Proceedings of the Standing Senate Committee on
National Finance
Issue 21 - Evidence - November 18, 2014
OTTAWA, Tuesday, November 18, 2014
The Standing Senate Committee on National Finance met this day, at 9:30 a.m., to give consideration to Supplementary Estimates (B) for the fiscal year ending March 31, 2015.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, we will begin our consideration of Supplementary Estimates (B) for the fiscal year ending March 31, 2015, which have been referred to our committee.
[English]
In our first hour this morning we're very pleased to welcome back officials from Treasury Board of Canada Secretariat. We welcome Mr. Bill Matthews, Comptroller General of Canada. He was here in that capacity recently and we welcome him back for maybe his last appearance in relation to Treasury Board Secretariat, generally, on Supplementary Estimates (B). We welcome back — and we hope she will be continuing — Marcia Santiago, Executive Director, Expenditure Management Sector.
If you would like to give us your introductory remarks and tell us a little bit about what we should expect to find in Supplementary Estimates (B). We have had a chance to review it briefly. Mr. Matthews, you have the floor.
[Translation]
Bill Matthews, Comptroller General of Canada, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. Members of the committee, good morning. As you mentioned, I am joined this morning by Marcia Santiago, with whom you are already very familiar.
[English]
I have changed roles; I'm now in a new role as Comptroller General of Canada, but I am here this morning in my old role as Assistant Secretary of Expenditure Management Sector. My replacement in that role, Brian Pagan, is with us this morning. Many committee members would know him. He has been here many times before on other issues and he is on day two of his new job, so we didn't think it was fair to have him at the table alone, but with Brian and Marcia you're in great hands and going forward I'm sure you'll be very well served.
The Chair: Thank you for introducing Mr. Pagan. We know him and we're pleased that he will be continuing with Ms. Santiago. We wish you well in your new responsibilities.
[Translation]
Mr. Matthews: We are pleased to be here this morning to answer questions on Supplementary Estimates (B) for the fiscal year ending March 31, 2015.
[English]
As usual, I will give you a brief overview of what's in Supplementary Estimates (B) to help the committee with its questions or area of focus. Then if the committee is agreeable I will turn it over to Marcia for a quick walk through of one department's Supplementary Estimates (B), as we usually do, to remind senators how these estimates work because they can be a little bit complicated.
If I could start on slide 3 of the presentation as a reminder on how the document is organized. What I would tell you about the introduction section is that if we only had 15 minutes to go through Supplementary Estimates (B), this is really where you should spend your time. In that section you will see the current year estimates for all departments, what they had for estimates or authorities in the previous fiscal year, as well as what they actually spent in the previous fiscal year. So it's a very nice snapshot and that starts on page 10 of section 1 in the introduction.
[Translation]
In the French document, that information is also on page 10.
[English]
That is a quick snapshot of the introduction. In this section you will also find the largest dollar items voted, so that gives you a sense of what to focus on, as well as any structural changes that are in the estimates. In Supplementary Estimates (B) we have one that is worth mentioning and that is the new Administrative Tribunals Support Services. It's a new organization that will perform administrative support services for a number of tribunals.
The Chair: Where do we see reference to that?
Mr. Matthews: In the introduction section. Maybe Marcia can find me a page while I madly flip here.
I'm think it is page 8, but maybe we'll have Marcia confirm that.
The Chair: That can come later.
Mr. Matthews: It is page 8 in both languages.
[Translation]
So it is also on page 8 in the French version.
[English]
Then you will have the listing of horizontal initiatives, which is any initiative where more than one department has received funding. It will show up in the horizontal initiatives, and we have some additional material for you on horizontal initiatives in this deck. That's the introduction section.
The bulk of this document is the details by organization or by department, which outlines the additional funding they are receiving in Supplementary Estimates (B). There are 63 organizations in this Supplementary Estimates (B) and as a reminder to senators, if an organization is not receiving funding through Supplementary Estimates (B) it will not appear here. Unlike the Main Estimates where we have all organizations, in supplementary estimates it's only the organizations that are seeking funds.
In the annex you will see the proposed schedule to the bill, which is what the Senate will eventually vote on in terms of granting supply. There is additional information on statutory forecasts online, spending by program as well as Treasury Board central vote allocations. That is a reminder on the overview and how the document works.
If I could take you to slide 4, this is grosso modo the numbers we are looking at today in Supplementary Estimates (B). We have roughly $2.9 billion in voted amounts as well as $327 million in statutory. Remember that the statutory items are presented for information only. It's the voted items that actually form part of the appropriation act, and I will go through in future slides and give you a breakdown on each of these things.
I will also flag for senators that under non-budgetary we're showing zero dollars, but we have two one-dollar amounts in non-budgetary items that relate to vote wording changes. You'll remember that if we have to change vote wording or something else, technically speaking we will often do a one-dollar item to get it into the estimates.
Slide 5 is where we compare these Supplementary Estimates (B) and the year to date to previous estimates, and give a sense of where the spending is or where the authorized spending is. The trends are ones that I have spoken to this committee about many times before. Voted spending is decreasing, largely because of unwinding of economic action plans and other reductions, while statutory spending is increasing. The reasons for statutory spending increases, as we've discussed many times before, are largely related to elderly benefits such as old age security as well as the legislated increase in the Canada Health Transfer. Those increases are more than offsetting the reductions in voted spending. So that's what we're looking at in total.
If you're looking at these Supplementary Estimates (B), our voted amounts are less than in the previous year and you might be wondering why that is. The amounts in 2013-14 in Sup (B) were unusually large. We had items there for disaster financial assistance as well as a big chunk related to the Manuge settlement and another out-of-court settlement. This year, in fact, while Supplementary Estimates (B) is always the largest of the supplementary estimates, it's really returning back to a more normal level than it has in previous years. Last year was a bit of an anomaly for us.
I will highlight the major voted items on slide 6. There's a list here and I'll speak to some of these. The two largest items relate to National Defence. The first item is sustainment and operational readiness of the Canadian Armed Forces. I know you have National Defence witnesses appearing in the second hour so I will touch on this briefly. There is Chinook helicopter maintenance as well as maintenance dollars related to submarines, frigates, armoured vehicles and the Aurora aircraft in addition to dollars for training exercises related to live fire and Arctic exercises. I'm sure witnesses in the second half of this hour can give additional detail, if warranted, on those things.
The third item on this list is Treasury Board Secretariat, central vote, compensation adjustments. This is amounts that the Treasury Board Secretariat flows to departments to basically keep them whole for wage increases. We have not seen this in a couple of years, or not to this extent, because we've had the operating budget freeze in effect where departments had to absorb those wage increases through those budgets, but the operating budget freeze is not in effect for the current fiscal year so there is money flowing on that front. That's a series of departments.
The large items there, about 112 million of those dollars relate to the core public service; $40 million relates to special agencies. The big agreements that we're talking about that would have driven these increases relate to Correctional Services, our finance community, as well as ship repair east and west, but there are others in there as well.
Lastly I'll touch on VIA Rail. It has funding for $148.6 million. That relates largely to capital around enhancing and rebuilding passenger cars, tracks and signalling systems. Slide 7 of the major voted items, the one on the top of this list relates to the Canadian Air Transport Security Authority. I highlight this for you. It's related to non-passenger screening. The dollars there relate to providing additional staff to do screening of non-passenger folks. This is airline staff, baggage handlers, and those types of people.
There are a group of organizations that are getting funding for the remediation of federal contaminated sites, $80.2 million. That is directly linked to the environmental liability you would see for the government in the Public Accounts of Canada, and the size of the environmental liability for the Government of Canada is roughly $11 billion, to put it in perspective.
Fisheries and Oceans, we have some funds for Coast Guard renewal under the National Shipbuilding Procurement Strategy. There are three pieces there. The first piece relates to the design and engineering work for noncombat vessels; the second relates to funding for Vancouver shipyards, which is the shipyard that will build these things; and the third relates to the refit of the Louis St. Laurent icebreaker, because we're extending the service life of that icebreaker to 2021.
Transport Canada is replacing a ferry that runs from Digby, the MV Princess of Acadia. That is funding for that. The last one I'll mention on this page is funds for Canadian Heritage, the Toronto 2015 Pan-American and Parapan American Games. That funding relates to three venues that need funds; so we're happy to speak to that, if that's of interest.
Those items represent a fairly big chunk of these supplementary estimates. By focusing on these items, you get a sense of what these estimates have inside them.
The next couple of slides are on horizontal items. This is where more than one department is receiving funding. The first one I've already touched upon, which is remediation and assessment of federal contaminated sites. The second item on this page is renewal of First Nations Water and Wastewater Action Plan, and we've spoken about that before. The only other one I will highlight for you on this page is Statistics Canada. Two departments are receiving funding related to the 2016 census of population — Statistics Canada itself, which makes good sense — but also related to that Shared Services Canada, which is providing some of the IT backbone for this project, will be receiving funding as well, which is why you're seeing it as a horizontal item.
On slide 9: Canada Revenue Agency, the third item on the list, there is some funding for them as well as Shared Services Canada related to administration and implementation of new tax measures from Budget 2013. The focus of those measures is around, if I recall correctly, GST and HST delinquent employer filings, non-filing, so individuals or corporations who don't actually file, as well as a focus on excess RRSP contributions. Again, Shared Services Canada is actually helping with the IT part.
The other item worth mentioning is the Canadian Food Inspection Agency. There's a new safety program related to increases in purchasing certain kinds of foods; so fruit, vegetables, fish and seafood are on the list. The mix of countries they're coming from is different, so the agency has roughly 200 new inspectors who will be focusing on that program, because of the change in purchasing patterns of Canadians related to food.
Slide 10 is the focus on statutory expenditures. There are a couple of pieces that are interesting. Finance has some payments to the International Development Association for $441 million. That's interesting because we're now going to achieve that by flowing funds directly through a payment that used to be done through a demand note to that organization. This is low- or no-interest financing to the world's poorest countries. That program has been in existence for some time. It used to flow through a demand note. Now we will write cheques for $441 million; so the net impact on the fiscal framework is no different, but the way we're flowing those funds is different.
Then maybe I'll touch on the two decreases here. The forecast for interest costs is dropping. That has been a continuing theme as long-term interest rates continue to be lower than forecast; so this decrease in the forecast brings the interest expense in line with the latest forecast from the budget.
The last one is a decrease in the forecasted spending around the disbursements for softwood lumber. What is interesting is that $80 million decrease takes the forecast down to zero. The expectation for the current year is there will be no funding required on that front. Basically that relates to the strength of the U.S. housing market; so if the price of softwood lumber is roughly about $355 per thousand board foot, basically we forecast no payments. If the price drops below that, there is typically a need for those payments. Based on the forecast for the U.S. housing market, it's expected the price will remain at or above that level. Because it's going down to zero I thought it was worth mentioning.
To wrap up, $2.9 billion in budgetary voted expenditures, 63 departments and agencies, and this is the second of three planned supplementary estimates for 2014-15, and it is always the largest of the supplementary estimates. Maybe one plea before Marcia starts her presentation: When we do get to questions, if it is pertaining to a specific page of the document, if you can give us the page number so we can find the equivalent version in French or English so that all members can follow.
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you. Before I start on my prepared presentation, I would like to make a small correction. On slide 6, Mr. Matthews made reference to 2014-15 not being an operating budget freeze year. The current year is under freeze; the funding is not under freeze. The funding that is in Treasury Board vote 15 in the supplementary estimates refers to retroactive pay settlements for the previous year, 2013-14, which predates the freeze.
Mr. Matthews: I knew I was going to do that, so thank you, Marcia.
[Translation]
Ms. Santiago: Mr. Chair, honourable senators, I would now like to review the proposed authorities for the Department of Indian Affairs and Northern Development in these supplementary estimates, and situate that organization's planned spending within the overall federal government expenditures related to programs for Aboriginal peoples.
[English]
I have the response to a question on the federal debt that arose at the meeting of September 18, which is also related to these supplementary estimates.
So items brought forward in Supplementary Estimates (B) for the Department of Aboriginal Affairs and Northern Development are on page 2-48 in English. The grey box at the top of the page of the departmental presentation highlights the additional authorities, in this case totalling approximately $154 million, that the department will receive through these supplementary estimates. Nearly all of this amount will be voted through the Appropriation Act that will be introduced in the next couple of weeks, primarily new adjustments or new money, roughly $122 million. Another $31 million is a net increase from transfers to and from authorities previously voted. There is also an amount listed for information.
The Chair: I hear your words, but I haven't found where you are under Aboriginal Affairs and Northern Development. On page 2-48 there's a grey box that says ''These supplementary estimates.''
Ms. Santiago: Yes.
The Chair: I'm looking for the $154 million?
Ms. Santiago: The total of the $154 million is the sum of total budgetary expenditures, the 30.9 plus 123.
The Chair: I had to quickly add that up and follow you that way. That would have been helpful if you had broken it down. Thank you.
Ms. Santiago: I'll back up then. The new 122.5 total voted adjustments are what will be in the appropriation act that will be introduced shortly, and then the $31 million is not new money entering the system. These are appropriations that have already been voted but are being transferred between organizations through these supplementary estimates. There is a small amount in italics, total statutory authorities, that is listed here for information, and I'll refer to that again shortly.
As in most estimates for this organization, the new adjustments in these supplementary estimates are mostly in transfer payments or grants and contributions under vote 10b. This is consistent with the organization having the most voted transfer payments in the federal government, as their programming is delivered mainly through the funding agreements with First Nations. A large portion of that is for basic public services, which you will have seen in the Main Estimates, and accounts for much of the $6.9 billion figure that's listed under authorities to date.
In these supplementary estimates in the table further down that is titled Explanation of Requirements, you will see incremental adjustments for other programs, $41 million in vote 10b for funding for Operation Return Home at the very first item, for flood remediation and settlement in Manitoba; and further down the list, also in vote 10b, funding to support Aboriginal Participation in West Coast Energy Development, which is a horizontal item listed in the supplementary estimates for this year.
Next is the operating expenditures vote, the vote in general that supports an organization's own running costs and any programming that they deliver directly. Aboriginal Affairs vote 1b does have that funding. In the grey box it's listed at $32.5 million in total. Contributing to that $32.5 million are items in the list of Explanations of Requirements.
So this vote does have some operating costs as in the $8 million for the science and technology program, to be implemented at the Canadian High Arctic Research Station. The half million dollars that I had pointed out earlier for statutory authorities are for the employee benefits costs that are associated with the salary portion of these types of expenditures.
However, in these supplementary estimates the adjustments to the operating vote for Aboriginal Affairs are mainly to discharge legal obligations, so in the same list of explanation of requirements, you will see two items for Indian residential schools. There is the $11.9 million, for continued implementation of the settlement agreement, and then there is also funding for almost $10 million to provide documents to the Truth and Reconciliation Commission, and there's a smaller amount at the end of the list, funding for out-of-court settlements.
Finally, as the department does not have significant custodial capital, it typically has a fairly small capital vote. You will see again at the top of the page, the Authorities to Date in vote 5b, capital expenditures up to this point are about $8.9 million. With these supplementary estimates, it will be increased to a net total of $46.4 million. Most of that is related to the construction of the Canadian High Arctic Research Station.
That was a summary of the new adjustments for Aboriginal Affairs and Northern Development in these supplementary estimates.
[Translation]
Mr. Chair, you will recall that the committee previously asked questions about the government's total spending on programs for Aboriginal peoples. In the spring, we gave you a figure of $10.8 billion. That figure was based on information presented in the Main Estimates.
[English]
To date, taking into account both Supplementary Estimates (A) and Supplementary Estimates (B), the planned spending for a comparable set of programs supporting Aboriginal people has reached $11.3 billion. Aboriginal Affairs and Northern Development accounts for most of the incremental spending, so over $400 million of the half billion dollar increase. Half of that incremental spending is associated with three horizontal initiatives: renewal of the First Nations Water and Wastewater Action Plan, at about $160 million; comprehensive claims and self-government negotiations across Canada, $95 million; and facilitating Aboriginal Participation in West Coast Energy Development. The first two of those initiatives senators will have seen already in Supplementary Estimates (A) when Aboriginal Affairs came in for their own funds. In these supplementary estimates the other departments who were involved in those horizontal initiatives are coming in for their portions as well.
Another department that has a significant role in Aboriginal programming is Fisheries and Oceans. In these supplementary estimates, the Pacific and Atlantic Integrated Commercial Fisheries Initiatives at $32.3 million is listed. The program provides economic opportunities by helping to integrate First Nations fishing enterprises into commercial fisheries.
Other organizations, such as the Canada Mortgage and Housing Corporation, Employment and Social Development and the Royal Canadian Mounted Police, have program funding that is intended for Aboriginal communities and organizations. However, it is part of a larger Canada-wide program. So, for example, through these supplementary estimates, you will see that Public Safety is transferring $42 million from a countering crime program and for First Nations community policing services for services that will eventually be delivered by the Royal Canadian Mounted Police through their police operations program. So, again, that's just to point out a program that has intended application for Aboriginal communities but won't be listed as such in the estimates.
Aboriginal Affairs and Northern Development also has a long list of transfers to and from the votes of other organizations, further reflecting the horizontal nature of First Nations and Aboriginal programming.
[Translation]
Finally, at the September 18 meeting, we promised to follow up with the Department of Finance on a matter under advisement concerning a $6.8-million amount, which was reported as the cost of servicing the public debt in a historical publication. Canada's estimates from 1877-80 provide a comparable consolidated debt figure.
[English]
In fact, forecasted expenditures on public debt are still published in the estimates, and Mr. Matthews made a reference to the adjustment that is published in these sups. A total of $26.3 billion in forecast statutory expenditures was reflected in the 2014-15 Main Estimates. As of these supplementary estimates, that has been revised down to $26 billion, including interest on unmatured debt, which has decreased to $17.8 billion from 18.1, and other interest costs, which remain unchanged at $8.2 billion.
A consolidated figure for the total federal debt is published by the Department of Finance in the annual financial report of the Government of Canada. At March 31 of this year, the federal debt, or the difference between total liabilities and total assets, stood at $611.9 billion. This corresponds to the accumulated deficit at the end of the fiscal year as reported in Volume 1 of the Public Accounts.
With that, I'll conclude this portion of our presentation and thank you again. We would be pleased to respond to your questions.
The Chair: Thank you. You gave us a lot of information in a hurry, and it will take us a while to sift through some of that. I tried to make some notes. There are two senators so far who have indicated an interest in participating in questions and answers. I'll begin with Senator Eaton from Toronto.
Senator Eaton: Thank you very much. Going to 2-48, Funding for the facilitation of Aboriginal Participation in West Coast Energy, could you explain what that means? What is that $10.5 million for?
Ms. Santiago: The $10.5 million in contributions is for the department to be able to enable communities to participate in economic development. It was identified by Mr. Eyford as being successful in assisting communities by promoting and fostering partnerships between federal and non-federal partners in the resource area. The intention is to enable the strategic partnership initiative to work directly with the major projects management office, to identify and provide targeted programming to communities impacted by West Coast energy development who can benefit from the emerging economic opportunities and tailored skills development for their area.
Senator Eaton: It seems like a lot of money. I guess we should ask the department how it's going to account for it and what it is going to do.
Ms. Santiago: On the more specific elements of those agreements, yes, I think that would be something to ask the department.
Senator Eaton: That would be a fair thing to ask.
Mr. Matthews: My colleague mentioned the Eyford Report. If you are going to pursue discussions with the department, it may be a useful document for the committee to get their hands on because much of the goal of that spending is in reaction or a response to the findings of that report. That might be a good report for the researchers to get their hands on.
The Chair: What is the name of the report again?
Ms. Santiago: Eyford.
Senator Eaton: I'm more interested in whether they actually account to see the results if the money does —
Ms. Santiago: Structuring of the activities and expectations in those agreements is something the department would be able to give you more details on.
Senator Eaton: I have two more questions on that same page. On the funding for continued implementation of Indian Residential Schools Settlement Agreement, do you forecast when that will be concluded? Do you see a time when this money is spent?
Ms. Santiago: As I understand the process, the dispute resolution mechanisms are taking time to unwind, so the settlement process is a little bit more involved than being able to say here is a chunk of money and it will settle a bunch of claims. I understand there are new findings that arise, and because things take longer and sometimes there are new issues to be dealt with. I don't think it's necessarily a matter of ending with the quantum of money you see here.
Senator Eaton: If this money is not given out this year will continue on or remain on the books?
Ms. Santiago: If individual claims aren't completely settled, the funding will remain available for when they are actually settled.
Senator Eaton: I guess the same goes for the funding for the provision of documents to the Indian Residential Schools Truth and Reconciliation Commission. There is another $9 million there.
Ms. Santiago: The document collection is a more defined exercise. There are a lot of documents involved in processing these claims, but we would not necessarily expect that there would be continued requirements.
Senator Eaton: So there is not an end date in sight?
Ms. Santiago: There is for the work of the commission and the production of the report. The claims, the process —
Senator Eaton: How about for the report?
Ms. Santiago: I understand the report is expected within the next 18 months, in the remaining mandate of the Truth and Reconciliation Commission.
Senator Eaton: We probably won't see this again next year?
Mr. Matthews: If it's the next 18 months you could see it, so it's too early to say. As additional background, when that agreement was first reached, the number of claimants who decided to opt for the dispute resolution was higher than anticipated. That's part of the story. And as the process went on, additional schools were added to the list of eligible claimants. When you are into the dispute resolution, the documentation has been more onerous than expected in terms of finding documents, making copies and putting the files together. It has been quite a process. The end is in sight on that front, but the amount of documents is staggering and you need those documents to complete the work.
The Chair: I want to understand the discussion we've just had, and we're voting. Let's focus on the votes as funding for the continued implementation of the Indian Residential School Settlement Agreement. It's a vote 1b so it's under operating expenditures anticipated, but as I understand it you're saying that $$11.9 billion may not be spent this year and you know that now?
Mr. Matthews: Our expectation is that they will need this money but it is one where, as you are not allowed to overspend your vote, you make your best estimate. This is the best estimate. Would I be shocked if it did not all get spent and some got turned over to the next year? No, I wouldn't be shocked. But at this point in time it's the best estimate.
The Chair: It is an estimate as to how much will be needed this year as opposed to all of the settlements that are likely to happen over the next few years?
Mr. Matthews: Correct.
The Chair: It would not be good if we were voting an amount that would cover everything anticipated over the next several years all in this year, and then you vote it again next year. That will make it difficult to predict how much money is needed each year.
Mr. Matthews: To be fair, the rules require us only to put forward the money that can be spent this year. It's the same old annual appropriation. This organization receives its money annually. A few organizations operate differently, but this is not one of them. The amount you see here is what they expect to spend in the current fiscal year.
The Chair: That clarifies my concern from the earlier discussion that was ongoing.
[Translation]
Senator Hervieux-Payette: I ask the indulgence of my colleagues, as I will ask you a few general questions from constituents. How many people are working at Aboriginal Affairs?
[English]
Mr. Matthews: I don't actually have a figure for that in terms of number of employees, but I understand that department is coming tomorrow so I'm sure they will be able to answer that question.
The Chair: We will be hearing from that department tomorrow.
[Translation]
Senator Hervieux-Payette: Are we not studying the issue of residential schools this morning, Mr. Chair?
The Chair: No. We can discuss other issues, but the minister will be here tomorrow and will be in a better position to answer your question.
Senator Hervieux-Payette: I would like to know who sets spending priorities. Do Aboriginals participate in the decision-making process related to the $11-billion expenditures? Are there consultation mechanisms in place?
Mr. Matthews: In general, the department works with Aboriginal communities.
[English]
Given that First Nations are often the delivery arm of the grant and contribution funding, the priorities are discussed in general because they are the delivery arm. Specifically to the residential schools, this is in relation to an agreement reached directly with the First Nations so it essentially has the force of law. It's more than consultation; it's an agreement.
[Translation]
Senator Hervieux-Payette: Earlier, you talked about a horizontal budget for waste water. Does that $160-million budget also include drinking water?
[English]
Mr. Matthews: We have seen this program for several years in a row. It is jointly delivered. It is Health Canada as well as Indian and Northern Affairs. It does relate to drinking water as well as waste water, so it covers both. I don't have the split between the two, but the program design was to address both issues.
[Translation]
Senator Hervieux-Payette: As part of the water quality improvement process, what percentage of reserves now have drinking water?
[English]
Mr. Matthews: That's a very good question to ask the department. We often talk about performance measurement when it comes to government programs and how difficult it is. Drinking water and the quality of water is one that — I'm speculating here — lends itself quite well to performance measurement. A good discussion with the department on that front would be interesting.
[Translation]
Senator Hervieux-Payette: Why is it that Ms. Santiago was talking to us about those supplementary estimates, but I have to put my questions to the department? Can you explain to me how all this works in terms of administration?
Mr. Matthews: I will give you a refresher on how Supplementary Estimates (B) work.
[English]
It was not to pretend we are experts like the Department of Aboriginal Affairs and Northern Development, but we often have the habit with this committee of walking through the document for one department to remind senators what they're looking at in terms of how the document works.
My apologies for misleading you, but it was a reminder of how Supplementary Estimates (B) work, to see the totals of the different votes.
The Chair: Apologies should come from me, because I asked the witnesses to go through a department and help us understand what was there.
[Translation]
Senator Hervieux-Payette: So they are here as arbitrators, in a sense, for all government budgetary envelopes, and they explain to us how the amounts are allocated. We will find out later what the departments have requested. Is that right?
The Chair: We will find out the details.
Senator Hervieux-Payette: So I will wait until tomorrow to ask my questions.
[English]
Senator Wells: Thank you, witnesses, for appearing with us again.
I have a question about the horizontal items, and I imagine that when numerous departments get together on one project or budget item they are each allocated certain amounts based on whatever their department is doing. What happens when, naturally, there is slippage or unspent funds or funds that are further needed by one department, and another department within that same project has available funds because they're unspent, can they transfer between departments? Is that typical or do they have to come back the following year and ask for more money?
Mr. Matthews: Excellent question. The rules apply across the board for horizontal or otherwise. There were two parts to the question. The first was what happens if money slips. If money is unspent and the department needs to spend that money in the following year they have to come back to Parliament to get it reapproved.
Senator Wells: That's not automatically transferred into the future?
Mr. Matthews: No. The caveat there is we do have something called ''operating budget carry-forward'' and ''capital budget carry-forward'' where departments are allowed to carry forward 5 and 20 per cent automatically. But large dollars, grants and contributions, back to Parliament you come. If you look at infrastructure in these estimates, there is a fair amount of dollars they were allocated in previous years they were unable to spend, and it's back for reapproval, for a lack of better words. In terms of how you can move money between departments, you can do it but it requires parliamentary approval.
A lot of the transfers you will see here, Parliament has to approve the money going from one department to another department through a vote transfer. You cannot do that without Parliament's approval. The transfers in the Supplementary Estimates (B) are exactly that: Either a change of plans or a department has decided that another department is better suited to deliver the program, and they have agreed to shift money. If you look through many of these department's details you will see transfers, and that's exactly that.
Senator Wells: We hear a lot about reprofiling of funds, which is another way of saying, ''Hey, let's take this money and put it over here where we need it.'' The money used in the types of funding we are talking about, is that open to reprofiling?
Mr. Matthews: When we speak about repropiling, we are talking about moving money from one fiscal year to the next. That is the first question you asked, which is if I cannot spend my money this year and I have a need next year, I have to come back and reprofile it, but from a parliamentary perspective it still has to be approved.
The notion of if a department was given money in the year and decides that they would rather spend it on something else, from a parliamentary perspective Parliament approves at the vote level, so operating capital, grants and contributions. Parliament would have to approve any movement from operating the capital or vice versa.
If you are in the operating vote, you have some flexibility. That is why we produce online additional information on strategic outcome and programs so you can track what departments spent on each of their strategic outcomes and programs. From a parliamentary perspective, as long as you are within the operating vote, you can move money around to priorities.
Senator Wells: Under the specific umbrellas that were originally allocated?
Mr. Matthews: Right.
[Translation]
Senator Chaput: My question is about the Treasury Board of Canada Secretariat. On page 2-92 in the English version of Supplementary Estimates (B), we see a transfer to the Canada School of Public Service to support the Federal Youth Network. I have no recollection of that. Is the Federal Youth Network a new initiative? Can you remind me what that consists of?
[English]
Mr. Matthews: It's not a new initiative. I will get Marcia to give us additional details in a second. It's an initiative that used to be delivered or paid for directly by the Treasury Board Secretariat. There has been a change where we are now delivering it through the Canada School of Public Service, so that's why we are moving the money from Treasury Board to the Canada School. In terms of details on the initiative itself, we can follow up, if that's of interest to you.
[Translation]
Senator Chaput: I have the same question concerning a transfer to Industry Canada for the Canadian Open Data Experience. Is that a new initiative or is it a new way of doing things?
[English]
Mr. Matthews: No, same thing. A transfer means Treasury Board Secretariat was given the dollars, and it has now been decided that Industry Canada is best suited to spend those dollars so it's a transfer.
[Translation]
Senator Chaput: I assume I would obtain the same answer regarding the National Managers Community. This is another transfer from the Treasury Board Secretariat. Okay.
Can you explain to me why the Treasury Board Secretariat is making transfers amounts instead of the organizations requesting an appropriation increase? Why are you proceeding in that manner?
[English]
Mr. Matthews: It depends. When an initiative is first developed, the money is given to the department that we think is going to spend it. That's the starting point. Where we have transfers because departments have agreed that Canada School, in this case, is better suited, you will see the transfer in here. If that's an ongoing decision, next year in the Main Estimates you will see Canada School has that money rather than Treasury Board Secretariat.
You should only see the transfer in theory when there has been a change since the Main Estimates. Once a decision is made on an ongoing basis that another department is best suited to spend the money, you will see the transfer over. That being said, not in this case, but we have seen Agriculture and Canada Food Inspection Agency, for year one, an organization would receive the money and then transfer it to the other for delivery. Generally speaking, we ask for the money where we think it will be spent.
Senator Chaput: Is it a matter of policy?
Mr. Matthews: It's really a matter of trying to provide the best information we can. If we think a department is going to spend the money, that's where we would ask for it. Sometimes plans change and that happens, but once we know there is a permanent change in how the program is delivered in terms of which department, our preferred approach would be to put the money in the hands of that department from the get-go. There is the odd occasion where that doesn't work, for whatever reason, but generally speaking.
Senator Chaput: If I understand correctly, next year we shouldn't see those transfers regarding the three initiatives?
Mr. Matthews: If the Canada School is going to deliver that program on an ongoing basis, we should see it in their Main Estimates.
Ms. Santiago: The item for something like the Canadian Open Data Experience Challenge, you might see subsequent transfers for something like that, because that initiative has been at Industry Canada. The objective of this additional funding is for the secretariat to ask for an additional contribution to external partners to expand the role of the secretariat in participating in that challenge.
Senator Chaput: If that initiative has been with Industry Canada, how many years has it been with them?
Ms. Santiago: I couldn't speak to that level of detail. I wanted to make the point that other departments might wish to help to expand a program or to participate one time in a program that another department has undertaken. You might see these sorts of transfers again in the future.
Senator Chaput: Who makes the final decision regarding whether it's a transfer or is it the Treasury Board Secretariat?
Ms. Santiago: About whether it should be done as a transfer or some other mechanism?
Senator Chaput: Yes.
Ms. Santiago: Yes, the final determination is within the secretariat. For a department to be able to enter into any other kind of a financial transfer, there are other conditions that have to be satisfied. The simplest thing to do is if there's a question of a mandate or a policy authority, it is best to transfer it through the estimates, the most transparent thing, to Parliament.
The Chair: I'm at page 292, where Senator Chaput was posing questions, and it's Transfers to Other Organizations. Normally, I would have thought that the amount transferred would not have a bracket around it. It's actually the amount transferred but a bracket that says it's a negative.
Mr. Matthews: The bracket is because the Treasury Board Secretariat is transferring it out to another department, so that's a reduction in Treasury Board Secretariat's authority. That's why it is a bracket.
If it was an incoming transfer and another department was transferring funds to Treasury Board Secretariat, it would increase Treasury Board Secretariat's authority. When you see a bracket it's because Treasury Board Secretariat is moving money out of its reference level.
The Chair: It's a Treasury Board page. Even though you're specifically transferring that amount out, you put a bracket to say you are transferring it out of Treasury Board?
Ms. Santiago: You will see the same number without the brackets in the receiving organization.
The Chair: Except for Treasury Board of Canada Secretariat to the Canada School of Public Service, we'd have to go there to see it.
Mr. Matthews: If you went to Canada School of Public Service, correct.
The Chair: The particular program, which is called Federal Youth Network, may or may not be noted.
Ms. Santiago: You will just see the transfer, not the whole program.
The Chair: Thank you.
[Translation]
Senator Bellemare: My question is about transfers for public safety and emergency preparedness. When I look at the figures, I see that the authorities to date are $1.222 billion. Then I see cuts of $38 million. I checked, and it turns out that this is a transfer. Can you elaborate, as this concerns public safety and emergency preparedness? The transfer has to do with First Nations. Perhaps I will obtain an answer from the department in question, but I would like to have a bit more information on that transfer.
[English]
Ms. Santiago: Most of the transfer, as you noted, has to do with First Nations. This is actually a transfer that we see fairly often in the supplementary estimates, and in this case, Public Safety is transferring roughly $42 million from its grant and contribution program to the Royal Canadian Mounted Police. It's for First Nation community policing, and the reason they are doing this is in the communities for whom this funding is intended the community policing services are delivered by the RCMP. In a way, it's almost like they are transferring the funds to purchase the services, and transferring through the estimates is the clearest way of showing to Parliament that it's a similar purpose, but it's being undertaken by a different agent.
Mr. Matthews: In this case, the reason it shows as a transfer is it is going to another organization within the government to do the delivery. If there was a municipal or provincial police force doing the service, it would show up as an expenditure, but because the RCMP is a federal department we have it as a transfer.
The Chair: That concludes my list. We are almost out of time. Thank you very much, Treasury Board of Canada Secretariat, for again helping us through this document. A lot of things have been said in the last hour. We'll have to review the transcript to understand some of the points, but we do appreciate your coming to give us the general overview.
We have five other departments lined up to speak to us specifically about their department, which will be in more detail. Coincidently, the Department of Aboriginal Affairs and Northern Development will be one of the departments that we will be dealing with specifically tomorrow evening.
Thank you again and good luck to Mr. Pagan. We look forward to seeing all of you in due course.
Honourable senators, in our second hour this morning, we're pleased to welcome officials from National Defence and from Public Works and Government Services Canada, two of the departments that appear in the Supplementary Estimates (B).
From National Defence, we welcome back Kevin Lindsey, Assistant Deputy Minister and Chief Financial Officer; Rear-Admiral Patrick Finn, Chief of Staff, Materiel Group; and Captain (Navy) Jeff Zwick, Acting Chief of Program.
From Public Works and Government Services Canada we welcome Alex Lakroni, Chief Financial Officer, Finance and Administration Branch; Pierre-Marc Mongeau, Assistant Deputy Minister, Real Property Branch; and Nancy Chahwan, Assistant Deputy Minister, Parliamentary Precinct Branch.
There is lots of activity going on the Parliamentary Precinct side of things in terms of construction that we see every day.
I understand each department has brief opening comments. We'll begin with National Defence and then move to Public Works and Government Services Canada. But before I give the floor over to Mr. Lindsey, who is the chief financial officer, I understand that you will be retiring shortly and we wanted to thank you very much for the service that you have provided to the Public Service of Canada, and in particular helping us out in National Finance at the Senate. You've been before us on a good number of occasions and we have always found your testimony to be very helpful.
[Translation]
Kevin Lindsey, Assistant Deputy Minister and Chief Financial Officer, National Defence: Thank you for your comment and thank you for inviting me to present the Department of National Defence's Supplementary Estimates (B). Today, I am joined by Rear-Admiral Patrick Finn, Chief of Staff, Materiel Group, and Captain (Navy) Jeff Zwick, Acting Chief of Programs.
[English]
National Defence and the Canadian Armed Forces are maintaining a focus on the three enduring roles for the Canadian Armed Forces, which are protecting Canada's interests at home and abroad, defending the continent, and contributing to international peace and security. Defence continues to conduct missions as part of a whole-of-government approach to defend Canada's interests and keep all Canadians safe and secure. These estimates reflect that focus and put defence dollars where they are needed most.
Turning to the Supplementary Estimates (B) before you, I would like to highlight some key points for the committee.
The adjustments in these supplementary estimates result in an overall increase of $913 million, while transfers to other government departments result in a decrease of $37.3 million. The net change for National Defence resulting from these supplementary estimates is therefore an increase in funding of $876 million.
[Translation]
This increase in spending authority for fiscal year 2014-15 stems from net increases of $881.6 million to operating expenditures and $600,000 in grants and contributions, which is offset by a decrease of $6.2 million in capital expenditures. Three elements drive the increase in operating expenditures.
[English]
The first is maintaining levels of readiness expected by the Government of Canada, supported through the ongoing implementation of the Canada First Defence Strategy, which accounts for $652.2 million. The second is related to the Manuge class action lawsuit and consists of $190 million for the strengthening of the Canadian Armed Forces Service Income Security Insurance Plan long-term disability components, and for the purpose of implementing the Federal Court's approved settlement of the outstanding cost of living allowance.
[Translation]
The third is the assessment, management and remediation of federal contaminated sites through the Federal Contaminated Sites Action Plan, which accounts for $55.3 million.
[English]
The Department of National Defence and the Canadian Armed Forces continue to maintain strong financial responsibility and careful stewardship of resources in respect of the fiscal environment in which we operate.
[Translation]
As we move forward in the fiscal year, the department will continue to monitor our fiscal requirements to ensure value for taxpayer dollars.
[English]
Thank you, senators. We would be pleased to take your questions.
The Chair: Thank you very much, Mr. Lindsey. National Defence, for honourable colleagues, is at 2-60.
We're now going to Mr. Lakroni, Chief Financial Officer, Public Works and Government Services Canada. Public Works is found at 2-78.
[Translation]
Alex Lakroni, Chief Financial Officer, Finance and Administration Branch, Public Works and Government Services Canada: Honourable senators, I am pleased to be here on behalf of Public Works and Government Services Canada to discuss the department's 2014-2015 Supplementary Estimates (B) and its 2013-2014 Departmental Performance Report. With me are Nancy Chahwan, Assistant Deputy Minister of the Parliamentary Precinct Branch, and Pierre-Marc Mongeau, Assistant Deputy Minister of the Real Property Branch.
With responsibilities that range from preserving the heritage buildings here on Parliament Hill to issuing every payment for the Government of Canada, PWGSC provides services that support parliamentarians, public servants, and departments and agencies in the delivery of their mandates to Canadians.
As noted in PWGSC's 2013-2014 Departmental Performance Report, on a yearly basis, PWGSC injects approximately $14 billion into the Canadian economy through government procurement for 140 federal departments and agencies. Forty-five per cent of that business volume, outside of military procurement, is going to Canadian small and medium-sized enterprises. The department handles over $2.3 trillion in cash flow per year through the Receiver General function. It issues more than 13.7 million federal pay and pension payments. It supplies accommodation to parliamentarians and to more than 272,000 public servants in 1,716 locations across Canada.
Finally, PWGSC provides translation services for 1,470 parliamentary sittings and committee meetings through the highly skilled people you see at the back of this room, as well as their colleagues.
[English]
Responsible financial management has always been a hallmark of PWGSC. For Supplementary Estimates (B), the department is requesting $136.3 million to cover accommodation requirements from Crown-owned buildings and leased space.
This request represents a continuation of annual program funding and is consistent with real property portfolio management practices in previous years. Of this amount, $80 million will provide a stable source of funding for the refits and fit-up of PWGSC's accommodation portfolio. This amount will supplement the department's existing fit-up budget of $105 million and allow PWGSC to implement a 20-year fit-up cycle for its accommodation inventory. The new fit-up budget of $185 million is ongoing and replaces the annual request for incremental in-year funding.
An amount of $31 million will provide stable funding for PWGSC's office space inventory. This funding corresponds to the accommodation requirements of approved government programs. It replaces our annual funding request associated with a 13 per cent accommodation levy to the price and volume protection methodology, and $25.2 million is to cover the cost of inflation associated with PWGSC's real property portfolio. The inflation rate for 2014-15 is estimated at 1.6 per cent, on an operating budget of $1.6 billion. This funding request is consistent with those of previous years and will cover the increasing cost of utilities, security, rent and property taxes.
PWGSC is also reimbursing a net amount of $11.1 million to other government departments, mainly for reductions in their accommodation requirements.
With the aforementioned items, the net amount sought in these Supplementary Estimates (B) is $125.2 million, which would bring our total gross budget to $6.04 billion, broken down into categories.
First, $1.8 billion is related to the provision of optional services to departments, such as real property, project management and translation services, on a cost-recovery basis.
Second, $1.8 billion is for rent, fit-up and utilities of government-wide accommodation, receiver-general and central compensation administration functions and translation services to Parliament.
Third, $1.2 billion is for buildings and infrastructure maintenance and capital investments such as rehabilitation of the parliamentary precinct buildings.
Finally, $112 million is for employee benefit plans and other statutory items.
As PWGSC generates $3.14 billion, or 52 per cent of its budget, in revenues from client departments, this results in a net appropriation of $2.895 billion.
Mr. Chair, I would like to turn to PWGSC's Departmental Performance Report. This report highlighted that in 2013-14: The department launched the defence procurement strategy to provide the Canadian Armed Forces with the equipment it needs in a timely and cost-effective manner, while creating jobs and economic growth for Canadians. It supported Canadian small enterprises through the Build in Canada Innovation Program by awarding a total of 77 contracts to support the testing of innovations at the pre-commercialization stage. It strengthened its integrity framework. Lastly, PWGSC continued to work on the rehabilitation of parliamentary buildings.
[Translation]
The department did all of these things while achieving in 2013-2014 cumulative planned budget savings of $154.7 million. This underscores its commitment to sound financial management in all of its operations.
We have been able to find efficiencies in every sector of the organization. For example, over the last four years, PWGSC has cut its travel expenditures by half while leveraging the use of technology. In keeping with the government's priorities of job creation, economic growth and long-term prosperity for Canadians, the department supports the consistent delivery of high-quality services to Canadians, while providing measured value for the dollars with which it is entrusted.
Thank you, Mr. Chair and honourable senators. My colleagues and I would be pleased to answer your questions.
[English]
The Chair: Thank you very much. It often happens when you're going through these figures we're trying to follow it, if I lose you or if one of our honourable senators loses you, we miss some of the further points as we're trying to make this up, and in this case I need your help.
At page 2 of your comments, you talked about with the aforementioned items, the net amount sought in these supplementary estimates is $125.2 million, which would bring our total gross budget to $6.04 billion. It's the $6.04 billion that I'm having difficulty finding in any of your financials. Can you help me, page 278 and following?
Mr. Lakroni: Thank you for the question, Mr. Chair. The $125 million is the net amount of two numbers. As you see on page 2-78, there are total adjustments of $136.2. That's the total amount sought in the supplementary estimates, and then we are reimbursing other government departments by $11 million. The total of these two amounts is net to $125.2 million.
The second part of your question, the structure of the supplementary estimates is made so that we request appropriations on a net basis. On a net basis, PWGSC is seeking $2.9 billion, which is the total budgetary expenditures. What is not reflected here is the revenue that we collect, which is used to fund our activities. The revenue is reflected in Main Estimates, not in supplementary estimates.
The Chair: Okay.
Mr. Lakroni: So parliamentarians vote on a net appropriation, not on a gross appropriation. So for transparency purposes, we are disclosing the revenues in our opening remarks.
The Chair: We appreciate you doing that. Maybe a little explanation next time to help us, knowing that we're following your comments by looking at the estimates themselves, and the supplementary estimates, it would be helpful. Thank you very much for the explanation. It is all clear now.
Senator Eaton: I'm glad it is for you.
May I ask Mr. Lindsey and the Rear-Admiral, national defence sustainment and operational readiness of the Canadian Armed Forces, $652 million, does that have anything to do with our troops in Iraq right now or is that going to come on later or has this been accounted for?
Mr. Lindsey: This amount, senator, has nothing to do with those deployed operations. Every year we receive money from the centre from funds set aside in the fiscal framework to pay for readiness requirements.
Last year you may recall discussions around a figure in the estimates of $400 million. This year we have received $652 million, and that money will be distributed, if you would like me to go into it, in the following ways.
Senator Eaton: Yes, I would.
Mr. Lindsey: Of that amount, $115 million will be used for the sustainment of the new Chinook helicopter fleet in Petawawa. A further $334 million will be used for the maintenance of Victoria-class —
Senator Eaton: Can I stop you? When you say the Chinook helicopters, will that ever become a fixed expense or will that always be under sustainment and operational readiness?
Mr. Lindsey: We have now taken delivery of all of those helicopters, and now have the obligation to maintain them. This amount of money reflects what we expect it will cost us to sustain those on an annual basis. We can expect to see an amount around this figure for as long as we own that fleet for sustainment purposes.
Senator Eaton: It will always be a supplementary budget item; it will never be a fixed cost.
Mr. Lindsey: This amount was renewed this fiscal year, and the decision on the amount was made after we finalized the Main Estimates, and as a consequence we're bringing it in through the supplementary estimates. In future years, this amount will be in our Main Estimates.
Senator Eaton: Continue on.
Mr. Lindsey: A further $344 million is required for sustainment for the Victoria-class submarines, Halifax-class frigates, the Aurora patrol aircraft and light-armoured vehicles. We're allocating $70 million for maintenance and repair of infrastructure; $40 million will go to paying Canada's participation in the MOU for the F-35 fighter aircraft; $59 million will go to the army to conduct live fire and Arctic training exercises; and about $22 million will go to support the joint personnel support units at various bases across the country.
Senator Eaton: Could you go back to the line item with the F-35s? That's to keep our hand in; is that right?
Mr. Lindsey: Yes. This is just to continue our participation and give us the option of acquiring, at some point, should the government decide to do that.
Senator Eaton: That brings me to Public Works, Mr. Lakroni. In your speech, you launched the defence procurement strategy to provide the Canadian Armed Forces with the equipment it needs in a timely and cost-effective manner while creating jobs and economic growth for Canada. That was the strategy to procure the F-35s?
Mr. Lakroni: Thank you for the question. The PWGSC role in terms of the secretariat is to lead the secretariats in conjunction with other partner departments: National Defence, Industry Canada, DFAIT and Treasury Board. The statement that's made by my colleague is correct, and the secretariat looks at making sure that the strategy happens in a sound and effective manner.
Senator Eaton: I see. Thank you very much.
The Chair: Thank you, Senator Eaton.
[Translation]
Senator Maltais: I have a quick question. Some 10 or 11 years ago, Canada acquired submarines from Great Britain. They were not completely new, and we were told they were difficult to operate. What has happened to those submarines? Are they operational? Are they being used by Canada? Some costs are probably involved. How useful are they to the navy?
Rear-Admiral Patrick Finn, Chief of Staff, Materiel Group, National Defence: Those were four Victoria class submarines, three of which are currently at sea and operational. They are used for various tasks. They were involved in the fight against drugs in the Caribbean. They conduct patrols and participate in international exercises. HMCS Victoria, among others, participated in an exercise a few years ago when an old U.S. Navy vessel sunk.
Today, we are presenting some of the costs stemming from the use of submarines, three of which are at sea, and that includes the current maintenance costs. This platform is used a lot by the Canadian navy and plays a very important role in the fleet.
Senator Maltais: What is happening with the fourth submarine?
Rear-Admiral Finn: As is the case in all or our fleets, we do rotate platforms when it comes to maintenance, whether we are talking about our aircraft or our vessels. One after the other, they go through a maintenance and refitting period, when they are dry docked and dismantled for maintenance purposes.
Senator Maltais: Could one of the four submarines potentially come into the Gulf of St. Lawrence?
Rear-Admiral Finn: Yes, actually. Our submarines have crossed the gulf in the past. We do not currently operate there. These submarines were designed for the sea, but they can also be used in coastal areas.
Senator Maltais: We heard that, when they arrived here, a few adjustments had to be made. How much did it cost to make them operational?
Rear-Admiral Finn: I do not have the exact figures with me, but we could send them to you. These are used platforms, after all. The British Royal Navy did sell them to us at a discount, compared with the cost of a new submarine fleet.
Senator Maltais: How much time do they spend at sea over a 12-month period?
Rear-Admiral Finn: That depends on the mission, the year, the training, the crew and so on.
Senator Hervieux-Payette: My question is for Mr. Lakroni. I tried to follow along in the French and English texts.
You put office spaces and translation in the same budget. I am trying to understand why the two are together. It seems to me that there is no connection between those two elements. I can also tell you that I am currently dissatisfied. Last week, my request for translation was refused under the pretext that insufficient staff was available.
Were major cuts made in that area? You talked about 1,470 parliamentary sittings and committee meetings. In order to work with our constituents, in Quebec, we have to have English texts translated, and restrictions are now being imposed. These are supplementary estimates. You talked about an increase. Was that the result of complaints?
What are the objectives going forward? I think it is extremely important for any organization's documentation to be made available to Quebecers when we want to provide them with information.
Mr. Lakroni: I would like to clarify two components of the Translation Bureau's operations. That organization plays a very important role in the support of the federal government's adequate operations in both official languages, as well as in other languages. So there are two components.
The first component covers optional services provided to departments, on a cost-recovery basis. The budget earmarked for those activities is $161 million a year. Those are recoveries, and the bureau adjusts as needed. It should be noted that the demand has recently been volatile, but it is now stabilizing. However, I do not think that volatility affects parliamentary activities.
This brings me to the second component — parliamentary activities. The budget is not based on cost recovery. That $34-million budget is set aside for language services and parliamentary activities. I have not heard of any refusals or issues like the ones you talked about. I can check with the Translation Bureau. As I said, $34 million is available to provide services to Parliament and senators.
Senator Hervieux-Payette: It should be noted that about 400 of us are likely to use translation services. As a francophone, I may use the service more often than my anglophone colleagues, but I do not expect to be refused that service.
I would now like to talk about subcontractors, who are saying that they are not paid within reasonable time frames. They want to be paid once you have authorized the payment for the general contractor.
Why do you not have a payment policy that would require subcontractors to be paid within a reasonable time frame? You are putting small business owners in jeopardy. The general contractor is a major firm that uses a number of subcontractors, who are often on the brink of bankruptcy because of the 90-day time frame, as the general contractor uses the money for self-financing.
Why not require, in the general contractor's administration of the $14 billion attributable to contracts, that subcontractors be paid within 30 days? This is unacceptable. I do not even see why we would legislate on this. I think this is an administrative measure. You would award a contract, and the individual would complete it. In the contract, you would add a clause requiring the general contractor to pay their subcontractors.
Mr. Lakroni: Perhaps my colleagues could chime in. We are very proud of our performance when it comes to encouraging and supporting SMEs. We have an office in six regions to provide small and medium-sized businesses with support. The feedback we are receiving is very encouraging. You are specifically talking about the payment of subcontractors. We have fairly strict policies to ensure that the payments are made on time, in accordance with contract terms and conditions set in advance. I am not really aware of any specific cases.
However, our performance in terms of our ability to make payments by set deadlines has improved significantly over the past few years. I report quarterly on this issue, and I can see that our performance is sustained. Of course, there are always some specific cases, but I cannot discuss them if I am not aware of the circumstances. Were contract deadlines met on time? Were the conditions complied with? There are all sorts of variables. Contractors have various avenues of redress if they have not been paid on time.
Senator Hervieux-Payette: I think you should be more specific. I know that the department is not to blame and that its performance in terms of timely payments has improved. Those are installment payments based on contract completion. I used to work at an engineering firm, so I know how this works. My question is about subcontractors, who often do not have a lot of means and end up financing the general contractor, to whom you have already paid the due amounts. What I am saying is that it would be part of your responsibility to ensure they are paid. I am not talking about isolated cases, as this is happening across the country. We hear from a number of people who work in construction — be they plumbers, electricians or other tradespeople. As a parliamentarian, I really sympathize with them, and I am wondering why our public administrator does not make sure that, when it signs a contract with a general contractor, the subcontractors are paid within 30 days.
Pierre-Marc Mongeau, Assistant Deputy Minister, Real Property Branch, Public Works and Government Services Canada: We are taking note of your comment. Mr. Chair, I can tell you that we are serious about monitoring the payments made to the general contractor, as our contract is with them. We unfortunately have no contract with the subcontractor, so that creates some distance between us.
Some of our major contracts contain clauses regarding time frames within which the contractor must pay their subcontractor, once we have received the bill. You know how the system works. We receive the bill, approve it, pay it, they receive the money and then pay the subcontractor. They have a deadline. I am not sure whether it is 60 days or 90 days. I will check.
I also want to mention that we regularly work with the Canadian Construction Association. We have an annual meeting with the association, as well as discussions throughout the year, since a number of similar issues are raised. We try to work with the association to determine how, as the body representing all contractors, it can also consult subcontractors and its members and explain to them how to follow the processes better. We do what we can to influence contractors' organizations.
That being said, workmanship is also a consideration. Is the work completed and is it done well? We cannot talk about this today, as we are not familiar with the issue. Has the work been done as per plans and specifications? Has a certain amount of money been left aside to remedy any errors? We have to take all those elements into account before issuing a payment. Once again, the situation becomes more complicated because we do not have a contract with the subcontractor.
All that to say, Mr. Chair, that I have taken note of the comment, as has Mr. Lakroni, and we will check with our respective teams to see if this is something that happens regularly.
Senator Hervieux-Payette: This is important, and I think that, from a legal standpoint, when you sign the contract, you have all the authority as the future owner of the facilities to set out clauses that will ensure the contract's fulfillment. My colleagues and I have been receiving comments for years, and this is the most important issue that has come up. I am familiar with the deductions related to the non-performance or to performance that does not meet each trade's standards, but that is not at issue. The problem is the fact that, under major contracts, considerable amounts of money are paid out to contractors who use it to finance their operations. That is not the intended objective. They must use their profits for the work carried out, but they certainly cannot use that money for anything else.
By the way, I am impressed with how easily you pronounce PWGSC and TPSGC. That is very complicated for me.
Mr. Lakroni: We will take that as a compliment.
Senator Hervieux-Payette: My next question is about federal contaminated sites. What percentage of decontamination has been completed so far? That process will go on forever. I will probably be able to retire several times before that work is completed. How far along are we in the decontamination of National Defence buildings and the decontamination of the Quebec City region? Have those projects been completed?
Mr. Lindsey: The work is ongoing. There are a number of contaminated sites across the country. I do not have any figures with me today, but they are available.
[English]
I could take the question as notice and provide you with the number of the contaminated sites we have, how many have been remediated and how many we continue to work on.
[Translation]
There are some in the province of Quebec.
Senator Hervieux-Payette: Has the decontamination of the Quebec City site been completed? There was an agreement with the neighbours. Have you completed the remediation work?
[English]
Mr. Lindsey: Are you talking about a particular site?
Senator Hervieux-Payette: Yes, there's one just outside, I don't know if it's Valcartier or what the name is. There was one where the whole neighbourhood was concerned. My colleagues from Quebec are certainly aware of it. We have heard about this site over and over again.
Mr. Lindsey: We can certainly get back to you on the status of this site.
Senator Hervieux-Payette: The problem was contamination of the drinking water.
Mr. Lindsey: The water table. I can't remember the name of the site. Shannonville, thank you.
Senator Hervieux-Payette: Do you know if the work is finished or concluded whatsoever?
Mr. Lindsey: I do not know, but we will take that question on notice and ask our ADM responsible for real property to respond.
Senator Hervieux-Payette: You don't know if the money is going there or not? There is an amount of money that has been assigned?
[Translation]
Mr. Lindsey: Yes, I can provide you with sites.
[English]
Senator Hervieux-Payette: $55.3 million.
[Translation]
Mr. Lindsey: Yes, there are perhaps 50 sites that will require about $2.4 million for Portneuf—Jacques-Cartier, which I think includes Shannon. However, I am not sure whether that amount is allocated only for this project or if it covers others. We could confirm that for you.
Senator Hervieux-Payette: That would help, as this file has been dragging for a long time.
Mr. Lindsey: Absolutely.
Senator Hervieux-Payette: Thank you.
[English]
The Chair: I see in the English version at page 1-16, horizontal items, that $1.6 million to The Jacques Cartier and Champlain Bridges Incorporated for remediation, et cetera. The reason I went back to horizontal items is that I did notice at page 2-60 that the funding that DND is anticipating spending this year in remediation of contaminated sites is part of a horizontal item and the full amount the government is anticipating spending is $207 million amongst various departments.
Mr. Lindsey: That's correct, Mr. Chair. This is a continuation of a long-standing program. Some members may recall a reference to money that DND had sunsetting last year, but we expected that program to be renewed. This money represents the extension of that program, but again, the decision to extend it — not just for DND but for all government departments — was taken after the Main Estimates were finalized. As a consequence for 2014-15, we are bringing in the money through supplementary estimates. For 2015-16, we expect it will be included in the Main Estimates.
The Chair: Has Senator Hervieux-Payette asked you for the total global amount that's anticipated over the next several years of all those contaminated sites? How much will it be?
Mr. Lindsey: Mr. Chair, we actually continue to enumerate the sites for which we are responsible, so we could not give you a figure. I will check to see if we can give you an estimate over the foreseeable future, and we will take that as notice.
The Chair: Of known contaminated sites?
Mr. Lindsey: Right.
The Chair: Thank you. That will be helpful for us. I think we did get a global figure in the past on one occasion. I have in mind something like $10 billion or $11 billion of known contaminated sites and estimated remediation costs. That's from various departments, not just National Defence, but any information you or Public Works and Government Services Canada can give us to help us understand the global issue would be very helpful. We see here it's a horizontal item, which makes it clear it's the responsibility of several government departments.
Mr. Lakroni: Mr. Chair, if I may, this program is the lead of Environment Canada. I think they are in a better position to give the committee a fulsome picture. We can certainly give PWGSC's perspective on what we do on our side, but I think Environment Canada would be the best department to ask.
The Chair: If you could use your good offices to talk to Environment Canada — we don't have them on our list before we have to vote on this, so any information we could get before that would be helpful, even if it is second hand, as we say.
[Translation]
Senator Bellemare: I have two questions. One is for National Defence and the other one is for Public Works and Government Services Canada.
Regarding National Defence, are the expenditures related to the new Canadian army deployments against the Islamic State part of supplementary estimates or operating budgets?
My first question is for Mr. Lakroni. You say that, as part of your activities, you have supported small Canadian businesses through the Build in Canada Innovation Program (BCIP). You have signed 77 contracts through that program. I would like some more details on that initiative. Why is that part of your mission?
Mr. Lindsey: Regarding our efforts to fight the Islamic State, we will deliver on our commitments. We now know what the total amount of money required will be, but we still do not know whether we will need additional amounts.
[English]
We expect that in advance of final supplementary estimates this year, we will have a better idea. To the extent additional funding is required, we will seek it at that time.
[Translation]
Senator Bellemare: In the case of operations like these, are special purchase requisitions required, or is this part of appropriations that have already been voted on or statutory appropriations?
Mr. Lindsey: The funding granted as part of those operations is included in our regular allotment — Vote 1 for operating costs or Vote 5 for assets. But these are appropriations that the committee would know about if they were included in the supplementary estimates.
Mr. Lakroni: Thank you for the question, Madam Senator. I will give you a two-part answer. What does this program consist of and why is it part of Public Works and Government Services Canada?
As you know, the Department of Public Works and Government Services is the federal government's procurement officer. Its mission is to collaborate with small and medium-sized companies to facilitate their access to federal government contracts. Its goal is to eliminate barriers, inform companies and consult them when it comes to procurement strategies. We have offices throughout the regions to help small and medium-sized businesses on site.
That being said, in 2010 and 2011, as part of our innovation efforts, we felt it would be important to launch a pilot project to promote companies with innovative ideas. We want to facilitate their access to the market, as that is not always easy. We link their products to federal departments' needs. We help them penetrate the market, thus providing them with an advantage.
We are also testing companies' products. We then give them feedback, so they can decide whether or not their products need improvements. That initiative helps those companies better penetrate the market.
This program has been a great success and is funded over five years. It also has a military component for military procurement. The funding totals $40 million. From 2013 to 2014 and from 2017 to 2018, the program's effectiveness will be reviewed. The results are very encouraging. This program is recognized by Canadian industry and internationally.
The initiative prioritizes four sectors — the environment, health and safety, technologies, and health care. A security contract was concluded in the Waterloo region, in Ontario.
[English]
It's an instantly deployable micro remotely operated vehicle for surveillance, reconnaissance and inspection. It's an amount of $326,000 and it's National Defence. So we have about 21 departments that are basically the beneficiary of this initiative.
Another example with Industry Canada is in Ottawa, Ontario, again in the field of safety and security. It's a patented emergency mass notification network with auto-discovered wired and wireless devices in airports and campuses, arenas, et cetera. I have dozens of examples and could go on.
We are very proud of the performance of this program, and I think it is paying dividends in terms of achieving the objective for which it was initially created.
[Translation]
Senator Bellemare: Does this program facilitate access to public and private markets — as well as foreign markets — to encourage international competition?
Mr. Lakroni: Definitely.
Senator Chaput: My question is for Mr. Lakroni of Public Works and Government Services. On page 2 of your brief, you talked about accommodation requirements in Crown-owned buildings and leased space.
You mentioned an $80-million amount to provide a stable source of funding. You say that this amount will supplement the $105 million, resulting in a new budget of $185 million. You finally specify that the new fit-up budget is ongoing.
Does this mean that the Main Estimates will contain $185 million for accommodation fit-up going forward?
Mr. Lakroni: Absolutely.
Senator Chaput: Should not any additional amounts be part of supplementary estimates?
Mr. Lakroni: Exactly. That is the very spirit of renewing the real property funding formula.
Senator Chaput: You mentioned that the $85 million you are requesting this year is dedicated to the fit-up of PWGSC's accommodation portfolio, over a 20-year fit-up cycle.
Could you explain to me what that means? Is that part of planning?
Mr. Lakroni: In terms of funding, I would like to talk about the basis for the formula and what we are trying to achieve. Our formula was deemed to be complex and unintegrated. In supplementary estimates, we often had to request financing for all sorts of funding components related to real property.
We have been working with central agencies for two years, as this is a Treasury Board decision. Our objective is to simplify and integrate the way real property is funded.
We have used key components. One of those components is refitting. Instead of requesting adjustments mid-year, as you have pointed out, we have stabilized the budget at $185 million. We have also added $25.2 million for inflation. The inflation amount will probably change over the coming years. In the spirit of renewal, all other components will remain stable.
The other component in these supplementary estimates is an amount of $31 million in order to cover fluctuating accommodation requirements. New programs have been approved and will require office space. Other programs are coming to an end but will be renewed.
Every year, we put together fairly complex estimates and we request funding but, here, we have stabilized this component at the same time as all the rest.
Senator Chaput: So is the $31 million included in the $185 million, or is it an additional amount?
Mr. Lakroni: It is an additional amount.
Senator Chaput: Where does that $30 million appear in the supplementary estimates?
Mr. Lakroni: The $56 million for operating expenditures covers two components, an amount for $31 million and an amount for $25.2 million.
Senator Chaput: So that does not appear anywhere here? I have the $56 million, which includes the $31 million plus —
Mr. Lakroni: And the $25 million for inflation.
Senator Chaput: Very good.
Mr. Mongeau, did you have anything to add?
Mr. Mongeau: As my colleague said, we have found a methodology that, with the permission of the Treasury Board and the Department of Finance, will now give us access to stable funding, which is decided upon at the beginning of the year, in order to reduce subsequent funding requests as much as possible. So the annual budget for everything related to accommodation fit-ups is $185 million. Every year, we will get that money and not have to ask for it. Obviously, we have performance indicators, and at the end of every year, we will be able to tell Treasury Board the cost per square metre, for example. We will be able to analyze many such elements in order to confirm that the amount is appropriate and, four or five years down the line, make any necessary adjustments. What this does is give us access to funding that is much more stable, which means fewer surprises in terms of subsequent funding requirements.
Senator Chaput: I have a question about the Build in Canada Innovation Program.
You indicated that you had awarded a total of 77 contracts. Were those 77 contracts awarded to 77 different groups or companies?
Mr. Lakroni: As far as I know, yes. Some cases may have involved unique products, however. So a particular company may have introduced product A, only to develop an improved version, product B, two years later, for example.
I cannot necessarily tell you for sure whether they are all separate companies; there may have been one that benefited in that regard.
Senator Chaput: Is a list of the 77 contracts available?
Mr. Lakroni: Yes.
Senator Chaput: Would we be able to get that, Mr. Chair?
Mr. Lakroni: Yes, we will get back to the committee with that.
Senator Chaput: Could we also get the total amount awarded under those 77 contracts?
Mr. Lakroni: We will provide you with that information.
Senator Maltais: I would briefly like to come back to something Senator Hervieux-Payette brought up. This is for Mr. Mongeau.
Having been a member of another legislature, I know that when Public Works awards contracts, over a 12-year term, it pays the general contractor every 3 months. That is generally how it works everywhere. But the department then requires the general contractor to provide a list of the subcontractors used and the amount of the cheque paid to each of them.
That is where we get into problems with the general contractor not paying subcontractors. The department is not the problem, because it pays the general contractor. But is there a way the department could make sure that, before issuing the cheque, the general contractor gives you the list of subcontractors and a photocopy of the cheque sent to each of them? Legally speaking, you could be taken to court; an employee's pay is not something that can be lost in Canada.
If the general contractor is insolvent, the plumber or electrician is going to go after the government for their payment, and you will have to pay them.
Mr. Mongeau: Our contracts include a provision — which I have, unfortunately, forgotten the name of — whereby the general contractor must certify that the amounts received to pay subcontractors reflect genuine expenditures and that the subcontractors were, in fact, paid. It is usually a matter of old invoices, not ones for the current month but ones that are a month old or, occasionally, two months old. We have that information.
As I explained, since our contracts are not with the subcontractor, that is our only way to find out whether the general contractor has indeed made those payments.
You mentioned every three months, but I should point out that, in some cases, we pay the contractor every month so as not to prolong the period too much or make the general contractor finance the work.
So certification is the method we use. We follow up and make regular payments. I took note of the issue you raised, and I will look into it. I must remind you, however, that we do not sign contracts with subcontractors, so we cannot necessarily intervene in terms of the payment method used by the general contractor. But I will take your comment into consideration.
Senator Maltais: I want to come back to the town of Shannon, near Valcartier, which is right next to me. The problem is much more complex than people claim. There has been a class action lawsuit. The matter is before the courts, given that it involves various parties. People often blame the problem on the Canadian military, even though the military is not necessarily responsible. It is the current landowner of the site where the former CIL ammunition factory was located who is responsible for contaminating the water table.
The current landowner, SNC-Lavalin, refuses to acknowledge that it purchased contaminated land. It should be said that the Canadian Army, for its part, did its duty and paid for the decontamination of the sites on its land. The other site belonged to the former CIL factory, which was bought by SNC-Lavalin. The municipality acquired some of the land as well. I am not sure which judge will be able to sort out the case, which is still before the courts, but it certainly will not happen anytime soon and the fault does not necessarily lie with those currently being blamed. I just wanted to clarify that.
[English]
The Chair: Colleagues, this concludes our session. Our time has run out. On behalf of the Standing Senate Committee on National Finance, I thank Public Works and Government Services Canada and National Defence for being here and explaining their requests under Supplementary Estimates (B). Their information has been very helpful and clear.
We wish you continued success in your work or your travels, wherever they may lead, Mr. Lindsey. Thank you.
We'll be meeting again on the supplementary estimates tomorrow evening at our normal time. Officials from Aboriginal Affairs and Northern Development, Transport Canada, and Fisheries and Oceans will be here, if you'd like to make note of the names and prepare yourselves accordingly for those three other sessions. If there are any departments you would like to hear from please let anyone in steering or Jodi Turner know so that we can make arrangements for that. We do have to have this done and a report in before we receive the supply bill, so we're always under the gun at these times for supplementary estimates and estimates, in fact.
If that's not enough, we also have meetings on Bill C-43. We'll be meeting this afternoon at 2:15 in East Block. We were not able to get 160-S, I'm sorry, although we tried, but the good news is that we have 160-S for the rest of the week and we'll be meeting there on Wednesday and Thursday afternoon. So we will proceed to East Block today and then 160-S for the other two days of this week.
Are there any questions on that? Then I will see you all this afternoon. This meeting is now concluded.
(The committee adjourned.)