes down on the reader, the machine readable zone is read, and that unlocks the chip that is on the passport. It also shows a digital key, which is signed by the Government of Canada and which shows that the passport has not been tampered with. If the information that you have on page 2 and on the chip when they read it is not the same, then that means that there is a problem there and that the passport has been tampered with.
This passport then becomes either a five-year or a ten-year ePassport. It is the duration of the validity that is there. The 10-year ePassport would be introduced once we have rolled out the technology, all the printers are in place right across the country and in the two large printing plants that we have in Mississauga and in Gatineau.
The Chair: Maybe I did not make myself clear. I am wondering at what point we will have only the chip type with the new security. I am trying to figure out when you started so I know when the old passports will no longer be around and they will all be of one uniform technology.
Lisa Pezzack, Director General, Passport Canada: We have not started the rollout yet. We are still working on the project. There will be a transition period, as explained. The old passports will continue to be in circulation until they expire.
Just because the new one is coming out it does not mean it has to be replaced with an ePassport. We should be fully rolled out sometime next spring and at that point we will no longer be issuing the current, non-ePassport books.
The Chair: It would next spring, plus four or five years when we will be fully operational under the new system.
Ms. Pezzack: Yes.
The Chair: I have one other question. You keep saying that you are a business model and that you are a self- funding, special operating agency working on 100 per cent cost recovery.
Passport Canada, could you explain to me, legally, how your accountability is, to whom and when, for the record?
Ms. Desloges: I can. Our accountability is to the Minister of Foreign Affairs. As a special operating agency, we are also under the Revolving Funds Act and of course the User Fees Act. We live on the fees that we collect from our users. It means that we have to project the demand for passports. We have a forecasting team that will track the anticipated demand for passports and we function with activity-based management. That means for each of the services — each of the channels that we have — we can tell you how much it costs and we will track those costs on a quarterly basis. Our executive committee reviews forecasted demand and revenues on a quarterly basis. Based on that, we see whether we need to reduce our operating budget — and that means laying people off — or if we need to hire more people to deal with the anticipated demand.
Based on forecasts, we adjust twice a year and track our operations very carefully. I have with me the type of dashboard that you see more in the private sector than in the public sector. That is the dashboard our executive committee reviews every week in order to track how we are doing, where the points are in the various regions of Canada where there is more demand. Is it by mail? Is it in the offices across the country? We do national workload management and we also have a national tactical response team that enables us to deal with unanticipated events, for example the Canada Post strike which happened this year. You will have noticed that we were not in the media or if we were, it was because we were well prepared. That is thanks to a team that works very well together across the country to make sure that we meet the demands of Canadians.
Senator Downe: I am curious as to why Canada would consider offering a 10-year passport and a 5-year. I have checked, and the United Kingdom, United States and Australia have 10 years, New Zealand has five years, but none offer an option. Why would we get into options?
Ms. Pezzack: You are right. I know Japan and Switzerland also have a 10- and 5-year option. We kept the 5-year option for a couple of reasons. The transition from a 5-year business cycle to a 10-year business cycle will be difficult for us to manage. Our renewal rate is over 50 per cent now and 67 per cent of Canadians have a passport. Our volumes are in the 4.8 to 5 million range now. If we went strictly to a 10-year passport, our volumes would have dropped below 1 million and gone back up to 5 million a year. In part to help manage that huge trough, we kept the 5-year passport. We will also only give children 5-year passports because of issues around child safety and security and how much they change over the period.
Senator Downe: Your costs would be much higher because you are doing two. Most of the major countries decided to do one. I appreciate what you are saying and that there would be a bump, but surely there are ways of measuring that out. You do "x" number of provinces as the renewals come up they are automatically 10, and others have an option. This increases the costs, and if you are on cost recovery you want to keep your costs down. Why do you offer the two options? Is it your decision or the government's?
Ms. Desloges: With respect, senator, the booklet for the 5- and 10-year ePassport is the same. As you print the passport, what changes is the date in the passport. In terms of the production costs, that does not affect —
Senator Downe: What changes is you do not have to do it as often. You are doing it every 10 years instead of twice in 10 years. That surely would reduce your costs.
Ms. Desloges: It presents a challenge in the sense that the demand is stable the first five years, and then it drops dramatically.
Senator Downe: I heard that already.
Ms. Desloges: Yes, and then what we have left are first time applicants and children's applications. Children's passports are subsidized; the cost is at 60 per cent of the cost of an adult. It is also more expensive for Passport Canada to produce children's passports because we have to ensure the child is put into the hands and custody of the right parent. That means it is more expensive for us to produce children's passports than adult passports. From that perspective it means we incur greater cost during a period where the volume drops dramatically. That is one reason why we have significant costs during that period of time. We also have to look at the cost of downsizing and re- upsizing when the clients come back. They are there for the first five years. They are not there in year six because most have a 10-year passport, but at the end of year 10 they are coming back.
Senator Downe: Surely there is a way of averaging that out where you do not have this gap all at once and you could introduce it in stages. I find it passing strange that of the major countries that Canada relates to on a regular basis we are the only one offering two options when trying to keep the costs down. I do not want to take all the time.
I have another question pertaining to the Auditor General's report in 2005 where she found that the passport office did not meet the requirements for ongoing consultation on service standards and how they relate to passport and fees. The passport office also lacks reliable cost information related to public service standards.
Have you conducted any internal audit since then to address these problems and what are the results?
Ms. Desloges: The first thing we did in order to address that recommendation was to introduce activity-based management and costing, and we have been doing that on a regular basis as I said earlier. We have done that throughout all our operations. We are also doing that through our functional areas, including human resources, the security function, and we are starting to do it in the technology area. That addresses the main concern.
As part of the User Fees Act consultation, we have undertaken a two-year consultation process which was aimed to address that recommendation as well. First of all, we issued a questionnaire on the web. We had to design a process that was global because we have Canadians in Canada and also internationally abroad who wanted to comment on our proposal.
We had open-ended questions to them as to the types of improvements that they would like to see in our program. We also did three sets of round table discussions with consumer groups, industry groups and the travel and tourism groups in order to seek their views. We also did focus testing across the country with holders of passports, non- passport holders, seniors, as well as younger people, in order to test their views around the 10-year ePassport and the pricing structure.
We incorporated all of this feedback into the proposal that was tabled in November that was put on our website. We received again 7,000 visits from Canadians on the website to look at the proposal, look at the service standards that were mentioned and give us their feedback. Fifty-six people provided us with comments, and we answered every single one of them within the prescribed time lines. Then, of course, you have the tabling of the proposal that is with you today.
Those steps demonstrate that we have consulted very broadly. In fact, it is most likely the broadest consultation ever undertaken under the User Fees Act to make sure that as a cost recovery agency we took into consideration the views of Canadians and their concerns.
Senator Downe: The Auditor General did the report in 2005. My question was: Has your group done any internal audits to address these problems? I assume the answer is no? I did not hear "audit" in your answer anywhere.
Ms. Desloges: You did not hear audit, but ABM is part of a regular way of doing business now at Passport Canada and provides us a way of tracking costs, which is well respected both in the private sector as well as in government. As a matter of fact, Passport Canada is perhaps seen as one of the better-managed cost recovery organizations in the Government of Canada, and we have Treasury Board Secretariat that is following very closely the way we manage our finances. We also have externally audited financial statements done by Ernst & Young, which are done on an annual basis, and last year and the year before did not identify any observations in those external audits.
Senator Downe: Your internal consultation concluded that Canadians are generally satisfied with the Passport Canada service offering, but in 2005 the Auditor General of Canada, looking at value-for-money audit, came to a very different conclusion.
I have to tell you, I am from a part of Canada where people are extremely dissatisfied with Passport Canada, in Prince Edward Island, where you have a transient office. There is no permanent office. Obviously we live on an island; people have to leave the island to have a passport application. I constantly encounter citizens who have had an error in their form. They have to travel back to Halifax. As you may know, there is a bridge fee when you leave Prince Edward Island over $40. It is a very costly endeavour.
Passport Canada's response would reflect the Auditor General's comments of 2005, not your in-house consultation. You set up a temporary office in some locations, but the bulk of citizens have to leave. Passports are very different than they were 20 years ago. To get into the United States, you need a passport. It is a requirement for Canadians doing business, travel, what have you, when they leave the country, and I cannot understand why you do not have a service available in every province in Canada. I am concerned that the Auditor General's comments of 2005 still reflect the view of most Prince Edward Islanders.
Thank you, Madam Chair.
The Chair: Do you wish to respond?
Ms. Pezzack: One of the issues that the Auditor General was concerned about in 2005 was the way we did our fee increase in 2001. We had done some consultation, but with the events of 9/11 we ended up not providing the same service and fee proposal that we had discussed with the public in reaction to the increased security we had to take and the increased scrutiny under which we were putting applications, as well as the introduction of the "one person, one passport" policy which required children to have their own passport rather than being on the passports of their parents.
The consultations that we undertook were not internal; they were external and, as was mentioned, included consultations around the globe.
In relation to the issue on Prince Edward Island, we do have three Service Canada offices on the island, and we are operating a pilot there where they cannot only validate your form but they can validate your piece of identity, your documentary evidence of citizenship so that clients do not have to send away their documents to get their passports. We do understand the difficulties of the Island, but as a cost recovery organization, we also cannot afford to put an office where we will not make enough money to support the operations of that office.
In addition, in the case of Prince Edward Island, we have set up a separate special functioning with our bureau in Halifax so that if a client goes into a Service Canada office there and needs an expedited service within 10 days, we can offer that same service to someone on the island by processing the application in Halifax rather than processing it at our central processing plant in Gatineau, which is how we handle other Service Canada requests.
Senator Downe: Others have questions. It is a dramatic departure in standard levels for Canadians across this country. The last time I renewed my passport, I went to the office in downtown Ottawa. I walked in. I was the only one there. There were tons of people behind the counter. I walked up, and bingo, it did not take me any time at all. My neighbour in Prince Edward Island has to go to Halifax twice because there was no pilot project, which may or may not be incorporated. The standards of service are simply not acceptable. Thank you.
The Chair: I think you have made your point, Senator Downe.
Senator Wallin: I have some questions on the security aspect of this going to 10 years. I am in the middle of renewing NEXUS. It is taking eight weeks to do this from a person who has had diplomatic access and sits as a senator, so I cannot imagine what it might be like for a citizen who has not been through that process already. If it takes eight weeks to do that basic thing, I am wondering about, first, the 10-year time frame as you talk about the circumstances for children changing dramatically in the course of 5 years. It is certainly the case for individuals. We have had this pointed out to us in other context at the Anti-terrorism and National Defence Committees that even for the prospect of home-grown terrorists, where people are here and then become engaged in other activities, 10 years is a long time, in fact, to assume that someone's security status is constant.
Ms. Desloges: Let me start the answer, and I am sure my colleague Ms. Pezzack will have additional comments.
This is also another aspect of the business that is changing. It means that as the demand, of course, drops, the nature of the business will mean that we will need to ensure that the 21 million passports we have in circulation remain secure. That means ensuring that we deal with revocation of passports in some cases because a person may have committed a crime or may not be in a position where they should have a passport. They may have reported their passports lost or stolen too many times, and that would be something we need to address because there may be a problem there.
The other thing I would say is that having a 5- and a 10-year ePassport is not a bad thing in the sense that some people will opt to have a 5-year ePassport because they will look more like what they are currently, which will ensure they can confirm their identity. They will have access to automated border controls. Automated border controls in a number of countries take a picture of you and compare that with what the picture is on your passport. The more you look like your passport, the easier it will become to go through these automated border crossings.
Those are two elements that I would raise and there are some other elements that perhaps Ms. Pezzack would like to speak to.
Ms. Pezzack: There is a major difference with the NEXUS program, of course, because it is a binational program with the Americans. I hate to tell you this, but they treat everyone the same; it is the same waiting time for everyone.
Senator Wallin: I understand, but this is with some security clearances. Maybe you want to expand on that. It came up in another issue, too. I have no issue with the cost at all, but you could get same-day service during off-hours by paying a huge fee. What kind of security check could you do at two in the morning if someone wants a passport?
Ms. Pezzack: In fact, that is one of the reasons there is a significantly higher fee because we do call your references and your guarantor. We do our security checks in the off-hours, and because we call various people in to make sure those things happen, it costs so much more money.
Senator Wallin: Walk us through the security. I know we have to take our birth certificate, our this and our that and fill out the forms about the last five places we have lived — all that stuff; but that is not the same as a security check. If we are giving someone a 10-year passport, we should know about their history and whether they are on a watch list, and any of those things.
Ms. Pezzack: Agreed. One of the reasons we are going to the 10-year passport at this time is that we have taken the time to make improvements in our process to improve the security. For one thing, we repatriated the printing of passports from abroad, which allowed us to introduce more secure passports. For example, there are no more glued-in photos, which is a good thing for everyone. That was a process that we had to implement with the department and through our missions abroad.
We also introduced a system of facial recognition, which we use in our entitlement process. If you come in and say, "I am Madam Wallin," we look at your record and compare the photos through the facial recognition technology and say, "Yes, that is her; we are good." That is part of the security profile. We also check through guarantors and references that you have the social footprint you say you have. It is an enhancement to the identification verification process. We also do checks with Correctional Services and the Canadian Police Information Centre. We also have a list of people who have not paid their child support as well as a list of people that we have on a security list that we verify against on a daily basis.
[Translation]
Senator Robichaud: You mentioned that the photograph on a 5 to 10-year passport could be verified. But would the chip not take precedence over the photograph? I don't see why we would introduce a chip for security purposes and then all of a sudden, start to consider the photo.
Ms. Desloges: It is simply because people change over the years.
Senator Robichaud: I understand that.
Ms. Desloges: The photograph is on the chip and when the machine in an automated context reads the chip, it takes your picture, and when you go through, it checks if it sees the same thing and then says: It is a match. If it is not a match, you are sent to another level of security.
Senator Robichaud: But you also have information below the photograph?
Ms. Desloges: Yes. But if you change your picture and information every five years, it will look more like you than if you do it every ten years. That is all. In some cases, people will prefer to get a new picture and change their passport every five years, especially if they travel a great deal, because with 36 pages, they prefer the 5-year passport.
Senator Robichaud: I can understand for children, but for adults, that is fine. Thank you, Madam Chair.
[English]
Senator D. Smith: I do not quarrel with the no-cost concept. That is a reasonable goal, unless for some unknown reason it became prohibitively expensive. On the matter of 5-year and 10-year, I am kind of open-minded, actually. Switzerland and Japan did it, and they are pretty high-tech countries. If my doctor said that I had only a year or two to live, I might like the cheaper 5-year option.
I do not know how much of an issue this is in Canada, but fraudulent passports are not unknown. I would be interested in hearing how much of an issue it has been in Canada. I am sure there are other places where it is more of a problem. I am not a high-tech type and I am assuming that this ePassport with an electronic chip would make it much more difficult to have phony passports and, hopefully, impossible. Maybe you could enlighten us about whether that is a major part of the motivation for this.
Ms. Desloges: Those specifications have been developed by a working group at ICAO. They were intended to make the passports more secure. We found that there are 450 million ePassports in circulation around the world. Passport agencies at this time are getting more concerned by identity fraud. If you cannot tamper with the document, criminal elements will go elsewhere. If they cannot reproduce, then they will try to look at stealing identities and creating identities. That is where the effort is going amongst other passport agencies, as well as Passport Canada. As Ms. Pezzack described earlier, it is to confirm people's identity, identify their footprint, and to make sure that, for example with facial recognition, we can match if the person is already in the database. We have 21 million records of Canadians. Can we match this new applicant with someone who is already in the database? In some cases, we may have more than one identity for the same picture. That will bring us to do an investigation around why we would have a number of different identities associated with the same picture. That is an area of our operations that we are strengthening at this time because it is a serious risk.
Senator D. Smith: Should I assume that the ePassport chip makes it more difficult? Have fraudulent passports ever been a significant problem in Canada or is it pretty minor here compared to some countries?
Ms. Desloges: It is a problem all around the world.
Senator D. Smith: Is it serious here, too?
Ms. Desloges: It is a problem that we should all be concerned about in the sense that we take all means possible to fight criminal elements. Quite of bit of work is happening among various police agencies, the RCMP, our offices and the CBSA to ensure that we maintain the international reputation of the Canadian passport and its security.
Senator D. Smith: At our last meeting, I raised with one of the witnesses that my common name, David Smith, had been a problem name for me last year because apparently there was an American with that name who was a really bad guy. Even though they all know me at the airport, they say that they still have to phone; but I think we finally have it resolved. Would this ePassport help me? Maybe I do not even need my NEXUS card because it did not save me from that rascal David Smith in the U.S.
Ms. Pezzack: I think it will be more helpful to you as more countries move to automated border controls that the CEO was describing where they do the photo match with the picture as you go through. If you are pre-clearing American customs in Ottawa, you currently have to sort it out at the source because they just go by name. As they have more information with passenger names and dates of birth, that can also help, unless this very bad Mr. Smith was born on the same day as you.
Senator D. Smith: I asked the head of CSIS and he confessed that he had a brother-in-law named David Smith who was having the same problem. I asked him afterwards whether he was the source of the problem, and he did not think so.
[Translation]
Senator Fortin-Duplessis: First of all, thank you for your presentation Ms. Desloges. To begin with, I salute the adoption of the electronic passport because, first of all, it prolongs the lifecycle and the validity of the passport. It will also reduce the amount of paperwork since it facilitates people's mobility. The easier we make things, especially in a world where people and goods are circulating more freely, the better it is, especially since we are trying to do free trade with several countries, and we also want to agree on the mobility of people. So the easier we make it to go about this, and the better our regulations are, the better off everyone will be.
Canada was the only G7 country without the electronic passport, which allows us to monitor identity theft, fraud and illegal immigration. And over 40 countries in the world have adopted it. Yet, the International Civil Aviation Organization has been recommending the electronic passport for a long time.
Why so many delays in implementing the recommendation of the International Civil Aviation Organization?
Ms. Desloges: There are several aspects to the answer. I may be able to address some of them.
First of all, following the events on September 11, as Ms. Pezzack mentioned, we had to reinforce the passport security program a great deal, which involved repatriating the printing of passports abroad; this is now done entirely in Canada. The second step was to reinforce our issuing processes so as to better confirm people's identity. That also meant introducing facial recognition, the capacity to match photographs so as to confirm the applicants' identity.
Of course, the third thing was the fact that the United States imposed a passport requirement to enter the country. Canada and several other countries were told that they would have to produce an ePassport or a visa would be required. But because of our close relationship with the United States, we were exempted from the visa requirement. As a result, it gave us a bit more time to manage the increase in demand. What happened was that suddenly, there was a spike in demand. You may remember that about five years ago, there were huge line-ups at Passport Canada offices because everyone wanted to get a passport. So at that time, our priority was to manage that demand.
We also developed an ePassport pilot project in 2009, and this small pilot project was for diplomatic and special passports. We issued 50,000 special and diplomatic passports, which allowed us to test the technology and to determine the most cost-effective way to issue an ePassport.
We also learned from our international counterparts how to take the most cost-effective approach, because we are the only agency in the world that operates on a near 100 per cent cost-recovery basis. We did not have any other source of revenue. Our other problem was finding the money to put out a call for submissions and buy equipment, because without any financial support from government, we were not able to do this.
What the government did is that in budgets 2008 and 2010, we were given a line item to start purchasing the necessary equipment to produce ePassports.
The process we are completing under the User Fee Act will allow us to find the money to help produce the ePassport. We are now operating with a deficit, which greatly increases our costs. We will need another source of revenue to balance our books, because our only source of revenue are the fees generated by our users.
Senator Fortin-Duplessis: Canada has chosen not to include biometric data such as fingerprints or iris scans. So for now, Canada is sticking with photographs, that is, facial recognition.
I have noticed that other countries have chosen to capture biometric and secondary data like iris scans and fingerprints.
Has Passport Canada held discussions about including such biometric data? Is it too expensive? I would like your opinion on this.
Ms. Pezzack: It is true that several countries also use biometrics in their passports. Most of the time, it is fingerprints and not iris scans.
But other countries found that it was too expensive. In England, for example, they were thinking of adding fingerprints to their passports, but they decided not to do so after all because it just costs too much. And now is not the time to spend more money on a project like that one.
The other thing I wanted to mention is that the standard used by the International Civil Aviation Organization lies in facial biometrics because this is what we already have in our databases. We have pictures, and so we can compare these pictures. It is not useful to have biometrics which cannot be compared. This means that if you have fingerprints, which database will you compare them to if you want to do a check? That is part of the issue, that is, not only the expense, but also a database which can be compared with another one in order to conduct a check.
We had internal discussions and when we purchased the chips for electronic passports, we purchased chips that had room for a second biometric identifier if we decided to add that, however, for now we have no intention of doing that.
Senator De Bané: Ms. Desloges, page 19 of your proposal shows that between 2013 and 2018, you will have annual profits, or at least a surplus of revenues over expenses. Those years show 153 million, 187 million, 119 million, 132 million and 126 million.
After 2018, the annual losses are very high. Why will there be losses rather than surpluses starting in five years?
Ms. Desloges: As I explained, our cycle is a 5-year passport cycle but a 10-year passport cycle is being introduced, and Canadians, for the most part, prefer buying a passport once every ten years rather than every five years.
Therefore, over the first five years of the cycle that you see, clients are coming back because they had already applied five years ago and now they are coming to buy another passport. However, as of year six, given that they now have a 10-year passport, they are no longer coming back.
Revenue then drops dramatically and what we do have are children who are coming to buy their new passport; children's passports are subsidized and they are very costly for us to produce. What this means is that not only does our volume drop but the passports that we are issuing are much more costly in terms of operational costs, and given that we have no other source of funding beyond the fees that we collect, we must structure our operations over a 10- year cycle.
During the first part of that period, we put any surplus money that we collect in a special fund and then over the second 5-year period, we can use the funds that have accumulated in order to strike a balance and to be able to continue meeting our mandate.
I will ask Mr. Brunette, our numbers expert, if he has anything to add.
Senator De Bané: Could you please explain why on page 18 it states that in 2017-18 revenue is $574 million and then for the following year that drops to $28 million?
Michel Brunette, Director, Resource Management and Compliance, Passport Canada: Passport Canada's program has been organized over a 10-year period given that the 10-year passport is being introduced.
As Ms. Desloges explained, there is a higher volume over the first five years, on average 4.6 million passports being issued per year over the first five years. Those individuals who have applied for a 10-year passport will not come back to our offices for another ten years, that is those who will be getting their passports in 2011, 2012, 2013 and 2014. From 2018 to 2022, we have an average of 880,000 passports a year, a huge drop. The percentage of applications for children's passports, which is subsidized, will go from 17 per cent over the first five years to 71 per cent over the last five years. That type of passport is subsidized, and is more costly for us to issue from the outset.
2017-19 to 2019-20 are transition years where we need to reduce our staff to face a decline in demand.
Senator De Bané: I have another question, Madam Chair.
[English]
What is the incremental cost for you to enter valid for five years, valid for ten years? I do not see any incremental costs. Am I right?
[Translation]
Mr. Brunette: You are absolutely right, there are no additional costs associated with using one date or another. We balanced the program globally, not by product. If I may describe the 10-year passport, $88 goes directly into producing it, that includes office space, postal fees, salaries, and so on. Another $6 is for the ePassport technology, and those two costs also apply to the 5-year passport. They are the same.
Then there is $16 for an investment fund that is applicable only to the 10-year passport, as is another $20 amount which goes to subsidize products like the children's passport. The $160 passport includes $5 which will go to reimbursing the loan for the cumulative deficit we will have between now and the end of fiscal year 2012-13. There is another $25 in consular fees applicable to the 5-and 10-year passport, but we do not keep those fees, they are consular fees.
[English]
Senator Frum: You mentioned in your presentation that you received 7,000 responses to your web questionnaire. I am presuming and guessing that many of the issues that were raised had to do with privacy concerns. You described the process of checking the chip. Do you keep any records of people's travel activities as a result of the chip?
Ms. Desloges: The simple answer is no.
Senator Frum: I will take a simple answer. Thank you.
Senator Mahovlich: When I travel the subway or if I go to a movie theatre, there is a certain price for the elderly. I am looking at this and there is no mention of the elderly here. In all your consultation, did anyone ever mention the elderly? These people are on a fixed income. Where do you stand on that?
Ms. Pezzack: Yes, the issue did come up in our consultations because, as was mentioned, we consulted consumers, businesses and travel groups as well. We also do monthly demand forecast surveying and we sometimes ask the question about whether or not there is public support for subsidizing any special groups.
Senator Mahovlich: You have children.
Ms. Pezzack: Yes, we have children.
Senator Mahovlich: You are subsidizing children, yet the elderly, who built this country, may not live to use the 10- year passport.
Ms. Pezzack: There is a difference in that there is an international norm for subsidizing children's passports. It is the case with all of our major partners that children's passports are less expensive than those of adults. In the case of adults and seniors, if I may, they will have the choice of buying a lower-priced 5-year ePassport if they think that that would be more appropriate for them. However, in all of our market research there is not public opinion to support subsidizing any group other than children. We had 12 focus groups across Canada as part of our market research and about 65 per cent of the people who were participating in all of our consultations said that other than children there was no support for subsidizing any particular group, including seniors.
Ms. Desloges: I will ask Mr. Brunette to add a bit of financial information.
Mr. Brunette: From a financial perspective, if we were to subsidize the senior passport, 60 per cent, the same as we are subsidizing the children's passport, it would mean the 10-year passport would go up by $9, the 5-year would be going up by $6, and also the children's passport would be going up by $4. As I mentioned earlier, we balance the program as a whole and not by product and services.
Senator Mahovlich: That would show a lot of respect to the seniors.
The Chair: Senator Mahovlich, I could enter into that debate with you. Passports are not the same as living standards for seniors.
Senator Raine: You mentioned delivering security vis-à-vis applications. You follow up on references, look at the photos and check your database. You also mentioned you check Correctional Services and police databases.
I know that policing is also moving toward electronic data processing and identity verification systems. Will the passport chip be compatible with the data systems of the police forces? Will you be somehow able to talk to each other through these chips?
Ms. Pezzack: No, not through the chips. The standard for the chip is a standard that the International Civil Aviation Organization has set, and to have our passport accepted, that is what we have to use.
We do have data exchange capacity with police organizations now. We certainly keep up to date with lost and stolen passports so that people are not using them to travel. Some of the losses are convenient as opposed to real, as I am sure you understand. We are in constant contact with our security partners as part of maintaining our program and making constant improvements to the security of the program, but they are not able to read the chip. We do exchange information.
Senator Raine: You have a list of other fees you are charging that you have not been charging in the past. One I note is retention of a valid passport when there is a demonstrated need. What is your definition of a demonstrated need? I have come into this myself where I could not attend a conference because my passport would expire while I was away. At that point, no one in Passport Canada told me there was an opportunity to deal with that. Is this something new?
Ms. Pezzack: Yes. We are offering the service more at our missions abroad because people are often living in the country and have to have a visa in their passport that allows them to be in the country. As you know, many countries require you to carry that sort of identification with you at all times. We have been offering that service for people more through our overseas missions. We have not been offering the service here in Canada. We could offer it in the future. We have had some issues with it because people say, "I will come back and exchange my passport," and they do not show up or something else happens and we have to manage those printed passports so they do not get lost. There are some security issues around that.
Senator Raine: With the ePassport, you will be able to flag through the chip technology that it will be no longer valid even though it is presented?
Ms. Pezzack: That is what we do. We would have to cancel the passport, but we have already gone through the entitlement process; we have already incurred the expense; and then the client would have to come back and buy another one.
Senator Raine: I understand the need for a fee, but it would be useful to have that ability, because sometimes in your life you cannot control the timing of your business and your passport expiry date.
Going back to the issue of the security, the passport as a means of validating your identity is used for many things now. I am particularly interested because I note that 67 per cent of Canadians have passports, which I believe is higher than most countries.
Ms. Pezzack: It depends. It is about twice what it is in the U.S. In that, it is very different. In many European countries you see a much higher possession rate than the Americans.
Senator Raine: We are running into an issue in terms of background checks for people volunteering for non-profit organizations, volunteering to work for seniors or vulnerable children. The process for getting a security check done is onerous, complicated and time-consuming. It means that you were planning to coach soccer but by the time your clearance comes through the season is over. Is there any way that passport security can help that or would you have to talk to the police for background checks? If you have a passport, does it mean you have a clear police record?
Ms. Pezzack: No, not entirely. There are certain things for which we would refuse you a passport based on a police record and certain things we would not. The passport is a travel document. Our mandate is only to issue travel documents; it is not to issue identity documents. Unless there were a change to our mandate, it would not be possible for it to be used that way.
[Translation]
Senator Nolin: We rarely have the pleasure of having you with us. I want to stray off the topic that has brought you here today to pass on congratulations from a citizen who wrote to me over a year ago. He had had a problem obtaining his passport, and I believe that you have an internal arbitration process. Having that process is to your credit, the citizen was very happy with it. I think it is always interesting to receive some positive feedback like that. Please pass the remarks on to the appropriate person in your organization.
Most of my questions were answered by Mr. Brunette in response to Senator De Bané. I do have a question on consular services. The famous $25 that you charge once every ten years instead of every five years, how will the administration absorb that? You are being told to include the $25 in the price and that they will deal with the rest.
Ms. Desloges: Consular fees are completely separate and are not part of the consultation process at present. We collect them and they go directly into the Government of Canada's consolidated revenue fund.
Senator Nolin: So there isn't a breakdown of services included in this $25. What is included in the $25 amount? You cannot answer the question?
Ms. Desloges: I am not the one to answer your question, I am in charge of the passport program.
[English]
The Chair: Senator Nolin, we have asked the Department of Foreign Affairs and International Trade if they wish to come. The question of consular fees comes up and it is not Passport Canada. We can then ask them what the fee is for. It seems to be a question that is being asked of Passport Canada and of interest.
Are all countries now demanding passports when you travel? Many of our people who travel, including our retired citizens, travel for tourism. They want to go south to the United States — those who can afford it, of course — or to the islands. There was a tourism facilitation where, if you have some sort of identity document and you are dealing with a Canadian tour operator, you could use some other identity card. Are they all now moving to using passports as the way to get into a country? I just note that the Dominican Republic has now indicated that a passport will be required and the alert is going out to Canadians that a visa will be put in there. Are all countries now starting to use passports, visas, rather than other identity means, so Canadians should be alerted if they are travelling that that will be the method and mode of travel?
Ms. Pezzack: Yes, the passport is the only internationally recognized travel document. While some countries may currently let you in without one, we have seen a number of people who travelled south without a Canadian passport and then had a hard time getting on an airplane coming home. For land border travel, of course, there are alternatives, such as enhanced driver's licences or, as some of you mentioned, NEXUS cards. If you drive down to the United States and then for an emergency reason you have to fly home, you will still need a passport.
The Chair: Is the NEXUS program being expanded?
Ms. Pezzack: Yes, the NEXUS program you can now use for air, but not an enhanced driver's licence.
The Chair: With respect to the children, was the need to have a separate passport, if I recall, for children to stop any of the issues of custody and removal of children?
Ms. Pezzack: It is a bit larger than that. There is trafficking in children in certain countries, as I am sure you are aware. There are issues in relation to having a separate passport document because there are custody issues for many children. That is part of why they are more expensive to issue and it is part of why we have additional controls on who applies, how they apply, what information we need from parents, and as well, if you travel with a child and you are travelling without the other parent, you will often be requested to have a letter of confirmation that you have permission to allow the child to travel without the other parent.
The Chair: That letter that a parent is consenting to, there have been difficulties with that. As passports can be forged and utilized, so can letters; in fact, much more quickly. The ongoing issue of children, passports and removal is of concern.
Ms. Pezzack: It is of great concern. In fact, we started a children's task force within the organization in the last year to further focus on children-related issues. For parents who have a concern about their partner, former partner, someone taking the child out of the country illegally, they can provide us information and we will add that name to the security list so that if ever there were an application for a passport for that child, we would be alerted and would make serious inquiries.
The Chair: The Hague Convention works to prevent that.
Ms. Pezzack: Yes.
The Chair: Not everyone has signed up to the Hague Convention.
Senator Nolin: Is what you just said known to the public, that they can alert you?
[Translation]
Ms. Pezzack: I believe it is on the website.
Senator Nolin: We get that question on occasion: How can I stop my ex-husband or my children's father? That is good to know.
Ms. Pezzack: It is also good to know that even if an application is made, both parents must sign it.
[English]
I will have to say it in English: a court order that says that one person has the right to have that child travel.
The Chair: It is a very complex issue that I have followed for quite some time and of greater concern as we become more mobile. Again, it is whether the children are being treated properly and if the child is removed from Canada what residual capabilities Canadians have. That is an area that we need to continue to explore as families change and move around.
Senator Downe: With respect to the policy decision, did Passport Canada decide not to cover the full cost of children's passports or was that a decision of the government? Do you have the authority to make those decisions internally?
Ms. Desloges: I would say that this is not a decision that Passport Canada makes on its own. This is something that consultation showed that the Canadian public supported. It is part of the User Fees Act proposal that we have on the table, and would be approved by government once the Senate and House of Commons committees have had a chance to review this proposal.
Senator Downe: You are a cost-recovery agency, but you are recommending that in one of the areas you do not recover the cost you are incurring; in this case, passports for children?
Ms. Desloges: In this case, we are recommending that, based on two years of consultations with Canadians, this is what Canadians told us.
Senator Downe: Is this the 7,000 people you referred to earlier, or the round tables and additional consultation?
Ms. Desloges: There were two waves of Internet consultations. The first wave, which was open-ended, asked for suggestions from Canadians. It was the round table. It was the focus testing that was done across the country. It was the monthly surveys. It was also the Internet consultation that we did when we posted the proposal for the fees and service standards. We had 7,000 more people who went back, and only 56 people, as I explained, gave us some comments, and there was no requirement for panels by Canadians.
Senator Downe: Have you done any consultation with Prince Edward Islanders, since it is the only province without a passport office, on having a passport office there, as another area where there would not be cost-recovery?
Ms. Desloges: The consultations we did were open to all Canadians and Canadians also around the world. We publicized the consultations through media advisories that went right across the country and covered ethnic media and minority language media as well. It was a very open process. I have not seen that there was a special request to open up an office in P.E.I. as part of the consultation input we got, but we can certainly check that.
Senator Raine: First, I would like to echo what my colleague has said, that I think the service you are doing for Canadians is outstanding. I congratulate you. I have dealt with Passport Canada for many years. In the last 20 years it has improved almost on an annual basis. Well done. It is the best thing post-9/11. How you adapted was superb.
Going from a five-year to ten-year, you will sell 20 million passports in the next five years and then you will have 20 million customers who are not coming back for five years. Is there a plan at all to even out the flow by maybe offering a little discount if you come in two years early? I am serious, because I think it is in everyone's interest to go to a more even flow. Our demographics do not show that happening for a while.
Mr. Brunette: It is a very good question and something we struggle with because we had to balance the program over 10 years as a whole. Having the 5-year passport, to go back to the earlier discussion, is actually helping us to balance the program. In fact, it evens up the demand a bit. The more people go for the 5-year passport, the more it would even up the demand and we would have fewer peaks and valleys, which are expensive to the program. We would like to even up the demand, but it is out of our control. For people who opt for the 10-year passport, we will have to issue a 10-year passport, but if you want a 5-year passport, it will help us.
Senator Raine: The other thing is, during those five years, you will have to go on a sales blitz and get 100 per cent of Canadians getting passports.
[Translation]
Senator Robichaud: When you did your consultations, did they focus solely on cost recovery and the price? Did it come up at any point that your services could be reduced, as in Prince Edward Island?
Ms. Desloges: You are talking about an open consultation where we asked Canadians for their feedback on existing services. We also asked for their suggestions on how to improve our services and we asked if Canadians wanted the cost of a passport to be kept as low as possible: what suggestions would you make that could enable us to meet that objective? So the questions were open, and we also held discussions. We did roundtables; I participated myself, with consumers from the business, tourism and travel sectors. We spent a good four hours with each group to specifically look at the challenges, the options, and what suggestions they had for us. The specific issue of Prince Edward Island was not raised at the roundtables nor during the focus group testing.
Senator Robichaud: Were any of the consultations held in Prince Edward Island?
Ms. Desloges: Our consultations were done essentially over the Internet. We also invited in some groups. I can give you a list of the associations we invited.
[English]
Advanced Card Technology Association of Canada, Air Transport Association of Canada, Association of Canadian Travel Agencies, Association of International Customs and Border Agencies, Canadian Airports Council, Canadian Association of Tour Operators, Canadian Civil Liberties Association, Canadian Federation of Independent Business, Canadian Federation of Students, Canadian Snowbird Association, Canadian Soccer Association, Canadian/American Border Trade Alliance, Consumers' Association of Canada, Institute for Citizen-Centred Service, International Air Transport Association, the National Airlines Council, the Tourism Industry Association.
[Translation]
Senator Robichaud: That was not my question, Ms. Desloges. Were there any consultations, or what we call roundtables, on Prince Edward Island?
Ms. Desloges: Our round tables were held in Ottawa.
Senator Robichaud: Because you should have known that with cost recovery, there was a possibility that the outcome would require eliminating service on Prince Edward Island.
Ms. Desloges: That is why we have partners. Ms. Pezzack mentioned the Service Canada offices. There are three Service Canada offices that receive applications in Prince Edward Island. We are always concerned about providing the best service possible, and we have twinned our Halifax office so that it can specifically process urgent requests. In fact, we have tried everything we could because we are currently losing money. It costs $1.4 million to $4 million just to open a new office, to set it up. After that, you need to add in the operating costs, the recoverable costs, and then there is the issue of volume.
Senator Robichaud: I am not calling into question your figures.
Ms. Desloges: The question is this: in a context of cost recovery, how do we balance the costs of the program for all Canadians? That is why we asked the question: what suggestion do you have for us? How can we reconcile service imperatives and cost-recovery imperatives?
Senator Robichaud: Ms. Desloges, you also mentioned the subsidized passport for children. And when you say that Service Canada will offer services on your behalf, they will not replace the services that Passport Canada could provide. All you need to do is talk to people on employment insurance who often have to deal with Service Canada. They will tell you that sometimes, it really does not work.
[English]
The Chair: I think the point has been made about P.E.I., as it was on the floor of the Senate.
I would like to thank you, Ms. Desloges, for coming with your associates and fielding many questions about the user fee issue we are dealing with and broader issues of Passport Canada. Thank you very much for appearing before us today.
(The committee adjourned.)