Proceedings of the Standing Senate Committee on
National Finance
Issue 27 - Evidence - February 24, 2015
OTTAWA, Tuesday, February 24, 2015
The Standing Senate Committee on National Finance met this day at 9:33 a.m. to study Supplementary estimates (C) for the fiscal year ending March 31, 2015.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this morning we begin our study of Supplementary estimates (C) for the fiscal year ending March 31, 2015.
[English]
We are pleased to welcome officials from the Expenditure Management Sector of the Treasury Board of Canada Secretariat, returning for another appearance. We always welcome you back. We have Mr. Brian Pagan, Assistant Secretary; Marcia Santiago, Executive Director; and Darryl Sprecher, Senior Director.
Mr. Pagan, you will give us an overview of the Supplementary Estimates (C) and how they fit into the overall fiscal cycle for the Canadian government. You have the floor, sir.
[Translation]
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. Good morning. I will begin by giving you an overview of supplementary estimates (C) for 2014-15. After that, I will be pleased to answer your questions. Allow me to briefly describe the structure of the supplementary estimates.
[English]
Following this overview, I will walk you through the dollar amounts, both of this particular supplementary estimates exercise and the fiscal year as a whole. Before I conclude, I will also highlight the largest items in dollar terms, what we call major items, as well as horizontal initiatives or those initiatives that are being supported by two or more departments.
I am on slide 3 of the presentation now.
The supplementary estimates are essentially presented to you in three parts. There are no major changes to the organization of the presentation for this cycle.
Part 1 is the introduction, and in these first several pages you will see an overview or outline of the structure and purpose of supplementary estimates, a description of the major items that I will walk you through in a little bit of detail, a description of major net changes to individual votes, an explanation of new votes introduced for the first time, several summary tables that present the aggregate of these estimates, and the total for the fiscal year.
[Translation]
Afterwards, part 2, the bulk of the supplementary estimates, sets out the requirements by departments and organizations. Each organization indicates its needs by vote and initiatives. Here you can find information on transfers as well as a breakdown of subsidies and additional contributions by program. A total of 41 organizations are represented in the supplementary estimates.
[English]
Finally, at the back of the supplementary estimates is an annex. You will find the proposed schedule on the appropriation bill on amounts presented in these estimates.
Additional information is included in online annexes. On the TBS website, and our address as listed here, one can find information on statutory forecasts, estimates by strategic outcome and program, planned expenditures by standard object, transfers between organizations, and allocations from TB central votes.
Turning to slide 4, these Supplementary Estimates (C) provide information on $1.8 billion in voted budgetary appropriations for 41 organizations. The new funding supports government priorities set out in the fiscal framework, including Budget 2014 as well as prior budgets. Parliamentary approval of these expenditures will be sought through an appropriation bill, which will be tabled before the end of March.
[Translation]
These supplementary estimates also show a net decrease of $1.3 billion in statutory budgetary expenditures. The annex on statutory forecasts, the table of which can be found online, shows the various changes made to planned statutory expenditures.
[English]
Turning to slide 5, this is a comparison of these supplementary estimates against prior years. As I mentioned, these supplementary estimates total $1.8 billion in voted appropriations for a total of $94 billion in this fiscal year, or roughly 39 per cent of the total forecasted government expenditures of $242.1 billion.
These voted expenditures are approximately equal to the 2013-14 fiscal year and $4.6 billion lower than the $98.6 billion that was recorded in fiscal year 2012-13.
[Translation]
Statutory expenditure forecasts increased by $3 billion as compared to the same period last year. The increase is mostly attributable to the Canada Health Transfer which increased by $1.8 billion because of annual progression factors and aid payments, for an increase of approximately $1.2 billion as compared to 2013-2014.
[English]
Turning to slide 6 of the presentation, and page 5 in the English version of the supplementary estimates, I will now take a few minutes to explain the major voted items in these supplementary estimates.
Beginning on page 5, you will find detail on 11 initiatives that represent approximately $1.4 billion, or almost 80 per cent of the voted amount in these supplementary estimates.
Looking down the list you will see that many of the items belong to the Treasury Board of Canada Secretariat or Foreign Affairs, Trade and Development. The largest item is $400 million for the Treasury Board of Canada Secretariat. This relates to the cash-out of accumulated severance. Under recent collective agreements, employees will no longer accumulate severance pay in cases of resignation and retirement. Severance benefits accumulated up to the signature of the applicable collective agreement are payable to the employee upon request. In this fiscal year, we recently concluded collective agreements with organizations including the Canada Food Inspection Agency and the Canada Border Services Agency. My information indicates that approximately 26,200 public servants will be cashing out severance as a result of these collective agreements.
The second largest item is $294.6 million for Employment and Social Development. This is the annual writeoff of unrecoverable Canada student loans. The amount relates to 63,540 debts, and the majority of these borrowers defaulted in repayment in 2008 or earlier. I'm told that the average debt written off is approximately $4,500.
Next on the list, you will see the Treasury Board Secretariat once again, this time for the Service Income Security Insurance Plan, or SISIP. SISIP provides long-term disability benefits to medically released Canadian Armed Forces members. Over the past two years, there has been an increase in disability claims with the end of the Afghanistan mission.
The fourth item is operational funding for National Defence for their current deployments related to conflicts in Iraq and the Ukraine.
[Translation]
The next item is the vote of $126 million granted to the Department of Foreign Affairs, Trade and Development to extend the mandate of the Stabilization and Reconstruction Task Force and Global Peace and Security Fund.
That financial support will be used for international interventions in crises and to assist programming in fragile states. The last budget item on that page will allow the Department of Indian Affairs and Northern Development to reimburse the provincial and territorial governments and other service providers for their interventions in first nations communities. These costs are due in large part to flooding and forest fires in Ontario, Manitoba and Saskatchewan.
[English]
Turning to slide 7 of the deck, you will see, at the top of the page, $52 million for Foreign Affairs, Trade and Development to support international organizations such as the Red Cross and Doctors Without Borders to combat the Ebola virus disease outbreak.
The second item on this page is for Treasury Board Secretariat. As part of the changes to the Public Service Health Care Plan negotiated in 2014, benefit enhancements will begin in 2015. Other changes will be in place by April 2018, including cost increases for retired members, which will lower the cost of the plan to the government.
[Translation]
This budget also allocates $36.7 million to work done in some of the planet's poorest countries to prevent and treat AIDS, tuberculosis and malaria.
[English]
The second last item on the page is for the largest horizontal item in these supplementary estimates, a continuation of programs to protect against bovine spongiform encephalopathy, BSE.
[Translation]
The last item among the major voted items is funding granted to Shared Services Canada for the reconstruction of information technology systems for the National Research Council of Canada.
[English]
Mr. Chair, that is an overview of the 11 largest items in the supplementary estimates, totalling almost $1.4 billion.
Very briefly, turning to pages 15 to 17 of the English version of supplementary estimates, I will take a few minutes to explain what we call horizontal items. These are seven initiatives involving more than one department in the provision of a program or service to Canadians.
The information pages show funding requirements presented throughout the year for each organization, including any planned statutory spending, such as employee benefit plans.
The first item that you will see is $205.5 million over 5 years, announced in Budget 2014, to continue bovine spongiform encephalopathy programming to safeguard human and animal health.
The second horizontal item is for government advertising. These funds will support five campaigns: Canada Heritage's "Canada 150"; Citizenship and Immigration's "Services to Newcomers"; Finance for advertising related to the Economic Action Plan; and National Defence for Canadian Armed Forces recruitment.
The Chair: I'm sorry. Is there a point of order?
Senator Stewart Olsen: It is a point of clarification.
The Chair: Point of clarification.
Senator Stewart Olsen: Sorry to interrupt your flow.
On the horizontal items, when you are speaking about mitigating public health, animal health and BSE, 33.4 million voted and 4.3 million statutory. If you go back, it is the 33.4 on the major voted items. Can you explain why that appears twice?
Mr. Pagan: I'm not quite sure I —
Senator Stewart Olsen: On page 7, on the major voted items in your deck —
The Chair: Why don't we use the Supplementary Estimates (C)? Page 1-15 is what we have been following with regard to horizontal items.
Senator Stewart Olsen: I have been following on the deck.
The Chair: I'm trying to encourage us to use the Supplementary Estimates (C).
Senator Stewart Olsen: What page?
The Chair: You are at page 1-15.
Mr. Pagan: Correct, yes.
The Chair: For the horizontal items.
Senator Stewart Olsen: I am just wondering why the item appears twice. I understand that the second one is because they're combined departments.
Mr. Pagan: Right.
Mr. Pagan: In English, we are on page 15.
What we will see, using the English version, top of the page, is that our first item is our horizontal initiative related to BSE. The total for this initiative is $37.7 million, and this is broken out according to the requirements for the Canadian Food Inspection Agency and the Public Health Agency.
For the Canadian Food Inspection Agency is 32.6 million. That's the aggregate amount. I believe that, in that case, we have both the voted and a stat item.
So we have $32.6 million for the Canadian Food Inspection Agency, and that's their operating requirement. The Public Health Agency of Canada is $800,000, and then a statutory amount of 4.3 million for your total of 37.6.
The major voted is our 32.6 plus the 800K.
Senator Stewart Olsen: Thank you. It is much clearer if I look at this one.
The Chair: The voted portion is the portion that we, as parliamentarians, will be called upon to say yes or no to.
Senator Stewart Olsen: I understand. It just wasn't clear.
The Chair: That was helpful. Thank you.
Mr. Pagan: I had left off at a description of the horizontal item related to government advertising.
Next is funding for the Canadian Institutes of Health Research and the Public Health Agency for Ebola preparedness and response. Examples of activities funded include development of Ebola vaccines, training and tools for frontline responders, rapid response teams to provide expertise, and surge capacity to provinces and territories.
[Translation]
The last budget item on this page is the reform of the Temporary Foreign Worker Program, the purpose of which is to make sure that Canadians can have access to vacant positions before foreign workers. The new international mobility programs focus on the entry of foreign nationals rather than on the vacant positions for certain jobs, so as to support Canada's national economic interests.
[English]
Turning to slide 9 of our deck and continuing with the horizontal items on pages 16 and 17 of the English version, we see funding to strengthen Canada's marine oil spill prevention and response capacity. Examples of work being done on this front include establishing new area response planning partnerships for four pilot regions, researching the effects of petroleum products in marine environments with various responses, and increasing the automation and interoperability of Canada's navigation system.
[Translation]
The last two horizontal items in the current supplementary estimates were announced in Budget 2014. Health Canada and the Canadian Institute of Health Research have joined forces to prevent prescription drug abuse. Prescription drugs are now the third most consumed group of substances by young Canadians after alcohol and marijuana.
The last budget item concerns the establishment of a food safety information network which will allow for the collection, analysis and exchange in real time of data in this regard, which will strengthen the ability to detect and respond to food hazards.
[English]
Turning to slide 10 of the presentation, just a word on statutory expenditures. It is important to emphasize that the estimates present information on the totality of government programming. The appropriation bill will focus on the voted amounts; nonetheless, the estimates do present information and expenditure forecasts for certain statutory expenditures.
A full list of the forecast changes of these statutory items is available online. Here on slide 10, we're showing the single largest forecast changes in dollar value. There is one increase to highlight. It's a non-budgetary item, a $200 million loan to Ukraine to promote economic and financial sector reforms. These funds were announced in January. There are also large decreases in statutory expenditures at the Departments of Finance and Employment and Social Development.
At the Department of Finance, interest costs — the decrease in interest on un-matured debt and other interest costs — reflect revisions of forecasted rates by private sector economists consistent with the 2014 economic and fiscal update. These reductions total approximately $1.1 billion.
[Translation]
The Department of Employment and Social Development has updated its forecast expenditures for old age security payments. The changes are related to estimate updates in the number of beneficiaries and average payment amounts. After the revision, there is still a forecasted increase in old age security payments of approximately $1.2 billion as compared to payments in 2013-2014.
[English]
Turning to slide 11, our conclusion.
[Translation]
This overview allowed us to briefly examine some of the main initiatives to be found in Supplementary estimates (C) for 2014-2015.
[English]
A supply bill supporting the $1.8 billion of voted funding presented in these estimates will be tabled in March.
With that introduction, Mr. Chair, my colleagues and I would be happy to respond to your questions or walk you through the document in more detail.
The Chair: Thank you. If any honourable senators need to go back to fundamentals, you will understand that you have dealt with a lot of different pieces of terminology here, like the horizontal aspect. The 200 million you have just looked at, which you said was non-budgetary, may or may not be understood by a number of colleagues around the table. There may be some questions on those kinds of issues: statutory and voted, and non-budgetary and budgetary.
Mr. Pagan: Perhaps just a word on that distinction between budgetary and non-budgetary.
The Chair: That may be helpful.
Mr. Pagan: Turning to page 3 of the document, both in English and French.
The Chair: Page 3 of which document?
Mr. Pagan: The estimates.
The Chair: Thank you. Page 1-3?
Mr. Pagan: Correct.
You will see on page 3 a table presenting estimates to date, authorities and proposed authorities for 2014-15, and then several footnotes.
The first footnote explains budgetary expenditures, which include the cost of servicing the public debt; the operating and capital expenditures of departments; transfer payments to other levels of government, organizations or individuals; and payments to Crown corporations. This is the totality of our estimates universe. There are 130 appropriation-dependent organizations. This is all reflected in what we consider to be budgetary expenditures.
Non-budgetary expenditures are essentially those assets that are on the balance sheet of the Government of Canada: loans, investments and advances. These outlays represent changes in the composition of financial assets or liabilities of the government, but they have no bearing on the actual budgetary expenditures of government. They're simply part of our financial statements. They're not reflected in the appropriation requirements of Parliament.
The Chair: To what extent is Parliament called upon to participate in the non-budgetary outputs of the government?
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: There are voted loans. It works the same way, essentially, as budgetary items. There are authorities for loans, interest and advances that appear in the appropriation bill. The most common one, in my recollection, is loans to Native claimants. So there is a vote that is prefixed with an "L," which appears under Indian Affairs and Northern Development.
The Chair: Will we see that designated as the non-budgetary in the supply bill? In other words, the money is going out as a loan but will be coming back in due course.
Ms. Santiago: That is right. It is expected to be repaid.
The Chair: We have that here as well. If it doesn't get repaid and it has to be written off, which happens from time to time, like student loans, then it is brought back in as an expenditure.
Ms. Santiago: As a budgetary charge.
The Chair: Which we have to vote on to write it off, correct?
Ms. Santiago: Correct. As I said, the most common kinds of votes with L's on them are the loans you will see usually at the beginning of the fiscal year. You will see them in the interim supply and full supply bills for Main Estimates.
Another common place where you will see an "L" vote is the $1 items. We have talked about this before, where $1 is the cost of admission into the supply bill. Some statutory authorities — for instance, the authority of the Department of Finance to enter into loan agreements with other organizations — require the authority of the appropriation act to make adjustments.
I believe we had a few in Supplementary Estimates (B), where you will have an L vote for $1, which is to change an amount in another bill, to add the name of a recipient or something like that. Those are the kinds of non-budgetary items you would see in a supply bill.
The Chair: The $1 is not the amount being changed.
Ms. Santiago: No. It is just to put it into the bill, because to be an appropriation act you need a monetary amount.
The Chair: For those of us following, it is like a flag; we had better go find out what this is all about.
Ms. Santiago: That's right.
The Chair: Thank you very much.
We will begin with honourable senators who have indicated an interest in pursuing some of the points that you have made.
[Translation]
Senator Rivard: Thank you very much. Let's go to slide 6, as regards Employment and Social Development Canada and the write-off of unrecoverable Canada student loans, for close to $295 million.
First, Quebec has its own student loans program. Does the federal government make transfers in this area or are Canadian students the only ones who can borrow from that fund?
Mr. Pagan: I am not familiar with the Quebec programs or the arrangements with Quebec. The information in slide 6 concerns the Canadian program only.
[English]
I believe that there are transfers to the Government of Quebec to manage their own program. Clearly, students of Quebec are eligible for this program, and so this amount represents the writeoffs for the Canada Student Loans Program.
[Translation]
Senator Rivard: Unfortunately, you do not know any more than I do whether it is the same program or whether we make transfers. The amount of $294 million refers to losses we want to write off the books. Is this an annual exercise, or one you do every four or five years, when you see that the money is not being reimbursed? Can you tell us whether this is a recurring situation, with the same amounts coming back every year, or does this cover a period of three or four years?
Mr. Pagan: It is a fairly regular process. It is not strictly annual.
[English]
I don't believe there is a requirement to do this on an annual basis, but there is a discipline, both in the program administration and in debt collection, to keep the program current. So what we've seen over the last couple of years are fairly regular writeoffs but no legislative requirement to do this on an annual basis.
[Translation]
Senator Rivard: On the same topic, the Government of Quebec passed a law about ten years ago preventing students from declaring bankruptcy in order to avoid having to pay back their student loans. These young people were not really conscious of the impact of such a move on the rest of their career, and were choosing the easy way out; and so the Government of Quebec passed a law that excludes write-offs. Now, under this program, if an Ontario participant declares bankruptcy, will his debt to the government remain, or will it be written off?
Mr. Pagan: I will have to check, but I think the debt is written off.
[English]
That is something that we would want to confirm with ESDC.
[Translation]
Senator Rivard: I would appreciate a written response, at your convenience.
The Chair: Senator, some representatives of the student loans program will be with us in half an hour.
Senator Rivard: Perfect, thank you. As for the Canadian Food Inspection Agency, if I understand correctly, this concerns mad cow disease?
Mr. Pagan: Yes.
Senator Rivard: Is the $32 million to optimize security at the National Research Council of Canada due to pirating by China or other countries that hacked into the computer system? This is an unplanned expense that is directly related to that event, correct?
Mr. Pagan: Yes, that is correct.
[English]
Ms. Santiago: I have a clarification to make. It's actually being voted to Shared Services Canada. It's for the work to be done at the research council, but the vote is to Shared Services Canada.
[Translation]
Senator Rivard: In light of the aging population, I have some trouble understanding the decrease in statutory expenditures. Under the heading "Finance: Interest costs," we see that the budget for old age security payments has declined by $322 million, and that the budget allocated to the Guaranteed Income Supplement has decreased by $97 million. Am I to understand that a higher amount had been budgeted? I am surprised to see the amounts diminish, while the population is aging and the number of beneficiaries is increasing. All the better, of course, but this surprises me.
Mr. Pagan: Planning the budget for certain aspects of that program is quite a difficult process.
[English]
The Department of Finance and ESDC work together on their forecasting models on Old Age Security and Guaranteed Income Supplement payments. In fact, for this fiscal year, we've seen in the GIS a forecasted decrease of approximately $97.9 million due to a decrease in the estimated number of beneficiaries. There's a threshold, and there are actually fewer senior citizens below that threshold than had been originally forecasted at the beginning of the year, and that contributes to approximately $179 million in decreased payments.
At the same time, the forecasted payment is increasing. At the beginning of the fiscal year, they're anticipating a payment of $450.59 a month, and they have increased that to $454.19. This is driven by the cost of living and some of the factors that drive that payment.
With respect to Old Age Security, there has been a decrease in the estimated number of beneficiaries from 5,473,000 to approximately 5,464,000. A net decrease in the number of beneficiaries has contributed to a decrease of almost $322 million in OAS payments.
[Translation]
The process uses an assessment involving the density of the population and the growth of the economy, which impacts the monthly amount of these payments.
[English]
Senator Tkachuk: I'd like to follow up on the student loans.
Chair, did you say that the next group will be the people who oversaw the program?
The Chair: Yes.
Senator Tkachuk: I'll ask a couple of questions to see what these people know, and whatever they can't answer, I can ask the other group.
On the student loan program, when they default, is that because they're bankrupt, or is it negotiated?
Mr. Pagan: It's not necessarily bankrupt. It's not making payments. Sometimes it's a question of not finding these students. Sometimes it's a demonstrated inability to pay without declaring bankruptcy. Any number of factors can lead to that, but there is rigour in the process.
Repayment commences six months after graduation, and the standard approach is a regular monthly contribution over 114 months, approximately nine years. Where individuals get into some trouble is they can negotiate changes to that plan and extend it if necessary. When it comes to delinquent accounts or writing off these accounts, there is a process run by the Canada Revenue Agency where they make escalating contact, so letters and phone calls.
Senator Tkachuk: Do they go to a collection agency?
Mr. Pagan: They don't on the Canada student loans. It has been, as I understand it, contemplated in the past in pilot projects, but, no, in this instance, they don't use collection agencies.
Senator Tkachuk: Where do the students come from? Do you have statistics as to what part of the country?
Mr. Pagan: We do have a great detail of statistics, which I'll be glad to leave with the committee. Essentially, grant disbursements are spread across the country as are delinquencies and defaults. There is no particular centre or area known to be problematic.
The average loan to a student in a typical year is approximately $5,400. The average debt upon graduation is approximately $12,000, and we're seeing that the average writeoff is approximately $4,500. These are accounts that have been delinquent since 2008. Every reasonable attempt has been made to recover these amounts. It represents approximately 2 per cent of the overall loan portfolio.
Senator Tkachuk: I have questions on two other areas. One is on the funding to prevent prescription drug abuse, $3.3 million. Health is a provincial responsibility. Is that an advertising program, or what would it entail? If the funding is for prescribed drugs, would it be to doctors or are they mostly stolen drugs?
Mr. Pagan: First, you're quite right. Health care is a provincial responsibility. That said, abuse of pharmaceutical drugs has emerged as a leading health and safety issue in Canada, and provincial and federal health ministries have convened to discuss that issue and identify possible remedies and approaches to deal with it.
This funding is going to be used to support pharmacy inspections to reduce the diversion of drugs that have not been properly prescribed, promote awareness of the effects of prescription drug abuse — so an advertising component — enhance the treatment and prevention services available to First Nation communities, and improve national data on prescription drug abuse and related research. It's a multi-faceted approach of inspections, awareness and education in targeted communities.
Senator Tkachuk: You can either steal them or a doctor has to prescribe them. You can only get them from a drug store. It's a fairly limited supply. Who is doing this? Are they mostly thefts? You hear the stories about prescription drugs, but it seems to me that it's either doctors who are prescribing them for illegal purposes or no purpose at all, so they're just giving them the drugs, or the drugstore, the pharmacists themselves, are. It seems to me it would be easy to find out, is my point.
Mr. Pagan: This is an emerging issue. The program is designed to answer some of these questions.
This initiative was announced in Budget 2014. It's a time-limited program or what we call a sunsetting program. There's $44.9 million over five years to work on this inspection awareness and education component. They'll do an evaluation as they do with all programs, and based on those evaluation results there will be a decision as to what to do with the program in years ahead.
Senator Tkachuk: I just had one more question, chair.
The Chair: We are running down on time.
Senator Tkachuk: It's on emergency management and on-reserve response, the $69.1 million. I think you mentioned that three provinces received money.
Ms. Santiago: Ontario, Manitoba and Saskatchewan.
Senator Tkachuk: They didn't have fires anywhere else?
Ms. Santiago: This particular increment is targeted mainly for those.
[Translation]
Senator Chaput: Firstly, I would like a clarification. On page 5 of the French version of your document, we see a comparison of proposed authorities for 2014-15 and 2013-14.
In last year's document, which you presented here, the 2013-14 proposed authorities contained a different figure from the one that is in this year's document. Last year, proposed authorities for 2013-14 were $259 billion, and in your comparison for this year, they are $239 billion.
Does this mean that some of the proposed authorities are not necessarily spent?
Mr. Pagan: There is a brief footnote.
[English]
This footnote indicates two factors that contribute to the evolution of estimates or proposed authorities from one year to the next.
In general, and perhaps I should have been very clear about this at the outset, if there are some 130 appropriation-dependent departments, all but 3 of them are on what we call an annual appropriation. The fiscal year ends March 31, so the authorities in a year are clearly defined. At the end of the year there is an ability to carry forward a very small amount, up to 5 per cent of operating, into the next fiscal year, but otherwise, monies lapse.
Three organizations — the Canada Revenue Agency, the Canada Border Services Agency and Parks Canada — have what is referred to as a two-year non-lapsing authority. You will actually see the distinction between these three organizations and the others in the schedule to the appropriation act where those three are separated. They have their own schedule to the act. That in itself does contribute to a variation or can contribute to a variation in one year to the next because the non-lapsing amounts from those three organizations carry over and impact proposed authorities in subsequent years.
The other adjustment, which is much more important in terms of the overall difference in numbers, is the treatment of the Employment Insurance Operating Account. In 2014-15 there was an adjustment or a change in the way in which the EI Operating Account was reflected in estimates documents. What we have done this year is restate those 2014-15 amounts to account for that change in the treatment of the EI Operating Account introduced last year.
[Translation]
Senator Chaput: So, that is what explains the difference between last year's figures and this year's?
Mr. Pagan: That is correct.
Senator Chaput: The Treasury Board Secretariat requested an additional amount for Service Income Security Insurance Plan shortfalls. What is the annual cost of this for the federal government, and why are additional sums being requested for this year?
[English]
Mr. Pagan: As I indicated very briefly in the overview, the SISIP program has experienced some increases in claims since the conclusion of the mission in Afghanistan. The forecasted cost for 2014-15 is approximately $173.7 million. That's the forecast we have at this time. That reflects an increase in SISIP claims from an average of about 1,450 over a four-year period, 2008 to 2012, to approximately 2,800 claims anticipated for 2014, so a fairly dramatic increase in claims.
[Translation]
That is why additional sums are being requested, to increase the envelope that funds that program.
Senator Chaput: What kind of increase does this additional amount for 2,800 claims represent, in percentage terms?
[English]
Mr. Pagan: I wouldn't have that readily available. We could find that. This is 2,800 claims against a Canadian Forces standing capacity that numbers in the tens of thousands, so we would have to get that information for you.
Senator Chaput: Thank you.
Senator Gerstein: Thank you, panel, for being with us today. I have three questions, following up on the questions raised by Senator Rivard and Senator Tkachuk about the writeoff of the student loans.
Could you clarify the process by which a student obtains a loan? Does he or she go to a financial institution and that's where the credit is granted and, in fact, the government backs up the loan from the financial institution, or is the obligation with the Government of Canada directly from the outset?
My second question is: What is the present size of the Canada student loan portfolio?
Third, does the $300 million writeoff that we are being asked to approve clean up, in effect, the pre-2008 portfolio?
The Chair: Does Social Development have answers to all those questions?
Mr. Pagan: I would expect that they would —
The Chair: All of the information you have was obtained from Social Development?
Mr. Pagan: We have some of our own information.
The Chair: Give us all of your own stuff.
Mr. Pagan: Sure. Our own is in the public domain.
Senator, to your second question on the size of the program — and these are 2012-13 numbers for which the last full year of information is available — there were 472,000 full-time students and 9,600 part-time students. That represented a program of over $2.6 billion in loans.
I'm not completely familiar with the application process, but there are no longer intermediaries between the program, the government and students.
Senator Gerstein: "No longer" as in the last five years? Relatively speaking, in 2008 were they dealing with financial institutions?
Mr. Pagan: I'll find the exact year for you. We have that.
Senator Gerstein: Just approximately.
Mr. Pagan: In a previous iteration of the program, the loans were administered by financial institutions, and my understanding is that that actually complicated debt collection and added some costs. I'll find the exact year, but there was a decision to remove that intermediary just a few years ago. I believe it was 2000, so we're dealing directly with the program now.
Senator Gerstein: My final question: Does this $300 million writeoff clean up the 2008 and prior problems?
Mr. Pagan: I can't say that with absolute certainty, senator, and the issue is that there is a writeoff period. If we have not been able to make collection claims for loans pre-2008, they are written off, but I would expect there are some instances where loans from that period are still outstanding and there have been arrangements made with the individual.
Senator Gerstein: I wouldn't consider that in default. If arrangements are being made, it's not in default —
Mr. Pagan: Yes.
Senator Gerstein: — if they're complying with the new arrangements. I'm talking about the ones that you haven't heard from since 2008 and they are gone.
Mr. Pagan: We will confirm that, but I suspect that's the case.
The Chair: Colleagues, we're running down on time. Try to keep your questions as succinct as possible.
[Translation]
Senator Bellemare: My first question concerns the macroeconomics of the estimates. We see, for example, on pages 1 to 4, that the Main Estimates that were voted were of $235 billion. Finally, after the increases requested in Supplementary Estimates (A), (B) and (C), we will reach $241 billion. I would like to hear about the real evolution of the budget over the past five years in terms of what we spent, and especially, a detailed breakdown regarding operating expenses, capital expenditures, and program expenditures.
The government is making budgetary restraint efforts. Can we really see these in the end, over time? Do we also see it in the details relating to the operations, capital, and program expenditures?
As to my second question, we often hear it said that departments are not always able to spend their budgets. Here we have the supplementary estimates, and we are adopting expenditure increases for all of government. Where in the government apparatus is it shown that a department cannot spend everything and returns surpluses to the Treasury? We are studying all of this, but where do we see it in the figures?
[English]
Mr. Pagan: To your first question on the ventilation of the operating budget, capital, et cetera, we can provide the committee with that detail. If I understand correctly, you are looking for some history over the last five years. I don't have these numbers at hand, but what I can tell you is that we all know there has been a concerted effort on the part of public service and the government to contain operating costs of government over the last number of years as part of the Deficit Reduction Action Plan and the work to restore the government to a budget balance.
In fact, we see some of that, at a very high level, on page 5 of the handout I gave you today. When we look at proposed authorities and the voted amount, keep in mind that the overwhelming proportion of voted amounts are what are we consider operating costs of government. It's the salaries, programs and services delivered to Canadians. We see a decrease in that voted amount from $98.6 billion in 2012-13 of to the forecast of this year of $94 billion. That is your first indication of some attempts and success in controlling the operating expenditures of government, but we will get the committee a bit more detail on that.
The most direct or easiest way to find information on lapses is in the Public Accounts documents, which our colleagues in the Office of the Comptroller General present. We reflect a portion of that information, generally in the Supplementary Estimates (B) exercise each year, where we will present to Parliament the carry forward amounts of the operating budget carry forward and the capital carry forward. Operating budget carry forward is set at 5 per cent, capital at 20 per cent. Parliamentarians will see the specific amounts carried forward by each department in accordance with those carry forward provisions. That's fairly easy to identify and locate.
The second aspect of your question is much more difficult. That dealt with reprofiles and where one finds that. Essentially, one finds that in the bottom line numbers that are presented in the fiscal framework — the budget — by the Department the Finance and the updated estimates documents, which are presented to Parliament.
The process is that when the government decides to invest in a program or service, with the best information they have available, they will allocate a cash profile to the program. As the department works to get that program up and running and has consultations with stakeholders, other jurisdictions, departments, et cetera, there will be adjustments, and they will seek a reprofile. They would like to take $100 that was in this fiscal year and move it one or two or three years out.
Each and every request is assessed by the officials at the Treasury Board Secretariat as to whether it's valid. We make a recommendation to the Department of Finance, and the Minister of Finance will make the ultimate decision on whether to move that money from one year to the next. When they do that, it is immediately reflected in the fiscal framework for that year.
So we never lose the money, but at the same time, you can't readily identify an account or an item where you can check to see how much has been reprofiled. It becomes part of the ventilation of each year of the fiscal forecast and reflected ultimately in the requests for spending authority of Parliament.
It's an incredibly complex process. I can't possibly do it justice in —
The Chair: Senator Gerstein is our committee expert on reprofiling.
Mr. Pagan: From time to time, we conduct what we will call Estimates 101 or Fiscal Framework 101. If there is interest on the committee, we would be glad to come back and, rather than speak to an estimates document, speak to the process more generally in terms of how we take a budget priority and make that an approved TB program and then how it is reflected in the estimates documents. If there's interest, we would be glad to do that.
[Translation]
Senator Bellemare: May I make a suggestion, if it is appropriate to do so now? We are examining the whole budget process, but there is a document we do not examine closely, that of public accounts, which is the sum total of everything we do.
It would be interesting for us, when the public accounts document is published, because that is reality, that we be able to at least study it during one meeting with people who can present the public accounts to us as compared to the budget.
The Chair: After the fact.
Senator Bellemare: Yes.
The Chair: That is a good idea. We have often discussed it, but we have not done it, because we are so busy with the estimates.
[English]
Mr. Pagan: Senator, I did find a bit more information to respond to Senator Gerstein, if I can just have 30 seconds.
The government started disbursing Canada student loans directly to students in the year 2000. There's a nine- or ten-year prepayment program generally. As of 2013, only 3 per cent of Canada student loans still in repayment have been disbursed by private financial institutions. So 97 per cent of the portfolio of 2.6 billion is managed directly by the government.
The Chair: Thank you for finding that information.
I may ask you to take the next two senators' questions because we've run out of time and I want to get the senators' questions on the record. If you could provide us with written answers to those, that would be helpful. I know we will be seeing you again with respect to the Main Estimates. Some of these questions may relate to process, which you can also handle at the Main Estimates meeting.
Senator Wallace.
Senator Wallace: This may be covered with our next witnesses, but back to the student loan issue, I'm wondering if the government has ever taken legal action against students to enforce payment.
The other question relates to one of the horizontal items you have described, which is the roughly 12.7 million that is being requested to fund enhancement of Canada's oil spill response capability. In the estimates, page 1-16, there's reference to establishing new area response planning partnerships for four pilot regions.
As I understand it, spill response capability in Canada is essentially handled by the private sector. There are spill response organizations in each of the regions of the country. To my knowledge, they have worked very effectively and well.
What is envisaged with these new response planning partnerships for the regions, and would it impact the private sector spill response organizations that exist today?
Final question on the same issue: There's reference to the establishment of a centre of excellence for marine transport of oil and liquefied natural gas. I would like to have more detail on what is envisaged with that centre of excellence and would be most interested in knowing where that centre might be located.
The Chair: Could you provide us with written answers to those questions?
Final senator, also from New Brunswick, Senator Stewart Olsen.
Senator Stewart Olsen: This is more informational. I just wanted to mention, following Senator Tkachuk's question on the abuse of prescribed pharmaceuticals, that the Standing Senate Committee on Social Affairs, Science and Technology did a fairly in-depth study on this problem. It was from the results of that study that it was decided that the Department of Health needed to have a better look at it. Out of that flows the request for this money. I wouldn't want to see that jeopardized as a result of some good hard work done by the Senate committee.
Thank you, chair for the opportunity.
The Chair: Thank you for your comment.
[Translation]
Senator Rivard: I have question which you could answer in writing if you do not have time today. The Senate is asking for $900,000 to improve security. Can we know whether this amount will be allocated to the Royal Canadian Mounted Police or to the internal Senate security service? Will this mean that more employees will be hired? Before you answer me, I would have a related question.
Approximately 20 senators' positions have become vacant over the past five years. In the Senate budget, there are salaries for assistants and other members of senators' staff. I evaluate that these salaries come to $300,000, because for all of the Senate, the envelope is $90 million, which includes positions; however, whether there are 10, 15 or 100, the costs are the same. We cannot transfer funds on the basis of amounts that were not spent, because that is in the past. However, could we have taken this $900,000 out of the Senate funds that were not spent?
[English]
The Chair: Those are all very interesting questions, but, regretfully, we have run out of time at this stage.
Could you provide us with your information in writing? A number of these points could be pursued under Main Estimates as well. We will set aside more time on the Main Estimates than we have for these supplementaries.
Thank you very much to the Treasury Board of Canada Secretariat representatives. Mr. Pagan, Mr. Sprecher and Ms. Santiago, it is always a pleasure to see you back here, and we will see you in a couple of weeks.
As you know, we're dealing with Supplementary Estimates (C), which is the final supplementary estimate for this year.
[Translation]
We are continuing our study of Supplementary Estimates (C) for the fiscal year ending March 31, 2015.
[English]
We are very pleased to welcome officials from two departments this morning for the next hour. From Employment and Social Development Canada, we welcome Alain Séguin, Chief Financial Officer; and Gail Johnson, Assistant Deputy Minister, Learning Branch.
From the Department of National Defence, we welcome Mr. Claude Rochette, Assistant Deputy Minister and Chief Financial Officer, Finance and Corporate Services; Major-General John Madower, Chief of Program; Edison Stewart, Assistant Deputy Minister, Public Affairs; and Jaime Pitfield, Assistant Deputy Minister, Infrastructure and Environment.
I understand that each department has a brief opening statement. Do we have them both in writing? We should have a statement from each of the departments. I introduced Employment and Social Development first, so why don't we begin with Mr. Séguin.
Alain P. Séguin, Chief Financial Officer, Employment and Social Development Canada: Thank you very much, Mr. Chair and members of the committee. I'm pleased to appear before you in my capacity as Chief Financial Officer for Employment and Social Development Canada.
I have a few assistant deputy ministers from key areas of ESDC in attendance with me and in the back, if there are specific questions and details you want on some of our programs to help in this discussion.
[Translation]
The department I represent helps Canadians at crucial stages in their lives, whether they are still in school or raising a family, looking for a job or retiring from the workforce. Our department is responsible for delivering high-quality services that are timely and accessible, mainly through Service Canada.
[English]
We also have the mandate to maintain strong, productive, healthy and competitive workplaces within the federal jurisdiction through our labour program.
Allow me to offer the committee an overview of ESDC's portion of the 2014-15 supplementary estimates, tabled on February 19, 2015.
[Translation]
Supplementary estimates present information on spending requirements that were either not sufficiently developed in time for inclusion in the Main Estimates or have subsequently been refined to account for developments in particular programs and services.
Through these estimates, we provide Parliament an update on various statutory programs. Statutory items are included in the estimates for information only because Parliament has already approved the purpose of the expenditures and the terms and conditions under which they may be made through other legislation.
[English]
As part of our Supplementary Estimates (C), you will note the budgetary statutory items forecast decreased by 323.9 million. This is mainly due to the Old Age Security program. The decrease in forecasted expenditures for OAS program benefits is the result of changes in the average monthly rates, the estimated number of beneficiaries and the estimated amount recovered from higher-income seniors through the OAS recovery tax. This is an adjustment to the forecasts included in the 2014-15 Main Estimates as a statutory item. The decrease impacts the forecasted expenditure and not the actual benefits paid. In 2013-14, the federal government paid a little over $41.8 billion in OAS, GIS and allowance benefits to eligible seniors, while it is estimated that almost $43.8 billion will be paid in 2014-15.
The number of beneficiaries for OAS pension is forecasted at $5,464,537, which represents an increase of 157,369 from the 5,307,168 actual beneficiaries in 2013-14.
[Translation]
Old Age Security is the cornerstone of Canada's retirement system and provides a minimum level of income to seniors in recognition of the contribution that they have made to Canadian society and the economy. In addition to the statutory items, ESDC is asking for an additional $314.3 million in voted appropriations.
This includes $294.6 million related to a request for the write-off of debts owed to the Crown for unrecoverable Canada student loans. As general practice, a separate vote is established for authority to write off debts and vote 7 was used for this purpose.
A loan to an outside body is considered a non-budgetary item since the loan is expected to be repaid. Student loans are an asset for the Government of Canada, and such write-offs require Parliament's approval.
[English]
According to the Debt Write-off Regulations, debts should be written off in the year in which they are determined to be uncollectible. The Debt Write-off Regulations contain criteria under which accounts may be submitted for writeoff. The criteria include deceased, bankrupt, cost-effectiveness, statute-barred and hardship. Our request under vote 7 is consistent with such regulations, as we have determined these debts to be uncollectible this fiscal year.
The Canada Student Loans Program writeoff of $294.6 million is primarily for debts of borrowers who defaulted in repayment in 2008 or earlier, for which efforts to collect the amount owed have not been successful.
The Canada Student Loans Program provides over $2.5 billion in student loans each year, helping students in financial need to access post-secondary education, while ensuring accountability for taxpayers' money.
[Translation]
The government is assisting Canadians in managing debt loads through the Repayment Assistance Plan, and by implementing measures to improve the repayment and recovery of Canada student loans.
Under vote 1 — Operating expenditures — $19.6 million is requested for implementation of policy changes in the Temporary Foreign Worker Program. The number of foreign workers entering Canada grew considerably over the past decade, and there is evidence that some employers were hiring foreign workers instead of Canadians.
On June 20, 2014, the ministers of CIC and ESDC announced a comprehensive overhaul of the Temporary Foreign Worker Program to limit access to the program to ensure Canadians are first in line for available jobs; use more and better labour market information for stronger screening; and introduce stronger enforcement and tougher penalties for employers who break program rules.
[English]
Also, ESDC is requesting authority to transfer $2.5 million from operating expenditures to Shared Services Canada to fund accommodation costs associated with the delivery of email, data centre and network services which was left aside at the time of the transfer in 2011-12.
Finally, you will note a net increase of 46.3 million for the non-budgetary statutory items, mainly due to the introduction of the new Canada Apprentice Loan Program announced in Budget 2014. The amount of 42 million represents the estimate of apprentice loans to be issued in the current fiscal year.
[Translation]
I hope this overview has given you a better understanding of the Supplementary Estimates (C) for our department. My colleagues and I would be pleased to answer your questions.
[English]
The Chair: Mr. Séguin, thank you very much. I'm sure honourable senators will have quite a few questions about the student loan program. You've touched on a lot of the issues with respect to the regulations which didn't come up previously.
Mr. Rochette.
Claude Rochette, Assistant Deputy Minister and Chief Financial Officer, Finance and Corporate Services, National Defence: Thank you, Mr. Chair and senators, for the invitation to present the Department of National Defence's Supplementary Estimates (C) for the year 2014-15. It is an honour to be before this committee for the first time as the new Chief Financial Officer for the Department of National Defence.
Today I'm joined by my colleagues: Assistant Deputy Minister of Infrastructure and Environment, Mr. Jaime Pitfield; Assistant Deputy Minister of Public Affairs, Mr. Edison Stewart; and Chief of Program, Major-General John Madower.
[Translation]
The Department of National Defence and the Canadian Armed Forces are maintaining a focus on their three enduring roles to protect Canada's interests at home and abroad, defend North America in concert with the United States, and contribute to international peace and security.
The Department of National Defence and the Canadian Armed Forces continue to conduct their missions as part of a whole-of-government approach to defend Canada's interests and keep Canadians safe and secure. These estimates reflect that focus and put defence dollars where they are needed most.
[English]
Turning to Supplementary Estimates (C) before you, I would like to highlight some key points for the committee on page 30 in the English version and on page 26 in the French version.
The adjustments in these supplementary estimates result in an overall increase of funding for National Defence of $144.8 million of which $143.3 million is in operating expenditures and $1.5 million in statutory funding, while transfers to other government departments result in a decrease of funding of $2.5 million.
The net change resulting from these supplementary estimates is, therefore, an increase in funding of $142.3 million, or 0.7 per cent of the authorities to date.
This increase in spending authority for the fiscal year 2014-15 stems from the net increases of $142 million to operating expenditures and $1.5 million to statutory funding, which is offset by a decrease of $1.2 million in capital expenditures.
The primary element that drives the increase in operating expenditures is funding of $138.1 million related to military support for operations overseas. The Canadian Armed Forces are involved in international coalition efforts overseas to address sources of instability and threats to international security.
In Iraq, Canada is contributing to the coalition fight against the Islamic State of Iraq in the Levant, ISIL. Operation IMPACT funding of $122.6 million is comprised of $121.1 million in operating expenditures, and $1.5 million in contributions to the employee benefits plan for military members.
The operation in Iraq supports NATO-led assurance efforts to counter Russian aggression, particularly in Central and Eastern Europe. Funding of $17 million has been dedicated to Operation REASSURANCE.
The incremental funding sought in these supplementary estimates covers the cost of deploying and ramped up operations under way, with the most expensive part of the operation being the costs for aircraft, ammunition and meals and accommodation to personnel while in theatre.
[Translation]
Other incremental costs include mission equipment support, repair and overhaul, overseas allowances and engineering support.
In addition to operations funding, the department is seeking $3 million in funding for the government advertising programs in support of the department's Canadian Armed Forces recruitment campaign, and $1.8 million for funding related to the environment site remediation activities for the School of Electrical and Mechanical Engineering Construction Project at Canadian Forces Base Borden.
Finally, the department is seeking $453,000 for the reinvestment of royalties from intellectual property, which will be reinvested by the department in the costs associated with incentive awards for technology transfer activities.
[English]
Mr. Chair, the Department of National Defence and the Canadian Armed Forces continue to maintain strong fiscal responsibility and careful stewardship of resources in respect of the financial environment in which we are operating. As we reach the end of the fiscal year, the department will continue to monitor our fiscal requirements to ensure value for taxpayer dollars.
Thank you. My colleagues and I are pleased to hear the committee's thoughts and to answer any questions you may have.
[Translation]
The Chair: Thank you very much, Mr. Rochette. I'm going to let the senators with questions go first, beginning with the senator from Quebec, Senator Bellemare.
Senator Bellemare: My first questions are for Mr. Séguin, from Employment and Social Development Canada. I have three short questions.
Despite a decrease in the envelope for Old Age Security and related programs, was there a change this year over previous years in the amount allocated to the Guaranteed Income Supplement, in terms of the universal pension, which is tax refundable, since so many people were reimbursed this year? As far as the Guaranteed Income Supplement is concerned, is the percentage increasing? Is the phenomenon more pronounced in certain provinces?
The other part of my question has to do with foreign workers. You requested supplementary funding for the new reform. How many employees have you hired to implement this measure? Do they work in the regions with the provinces in order to identify where the real needs are or are they in the main offices? At the end of the day, it involves a service that should actually be delivered on the ground. Could you give us a brief overview of the labour market agreement situation as far as the provinces go?
I also have a question about the defence portfolio. Operating expenditures have increased slightly, but not significantly. An adjustment was made. And there is also the matter of your transfers. In light of all the problems surrounding international security and defence that we know of, do you have enough operations funding for the Canadian Armed Forces members deployed all over the world?
Mr. Séguin: I will begin with the easiest question. I am going to ask Mr. La Salle to answer your question on security. As for your question regarding the changes to the Temporary Foreign Worker Program, the increase in Supplementary Estimates (C) represents an increase of approximately 157 employees assigned directly to the program and a few others assigned to corporate programs, for a total of 170. A large number of those employees certainly do work in the regions. I don't know the exact proportion off the top of my head, but I could get that information for you.
Senator Bellemare: Which offices do they work in? In the regional offices of the departments?
Mr. Séguin: In regional offices all over the country. We could provide the details to you, but I don't have them with me right now.
Senator Bellemare: I would think they work with the provinces.
Mr. Séguin: No, for the department itself, specifically. So they work in Service Canada's regional offices. The program already has allocated resources. Currently, the program is operating with about 350 staff.
Dominique La Salle, Director General, Seniors and Pensions Policy Secretariat, Employment and Social Development Canada: Good morning. The most useful document when it comes to projections is the report that the chief actuary puts out every three years. The last report covered the period up to December 31, 2012 and was tabled in the House in May 2014. It provides projections over a period of 75 years, and analyses that take into account factors such as life expectancy, immigration and personal wealth. Previously, initial projections indicated that Guaranteed Income Supplement expenditures would decrease over the long term. But the Tax-Free Savings Account, or TFSA, introduced by the government a few years ago, changed those projections somewhat because TFSA savings are not counted as income under the Guaranteed Income Supplement. GIS-related expenditures were expected to decrease, but now, that spending is levelling off or increasing slightly around 2013.
Senator Bellemare: Have the amounts increased this year over last year?
Mr. La Salle: They are fairly stable, but I think the major trends are what we need to examine.
Senator Bellemare: Thank you very much.
Mr. Séguin: As for your question on the labour market, my understanding is that the talks are still under way.
Senator Bellemare: No province has signed an agreement?
Mr. Séguin: My understanding is no, not yet.
Senator Bellemare: Thank you.
[English]
The Chair: I'm sorry, this has to be recorded. We can't have conversations from a distance.
Mr. Séguin: I'll translate. The LMAs, the Canada Job Grant portion, they were all signed.
[Translation]
It involves labour market development and what are referred to as LMDAs.
Senator Bellemare: Are you talking about the $2 billion?
Mr. Séguin: Yes. The talks are ongoing.
Senator Bellemare: Do you expect agreements to be signed soon?
Mr. Séguin: I'm not sure. I don't have those details, unfortunately.
Senator Bellemare: You aren't able to answer that. Thank you.
The Chair: Do you have another question, Senator Bellemare?
Senator Bellemare: No, but I had asked Mr. Rochette a question.
Mr. Rochette: It's a rather broad question. I think the best way to answer your question would probably be to examine past statistics and the total amount of authorities received by the department.
For instance, if we look at 2005-06, the total authorities were $14.7 billion, as compared with this year, 2014-15. If we include Supplementary Estimates (C), the total authority would be about $20.1 billion. So that's a $5.1-billion increase in 10 years. Already, you can see that costs have increased. And we also need to make sure we have the funding we need for our operations.
I would also like to point out that the Department of National Defence has provided for an automatic increase program to offset the cost of inflation. The program will protect against a loss in current value and ensure the department has the funding it needs.
In terms of the defence strategy that was announced, the department is making sure it has the capacities the Canadian Armed Forces need. It's important to have an estimate of those costs and to manage the program with a 20- to 30-year outlook. That enables the department to plan in advance and ensure the necessary funding is available in the form of capital.
Lastly, when it comes to operations such as those we are currently engaged in, we can examine our supplementary costs and ask the government, as we are doing today, for funding to make up for the costs that exceed the envelopes we normally receive.
Senator Bellemare: Thank you for your answer.
The Chair: If I understood correctly, then, the automatic increase of 2.5 per cent relates to capital and operations?
[English]
Mr. Rochette: It's based on the funding back to 2008-09, and it's basically an escalator of 2.5 per cent that gives us an operating expense increase.
[Translation]
The Chair: Is the Department of National Defence the only department using such an automatic increase program?
Mr. Rochette: I couldn't say.
The Chair: Very well. We will look into that.
Senator Hervieux-Payette: On page 7, you talk about the apprentice program and the $42 million representing the estimate of apprentice loans to be issued. Previously, you did loan write-offs for other students. Is the $42 million strictly to issue loans or does it also include the operating budget to administer the loans?
[English]
Gail Johnson, Assistant Deputy Minister, Learning Branch, Employment and Social Development Canada: That money represents the expected amount to pay out in Canada apprentice loans, the new program that was launched in January 2015. So that is new money given to people who have access to this program. It's just the loan.
Senator Hervieux-Payette: It's not in the document and it's not in the supplementary, but I would like to know the amount of publicity that you have paid. On television we regularly see ads about the apprentice program. I would like to know the cost of these ads, because I think it's important. It comes back quite often. They are very sexy, but at the same time, I'd like to know if there is a relationship between the program and the publicity.
My second question is for Defence.
[Translation]
On page 30, we see that the department is requesting $3 million for funding related to government advertising programs. It is a horizontal item. I will tell you right now that the language in the document means nothing to me. All I know is that I have never seen so much advertising by the federal government as I have this last year.
Which government advertising programs are we talking about? Do they involve recruitment or other defence-related measures? What is the $3 million for?
[English]
Edison Stewart, Assistant Deputy Minister, Public Affairs, National Defence: It relates to the recruiting campaign. We have spending of about $8 million or $9 million for recruitment in the fiscal year. Some of it is for priority occupations. There are about 20 priority occupations. Another element of the campaign is to increase our recruitment of women.
The larger aspect is I think the one to which you refer, which is the television campaign that you see now. This is again to encourage people to apply for any one of over 100 occupations in the Canadian Armed Forces.
[Translation]
Senator Chaput: My questions are for the Employment and Social Development Canada official. My first question pertains to the comprehensive overhaul of the Temporary Foreign Worker Program and the measures you are currently putting in place.
In implementing the program, do you take into account francophone considerations? The federal government has immigration targets to ensure that a certain number of workers every year are French-speaking. Does your reform take that component into account to help the federal government achieve its target and support official language minority communities? And if so, how?
Mr. Séguin: I'm going to ask the director general of the Temporary Foreign Worker Program, Alexis Conrad, to answer your question.
[English]
Alexis Conrad, Director General, Temporary Foreign Workers Program, Employment and Social Development Canada: The decision of which foreign workers to bring into the country is a decision of the employer themselves. They will make a selection based on who they feel is the right person with the right skill set to come into Canada and work directly. The government doesn't set targets on foreign workers coming in for temporary entry by country or linguistic profile. It's exclusively up to the employer to decide who they want to bring in, assuming they meet entrance criteria to work in Canada.
[Translation]
Senator Chaput: Do workers who apply for the program have to meet official languages requirements? Do they have to be able to speak English and French in some cases?
Mr. Conrad: Our department does not make that decision, Citizenship and Immigration Canada does. Certain requirements do exist. Workers must have a certain level of proficiency in English or French in order to work in Canada.
Senator Chaput: Certain requirements for certain levels of proficiency.
Mr. Conrad: Yes. One of the requirements is that the individual has to have a certain level of proficiency in English or French.
Senator Chaput: Not for all levels, however.
Mr. Conrad: Not both languages.
Senator Chaput: One and sometimes the other.
Mr. Conrad: It depends on the location where the individual is working and the needs of the employer.
Senator Chaput: I see. I hope the proficiency requirement for French does not apply solely to workers going to Quebec, because French speakers are also needed outside Quebec.
My second question is for the Employment and Social Development Canada official regarding the $2.5-million transfer to Shared Services Canada. In the past year, we've seen a number of articles on the consolidation of federal departments' separate email systems into one main email system. We've also seen articles on the challenges associated with that consolidation. I read that deadlines for the initiative would not be met because the work was not happening as quickly as planned and that more time would be needed.
You are transferring $2.5 million this year. How many transfers has your department made to Shared Services Canada and for what amounts?
Mr. Séguin: This transfer was deferred. All of the money was supposed to have been transferred when Shared Services Canada was created in 2011-12. I don't know the exact amount, but a transfer was made at that time, but that is it.
Small transfers may have been made here and there, but the bulk of the money was transferred in 2011-12. This transfer is for accommodation, owing to the transfer of accommodations for the data centres and computer systems. We finally negotiated accommodation size and the related costs with Shared Services Canada, and the transfer was made only this year.
It should have been made in 2011-12. It was a total transfer to Shared Services Canada to enable the department to provide us with a single email address, data centres and so forth, pursuant to its original mandate.
Senator Chaput: Since 2011-12, then, only one transfer of $2.5 million has been made?
Mr. Séguin: No.
Senator Chaput: There have been two.
Mr. Séguin: In 2011-12, several tens of millions were transferred; I can't recall the exact amount. I could get that number to you, as we do have it, but I wouldn't want to give you the wrong information right now.
Senator Chaput: Please.
Mr. Séguin: So a transfer was made at that time, followed by a few adjustments. But, overall, that was the planned transfer. This transfer here is simply to complete the 2011-12 transfer.
Senator Chaput: It is being added on.
Mr. Séguin: That is correct, in order to complete the transfer of core services.
Senator Chaput: What services does Shared Services Canada currently provide you with? Just a few examples will do.
Mr. Séguin: It provides a list of services. They include email services, video conferencing, and data centre operation and maintenance. I don't have the full list, but I could provide it to you.
Senator Chaput: No, that's fine. Last question on the subject. As far as video conferencing services are concerned, does this mean that they are now free when you need them? You don't have to pay additional fees for the service?
Mr. Séguin: That's a good question. In theory, that's correct.
Senator Chaput: They are universal services?
Mr. Séguin: They are universal, but if differences exist as far as scale and volume are concerned, I would have to check on how significant those differences are. Overall, Shared Services Canada delivers those services.
Senator Chaput: Would you kindly provide the committee with the additional information?
Mr. Séguin: Yes, I can provide you with the information on the transferred amounts and services.
The Chair: Tomorrow evening, we will be hearing from representatives of Shared Services Canada.
Senator Chaput: Very good. I will have a question for the National Defence officials in the second round.
The Chair: A second round is possible. Senator Wallace, from New Brunswick, please go ahead.
[English]
Senator Wallace: Mr. Séguin, I was interested in and some of my other colleagues have commented on the writeoff of the student loan debts. Of the total voted appropriations that are being requested of $314 million, $294 million is for the writeoff of student loans, and $294 million is a lot of money. I find when we go through all of this, we are talking millions and billions. When you stop to think about it, that's a lot of taxpayers' money.
When I was listening to Mr. Rochette, I was reminded of how significant that figure is. Mr. Rochette points out to us that the primary element behind his increase in requested funds is for $138 million to support Canada's military operations overseas. That's $138 million. So the student loan debt that your department is writing off would be equal to two years of providing our military with support overseas. To put in that context, it really reminds of the significance of what we're talking about here.
In terms of the ability of your department to recover student loan debt, do you believe that your department is as effective, if not more effective, than the private sector in debt collection, in particular the strategies and efforts of major financial institutions? Do you believe your department is as effective or more effective than they are?
Mr. Séguin: I won't answer that with a one-word answer. I'll suggest that we play one part in the collection process, as does the Canada Revenue Agency. They play a big part in the collection, but I'll ask Gail Johnson to provide a bit more detail on how that works. I think she's more able to do that.
Ms. Johnson: Thank you for the question.
The Canada Student Loans Program has for the last several years been working and pursuing strategies to recover the debt from students. We have an external third party service provider who we work with, and we provide incentives to collect the student loans before they go into default.
We have 270 days before the loan goes into default, and we pursue strategies vigorously with the third party service provider in order to collect the debt while they're in repayment, because we know that is the opportunity where we can actually maximize recovering the money.
Once the 270 days have passed, the loans go over to the Canada Revenue Agency for collection, and we continue.
We're in the process right now of putting in place a recovery strategy to ensure that we put in mechanisms that will enable us to recover as much money as possible. So we're working with the service providers. We're working with the Canada Revenue Agency as well to enable them to use activities to collect the debts as well as other administrative activities, which will help us to cut down on abuse of the system.
Senator Wallace: Would you work with lawyers to take legal action to enforce payment? Do you ever take legal action against students?
Ms. Johnson: That is one of the tools that the Canada Revenue Agency has at its disposal; pursuing legal action with students.
Senator Wallace: Mr. Rochette, with the increase in expenditures to support our military operations overseas, a lot of your costs are embedded. You have the wage costs of our military personnel. You have costs related to equipment, but if you deploy them, you have incremental costs, costs that would be incurred as opposed to if those same forces and equipment were in Canada.
When you describe the costs that relate to our military operations overseas, are they truly incremental, or do they reflect an allocation of costs that you would incur anyway, but for which, for cost accounting reasons, you want to have a realistic idea of how much of our resource, how much of our true cost, is being spent on these military operations? Is it all incremental cost, or does it reflect an allocation of existing embedded cost?
Mr. Rochette: Thank you very much for your question.
As you mentioned, when we do the costing for any operations, like what we're asking for in the Supplementary Estimates (C) currently, it's truly the incremental cost. For example, looking at Operation IMPACT, when we look at the cost of an airplane, we calculate the cost for a number of hours that they operate. We have a cost factor manual that tells us exactly how much it costs. This is truly what we do outside of the normal operation that we would do in Canada, for example, training, airplanes and things like that.
Senator Wallace: So the wages paid to personnel would be wages in addition to what they would be if they were at bases in Canada? It's not a matter of allocating those wage costs to the exercise in Iraq or —
Mr. Rochette: Exactly. The wages are not added to the incremental costs.
What you will see for the members is that, when they go on operation, they are going to get specific allowances, like a foreign allowance. They will get a risk allowance and things like that. Those are in addition to what they would normally receive in Canada, and we add that to the cost.
[Translation]
Senator Rivard: The people from the Treasury Board told us that you would be able to answer our student loan questions, Mr. Séguin. I realize that debt write-off is subject to a variety of criteria, but is it reasonable to think that the vast majority of the write-off is the result of bankruptcy? Do you have any figures on that, percentage-wise?
I would tend to think bankruptcy is the main reason for the write-off. Would you agree with that assessment?
Mr. Séguin: I am going to ask Ms. Johnson to answer that, as I believe she is more familiar with the details than I am.
[English]
Ms. Johnson: The vast majority of the writeoff, 88 per cent of it, is statute barred. About 11 per cent of it is as a result of bankruptcy, and then the remaining 1 per cent is for hardship, deceased, et cetera.
[Translation]
Senator Rivard: The Quebec government passed legislation that excludes debt write-off to prevent students from declaring bankruptcy in order to avoid having to repay their student loans. Practically speaking, when the student joins the workforce, the government pays itself from tax refunds the worker is entitled to over the years. The government of Quebec recovers 75 per cent to 80 per cent of debt by not writing off bankruptcy-related debt. Have you ever considered adopting that approach for your program?
[English]
Ms. Johnson: The loan is written off, but the debt is not extinguished, so we can still use certain measures to recoup money if that opportunity presents itself. As we're in the process right now of looking at other strategies, we are looking at strategies where we can work with Canada Revenue Agency to continue to find ways to recover that money after the writeoff.
The Chair: I hope it's the same one that I would have asked for.
Senator Hervieux-Payette: I was there when we amended the bankruptcy law, and we have made sure to have a long period of time before you extinguish it. But it's going to be eight years or ten years before the people can go and write off that debt. So that's federal.
Provincially, this could be legally contested because bankruptcy is a federal jurisdiction. So if people were contesting that, they might win.
Senator Tkachuk: I have a supplementary on the CRA. Do they take a commission on a collectible debt? Do they take a percentage of a collectible debt that they collect?
Mr. Séguin: No, they're funded to provide those services for us. They're already funded.
The Chair: Could you clarify the difference between writing off the loan and writing off the debt? What are you asking us to do here?
Mr. Séguin: I can answer that. In this case, as part of the legislation, when a debt becomes statute barred, in essence, after six years of non-activity, at that point there's no activity that can be taken. So CRA cannot pursue unless something has changed in the debt. At that point, since we cannot pursue the individuals, the law says we need to write it off. If an individual decides they want to get another loan, at that point the student loan becomes reactivated, and from that point they have to start repayments on the loan. At any time they can make a repayment and it will be an offset to previous years' writeoffs.
So the fact that we can't pursue the loan or the non-repayment doesn't mean that individuals cannot make payments back into the account, which happens from time to time.
The Chair: So we will be voting to wipe out a number of loans.
Mr. Séguin: As uncollectible, in essence.
The Chair: But it's gone. There is no obligation to repay then, but you still have a contract sitting in your drawer with respect to this student. If they come back, they reactivate the loan that has been written off. Is that what you're telling us?
Ms. Johnson: Once the loan is written off, CRA is unable to pursue further legal action, but the loan is never extinguished. So if a student wants to come back and pursue post-secondary education, the student would have to rehabilitate that loan and pay it off before they could get access to further student loans. So the loan is never extinguished; it is written off, meaning that further legal action cannot be pursued. But we can use other measures, and we're working on that now to see what else we can do to recover it.
The Chair: Thank you for highlighting that distinction, because I'm not sure we were aware of that. We thought we were voting here to clean these things off.
As part of your undertakings on the student loans that you have undertaken for us, have you agreed or would you agree to go back over the last five or six years and tell us how much has been written off over that period of time and how frequently?
Mr. Séguin: Sure, we can provide that.
The Chair: Thank you.
We're into round two.
[Translation]
Senator Chaput: My question is for Mr. Rochette, from the Department of National Defence. It pertains to the Canadian Armed Forces recruitment campaign.
Could you tell me whether the $3 million you are requesting will be used to recruit Canadian Armed Forces members?
Mr. Rochette: Thank you for your question. Yes, the $3 million is to fund a recruitment campaign using television and the Web, as well as necessary IT services, for the purposes of recruitment.
Senator Chaput: It will be targeted for the Canadian Armed Forces?
Mr. Rochette: The amount that will be spent this year will actually be $4 million, with $1 million coming from the department and $3 coming from the Government of Canada program.
Senator Chaput: Are you able to break down the amount for us, percentage-wise, in terms of television, radio, newspaper and Web advertising? If you don't have the information with you, you could send it to the committee.
[English]
Mr. Stewart: The campaign that's under way right now, which is called "Ready When You Are," is a national conventional and specialty television and cinema campaign.
Senator Chaput: Only?
Mr. Stewart: Only.
[Translation]
Senator Chaput: What percentage of the campaign is conducted in French and what percentage is conducted in English?
Mr. Stewart: I will have to check.
[English]
The Chair: Mr. Stewart, if you could verify that, it would be helpful.
[Translation]
Senator Chaput: Since you are going to find out the percentage conducted in French, would it also be possible to tell us the percentage of French-language advertising targeting strictly Quebec and, if applicable, the percentage of French-language advertising geared towards the entire country to target francophones outside Quebec?
Mr. Stewart: Absolutely, yes.
[English]
Mr. Rochette: Mr. Chair, you asked me at the beginning about the 2 per cent defence escalator. The 2 per cent can be applied to operating expenses or capital or vice versa, so we decide in the department how we want to apply it.
The Chair: That was 2.5 per cent?
Mr. Rochette: It's 2 per cent, sorry. I just verified.
The Chair: It is 2 per cent, not 2.5?
Mr. Rochette: Two per cent.
The Chair: We will have to see if we can't get that up for you. That's very helpful. Thank you for clarifying that. It's 2 per cent.
Colleagues, tomorrow evening we will hear from Foreign Affairs, Aboriginal Affairs, Shared Services, Public Works and Government Services, and Public Health Agency, all on Supplementary Estimates (C).
Let me, on behalf of the Standing Senate Committee on National Finance, thank the representatives from National Defence as well as Employment and Social Development for being here and helping us with your supplementary estimate requests. We will do our best to get those through Parliament for you.
(The committee adjourned.)